Gainesville Utilities Department v. Florida Power Corporation

PETITIONER:Gainesville Utilities Department
RESPONDENT:Florida Power Corporation
LOCATION:C-M School Corporate Office

DOCKET NO.: 464
DECIDED BY: Burger Court (1970-1971)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 402 US 515 (1971)
ARGUED: Feb 24, 1971
DECIDED: May 24, 1971

Facts of the case

Question

Audio Transcription for Oral Argument – February 24, 1971 in Gainesville Utilities Department v. Florida Power Corporation

Warren E. Burger:

We’ll hear arguments next in 464, Gainesville Utilities against Florida Power Corporation.

Counsel may I inquire, is it contemplated that 464 and 469 will be interchangeably argued in both sets of arguments or are you going to have them completely separated?

George Spiegel:

Well, procedurally they’re completely separated?

Warren E. Burger:

Yes, I realize that.

George Spiegel:

But in terms of the subject matter they are the same.

Warren E. Burger:

Further — my question is, specifically in the next hour are we going to concern ourselves with 464?

George Spiegel:

Yes.

Warren E. Burger:

Very well, you may proceed whenever you’re ready Mr. Spiegel.

George Spiegel:

And Mr. Chief Justice and may it please the Court.

The City of Gainesville, Florida operates an isolated electric system serving some 60,000 people and Alachua County, Florida and is a rapidly growing system with a demand doubling every five years in a concomitant necessity to continue to build additional generating facilities.

There is in Florida and there was at the time in 1965 an interconnected system of five utilities.

Our home were interconnected with each other, were selling power back and forth between each other and generally applying to each other mutual assistance and their operations in general were guided by an operating committee and their interconnections were founded upon bilateral agreements.

The City of Gainesville desires to interconnect with this grid or this pool and it was unable to negotiate an agreement with either of its closest neighbors, Florida Power and Light Company and Florida Power Corporation and accordingly —

Byron R. White:

Mr. Spiegel, was the City ever a customer, a direct customer of any of these five utilities?

George Spiegel:

No, Your Honor.

Byron R. White:

It’s all been a municipal operated situation?

George Spiegel:

Yes, during World War II, there was an emergency interconnection with Florida Power Corporation which was severed shortly after the war.

We commission after extents of hearings under Section 202 (b) of the Federal Power Act ordered the interconnection and fixed the terms and conditions for the sale of energy across that interconnection and for the responsibilities which Gainesville would have to assume by way of providing generating capacity reserves to the interconnected system.

And in general, the Commission fixed the same pro rata terms and obligations on Gainesville as what exists among members of the pool.

Appeal was taken — a petition for review was taken to the Fifth Circuit Court of Appeals by Florida Power Corporation.

Byron R. White:

Mr. Spiegel, would you say that broadly all the significant conditions for Gainesville are the same they are between and among the other members of the grid?

George Spiegel:

Yes, sir.

There are some minor differences in certain of individual bilateral contracts but in general they are the same.

But the Commission does require that Gainesville abide by the operating criteria of the Florida Operating Committee precisely the same as other systems.

Three issues were presented in the Court of Appeals, the first issue being whether the Commission had authority to order the interconnection and the court upheld the Commission on that.

The second issue was whether the Commission should be required to condition the interconnection upon the making of a territorial agreement between the parties.

The Commission had declined to do so and the court had upheld the Commission on that issue.

The only question on which — the third question and the only question on which the court reversed was as to a single aspect of the compensation arrangement.

There’s no disagreement as to what the price should be when economy energy flows through the system between a systems.

There’s no dispute as to what — there’s no serious question as to what the rate should be when they arranged firm transactions, short-term transactions.

George Spiegel:

It is agreed that Gainesville shall pay all of the cost of making the interconnection.

But the court took the position that because Gainesville was small and because it considered that Gainesville was receiving the larger part of the benefits that there must be some other charge of some sort.

And it wasn’t sufficient to accept the Commission’s principle — its rule that when interconnected systems operate together, it is the duty that each one carry its proportionate utility responsibility and that is — and that if it discharges that proportion of responsibility it has provided its basic cost burden.

Now, what the Commission is saying is this, that when a group of utilities are interconnected, each one brings some load to the interconnected system.

And that load say a 100 megawatts is a burden on the interconnected system.

Therefore, it must also bring some generating capacities to offset the load which it brings and it must bring generating capacity not just equal to its load but it must be something greater.

It must bring a reserve capacity so that in the event of failure of generator, there will be other generating capacity available to the systems.

And what the Commission here is saying is, that if Gainesville brings that capacity to the interconnection that extra capacity that reserve capacity to the interconnection which it is required — which it would be required to do under the operating criteria of the Florida pool as each system under the Florida pool is required to do then it would meet its basic responsibility for not burdening the pool.

Byron R. White:

How about the new — wouldn’t Gainesville have to pay for any power that it actually used?

George Spiegel:

Oh, yes, yes.

When the energy flows, there are payments and likewise, when —

Byron R. White:

But what — and there’s no question about the adequacy of that rate as a rate for payment for that power?

George Spiegel:

No question, it’s — no there is none and I don’t think a serious question on that.

Byron R. White:

So, you really do pay? You do — under the Federal Power Commission order you would do more than just bring your generating capacity, make your generating capacity available to the system?

George Spiegel:

That’s right.

Byron R. White:

And you would be paying for power or if the flow in your direction was greater than the flow in the other direction?

George Spiegel:

That is correct and vice versa.

In other words, there’s a mutual arrangement.

In other words, we agree to backup Florida Power Corporation and through Florida Power Corporation supply emergency energy to any system that needs it.

And likewise, there would be payments from Florida Power Corporation.

Byron R. White:

Is there any way of — what is the arrangement, what is the practical situation?

Let’s assume that your system was using all the power you had with right within the system.

Let’s assume when your generators went out —

George Spiegel:

Right.

Byron R. White:

— and your system was using all the power that you then have.

George Spiegel:

Right.

Byron R. White:

And then let’s say there was a need for power in the larger system.

George Spiegel:

Right.

Under those circumstances, we could not supply it nor will we be required to supply it?

Byron R. White:

What would be the — you just wouldn’t give it to them because there’s a way of what would you do, cut the switch or what?

George Spiegel:

Well, the switch can be opened.

By open, it means —

Byron R. White:

Is that what you would do?

George Spiegel:

It doesn’t —

Byron R. White:

Is that what you would do?

George Spiegel:

If I understand your example.

You’re assuming that Florida — that Gainesville has a load, we’ll say a, 50 megawatts.

Byron R. White:

Yes.

George Spiegel:

That even though it has a 100 megawatts of capacity the only 50 megawatts is then operated, —

Byron R. White:

Yes.

George Spiegel:

The other 50 Megawatts is been down on forced outage.

Byron R. White:

Yes.

George Spiegel:

And the power company will ask us for power for an emergency on their situation, we could not supply it.

Byron R. White:

Well, I will set in that — and I take it that would be true the other way too?

George Spiegel:

Now, be true to the other way.

Byron R. White:

If you need or suddenly needed power, would you apparently think you need some connections to take care of emergencies?

If you — if there was an emergency in the Gainesville system —

George Spiegel:

Right.

Byron R. White:

— and you suddenly needed power —

George Spiegel:

Right.

Byron R. White:

— and the larger system has then overloaded itself.

George Spiegel:

Right, like Consolidated Edison New York.

Byron R. White:

Yes.

You — they could not furnish you the power?

George Spiegel:

That’s right.

They would not —

Byron R. White:

They have no obligation constantly to be to — to be on stand by status to furnish you emergency power?

George Spiegel:

That is my understanding.

That is the service for which we requested.

That is the service that it was ordered.

Byron R. White:

Of which?

George Spiegel:

That the seller and seller system — the helping system doesn’t help the other system —

Byron R. White:

Unless, it’s in position to do so?

George Spiegel:

Was in position to do it.

Now, this is fundamental.

Byron R. White:

Now, isn’t that quite a difference between the litigants in this case on that issue?

George Spiegel:

There is and the court, I think this is one of the basic errors the court made where it, I think it tried to understand the electrical arrangements but misunderstood them.

Byron R. White:

Wouldn’t concede or would you concede that if Florida Power render an obligation to maintain a capacity which under any circumstances — so that in under any circumstance does it could furnish you emergency needs for power that it maybe you should do something more than pay for power?

George Spiegel:

Oh, yes.

If they are obligating themselves to have 50,000 kilowatts constantly available on call for us which they have to give to us in preference to their own customers or even irrespective of whether they have to unload their own customers, then you would have a fixed to standby obligation.

Byron R. White:

So you’re saying —

George Spiegel:

I doubt they would be willing to sell that service for the $3.08 per kilowatt.

Yes.

Byron R. White:

Yes and you wouldn’t to expect to buy it for that, would you?

George Spiegel:

It’s an animal that I don’t understand in terms of electrical situation.

Byron R. White:

So, you’re saying that —

George Spiegel:

If they’re obligating themselves on a firm basis to have the generation and have the transmission, then it’s an obligation that runs in the order of $20.00 to $30.00 a kilowatt here.

Byron R. White:

Yes and they might be cheaper for you to build your own.

George Spiegel:

It would be cheaper for us to.

Byron R. White:

How about that?

George Spiegel:

The thing that needs to be emphasize is that the switch and the control where the operations is in the hands first of all of the dispatches of the system and they under an operating committee of the two parties.

And they are in a position to decide when and under what circumstances the switches to be opened and by whom.

Now, the basic obligation as it exist in the agreements which a matter of record in this case between the various companies all say the same thing.

They say that when you receive a call for an emergency, you shall give it to them if you can do so without jeopardizing your own service.

Byron R. White:

What you’re saying —

George Spiegel:

And they further provide in the body of the contracts that if at any time the operations of the other party, the power its drawing jeopardize your service, you have a right to open the switch.

