[Federal Register Volume 83, Number 95 (Wednesday, May 16, 2018)]
[Notices]
[Pages 22660-22661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10402]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. ER12-1338-003; ER12-1347-004]


Order Establishing Briefing Schedule: Duke Energy Corporation 
Progress Energy, Inc.; Carolina Power & Light Company

Before Commissioners: Kevin J. McIntyre, Chairman; Cheryl A. 
LaFleur, Neil Chatterjee, Robert F. Powelson, and Richard Glick.

    1. On July 14, 2017, the United States Court of Appeals for the 
District of Columbia (D.C. Circuit) issued a decision,\1\ vacating in 
part the Commission's acceptance of a Joint Dispatch Agreement (JDA) 
between Duke Energy Carolinas, LLC (Duke Energy Carolinas) and Carolina 
Power & Light Company (CP&L) \2\ and remanding the matter to the 
Commission for further consideration. The court found that certain 
provisions in the JDA result in disparate rate treatment between 
native-load and non-native-load wholesale customers and that the 
Commission had not offered a valid reason for such a disparity.\3\ 
Also, the court found that the Commission failed to sufficiently 
respond to several arguments raised by the City of Orangeburg, South 
Carolina (Orangeburg) regarding certain regulatory conditions in the 
JDA that Duke Energy Carolinas and CP&L agreed to include pursuant to 
proceedings before the North Carolina Public Utilities Commission 
(North Carolina Commission). As discussed below, we establish a 
briefing schedule to develop a better record on which to make a 
determination on these two issues.
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    \1\ Orangeburg, South Carolina v. FERC, 862 F.3d 1071 (D.C. Cir. 
2017) (Orangeburg v. FERC).
    \2\ Duke Energy Corp., 139 FERC 61,193 (2012) (JDA Order), order 
denying reh'g, 151 FERC 61,242 (2015) (JDA Rehearing Order) 
(together, JDA Orders).
    \3\ Orangeburg v. FERC, 862 F.3d at 1084 (citing Black Oak 
Energy, LLC v.  FERC, 725 F.3d 230, 239 (D.C. Cir. 2013) (Black 
Oak)).
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I. Background

