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<title>May 2000: Florida Supreme Court Determines Public Service Commission Lacked Authority</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<td width="70%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p align="left"><b><u><br>
May 2000</u><br>
<font face="Arial" size="5">Florida Supreme Court Determines Public Service Commission Lacked Authority To Issue A Determination Of Need For Merchant Plant </font></b><strong><br>
by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2000/05</em>)</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">In a decision issued on April 20,
2000, the Florida Supreme Court by a 6-1 decision held that Florida law
precluded the Florida Public Service Commission (FPSC) from issuing a
determination of need ruling to applicants for a merchant power plant.
Without a ruling on the determination of need, under Florida law
construction of the new plant may not be undertaken. On August 19, 1998,
Duke Energy New Smyrna Beach Power Co., Ltd. (Duke) and the Utilities
Commission of the City of New Smyrna Beach (New Smyrna) filed a joint
petition with the FPSC for a determination of public need for a
514-megawatt, combined cycle merchant plant. Duke and New Smyrna entered
into an agreement under which Duke would build, own, and operate the
plant, and New Smyrna would provide a location, tax reductions, and
certain facilities. The joint petition proposed that thirty megawatts be
sold to New Smyrna for consumption by its residents, and the remainder
would be sold at wholesale to utilities for resale to their retail
customers. Under the proposed plan, wholesale power would be primarily
used to serve Florida customers, but would not exclusively be used for
Florida customers. This decision reversed the 3-2 FPSC decision to grant
the determination of need. Three electric utilities – Tampa Electric
Company, Florida Power Corporation, and Florida Power & Light Company
– appealed the FPSC ruling to the Florida Supreme Court.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">According to the court, the FPSC
exceeded the authority granted it under the Florida Electrical Power Plant
Siting Act (Siting Act) and the Florida Energy Efficiency &
Conservation Act (FEECA). The Siting Act requires that any new power
generation plant whose capacity exceeds seventy-five megawatts must obtain
certification under the various requirements of the Siting Act. Among
other things, the Siting Act requires the FPSC to prepare a determination
of need report pursuant to FEECA to applicants seeking certification of
their power plants. In granting a determination of need under FEECA, the
FPSC must consider electric system reliability and integrity, the need for
reasonable electricity costs, whether the plant is the most cost-effective
alternative, and conservation measures the applicant might take to
mitigate the need for the plant. The Siting Act provides that construction
of new power plants may not be undertaken without first obtaining
certification in the manner provided in the Siting Act. One of the steps
in the certification process requires the FPSC to submit a determination
of need report to the Florida Department of Environmental Protection. The
department determines the completeness and sufficiency of the application.
The siting board, consisting of the Governor and Cabinet, decides whether
or not to issue the certification.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">A proceeding on a determination of
public need may be initiated by an applicant or by the FPSC’s own
motion. According to the court, the Siting Act defines an
"applicant" as "any electric utility which applies for
certification pursuant to the provisions of this act." Florida
statute includes public utility districts and regulated electric companies
engaged in the business of generating, transmitting or distributing
electricity as "electric utilities" for purposes of the Siting
Act. New Smyrna is a municipal electric utility directly serving retail
customers in Florida. Duke is not subject to FPSC jurisdiction as a public
utility, but is subject to the jurisdiction of the Federal Energy
Regulatory Commission because it offers electrical power for sale at
wholesale. Duke argued that it is a regulated electric company, because it
is regulated by FERC, and that the inclusion of New Smyrna as an applicant
satisfied the electric utility requirement.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">In reviewing the statutory history
of the Siting Act and FEECA, the court found that the term
"utility" was limited to entities providing electricity or
natural gas at retail to the public. The court further determined the
Florida Legislature intended that the law provide the regulatory framework
for Florida regulated utilities to provide service to their Florida retail
customers. The court noted that the Legislature intended to balance the
need for increased generation capacity with impacts on human health and
the environment. The court stated that the "projected need of
unspecified utilities throughout peninsular Florida" is not among the
needs the FPSC is authorized by the Legislature to include in its
determination of need analysis. Based on these findings and in reliance
upon a 1992 Florida Supreme Court decision pertaining to the status of
cogeneration facilities under the Siting Act, the court found the
Legislature did not intend to authorize the FPSC to entertain a
determination of need application for a plant whose output is not
"fully committed to use by Florida customers who purchase electrical
power at retail rates."</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The court additionally disagreed
that the inclusion of New Smyrna as an applicant resulted in compliance
with Florida law, based on New Smyrna’s projected use of thirty
megawatts. Also, New Smyrna argued that interpreting the Florida statutes
in such a way as to prohibit Duke from seeking a determination of need
ruling violates the United States Constitution by discriminating against
out-of-state commerce without authority from the United States Congress.
New Smyrna also argued that federal law (the Energy Policy Act of 1992,
mandating a robust wholesale market) preempts any state requirement that
Duke obtain a contract with a retail electric utility to construct the
plant. In response to New Smyrna’s argument, the court opined that the
Energy Policy Act specifically gave the states the authority to site
facilities and to engage in environmental protection regulation.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">One member of the court dissented.
Justice Anstead disagreed with the majority’s "strained and
artificial construction" of Florida law. Duke, New Smyrna, the FPSC,
and others have filed a motion with the Florida Supreme Court asking it to
rehear the case.</font></p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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