Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-01283/USCOURTS-caDC-95-01283-0/pdf.json

Parties Involved:
Federal Energy Regulatory Commission
Respondent
Florida Power & Light Company
Petitioner
Fort Pierce Utilities Authority
Intervenor
Utilities Commission, City of New Symrna Beach, Florida
Intervenor
Vero Beach Utilities Commission
Intervenor

Document Text:

<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 22, 1996 Decided July 19, 1996

No. 95-1283

FLORIDA POWER & LIGHT COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

UTILITIES COMMISSION, CITY OF NEW SYMRNA BEACH,

FLORIDA, ET AL.,

INTERVENORS

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

Steven J. Ross argued the cause for petitioner, with whom Randolph L. Elliott and Jacob A.

Bouknight, Jr. were on the briefs.

Katherine Waldbauer, Attorney, Federal Energy Regulatory Commission, argued the cause for

respondent, with whom Jerome M. Feit, Solicitor, and Joseph S. Davies, Deputy Solicitor, were on

the brief.

David E. Pomper argued the cause for intervenors, with whom Robert A. Jablon and Harvey L.

Reiter were on the brief. Alan J. Roth entered an appearance.

Before: EDWARDS, Chief Judge, WALD and SENTELLE, Circuit Judges.

SENTELLE,Circuit Judge: Petitioner Florida Power & Light Company ("FP&L") seeks review

of orders of the Federal Energy Regulatory Commission ("FERC") rejecting FP&L's filing of

unexecuted back up transmission agreements with Fort Pierce and Vero Beach, Florida. FP&L

sought through these agreementsto charge the two citiesfor back up transmission service it claimed

that it was providing the cities by default because of the physical properties of the interconnections

among FP&L and the two cities. Because we conclude that FERC's orders are not supported by

substantial evidence with regard to the Commission's interpretation of a reserve power sharing

agreement among certain Florida utilities, we grant the petition for review and remand the case to

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 1 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

FERC.

I. Factual Background

The cities of Vero Beach and Fort Pierce, Florida, are served respectively by the Vero Beach

Utilities Commission ("Vero Beach") and the Fort Pierce Utilities Authority ("Fort Pierce")

(collectively "the Cities"). For thirty-six years, the Cities have been directly interconnected to each

other through a single 138-kilovolt ("kV") tie line which they own and operate pursuant to an

interconnection agreement between them. This interconnection agreement allows marginal power

demand to be supplied by the cheapest source, regardless of which city is that source. This system

is known as "economic dispatch" or "economy energy" transfer. Both cities are also independently

connected to FP&L by 138 kV lines and are thereby indirectly connected to one another through the

FP&L grid. This arrangement means that, should the Cities' tie line unexpectedly go out of service

for any reason, under the laws of physics any power being delivered over the tie line automatically

and instantaneously would be rerouted over the FP&L transmission system to the receiving city.

In 1993, in an unrelated proceeding, FERC approved a "transmission backup" tariff

arrangement between FP&L and the Utilities Commission of New Smyrna Beach, Florida ("New

Smyrna"). Florida Power & Light Co., 62 FERC ¶ 61,251, reh'g denied, 65 FERC ¶ 61,411 (1993)

("the New Smyrna Orders"). New Smyrna, which purchased power over a single line from Florida

Power Corporation ("FPC"), lacked sufficient capacity to meet its power demand on its own. FP&L

convinced FERC that, if the single line connecting New Smyrna and FPC were to go down, the FPC

power would automatically be rerouted over FP&L lines. Id. at 62,692-93. FERC accordingly

approved a tarifffor "transmissionbackup" service which required New Smyrna to compensateFP&L

for maintaining the reserve capacity to service New Smyrna.

Following the New Smyrna Orders, FP&L began negotiating with the Cities to determine

whether FP&L should require a back up transmission charge there as well. Then, in August 1994,

while these negotiations continued, the tie line between the Cities was knocked out of service by

lightning, causing its first outage in thirty-six years. For two weeks, the Cities continued their

economic dispatch arrangement, but they transmitted the energy over the FP&L lines. They had no

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 2 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

agreement with FP&L permitting such transmission, and they did not notify FP&L that they were

conducting the transmission. After two weeks, the Cities stopped their economic dispatch

arrangement when they realized that they had no permission to transfer power back and forth via the

FP&L lines. The outage of the tie line continued for another five months, but the Cities did not

conduct economic dispatch during that period. Although the Cities have expressed a willingness to

compensate FP&L for the two-week use of their lines, the parties had not reached agreement on this

compensation as of the date of oral argument.

