[Federal Register Volume 62, Number 131 (Wednesday, July 9, 1997)]
[Rules and Regulations]
[Pages 36657-36663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17800]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket Nos. RM95-8-004 and RM94-7-005]
Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery of
Stranded Costs by Public Utilities and Transmitting Utilities
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule; order denying motion for stay.
-----------------------------------------------------------------------
SUMMARY: The Federal Energy Regulatory Commission (Commission) denies
Ontario Hydro's motion for stay pending judicial review of the
reciprocity provision of Order No. 888 as it applies to transmission-
owning foreign electric utilities. Based on the limited information
provided by Ontario Hydro, the Commission could not conclude that
Ontario Hydro has demonstrated on this record that justice requires a
stay.
FOR FURTHER INFORMATION CONTACT: Lois D. Cashell, Secretary, (202) 208-
0400.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in the Public Reference Room
at 888 First Street, N.E., Washington, D.C. 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing 202-208-1397 if dialing locally or 1-800-856-3920 if dialing
long distance. To access CIPS, set your communications software to
19200, 14400, 12000, 9600, 7200, 4800, 2400, or 1200 bps, full duplex,
no parity, 8 data bits and 1 stop bit. The full text of this order will
be available on CIPS in ASCII and WordPerfect 6.1 format. CIPS user
assistance is available at 202-208-2474.
CIPS is also available through the Fed World system. Telnet
software is required. To access CIPS via the Internet, point your
browser to the URL address: http://www.fedworld.gov and select the ``Go
to the FedWorld Telnet Site'' button. When your Telnet software
connects you, log on to the FedWorld system, scroll down and select
FedWorld by typing: 1 and at the command line then typing: /go FERC.
FedWorld may also be accessed by Telnet at the address fedworld.gov.
Finally, the complete text on diskette in WordPerfect format may be
purchased from the Commission's copy contractor, La Dorn Systems
Corporation. La Dorn Systems Corporation is also located in the Public
Reference Room at 888 First Street, N.E., Washington, D.C. 20426.
Before Commissioners: James J. Hoecker, Chairman; Vicky A.
Bailey, William L. Massey, and Donald F. Santa, Jr.
Order Denying Motion for Stay
Issued June 20, 1997.
On May 2, 1997, Ontario Hydro filed a motion for stay pending
judicial review of the provision of Order No. 888 1
``requiring transmission-owning foreign electric utilities to provide
open-access transmission services as a condition to receiving
transmission access from transmission-owning public utilities in the
United States (the `Open-Access Condition').'' 2 On May 16,
1997, the Commission, in response to Ontario Hydro's motion, issued an
order clarifying the reciprocity condition of Order No. 888 and
requesting additional information.3 Ontario Hydro submitted
its response on May 23, 1997. Based on the limited information provided
by Ontario Hydro, as set forth below, we cannot conclude that Ontario
Hydro has demonstrated on this record that justice requires a stay. We
therefore deny Ontario Hydro's motion.
---------------------------------------------------------------------------
\1\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities and
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. &
Regs. para. 31,036 (1996), order on reh'g, Order No. 888-A, 62 FR
12274 (March 14, 1997), FERC Stats. & Regs. para. 31,048 (1997),
reh'g pending.
\2\ Motion for Stay at 1.
\3\ Order Clarifying Order No. 888 Reciprocity Condition and
Requesting Additional Information, 79 FERC para. 61,182 (May 16
Order).
---------------------------------------------------------------------------
I. Background
A. Motion for Stay
Ontario Hydro is a Canadian utility that historically has sold
electric power to U.S. purchasers. It claims that the Open-Access
Condition will ``disrupt'' its entire ``forecasted'' $235 million
(Canadian) per year U.S. export business and that it will have no
opportunity to recover any of its losses.
Ontario Hydro interprets the Open-Access Condition as applying
``not only
[[Page 36658]]
to sales by Ontario Hydro that require delivery by Ontario Hydro to
points within the U.S., but also to sales by Ontario Hydro to U.S.
purchasers at the Canadian border, which do not require delivery by
Ontario Hydro to points within the U.S.'' 4 It asserts that
it will lose all of these sales because it ``cannot allow the required
open access into Ontario without the approval of the Ontario
Government, which will require a complete restructuring of the
Province's electric power system and the resolution of a number of very
complex financial and other issues.'' 5
---------------------------------------------------------------------------
\4\ Motion for Stay at 2.
\5\ Id.
---------------------------------------------------------------------------
Ontario Hydro asserts that its motion for stay satisfies the test
for granting a stay and maintains, among other things, that it will
sustain substantial irreparable injury without a stay. In particular,
it alleges that Order No. 888 has precluded Ontario Hydro and its U.S.
purchasers from obtaining transmission services from interconnected
utilities in the Michigan Electric Coordinated System (MECS) and
Niagara Mohawk Power Corporation, has resulted in Ontario Hydro sales
to a U.S. customer being interrupted by the MECS utilities, and has
allowed MECS utilities to obtain commercially sensitive market
information from Ontario Hydro. It further asserts that a stay would
not cause harm to any other party and that a stay is in the public
interest by keeping existing competitors in the bulk power market.
