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

Heading: Phasing Out Interruptible Load

Text: 22 Louisiana argues the Commission acted arbitrarily and capriciously by allowing Entergy to phase interruptible load out of its calculation of peak load over the course of a year. The gist of its argument is simply that the Commission, having held a rate unjust or unreasonable and approved a new rate in place thereof, may not carry forward the effect of the disapproved rate, any more than it could simply leave the unjust or unreasonable rate in place. See Pub. Util. Comm'n of Cal. v. FERC, 254 F.3d 250, 254 (D.C.Cir.2001) (the formula itself is the rate, not the particular components of the formula) (quoting Ocean State Power II, 69 F.E.R.C. ¶ 61,146 at 61,544 (1992)). 23 The Commission contends the phase-in of the new rate was the natural result of the billing lag built into the formula rate. Louisiana Commission, 112 F.E.R.C. ¶ 61,192 at 62,014 P 13. The Commission's point appears to be that the System Agreement called for a cost of service rate, which required that costs incurred in one month be recovered in a later month, thus necessarily creating a billing lag for the intervening months. See Pub. Serv. Co. of N.H. v. FERC, 600 F.2d 944, 948 (D.C.Cir.1979). Louisiana, on the other hand, argues the System Agreement provided a fixed rate formula, which used data from a past period as a proxy for current costs. See id. at 948, 950-52. 24 The Commission errs insofar as it suggests the lingering inclusion of interruptible load in the calculation of peak load was justified on the ground that it properly recovered an actual cost incurred in the provision of service. The cost of providing interruptible service is, by definition, avoidable and therefore—as the Commission has held, see Kentucky Utilities, 15 F.E.R.C. ¶ 61,002 at 61,004 — not an expense that justifies an increase in capacity, and therefore not the type of expense for which one Operating Company may recover from others under the Entergy System Agreement, Louisiana Commission, 106 F.E.R.C. ¶ 61,228 at 61,802-04 PP 63-77 (Opinion No. 468). This is so regardless whether including interruptible load in Entergy's calculation of peak load enabled it to recover actual costs via deferred billing or served as a proxy for actual costs in a fixed rate formula. On either view, the Commission has not explained why Entergy may continue to bill for costs the Commission has determined may not be justly and reasonably recovered. We hold, therefore, the Commission acted arbitrarily and capriciously by allowing Entergy to phase interruptible load out of its calculation of peak load for the purpose of allocating costs among the Operating Companies after the Commission had determined inclusion of interruptible load in the determination of peak load responsibility was unreasonable and therefore unlawful.