Summary
In Borough of Olyphant v. PPL, No. 03-4023, 2004 U.S. Dist. LEXIS 8958, *21 (E.D. Pa. May 14, 2004), aff'd Borough of Olyphant v. PPL Corp., 153 Fed. Appx. 80 (3d Cir. 2005), the plaintiff, the Borough of Olyphant (which is also a plaintiff in the present case), raised an identical claim regarding the letter agreements.
Summary of this case from Borough of Lansdale v. PPL, Inc.Opinion
Civil Action No. 03-4023.
May 14, 2004
MEMORANDUM and ORDER
The Borough of Olyphant, Pennsylvania ("the Borough") brings this action against PPL, Inc., PPL Corp., PPL Electric Utilities Corp., and PPL Generation, L.L.C. (collectively, "PPL") alleging various antitrust violations, Compl. ¶¶ 12-18, 22, and asserting a claim for breach of contract and/or violation of final orders of the Federal Energy Regulatory Commission ("FERC"). Compl. ¶¶ 19-22. Defendants assert counterclaims for tortious interference with ongoing contractual relations, Counterclaims ¶¶ 8-11, 18-29, and breach of contract. Counterclaims ¶¶ 12-17, 30-35. Currently pending before the court is defendants' second motion for summary judgment on all counts of plaintiff's complaint.
Plaintiff has characterized its claim contained in Count II of the complaint alternatively as a claim for breach of contract and a claim for violation of FERC final orders. I address this ambiguity in Part II of this opinion, but ultimately conclude that the characterization is, in fact, inconsequential to the determination of whether or not plaintiff's claim survives summary judgment.
Defendants argued in their first motion for summary judgment that they are entitled to summary judgment on all claims contained in count I, i.e. all allegations of antitrust violations, because the Borough cannot show "antitrust injury." "Antitrust injury" has been defined by the Supreme Court as: "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
The first motion for summary judgment was dismissed as moot by order of March 24, 2004 since the second motion for summary judgment incorporated the same arguments.
Although defendants renew this argument in their second motion for summary judgment, they do so summarily, without any additional evidence or legal support. Therefore, even though defendants' first motion for summary judgment has been dismissed, I will refer to it for the analysis of defendants' "antitrust injury" argument.
Defendants contend that "the Borough seeks exclusive rights to serve power to customers within its borders and does not seek competition," Def. Br. in Support of First Mot. for Summ. J 6, and that, therefore, plaintiff cannot show antitrust injury. However, a number of plaintiff's claims relate to the wholesale power market, see Parts I.A and I.C.2 of this opinion, in which PPL is a seller and the Borough is a buyer, and not the retail power market, in which both PPL and the Borough are sellers. Defendants' arguments regarding what the Borough plans to do as a seller of retail power do not affect the Borough's status and interest as a buyer of wholesale power. Hence, regardless of any expressed interest by the Borough to become the sole retail energy provider to customers within its borders (which may or may not be realized), the Borough has alleged a sufficient "antitrust injury" as a buyer of wholesale power. And since the Borough has joined other boroughs in Pennsylvania to essentially reassert in a new action all of the claims presently before this court, see Borough of Lansdale v. PPL, Inc., No. 02-8012 (E.D. Pa. filed Oct. 22, 2002), it seems more efficient to address and rule on all of the legal arguments (and facts presented in support thereof) than to consider some of these issues in the instant case and some in the Lansdale case. This is particularly true considering the unlikeliness that all of the other boroughs in the Lansdale case have expressed the same (alleged) desire to become the sole retail energy provider for the customers within their respective borders. Hence, I will not further address the arguments raised in defendants' first motion for summary judgment and reiterated in defendants' second motion for summary judgment concerning the lack of "antitrust injury."
Defendants conceded at oral argument that they had not briefed the "lack of antitrust injury" argument as it may apply to wholesale energy sales.
