Court Opinion

ID: 8914576
Source: CourtListenerOpinion
Date Created: 2022-11-27 04:27:28.418272+00
Date Added: 2024-06-11T17:08:51.511431
License: Public Domain

HOLDEN, Commissioner,

concurring:

I withhold further objection to, and concur in the issuance of, the order of the Commission in this docket. The present order is a pragmatic solution and the case is of vintage quality, having been filed more than four years past and having been decided by the Administrative Law Judge seventeen months ago. Hence, no further delay is warranted.
However, I do believe it is a matter that we shall have to revisit. It is fundamentally unsatisfactory to ignore obvious fact and to rely for the long term upon the fiction of “separate” companies. Yet such reliance is clearly present in the manner in which the responsibility of one company to its partners within an interconnection agreement is described.
“A deficit pool member by definition has failed to install sufficient generating capacity to meet its load and its proportionate share of the pool’s installed reserve. To meet its reserve responsibilities and to equalize reserve obligations, the deficit member must purchase capacity from pool members whose installed capacity exceeds their loads and proportionate reserve requirements, and pay a reasonable and just rate for such capacity. This obligation to purchase and pay for capacity cannot be excused because installed capacity costs have escalated for all members. By reason of its deficit status, the deficit member has avoided the costs of installing adequate capacity and must equalize its reserve obligation by purchasing capacity installed by other pool members.”1
That statement describes the purest concept of a power pool, in which independent companies make commitments to each other. When this is in effect, the management of each company is responsible for the interests of its separate investors. And, when this in effect, the certificate and/or rate regulators are ultimately responsible for, and have capacity to effectuate, the interests of their several jurisdictional publics.
Pooling necessarily inhibits individual company discretion, but is independently accepted on the basis of perceived advantage. The situation is quite different on the American Electric Power System. I do *900not have to conclude that the difference is bad. But it should be recognized realistically, as it is in the statement of the Chairman of the Indiana Public Service Commission. At Oral Argument, Chairman Wallace stated:
“We know what the responsibility of the state regulatory agency * with the dichotomy between the Federal and state roles. We are responsible for the retail rates. We are supposed to be the replacement for competition at the retail level, just as you are the substitute for competition at the wholesale level and we are supposed to allow rates that will only earn a reasonable return on the plant reasonably necessary and used for producing the electricity for retail customers. That as we all know sounds simple, but it is not very simple to implement. It is not simple or easy to implement under any circumstances but it is virtually impossible in some circumstances. The American Electric Power system to a certain extent is probably totally unregulated. I have never said that I felt that a state regulator, as a state regulator we can give even these traditional consents ** of regulation, really have a handle on regulation of retail rates for this company if for no other reason than the operating companies in Indiana and six other states in which the company operates, those decisions are not made by the operating companies, the investment decisions are not made, and in the sense that the state regulatory commission can then effectively regulate them.” 2
The same concept is present, in the filings by Michigan Public Service Commission and Indiana and Michigan Distributions Association [sic].
In my view, the same concept is also implicit in the argument of the Ohio PUC against the Staff approach to costing. Ohio PUC notes the length of time that Ohio ratepayers have been involved in the charges of a surplus company, and anticipates the time in which the shuttle will be reversed and Ohio ratepayers will be in the deficit position.3
The shuttle effect is the result of the manner of planning and deciding the future of the American Electric Power System, as well as of changes in the real world (i.e. actual vs. projected load growth, financial exigencies, etc.) Thus, it is central management that decides which state’s ratepayers will finance new construction on its system. (This is not to conclude that the American Electric Power system is in some manner imprudent, but merely to note that AEP is essentially the independent variable in a dynamic process and that the state regulatory process is indeed the dependent variable.)
If investment decisions are established by central management, then it can be argued possibly, that investment is the right criterion fairly to apportion charges.
Whether the investment basis, rather than the kilowatt capacity basis, for allocation is the right alternative, I do not now judge. Nor do I even have a provisional view that it would be superior. I do believe the dollars versus kilowatts choice deserves systematic comparison and a determination.
I do not preclude the possibility that even with a fuller record, the Commission should ultimately come to the same decision as is embodied in the present order. It is not necessary to attempt to resolve that question here. The record available to the Commission does not allow that determination.
All that is necessary is to observe that the Commission should probably review the interconnection agreement when there is a reasonable basis to believe that a superior practical alternative might, in fact, be de*901veloped. Whether this should involve a rate case under Section 205, a proceeding under 206, some form of broader examination under a Federal-State joint board format, collaboration with the NARUC, or some form of proceeding in which the relevant authorities of the Secretary of Energy to adopt an intervenor status might be utilized is a matter to be examined at some more appropriate time.
