On December 18, 2012, the U.S. Court of Appeals for the District of Columbia Circuit (“DC Circuit”) again addressed the question of whether, and to what degree, FERC has the authority to regulate charges to electric generators for the use of station power.  Denying a petition for review by a group of generators from California led by Calpine Corporation (“Calpine”), the DC Circuit held that FERC properly recognized that its lack of jurisdiction over retail sales prevented it from regulating the netting periods used by utilities to assess station power charges.

Station power is the electricity used by a generator for heating, lighting, air conditioning, and office equipment, and when generation and transmission services were bundled, the station power was “netted” against the power produced on-site.  Generally, the use of station power by a generator, i.e., when its use of energy from the grid exceeds its gross output, is considered a retail sale of electricity by a utility to the generator.  However, whether such state-jurisdictional retail charges arise depends on the period of time over which the generator’s use of station power is netted against its gross output.  Some non-utility generators have preferred longer netting periods over which gross output is more likely to exceed its use of power from the grid, enabling the generator to avoid retail charges.  In recent years, disputes have arisen regarding FERC’s authority to approve tariff language establishing station power netting periods.

In its 2010 Southern California Edison decision (Southern California Edison v. FERC, 603 F.3d 996 (D.C. Cir. 2010)), the DC Circuit held that FERC had exceeded its jurisdiction by ordering the California Independent System Operator (“CAISO”) use the same netting period to calculate transmission charges for station power and for retail charges.  The court stated that “FERC’s order does not just sideswipe state jurisdiction; it attacks it frontally.”  On remand from that decision, FERC issued an order acknowledging it lacked the authority regulate netting periods for determining when a retail sale had taken place. 

Calpine and other California generators asked the court to again revisit the question, arguing that FERC “over-read” the Southern California Edison decision and that FERC failed to look for other jurisdiction grounds to approve the CAISO’s netting process, which they favored. The court again found that FERC lacks jurisdiction to regulate station power netting practices.  Specifically, the court found that FERC’s wholesale jurisdiction does not extend to retail sales of station power, and thus does not require or permit it to regulate netting of station power charges.  The court rejected Calpine’s argument that FERC should have jurisdiction because “there is a direct mathematical relationship between the amount of generator-supplied energy available for sale at wholesale and the amount of energy used for station power.”  The court concluded that station power charges is ultimately not within FERC’s jurisdiction because “[w]hile the regulation of transmission charges is undoubtedly within FERC’s jurisdiction, retail charges are not.

A copy of the DC Circuit opinion is available here.  For a full discussion of Edison see May 7, 2010 edition of the WER.  For a discussion of FERC’s order on remand from Edison see September 10, 2010 edition of the WER.