And the Commission’s order when it orders emergency service here, she must be read within the context of that practice.

Byron R. White:

Are you saying even though the right is only for emergency power, it’s only when the power is to take you to the other system?

George Spiegel:

That’s right.

And that’s the standards throughout the industry by which systems interconnect.

George Spiegel:

Now, that doesn’t mean that this thing, that the kind of emergency assistance available is not an important thing.

It’s an important thing because what happens is every system pulls its reserves.

That’s why it got co-insurance arrangement so that the Gainesville reserves plus the Orlando reserves plus the Jacksonville reserves are available to anybody in the group that needs them.

Hugo L. Black:

But isn’t this based on an assumption and practical experience that the same disaster is not going to strike all the members of the pool at the same time and then the same degree?

George Spiegel:

That’s right.

In other words the probabilities are that the reserve capacity will be sufficient and the systems under most cases.

In other words, they’ll have a — they’ll make calculations the law that probability of loss calculations for total system and they’ll conclude that we have achieved the standard so that load will not exceed available capacity more than one day in 10 years.

It’s just those kinds of probabilities.

Hugo L. Black:

Is the sole — does the sole question here relate to compensation?

George Spiegel:

The whole question relates to compensation.

Hugo L. Black:

For the power that they get?

George Spiegel:

Not for the power that is given, but for the fact that the power is available.

In other words, —

Hugo L. Black:

But there’s a power to get it.

George Spiegel:

I’m sorry sir?

Hugo L. Black:

There’s a power to get or can’t get compensation for it, isn’t it?

George Spiegel:

They get the compensation when the power flows.

Hugo L. Black:

That’s right.

But isn’t that the issue as to where it’s too much or too little?

George Spiegel:

No, the issue here is where the Florida Power Corporation should be compensated when the power is not flowing because under that theory —

Hugo L. Black:

That still gets back I suppose in the question where the compensation is too much and too little, doesn’t it?

George Spiegel:

Yes.

Hugo L. Black:

I thought it is.

George Spiegel:

Over all, over all yes.

Hugo L. Black:

And that’s what the Commission has passed on?

George Spiegel:

That’s what the Commission has passed on.

Hugo L. Black:

That’s what the court set aside?

George Spiegel:

That’s what the court set aside.

The court in effect prohibits the Florida Power Commission from utilizing this rule of proportionate utility responsibility and it says that this is an adequate based upon its understanding — the Court’s understanding it seems to me of how electrical systems operate.

It seems to me a clear example of a policy factual determination which has been placed in the hands of the experts, the Federal Power Commission and should be allowed to stand as along as there is warrant in the record.

George Spiegel:

As long as the Commission’s reasoning is adequate, as long as there’s a substantial support in the evidence.

Warren E. Burger:

Now, I suppose there are great many agreements — pool agreements and multilateral and bilateral throughout the industry and the country.

Do you —

George Spiegel:

Yes, there are.

Warren E. Burger:

Does this record show or you happened to know whether there are other arrangements of this kind imposed by Commission order?

George Spiegel:

There’s been very little on the way of Commission orders.

This is practically a case of first impression of this type of interconnection.

Now, there is testimony by the experts of the staff who’ve examined a multitude of interconnection arrangements and pooling arrangements throughout the country and they say in effect and they testify in effect that the kind of standby charge that’s here being recognized is contrary to the general practices in the country.

Now the court, you see, reasons that a firm obligation has been placed upon Florida Power Corporation even though the Commission states specifically that we are providing no firm obligation, no firm service.

And so, proceeding from that the erroneous position it concludes that cost are being placed upon — fixed cost are being placed upon Florida Power Corporation which the Commission said are not.

And proceeding further, the court then tries to decide or does decide that in its view there can be no reciprocity of benefits between the systems.

As the Fifth Circuit Court views it a big system can never receive benefits from a small system and all the benefits go on the other way.

But here again is an area that was covered in the evidence and it’s covered by findings of the Commission where the Commission determined otherwise that there are benefits falling both ways even though one system is smaller than the other.

There are power transactions that can be made.

There is the availability of the reserve capacity which Gainesville will have and actually, the court determined — the Commission indicates that these benefits can be very substantial.

So, here again, the court without, I believe, reviewing all the evidence before the Commission has substituted its view on the facts for the findings which the Commission has made.

And I think the case is as simple as that and it simply is an area in which the Commission had a permissible range of choices where it has developed a practice and a policy which is of importance in this case and could well be of importance in other cases.

And the court is saying that it’s beyond their authority that the company at the — that the Commission is in error on the facts.

I would like to reserve my remaining time.

Warren E. Burger:

Very well Mr. Spiegel.

Mr. Emory.

Richard W. Emory:

Mr. Chief Justice and may it please the Court.

First, I’d like to state that this case doesn’t involve whether there should or should not be a connection because Florida Power Corporation has been offering to interconnect voluntarily ever since the case began.

And I’ve filed in our brief exhibit 40, which is the interconnection agreement which we offered.

We are opposed to a force connection or a connection ordered by the Commission which we feel doesn’t meet the statutory standards of necessary or appropriate in the public interest and not an undue burden on our system.

Warren E. Burger:

How does the Commission order differ significantly in your view if it does with the arrangements you have with the other members of the pool?

Richard W. Emory:

Your Honor, these arrangements with other members of the pool are based on mutuality or reciprocity of service benefits.

We have two other arrangements with other systems where there are special payments provided for.

We have an arrangement with Golf Power Company where Florida Power Corporation is playing golf $5.80 a kilowatt per year and we’re only asking for $3.08 here.

It all depends on whether the arrangement or the interconnection has mutual service benefits.

Richard W. Emory:

If it doesn’t have mutual service benefits, there should be something to offset that lack of mutuality and this is —

Warren E. Burger:

Do you say that Florida Power doesn’t have any benefit out of this?

Richard W. Emory:

We can’t see where we would get anything out of this interconnection.

In fact, we think that we would be seriously criticized if we even considered spending the million and a half dollars that Gainesville proposes to spend on the interconnection.

The Florida Public Service Commission would criticize us for wasting our money and the consumers would criticize us for wasting our money and that gets down to understanding what does interconnection does.

Warren E. Burger:

Well, what’s the million and a half for which?

What are you saying the amount —

Richard W. Emory:

That is the cost of Gainesville estimated the cost of the interconnection to our system would be a million and a half dollars.

The Federal Power Commission found $3 million but there isn’t anything in the record to support this extremely.

But we don’t care what it cos.

We don’t think that we could — would be justified in spending any money on it because all of these to our system is a burden.

Warren E. Burger:

Well, I have an impression and I want you to correct it if it’s wrong that Gainesville was to pay that.

Richard W. Emory:

They are to pay that and they say that will be a burden but they will pay it because they are ordered to.

They’ll pay it because they want to because they’re not subject to the jurisdiction of the Federal Power Commission.

This order has no real effect upon them.

They’re outside the jurisdiction of the Federal Power Commission.

So, —

Warren E. Burger:

Well, if — can it be made a condition of the interconnection order?

Isn’t that this posture is really about?

Richard W. Emory:

Well that they pay for it, yes.

But suppose they don’t want to build it.

Warren E. Burger:

Well, then they don’t get the interconnection isn’t that simply?

Richard W. Emory:

That’s right.

So, if they build it, it will be because they want to.

That’s my point.

Warren E. Burger:

But I’m not sure I follow what it is you complain about in that situation.

Richard W. Emory:

We complain that where our system is going to be required to subsidize and support their system and give them substantial financial benefits that their own witness estimate it would be worth $520,000.00 a year to their system And we pay the whole cost of standby service for both systems.

Now, our customers and this is — it’s important to understand what “standby” is.

All large power systems had to have an over capacity to take advantage of emergencies, that’s obvious. It’s just like having a fire department in a city.

You got have a certain amount of over capacity and you got to be able to get that over capacity to any part of the system wherever you have a power shortage.

Richard W. Emory:

Now, we have a $65 million transmission line going half the length of Florida.

This system serves the west coast of Florida back from St. Petersburg up to the Georgia line and in then to central Florida.

We have a $65 million transmission line that cost us $13 million a year to main own and maintain and operate.

Now, there’s no time to open or close switches.

These emergencies happened like that if the power isn’t supply within 1/20th of a second.

One 1/20th of a second, you’re going to have a brownout or blackout.

Byron R. White:

Mr. Emory, but you don’t have to build or maintain the cost of disconnection any more capacity than (Voice Overlap)?

Richard W. Emory:

No, we don’t, but in not for this one customer and this is why we’re —

Byron R. White:

But this one customer has not been figured any obligation in view of the —

Richard W. Emory:

Not this one customer, that’s right.

If you give him a free hour, transmission system can take care of Gainesville without any additional capacity.

But what about the next customer and that we got a lot of municipal systems in Florida.

We’re serving 12 at wholesale.

We’re serving nine REA’s.

Suppose they all want free standby.

Now, our customers we figure —

Byron R. White:

But when you run out of capacity when you have necessary that nobody in connection?

Richard W. Emory:

Oh, it isn’t that’s simple, Your Honor.

We — if we can’t do it, we have to provide capacity and for anybody with whom we’re interconnected.

Byron R. White:

So, did they make the connection?

Richard W. Emory:

Well, if the Federal Power Commission orders us to, we do.

Byron R. White:

But you’re not suggesting it’s an order you’re making connection.

Of course you build at your expense and capacity.

Richard W. Emory:

No, the statute does restrict them against ordering us to do anything that would require any addition to our system.

But let’s look at it from the point of view of our customers.

We figure that this build in to our system of cost of $3.20 a kilowatt for standby in our transmission line.

Every customer on our system in his rates has that build in to his rates as one element of cost.

Now, —

Warren E. Burger:

When you speak of customers, are you speaking of large or the individual householder?

Richard W. Emory:

Retail customers and wholesale customers, everybody.

Warren E. Burger:

Well, is that an average cost by a numbers or are you talking now but the householder?