APPENDIX
ORDER DENYING APPLICATIONS FOR REHEARING AND CLARIFYING REQUIREMENT FOR CREDITS OR REFUNDS
(Issued September 24, 1979)
By Opinion No. 50 issued July 27,1979, in the captioned docket we approved, with certain changes, a proposed modification (Mod. 3) to an Interconnection Agreement regulating the charges for sales of power and energy among the principal operating subsidiaries of the American Electric Power System. The decision, in the main, approved the modification proposed by AEP while finding that a monthly carrying charge faetor used in calculating payments under the Agreement should be reduced from the level proposed and collected throughout the period during which the modification has been in effect subject to refund. Applications for rehearing of our decision have been filed by the Indiana and Michigan Municipal Distributors Association, The Public Service Commissions of the States of Indiana, West Virginia, Michigan and Ohio, and by AEP.
We have reviewed the specifications of error raised in the applications and find little that was not fully and adequately considered by us in the development of our decision. The reconsideration of these matters at this time gives us no reason to question the correctness of our determinations. The decision to require a reduction in the monthly carrying charge factor, and the adjustment to the rate of return element in the calculation which underlies the adjustment, were, we believe, adequately supported in all essential particulars. Accordingly, we are unable to accept the claim by the Ohio Commission that the original factor “is not unreasonable in the totality of the circumstances,” nor do we believe, as AEP argues, that the 17.5 percent carrying charge rate had been adequately established. In essence, we find that no modifications to the opinion portion of our decision are necessary or warranted.
There is one matter, however, which appears to require some clarification. Ordering Paragraph D of the Opinion requires Ohio Power Company to “. . . provide a statement reflecting appropriate credits for all sales of energy under Modification No. 3 due to the required modification in the monthly carrying charge factor.” This directive implements the finding in the Opinion, and restated in Finding Paragraph 2, reducing the monthly carrying charge factor to no more than 1.37 percent. The requirement for the filing of the credit statement was directed to Ohio Power Company for the reason that the Interconnection Agreement is on file with the Commission as Ohio Power Company’s Rate Schedule No. 23. Thus, insofar as the Commission is concerned, Ohio Power Company acts as agent for all the interconnected AEP subsidiary companies in their day-to-day operations under the agreement, in much the same manner as the AEP Service Corporation acted as agent for the same companies in the filing of the proposed Mod. 3. The reference at pages 5-6 of the Opinion to staff’s suggestion that changes might be made only prospectively (i.e., from and after the date of the Commission’s decision) clearly related to “. . . the higher pool charges which would result from its [staff’s] recommendations ...” and has no relevancy to our determination, which we thought had been clearly expressed, and which we here reaffirm, to require credits with respect to all charges levied by any of the operating companies during the period in which Mod. 3 has been in effect subject to refund and which have now been found excessive to the extent that they were based on the higher carrying charge factor.
*902The fact that a crediting mechanism was deemed satisfactory, rather than requiring actual cash refunds, simply reflects the close interrelation of the associated companies and the fact that, to our knowledge, intercompany charges and payments are handled as accounting transactions on a consolidated basis. In order to eliminate any further misunderstanding we shall amend our Order consistent with the foregoing discussion.
The Commission orders:
(A) The applications for rehearing and reconsideration of Opinion No. 50 filed by the Indiana and Michigan Municipal Distributors Association, the West Virginia Public Service Commission, the Public Service Commission of Indiana, the State of Michigan and the Michigan Public Service Commission, the Public Utilities Commission of Ohio and the American Electric Power Service Corporation are denied.
(B) Ordering Paragraph (D) of Opinion No. 50 is amended to provide:
“(D) Within 90 days from the date of issuance of this Opinion, Ohio Power Company, or American Electric Power Service Corporation as agent for Appalachian Power Company, Indiana & Michigan Electric Company, Kentucky Power Company and Ohio Power Company, shall provide a statement reflecting appropriate credits or refunds for all excess charges levied and collected under Modification No. 3 by any of the operating companies, applicable throughout the period in which Modification No. 3 has (or will have) been in effect subject to refund, due to the required modification in the Monthly Carrying Charge Factor.” Interest on the credits or refunds shall be included at the rate or rates specified in the Commission’s Regulations.
(C) In all other respects, Opinion No. 50 issued July 27, 1979, in this proceeding is confirmed.
By the Commission.
(SEAL)
Kenneth F. Plumb
Secretary

. American Electric Power Brief on Exceptions, pp. 28-29.

 Some word such as “agency” or “commission” apparently was omitted.

 Apparently transcription error. Was the word “constraints”?

. Oral Argument held at Washington, D. C., June 20, 1979, re American Electric Power Service Corporation, Docket No. E-9408, p. 675 and 676.

. Response of Ohio PUC re Docket No. E-9408, dated March 8, 1979, p.2.