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S. Cal. Edison Co. v. FERC

United States Court of Appeals for the District of Columbia Circuit

April 5, 2010, Argued; May 4, 2010, Decided

No. 05-1327 Consolidated with 08-1384

Opinion

 [*997]   [**268]  SILBERMAN, Senior Circuit Judge: FERC approved a tariff filed by the California Independent System Operator ("CAISO"), manager of California's electric power transmission grid. Southern California Edison petitions for review of that FERC order because the tariff permitted generators of  [***2] electricity to avoid paying significant retail charges for the energy they used -- whether self-generated or not -- for their own heating, lighting, air conditioning and office equipment needs, called "station power." Petitioners assert that ] FERC, which has undoubted jurisdiction to regulate wholesale sales and transmission charges, has exceeded its authority by insisting that the same method used for calculating transmission charges for station power be used to calculate retail charges.

As we explained once before in Niagara Mohawk Power Corp. v. FERC, 452 F.3d 822, 371 U.S. App. D.C. 446 (D.C. Cir. 2006), involving the New York market, the Commission ordered the unbundling of electric energy markets in Order 888, whereby vertically integrated utilities that owned generation, transmission and distribution facilities and sold them as a package were obliged to sell transmission services separately. They were required to file open access transmission tariffs applicable to both their own electrical transmissions and those provided to independent generators. The order also encouraged the creation of non-profit independent system operators (ISOs) to ensure competitive pricing of transmission services and reduce  [***3] the market power of the utilities. CASIO is one those ISOs.

Just as in New York, unbundling caused a sea change in California. The three largest investor-owned utilities divested most -- but not all -- of their generating facilities and now operate primarily as owners of transmission facilities and providers of retail services. The companies that purchased generating facilities from the utilities, by contrast, sell wholesale power. ] FERC has jurisdiction over wholesale sales and transmission, whereas the states maintain jurisdiction over retail distribution.

Under this new regimen, the generators' use of "station power" became a contentious issue. Prior to unbundling, utilities which owned and operated the generators would not, of course, charge themselves for the use of station power; they simply subtracted ("netted") their own use against their gross output. But now, when the generating facilities use station power -- even when they get it from their own facilities -- it is arguably functionally equivalent to a retail sale falling within the jurisdiction of the states, not FERC. That  [*998]   [**269]  raises the question of how to calculate properly the charges the utilities can impose on the generators  [***4] for their use of station power. In other words, what is the appropriate netting period by which it should be determined how much power a generator took for its own station power needs? FERC has the undeniable right to approve the netting methodology to determine how much electricity generators deliver to and take from the grid for transmission purposes, but in both Niagara Mohawk and this case, the FERC-approved tariff required the same methodology for both transmission and local use.

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603 F.3d 996 *; 390 U.S. App. D.C. 267 **; 2010 U.S. App. LEXIS 9117 ***

SOUTHERN CALIFORNIA EDISON COMPANY, PETITIONER v. FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT, NORTHERN CALIFORNIA POWER AGENCY, ET AL., INTERVENORS

Prior History:  [***1] On Petitions for Review of Orders of the Federal Energy Regulatory Commission.

CORE TERMS

generators, transmission, netting, charges, tariff, retail sale, station, wholesale, retail, facilities, electricity, costs, consumption, regulation, calculate, energy, grid, unbundling, hourly

Energy & Utilities Law, Utility Companies, Buying & Selling of Power, US Federal Energy Regulatory Commission, Civil Actions, Jurisdiction, Civil Procedure, Appeals, Reviewability of Lower Court Decisions, General Overview