Case Title: In re East Georgia Cogeneration Ltd

Citation: 

Docket Number: 5177

State: vermont

Court: Vermont Supreme Court

Date: 1992-02-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
 that corrections may be made before this opinion goes to press.


                                 No. 91-345


 Petition of East Georgia Cogeneration        Supreme Court
 Limited Partnership

                                              On Appeal from
                                              Public Service Board


                                              February Term, 1992


 Richard H. Cowart, Chair

 Gerald R. Tarrant, Montpelier, and Stephen G. Kozey of Skadden, Arps, Slate,
   Meagher & Flom (Of Counsel), Washington, D.C., for plaintiff-appellant

 Joseph Kraus, Rutland, and Ralph W. Howe III of Paterson & Walke, P.C.
   (Of Counsel), Montpelier, for defendant-appellee Central Vermont Public
   Service Corp.

 Michael Marks of Lisman & Lisman, Burlington, for defendant-appellee Vermont
   Power Exchange, Inc.

 Geoffrey Commons, Montpelier, for defendant-appellee Department of Public
   Service


 PRESENT:  Allen, C.J., Gibson, Dooley and Morse, JJ., and Peck, J. (Ret.),
           Specially Assigned
 
 
      ALLEN, C.J.   Appellant East Georgia Cogeneration Limited Partnership
 (EGC) appeals from an order of the Vermont Public Service Board (Board)
 denying a certificate of public good for EGC's proposed cogeneration
 facility.  Appellees are Central Vermont Public Service Corporation (CVPS),
 a utility that would be required to purchase output from the proposed EGC
 facility; the Department of Public Service (DPS), which represents the
 interests of Vermont's ratepayers before the Board; and the Vermont Power
 Exchange, Inc. (VPX), the designated purchasing agent for output from
 cogeneration facilities.  The Board's order is affirmed.
         EGC proposed to build a 29©megawatt gas turbine cogeneration facility
 in the East Georgia Dairy Industrial Park in Georgia, Vermont.  It designed
 the power plant to be a "qualifying facility" under Section 210 of the
 Federal Public Utility Regulatory Policies Act of 1978 (PURPA).  16 U.S.C. {
 824a©3.  EGC gained its status as a "qualifying cogenerator" by contracting
 with the Vermont Whey Company to provide steam generated by the plant for
 that enterprise.  EGC entered into a power sales agreement with VPX to sell
 its entire output of electrical energy at rates established by the Board.
 The Board reviewed the agreement between EGC and VPX and concluded that, at
 the "levelized" rates sought by EGC, there was neither present nor future
 need for the project's output.  The Board, in rejecting EGC's application
 for a certificate of public good, also concluded that the project would not
 result in economic benefit to the state and its residents.
         On appeal, EGC argues that federal law entitled it to rates established
 by the Board under Docket No. 5177, and that the Board cannot deny those
 rates based on its assessment of need and economic benefit.  EGC also
 maintains that the Board's order amounted to a collateral attack of Docket
 5177 rates in violation of state law, federal law, and the Board's own
 decisions.  Finally, EGC argues that it secured a vested right to Docket
 5177 rates when it tendered a power sales agreement to VPX.  CVPS contends
 that EGC was properly denied a certificate of public good because it failed
 to satisfy the requirements for such a certificate.  CVPS also argues that
 the agreement between EGC and VPX is not legally enforceable.  DPS contends
 that power purchase agreement between VPX and EGC was not part of the
 record below and that we should not, therefore, construe that document.  DPS
 also emphasizes that state review of the contract was warranted because EGC
 sought levelized rates, which are higher than those mandated by federal law.
 VPX contends that EGC was entitled to Docket 5177 rates because it executed
 a legally enforceable agreement which satisfied state and federal requirements.
 Before reaching the issues presented, we set forth the regulatory
 framework, the relevant facts as found by the hearing officer and adopted by
 the Board, and the procedural history of this case.  We also state the
 standards that apply to this Court's review of administrative orders.
                          REGULATORY FRAMEWORK
         Congress enacted PURPA in 1978 to combat the nationwide energy crisis
 by encouraging the development of cogeneration and small power production
 facilities.  See In re Vicon Recovery Systems, 153 Vt. 539, 543, 572 A.2d 1355, 1357 (1990).  A "cogeneration facility" produces both electrical
 energy and steam or other forms of useful energy for industrial or commercial 
 purposes.  16 U.S.C. {{ 824a©3(j), 796(18)(A).  PURPA encourages the
 development of cogeneration by requiring utilities to purchase output from
 such facilities at rates not to "exceed[] the incremental cost to the
 electric utility of alternative electrical energy."  Id. { 824a©3(b). 
 PURPA further provides that the rates for such purchases "shall be just and
 reasonable to the electric consumers of the electric utility and in the
 public interest. . . ."  Id.
         Charged with implementation of PURPA, the Federal Energy Regulatory
 Commission (FERC) promulgated rules that set the rates for purchases of
 output from qualifying facilities by utilities, absent negotiated rates, 
 at "avoided cost."  18 C.F.R. {{ 292.301(b), 292.304(d).  "Avoided cost
 means the incremental costs to an electric utility of electric energy or 
 capacity or both which, but for the purchase from the qualifying 
 facility . . . , such utility would generate itself or purchase from another 
 source."  Id. { 292.101(b)(6).  FERC places implementation of its avoided cost 
 scheme in the hands of state regulatory authorities.  Id. { 292.401(a).
         The Public Service Board issued Rule No. 4.100 to meet Vermont's
 responsibilities under PURPA and the FERC regulations.  The rule defines a
 "qualifying facility" as a cogeneration or small power production facility
 under federal and state law which has also "received a certificate of public
 good under 30 V.S.A. { 248 . . . ."  4.103(A)(9).  The rule also establishes
 the authority of the Board to designate a purchasing agent, 4.102(C), and
 directs that agent to purchase electricity offered by any qualifying facility 
 located in Vermont and to sell such power to all Vermont electric
 utilities on a pro rata basis.  4.104(A).  The purchasing agent, however,
 "shall not be empowered to enter into any agreement for purchases from a
 qualifying facility until such agreement shall have been approved by the
 Board."  Id.  The Board adopts rates for purchases at the utilities' "full
 avoided costs . . . as specified under 4.104(E)."  Id.  
         Rule 4.104(E) requires the Department of Public Service to "annually
 determine the avoided capacity and energy costs of the Vermont composite
 electric utility system, and . . . file proposed rate schedules with the
 Board for approval."  The Board, "after hearing, shall approve or modify
 such schedules."  Id.  The rates adopted must provide three options to
 qualifying facilities: "short-term sales," which have a term of one year;
 "long-term non-firm sales," which have a term of five, ten, or fifteen
 years; and "long-term firm sales,"  which have a term of ten, twenty or
 thirty years.  4.104(E)(1),(2),(3).  Pursuant to this rule, the Board
 adopted the rate schedule involved in this appeal.  PSB Docket No. 5177
 (March 13, 1989).  To remain eligible for those rates, "[p]rojects . . .
 must satisfy the requirements of Rule 4.100 and achieve commercial operation
 by April 30, 1993."  Id. at 4. 
        A qualifying facility which is eligible for firm rates may elect non-
 levelized, fully levelized, or partially levelized rates.  4.104(E)(5).
 Levelized rates provide a constant revenue stream by converting a series of
 annual rates to an equivalent annuity, resulting in larger payments during
 the early years of a project's operation.  See In re Hydro Energies Corp.,
 147 Vt. 570, 571 n.1,