FERC Orders Transmission Provider to Issue Refunds for Miscalculation of Energy Imbalance Service
On June 28, 2012, FERC granted in part Seminole Electric Cooperative, Inc.’s (“Seminole”) complaint against Florida Power & Light Company (“FPL”), which accused FPL of misapplying the language of Schedule 4 (Energy Imbalance Service) of its Open Access Transmission Tariff (“OATT”). Specifically, FERC granted Seminole’s claim that FPL violated its OATT by misconstruing Schedule 4’s tier thresholds, but rejected Seminole’s claim that FPL incorrectly apportioned penalties within the highest possible tier. FERC ordered FPL to refund Seminole the overcharges for its misapplication of imbalance charges, and established a refund effective date of October 20, 2009, approximately two years later than Seminole’s requested refund effective date of August 2007.
Seminole originally filed its complaint on March 30, 2012. With regard to the tier threshold issue, Seminole argued that FPL applied the “lesser of” – instead of the “greater of” – either the percentage or MW amount to be used as the threshold when determining if a deviation from a generator’s hourly schedule has occurred under Schedule 4. FERC agreed with Seminole, stating that the “greater of” approach is the correct standard. FERC explained that the language of Order Nos. 890 and 890-A demonstrates the Commission’s intention to model its pro forma Schedule 4 after the tiered approach for levying imbalance charges used by the Bonneville Power Administration (“Bonneville”), “including the graduated percent or nominal MW thresholds to each tier, ‘whichever is larger.’” Therefore, FERC ruled that FPL erred in applying the “lesser of” approach when calculating imbalance charges.
While FERC accepted Seminole’s argument concerning the misapplication of tier thresholds, it rejected Seminole’s argument that FPL incorrectly apportioned penalties using the highest possible tier. In its complaint, Seminole argued that FPL improperly applied imbalance penalties for an individual tier to the entirety of the imbalance, instead of using a multi-tier approach that apportions deviations within each tier based on the imbalance of that individual tier. FERC ruled, however, that Schedule 4 does not specify a single approach to apportionment. Instead, FERC noted that, “While Order Nos. 890 and 890-A expressly adopted the graduated, three-tiered [Bonneville] approach…the Commission did not address whether transmission providers are required to levy imbalance charges in a single [tier] or across multiple tiers.” As such, FERC concluded that FPL’s interpretation of Schedule 4 was reasonable.
FERC also determined that Seminole’s refund must be limited to the previous 24-months, rejecting Seminole’s claim that the filed rate doctrine requires a refund dating back to when the overcharges began in August 2007. FERC explained that Section 12.0 of the Network Integration Transmission Service Agreement (“NITS Agreement”) between Seminole and FPL limits retroactive billing to the previous 24 months, and that limitation is itself the filed rate. Importantly, the limitation reflects the parties’ agreement to knowingly waive their right to refunds for violations falling outside the 24-month window, including violations of the rate on file with the Commission, such as FPL’s misapplication of Schedule 4. As such, the Commission set a refund effective date of October 20, 2009.
Finally, FERC accepted FPL’s proposed revisions to its OATT Schedules 4 and 9, which FPL filed approximately a month after Seminole filed its complaint and which were intended to clarify the two schedules’ tier threshold and apportionment provisions at issue in Seminole’s complaint.
A full copy of the FERC order is available here.