Richard W. Emory:

Well, I’m not talking — I haven’t broken this down for how much power any one person should use.

This is based on our load.

We have a load of 1,500 megawatts.

We figure this is what it cost on a total load basis and we have to recover that money somewhere, we haven’t broken it down for an individual customer.

But take one of the cities that we’re serving wholesale.

We serve them power — they buy power from us.

In their rate, is built-in the cost of our transmission system and our standby capability and they pay for it.

Now, Gainesville wants it for nothing and we think —

Byron R. White:

They just want to pay this power.

Richard W. Emory:

Well, that’s right but that’s — we pay for the power if we buy it from them, but what’s going to happen is and you got to understand.

This interconnection inevitably unavoidably will result in us protecting them at all hours of the day and night against any outage on their system, the testimony.

Byron R. White:

But only as long as you got the some power, it’s fair?

Richard W. Emory:

No, we cannot operate our system in a way that I wouldn’t protect them except for opening the switch which the Federal Power Commission says you can do.

We have to have — Mr. Justice White, it really is this.

Our system —

Byron R. White:

Let’s just assume that one of your big generators goes down and that your reserve capacity that you’re maintaining to guard against failure which is why you maintain it.

Richard W. Emory:

That’s right.

Byron R. White:

Let’s assume you have a failure and you have to use your generating — your reserve generating capacity to satisfy your normal load.

Are you suggesting that in that situation, there’s no way would you keep it — serve it parties in Gainesville power, it did also have an emergency?

Richard W. Emory:

It’s conceivable in some great crisis if we have enough loss of generation we might have to cut off everybody — a lot of people and that to cut off some of our own customers.

Byron R. White:

They can get their own.

Richard W. Emory:

Oh, we can cut off — we can cut them off.

(Voice Overlap) But in any normal operation we have to protect against loss of 400 or 500 megawatts.

And we have to have that spinning.

That has to be an operation all the time and it has to be available within one 1/20th of a second.

Byron R. White:

That’s true whether you have negative gains or whatever?

Richard W. Emory:

That’s right.

But what —

Warren E. Burger:

So how does the connection with the Gainesville add to your burden being aside whether it confers any benefit on them?

Richard W. Emory:

It does not add to our burden.

We cannot deny that but what we say, anybody and everybody who connects to our transmission system ought to pay its fair share of the cost.

I mean they shouldn’t get a free ride.

Warren E. Burger:

How many people are there in the pool with you now, the bilateral and multilateral contract pool?

Richard W. Emory:

Well, the only ones that I know are Florida Power and Light, Tampa Electric, Orlando and Jacksonville.

Warren E. Burger:

And now, refresh my recollection on your standby arrangements with them.

Richard W. Emory:

We do not have any similar standby arrangement with them because we have what we envisage mutuality of service arrangements.

I mean if we lose a couple of hundred megawatts, they can supply it to us the same way if they lose a couple of hundred megawatts we can supply to them.

Warren E. Burger:

Well, are you telling us the probability is much greater that it will be a one-way street with Gainesville than it is with the others?

Richard W. Emory:

We’d say would be a complete one-way street here whereas with the others it’s a mutual street, it’s a two-way street.

Warren E. Burger:

What about Justice White’s question to you?

What is if one of your big generators burns out or one of your big plants gets hit by lightning or whatnot?

Richard W. Emory:

Well, we have those things happened and so far as I know, we’ve never — we’ve been able to take care of all them that I know about.

Warren E. Burger:

But if you didn’t need them as Justice White’s suggested, you could under this order, call on Gainesville for its reserve power, could you not?

Richard W. Emory:

Your Honor, Gainesville couldn’t supply enough to see.

I mean, it wouldn’t merely do us any good, the most that they can supply in instantaneous power if they had everything running and they admit that they wouldn’t run everything, it would be about 10 megawatts.

And for a system that needs 400 or 500, the 10 we can’t see.

Now, furthermore in our planning and operation of our system, we and this is why they mean nothing to us, we include 30 or 40 megawatts as a margin of error in planning our system and then the operation of our system.

We couldn’t change our method of operation because of Gainesville, because they can’t supply enough to provide any mutuality to this interconnection or any reciprocity to this interconnection.

William O. Douglas:

Mr. Emory, what if any — is the relation between Florida Power and the Florida Power and Light?

Richard W. Emory:

None, whatsoever except, they have a number of interconnection agreements.

William O. Douglas:

No, interlocking directorates or anything of this kind?

Richard W. Emory:

No, not there is —

William O. Douglas:

But you have an interconnection with them, that’s all?

Richard W. Emory:

Have several.

William O. Douglas:

Alright.

Hugo L. Black:

When is the power — Florida Power Company operate, what its area?

William O. Douglas:

Its area is from St. Petersburg roughly north up to Pensacola up to west coast of Florida and through central Florida.

Hugo L. Black:

Down to Miami or does it go to —

William O. Douglas:

No, that’s Florida Power and Light Miami, it’s only on the —

Hugo L. Black:

That’s Florida Power and Light?

William O. Douglas:

Yes, and Florida Power is —

Hugo L. Black:

You said your system, what is your system?

William O. Douglas:

The system is from St. Petersburg north up to west coast of Florida.

Hugo L. Black:

Who generates the power?

William O. Douglas:

We generate the power.

Hugo L. Black:

Florida Power?

William O. Douglas:

Florida Power.

Hugo L. Black:

Where?

William O. Douglas:

The generate it.

They’ve got about eight different generating stations.

Hugo L. Black:

Where?

William O. Douglas:

The largest one is Crystal River.

They got one right outside to St. Petersburg, one just north of Tampa.

Hugo L. Black:

They’re all in Florida?

William O. Douglas:

All in Florida and they’re interconnected with Gulf and —

Hugo L. Black:

Now, in the long —

William O. Douglas:

And on the Georgia line.

Hugo L. Black:

The sum total of this is, you admit that the Gainesville Power Company wants to buy power from your company?

William O. Douglas:

No, Your Honor.

They don’t want to buy power.

Hugo L. Black:

They don’t.

They want you to give it to them.

William O. Douglas:

They want us to give them free standby is what they want.

Hugo L. Black:

Free standby whether they get power from you?

William O. Douglas:

They might get — we don’t know, they insist they do not want any firm purchase of power, but here’s what free standby does to them.

They are carrying a reserve in generation when this case was tried of about 112% of their largest unit.

If they make this connection by the mere fact they make the connection, we will protect them on every hour of the day and night.

Hugo L. Black:

I’ve understood your protection but do they get power from you?

William O. Douglas:

It depends under if they have any outage.

William O. Douglas:

If they have any —

Hugo L. Black:

Well, do they get power from you at any time under any circumstances?

William O. Douglas:

Anytime they have a loss of generation or didn’t generation generate enough power for their needs they get power.

Hugo L. Black:

And the problem here that the Power Commission had to consider was how much they have pay for it, wouldn’t it?

William O. Douglas:

That’s right.

Hugo L. Black:

And that’s the issue?

William O. Douglas:

That’s right.

Hugo L. Black:

That’s the only issue.

William O. Douglas:

That’s the only issue.

Byron R. White:

And they didn’t say that maybe the Commission didn’t hold to pay if they were getting that power for nothing.

Richard W. Emory:

Yes, they just said that —

Byron R. White:

Now wait a minute.

They pay a certain amount for the power that’s used.

And do they pay any less than yours — than anybody else paying for power?

If you want to pay more than the normal rate for power in order to compensate you, would they pay?

Richard W. Emory:

No, we are asking for no higher charge for power.

We are asking them to bear a fair share of the cost of our standby for the amount of the standby that they’re going to use.

We say that this standby or our built-in excess capacity which is going to protect both systems cost us $3.20 per kilowatt per year. If you pay your fair share of the cost of that based on the demands that you’re putting on the excess capacity on our system and the demands that we’re putting —

Byron R. White:

Did you say as to your other customers to share on that free trial standby?

Isn’t that included in the rate that they now pay?

Richard W. Emory:

That’s right.

Byron R. White:

Well, now why isn’t included in the rate of Gainesville?

Richard W. Emory:

Because there’s no provision for it, that’s what we’re complaining.

Byron R. White:

If you charge the Gainesville for the power they purchased, that they actually get them the same rate as others are paying, would there still be free trial evidence, why is it (Inaudible)?

Richard W. Emory:

Well, because the other people not only pay for the power that they get based on complicated, etcetera.

Byron R. White:

Well, they pay you a rate.

Richard W. Emory:

You’re right, they pay a rate.

Byron R. White:

And that includes the provision for this?

Richard W. Emory:

That’s right.

Byron R. White:

Alright, now the rate would be charge to Gainesville as exactly the same?

Richard W. Emory:

No, it isn’t it does not include any provisions for standby, that’s our whole point.

It doesn’t, it only includes when they take power they pay 5 cents per kilowatt plus a low energy charge.

Actually, they get it cheaper because they get it at our cost plus 10%.

They get what we call an interchange rate.

Byron R. White:

At your cost which includes —

Richard W. Emory:

Plus 10%.

Byron R. White:

A normal rate making calculation?

Richard W. Emory:

Yes.

Byron R. White:

That cost it?

Right?

Richard W. Emory:

That will compensate us for when they’re taking power across the interconnection but it will not compensate us for maintaining this large transmission system.

Byron R. White:

Now, I thought you would you maintain it?

Richard W. Emory:

That’s right, but we — if they want to use it why shouldn’t they pay for it?

Byron R. White:

Why shouldn’t they pay for anything more than the power they actually use when they’re going to maintain the standby capacity anyway?

Richard W. Emory:

Well, Your Honor it’s the same — it’s this situation.

If you go into an airline and they have an empty seat, do you contend that you should take — get a free ride?

If you go to a hotel —

Byron R. White:

All I should pay is what the other passengers are paying.

Richard W. Emory:

That’s all we’re asking them.