For the same reason, I will not consider defendants argument that if summary judgment is granted on the claims contained in the first count of plaintiff's complaint, the Court does not have jurisdiction over the claims contained in the second count of the complaint because supplemental jurisdiction would be lost. Rather, I will address and rule on all of the legal arguments and facts presented in support of the claims contained in the second count of the complaint.
For the reasons set forth below, defendants' motion for summary judgment will be granted. More specifically, I will grant defendants' motion for summary judgment on plaintiff's claims for violation of § 1 of the Sherman Act, § 2 of the Sherman Act via a price squeeze, and § 2 of the Clayton Act, as well as plaintiff's claim for breach of contract and/or violation of final orders of the FERC. I will grant defendants' motion for summary judgment on plaintiff's claim that defendants monopolized or attempted to monopolize the wholesale power market in violation of § 2 of the Sherman Act, but without prejudice to the right of plaintiff to pursue the claim in the Lansdale case. Since defendants succeed on their motion for summary judgment in its entirety for other reasons, it is unnecessary to consider defendants' statute of limitations argument at this time. Def. Br. 18-19.
BACKGROUND
This case involves the electric power industry in Pennsylvania. This industry is partially regulated by the Federal Energy Regulatory Commission ("the FERC"), partially regulated by the Pennsylvania Public Utility Commission ("the PUC"), and partially unregulated. In general, the FERC regulates the sale of wholesale power and its transmission in interstate commerce and the PUC regulates the sale of retail power in Pennsylvania and its distribution to the ultimate consumer. In the instant case, the two regulatory regimes are often considered simultaneously, primarily because the Borough purchases wholesale power from PPL for resale to its retail customers and also competes with PPL for the sale of retail power to other potential retail customers. It is important, however, to understand the basics of how each regime works independently in order to be able to understand how the two interact in the instant case.
I. The PUC and Retail Power in Pennsylvania
Effective January 1, 1997, Pennsylvania adopted the Electricity Generation Customer Choice and Competition Act ("Competition Act"), 66 Pa. Cons. Stat. §§ 2801 et seq., which effectively deregulates the business of generating electricity in Pennsylvania. Consumers can now choose to purchase their electricity from electric generation suppliers ("EGS") other than the utility previously granted an exclusive franchise. Generation service, however, is only one of three services traditionally provided by the sole utility granted an exclusive franchise over any individual territory. PPL Industrial Customer Alliance v. Pennsylvania Public Utility Comm'n, 780 A.2d 773 (Pa.Cmwlth. 2001). The other two services are transmission and distribution. Id. These two services, which are considered "natural monopolies," were not opened to competition by the Competition Act, but rather continue to be regulated. The local utility still remains solely responsible for the transmission and distribution of the electricity. If consumers do not or cannot choose an alternative EGS, the local utility is also required to provide electricity to them as the "provider of last resort" ("POLR") at the rate cap amount. 66 PA. CONS. STAT. § 2802(16). Those consumers who do choose another generation supplier receive a "shopping credit" from the local utility, which is equal to the generation component of the bundled rate. These consumers then pay the market rate (usually lower than the local utility rate) to a different EGS for the generation of their electricity, while continuing to pay the local utility its rates for transmission and distribution.
The Pennsylvania Legislature recognized that certain costs incurred by local utilities while they were monopolies (and the electricity market was completely regulated) would not be recoverable in a competitive market. See 66 PA. CONS. STAT. § 2803. These are referred to as "stranded costs." In order to allow the local utility to recover its stranded costs, the General Assembly created the competitive transition cost ("CTC"), 66 PA. CONS. STAT. § 2808, which would be paid by retail consumers to their local utility, i.e. the former monopoly in the area that remains responsible for the distribution of the electricity. The Competition Act required each Pennsylvania utility to file a "restructuring" plan with the PUC, 66 PA. CONS. STAT. § 2806(d), which needed to explain how the utility would come into compliance with the new mandates of the Competition Act. In addition to reviewing all of the restructuring plans, the Competition Act also assigned the PUC the responsibility of determining each utility's retail stranded costs, which it would do after a public proceeding.
