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decided: September 21, 1988.


Appeal from the Order of the Pennsylvania Public Utility Commission, in the case of Pennsylvania Public Utility Commission, et al. v. Philadelphia Electric Company, No. R-850290, dated July 24, 1986.


Larry B. Selkowitz, with him, Mark P. Widoff, Widoff, Reager, Selkowitz & Adler, P.C. for petitioner.

Lee E. Morrison, Assistant Counsel, with him, Bohdan R. Pankiw, Deputy Chief Counsel, and Daniel P. Delaney, Chief Counsel, for respondent.

Gerald Gornish, with him, John H. Schapiro and Jeffrey B. Wolin, Of Counsel: Wolf, Block, Schorr and Solis-Cohen, for intervenor, Philadelphia Electric Company.

President Judge Crumlish, Jr., and Judges Craig, MacPhail, Doyle, Barry, McGinley and Smith. Opinion by Judge McGinley.

Author: Mcginley

[ 119 Pa. Commw. Page 609]

This is an appeal by Albert Einstein Healthcare Foundation, University of Pennsylvania, and Amtrak (Petitioners) from an order of the Pennsylvania Public Utility Commission (Commission) setting rates to be charged by Philadelphia Electric Company (PECO) for firm backup power for cogeneration facilities. We affirm.


Congress enacted the Public Utility Regulatory Policies Act of 1978, (PURPA) along with several other statutes, as part of an overall national energy policy. The relevant portions of PURPA are §§ 201 and 210, codified at 16 U.S.C. § 796 and § 824a-3, respectively. Section 201 of PURPA defined two types of entities, small power production facilities and cogeneration facilities, which (provided they meet eligibility standards set forth by the Federal Energy Regulatory Commission (FERC)) would be known as "qualifying facilities" or "QFs." A "cogeneration facility" is one which produces both electric energy and steam or some other form of useful energy, such as heat. 16 U.S.C. § 796(18)(A). The within matter concerns itself specifically with cogeneration facilities.

[ 119 Pa. Commw. Page 610]

Section 210 of PURPA was promulgated to encourage cogeneration and small power production. Section 210(a) directs FERC to promulgate rules to encourage the development of power, including rules requiring utilities to offer to buy electricity from, and to sell electricity to, QFs.

FERC defined four types of power that must be supplied to QFs: supplementary power, back-up power, interruptible power, and maintenance power. 18 C.F.R. § 292.101(b). Back-up power is electric energy or capacity which is supplied by an electric utility to replace energy ordinarily generated by a facility's own generation equipment during an unscheduled outage of the facility. Although interruptible power is listed therein as a separate type of power, it is actually not a different type of power, but rather is a method of supplying power. Back-up power (as well as maintenance power) can be supplied on a firm basis, or on an interruptible basis. Firm service requires the utility to provide power to the QF without interruption whenever the QF demands it. Interruptible service permits the utility to interrupt the service to the QF when the utility experiences a capacity shortage on its system. This appeal involves only the rate for firm back-up power.

Section 210(c) of PURPA specifically required that FERC implement regulations insuring that rates for utility sales to QFs be just, reasonable, in the public interest and not discriminate against QFs. (Emphasis added.) In American Paper Institute, Inc. v. American Electric Power Service Corporation, 461 U.S. 402, 414-415 (1983), the Supreme Court held that Congress intended the phrase "just and reasonable" to be accorded its traditional rate-making meaning.

The FERC regulations provide, inter alia, that absent factual data to the contrary, the rates for back-up power may not be based on the assumption that scheduled

[ 119 Pa. Commw. Page 611]

    or unscheduled outages will occur simultaneously, or during system peak, or both.

(c) Rates for sales of back-up . . . power. The rate for sales of back-up . . . power:

(1) shall not be based upon an assumption (unless supported by factual data) that forced outages or other reductions in electric output by all qualifying facilities on an electric utility's system will occur ...

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