Opinion ID: 386006
Heading Depth: 2
Heading Rank: 3

Heading: The Applicability of Sections 211 and 212

Text: 55 Finally, we turn to NYSEG's claim that the Commission exceeded its authority because its order modifying NS-11 compels wheeling without complying with the statutory prerequisites of §§ 211 and 212 of the FPA. The Commission does not contend that an order requiring wheeling need not be preceded by the determinations envisioned by §§ 211 and 212. Rather, it contends that its order modifying NYSEG's contracts with PASNY and Penn Yan does not at all compel wheeling. 56 As the Commission views it, it is NS-11 which obligates NYSEG to wheel; the challenged provision of NS-11 limits Penn Yan's ability to resell the wheeled power to certain customers; and the Commission's order merely removes this restriction. Thus the Commission denies that the territorial limitations have any relationship to the volume of power NYSEG is required to wheel, stating that the only limitation on the amount of power Penn Yan may receive is imposed by its contract with PASNY, and that Penn Yan's petition indicates that it has not yet reached its full capacity allocation. Most of these premises are disputed by NYSEG, which admits that it committed itself in NS-11 to wheel power to a limited extent, but contends that the Commission's order expands NYSEG's voluntary commitment by eliminating any ceiling on the amount of wheeled power available to Penn Yan and utilities of other communities listed in the challenged provision of NS-11. NYSEG's position is that a valid purpose of defining its wheeling obligation in terms of the existing territories of the listed municipalities was to protect itself from undue volume demands on its transmission lines, a concern that is reflected also in Article IX of NS-11. The latter provision requires PASNY to notify NYSEG annually of its estimate as to the amount of power to be wheeled for the ensuing five years; NYSEG must respond as to whether or not it will be able to transmit these amounts and to state any qualifications as to voltage, point of delivery or amount of delivery that attaches to any affirmative answer. NYSEG is thereupon obligated to wheel only in accordance with its affirmative answers, as qualified. Presumably the amount of power PASNY allots to Penn Yan will be affected by any limitations that NYSEG has placed on the amount it will wheel for PASNY with regard to Penn Yan. NYSEG stated its belief that in 1978 Penn Yan in fact exceeded its power entitlement under its PASNY contract. The implication is that the Commission's modification of NS-11 may well require NYSEG to wheel more power to Penn Yan than NYSEG deems prudent. Further, NYSEG points out that the Commission's order would permit any other community utility to make similar demands. 57 We agree that the effect of the Commission's order will be to increase beyond NYSEG's voluntary commitment the amount of power NYSEG is required to wheel. It is obvious that Penn Yan does not propose to furnish electricity to Excell homes by reducing the amount furnished to the territory covered by the contracts. What Penn Yan seeks to sell to Excell, therefore, is not the presently wheeled power; it is an amount over and above the amount NYSEG is now wheeling, and the total power sought by Penn Yan may be, or may become, greater than the maximum amount of power that NYSEG has agreed to wheel. Thus, regardless of whether the primary purpose of the challenged paragraph of NS-11 was to limit the calls on NYSEG's lines or was to protect NYSEG from competitive raids on its other customers, the effect of the Commission's order is to expand NYSEG's commitment to wheel. 58 With this factual analysis, the legal question becomes whether FPA §§ 211 and 212 should be interpreted narrowly to apply only to a Commission order to wheel where no wheeling had previously been ordered or agreed to, or whether they should apply also to an order expanding a voluntary pre-existing commitment to wheel. While the statutory provisions, on their face, offer little guidance on this question, the purpose and history of the Commission's statutory powers to compel wheeling persuade us that §§ 211 and 212 apply to orders that would expand a voluntary commitment to wheel. 59 As originally enacted, the FPA did not permit the Commission to compel wheeling. Prior to its enactment, provisions were proposed which would have required  'every public utility to ... transmit energy for any person upon reasonable request'  and would have empowered the Federal Power Commission to order wheeling if it found such action to be 'necessary or desirable in the public interest.' H.R. 5423, 74th Cong., 1st Sess.; S. 1725, 74th Cong., 1st Sess. These provisions were eliminated to preserve 'the voluntary action of the utilities.' S.Rep.No. 621, 74th Cong., 1st Sess., 19. Otter Tail Power Co. v. United States, 410 U.S. 366, 374, 93 S.Ct. 1022, 1028, 35 L.Ed.2d 359 (1973). Congress thereby revealed its preference for reliance on voluntary commercial relationships rather than on a pervasive regulatory scheme for controlling the interstate distribution of power. Id. 16 60 In November 1978, however, the Public Utility Regulatory Policies Act, amending the FPA, granted the Commission certain additional powers, including the power to compel wheeling. 