Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller, John R. Norris, Cheryl A. LaFleur, and Tony Clark.
1. This case is before the Commission on voluntary remand from the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit). Below, the Commission continues to affirm its finding that the rate schedule Chehalis Power Generating L.P.
(Chehalis) proposed for supplying Reactive Supply and Voltage Control from Generation Sources Service (reactive power) to the Bonneville Power Administration (Bonneville or BPA) is a changed rate subject to the suspension and refund provisions of section 205(e) of the Federal Power Act (FPA).
However, the Commission clarifies its policy related to jurisdictional reactive power rate schedules for which there is no compensation, requiring that such rate schedules containing the rates, terms, and conditions for reactive power service be filed with the Commission on a prospective basis. This policy will ensure that ratepayers are protected from, inter alia, excessive rates, as the Commission will have the ability to suspend and refund any changed rates upon filing.
2. On May 31, 2005, Chehalis submitted a proposed rate schedule to the Commission setting forth proposed rates for Chehalis's provision of reactive power to Bonneville. Chehalis denominated the rate as “initial” stating that “[t]he reactive power service that is the subject of the submitted rates is a new service offered by Chehalis in that it has never sought to charge for this service before.” 
3. On July 27, 2005, the Commission accepted Chehalis's reactive power rate schedule, suspended it for a nominal period, made it effective subject to refund, and established hearing and settlement judge procedures.
In that order, the Commission found that the reactive power rate schedule was not an initial rate, because “[a]n initial rate must involve a new customer and a new service.” 
The Commission stated that “Chehalis has been providing reactive power to BPA pursuant to an interconnection agreement, albeit without charge. Thus, the proposed rates for reactive power in the instant proceeding are not initial rates, but are changed rates.” 
4. On December 15, 2005, the Commission denied Chehalis's rehearing request. The Commission explained that its well-settled precedent established that an initial rate is a rate for a new service to a new customer.
Finding that Chehalis had already been providing reactive power to Bonneville, the Commission denied rehearing and explained that Chehalis was not providing a new service to a new customer.
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5. On May 23, 2008, Chehalis petitioned the D.C. Circuit for review.
On August 10, 2010, the D.C. Circuit remanded the case to the Commission on a single issue: whether or not the rate for reactive power should have been filed with the Commission. In its remand order, the D.C. Circuit observed that, while Chehalis had advanced “a host” of grounds for reversing the Commission's orders, and while the Commission had provided responsive arguments, the court would address only one of Chehalis's arguments, one that the court stated that the Commission “entirely failed to address.” 
That argument is that “the only rates that are subject to § 205(e)'s suspension and refund provisions are those that change a rate already on file with FERC.” 
6. The D.C. Circuit summarized Chehalis's “on file with” argument as follows: before May 31, 2005, Chehalis had not filed a rate schedule—pursuant to FPA section 205(c)—for the reactive power it provided to Bonneville. Because Chehalis had not previously filed a rate schedule for the reactive power it provided to Bonneville, Chehalis stated that there could be no change in rates under the FPA. And because FPA section 205(e) limits the Commission's power to suspend rates and order refunds to changed rates, the Commission therefore could not suspend and order refunds here.
The court remanded the case to the Commission to consider this argument.
7. In its order on remand, the Commission found that the rate for reactive power that Chehalis provided to Bonneville should have been filed, thus making Chehalis's filing a changed rate, subject to the suspension and refund provisions of section 205(e) of the FPA.
The Commission noted that, in any event, whether or not a pre-existing rate had, in fact, been filed with the Commission was not part of the Commission's longstanding test for the determination of what constitutes a changed versus an initial rate.
The Commission's well settled precedent was that an initial rate was one that involved both a new service and a new customer.
Because the record in the case showed that Chehalis had been providing reactive power service to Bonneville since 2003, the proposed rate schedule for the provision of reactive power filed on May 31, 2005 did not propose a rate for a new service and a new customer.
8. The Commission denied rehearing of its Remand Order, stating that section 205 of the FPA required that rates, terms, and conditions of jurisdictional services must be filed with the Commission, and because reactive power is a jurisdictional service, Chehalis should have filed its rate schedule for reactive power. Accordingly, the Commission found it was fair to treat Chehalis's proposed rate schedule at issue as a changed rate.
The Commission also rejected Chehalis's contention that the Commission's action was contrary to its precedent “cancelling and rejecting generators' rate schedules when there is no longer any compensation associated with the obligation to follow a voltage schedule.” 