We’re asking to pay exactly what our customers pay.

Byron R. White:

No, I don’t — all I like to pay is for my ride, I don’t like to pay the airline when the airplane is empty than sitting an overload.

Richard W. Emory:

No.

Warren E. Burger:

Are you analogizing this Mr. Emory to an option that the standby agreement — the standby order that is here is an option which must be fulfilled on demand and then you say that option is in of itself worth something?

Richard W. Emory:

That’s right.

We say it’s more than an option.

We say it’s an absolute firm obligation that we can’t escape.

Warren E. Burger:

Well, an option I was assuming it’s a firm obligation.

Richard W. Emory:

And it’s a firm obligation and once you make that connection and close the switch in order the switch kept closed, we’re going to be standing there with the standby.

Thurgood Marshall:

Mr. Emory, in light of this, is there any of the cost who would be in exact same position in Gainesville?

Richard W. Emory:

We have one that I know of since the case — it’s not in the record who is paying the standby.

Richard W. Emory:

Now, I like —

Hugo L. Black:

May I ask you a question.

Thurgood Marshall:

My whole point, what it seems to worry me at least a little bit is assuming in the next five years, Gainesville never needs to close the switch and they would still be paying like insurance, wouldn’t it?

Richard W. Emory:

Well, it’s like insurance make sense Your Honor, that’s right, but the switch is closed.

The power — Federal Power Commission ordered the switch kept closed and unless the switch is kept closed, this arrangement is no good to them.

It’s only good to them because the switch is closed and if they have any generating outage or generating deficiency, they will be automatically protected.

If they weren’t going to close the switch, they shouldn’t pay for standby.

I would agree with that. But when they close the switch and keep the switch closed and impose upon us the burden to protecting them, we think they ought to pay their fair share.

Now, if what we ask isn’t a fair share, we’re probably willing to listen to what’s reasonable, but the Federal Power Commission just if evaded this.

Thurgood Marshall:

Well, as of now starting (Inaudible) but if they pay for the connection, you don’t put out anything in dollars and cents.

They can still they draw out some electricity, right?

Richard W. Emory:

No, I don’t agree with that.

We are paying about $13 million a year for our backbone transmission network.

Thurgood Marshall:

Would that increase that?

Richard W. Emory:

No, we would be paying that anyway.

Thurgood Marshall:

So you wouldn’t any increase?

Richard W. Emory:

We won’t increase, but we say we should —

Thurgood Marshall:

What Gainesville —

Richard W. Emory:

— subsidize them.

Thurgood Marshall:

What you ask in Gainesville is to join the others to subsidize.

Richard W. Emory:

We are asking that we not be required to subsidize them because if we provide them with free standby, and we think that that’s exactly what we’re doing.

Now, there is a case I like to refer to that’s not in this brief.

The Colorado Interstate Gas Company versus Federal Power Commission, 324 U.S. 581 and at page 615, in a concurring opinion by Mr. Justice Jackson and this case involved gas rates — natural gas rates and whether industrial customers should get a lower rate than some municipal customers on the same theory that they weren’t adding to the cost.

In other words, it wouldn’t going to cost anymore to serve them, therefore, they should give a cheap incremental rate.

And Mr. Justice Jackson said, “I do not think it can be accepted as a principle of public regulation that industrial gas may have a free ride because the pipeline and compressor have to operate anyway, any more than we can say that a big customer should have a free ride for his coal because the train runs anyway.”

Now, we feel that that fits this case exactly, we’re going to provide standby that will protect both of the systems.

We can’t avoid it.

It’s an inevitable consequence of this interconnection.

Byron R. White:

(Inaudible)?

Richard W. Emory:

That’s right.

Byron R. White:

How much of the customers?

Richard W. Emory:

Well, presumably they contribute all of it.

What we’re talking about is an averaging.

Of course, with — this was a hundred we’re talking about charging them $154,000.00.

Byron R. White:

Charge to Gainesville?

Richard W. Emory:

That’s all we’re talking about.

Byron R. White:

What’s that mean?

The others would get what?

Richard W. Emory:

The maintenance.

Byron R. White:

Well, suppose the customer doesn’t pay —

Richard W. Emory:

If you could fine a $154,000.00 in our rate structure, our customers would be entitled to $154,000.00 rate reduction theoretically.

It goes —

Hugo L. Black:

I understood you to say whenever this company gets into power from you the Commission is required to pay cost plus 10%.

Richard W. Emory:

That’s right.

Hugo L. Black:

And that’s what you’re complaining now?

Richard W. Emory:

No, wait actually we propose —

Hugo L. Black:

Well, that if is the cost you’re complaining about it?

And they have to pay your cost plus 10%?

Richard W. Emory:

No, we’re not complaining about that Your Honor, in fact —

Hugo L. Black:

Well, aren’t you complaining about the price they pay you?

Richard W. Emory:

No, actually that price was recommended by us to the Commission.

The Commission took our proposal on that.

We are complaining that they don’t pay —

Hugo L. Black:

They’re just your proposal, the cost plus 10%?

Richard W. Emory:

No, we complain that they are not paying anything for the free standby when they are not taking power.

Hugo L. Black:

Well, let’s forget get those words a minute.

Richard W. Emory:

Yes.

Hugo L. Black:

When you sell power, has the Commission given you rate of cost plus 10%?

Richard W. Emory:

In this interchange arrangement.

Hugo L. Black:

In this rate, and that’s what you get from them?

Richard W. Emory:

Yes.

Hugo L. Black:

And if every particle of power they use?

Richard W. Emory:

That’s right.

Hugo L. Black:

And in five years as you say cost plus 10% of public utility is not enough?

Richard W. Emory:

It’s not — it is not compensatory if we’ve got to maintain the firehouse, the fire station 24 hours a day, 365 days out of the year to protect their system and our system.

If that was all we were giving them —

Hugo L. Black:

Well, if you get less than 10% profit, can’t you complain to them that you’re not getting price they fit?

Richard W. Emory:

Well, Your Honor we’re — our cost is not limited to the cost of the power that we deliver to them.

Our cost is the cost of maintaining this transmission system.

Hugo L. Black:

Do you mean the power company has taken a lead in the Commission?

Make them sell power for less than cost plus 10%?

Richard W. Emory:

Well, we’re not complaining about the charge for the power to —

Hugo L. Black:

But that’s what you get.

Richard W. Emory:

We’re complaining that there was no provision in here to provide for standby.

Now, the Commission has allowed the Federal Government’s standby, they’ve allowed the Southeastern Power Administration $2.75 a kilowatt.

Byron R. White:

Why does the company if in a particular year Gainesville didn’t take whatever these units power hour, you wouldn’t be getting anything cost plus 10% at all?

Richard W. Emory:

That’s right.

Byron R. White:

What you want in that view on the Government side as long there is $154,000.00 from Gainesville to help to pay for substantial?

Richard W. Emory:

That’s right and that’s as simple as that.

Now, the Chairman of the Federal Power Commission in testifying before Congress in 1967 on the — what is known as Title III of the Federal Power Act which was never passed was asked by Senator Monroney and this is all about standby.

Senator Monroney: I mean at the time, he is not selling it.

The “it” being power, at the time he is not selling it does not receive remuneration for the extra standby capability he has.

Mr. White: Mr. White being the Chairman of Federal Power Commission.

He might be paid for the capability, yes.

In other words, in order to protect the system, you contract with your neighbor who says, “Under these circumstances, I will provide you the necessary energy, if the worst scenario comes to pass, you have to pay for that right for his commitment to you to meet your needs when you need help either by making a money payment or by making the same electrical service available to him.”

So the answer is yes, you are paid for that and frankly it is good business from both points of view.

Senator Monroney: In other words, you are paid for the standby capability even though it is not used.

Mr. White, chairman of the Federal Power Commission: Yes.

Senator Monroney: You would have that for maybe two or three years and maybe never need the power, but for only a day or two.

Mr. White: That is correct.

Richard W. Emory:

And under the isolated system, they have to have standby power available unless they want their customers to go without service in the event of a disturbance.

Byron R. White:

Now, Mr. Emory, going back though the Florida Power and Light where you have an interconnect, you are performing standby service for them and they for you.

Richard W. Emory:

That’s right.

Byron R. White:

And so what each one pays to the other is the mutuality of service so to speak?

Richard W. Emory:

That is correct.

Byron R. White:

There isn’t a dime that flows across.

Richard W. Emory:

No, me too.

Byron R. White:

Well, then so far as Gainesville is concerned, isn’t the same thing on them what’s lesser degree?

Richard W. Emory:

No, because in Gainesville’s case, there’s nothing really that can flow across.

They can’t provide enough of this standby capacity to even for us to even take in the consideration.

Byron R. White:

I’ll repeat my question, isn’t the difference one between 10 megawatts or whatever it is ends a much larger thing?

Richard W. Emory:

In hundreds.

Byron R. White:

But again, isn’t a matter just to degree between Gainesville on one hand that Florida P and L on the other?

Richard W. Emory:

If it is a matter of degree except to the degree is so small that it becomes meaningless.

Byron R. White:

Unless Gainesville could provide 200 to 300, you wouldn’t be here?

Richard W. Emory:

Oh, no.

Byron R. White:

Alright, explain to us.

Richard W. Emory:

Well, I —

Byron R. White:

It’s 15, 75, 100?

Richard W. Emory:

Your Honor, it’s hard to know because all these agreements are pretty complicated, they’re all negotiated, they all involved a lot of factors and there’s certain going to be enough —

Byron R. White:

Let me put this way, when the agreements under a couple of hundred, would anyone could provide or something less?

Richard W. Emory:

Of instantaneous, yes with Orlando but we’re buying a hundred megawatts from them regularly, I think.

Byron R. White:

A hundred is as much as they can provide?

Richard W. Emory:

Well, that is a firm purchase on their fit.

I don’t think they could provide it but depend on what they had operating and I do have to do some arithmetic.