The stranded costs allocated to retail distribution lines are regulated by the PUC. As will be seen, stranded costs allocated to wholesale transmission lines are regulated by the FERC.
II. The FERC and Wholesale Power in Pennsylvania
In 1935, Congress enacted the Federal Power Act ("FPA"), 16 U.S.C. § 791a-828c, which "established the Federal Power Commission to oversee the wholesale transmission and sale of interstate electric power." 49 Stat. 838 (1935) (codified as amended at 16 U.S.C. § 791a-825r). In 1996, the FERC issued Order No. 888 in an effort to remedy certain perceived defects in the bulk power markets. New York v. FERC, 535 U.S. 1, 11 (2002) (interpreting Order No. 888, 75 FERC 61,080). The portion of this Order relevant to the instant case is that it required, like the Pennsylvania Competition Act to follow, the unbundling of generation and transmission services. As the Supreme Court explained this provision, the unbundling "requir[ed] each utility to state separate rates for its wholesale generation, transmission, and ancillary services, and to take transmission of its own wholesale sales and purchases under a single general tariff applicable equally to itself and to others." New York, 535 U.S. at 11. This effectively opened the potential for competition among energy wholesalers because a consumer could now purchase energy from an alternative supplier and have that energy transmitted over the network already in place. And like the Pennsylvania General Assembly, it permitted the previously monopolistic wholesalers to recover reasonable wholesale stranded costs incurred because of the increased competition for generation services.
In 1997, Congress reorganized the FPC as FERC.
In order to regulate the price of wholesale power, the FERC traditionally required "every public utility [to] file with the Commission . . . schedules showing all rates and charges for any transmission or sale subject to the jurisdiction of the Commission," 16 U.S.C. § 824d(a), i.e. the "transmission of electric energy in interstate commerce" and "sale of electric energy at wholesale in interstate commerce." 16 U.S.C. § 824(b). However:
[m]ore recently, in the case of wholesale electricity, FERC has moved to a ratebased market mechanism for pricing electricity. In other words, rates are determined based upon the price obtained when electricity is traded on the market. These rates paid by wholesale buyers remain subject to FERC jurisdiction and review. While utilities do not necessarily file specific rates with FERC prior to selling energy, they sell pursuant to the terms, conditions and formulas established by FERC's regional wholesale electricity rules. FERC approves those rules in advance of authorizing the wholesale electricity markets to operate.Utilimax.com, Inc. v. PPL Energy Plus, LLC, 273 F. Supp.2d 573, 575-76 (E.D. Pa. 2003). The relevant regional wholesale electricity market established by the FERC is PJM Interconnection ("PJM"). "Pursuant to rules approved by FERC and subject to FERC's on-going regulation of wholesale electricity markets, PJM coordinates the continuous buying, selling, and delivery of wholesale electricity through various auction markets designed to match supply with demand" Id. at 576. Many wholesale customers purchase the energy they ultimately resell at retail to endusers through what is called the "installed capacity" ("ICAP") market. Wholesale customers can buy their necessary power "by any of three methods: (a) acquiring capacity through bilateral contracts with other entities; (b) purchasing capacity credits in the PJM long-term auction market; or (c) purchasing capacity credits in the PJM daily auction market." Id. The FERC regulates each of these purchasing methods.
The specifics of installed capacity and how the ICAP market works are not important at this juncture and will therefore not be discussed.
