|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/enrgy/statelin/ |
Upload File : |
<html>
<head>
<title>Massachusetts Supreme Court Approves Imposition of Stranded Cost Recovery Charge</title>
</head>
<body style="font-family: Arial" vlink="#808080">
<div align="center"><center>
<table border="0" cellpadding="8" cellspacing="0" width="98%" bgcolor="#000000">
<tr>
<td width="100%" valign="middle"><a name="top"></a><img src="../images/pmamagsm.gif" alt="PMA Online Magazine" border="0" align="right" WIDTH="229" HEIGHT="100"></td>
</tr>
</table>
</center></div><div align="center"><center>
<table border="0" cellpadding="8" width="98%">
<tr>
<td width="15%" valign="top" align="center">
<!--webbot bot="Include" U-Include="sl_sidebar.htm" TAG="BODY" startspan -->
<table border="2" cellpadding="8" width="15%" id="table1" bordercolor="#FFFF00" bgcolor="#C0C0C0">
<tr>
<td width="100%" valign="top" align="center"><map name="FPMap0_I1">
<area href="http://www.powermarketers.com/adrates.html" shape="rect" coords="14, 297, 97, 322">
<area href="http://www.powermarketers.com/pmajobs.htm" shape="rect" coords="11, 230, 95, 257">
<area href="http://www.powermarketers.com/main.htm" target="_parent" shape="rect" coords="12, 163, 96, 189">
<area href="http://www.powermarketers.com/power2.htm" target="_blank" shape="rect" coords="12, 95, 96, 121">
<area href="../pmamag.htm" shape="rect" coords="11, 29, 96, 54"></map><img rectangle="(12,163) (96,189) http://www.powermarketers.com/main.htm##_parent" rectangle="(12,95) (96,121) http://www.powermarketers.com/power2.htm##_blank" rectangle="(11,29) (96,54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" usemap="#FPMap0_I1" width="110" height="350"><p><a href="../searchpma.htm"><img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<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>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p><a href="#top"><img src="../images/b-t-top.gif" alt="Back To Top" border="0" width="71" height="35"></a></td>
</tr>
</table>
<!--webbot bot="Include" i-checksum="45188" endspan --></td>
<td width="69%" valign="top"><img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" WIDTH="375" HEIGHT="75"><p><b><u>
<br>
</u></b></p>
<p><b><u><br>
October 1997</u><br>
</b><big><big><big><strong><font face="Arial">Massachusetts Supreme Court
Approves Imposition Of Stranded Cost Recovery Charge<br>
</font></strong></big></big></big><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
05/98</em>)</font><b> </p>
</b><p><font face="Arial">On September 18, 1997, the Massachusetts Supreme Judicial Court
(the "Court") ruled that Cambridge Electric Light Company (the
"Company") could impose a customer transition charge ("CTC") on the
Massachusetts Institute of Technology ("MIT") and that the CTC does not violate
the state’s Public Utility Regulatory Policies Act ("PURPA") regulations.
The Court remanded the case to the Massachusetts Department of Public Utilities
("DPU"), however, because the DPU’s decision did not adequately analyze
certain issues, including whether the Company’s stranded costs were prudently
incurred. The CTC was imposed on MIT because MIT now receives power from a cogeneration
facility and no longer purchases all of its energy from the Company.</font></p>
<p><font face="Arial">In 1985, MIT began investigating the option of constructing a
cogeneration facility to lower its power costs. In 1992, the Company proposed several
options to lower MIT’s power costs in an effort to retain MIT as a full requirements
customer. After MIT and the Company failed to reach agreement, MIT constructed a
cogeneration facility in 1993 and the facility commenced operations on September 16, 1995.
While MIT’s cogeneration facility generates sufficient power to meet MIT’s
normal electricity requirements, MIT must purchase back-up and auxiliary power from the
Company. In May 1994, MIT petitioned the DPU to establish just and reasonable rates for
the following type of services to be rendered by the Company: standby, maintenance, and
supplementary service. In response to this request, the Company filed proposed rates for
these three services and also proposed that major customers, such as MIT, pay the CTC as
compensation for stranded costs once the customer no longer purchases all of its power
from the Company. </font></p>
<p><font face="Arial">The DPU approved the CTC ruling that it did not violate PURPA
because the CTC charge did not single out MIT for discriminatory treatment as a qualifying
facility ("QF"). The DPU ruled that the Company could recover seventy-five
percent (75%) of the CTC from MIT. The approved CTC required MIT pay approximately
$110,000 per month or $1.3 million per year.</font></p>
<p><font face="Arial">Subsequently, MIT appealed the DPU’s decision to the Court and
asserted that the CTC violates the Massachusetts’ PURPA regulations because the CTC
discriminates against customers who have a source of power other than the Company. The
Massachusetts Attorney General ("AG") also opposed the imposition of the CTC,
asserting that the Company had been on notice since at least 1985 that MIT was actively
considering self-generation and yet the Company did not undertake any meaningful effort to
mitigate the foreseeable consequence of losing MIT as a full requirements customer. </font></p>
<p><font face="Arial">On September 15, 1997, the Court ruled that the CTC does not violate
state PURPA regulations because the CTC applies to a broad class of customers and does not
single out QFs. In addition, the Court stated that it found instructive the Federal Energy
Regulatory Commission’s policy to permit recovery of stranded cost through a
mechanism such as an exit fee. The Court concluded that the recovery of prudent and
verifiably authorized stranded costs is in the public interest and is consistent with
PURPA. </font></p>
<p><font face="Arial">The Court also ruled that the DPU’s decision failed to make
certain necessary findings thus making it impossible for the Court to consider certain
claims raised by MIT and the AG. Therefore, the Court remanded the case back to the DPU.
For example, the Court noted that the DPU’s conclusory statement that all stranded
costs had been prudently incurred could not be accepted. The Court noted that DPU
proceedings regarding the deregulation of the electric power industry involve a scheme
requiring aggressive mitigation of stranded costs by utilities. In these proceedings the
DPU stated that utilities are in a position to avoid entering into new obligations that
might be stranded by the emergence of customer choice. The Court concluded that to permit
a utility to recover imprudent or unreasonable costs would impede the very policies
identified by the DPU as worthy of promotion. The DPU will address these and similar issue
when it determines the remanded case.</font></p>
<!--webbot bot="Include" u-include="sl_bottom.htm" tag="BODY" startspan -->
<hr color="#FFFF00">
<blockquote>
<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>
<!--webbot bot="Include" i-checksum="27861" endspan --></tr>
</table>
</center></div>
<p align="center"><a href="9710olsn.htm#top"><img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></p>
</body>
</html>