Finally, Ontario Hydro asserts that it is likely to succeed on the
merits because the Commission ``lacks express statutory authority for
issuance of this rule, an appellate court has rendered a
contemporaneous decision that undermines the Commission's authority to
issue the new regulation,6 and the Commission's rule is
inconsistent with U.S. obligations under an international trade
agreement.'' 7
---------------------------------------------------------------------------
\6\ Motion for Stay at 7-8. Ontario Hydro cites Altamont Gas
Transmission Company v. FERC, 92 F.3d 1239 (D.C. Cir. 1996), cert.
denied sub nom. Indicated Expansion Shippers v. FERC, 117 S.Ct. 1568
(1997).
\7\ Motion at 8 and 11. Ontario Hydro references the North
American Free Trade Agreement (NAFTA), Article 301, see 32-3 Int'l
Legal Materials 682 (1993); 19 U.S.C.A. Sec. 3301 et seq. (1995
Supp.) (legislation implementing NAFTA), and the General Agreement
on Tariffs and Trade (GATT), 61 Stat. A5, A18-A19 (1947).
---------------------------------------------------------------------------
B. Responses to Motion for Stay
On May 13, 1997, Consumers Energy Company (Consumers) and Detroit
Edison Company (Detroit Edison) filed a preliminary joint answer
opposing the motion for stay (Preliminary Joint Answer).8
They explain that Consumers, Detroit Edison and Ontario Hydro are
parties to an Interconnection Agreement under which Ontario Hydro
continues to sell power into the United States through buy-sell
transactions. In particular, they provide data showing that during 1996
Ontario Hydro sold $54,537,600 of electric power pursuant to the
Interchange Agreement and $24,821,554 of electric power during the
first four months of 1997.9 Thus, they argue, Ontario Hydro
cannot show that it will be harmed by a denial of a stay because it is
able to sell power in the United States despite the reciprocity
condition of Order No. 888 and Ontario Hydro's lack of a reciprocal
open access tariff.
---------------------------------------------------------------------------
\8\ Consumers and Detroit Edison comprise the MECS System.
\9\ The derivation of these amounts is set forth, by month, in a
chart attached to the affidavit of Jon E. Weist, Staff Engineer,
Transmission Operations, for the Michigan Electric Power
Coordinating Center.
---------------------------------------------------------------------------
On May 16, 1997, Hydro-Quebec filed an answer opposing the motion
for stay. It seeks assurance that any action the Commission takes
concerning Ontario Hydro's motion will not delay the Commission's
ruling on HQ Energy Services (U.S.) Inc.'s (an affiliate of Hydro-
Quebec) request for market-based rate authority in Docket No. ER97-851-
000.
C. Commission Order of May 16, 1997
By order issued May 16, 1997, the Commission clarified the Order
No. 888 reciprocity condition and requested Ontario Hydro to provide
additional information. The Commission clarified that the revised
language in the Section 6 reciprocity condition in the pro forma tariff
``does not impose the reciprocity condition in circumstances where a
Canadian utility sells power to a U.S. utility located at the United
States/Canada border, title to the electric power transfers to the U.S.
border utility, and the power is then resold by the U.S. border utility
to a U.S. customer that has no affiliation with, and no contractual or
other tie to, the Canadian utility.'' Because Ontario Hydro's motion
contained only general, unsupported allegations of harm and did not
contain sufficient information for the Commission to analyze whether a
stay is appropriate, the Commission asked Ontario Hydro to respond to a
number of specific questions. These questions were an attempt to
ascertain specifically how Ontario Hydro has conducted transactions
with U.S. border utilities and U.S. customers both pre-and post-Order
No. 888, whether Ontario Hydro was indeed being denied transmission
access as a result of Order No. 888 in order to continue historical
transactions with U.S. utilities, and the derivation of Ontario Hydro's
claimed monetary injury.
D. Further Answer of Detroit Edison
On May 19, 1997, Detroit Edison filed a further answer opposing the
motion for stay.\10\ It emphasizes that Ontario Hydro's sales have not
been ``abruptly halted,'' but that instead, ``exports of electricity
from Ontario Hydro to the State of Michigan during the first four
months of 1997 totaled 1,359,238 Mwh, at a value of $24.8 million of
sales, as compared with exports of 416,269 Mwh, at a value of $9.6
million of sales, during the same period of 1996.'' \11\ It points out
that Ontario Hydro is party to an Interconnection Agreement under which
``Ontario Hydro's sales to United States purchasers are continuing in
the same manner Ontario Hydro has utilized for many years to build the
export business it now claims is threatened by the requirements of
Order No. 888.'' \12\
---------------------------------------------------------------------------
\10\ Also on May 19, 1997, Consumers filed a summary answer to
Ontario Hydro's Motion for Stay concurring with the arguments
contained in Detroit Edison's Answer. It explains that it is not
joining with Detroit Edison's Answer simply because Detroit Edison's
Answer includes some factual assertions about which Consumers has no
personal knowledge.
\11\ Detroit Edison Answer at 2.
\12\ Id. Detroit Edison explains:
The electrical transmission facilities of Detroit Edison have
been directly interconnected with those of Ontario Hydro since
September, 1953, and the electrical generation and transmission
networks in Michigan and Ontario are coordinated in accordance with
the provisions of an Interconnection Agreement between Detroit
Edison, Consumers Energy Company (``Consumers''), and Ontario Hydro
dated as of January 29, 1975, as amended July 20, 1976, June 21,
1979, April 1, 1985, October 3, 1988, and February 1, 1991.
