The Federal Power Act places restrictions on the Federal Energy Regulatory Commission’s authority to suspend and require refunds for “initial” rate filings. Unsurprisingly, FERC has for many years chafed at the limitation, and has narrowly construed the initial filings provision in section 205(e) of the FPA to be inapplicable unless a rate filing involves both a new customer and a new service.
FERC’s unusual response to a recent appeal to the D.C. Circuit questioning the initial rate filing policy may have far-reaching and unintended consequences. In that case, Chehalis Power Generating, L.P., 145 FERC ¶ 61,052 (Oct. 17, 2013), FERC took the extraordinary steps of (1) requesting a voluntary remand of the appeal so that (2) it could announce a new policy that requires all utilities that offer jurisdictional reactive power service to have rate schedules on file, even if they are providing the service for free, as may be the case under generator interconnection agreements. FERC has never before interpreted the filing requirement for reactive power in this fashion. The new requirement will allow FERC to treat any future filing by utilities to establish initial reactive power revenue requirements for their generators as “changed” rates that are subject to suspension and refund under the FPA.
The facts of Chehalis are not remarkable: a generator that had been providing reactive power service to the Bonneville Power Administration for free decided to start charging for it and so filed a rate with FERC. The Chehalis order finds that reactive power is a jurisdictional service and, since Chehalis was previously providing the service for free, it should have had a rate schedule on file for the free service—even though the Commission concedes that it previously accepted notices of cancellation of reactive power rate schedules when the utility was no longer receiving compensation. FERC thus “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 conditions 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.”
Utilities that did not think they needed to file a rate schedule to provide free service from their generators can draw comfort from the knowledge that FERC does not intend to initiate enforcement actions for their oversight. But, FERC announced that it expects timely compliance with its new interpretation, or else utilities can face potential future fines. To help bring utilities into the fold, FERC directed its staff “to convene a workshop, in a generic proceeding, to explore the mechanics of public utilities filing reactive power rate schedules for which there is no compensation.”
It is not difficult to find other “jurisdictional” services that utilities may provide on a voluntary, or even cooperative, basis, such as blackstart service, that may fall under the logic of Chehalis. FERC’s rationale raises the possibility that utilities will need to review their compliance with FERC’s filing requirements to evaluate whether they have practices pertaining to jurisdictional services that could be reduced to tariffs that arguably should be filed to comply with the FPA. It remains to be seen whether FERC’s drive to minimize the effect of an inconvenient directive by Congress will have long-term unintended consequences as utilities evaluate the jurisdictional implications.