17 Under new FPA §§ 211 and 212, the Commission may require one electric utility to provide transmission services for another utility, provided certain substantive and procedural requirements are met. Section 211 states, in relevant part: 61 Upon receipt of such application (by one utility for transmission services of another utility), after public notice and notice to each affected State regulatory authority, each affected electric utility, and each affected Federal power marketing agency, and after affording an opportunity for an evidentiary hearing, the Commission may issue such order if it finds that such order- 62 (1) is in the public interest, 63 (2) would- 64 (A) conserve a significant amount of energy, 65 (B) significantly promote the efficient use of facilities and resources, or 66 (C) improve the reliability of any electric utility system to which the order applies, and 67 (3) meets the requirements of section 824k of this title. 68 16 U.S.C.A. § 824j(a). Section 211 further provides that no such order may be issued unless the Commission determines that such order would reasonably preserve existing competitive relationships. 16 U.S.C.A. § 824j(c)(1). 69 In accordance with § 212, 70 No order may be issued by the Commission under ... subsection (a) or (b) of section 824j of this title unless the Commission determines that such order(1) is not likely to result in a reasonably ascertainable uncompensated economic loss for any electric utility ... affected by the order; 71 (2) will not place an undue burden on an electric utility ... affected by the order; 72 (3) will not unreasonably impair the reliability of any electric utility affected by the order; and 73 (4) will not impair the ability of any electric utility affected by the order to render adequate service to its customers. 74 The determination under paragraph (1) shall be based upon a showing of the parties. The Commission shall have no authority under section ... 824j of this title to compel the enlargement of generating facilities. 75 16 U.S.C.A. § 824k(a). 76 The new power to order wheeling was undoubtedly intended, at least in part, to serve as a tool for enhancing competition by facilitating bulk purchases of power. See H.R.Rep. No. 95-496 (IV), 95th Cong. 1st Sess. 151 (1977) reprinted in (1978) U.S.Code Cong. & Admin.News, pp. 7855, 8454, 8593-94; S.Rep. No. 95-442, 95th Cong. 1st Sess. 32 (1977) reprinted in (1978) U.S.Code Cong. & Admin.News, pp. 7903, 7929. On the other hand, in contrast to determinations under § 206 which focus on public, not private, interest, 18 it is clear from the express requirements of §§ 211 and 212 that the public interest and the enhancement of competition are not alone sufficient justification for compelling wheeling. Findings under § 211 must assess the impact of such an order on specific aspects of private interests as well: the Commission must find that the order is not likely to cause the transmitting utility to suffer an uncompensated economic loss or other undue burden; the Commission must find that the applicant for transmission services has demonstrated that he is ready, willing, and able to pay the reasonable costs of transmission services plus a reasonable rate of return on such costs; and the Commission must find that the wheeling order would reasonably preserve existing competitive relationships. Cf. H.R.Rep. No. 95-496 (IV), supra at 152, (1978) U.S.Code Cong. & Admin.News at 8595 (emphasizing statutory safeguards plus judicial scrutiny to insure fair treatment and full compensation). Finally, even when all prerequisites for the issuance of an order compelling wheeling have been met, the Commission is instructed to issue a proposed order, so as to allow the parties themselves an opportunity to agree on terms and conditions. § 212(c)(1), 16 U.S.C.A. § 824k(c)(1). 19 77 These requirements reflect an intent to safeguard the voluntariness of wheeling arrangements to the greatest extent possible while providing assurance to all persons that they will be treated fairly and compensated fully if they are compelled to provide involuntary services. H.R.Rep. No. 95-496 (IV), supra, at 152, (1978) U.S.Code Cong. & Admin.News at 8595. The narrow interpretation of § 211 urged by the Commission to exclude its modification of NS-11 from the ambit of § 211 would, in our view, be inconsistent with Congress' intent. 78 This conclusion does not suggest that we would view the Commission's modification of the NYSEG-Penn Yan contract, by itself, as an order to wheel. Simple elimination of Penn Yan's undertaking not to contract with PASNY for energy beyond the needs of customers within the Village's 1961 territorial limits, would appear to do no more than permit Penn Yan to expand its wholesale purchase contract with PASNY; this, without the ordered modification of NS-11, would not compel wheeling. Nor do we suggest that the Commission is powerless to review a wheeling agreement under § 206 without following the requirements of §§ 211 and 212. If, after a hearing as required by § 206, the Commission determines that a particular rate, charge, or condition is unreasonable, it can order a modification. But where, as here, the modification amounts to an order requiring wheeling, it must be preceded also by determinations in accordance with §§ 211 and 212. Simply put, we will not allow the Commission to do indirectly without compliance with the statutory prerequisites, what it could not do directly without such compliance. Cf. Richmond Power & Light v. FERC, 574 F.2d 610, 620 (D.C.Cir.1978). 79 For the foregoing reasons, we affirm so much of the Commission's orders as required the filing of the contracts, and we vacate so much of the orders as modified the contracts, and remand for proceedings not inconsistent with this opinion. 80