[BETA] Fortnightly

The Federal Energy Regulatory Commission (FERC) has set for hearing a complaint by the Municipal Electric Utilities Association of New York (MEUA) against one of its members (the Town of Massena) and the New York Power Authority (NYPA). The complaint alleges that NYPA improperly agreed to sell low-cost hydroelectric power to an industrial customer, violating the Niagara Redevelopment Act as well as a FERC license assigning statutory preference to municipal utilities (Docket No. EL95-57-000).

The Act and the license require NYPA to sell as much as 50 percent of the hydropower it produces at the Niagara Project as "preference" power to "public bodies" in New York State and within "economic transmission distance." The courts consistently have held that the preference applies only to government-owned utilities that sell at retail, specifically excluding ultimate consumers or municipal agencies that act as conduits for ineligible recipients.

Since demand for preference power has exceeded volume for many years, NYPA reallocated preference power among public bodies to spur economic development. Municipalities were offered additional preference power to serve industries that created new jobs. The Town of Massena, a municipal utility, was allocated industrial development power to serve a General Motors plant, but MEUA claims that proposed sale amounts to a direct sale from NYPA to General Motors.

The FERC explained that the principal test in enforcing the preference power provisions is whether a public body engages in "direct retail distribution." Specifically, whether 1) Massena provides a basis for rate comparison and other competition with a private utility, 2) the municipality is directly responsible for meeting the requirements of General Motors, and 3) Massena will exercise control over the distribution system. At this time, the FERC says it needs more information. Although the power purchased by Massena flows over a line that Massena co-owns and leases from NYPA, it is unclear whether and how that line will be used for the proposed sale.

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