---------------------------------------------------------------------------
Detroit Edison further explains that the alleged interruption of
sales to a U.S. customer (Toledo Edison Company) by MECS actually was
undertaken as a buy/sell transaction pursuant to the Interconnection
Agreement and that ``during the month of April 1997, Toledo Edison
purchased 632,144 megawatthours of energy produced and sold by Ontario
Hydro in 13 separate transactions.'' \13\
---------------------------------------------------------------------------
\13\ Detroit Edison Answer at 6-7 and 13-14.
---------------------------------------------------------------------------
Detroit Edison asserts that Ontario Hydro has not demonstrated a
likelihood of success on the merits of its appeal because the
Commission's action was fully within its jurisdiction and consistent
with the United States' NAFTA obligations. It also asserts that Ontario
Hydro will not be irreparably injured by the denial of a stay as
evidenced by the continuing and even increasing deliveries of energy by
Ontario Hydro to MECS since issuance
[[Page 36659]]
of Order No. 888. Detroit Edison further asserts that a stay would harm
other parties, including itself, because Ontario Hydro would be
permitted to compete in the United States with Detroit Edison and other
U.S. utilities, but Detroit Edison and other U.S. utilities would not
be able to compete with Ontario Hydro in Canada. Finally, Detroit
Edison declares that a stay would not be in the public interest because
it would substantially alter the status quo and permit Ontario Hydro to
compete unfairly in the United States.
E. Response of Ontario Hydro to May 16 Order
On May 23, 1997, Ontario Hydro submitted its response to the
Commission's May 16 Order. Ontario Hydro declares that because the
Commission clarified that buy/sell arrangements that include a
contract, link or tie between Ontario Hydro and the non-border
purchaser are subject to reciprocity, all of its buy-resell
transactions (now numbering 40) will now be blocked by the Open Access
Condition unless it can obtain waivers.
Ontario Hydro further takes issue with the scope of the
Commission's questions. It interprets the questions as implying that
``Ontario Hydro cannot be suffering much injury due to Orders 888 and
888-A, because Ontario Hydro has been conducting some sales at the
international border--essentially under the `old' pre-Order 888 rules--
and should have no expectation that it could participate fully under
the new rules established by the Commission for the U.S. wholesale
power market.'' \14\ Ontario Hydro believes that this approach ``does
not fairly reflect the good faith contributions Ontario Hydro has made
to U.S. utilities and other organizations over the years and its rights
under the U.S. law and binding international agreements.'' \15\ It
maintains that it is entitled under U.S. law and international trade
agreements to obtain transmission services in the United States on the
same terms as U.S. public utilities.
---------------------------------------------------------------------------
\14\ Ontario Hydro Response at 5-6.
\15\ Id. at 6.
---------------------------------------------------------------------------
In claiming irreparable harm, Ontario Hydro asserts that--
[i]t would be a mistake for the Commission to focus narrowly on
data from sales under the old order in assessing the injury caused
by the Open-Access Condition, since the injury to Ontario Hydro will
occur under the new open-access regulatory regime * * *. Ontario
Hydro expects to sell power to many of these power marketers and
other non-border utility merchant organizations, if the Open-Access
Condition is stayed and Ontario Hydro is not forced to sell only to
U.S. border utilities. [16]
---------------------------------------------------------------------------
\16\ Ontario Hydro Response at 7-8.
Ontario Hydro adds that even though it has made sales since issuance of
Order No. 888, these sales will ``dwindle away'' once U.S. utilities
are aware of their right to deny foreign utilities transmission access
because of the reciprocity condition.
Ontario Hydro's response does not provide the majority of the
specific information requested by the Commission, but instead answers
the Commission's questions in only a most general manner. In response
to questions concerning the derivation of its forecasted $235 million
per year loss, Ontario Hydro states that its--
[e]lectric power sales into the U.S. fall into three main
categories, those in which (1) power was transmitted to the U.S.
purchaser through the purchase of transmission services by the
purchaser, (2) power was delivered to the U.S. purchaser through a
buy-resell arrangement, and (3) power was sold directly to a U.S.
border utility. Ontario Hydro's historical records of transactions
are based on billing records. These detailed, auditable records
state to whom energy was sold (contractually) and the revenues
received. However, the records are voluminous and individual sales
data cannot be provided to the Commission in response to the May 16
Order. However, based on the experience of Ontario Hydro personnel
in the Interconnect Markets Department, Ontario Hydro believes that
approximately one-third of sales fall into the first two categories
above, i.e., have not been to an interconnected U.S. border
utility--at least with respect to 1997 year-to-date sales. Most of
the sales to interconnected U.S. border utilities for their own use
have been to Detroit Edison. [17]
---------------------------------------------------------------------------
\17\ Ontario Hydro Response at 9-10.
Ontario Hydro then claims that it has entered into agreements with
``many'' U.S. utilities and power marketers and if it could obtain
open-access transmission in the United States, ``it would be able to
increase sales to these entities dramatically.'' 18
---------------------------------------------------------------------------
\18\ Ontario Hydro Response at 10.