A. Case History

    2. The history of this case is recounted at length in earlier 
Commission orders.\4\
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    \4\ City of Orangeburg, South Carolina, 151 FERC 61,241, PP 3-10 
(2015) (dismissing Orangeburg's petition for declaratory order); JDA 
Order, 139 FERC 61,193 at PP 2-4; JDA Rehearing Order, 151 FERC 
61,242 at 2-4.
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    3. As relevant here, in 2012, Duke Energy Corporation (Duke) and 
Progress Energy, Inc. (Progress) filed on behalf of Duke Energy 
Carolinas and CP&L a JDA that provided for the joint dispatch of Duke 
Energy Carolinas' and CP&L's respective generation facilities to serve 
their loads.\5\ In accepting the JDA, the Commission found that the 
allocation of the lowest energy cost under the JDA to the native-load 
customers of Duke Energy Carolinas and CP&L is not unduly 
discriminatory.\6\ The Commission stated that this finding was 
consistent with Order No. 2000, wherein it acknowledged that ``in areas 
without retail choice, state commissions have the authority to `require 
a utility to sell its lowest cost power to native load, as [they] 
always [have].' '' \7\ Also, the Commission found that sections 3.2 
(c)(ii)-(iv) of the JDA,\8\ which listed certain regulatory conditions 
that the parties agreed to include in the JDA pursuant to proceedings 
before North Carolina Commission, pertain to retail ratemaking and, 
therefore, should be removed from the agreement.\9\
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    \5\ The JDA provides that the savings from the joint dispatch--
in fuel, purchased power, and related savings--will go directly to 
retail and wholesale customers in North Carolina and South Carolina. 
JDA Order, 139 FERC 61,193 at P 6.
    \6\ Id. P 45.
    \7\ Id. P 45 (quoting from Regional Transmission Organizations, 
Order No. 2000, FERC Stats. & Regs. 31,089 (1999) (Order No. 2000), 
order on reh'g, Order No. 2000-A, FERC Stats. & Regs. 31,092 (2000), 
aff'd sub nom. Pub. Util. Dist. No. 1 of Snohomish County, 
Washington v. FERC, 272 F.3d 607 (D.C. Cir. 2001)).
    \8\ Section 3.2 (c)(ii)-(iv) of the JDA states:
    (ii) Neither [Duke Energy Carolinas] nor [CP&L] may make or 
incur a charge under this Agreement except in accordance with North 
Carolina law and the rules, regulations and orders of the [North 
Carolina Commission] promulgated thereunder;
    (iii) Neither [Duke Energy Carolinas] nor [CP&L] may seek to 
reflect in its North Carolina retail rates (i) any costs incurred 
under this Agreement exceeding the amount allowed by the [North 
Carolina Commission] or (ii) any revenue level earned under the 
Agreement other than the amount imputed by the [North Carolina 
Commission]; and
    (iv) Neither [Duke Energy Carolinas] nor [CP&L] will assert in 
any forum that the [North Carolina Commission's] authority to 
assign, allocate, make pro forma adjustments to or disallow revenues 
or costs for retail ratemaking and regulatory accounting and 
reporting purposes is preempted and [Duke Energy Carolinas] and 
[CP&L] will bear the full risk of any preemptive effects of federal 
law with respect to this Agreement.
    JDA Order, 139 FERC 61,193 at P 23.
    \9\ Id. P 37. Also, the Commission noted that ``beyond requiring 
the removal of these provisions from the JDA, we offer no view on 
the North Carolina Commission's authority to impose or apply such 
requirements in its proceeding.'' Id.
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    4. Orangeburg requested rehearing, which the Commission denied in 
the JDA Rehearing Order.\10\ In that order, the Commission affirmed its 
finding that the JDA's pricing methodology (i.e., allocating the lowest 
cost resources to serve the parties' native loads, while allocating the 
higher cost resources to off-system sales (non-native load customers)) 
is just and reasonable.\11\ In addition, the Commission held that this 
methodology does not unduly discriminate against Orangeburg, which is 
neither a native-load customer of Duke Energy Carolinas nor CP&L.\12\ 
With that determination, the Commission declined to make a finding with 
respect to Orangeburg's other arguments, such as the lawfulness of the 
North Carolina Commission's regulatory conditions.\13\
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    \10\ JDA Rehearing Order, 151 FERC 61,242 at P 1.
    \11\ Id. PP 12-13.
    \12\ Id. at P 13.
    \13\ Id.
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B. D.C. Circuit Remand

    5. In Orangeburg v. FERC, the court stated that, in accepting the 
JDA, the Commission approved certain provisions that established 
disparate treatment between native-load and non-native-load wholesale 
customers.\14\ The court stated that, ``according to Orangeburg, these 
JDA provisions operate against the backdrop of [the North Carolina 
Commission's] functional veto over which wholesale customers fit into 
the former category. The court stated that, for the orders to survive 
review, the Commission must have offer[ed] a valid reason for the 
disparity between native load and non-native load wholesale customers 
``under these circumstances.\15\ The court found that the Commission's 
exclusive

[[Page 22661]]

reliance on Order No. 2000 for approving the JDA's disparate treatment 
and responding to Orangeburg's overlapping Federal Power Act, 
preemption, and Commerce Clause arguments was untenable for a number of 
reasons.\16\ The court concluded that because the Commission [has not] 
offer[ed] a valid reason for the disparity, the court could not affirm 
[the Commission's] approval of the JDA provisions that establish 
disparate treatment of native-load and non-native-load wholesale 
customers, and incorporates [the North Carolina Commission's] 
potentially unlawful regulatory regime.\17\ Accordingly, the court 
vacated in part the JDA Orders and remanded the matter to the 
Commission for further explanation regarding its approval of the 
JDA.\18\
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    \14\ Orangeburg v. FERC, 862 F.3d at 1074, 1081 (wholesale 
customers are treated differently based on their native-load status. 
. . . The JDA divides the world into two categories of customers: 
Native load and non-native load. Only native-load customers--
including wholesale customers--enjoy access to the most reliable and 
lowest cost power.'').
    \15\ Id. at 1084 (citing Black Oak Energy, 725 F.3d at 239) 
(internal quotation marks omitted).
    \16\ Id. at 1085-1087.
    \17\ Id. at 1087.
    \18\ Id.
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II. Discussion