In November 1994, FP&L filed with FERC proposed "Reserve Transmission Service

Agreements" between FP&L and both of the Cities. FP&L stated that, during an outage on the tie

line between the cities, electricity would automatically flow to FP&L's lines, and that FP&L was

therefore required to maintain sufficient transmission capacity at all timesto transmit this power. The

proposed agreements, if approved by FERC, would have established a tariff under which, according

to the Cities, they would pay FP&L about $225,000 a year to compensate FP&L for providing

standby transmission service to the Cities. The Cities intervened, arguing that FP&L did not need

to provide any reserve capacity because the Cities would simply discontinue their joint dispatching

operation should the tie line go out again. They further argued that each city had sufficient generation

capacity to meet its own needs during any outage of the tie line and that they could bring this capacity

on line within thirty minutes of any tie line outage. Finally, they claimed that "they were already

entitled to use FP&L's system for transmission for a period of 30 minutes while they adjusted for the

loss of the tie line without compensation." Respondent's Brief at 7. They argued that usage of

another power company'stransmission facilitiesin such a situation is considered "inadvertent" under

the guidelines of the Florida Coordinating Group ("FCG"), of which both the Cities and FP&L are

members.

FERC, accepting the Cities' arguments, summarily rejected FP&L's filing. Florida Power &

Light Co., 70 FERC ¶ 61,007 (1995). The Commission concluded that the Cities (1) have sufficient

resources to meet their own loads and therefore (2) will never use the back up service FP&L claims

to provide for more than 30 minutes"the grace period prescribed ... for generation outages." Id.

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 3 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

at 61,017. FERC also noted that the August 1994 outage was "the single forced outage [of the

Cities' tie line] that has occurred during the last 36 years" and that it was unlikely to recur. Id. In

May 1995, FERC denied FP&L's request for rehearing. Florida Power & Light Co., 71 FERC ¶

61,125 (1995). Among other things, FERC noted that this case stands "in sharp contrast" to the case

involving New Smyrna. Id. at 61,403 n.1. In the New Smyrna case, FERC had concluded that FP&L

reallywas providing back up service to New Smyrna for which it deserved payment. FP&L petitions

for review of the two FP&L orders rejecting the tariff request. The Cities intervene on behalf of

FERC.

II. Analysis

Petitioner's case turns on the applicability of the so-called "thirty-minute grace period" in this

situation. If the grace period applies, then it is possible that the city taking economy energy at the

time of a break in the tie line would have time to replace that energy with energy of its own

generation. On the other hand, if it does not apply, then the instantaneous "jump" of the economy

energy onto FP&L's line at the time of a break in the tie line would be problematic because it would

occur without FP&L's permission.

In its first order, FERC described the thirty-minute period as "the grace period prescribed by

the NorthAmericanElectricReliabilityCouncil[("NERC")]for generation outages." Florida Power

& Light Co., 70 FERC ¶ 61,007, at 61,017 (emphasis added). After FP&L noted in its request for

rehearing that a break in the Cities' tie line is not a generation outage, but a transmission outage,

FERC stated in its second order that "[t]he thirty-minute "grace period' we were referring to in the

original order isthe 30-minute period withinwhich a Florida Coordination Group (FCG) control area

must restore operating reserve margins after a contingency has occurred." Florida Power & Light

Co., 71 FERC ¶ 61,125, at 61,403.

FERC'sreference to "the thirty-minute "grace period' " evokes an FCG agreement created to

comply with NERC guidelines, under which a utility such as either of the Cities must have enough

generation and transmission capacity to meet its demand without jeopardizing the reliability of other

utilities interconnected with it. That means that it must have on line additional generation equal to

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 4 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

its largest unit, so that if that unit failed, the reserve generation capacity would be available almost

immediately. Utilities who are members of the FCG have set up a power-sharing arrangement so that

eachmember need notseparatelymaintainsufficient on-line capacityto complywith thisrequirement.

Under the FCG power sharing arrangement, each member utility maintains some excess generation

capacity on line. When one member unexpectedly loses capacity due to a "disturbance," it makes up

for it by using reserve energy from other members. It then has thirty minutes to either start up its

own replacement generation capacity or purchase energy on the market. FCG members have also

agreed that using reserve capacity in this manner is an "inadvertent" use for which no transmission

charge may be levied.

It is undisputed that all the utilities involved in these proceedings are FCG members.