---------------------------------------------------------------------------
F. Answer of Consumers and Detroit Edison to Ontario Hydro Response
On May 30, 1997, Consumers and Detroit Edison filed a joint answer
to Ontario Hydro's Response. They attach to their response a copy of
the international border agreement, called the Interconnection
Agreement, which governs the transmission of energy from Ontario
Hydro's substations on the Canadian side of the border to the Detroit
Edison/Consumers substations on the U.S. side of the border and the
sale of energy to the border utilities; such transmission and sales are
subject to the jurisdiction of the Department of Energy (DOE).
Consumers and Detroit Edison argue that Ontario Hydro's Response fails
to address material aspects of the Commission's May 16 Order and
provides incomplete and ambiguous responses to other aspects. They
assert that Ontario Hydro failed to explain its steadily increasing
buy/sell transaction sales to U.S. customers since the effective date
of Order No. 888. They also assert that every one of Ontario Hydro's
contracts for the sale of power to U.S. purchasers (other than a border
utility) cannot be rendered void or voidable because in transactions
where a border utility in a buy-sell transaction takes title to power
and energy entering its system, ``the power and energy resold and
transmitted in the United States is its own.'' 19 They
emphasize that such arrangements are the only ones authorized under the
Interconnection Agreement. Moreover, they state that while Ontario
Hydro implies that it has a formal contractual arrangement with each of
its U.S. customers, the language used by Ontario Hydro suggests that
its agreements with U.S. customers may not be formal
contracts.20
---------------------------------------------------------------------------
\19\ Joint Answer at 4.
\20\ Ontario Hydro failed to provide even one of the 40
``contracts'' to which it refers.
---------------------------------------------------------------------------
Consumers and Detroit Edison further argue that Ontario Hydro is
seeking preferential access to transmission services in the United
States and is seeking ``to build a power sales business by selling in
the United States at unregulated, market-based rates without meeting
any of the requirements imposed on utilities in the United States for
market rate authorization.'' 21
---------------------------------------------------------------------------
\21\ Joint Answer at 4 (footnote omitted).
---------------------------------------------------------------------------
II. Discussion
Based on the limited information provided to us by Ontario Hydro,
and in light of the additional information that has been submitted by
Consumers and Detroit Edison with respect to ongoing trade with Ontario
Hydro, we cannot conclude based on this record that the requested stay
is warranted. The overwhelming failing of Ontario Hydro's motion for
stay is that it contains not one solid figure that would indicate that
Ontario Hydro is suffering or may suffer irreparable harm as the result
of Order Nos. 888 and 888-A. We have carefully reviewed all of the
pleadings and other information provided in this case and can only
conclude that since the effective date of Order No. 888 Ontario Hydro
has continued to make significant sales to U.S. purchasers contrary to
its claim that ``the Open-Access Condition
[[Page 36660]]
will disrupt Ontario Hydro's entire $235 million per year U.S. export
business, with no possibility of recovery of losses.'' 22
---------------------------------------------------------------------------
\22\ Motion for Stay at 1.
---------------------------------------------------------------------------
Additionally, from what we can glean from the filings before us, it
appears that while historical trade with U.S. border utilities has not
been disrupted and in fact has increased since Order No. 888 became
effective, Ontario Hydro's real concern may be the potential of not
being able to increase trade with non-border utilities in the future
through the use of U.S. open access tariffs. Ironically, it is the
existence of the open access tariffs required by Order No. 888 that
gives rise to Ontario Hydro's ``expectation'' of growing trade in the
United States. It cannot at the same time claim the benefits of open
access transmission and object to one of the provisions the Commission
included in Order No. 888 to ensure that competition takes place on
fair terms. As discussed below, we do not believe that Ontario Hydro's
potential to increase trade with U.S. non-border utilities can be said
to invoke irreparable harm; moreover, we believe that to excuse Ontario
Hydro from the same open access tariff provisions that apply to U.S.
non-public utilities would provide an undue and anticompetitive
preference to Ontario Hydro.
Justice Does Not Require a Stay
Under the Administrative Procedure Act, the Commission will grant a
stay if ``justice so requires.'' 23 Ontario Hydro based its
motion for stay on a broad array of general statements lacking in any
specificity or evidentiary support. Significantly, it failed to provide
the bulk of the information the Commission sought in its May 16 Order
in order to make a determination as to how the reciprocity condition
might apply to Ontario Hydro, the potential dollar impact on Ontario
Hydro of applying the reciprocity condition, and whether justice
requires a stay. Ontario Hydro has failed to show that justice requires
a stay.
---------------------------------------------------------------------------
\23\ 5 U.S.C. Sec. 705 (1994).
