Opinion ID: 186908
Heading Depth: 2
Heading Rank: 1

Heading: Interruptible Load in the Calculation of Peak Load Responsibility

Text: 4 Under § 201(b) of the Act, the Commission has jurisdiction to approve rates, terms, and conditions for wholesale electricity service offered in interstate commerce, see 16 U.S.C. § 824(b) (2004), which includes the electricity sold by the Operating Companies. The Commission may review and order a change in any rate it finds is unjust, unreasonable, unduly discriminatory or preferential. § 206(a), 16 U.S.C. § 824e(a) (2004). 5 Some of the Operating Companies carry an interruptible load in addition to a firm load. Firm load is electricity sold pursuant to a contract that entitles the customer to receive service from the seller on demand. Interruptible load, on the other hand, is electricity sold pursuant to a contract that entitles the seller to curtail service when it does not have enough capacity to produce electricity in excess of the quantity demanded by customers with contracts for firm service. Louisiana regulates the retail rates charged by utilities operating in Louisiana, where most of Entergy's retail customers with contracts for interruptible service are located. 6 In 1995 Louisiana filed a complaint with the Commission claiming the formula for peak load responsibility in Entergy's System Agreement was unjust or unreasonable because it allocated capacity costs to the Operating Companies based upon monthly peak demand for both firm and interruptible load. The Commission, whose trial staff estimated that removing interruptible load from the formula Entergy used to calculate peak load responsibility would shift $14 million in cost responsibility from Entergy Louisiana's ratepayers to the ratepayers served by the other Operating Companies, rejected Louisiana's complaint. La. Pub. Serv. Comm'n v. Entergy Servs., Inc., 76 F.E.R.C. ¶ 61,168 at 61,956 (1996), reh'g denied, 80 F.E.R.C. ¶ 61,282 at 62,007 (1997). The Commission also determined Louisiana was not entitled to a hearing because it had not alleged that Entergy's decision no longer to count interruptible load when deciding whether to add new capacity had upset the rough equalization of costs among the Operating Companies achieved by the System Agreement. Louisiana Commission, 80 F.E.R.C. ¶ 61,282 at 62,007. 7 We granted Louisiana's petition for review and held the Commission did not give an adequate explanation for departing from the precedent it had set in Kentucky Utilities Co., 15 F.E.R.C. ¶ 61,002 at 61,004-05 (1981), where the Commission held it was unjust or unreasonable for a utility to charge capacity costs to a customer purchasing only interruptible service because the utility could control its capacity costs by curtailing interruptible service during times of peak demand. See La. Pub. Serv. Comm'n v. FERC, 184 F.3d 892, 896-97 (1999) ( Louisiana I ). We remanded the case for the Commission to determine whether including interruptible load in the formula for allocating peak load responsibility was unjust or unreasonable and, if not, then to explain its reasoning in light of Kentucky Utilities. See id. at 897, 900. Because we could not discern the content of its `rough equalization' standard, we also directed the Commission to clarify the standard and either reveal why [Louisiana's] allegation of an unjust and unreasonable method of allocation with facially significant consequences does not meet that standard, or grant [Louisiana] a hearing, as the case may be. Id. at 899. 8 Nearly five years later, in March 2004, the Commission determined it was unjust or unreasonable for Entergy to include interruptible load in its calculation of peak load responsibility because the Operating Companies could control capacity costs by curtailing interruptible service during times of peak demand. Louisiana Commission, 106 F.E.R.C. ¶ 61,228 at 61,802-04 PP 67-77 (Opinion No. 468). Entergy moved for rehearing, arguing it should not have to remove interruptible load from its calculation of peak load for the 12 months preceding April 2004 so that the effect of Opinion No. 468 will be phased in prospectively over the ensuing twelve months. In April 2005 the Commission answered, rather cryptically: Entergy must adjust the system peaks and its rates beginning April 1, 2004, as required by Opinion No. 468. La. Pub. Serv. Comm'n v. Entergy Servs., Inc., 111 F.E.R.C. ¶ 61,080 at 61,372 P 31 (2005) (Opinion No. 468-A). Later that month, at a hearing before the Louisiana Public Service Commission, counsel for Entergy Services, Inc. took the position that the Opinion No. 468-A was saying that you begin the rolling 12 months in April of '04, so that, by the time you get to April of '05, you'll have the effect; in other words, Entergy interpreted Opinion No. 468-A as adopting its request to phase the interruptible load out of its formula for peak load responsibility over a period of 12 months. 9 In June 2005 Louisiana filed a protest with the Commission. In a Compliance Order issued that August, however, the Commission expressly accepted Entergy's phase-out approach as the natural result of the billing lag built into the formula rate. La. Pub. Serv. Comm'n v. Entergy Servs., Inc., 112 F.E.R.C. ¶ 62,192 at 62,014 P 13 (2005). Louisiana now seeks review of Opinion Nos. 468 and 468-A, so interpreted.