They — I don’t know whether they could provide 40 or 50 megawatts of standby, I’m not sure, instantaneously.

Byron R. White:

(Voice Overlap)

Richard W. Emory:

No.

But —

Thurgood Marshall:

We’re having forth the price that Gainesville paid this money and catching on the line for the — that brought the cost to the consumer of Florida Power.

Thurgood Marshall:

I know that’s an important volume.

Richard W. Emory:

Well, I say, it would save our customers $154,000.00 a year which would go in to our earnings.

Thurgood Marshall:

Well, did it actually mean that the rates would be dropped?

Richard W. Emory:

Well, if you could find a hundred and —

Thurgood Marshall:

It wouldn’t last to try a power drop in rate.

Richard W. Emory:

Well, this probably wouldn’t affect federal power rates.

It would affect our domestic or interstate — intrastate rates.

It would be one fact —

Thurgood Marshall:

When did the light — electricity rates dropped in Florida Light?

Richard W. Emory:

They’ve been dropping regularly every year.

I noticed.

Mr. Emory, how much — how did we got to have to be in Gainesville to completely shutdown, what would be the demand to under standby if they can provide only 10? As a maximum, they can need from you 10 or what?

Richard W. Emory:

Well, what they say they want is 50 megawatts such as the size of their largest unit and their actual testimony is we need and want emergency backup service in the amount of our largest unit which is 50 megawatts.

Byron R. White:

Of course you, you held a complaint if you have a hundred Gainesville wanting standby, I take it your position it should be locked in already, wouldn’t you?

Richard W. Emory:

We have two or three.

Warren E. Burger:

Mr. Emory, if I follow your arguments, you’re saying that this order imposes on you just proportionate burden in the way that for illustration a mutual defense pact between the United States and Jamaica or Guatemala?

Richard W. Emory:

I guess.

Warren E. Burger:

It’s all one way, is that your point?

Richard W. Emory:

That’s right.

Warren E. Burger:

They can’t ever help you but you’re bound to standby 24 hours a day, 365 days a year to help them if they need it?

Richard W. Emory:

That’s right, Your Honor.

Hugo L. Black:

Who gave the Commission the cost of your operation?

Richard W. Emory:

We had two engineering witness made this estimate.

Hugo L. Black:

In your company?

Richard W. Emory:

Yes.

— No, he was an independent — well, he was hired consultant.

Hugo L. Black:

They adopted it?

Richard W. Emory:

No, they just ignored it.

Hugo L. Black:

Well, I thought you said they arrange you get 10% profit.

Richard W. Emory:

Although, that’s on the power they sell on the standby, they didn’t.

Hugo L. Black:

On the power that this company bought.

Richard W. Emory:

Well on that they just took our —

Hugo L. Black:

But we didn’t leave out of that to due the cost of operation, the cost of your whatever that is standby or stop by?

Richard W. Emory:

No, we have no standby charge in that Your Honor.

None.

Warren E. Burger:

What was the evidence on the reasonable value of the standby $154,000.00?

Richard W. Emory:

$154,000.00

Warren E. Burger:

Thank you Mr. Emory.

Mr. Spiegel, you have 10 minutes left.

George Spiegel:

It’s hard for me to believe that we’re talking about the same case.

There’s an interconnection ordered here of 60 megawatts and when you evaluate the resources on each side of that interconnection, the likelihood that Gainesville can supply 60,000 kilowatts to Florida Power Corporation when Florida Power Corporation needs it is probably as great as that Florida Power Corporation can supply it to Gainesville.

I think that’s clear on the record here.

Gainesville has a reserve right now of 60 megawatts and the Commission found in the course of the years it would have reserves running in the order of 40% of its peak.

So that’s 50, 60, 70 megawatts.

So we have power in our side of the system and secondly the Commission found that our units though smaller but because they are smaller, are more reliable.

Our outage rate is much less.

They have these big units.

They are probably the big units Consolidated Edison is proud of its big units but the big units have higher outage rates.

Byron R. White:

(Voice Overlap) higher than you for the backup or perhaps more from that, it would be by you up next?

George Spiegel:

Yes, Your Honor.

In other words, any system tied to consolidate with Edison up and down the west coast to a small east coast.

Small system is not receiving help from Edison rather it’s drawn down.

And actually a report issued only two days ago by the Federal Power Commission indicates a very serious reserve shortage in Florida for both Florida Power Corporation and Florida Power and Light.

Now, this report shows and as of this summer they expect that Florida Power Corporation will have something in the order of 5% reserves.

Byron R. White:

Well, aren’t you asking for standby charge?

George Spiegel:

Well, that’s the point.

The point is if we are dedicating per kilowatt more transmission actually its $3 million worth on their basis than they are dedicating to us.

So, if they want a charge us $3.08, I suppose we should be charge in $4.50 and right off in that basis.

Byron R. White:

Perhaps, you can come out pretty well.

George Spiegel:

Well, if that will make it bilateral because both is going to charge for everything we do for each other.

George Spiegel:

But you have to recognize that what you’re dealing with is a pool.

You’re not just dealing with two companies and you got pool operation everybody contributes to that pool.

Everybody works together in that pool when somebody has a big problem as we point out in the brief.

In January of 1969, when Florida Power and Light lost a big unit then Southern Florida, the City of Jacksonville and the City of Orlando had the cut load in order to keep the systems alive.

Byron R. White:

Incidentally, I gather you brought this all out before the Commission?

George Spiegel:

We fought it up before the Commission.

Byron R. White:

What issue?

George Spiegel:

This very issue the Commission to study that very carefully —

Byron R. White:

Anything said here that wasn’t said before the Commission?

George Spiegel:

I don’t think so, Your Honor.

Warren E. Burger:

Mr. Spiegel, you know whether Gainesville has any standby arrangements with private industrial customers who maintain their own generating clients?

George Spiegel:

We do not.

Warren E. Burger:

That’s a common practice though in the industries, is it not?

George Spiegel:

There is a form of service of that type.

Warren E. Burger:

Do the power companies charged for that standby service just a standby?

George Spiegel:

I believe that there are rates that have such charges.

Now, that’s true.

I have and many negotiations have always opposed such charges in any interconnection arrangement between utilities both of whom have their own generating resources.

The basic position that we always have taken in many negotiations and in many contracts is that if we supply our proportionate share of the reserve and make it available to the other side on equalize basis, we’re making our contribution by our investment cost in the facilities themselves.

Warren E. Burger:

But that’s all was in the context for the parties who are reaching this by agreement because the parties themselves see a mutuality of benefit, isn’t that true?

George Spiegel:

Yes, all the parties are concerned that we might make a complaint to the Federal Power Commission.

Now, with the Federal Power Commission here has decided this important question.

Warren E. Burger:

And this is you said and I think it was you who said, “This is the first interconnection of this kind?”

George Spiegel:

This is the first interconnection, full interconnection decision by the Federal Power Commission between two generating utilities.

Now, —

Hugo L. Black:

Is the Gainesville Company privately owned?

George Spiegel:

No, it’s a municipally own operation.

Now, this big —

Hugo L. Black:

Was it always?

George Spiegel:

Always.

George Spiegel:

Now, this business about the size, the compare of the size between Florida Power Corporation and Gainesville is no different than the compare of the size between Orlando and Florida Power and Light and still there would not standby arrangements in that arrangement and in the subsequent contracts.

Thank you.

Warren E. Burger:

Thank you Mr. Spiegel, Mr. Emory.

The case is submitted.

We’ll now move to 469, Federal Power against Florida Power Corporation.

Mr. Gooch, you may proceed whenever you’re ready.

Gordon Gooch:

Mr. Chief Justice and may it please the Court.

This of course is the same case as 464.

The Federal Power Commission is appealing the judgment of the Fifth Circuit which circumscribed the discretion committed to the Commission in rate making in connection with interconnections under the Federal Power Act.

The Federal Power Commission is charged by Congress with the responsibility of seeing to it that all the citizens of the United States have reliable and adequate supply of power of this country and with due deference to the environment.

In this particular case, the Commission was called upon by the City of Gainesville, a municipal owned but the entirely self-sufficient generating system to hold a hearing to determine whether or not an interconnection should be ordered with a larger investor-owned utility the Federal Power — Florida Power Corporation and if so at what rate.

After extensive hearings before the Commission that were held not only in Washington, but in Florida, the Commission considered the type of evidence that Mr. Emory has recited here.

He considered the type of evidence that Mr. Spiegel has recited here.

And in addition, had the staff case placed in the record by those in the Bureau of Power at the Federal Power Commission who are charged with the responsibility of looking over these problems nationwide.

After the examiner’s decision, the Commission considered the case on its merits and concluded the following.

They concluded first that an interconnection was in the public interest that it placed no undue burden at all on the Florida Power of the system in Florida was connected with, that it would not require Florida Power to increase any facilities.

The Commission determined that the service to Florida Power’s customers would not be impaired at all.

The Commission assigned 100% of the cost of the interconnection to the City of Gainesville and the Commission set the —

Warren E. Burger:

Do you mean the transmission line or whatever facilities go with that?

Gordon Gooch:

Yes, sir.

And assigned a rate to be charged for the actual energy transfers across the interconnection.

Now, what the Commission did in its order was to place Gainesville in the same position that it would have been in if the five other utilities in the Florida operating group had admitted it to its informal membership.

With one significant exception, the Commission imposed on the City of Gainesville as a condition for the interconnection that it maintain an installed reserve capacity, something that none of the other members of the Florida Operating Committee are required to do.

Now, much argument is made here —

Potter Stewart:

That Mr. Gooch, that it maintain what kind of a reserve capacity?

Gordon Gooch:

The installed reserve capacity.

It is required to maintain a 115% of its peak in installed generating capacity.

Potter Stewart:

Installed?

Gordon Gooch:

Yes, sir.

Potter Stewart:

That will involve their taking any other investments —

Gordon Gooch:

Yes, sir.