---------------------------------------------------------------------------
Ontario Hydro has failed to demonstrate that Order Nos. 888 and
888-A have resulted or will result in the stoppage of its export trade
to the United States. With regard to sales that occur through Consumers
and Detroit Edison (the MECS utilities), as Consumers and Detroit
Edison indicate in their Joint Preliminary Answer and Joint Answer,
Ontario Hydro and the MECS utilities continue to engage in buy/sell
arrangements under the Interconnection Agreement and the MECS utilities
continue to provide the transmission necessary to deliver the power
sold by Ontario Hydro. Based on the record before us, it appears that
Ontario Hydro has not been a customer under the MECS utilities' Order
No. 888 open access tariffs (thus invoking the tariff reciprocity
provision), but rather the MECS border utilities either have
transmitted the power pursuant to pre-existing unbundled bilateral
agreements or pursuant to their own tariffs (presumably under the Order
No. 888 tariff since July 9, 1996) to move the electric power purchased
from Ontario Hydro to the customers designated by Ontario Hydro; in
other words, the MECS utilities have been taking service under their
own open access tariffs for historical trades, and Ontario Hydro has
continued to make significant sales in the United States, without being
subjected to the reciprocity condition.24
---------------------------------------------------------------------------
\24\ The reciprocity condition of the open access tariff
(section 6 of the tariff) applies to third-party customers that take
service under the tariff. As clarified in Order No. 888-A, it also
applies to any third-party entity in the chain of a transaction that
involves the use of an open access tariff by a third-party customer.
With regard to sales through the MECS border utilities, which all
appear to be buy-sell transactions, it does not appear on this
record that Ontario Hydro, any of the 40 power purchasers with whom
it says it has contracts, or any other third party has been a
transmission customer under the MECS utilities' open access tariffs.
---------------------------------------------------------------------------
With respect to the sales that Ontario Hydro has been making in the
United States, we note that from actual monthly data provided by
Consumers and Detroit Edison (the only actual data provided in this
proceeding) concerning Ontario Hydro's interchange transactions with
MECS, Ontario Hydro has sold $58,975,770 of power to MECS during the 10
months from July 1996 (the month in which Order No. 888 became
effective) to April, 1997 (the last month in which Detroit Edison had
information available).25 Moreover, for the first four
months of 1997 (post Order No. 888), Ontario Hydro sold $24,821,554 of
power to MECS, which is $15,178,261 more than the comparable period for
1996 (pre Order No. 888), or an increase in sales of 157 percent. Thus,
rather than Ontario Hydro's dire assertions that its ``entire $235
million per year U.S. export business'' will be disrupted by Order No.
888 and that its sales will ``dwindle away'' once U.S. utilities become
aware of reciprocity, based on the information in this record it
appears that Ontario Hydro has actually experienced a significant
increase in sales to the United States since the effectiveness of Order
No. 888.
---------------------------------------------------------------------------
\25\ All dollar amounts used in this order are in Canadian
dollars. As reported in the Wall Street Journal of June 11, 1997,
the exchange rate was $1 Canadian equals $0.7208 U.S.
---------------------------------------------------------------------------
Ontario Hydro, essentially ignoring these increased sales, implies
that it is not entirely concerned with the historical transactions it
has undertaken with U.S. utilities, but is concerned with additional
transactions that it may enter into pursuant to the open access tariffs
of U.S. utilities, and that these future transactions may be
jeopardized by the reciprocity condition of Order Nos. 888 and 888-A.
However, in attempting to analyze this concern, we are again faced with
a lack of information and the incomplete answers provided by Ontario
Hydro to our questions. For example, we have no way of knowing, as
discussed below, the type of transactions included in Ontario Hydro's
forecast of ``$235 million per year U.S. export business'' and whether
any of that amount may be subject to the reciprocity
condition.26 Ontario Hydro chose not to provide any
derivation of that forecasted amount, even after being requested to do
so by the Commission in its May 16 Order.27 Without an
understanding of the composition of the forecasted $235 million, the
Commission finds it impossible to determine what portion of the $235
million may involve transactions subject to the reciprocity condition
and arguably subject to loss by Ontario Hydro.
---------------------------------------------------------------------------
\26\ Similarly, Ontario Hydro referenced in its Motion for Stay
an historical amount of $750 million in gross proceeds from the sale
of wholesale power to U.S. purchasers over the last three years, but
again failed to provide the breakdown of that amount, as requested
by the Commission in its May 16 Order.
\27\ The fact that its historical records of transactions are
based on billing records that are voluminous, as claimed by Ontario
Hydro as justification for not providing the information to the
Commission, is no reason for not providing the derivation of the
``forecasted'' $235 million.
---------------------------------------------------------------------------
The significance of Ontario Hydro's failure to explain the
derivation of the $235 million is underscored by Ontario Hydro's own
explanation that its electric power sales into the United States fall
into three categories: ``(1) power was transmitted to the U.S.
purchaser through the purchase of transmission services by the
purchaser, (2) power was delivered to the U.S. purchaser through a buy-
resell arrangement, and (3) power was sold directly to a U.S. border
utility.'' 28 Ontario Hydro does not explain in any detail
how the buy-sells under Category (2) are accomplished, including the
specifics of any ``contractual or other tie'' between the ultimate
purchaser and Ontario Hydro, so the Commission cannot definitively
determine whether
[[Page 36661]]
or not the reciprocity provision of the open access tariff would apply
to this category.29 However, even assuming that the first
two categories would subject Ontario Hydro to the reciprocity
condition, but not the third, as Ontario Hydro implies, it is
significant to note that Ontario Hydro itself admits that only
approximately one-third of its sales fall into the first two
categories, thus leaving two-thirds of its sales, or approximately $157
million, under category three and not subject to
reciprocity.30 Moreover, as noted, it is not clear that the
transactions that Ontario Hydro has placed in Category (2) are subject
to reciprocity since Ontario Hydro has failed to inform us as to
whether it, its non-border utility purchasers or a third-party
intermediary would be seeking transmission access under the Order No.
