PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 25'h day of June, 2015. CASE NO. 14-0499-G-C LONGVIEW POWER, LLC, Maidsville, Monongalia County, V. HOPE GAS, INC., dha DOMINION HOPE, a public utility, Morgantown, Monongalia County, Complainant, Defendant. COMMISSION ORDER The Commission adopts the interim decision issued on May 22, 2014, as a final ruling and closes this case. BACKGROUND Longview Power, LLC operates a coal-fired electric generating station in Monongalia County. Natural gas fires the boilers to provide start-up service at the plant. Thereafter, coal is used as fuel to generate electricity. Natural gas is sometimes needed for flame stabilization during plant operations. Longview paid Hope Gas, Inc., doing business as Dominion Hope, to construct a line through which natural gas is transported from the Dominion Transmission, Inc. (DTI) interstate pipeline and delivered to the Longview generating station. Longview's Formal Complaint at 2-3 & Service Agreement 113.1,3.2 (Mar. 28,2014). On August 30, 2013, Longview filed for protection by the United States Bankruptcy Court in the District of Delaware. In re Longview Power, LLC, Case No. 13-1221 1 (BLS). On January 31, 2014, Longview requested authority from the Bankruptcy Court to reject two contracts between Longview and Dominion Hope: a) September 1, 2008 Service Agreement Applicable to Transportation of Natural Gas (Service Agreement) and b) March 25, 2010 Agreement for Payment of Operation and Maintenance Costs of Facilities Operated by DTI (O&M Expense Contract).
On March 28, 2014, Longview filed a formal complaint and request for interim relief with the Public Service Commission of West Virginia, asking the Commission to declare that the exclusivity clause in the Service Agreement is against public policy. Longview also asked the Commission to declare that Dominion Hope cannot pass through to Longview the O&M costs of the interconnect facilities at the junction of the DTI and Dominion Hope lines. Formal Complaint at 1-12 & attachments. On May 22, 2014, upon the particular facts of this case, the Commission concluded that while the Service Agreement and the O&M Expense Contract are in effect it is in the public interest for Longview to be able to consider and pursue the options provided by Gas Transportation Rules 4 (bypass) and 5 (utility-to-utility competition), 150 C.S.R. Series 4, that would enable Longview to propose the acquisition and transportation of gas supplies needed to enhance its ability to remain in operation. Comm n Order at 9 (May 22,2014) (Interim Order). The Commission concluded that the annual costs under the O&M Expense Contract were minimal when compared to total annual plant operating costs and did not present sufficient risk of irreparable harm to justify the granting of interim relief. The Commission also wrote that it had not yet been persuaded that it is improper for Longview to pay these costs and reserved a final decision to a later time. Id. Thereafter, status reports were periodically filed by the parties. On June 4, 2014, Longview advised that following the issuance of the Interim Order by the Commission Longview determined that it was unnecessary at that time to request authority from the Bankruptcy Court to reject either of the contracts with Hope. Longview also stated that it would abide by the Commission s final ruling on the merits regarding the O&M Expense Contract. Longview Response to Comm n Order at 1 (June 4, 2014). In a January 30, 2015 status report, Longview wrote, Longview intends to assume the two contracts with Dominion Hope, subject to the Commission s relevant rulings in this proceeding... Longview also indicated in its June 4, 2014 letter that it would abide by the Commission s final ruling on the merits as it relates to the DTI O&M Agreement. Longview maintains this position and does not object to the Commission s adoption of its May 22, 2014 decision as a final order in this matter. Longview Response to Comm n Order at 1-2 (Jan. 30,2015). On March 26, 2015, the Commission required Longview to file a status report within thirty days of a Bankruptcy Court order relating to the reorganization plan and address whether any further Bankruptcy Court action is expected and if there are any unresolved issues to be addressed by the Commission. Comm n Order at 1-3 (Mar. 26, 20 15). 2
Pending pleadings On April 15, 2015, Longview reported that on March 16, 2015, the Bankruptcy Court accepted the Debtors Second Amended Joint Plan of Reorganization. On April 13, 2015, substantial consummation of the plan occurred and Longview emerged from bankruptcy protection. Longview stated that no further action is required by the Bankruptcy Court, and the Bankruptcy Court s confirmation of the reorganization plan presented no unresolved issues for the Commission to address. Longview Status Report at 1-2 (Apr. 15,2015). Longview suggested, though, that the Commission require that Section 2.4, Exclusive Service, be deleted from the Service Agreement. Hope declined to delete that provision during negotiations, and Longview asserted that clarification of the parties responsibilities by the Commission would allow Longview to better explore alternatives to secure gas supply for the plant. rd. On April 22,2015, Hope filed a response, arguing