Potter Stewart:

Capital investment.

Gordon Gooch:

Yes sir.

Potter Stewart:

Does the record show whether they would’ve done that absent this interconnection?

Gordon Gooch:

Sir, the record that it is closed in 1965 had projections all the way through 1979 and in the projections that showed by the staff witnesses the projected additional generation that would be required.

The Federal Power Commission now made it possible for Gainesville to purchase that power rather than install it if there was an economic benefit to do so.

Now, as through the year roughly 1970 though, based on the projections of 1965 with the addition of the two 15 megawatt gas turbines, Florida — the City of Gainesville would have adequate installed capacity to meet the 115% obligation imposed on them by the Federal Power Commission.

But as their load grows, they have the burden of maintaining the installed reserve.

Now —

Have been what?

Megawatts?

What’s this called for?

Gordon Gooch:

Well, as of the projection in the record, the City of Gainesville at the present time would have 138 megawatts of installed.

They have anticipated the peak of about 102 in the year 1970 according to the record that was back in 1965 with the projections.

Now, —

Hugo L. Black:

How long did it take to conduct the hearing?

Gordon Gooch:

Sir, it went on from 1965 they didn’t clear the Commission to the final opinion on rehearing was on January of 1969.

Hugo L. Black:

How long, I mean the volumes of evidence?

Gordon Gooch:

I’ve seen the condensed that’s about 13 in transcript form, sir.

And we have three witnesses from the City of Gainesville of my recollection including the witness from the Clay County Cooperative.

We had witnesses from Florida Power.

We had three staff witnesses all subject to cross-examination before the examiner.

Now, the main point that I would like to make is that I cannot for the life of me see how anyone can read the order of the Federal Power Commission as requiring firm service to be rendered by Florida Power to the City of Gainesville.

I cannot see in any way how that order could be so construed.

The order is set and clearly says that it is non-firm power.

The order clearly says that the emergency service is subject to the control of the dispatchers and the order clearly says that the operation of the interconnection will be left to a committee which the Commission ordered between the City of Gainesville and Florida Power Corporation.

Warren E. Burger:

Now what you are — are you saying that this is not firm in the sense that it’s only on a capacity available basis?

Gordon Gooch:

I am saying sir that the Florida Power Corporation is not required by the order of the Federal Power Commission to maintain 50 megawatts or 60 megawatts of capability at the Archer Substation at all times and under all circumstances for the benefit of the City of Gainesville.

They are only ordered to make that power available if ask and when it is available to the Florida Power and its interconnected system.

Hugo L. Black:

In other words, as I understand what you’re saying is they’re not required to keep a standby?

Gordon Gooch:

That’s right sir.

Second point I would like to make —

Byron R. White:

What happens if one of the Florida Power, other connections has a need for Florida Power standby power and is using it but then Gainesville comes along and need some, it can’t get it, can it?

Gordon Gooch:

That’s right sir.

Byron R. White:

Now, you say that they have the right to refuse it or to turn out or to open the switch?

Gordon Gooch:

I am saying sir that the matter can be handled in one of several ways.

One, that the Florida Power has the right to open the switch.

I am saying also that Florida Power has the right to tell the City of Gainesville to shed load.

Byron R. White:

And if the City of Gainesville is already using it?

Let’s say the city of Gainesville has an outage in it is using Florida Power’s reserve and is using it and then there are some other connection of Florida Power’s system needs them also has the same need that Gainesville has.

Gordon Gooch:

Yes sir.

Well, let me —

Byron R. White:

And the Florida Power can’t provide them both?

Gordon Gooch:

Let me answer in this way sir.

If it is a firm customer of Florida Power, in other words, if it is a question of impairing the ability of Florida Power —

Byron R. White:

no, I’m talking about just one of their (Voice Overlaps) another system.

Gordon Gooch:

City of Orlando.

Like the city of Orlando which is comparable in size to the City of Gainesville.

If it’s as and when available to both systems and I would assume that if that the dispatchers them would have to get together and decide who’s going to shed load, how they’re going to lay it off among themselves.

Hugo L. Black:

As I understand —

Thurgood Marshall:

Suppose I have a problem in any —

Gordon Gooch:

Yes, sir.

Thurgood Marshall:

Whether there’s a sudden breakdown of the generator in Gainesville, would the committee be?

Gordon Gooch:

No sir, the purpose of the committee is to setup the operating procedures as to how the interconnection will be setup, what sort of relays will be put in there, what sort of — how the system will be operated.

It is true.

Thurgood Marshall:

How is it right now, well assuming that the order of the Federal Power Commission to put it into effect.

Gordon Gooch:

Yes, sir.

Thurgood Marshall:

And next year, Gainesville has breakdown.

Gordon Gooch:

Yes, sir.

Thurgood Marshall:

Do they get to help them?

Gordon Gooch:

That depends on first whether it is available on the Florida Power Corporation system, point one.

Point two, it has to be scheduled and if the–

Thurgood Marshall:

Well, I know as I understand as it bothers me, what I mean, how do you schedule this sudden breakdown —

Gordon Gooch:

Well, you don’t schedule the sudden breakdown.

The point is that it is true that power will flow.

Frankly, it will flow mostly from Gainesville to Florida Power according to the staff case, but it is true that instantaneously as if a load goes down on one or other side of the interconnection power will flow.

But that doesn’t mean that it will flow forever.

It can be shut off almost immediately if the power is needed somewhere else.

Warren E. Burger:

Did I understand you to say that the firm customers of Florida Power under their pool agreements or otherwise have a prior claim on the power over Gainesville?

Gordon Gooch:

I say that the firm customers do have a prior claim on the power.

Yes, sir.

Byron R. White:

But not the pool?

Gordon Gooch:

But not the pool because as the Commission evidence showed in fact by installing Gainesville into the pool under the terms, what the Commission was really trying to do was to fit Gainesville and as a full-fledged member of the pool without being having to pay twice dues because they were late in joining.

And the — instead of getting any credit for having done that, we’re blamed because we didn’t follow what someone else says the industry practices.

Well, of course the Commission is under no obligation to follow with the industry perhaps says.

Byron R. White:

Mr. Gooch, has the Commission ever approved the interconnection where something more or some payment is provided more than just for the power when as used?

Gordon Gooch:

If we take the instances at which were not in the record but mentioned in briefs of Florida Power, I cause those specific instances to be check by the section of the Federal Power Commission who reviews those things.

And they informed me that if we were to resolve that kind of dispute at this hearing that they would testify that none of the contract cited by Florida Power Corporation can attain the kind of standby charged at Florida.

Byron R. White:

I understood from Mr. Emory, perhaps I misunderstood him that some of their connections were paying more than, it’s going to cost Gainesville?

Gordon Gooch:

Well, sir on page 26 of their brief, they refer to a 12-megawatt sale which is I believe the one that Mr. Emory was referring to.

That was in our view an entirely different situation because the line was placed in for the benefit of Florida Power’s customers.

Now, subsequent to the time that the evidence was in in this case, subsequent to that time, the Florida Power Corporation came in and said, that they have negotiated, they deal with another company which they had imposed some sort of standby charge.

Byron R. White:

With another system?

Gordon Gooch:

Well, yes.

Byron R. White:

Not a firm customer?

Gordon Gooch:

That was my understanding, but the point that causes the problem is that the only reason to bring up that kind of point is to claim that the Federal Power Commission gave Gainesville better membership conditions in the pool and others have.

Now, we say that’s not sole and the all the evidence shows that Gainesville has the same —

Byron R. White:

Well, do you think it was so I suppose there’s two ways of carrier?

Gordon Gooch:

Yes, sir.

And the second, I’m just getting to ready to bring up, and that is that the Commission specifically provided in its order that Florida Power Corporation may file for a rate increase under the Commission’s regulations if they’re not getting what they think they’re entitled to under the service of the interconnection.

Warren E. Burger:

They won’t know anything about that in the way of experience until they have some interchange?

Gordon Gooch:

Precisely, and the Commission — the expert evidence on which the Commission rely showed that the City of Gainesville would be providing proportionately more service to Florida Power than otherwise.

Now, I’d like to touch on that point for a second if I may.

50 to 60 megawatts, Florida Power admits that they can give 50 or 60 megawatts without even filling at their system.

They got a swing of 30 to 40 megawatts that they say that it means nothing to them.

But I say that 50 megawatts going back across the interconnection from Gainesville to Florida Power can’t be too insignificant if Florida Power is buying firm from tiny Orlando at 100 megawatts.

If the interconnection — the valid interconnection between the Florida Power system and its neighbors to the north and Georgia will open at 130 megawatts, if Florida Power will negotiate a 12-megawatt transaction and then cited in their brief as an example.

And if as the minutes of the Florida Operating Committee show the Florida Operating Committee does not even maintain at all times adequate spending reserves under their own standards.

And if as in this record, the City of Gainesville and Florida Power Corporation are arguing over service to individual customers in Alachua County.

It seems to me that we cannot argue that 50 megawatts is insignificant to Florida Power Corporation.

Now, the Commission has to resolve these kind of disputes all the time and then have to resolve the disputes not only because it is a dispute between parties, but because they have an affirmative obligation to develop a policy that will work nationwide.

And the staff tries to do its best to put on a case that will be assistance to the Commission.

The Commission doesn’t of course always take the best part of anybody’s case, but they resolve the disputes in this case.

They set the rates and they ordered the interconnection and we believe the Fifth Circuit was an error in saying if the Commission may not set the rate on the basis that they did.

Warren E. Burger:

Mr. Gooch, you referred to the expert testimony put in by the Commission on staff, I take it.

Gordon Gooch:

Yes, Sir.

Warren E. Burger:

On this flow that would be from Gainesville more likely to the Florida Power, was that disputed or was that undisputed?

Gordon Gooch:

Well, it is disputed in the sense that I don’t — it’s difficult to say.