The Commission distinguished Hot Spring Power Co., L.P.
and other similar cases cited by Chehalis on the ground that, while the purchasing utilities involved were not obligated to pay the generators for within-the-deadband reactive power, the generators in those cases all had, in fact, filed rates.
9. On appeal of the Remand Order and Rehearing Order, Chehalis contends that the Commission erred by determining: (1) That the interconnection agreement between Chehalis and BPA was required to be filed prior to May 2005, even though it did not contain rates for reactive power service and Chehalis was not proposing to collect charges for such service prior to that date, and (2) that the proposed rate schedule for supply of reactive power service filed by Chehalis in May 2005 was a change in rates that could be suspended and made subject to refund under section 205(e) of the FPA. Chehalis specifically argued that, in prior Commission orders, when the generators cancelled their existing reactive power rate schedules, the Commission accepted those cancellations without suggesting that a replacement rate schedule must be filed for the supply of reactive power without compensation.
10. Upon consideration of Chehalis's brief filed with the court, the Commission moved for a voluntary remand to more fully consider Chehalis's arguments. On June 18, 2013, the court granted the Commission's motion.
II. Commission Determination
11. The Commission finds that further explanation is required in this proceeding. Section 205 requires that rates, terms, and conditions for jurisdictional services must be filed with the Commission; the statute does not make such a filing optional, or otherwise grant discretion to utilities to decide whether or when they must file their rates, terms, and conditions.
If the provision of reactive power is a jurisdictional service,
and no one in this proceeding denies that it is, then the utility providing this service has an obligation to file a rate schedule governing the provision of this service. Accordingly, we reaffirm our finding that Chehalis should have earlier filed a rate schedule for its provision of reactive power service, making its later filing on May 31, 2005, a changed rate.
12. However, the Commission also recognizes that it has previously accepted notices of cancellation of reactive power rate schedules where compensation was no longer involved. In order to clarify the Commission's policy related to reactive power service provided without compensation, the Commission finds that, on a prospective basis, for any jurisdictional reactive power service (including within-the-deadband reactive power service) provided by both existing and new generators, the rates, terms, and Start Printed Page 63179conditions for such service must be pursuant to a rate schedule on file with the Commission,
even though the rate schedule would provide no compensation for such service.
The Commission directs staff to conduct a workshop, in a generic proceeding, to explore the mechanics of public utilities filing reactive power rate schedules for which there is no compensation.
13. This policy is consistent with the Commission's precedent distinguishing between a changed rate and an initial rate.
In Southwestern Electric Power Co., the Commission defined an initial rate as one that provides for a new service to a new customer.
The Commission explained: “We believe that our broadened definition of a change in rate is consistent with and serves to further the policies which underlie the FPA. The primary purpose of the legislation is the protection of customers from excessive rates and charges.” 
The Commission emphasized that this definition of a changed rate allowed the Commission to give customers refund protection and, therefore, shield them from the ability of utilities to exploit any sort of regulatory lag by filing unjust and unreasonable rates.
Stressing this policy of protecting customers, the Commission stated: “Taking a broad view as to what constitutes a change in rate clearly serves, by making filings subject to the Commission's suspension and refund authority under section 205(e) of the FPA, to protect customers of electricity from excessive or exploitative rates.” 
14. As we explain below, because our policy is being clarified and we are prospectively providing for the filing of rates, terms and conditions for the provision of reactive power service (even within-the-deadband reactive power service) for which there is no compensation, we find that it would be appropriate for Chehalis to recover the amounts it previously refunded to BPA, with interest calculated in accordance with 18 CFR 35.19a (2013).
The DC Circuit has recognized the Commission's authority to order recoupment of funds previously paid if the Commission provides adequate explanation.
In the instant case, we find the recoupment of funds would be appropriate.
The Commission is clarifying its policy and, as explained above, finding that, with regard to jurisdictional reactive power service (even within-the-deadband reactive power service) for which there is no compensation, on a prospective basis rate schedules governing the rates, terms, and conditions for such service must be on file with the Commission.
Therefore, given that we are applying this policy on a prospective basis, we find that it would be appropriate for Chehalis to recover the amounts previously refunded to BPA, with interest.
The Commission orders:
The Secretary is hereby directed to promptly publish a copy of this order in the Federal Register.
By the Commission.
Issued October 17, 2013.
Kimberly D. Bose,
[FR Doc. 2013-24756 Filed 10-22-13; 8:45 am]
BILLING CODE 6717-01-P