On April 21, 1999, the Louisiana Public Service Commission (PSC) unanimously determined that a cogeneration facility whose power would be consumed by an owner-manufacturing company and would be sold at wholesale is not an electric public utility under Louisiana law, and not otherwise subject to regulation by the PSC as an electric public utility. The cogeneration facility is a combined cycle project, and the steam produced could be sold to third parties. The joint owners are PPG Industries, Inc. (PPG), a manufacturer having a chemical plant at the site of the proposed cogeneration facility, and Entergy Power (Entergy), a non-regulated subsidiary of Entergy Corporation. Factors considered by the PSC in its decision included the fact that each owner holds a fifty percent interest in the facility, which mirrors capacity entitlements for each owner; the fact that PPG would use a portion of its capacity entitlement for its on-site chemical plant; the fact that PPG would operate the facility; and the fact that there would be no retail sales of the energy. The PSC declined to regulate the production and sale of steam generated at the facility.
Under Louisiana law, an "electric public utility" is defined as "any person furnishing electric service within the State of Louisiana." Persons not primarily engaged in the generation, transmission, distribution, and/or sale of electricity who own, lease, or operate an electric generation facility are exempted from this general rule provided such persons consume all of the energy generated by the facility for their own use at the site of generation, sell all of the energy generated to an electric public utility, or combine self-consumption with sale to a public utility.
In the petition to the PSC requesting a declaration as to the regulated status of the facility, the owners described the plan related to the proposed facility. The PSC specifically limited its order to these factual representations. The direct owner of the facility will be RS Cogen, with PPG and Entergy each owning fifty percent of RS Cogen, and each entitled to fifty percent of the electric capacity of the facility. Each owner is committed to pay for its capacity with mirror demand charges. While Entergy is a non-regulated company, it is affiliated with Entergy Gulf States, Inc. (EGS), which is an electric utility providing service in the area surrounding the site of the facility, by virtue of the fact that each is owned by Entergy Corporation, a public utility holding company. However, Entergys relevant activities are independent and segregated from the regulated activities of EGS.
PPG will use its capacity for its on-site chemicals plant and/or will sell its capacity in the wholesale power market. The capacity to which Entergy is entitled will be sold to Entergy Power Marketing Corporation (EPMC), a wholesale power marketer affiliated with Entergy. EPMC will only sell its capacity entitlement in the wholesale power market. The owners will apply for the facility to achieve the status of a "Qualifying Facility" under the Public Utility Regulatory Policies Act (PURPA). RS Cogen will sell the steam generated by the facility to PPG and possibly third parties pursuant to the requirements of the PURPA. The owners represented that no retail electric service would be provided by the facility and that no utilities or ratepayers will become obligated for any of the costs associated with the facility.
Because the facility would not be providing retail electric service to the public, and because the facility would have no captive customers and not subject ratepayers or utilities to risk, the PSC found the owners do not provide electric service to the public and are therefore not subject to the jurisdiction of the PSC.
The PSC additionally found the facility falls within the exemption provision of "electric public utilities" under Louisiana law. The PSC found all three owners to be owners, lessees, or operators of the generating facility on the basis that RS Cogen is the direct owner, PPG is an indirect owner and the operator of the facility, and that Entergy is an indirect owner. The PSC also found that no owner is primarily engaged in the generation, transmission, distribution and/or sale of electricity. The PSC specifically noted that a greater than fifty percent equity interest in the facility by Entergy would meet this requirement, but a fifty percent equity interest does not. Even though Entergy is neither a utility nor a holding company, because it is held by a electric utility holding company, it is considered engaged in the generation, transmission, distribution and/or sale of electricity.
The PSC also found the self-consumption and/or wholesale consumption requirement for the electric public utility exemption to be present. Because PPG is an owner/operator of fifty percent of the facility and because that ownership interest is equivalent to its entitlement to fifty percent of the capacity, the PSC found that PPG will not be buying power from the facility, but instead will be consuming energy for its own use. The PSC further determined that the sale of power in the electric wholesale market by PPG and Entergy is not subject to state regulation because the wholesale sales would fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC). Even though states have the responsibility to implement FERCs regulations pertaining to wholesale power sales by qualifying facilities under PURPA and the PSC did issue such an order implementing the regulations, the PSC found that a wholesale sale between PPG and an electric utility would not subject PPG to state regulation where the sales are an integrated part of the qualifying facility. However, the PSC stated the order does not affect its ability to regulate PPG or RS Cogen as a customer or supplier to EGS, including sales of excess energy under PURPA. The PSC similarly found that the transfer of Entergys fifty percent capacity to EPMC constitutes a wholesale sale of power of a qualifying facility which is not subject to state regulation.
The PSC declined to regulate the production and sale of steam generated by the facility, stating it has not historically done so and does not intend to change that policy now. The PSC conditioned the order on the facility remaining a "qualifying facility" under PURPA and asserted the order does not affect its regulatory power over the owners in the event retail competition is approved in Louisiana. The PSC also stated the order does not affect its avoided cost regulations.