that the Interim Order provided clear direction to Hope and Longview and voided Section 2.4 to the extent necessary to allow Longview to pursue Commission-jurisdictional options. Hope argued that Longview s proposed deletion was overreaching because Section 2.4 has Commissionjurisdictional and non-commission-jurisdictional components. Hope is not willing to eliminate that provision and has offered to amend the Service Agreement by inserting language from the Interim Order, but Longview declined. Hope Response at 1-4 (Apr. 22,2015). On May 1, 2015, Longview reiterated its request that the Commission require the parties to remove the exclusivity provision from the Service Agreement. Longview Reply at 1-7 (May 1,2015). On May 4, 2015, Hope filed a response, repeating its position that the Interim Order is clear. Hope Response at 1-2 (May 4,2015). On May 20, 2015, as corrected May 21, 2015, Staff filed a Revised Further Staff Memorandum, recommending that the Commission decline to intercede in the contract negotiations between Longview and Hope. Staff asserted that the Commission did not declare in the Interim Order that the exclusivity provision was void in all cases and should be removed from the contract. The Commission found instead that, upon the specific facts and circumstances of this proceeding, it is in the public interest to allow Longview to propose alternate methods of natural gas delivery. Staff agreed with Hope that the Interim Order speaks for itself and Commission jurisdiction cannot be changed as a result of any party s positions, arguments or status reports. Revised Further Staff Memo at 1-2 (May 20,2015, as corrected May 21,2015). On June 1, 2015, Longview filed a response to the Staff Memo, asserting that Longview and Hope disagree on whether the Interim Order permits Longview access to 3
all alternatives or only those that are Commission-jurisdictional. Longview argued that this ambiguity could be resolved if Section 2.4 was removed from the Service Agreement. Longview Response to Staff at 1-2 (June 1, 2015). On June 5, 2015, Hope filed a response to Longview, asserting Longview incorrectly stated that Hope sees an ambiguity in the Interim Order. Hope stated that the Commission s ruling on the exclusivity provision was not ambiguous. Hope s Response to Longview at 1 (June 5,2015). DISCUSSION Service Agreement In the interim Order, the Commission held that the exclusivity provision did not prevent Longview from bringing alternative supply arrangements to the Commission: The Commission determines that the exclusivity clause should not preclude Longview from seeking to obtain service through a bypass facility or from another utility as long as such alternative service arrangement is obtained in accordance with the provisions of Commission rules. Upon these particular facts, we conclude that it is in the public interest for Longview to be able to consider and pursue the options provided by Gas Transportation Rules 4 (bypass) and 5 (utility-to-utility competition) that would enable it to propose the acquisition and transportation of gas supplies needed to enhance its ability to remain in operation. The Commission wishes to make clear that Longview may investigate and pursue bypass or utility-to-utility competition and propose to the Commission alternate measures to have natural gas delivered to the DTI interconnect or to the generating station while the Service Agreement and O&M Expense Contract are in effect. At this juncture, we conclude that it is not in the public interest for a baseload electric generating station to be prevented from operating by virtue of a provision in a contract for interruptible transportation of natural gas that is intended to insulate a natural gas utility from competition in its transportation services to a particular enduser. To the extent the existing exclusivity clause in the Service Agreement prevents Longview from exploring and proposing alternatives to the Commission, the clause is deemed void as unreasonable and adverse to the public interest. Dominion Hope does not need the exclusivity clause to protect it against unlimited competition because that is accomplished by statutory provisions that provide that public utilities are not subject to competition. This case will remain open and the Commission will issue a final Order when Longview actually proposes a specific alternative. interim Order at 9. 4
Longview did not reject the Service Agreement in the bankruptcy proceeding and does not object to the adoption of the Interim Order as the final decision in this matter. Longview Response to Comm n Order at 1-2 (Jan. 30,2015). In the status report filed on April 15, 2015, Longview stated that the Bankruptcy Court s confirmation of the reorganization plan presents no unresolved issues that the Commission needs to address. Longview Status Report at 1 (Apr. 15,2015). The Commission concludes that the above discussion kom the Interim Order, the corresponding Conclusions of Law and the Ordering Paragraph resolve the matters relating to the Service Agreement that Longview originally complained of in Case Number 14-0499-G-C. There is no actual controversy pending for the Commission to resolve. On April 15, 2015, a month after Longview emerged from bankruptcy protection, Longview asked the