Nevertheless, FP&L argues that the instant case is not an appropriate factual situation for reliance

on the FCG thirty-minute grace period. When the Cities' tie line goes out, neither city has lost its

individual generating capacity. Therefore, the FCG arrangement gives it no right to the FCG reserve

capacity energy. FERC and the Cities point to the FCG Florida Specific Procedure for Operating

Reserves(Oct. 1994), which provides that "[o]perating reserves shall be made available for up to 30

minutesfollowing a disturbance." They argue that a tie-line outage would qualify as a "disturbance."

Unfortunately, that document does not define "disturbance." FERC and the Cities contend that FCG's

Planning Criteria (Oct. 1989), which classifies both "Loss of generation" and "Loss of transmission"

as "Possible but improbable disturbances," supports their interpretation. They argue that a break in

the tie line is a "Loss of transmission," which in turn qualifies as a "disturbance." FP&L responds by

noting that "the planning criteria do not define the availability of operating reserves. The mere use

of the word "disturbance' in both guidelines does not make the definitions interchangeable."

Petitioner's Reply Brief at 10. The Cities also point to a publication entitled Florida's Electric

Utilities: A Reference Guide (1994), which contains a definition of "Spinning Reserve" discussing

the availability of reserve power in cases of "emergencies causing the loss of a generation unit or

transmission line failure." Id. at 190 (emphasis added). FP&L responds that this definition is not

properly before the court because it is not in the record. In any case, FP&L argues that even if a loss

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 5 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

of transmission qualifies as a disturbance for reserve power access purposes, this does not mean that

a loss of transmission in an economy energy transfer situation necessarily qualifies. The distinction

between a utility's internal transmission loss and a break in an economy energy transfer line such as

that linking the Cities is relevant. FP&L plausibly argues that reserve capacity is available when loss

of transmission capacity makes a utility unable to transmit its own power to its own customers, but

not when a transmission difficulty only impedes its ability to import economy energy from another

utility.

Fortunately, our task today is not to interpret the FCG guidelines or to decide how they apply

to the facts of this case. That is FERC's job. We merely face the job of determining whether FERC

has supported its decision with substantial evidence. See 16 U.S.C. § 825l (b) (1994). We conclude

that it has not. We cannot readily discern the exact meaning of the FCG guidelines in this context and

FERC's orders provide no interpretive guidance. The first order does not even refer to FCG, its

thirty-minute grace period, or its guidelines. It simply refers to the thirty-minute "grace period

prescribed by [NERC] for generation outages." Florida Power & Light Co., 70 FERC ¶ 61,007, at

61,017. The second order discusses the FCG thirty-minute grace period, but simply assumes that it

applies to this factual situation without explaining why. Florida Power & Light Co., 71 FERC ¶

61,125, at 61,403. We are unable to glean from these orders the basis of FERC's decision.

The problems with FERC's orders do not end there. Even if we were to assume that the FCG

reserves are available to the Cities if the tie line breaks down, both FERC and the Cities have failed

to show from the record that the Cities would actually access the FCG reserve power in such a

scenario. As a matter of physics, the economy energy would continue to flow between the Cities in

the event of a tie line breakdown because it would flow across FP&L's lines. That economy energy

is not FCG reserve power, and we can only assume that it would take some amount of time for the

city that was receiving economy energy at the time of the breakdown to switch to FCG reserve

power. The economy energy would therefore flow over FP&L's line without permission or

compensation for whatever time it would take the city to switch. FERC's orders do not account for

these facts.

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 6 of 7
<<The pagination in this PDF may not match the actual pagination in the printed slip opinion>>

We do not decide today whether the Cities must compensate FP&L for back up service and,

if so, at what rate. We merely remand the case to FERC for further explanation or reconsideration

of its decision. The petitioner also requests that we order FERC to conduct an evidentiary hearing

on remand rather than disposing of the case through summary procedures as it did originally. We

decline to grant that request. Whether or not, in light of our disposition today, the facts are

sufficiently established so as to permit resolution of this case through FERC's summary procedures,

see Summary Disposition, 18 C.F.R. § 385.217 (1995), is a matter for the Commission to consider

on remand.

III. Conclusion

Because we cannot determine the basis of FERC's reliance on the FCG thirty-minute grace

period in forming its conclusion that the Cities would have accessto FCG reserve power in the event

of a breakdown in the tie line, we grant the petition for review and remand the case to FERC for

further explanation or reconsideration of its decision in light of this opinion.

USCA Case #95-1283 Document #212306 Filed: 07/19/1996 Page 7 of 7