    6. We establish a briefing schedule to allow the parties and other 
interested persons to address the two issues noted below that the D.C. 
Circuit raised in its decision. Further briefing on these issues will 
help develop a better record for the Commission to respond to the 
court's directive to reconsider these issues.
    7. We request briefing on the following issues, in particular:
    (a) Is the JDA's disparate treatment of native and non-native load 
wholesale customers unduly discriminatory or preferential? In answering 
this question, please address the following:
    (i) Explain why the JDA treats native and non-native load wholesale 
customers disparately and whether the differences between these 
customers justify the disparate treatment.
    (ii) Specify in detail the contractual provisions in current or 
future wholesale contracts that would qualify a wholesale customer for 
native load treatment under the JDA,\19\ as well as any contractual 
provisions that would disqualify a wholesale customer for native load 
treatment under the JDA.
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    \19\ The JDA provides that Native Load Customers include 
wholesale customers that have native load served by Duke Energy 
Carolinas or CP&L, for which Duke Energy Carolinas or CP&L has an 
obligation pursuant to current or future wholesale contracts, for 
the length of such contracts, to engage in planning and to sell and 
deliver electric capacity and energy in a manner comparable to the 
[utilities'] service to its Retail Native Load Customers. Duke 
Energy Carolinas, FERC Electric Tariff, Rate Schedule No. 341 at 
Article I, Definitions.
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    (iii) Explain why wholesale sales between Duke Energy Carolinas and 
CP&L are excluded from the definition of non-native load sales and how 
the JDA would treat such a sale between the utilities.
    (b) Do the North Carolina Commission's regulatory conditions \20\ 
impermissibly interfere with this Commission's jurisdiction over 
wholesale ratemaking, in violation of the Federal Power Act \21\ or the 
Commerce Clause of the United States Constitution? \22\
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    \20\ Here, we are referring to the regulatory conditions that 
were in section 3.2 (c)(ii)-(iv) of the JDA, which the JDA Order 
required be removed.
    \21\ 16 U.S.C. 824e(a) (2012); see, e.g., Nantahala Power and 
Light Company v. Thornburg, 476 U.S. 953 (1986); Mississippi Power & 
Light Company v. Mississippi ex rel. Moore, 487 US 354 (1988).
    \22\ U.S. Const. art. 1, 8, cl. 3; see, e.g., New England Power 
Company, 455 U.S. 331 (1982).
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    8. We require Duke Energy Carolinas and CP&L to submit--and others 
may submit--initial briefs on or before 45 days from the date of this 
order. Reply briefs must be submitted on or before 30 days following 
the due date of the initial briefs. Any person who is not currently a 
party to the proceeding and who wishes to submit a brief must file a 
notice of intervention or motion to intervene, as appropriate.
The Commission Orders
    (A) Duke Energy Carolinas and CP&L are required to submit, and 
other parties are hereby permitted to submit initial briefs on or 
before forty-five (45) days of the date of this order, as discussed in 
the body of this order.
    (B) Parties are hereby permitted to file reply briefs on or before 
thirty (30) days of the date of filing of initial briefs.
    (C) All interested persons who wish to submit briefs but that are 
not currently parties to Docket Nos. ER12-1338-003 or ER12-1347-004 may 
submit notices of intervention or motions to intervene, as appropriate, 
within 21 days of the date of this order. The briefing schedule 
described in Ordering Paragraphs (A) and (B) will apply to such 
persons.
    (D) The Secretary is hereby directed to publish this order in the 
Federal Register.

    By the Commission.

    Issued: May 10, 2018.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2018-10402 Filed 5-15-18; 8:45 am]
 BILLING CODE 6717-01-P