ORDER NO. 96-141

ENTERED JUN 4 1996

THIS IS AN ELECTRONIC COPY

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

DR 16

DISPOSITION: HERMISTON GENERATING COMPANY, L.P., DECLARED NOT TO BE A PUBLIC UTILITY UNDER

ORS 757.005

On June 21, 1994, Hermiston Generating Company, L.P. (Hermiston Generating) filed a petition requesting a declaratory ruling that neither it nor its Facility is a public utility under ORS 757.005, and that the Commission does not have jurisdiction to supervise and regulate Hermiston Generating or its rates, charges and services. On October 21, 1994, the Commission issued a declaratory order stating that the activities of Hermiston Generating, as represented in the declaratory petition filed June 21, 1994, and amended by a filing on October 5, 1994, do not subject Hermiston Generating to regulation in Oregon as a public utility. DR 12, Order No. 94-1570 (October 21, 1994).

On April 29, 1996, Hermiston Generating filed a supplemental petition to address a specific issue surrounding the sale of electricity from the Hermiston Project. Under the Option Agreement between Hermiston Generating and PacifiCorp (the "Option Agreement"), PacifiCorp has the right to exercise the option to acquire a 50% undivided interest in the Hermiston Project. Hermiston Generating states that PacifiCorp has exercised that option. Hermiston Generating now seeks an order declaring that following PacifiCorp's purchase of its 50% undivided interest in the Hermiston Project, Hermiston Generating will still not be a public utility as defined in ORS 757.005.

Commission Staff studied Hermiston Generating's petition and submitted a memorandum to the Commission recommending that the petition be granted. At its May 14, 1996, public meeting, the Commission adopted Staff's recommendation to issue a declaratory ruling stating that Hermiston Generating is not a public utility under ORS 757.005. A copy of the Staff report is attached to this order.

The findings of fact are based on the Commission's records.

FINDINGS OF FACTS

Order No. 94-1570 describes Hermiston Generating and its affiliated companies. The Hermiston Project is a two-unit combined-cycle natural gas-fired combustion turbine power plant with a nominal rating of about 474MW, and is located near Hermiston, Oregon.

After the ownership transfer transaction has been completed, the Hermiston Project (and the related assets) will be held by Hermiston Generating and PacifiCorp as tenants in common, and each party will own a 50% undivided interest in the Hermiston Project. The output from the 50% undivided interest that will be owned by Hermiston Generating will continue to be sold at wholesale by Hermiston Generating to PacifiCorp under a Power Sales Agreement the parties executed. The output from PacifiCorp's portion of the Hermiston Project will no longer be governed by the Power Sales Agreement. Instead of purchasing this output from Hermiston Generating, PacifiCorp will own such output by virtue of its ownership share of 1/2 of the Hermiston Project and it will have the complete discretion over the uses to which the output of its portion of the Hermiston Project will be utilized.

PacifiCorp owns, operates, manages and controls plant and equipment in the state of Oregon for the production, transmission and delivery of electric power and is a public utility subject to the jurisdiction of the Commission. PacifiCorp conducts a retail electric business through two divisions: Pacific Power and Light Company and Utah Power and Light Company.

At the close of the transaction provided for under the Option Agreement, Hermiston is required to deliver to PacifiCorp those statutory special warranty deeds, bills of sale, certificates of title and other instruments of conveyance as are required to vest in PacifiCorp marketable title to an undivided 50% fee interest in the Hermiston Project. Therefore, all ownership of PacifiCorp's 50% portion of the Hermiston Project will reside with PacifiCorp, not with Hermiston Generating.

PacifiCorp has sole authority to make crucial operational decisions regarding the Hermiston Project, including: scheduling the output, determining how electric energy from its portion of the Hermiston Project will be utilized, and scheduling maintenance outages. Subsequent to the commencement of substantial construction, PacifiCorp also has had authority to approve all "essential contracts."

Pursuant to the Hermiston Project ownership and operating agreement (Operating Agreement), Hermiston Generating is designated as operating agent of the Hermiston Project. Pursuant to the Operating Agreement, PacifiCorp and Hermiston will jointly make decisions on operational issues via a committee. The operational issues will be common to both the portion of the Hermiston Project owned by Hermiston Generating and the portion of the Hermiston Project owned by PacifiCorp, such as approval of the annual operating budget, insurance coverage, and certain operating procedures (including the maximum operating capability of the Hermiston Project). Hermiston Generating will handle day-to-day operations. Hermiston Generating has entered into an agreement with U.S. Operating Services, Company, Inc. (USOSC) to provide day-to-day operating services to the entire Hermiston Project, pursuant to a November 7, 1994, operation and maintenance agreement. USOSC, a California general partnership, is owned by subsidiaries of PG&E Enterprises and Bechtel Enterprises, Inc., and is an affiliate of Hermiston Generating.

OPINION

Applicable Law

ORS 756.450 provides in relevant part:

 

On petition of any interested person, the Commission may issue a declaratory ruling with respect to the applicability to any person, property or state of facts of any rule or statute enforceable by the Commission. A declaratory ruling is binding between the Commission and the petitioner on the state of facts alleged, unless it is modified, vacated or set aside by a court.

 

ORS 756.040(2) authorizes the Commission "to supervise and regulate every public utility...in this state." ORS 757.005(1)(a)(A) defines "public utility" as:

Any corporation, company, individual, association of individuals, or its lessees, trustees or receivers, that owns, operates, manages or controls all or a part of any plant or equipment in this state for the production, transmission, delivery or furnishing of heat, light, water or power, directly or indirectly to or for the public, whether or not such plant or equipment or part thereof is wholly within any town or city.

 

Disposition

As noted in Order No. 94-1570, Hermiston Generating sales of electricity are sales for resale. After the ownership transfer transaction, all of the output from Hermiston Generating's portion of the Hermiston Project will continue to be sold at wholesale by Hermiston Generating to PacifiCorp. Thus, Hermiston Generating's sales of electricity will continue to be sales for resale that fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC). The fact that PacifiCorp will own half of the Hermiston Project does not change our conclusion that FERC's regulation of Hermiston Generating preempts any state regulation of the rates and terms and conditions that Hermiston Generating charges for its electric power services. Mississippi Power and Light Co. v. Mississippi, 487 U.S. 354, 371 (1988); Nantahala Power and Light Co., v. Thornburg, 476 U.S. 953, 964-65 (1986). The purchase by PacifiCorp of its undivided interest in the Hermiston Project does not change the Commission's conclusion that Hermiston Generating is not an electric utility.

CONCLUSIONS

Hermiston Generating's sales of electricity are sales for resale and are subject to FERC's exclusive jurisdiction. PacifiCorp's exercise of the option to acquire a 50% undivided ownership interest in the Hermiston Project does not change our conclusion that Hermiston Generating is not a public utility within the meaning of ORS 757.005.

ORDER

IT IS ORDERED that, on the basis of the facts presented in this proceeding, the Commission declares that Hermiston Generating Company, L.P., is not a public utility under ORS 757.005 in its involvement with the Hermiston Project.

Made, entered, and effective ________________________________________.

BY THE COMMISSION

___________________________________

Judy C. Colvin

Commission Secretary

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements in OAR

860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070(2). A party may appeal this order to a court pursuant to ORS 756.580.