Yes, it was disputed, there were witnesses that said that’s just a mathematical probability and the mere fact that it’s mathematical probability it doesn’t mean that it actually will happen.

There were plenty of arguments to the way that addressed to the Commission, but I do not recall any competing exhibits that showed different.

Hugo L. Black:

What’s were the findings of the Commission on the pool?

Gordon Gooch:

Commission found that it was likely that Florida Power would be drawing on the interconnection more than the City of Gainesville would, and the Commission then by imposing the same standards of responsibility on Gainesville as were imposed on Florida Power by the operating agreement.

The Commission thought there was an equality here and since the Gainesville can at some periods deliver the full 50 to 60 megawatts and not all the time across the interconnection.

Hugo L. Black:

The Court of Appeals said that’s a finding aside?

Gordon Gooch:

The Court of Appeals said that that particular finding was not entitled to weigh under the substantial evidence rule.

The Commission — the court of Appeals said that the benefits that the Federal Power Commission found for Florida Power System were vague and insubstantial.

And the court said that because of the firm obligation that was being imposed on Florida Power by the Commission’s order, that a standby charge was an order and the Commission would have to come up under some theory to do this.

Hugo L. Black:

And the Commission had found that no was no such firm?

Gordon Gooch:

That’s right.

The Commission ordered no firm.

Hugo L. Black:

Ordered that duty?

Gordon Gooch:

Absolutely, ordered no firm and if there was any doubt that the Commission ordered firm, you would have thought that Florida Power and their motion for rehearing before the Commission would’ve pointed out at inconsistency in the order between saying.

This is a non-firm order as to the interconnection and the facilities that were actually being ordered in, but nothing appears in their rehearing.

Warren E. Burger:

Mr. Gooch, I suppose this matter remains in the jurisdiction in the Commission in the sense that if two years from now, the showing can be made under the experience was enacted full in places of new developments not now in the record, the Commission it’s all to its order.

Gordon Gooch:

Yes, sir.

Hugo L. Black:

And there’s no reason from your experience I imagine done there with the Commission to imagine if it does show up anything like that, the company won’t call it to the attention.[Laughing]

Gordon Gooch:

No, Your Honor.

Warren E. Burger:

Thank you Mr. Gooch.

Richard W. Emory:

Mr. Chief Justice and may it please this Honorable Court.

I think it’s important to understand what standby is and I don’t think that that is really yet understood.

Mr. Justice Marshall referred to it as insurance and that in the sense is what it is.

Maybe a better definition it’s the order in the pipes all around the City of Washington where you have fire hydrants and you got quite complicated system of water pipes and fire hydrants and somebody is paying for those water pipes and those fire hydrants and the order that’s in there and that is what Florida Power is paying for and what we say we’re not going to get any compensation.

We’re paying for the fire department, the fire engines, the firemen, the water pipes and the water and it’s there at all hours of the day and night and it’s constantly available.

Now, we feel one of the reasons this has never come up before.

This is the first time the Federal Power Commission has ever come up with this idea of relative burden, burden sharing, burdens and proportion to size.

They’ve never — nobody had ever, ever dreamed of such a theory.

As far as I know, you can’t find it anywhere and any of their decisions in the one decision that they had on the subject, they said that charges across an interconnection should be based on the reciprocity and mutual exchange of services.

And the cases or the rights that have come up sense actually until this came along they really hadn’t passed on any rates.

They hadn’t had it force interconnection case and what we think makes this highly unfair and highly discriminatory where the Federal Government agencies Southeastern Power authority which is an agency of the Department of Interior has come in with the same kind of standby charge request, they’ve been allowed.

They are getting $2.75 of kilowatt per year for standby.

They have a 100 megawatts of reserve and they are selling it to three people on how really, a when as and if available basis and the contract say, that anyone of the other three are using it, it’s too bad though you can’t get it but this is being paid for every hour of the day or night.

Now, when they actually take power if they should have a breakdown and start taking power, they stop paying this $2.75 and I think they’re paying $9.00 or $10.00 and a half.

They pay a higher rate, but in addition to what they — in addition to paying for what they take, they pay for the Fire Department, they pay for the pipes that are in the ground and the water that’s at all time is there.

Now, Gainesville — something to say about Gainesville maintaining this 15% reserve.

Let me show you how ridiculous that is, they had a 112% reserve when we tried this case and they propose by tying in to our transmission system and relying on us to reduce that reserve to 15%.

And what is 15%? They got 100 megawatts of demand.

We’re talking about 15-megawatt reserve and here we need the 500 instantaneously and they’re going to reduce the reserve from 112% to 15% and they talk about that being a burden.

And to me, it just doesn’t make any sense at all.

Now, the one expert who heard all the whiteness and the testimony in this case was the Trial Examiner and he decided this case right down the line for us 100%.

Now, he decided that there should definitely be some charge for standby that it was well-recognized in the industry that where you pay for — where you provide a service for which you get no return, there should be some charge.

Richard W. Emory:

And it is also not uncommon in these interconnection arrangements to split the benefits — you decide what the savings are and one fellow it gets half and the other gets half and he proposed that standby be paid for by splitting of the financial savings.

We don’t object to that, actually, we think that would cost Gainesville more than what we propose to charge.

Although, it’s never been fully price status but it’s a perfectly to be reasonable proposal and it is a proposal that’s used many of these interconnection arrangements.

Now, there’s something been said about our customers having a prior claim over Gainesville for the standby.

Your Honors, that is just ignores the physical facts of how electricity operates.

We cannot even subordinate the demands of our customer to Gainesville.

We got this large transmission system if you look at exhibit 32, which is a map of which, you’ll see that it’s a pretty large thing.

And that is a big electric transmission system that’s charged at all hours to the day and night to feed any demands for current off of it.

Hugo L. Black:

Well, do you deny what Mr. Gooch says about the firmness of the requirements you have?

Richard W. Emory:

Absolutely, we think we can — it will be just as firm as it can be and the Gainesville witnesses admitted that.

Hugo L. Black:

You mean you deny to state or you deny what the Commission found that you were not being bound to supply them power?

Richard W. Emory:

I deny the statement and I deny what the Commission found.

I think saying that we will not be under a firm obligation to supply the standby just to play on words.

You don’t write the word firm in there that’s what they say.

We didn’t put in the word firm.

You don’t need to put in the word firm —

Hugo L. Black:

I have been taking and drawing a contract, if there are some ask firmly bound to do something, they’d put it in there.

Richard W. Emory:

Well, you don’t have to put the word firm in.

Hugo L. Black:

It’s filled.

Richard W. Emory:

No, you just sign the contract, “I hereby agree to buy a horse.”

You don’t see, “I hereby firmly agree to buy horse.”

And that’s what we’re talking about here.

They said, “You let Gainesville tack your transmission system.”

Hugo L. Black:

And you have to do it whether you want to do it?

Richard W. Emory:

Whether you want to do it and not.

And the mere fact they could puts us under a firm obligation to supply them whether they call it firm or call it nothing.

And it’s the same I buy — I promise buy a horse or I firmly promise to buy a horse.

Hugo L. Black:

A horse of course is a little different.

Richard W. Emory:

Well, that’s what we’re talking about, whether they use the word or don’t use the word that’s all into.

Hugo L. Black:

What he was talking about was, the Commission found that there was no duty — firm duty on your part to sell.

Hugo L. Black:

And if there was no duty on your part — the company’s part to sell and for that reason that they were not entitled to recover a compensation or requirement that didn’t exist.

Richard W. Emory:

Your Honor, —

Hugo L. Black:

What I understood him to argue, he maybe wrong — I maybe wrong in understanding him or he maybe wrong.

Richard W. Emory:

I don’t think and I’m trying to recollect.

I don’t think the word “firm” was ever used in connection with the standby.

I think they talked about —

Hugo L. Black:

I was talking about requirement, would you require —

Richard W. Emory:

There is no firm obligation to supply what in the industry has called firm power — firm service.

I agree to buy 100 kilowatts from you for the next three months.

That is called “firm power.”

There is no obligation in this agreement to have a selling “firm power” and there’s one reason and only one reason.

If they ever put that in their order, that would require us to enlarge our generating facilities or would give us an argument that it will require us to (Voice Overlap).

Hugo L. Black:

Then you’d be entitled to pay for?

Richard W. Emory:

Then we would be entitled to say that they didn’t have any jurisdiction because they don’t have jurisdiction to do anything that would definitely positively require us to enlarge our facilities.

Now, this word “firm” in connection with standby, I’m not sure that the Commission ever used the word or didn’t use the word because actually as I say, you don’t need to use the word.

It’s a meaningless word.

We are firmly bound where they say so are not.

Hugo L. Black:

Imagine if you had a — they admitted the demand and you didn’t supply and it would cost a lot of money, you could then find more reason to say that the word “firm” would’ve been pretty good in the contract.

Richard W. Emory:

Well, Your Honor we can envisage, we sincerely honestly cannot envisage.

They’re making a demand that we won’t supply and the Commission noticed that and Gainesville knows that.

How could they reduce their reserve from 112% of 15% down to 15 megawatts if they didn’t feel that they’re generating capability was going to be firmly protected?

They would be —

Hugo L. Black:

Are supplied by themselves?

Richard W. Emory:

But they’re planning to eliminate the supply for themselves.

They’re going to rely on us to supply and the Commission would be derelict in their duty if they said, Gainesville can reduce its reserve by about a 100% if they didn’t feel that Florida Power was going to be supply that and they know we’re going to supply it.

And in the case of the Southeastern Power Administration and the Southwestern Power Administration and other agencies they recognize that.

Now, one of the real reasons, I think maybe this case was argued separately, I don’t know was the Government took quite of different position in their brief in what Gainesville did.

Gainesville said the question in this case was whether they should be made to pay for benefits received in addition to reimbursing us for cost.

Well, we say they aren’t reimbursing us for cost much less paying us for benefits received.

The Government took the position that their relative burdens, they either that Gainesville supported us in proportion to its size that should be enough.