Commission to require the parties to delete Section 2.4 from the Service Agreement to facilitate Longview s continuing negotiations on alternative fuel supply arrangements. The Commission will promptly handle any natural gas fuel supply arrangements that Longview files for review by the Commission, as we explained in the Interim Order. The Commission will not, however, become involved in contract negotiations between Longview and Hope or act in a manner that may further the position of either Longview or Hope to the potential detriment of the other in any future Commission proceeding. The Commission will, therefore, deny the Longview request to require Section 2.4 to be deleted from the Service Agreement. The Commission ruling relating to the Service Agreement that was set forth in the Interim Order remains in full force and effect as our final decision. O&M Expense Contract In the Interim Order, the Commission stated that it was not yet convinced that it was improper for Longview to pay the costs set forth in the O&M Expense Contract: The O&M expenses of the DTI interconnect amount to $21,888 annually, and Longview also requests interim relief from the Commission in the form of an assurance that Longview need not pay this amount. The Commission finds that this cost is minimal when compared to total annual operating costs of the plant and does not present sufficient risk of irreparable harm to justify the granting of interim relief. Moreover, we have not yet been persuaded that it is improper for Longview to pay these costs. We reserve to a later decision our final ruling on this issue. Interim Order at 9. Longview did not reject the O&M Expense Agreement in the bankruptcy proceeding and after the Interim Order was issued Longview did not file any evidence or argument in support of its original challenge of those costs. Moreover, since the Interim 5
Order was issued, Longview stated that it would abide by the final Commission decision as it relates to the O&M costs and Longview stated that it did not object to adoption of the Interim Order as a final decision. Longview Response to Comm n Order at 1 (June 4, 2014); Longview Status Report at 1 (Jan. 30,2015). As Longview is no longer pursuing the challenge that it originally asserted relating to the O&M Expense Contract and as Longview does not object to adoption of the Interim Order as a final decision, the Commission will adopt the Interim Order as it relates to the O&M Expense Contract as the final decision in this matter. FINDINGS OF FACT 1. Longview did not reject either the Service Agreement or the O&M Expense Contract in its bankruptcy proceedings. Longview Response to Comm n Order at 1 (June 4, 2014); Longview Status Report at 1 (Jan. 30, 2015). 2. On March 16, 2015 the Bankruptcy Court accepted the Debtors Second Amended Joint Plan of Reorganization for Longview Power, LLC. Longview Status Report at 1-2 (Apr. 15,2015). 3. On April 13, 2015, substantial consummation of the reorganization plan occurred and Longview emerged from bankruptcy protection. rd. 4. On April 15, 2014, Longview asked the Commission to require that Section 2.4, Exclusive Service, be deleted from the Service Agreement. Id. 5. Longview is no longer pursuing the challenge that it originally asserted relating to the costs set forth in the O&M Expense Contract. Longview Response to Comm n Order at 1 (June 4,2014); Longview Status Report at 1 (Jan. 30,2015). CONCLUSIONS OF LAW 1. There are no unresolved issues relating to the Service Agreement that Longview originally complained of in Case Number 14-0499-G-C. 2. Although Longview asserts that Longview and Hope have different interpretations of the Interim Order, there is no actual controversy pending for the Commission to resolve relating to the Service Agreement. 3. As Longview is no longer pursuing the challenge that it originally asserted relating to the O&M Expense Contract and as Longview does not object to adoption of the Interim Order as a final decision, the Commission should adopt the Interim Order as it relates to the O&M Expense Contract as the final decision in this matter. 6
ORDER IT IS THEREFORE ORDERED that the Commission ruling relating to the Service Agreement that was set forth in the Interim Order issued on May 22, 2014, remains in full force and effect. IT IS FURTHER ORDERED that the Longview request for the Commission to require that Section 2.4 be deleted from the Service Agreement is denied. IT IS FURTHER ORDERED that the Longview request to be excused from complying with the tenns of the O&M Expense Contract, as set forth in the Formal Complaint, is denied. IT IS FURTHER ORDERED that the Interim Order issued on May 22, 2014, is adopted as the final decision in this matter as it relates to the O&M Expense Contract. IT IS FURTHER ORDERED that upon entry of this Order this case shall be removed from the Commission s docket of open cases. IT IS FURTHER ORDERED that the Executive Secretary of the Commission serve a copy of this Order by electronic service on all parties of record who have filed an e-service agreement, and by United States First Class Mail on all parties of record who have not filed an e-service agreement, and on Commission Staff by hand delivery. A True Copy, Teste. Ingrid Ferrell Executive Secretary CLWlsek 140499ce.doc 7