888 tariff to effectuate the buy-sells, thus invoking the reciprocity
condition. In either case, it appears based on this record that
historical sales through the MECS utilities have continued, with the
MECS utilities either transmitting power pursuant to pre-existing
unbundled bilateral agreements or pursuant to their own transmission
tariffs.
---------------------------------------------------------------------------
\28\ Ontario Hydro Response at 9.
\29\ In fact, Ontario Hydro does not give any detail for any of
the categories. However, reciprocity (unless waived by the
transmission provider or the Commission) would appear to apply to
Category (1) because it would involve the use of the open access
tariff by the U.S. customer that is purchasing power from Ontario
Hydro. Reciprocity would not appear to apply to Category (3) because
these appear to be transactions in which the border utility is the
purchaser and re-sells to a U.S. customer unknown to Ontario Hydro.
\30\ While Ontario Hydro provides this breakdown of sales, it
indicates that the breakdown is applicable ``at least with respect
to 1997 year-to-date sales,'' leaving one to guess the breakdown of
its $235 million forecast. Moreover, Ontario Hydro fails to provide
the Commission with the year-to-date sales to which it refers.
---------------------------------------------------------------------------
Because Ontario Hydro failed to provide any of the detailed
information requested by the Commission, we cannot calculate how much
of the alleged loss of sales falls into each of the three categories;
however, we expect that the vast majority of the estimated one-third of
sales falling into the first two categories actually fall into category
2 because neither Ontario Hydro nor Detroit Edison has made any
reference to actual transactions under which a U.S. purchaser obtained
transmission service from a border utility's open access tariff. Since
Ontario Hydro's sales appear to have continued (and increased) since
issuance of Order No. 888, we fail to see how there can be any
significant harm to Ontario Hydro as a result of Order Nos. 888 and
888-A. The transactions with the MECS utilities have continued since
the effective date of Order No. 888 and appear likely to continue.
Moreover, Ontario Hydro has not demonstrated that any of its 40
agreements for sales to U.S. purchasers (other than the U.S. border
utilities) cannot take place pursuant to the Interchange Agreement.
The above discussion has focused on border sales through the MECS
utilities Consumers and Detroit Edison. While Ontario Hydro has made
vague allegations regarding sales that would require it to use Niagara
Mohawk's open access tariff, it has failed to give any detail regarding
these transactions. For example, it has not described the New York
border utilities through whom it would transmit power nor provided
copies of any of the agreements it has with these or other U.S.
utilities or customers, nor provided any other of the requested
information.
Additionally, in the affidavit of Bruce D. Mackay, attached to
Ontario Hydro's Motion for Stay, Ontario Hydro asserts that it
responded to three specific requests for proposals (RFPs) for the
supply of electric power and implies that it was not chosen because it
was unable to obtain transmission service. However, seeking to clarify
the circumstances involving these RFPs, the Commission sought
additional information from Ontario Hydro. For whatever reason, Ontario
Hydro chose not to respond to our question of whether it could not make
the trades because it was denied transmission access by a U.S.
transmission provider.
With regard to the potential inability to increase trade with U.S.
utilities, Ontario Hydro has failed to demonstrate that this
constitutes irreparable harm. There is nothing in this record to
indicate that Ontario Hydro is in any worse a position than it was
prior to Order No. 888, at which time it had to rely solely on
voluntary transmission services from U.S. public utilities to sell to
U.S. utilities other than border utilities. As noted, to our knowledge
trade with border utilities has continued uninterrupted since issuance
of Order No. 888. Additionally, even if we were to accept Ontario
Hydro's implication that it is irreparable harm not to be able to
increase trade, other than two allegations of denials of transmission
access by U.S. utilities (Niagara Mohawk and Detroit Edison with
respect to one transaction involving Toledo Edison), it does not appear
that there has been any significant impedance to additional trade.
Additionally, contrary to Ontario Hydro's claim, we conclude that a
stay would substantially harm other U.S. utilities, including Consumers
and Detroit Edison, as well as U.S. non-public utilities. As required
by Order No. 888, all U.S. public utilities that own, operate or
control interstate transmission facilities now have open access
transmission tariffs on file with the Commission that require the
provision of transmission service to all eligible customers (or have
sought or obtained the necessary waiver from the Commission). Eligible
customers include Canadian entities. Moreover, any entity receiving
transmission service (whether domestic or foreign) must agree to
provide comparable transmission service to the public utility from whom
it received open access transmission service unless it receives a
waiver from the transmission provider or the Commission. Thus, if the
reciprocity condition of Order Nos. 888 and 888-A is stayed as
requested by Ontario Hydro, we would not be allowing Ontario Hydro to
obtain transmission services in the United States on the same terms as
U.S. public utilities. Rather, Ontario Hydro would be able to obtain
transmission access from U.S. public utilities and compete for
customers on those public utilities' transmission systems on
preferential terms. U.S. public utilities would not be able to obtain
reciprocal transmission service from Canadian utilities and compete for
customers in Canadian markets. This less than equal treatment could
cause U.S. public utilities to face a declining customer base brought
about by Canadian utilities taking U.S. customers through their new-
found access to U.S. markets, but without the U.S. public utilities
having a similar opportunity to seek customers in Canadian markets.