Richard W. Emory:

And we say proportion to size in this case is meaningless.

They also argued in their brief and Mr. Gooch made a remarkable statement in his argument that the Federal Power Commission doesn’t have to pay any attention to Commission practice.

I mean industry practice, but in their brief, they acknowledged that the vast majority of interconnection between utilities are effective voluntarily.

In contest to interconnection cases therefore and this is the first contested interconnection case that’s ever got — hasn’t been settled.

There have been about two or three others, but they have been always been settled.

It is appropriate that Commission just issues for establishing compensation terms take into account the terms of current interconnection agreements arranged at arm’s-length.

In other words, what they said was, we don’t have any expertise, we’ve never been faced with this problem before.

Therefore, we will look and see what the industry has been doing and every time you have given them an example of what the industry is doing, they said, “That’s not applicable, that’s not the same case.”

None of these cases are the same.

None of them are identical almost every interconnection arrangement is different.

Now, Mr. Spiegel in his reply brief referred to interconnection we have at Tallahassee which was put in after this case so it’s not in the record.

He says, “We’re not charging them for standby.

We are not charging them for standby for two reasons and there may be others.”

One is the interconnection is too small for us to supply them standby.

And the second reason, they have built some transmission for us so we’re getting some transmission from them.

All of these things had been done in arm’s-length.

They’re all based on an evaluation of what the various equities are and if there’s mutuality or any relative or reasonable mutuality and what each party is doing for the other, you don’t have a special charge.

But if one fellow is doing nothing, but getting a free ride, it’s standard to have him pay some reasonable compensation and if you don’t do that and the Government argues you’re going to des — you don’t follow their position, you’re going to destroy the incentive for interconnections.

We say if you don’t provide some mutuality or reimbursement or compensation that will destroy the incentive.

What incentive that we got to interconnect with Gainesville or any number of other municipalities?

Do you think I’m just take a free ride off of our backs.

Potter Stewart:

Tallahassee said the, I understood you say that the interconnection was too small to provide any standby (Voice Overlap).

Richard W. Emory:

That’s what I told you, Your Honor.

Potter Stewart:

What’s the point of having the interconnection?

Richard W. Emory:

This is something that I didn’t know a thing about until I got this brief on Monday and I really don’t know much about it.

I asked the company — the terms of that and it’s a small connection.

I guess we’re supplying them power or they are selling us power, I really don’t know.

We’re selling I’m told that we’re selling them some firm capacity in other words, they are buying 10 megawatts, 20 megawatts whatever it is and for standby they need 50 or 60 megawatts.

They’re buying some power from us if they could —

Hugo L. Black:

Is it also municipally-owned?

Richard W. Emory:

That’s municipally-owned.

The municipal ownership has no problem here.

We were interconnected with Orlando have been for years.

We’re interconnected with — through Florida Power and Light with Jacksonville which is a municipal system.

Those municipal systems are member of our operating group.

But are there paying anyway?

We’re not objecting to the fact that this is a municipal, that doesn’t bother us.

We say that we shouldn’t do it for nothing.

Now, as they say the industry practice is definitely and positively to arrange for some mutuality and if there’s not mutuality to have an exchange of compensation.

Now, I’ll read one more thing out of the brief.

The report to the President of the Federal Power Commission on the prevention of power failures and it recited this matter of the problem of interconnections and the necessity for interconnections to provide reliability of service particularly the small systems.

And after pointing out the importance to small systems, it said that the same time the users must contribute their proper share of the cost.

It’s the Federal Power Commission talking before they decided this case and going on they talked about factors that should be taken into account “this is the Federal Power Commission reporting to the President to the extent that it may be physically impossible for small system to fulfill all such obligations in kind, equalization should take the form of exchanging power or dollars among systems.

No formula have been accepted as universal applicable to these situations.

A wide range of pertinent factors are being considered such as relative benefits, methods or participation, reliability of service, conservation of natural resources, alternative opportunities and broad equities.”

Now, that is really all we’re asking to do to put their pocketbook so to speak where they must is and do what they say they’re going to do and what they have allowed federal agencies to do and the be fair to our system and to our customers who, if Gainesville gets a free ride, are going to bear the whole cost.

Warren E. Burger:

You don’t take the position I understand that it’s impossible that Gainesville would ever be called upon to give you some help?

Richard W. Emory:

They might be called upon to give us help over time and that’s important and I’m glad you asked that question.

Any help that you give overtime no matter what amount of time if it is instantaneous is no trade for the help that you need instantaneously because every system has generation that they can start up and give you overtime if you had time to react.

Warren E. Burger:

You mean 12 hours notice, 6 hours (Voice Overlap)?

Richard W. Emory:

Well, actually they would take two hours notice on most of their equipment.

That’s just not the equivalent if we got two hours notice, we can start up our own generators.

We got a lot of generators that aren’t operating all the time if we have — maybe if we have 10 minutes, we can start up or two hours.

Now we — they as far as overtime is concerned until they get down to this reserve if they reduce their reserve down to 15%, anything they can give us overtime is not worth anything.

But as long as they have this 100% reserve, or they could give us maybe 50 or 60 megawatts overtime and divide that testimony over two hours.

But by the time two hours had expired, they got little unit, Your Honor, that a 5 megawatts, one of them is 1megawatt, 14 megawatts, we may have 125-megawatt unit sitting around at overtime, we can start up and not need Florida Power and Light, Orlando, all the other systems, they’re interconnected with overtime.

And I would like to say one more thing and that is about, this business of their — the testimony Mr. Gooch was asked about the testimony of Florida Power relying on this interconnection whether it was disputed.

They put a man on the stand and made some computer studies and he took the Florida Power System and he treated as independent system with no interconnections with anybody and he found that we wouldn’t have enough power to meet our peak load or something like 25 days out of the year.

This is all in the briefs, then he said, he got another study it may help you time in with Gainesville, they will only — they won’t be able to meet their peak load 19 times of the year.

So therefore, they’re going to rely very heavily on this interconnection.

Richard W. Emory:

He assumed and we had no connections that we couldn’t call on Florida Power and Light, we couldn’t call on the Tampa, we couldn’t call on Orlando, couldn’t call on Jacksonville.

Actually, we don’t have these deficiencies, we can meet our peak load unless we have big outages everyday in the year and this really, it’s such a theoretical study, it’s almost absurd and the examiner really cut off my if you look at the record and it’s in their, he really cut off my cross-examination on that.

He said, it’s the first time I have heard enough about that because he saw how ridiculous it was.

Thank you, Your Honor.

Warren E. Burger:

Thank you Mr. Emory.

Mr. Gooch, so you have 10 minutes.

Gordon Gooch:

Thank you Mr. Chief Justice.

Southeastern Power Administration that is a firm 100-megawatt reserve that’s got to be available to those three customers at all times.

They install reserve point, Florida Power Corporation is under no obligation under the Florida Operating Committee rules to maintain any installed reserves and I strongly suspect that 15% of installed reserves would look awfully good to the Florida Power System come this summer on Turkey Point didn’t come here.

Next point, the Commission imposed on the City of Gainesville and installed reserve capacity that would see to it that it would always be self-sufficient.

The only thing that the Commission provided was that when Florida Power can help its little neighbor out, it should do so.

Byron R. White:

When there was nothing?

Gordon Gooch:

When Florida Power had the ability to do so.

Now, what does this do to the rate payer in the City of Gainesville?

Byron R. White:

It could also that like Gainesville had some fewer needs for the power.

Gordon Gooch:

Yes, sir.

Byron R. White:

All of its regular needs it was under an obligation to maintain its power.

Gordon Gooch:

Yes, sir.

Now, the reserve that Gainesville is required to maintain under the Operating Committee Formula is one thing.

What it has the capability to put across that interconnection is another.

Mr. Emory would have you to believe that Gainesville system is so adequate and so small that it has response and only two outages or more.

I point out as in the brief, they have the two 15-megawatt gas turbines, they have 50-megawatt generator and number seven unit and 26-megawatt.

Their testimony is they would always be running those too.

The seven, number seven and number eight and have the other two available.

So I suggest that it is somewhat unfair to the City of Gainesville to say that they cannot respond with emergency power across that interconnection.

Now, as to the relative benefits, again, by imposing on the City of Gainesville a demand charge — a standby charge based on the size of their largest unit, what that effectively does through rate treatment is to prevent the City of Gainesville from increasing the size of its larger generators.

Thereby, increasing the amount of rate that the citizens in Gainesville will have to pay if t they’re going to be an isolated system.

It would mean that they would have to buy an increments of small or less sufficient generators so they could always —

Byron R. White:

They wouldn’t have to?

Gordon Gooch:

If there is — well, if they were —

Byron R. White:

This type of (Inaudible)

Gordon Gooch:

No, sir.

Oh, as the alternative?

Yes, sir.

They would be faced with the economic choice of not completing the interconnection and building their own generation.

And the Federal Power Commission has recognized just like Florida Power recognizes that that it’s uneconomic and wasteful to carry more — install a capacity then you’re going to need for a reasonable period of time.

And so rather than deprecate the City of Gainesville for being able to reduce their installed capacity, this is one of the purposes, one of the benefits of interconnection.

And Florida Power cannot maintain its own and does not maintain its own installed reserves by itself to take care of itself in the event of major outages on its system.

So it is easy to, I suppose deprecate to the contribution that Gainesville can make, but then we should also deprecate the contribution that Orlando makes which is not that much bigger than Gainesville which includes 100-megawatt firm sale.

On value of service, it seems to me unnecessary to say that a Regulatory Commission is not bound to take into consideration the value of service.

The value of electricity to a man in an iron long is a lot more than valuable electricity to someone making coffee in the morning, but that has not been and has not in this case the basis on which the Commission sets rates for utility.

Warren E. Burger:

Thank you Mr. Gooch.

Thank you Mr. Emory.

The case is submitted.