Opinion ID: 553338
Heading Depth: 4
Heading Rank: 1

Heading: The MDAs and the Public Body Test

Text: 51 The MDAs submit that their LOAs with the IOUs satisfy the public body criteria. Specifically, they assert that they (1) provide yardstick competition, and (2) that the LOAs provide them with a sufficient degree of control over the distribution of power. Regarding the first point, the MDAs contend that the Commission ignored the fact that they compete directly with IOUs and that each kilowatt hour sold by a MDA is a kilowatt hour lost to an IOU. Additionally, they note that their rates are a matter of public record and are therefore available for regulatory comparison. Finally, the bills received by MDA customers reflect the difference in cost resulting from the provision of MDA power instead of IOU power. With regard to the second point, the MDAs submit that the record demonstrates that they maintain a high level of control over distribution. Specifically, they select their customer base, determine the amount of power to be sold to each customer, and set their own rates. 52 The LOAs entered into by the MDAs were a part of the record and the subject of close examination. In particular, the Commission analyzed the terms of the lease and operating agreement entered into by NYCPUS (one of the MDAs) and Consolidated Edison Co. (Con Ed)--a New York based IOU. Because the terms of the LOAs entered into by the other MDAs parallelled those of the NYCPUS/Con Ed agreement, the Commission focused its attention on this one agreement. Initial Decision, 42 FERC at 65,169. The Commission reached several conclusions. First, the ultimate responsibility for control of distribution remained with Con Ed. Indeed, the LOA expressly provided that Con Ed retain the franchise responsibility for providing service and that it be vested with the exclusive control over the entire distribution system. Second, Con Ed functioned as the operating agent for NYCPUS with responsibility for billing, metering and collection. Third, Con Ed retained the right to suspend the LOA in the event that provision of preference power resulted in higher energy costs for consumers. Fourth, Con Ed reserved the right to terminate the LOA if the MDA initiated condemnation proceedings or if compliance with the agreement would result in an increase in Con Ed's rates or a reduction in net income available for stockholders below the level that would pertain in the absence of the LOA. Fifth, a prerequisite to receipt of preference power was being a customer of Con Ed. See Opinion No. 329, 48 FERC at 61,471. 53 All of these conditions were expressly enumerated in the LOA. The Commission reasonably concluded that to compete with IOUs public entities must have the ability to manage and change those variables that affect costs and service. These LOAs provided no such flexibility. Instead, all responsibility for operations rested with the IOU. As the Commission appropriately explained: 54 In addition ..., the consumer must be a customer of the privately owned utility, or service is not available. Thus, the consumer has no real choice between utilities. There is insufficient separation of functions between the MDAs and the IOUs to create a threat of displacement, to allow the MDAs substantially to serve their customers' needs, or to provide an opportunity for rate comparison. 55 Id. 56 Given the express conditions of the LOAs and in light of the entire record, we conclude that there was substantial evidence in the record to support the Commission's conclusion that the MDAs lacked the requisite degree of control over distribution. As discussed above, we agree with the Commission that the exercise of such control is essential to a finding of public body status. 57