U.S. non-public utilities would also be put at a disadvantage
because they must also satisfy reciprocity (unless waived) as a
condition of using an open access tariff. Contrary to any implication
by Ontario Hydro, there is no separate ``foreign'' reciprocity
provision. The reciprocity provision set forth in Order No. 888 applies
to all eligible customers, whether foreign or domestic. Further, as is
the case with foreign utilities, reciprocity applies to a U.S. non-
public utility if any third party in the transactional chain (the power
purchaser or a third-party intermediary such as a power marketer) uses
the open access tariff. Thus, we are treating Ontario Hydro no
differently than we are treating domestic non-public utilities, e.g.,
federal public power entities such as BPA, state power authorities such
as New York Power Authority, and municipals and cooperatives.
Furthermore, the public interest does not favor Ontario Hydro's
motion for
[[Page 36662]]
stay. As described above, a stay would unfairly permit Canadian
utilities to compete in U.S. markets, but deprive U.S. utilities of the
opportunity to likewise compete in Canadian markets. This unequal
treatment could detrimentally affect the financial well-being of U.S.
public utilities. It also would give Canadian utilities a preferential
advantage over U.S. non-public utilities that seek to compete with
public utilities in U.S. markets. Further, we note that Ontario Hydro
is the only Canadian utility that has sought a stay and claimed any
harm from Order Nos. 888 and 888-A.31
---------------------------------------------------------------------------
\31\ The Commission has found that Hydro-Quebec's transmission
tariff meets the reciprocity provision of Order No. 888. See H.Q.
Energy Services (U.S.) Inc., 79 FERC para. 61,152 (1997).
---------------------------------------------------------------------------
On the other hand, a denial of the stay would not have such
potentially dire consequences. Ontario Hydro would still be permitted
to continue the buy/sell transactions with MECS (and possibly with
other border utilities), which, as we described in detail above, are
continuing to occur at greater levels than prior to the effectiveness
of Order No. 888.
Moreover, Ontario Hydro has the option to obtain open access
transmission in the United States in return for providing transmission
access only to those public utilities from whom it receives service. As
we have repeatedly explained, this does not require Ontario Hydro to
offer an open access tariff that is available to any eligible customer,
but permits Ontario Hydro simply to negotiate comparable transmission
access for the public utility from whom it seeks transmission
service.32
---------------------------------------------------------------------------
\32\ While Ontario Hydro recognizes this limited reciprocal
access, it asserts that under NAFTA and GATT, ``Ontario Hydro cannot
provide open-access transmission services to any entity on an ad hoc
basis, because all U.S. entities could expect and demand full access
to such services if Ontario Hydro provides them to any one entity.
That is the meaning of national treatment.'' Ontario Hydro Response
at 11. We disagree with Ontario Hydro's interpretation of national
treatment. National treatment means that each country must treat the
goods of the other countries no less favorably than the most
favorable treatment afforded to its own like goods. NAFTA, Article
301. Thus, unless Canadian law requires a Canadian utility to
provide open access transmission service (that is, transmission to
all eligible customers) to all Canadian utilities, such Canadian
utility need not provide open access transmission service to any
U.S. utility or to any Canadian utility. Additionally, as noted, the
open access tariff reciprocity provision does not require open
access service; rather it limits reciprocal service only to those
transmission providers from whom the Order No. 888 tariff user
obtains service.
---------------------------------------------------------------------------
Finally, Ontario Hydro's arguments as to the legal sufficiency of
Order No. 888 are unavailing. First, Ontario Hydro asserts that the
Commission does not have the authority to place conditions on the
import of power from Canada. The Commission, however, has placed no
conditions on the import of power from Canada. The reciprocity
condition applies solely to the transmission of electric energy in
interstate commerce and treats Canadian entities the same as any non-
public utility in the United States. The question of whether Canadian
power may be imported into the United States remains subject to the
U.S. Department of Energy's jurisdiction and is unaffected by Order
Nos. 888 and 888-A. Similarly, imports of U.S. power into Canada remain
subject to Canadian jurisdiction and are unaffected by Order Nos. 888
and 888-A. Moreover, as the Commission explained in Order No. 888-A,
``[j]ust as we are not asserting jurisdiction over domestic non-public
utilities under sections 205 or 206 of the FPA, we also are not
asserting jurisdiction over foreign entities. Rather, we are simply
placing the same reasonable and fair condition on both types of
entities' uses of the transmission ordered in the Final Rule.''
33
---------------------------------------------------------------------------
\33\ FERC Stats. & Regs. para. 31,048 at 30,292.
---------------------------------------------------------------------------
Second, Ontario Hydro cites a recent U.S. Court of Appeals decision
that it claims prevents the Commission from placing conditions on non-
jurisdictional entities and business practices.34 It further
asserts that while section 211 of the FPA gives the Commission limited
authority to order wheeling by U.S. non-public utilities, it does not
provide the Commission with authority to regulate power imports or
exports. Ontario Hydro's citation to Altamont is simply not pertinent
to this proceeding. Its second assertion, while true, is irrelevant.
---------------------------------------------------------------------------
\34\ Motion for Stay at 10-11 (citing Altamont).
