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Calpine Corp. v. FERC

United States Court of Appeals for the District of Columbia Circuit

September 19, 2012, Argued; December 18, 2012, Decided

No. 11-1122


 [*42]  [**177]  On Petition for Review of Orders of the Federal Energy Regulatory Commission

Silberman, Senior Circuit Judge: For the third time, we consider FERC's authority to regulate public-utility charges to independent generators for the latter's use of "station power" — the electricity necessary to operate a generator's requirements for light, heat, air  [***2] conditioning, etc. FERC now concludes that it lacks this authority, and we affirm.

We explained the legal and economic background of the electrical energy market in Niagara Mohawk Corp. v. FERC, 452 F.3d 822, 371 U.S. App. D.C. 446 (D.C. Cir. 2006), and Southern California Edison Co. v. FERC, 603 F.3d 996, 390 U.S. App. D.C. 267 (D.C. Cir. 2010), but we will again summarize. Generators may procure station power through one of three means: (1) "on-site" self-supply, which redirects some of the station's outbound generated electricity for internal use (also called "behind-the-meter" production); (2) "remote" self-supply, in which power is obtained from an affiliated, off-site facility; or (3) "third-party" supply, in which power is drawn off the grid from unaffiliated providers.

Historically, electrical utilities were vertically integrated and typically acted as local monopolies — they owned generation, transmission, and distribution facilities and sold these services as a bundled package in their service areas. Utilities obviously did not charge themselves for the use of station power at their generating facilities; rather, they simply subtracted ("netted") the energy consumed as station power against their gross output. But in 1996  [***3] FERC issued Order 888, which effectively unbundled generating from transmission and distribution services. The Commission accomplished this goal by requiring utilities to file open-access tariffs that offered rates to all customers on an equal basis — basically, utilities could not prefer their own affiliates over independent generators. Order 888 also encouraged the creation of non-profit independent system operators ("ISOs") to reduce the market power of utilities and ensure competitive rates; the California Independent System Operator ("CAISO") is one such entity.

 [*43]   [**178]  Order 888 was successful in causing major utilities nationwide to divest most of their generating facilities, but it raised questions as to how independent generators would be charged for their use of station power. Under what circumstances could a generator be charged retail rates for either drawing from the grid or self-supplying its station power? FERC answered this question by devising "netting intervals." If a generator's net output (total output to the grid minus station power use) is positive over a fixed period, then the generator is not charged retail rates for its consumption. But if the generator uses more power  [***4] than it sends, it is deemed to have obtained the shortfall in a retail sale from a third party (i.e., a utility).

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702 F.3d 41 *; 403 U.S. App. D.C. 176 **; 2012 U.S. App. LEXIS 25732 ***


Prior History: 2011 FERC LEXIS 398


generator, station, netting, wholesale, transmission, retail, charges, interval, energy, tariff, output, retail sale, grid, revised, orders, rates, retail rate, regulation, self-supplied, petitioners', monthly, hourly, electric energy, electricity, third-party, determines, facilities, integrated, consumed

Business & Corporate Compliance, Electric Power Industry, Federal Power Act, Federal Rate Regulation, Administrative Law, Judicial Review, General Overview