---------------------------------------------------------------------------
In Altamont, the Court addressed the Commission's conditioning
authority under section 7 of the Natural Gas Act (NGA) and found that
the Commission could not condition a jurisdictional pipeline's
certificate in order to affect state regulatory practices and
policies.35 Altamont dealt with the narrow question of the
scope of Commission and state jurisdiction under section 1(c) of the
NGA.
---------------------------------------------------------------------------
\35\ The court explained that the Hinshaw Amendment, section
1(c) of the NGA, 15 U.S.C. Sec. 717(c), ``provides that intrastate
rates and services, such as those of PG&E in this case, are exempt
from Commission scrutiny.'' 92 F.3d at 1243.
---------------------------------------------------------------------------
The situation here is in an entirely different context. The
Commission has required all public utilities to provide open access
transmission to all eligible customers, including non-jurisdictional
Canadian utilities such as Ontario Hydro. However, as a condition of
receiving the benefits of this new service, eligible customers that are
non-public utilities must agree to provide comparable transmission
service to the public utility from whom they receive service. There is
no requirement that a non-public utility customer provide open access
to all eligible customers, as the Commission required of public
utilities. In adopting this reciprocity condition, the Commission
explained that--
[w]hile we do not take issue with the rights these non-public
utilities may have under other laws, we will not permit them open
access to jurisdictional transmission without offering comparable
service in return. We believe the reciprocity requirement strikes an
appropriate balance by limiting its application to circumstances in
which the non-public utility seeks to take advantage of open access
on a public utility's system. [36]
---------------------------------------------------------------------------
\36\ FERC Stats. & Regs. para. 31,036 at 31,762.
Additionally, because transmission providers can waive the tariff
reciprocity provision, the net effect of the provision is no different
than the situation prior to Order No. 888 when all transmission service
(other than pursuant to section 211) was at the voluntary discretion of
the transmission owner.
As to Ontario Hydro's second assertion, Ontario Hydro has misread
Order Nos. 888 and 888-A. Nowhere in those orders has the Commission
asserted any jurisdiction (section 211 or 205) over domestic non-public
utilities. Indeed, it has no jurisdiction over U.S. non-public
utilities under section 205 and it can assert section 211 jurisdiction
over such utilities only upon application. Additionally, nowhere in
those orders has the Commission asserted jurisdiction over foreign
imports or exports. Rather, as the Commission explained in Order Nos.
888 and 888-A, we are simply placing a reasonable and fair condition on
domestic non-public utilities' and foreign utilities' uses of open
access transmission that U.S. public utilities are required to provide.
Ontario Hydro further claims that the reciprocity condition
violates the U.S. national treatment obligations under NAFTA and GATT.
The Commission fully responded to this argument in Order No. 888-A in
response to Ontario Hydro's rehearing request.37 We
explained that--
\37\ FERC Stats. & Regs. para. 31,048 at 30,291-92.
---------------------------------------------------------------------------
[w]e disagree with Ontario Hydro's claim that NAFTA's national
treatment principle requires us to allow a Canadian transmission-
owning entity (or its corporate affiliate) to take advantage of a
United States public utility's open access tariff--a tariff we have
[[Page 36663]]
required the utility to adopt--while simultaneously refusing to
allow the United States utility to use the Canadian entity's
transmission facilities.38
---------------------------------------------------------------------------
\38\ FERC Stats. & Regs. para. 31,048 at 30,291.
We emphasized that Ontario Hydro's interpretation would twist the
national treatment concept ``into a requirement that Canadian entities
be treated better than United States entities, including United States
non-public utilities that are subject to the reciprocity condition.''
39 Under Order Nos. 888 and 888-A, the same reciprocity
condition applies to foreign utilities as applies to U.S. non-public
---------------------------------------------------------------------------
utilities.40 Ontario Hydro's reading of NAFTA, however,
\39\ Id.
\40\ Ontario Hydro's citation to Conference of State Bank
Supervisors v. Conover, 715 F.2d 604 (D.C. Cir. 1983), cert. denied,
466 U.S. 927 (1984), as prohibiting a reciprocity condition is
entirely inapposite. This case dealt with the International Banking
Act, a federally enacted statute, which the court explained ``sought
to provide foreign banks with `national treatment' under which
`foreign enterprises * * * are treated as competitive equals with
their domestic counterparts.' '' 715 F.2d at 606. The court found
that an individual state's attempt to impose state reciprocity
requirements on a federally-chartered foreign bank would conflict
with the national treatment provided under the federal act and thus
was precluded. Id. at 617. No such state/federal conflict exists
with respect to the reciprocity condition set forth in Order Nos.
888 and 888-A.
---------------------------------------------------------------------------
[w]ould place transmission-owning Canadian entities (or their
corporate affiliates) in a better position that any domestic entity;
not only would Canadian entities not be subject to the open access
requirement, but, unlike domestic non-public utilities, they would
be able to use the open access tariffs we have mandated without
providing any reciprocal service. Ontario Hydro has cited no
precedent demonstrating that NAFTA imposes such an unreasonable
requirement.41
---------------------------------------------------------------------------
\41\ FERC Stats. & Regs. para. 31,048 at 30,291-92.
---------------------------------------------------------------------------
The Commission Orders: Ontario Hydro's motion for stay is hereby
denied.
By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 97-17800 Filed 7-8-97; 8:45 am]
BILLING CODE 6717-01-P