III. The Facts of the Instant Case
The Borough of Olyphant is a municipal corporation organized and existing under the laws of the Commonwealth of Pennsylvania. Def. Statement of Facts ¶ 1. PPL Corporation is the parent holding company of PPL Electric Utilities Corporation and PPL Generation, L.L.C., which means these two entities are wholly owned subsidiaries of PPL Corporation. Id. Prior to a corporate realignment completed in 2000, PPL Electric Utilities Corporation was named PPL, Inc. Id. at ¶ 2. PPL Electric Utilities Corporation is engaged in electricity generation and markets and trades wholesale electricity, capacity, and other related products. Id. PPL Electric Utilities Corporation is also a regulated public utility engaged in electric delivery service and electric supply to retail customers in its service territory in Pennsylvania. Id. The Borough presently purchases 12 kV power at wholesale from PPL and distributes and resells that power to most residents within its borders. Pl. Statement of Facts ¶ 3. Thus, PPL does not provide retail energy directly to these Borough residents. Def. Statement of Facts ¶ 5. Located almost entirely within the borders of the Borough, however, is the Mid-Valley Industrial Park ("the Park"). Id. at ¶ 3. PPL sells electricity directly, i.e. retail, to the Park residents, who do not resell the electricity they purchase from PPL. Id. Two Park customers have exercised their right to take electricity from alternate suppliers. Id. at ¶ 9.
Pursuant to the Pennsylvania Competition Act, PPL submitted its restructuring plan to the PUC on April 1, 1997, which included, inter alia, proposed unbundled rates, CTCs and tariff provisions, as well as a proposed stranded cost calculation. Pl. Ex. 5 (Joint Petition to PUC) at 6. After significant debate before the PUC between PPL and thirty-six intervening parties regarding the terms of the plan, the PUC adopted an opinion and order which substantially modified PPL's restructuring plan. Id. at 8. It seems neither side was satisfied with the PUC's revisions, as a number of parties filed suit in either a United States District Court or Pennsylvania Commonwealth Court. Id. at 9. The parties, however, eventually reached an agreement, the terms of which were put into a Joint Petition for Full Settlement of PPL, Inc.'s Restructuring Plan and Related Court Proceedings ("Joint Petition"), Pl. Ex. 5, and presented to the PUC for approval. The PUC approved the terms in a Final Order on August 27, 1998, which included an overall rate decrease and an increase in the amount of retail stranded costs PPL would be permitted to recover. Def. Ex. U. This order governs the sale of power by PPL to any retail consumer in Pennsylvania, including the Park customers within the Borough.
On May 8, 1996, after the FERC issued Order No. 888, a number of Pennsylvania Boroughs, including Olyphant, filed a proceeding before the FERC "to determine their liability, if any, to PPL for `stranded costs' if they were to stop purchasing capacity and energy from PPL following the initial 5-year terms of their current agreements with PPL." Def. Ex. N (FERC Settlement Agreement) at Art. 1. On January 29, 1998, PPL and the Boroughs reached a settlement, which they put in writing and submitted to the FERC for approval. Def. Ex. O (Power Supply Agreement) at Art. 1. The agreement resolved the stranded cost issues between the parties at that time (PPL would not seek stranded costs from the Boroughs) and modified their current power supply agreements. Def. Ex. N (FERC Settlement Agreement) at Art. 1. The FERC approved this settlement on May 29, 1998. Def. Ex. R. As part of the settlement agreement, PPL and the Borough entered into a new, five year power supply agreement on December 8, 1998. Def. Ex. O. Under the agreement, the Borough pays neither wholesale nor retail stranded costs on the wholesale power it purchases.
The precise meaning of this agreement is at issue in the instant case. More specifically, exactly which stranded costs, i.e. wholesale (transmission) or retail (distribution), PPL forfeited the right to collect from the Borough, is a central issue in the resolution of the Borough's claims.
The Borough seeks to be the electricity provider for all Park customers. Pl. Statement of Facts § 5. The Park customers currently do not pay wholesale stranded costs but do pay retail stranded costs. If the Borough is successful, the defendants argue the Park customers will still not pay wholesale stranded costs, but defendants will seek to continue to collect retail stranded costs. The Borough objects to this contention. At oral argument the parties advised the court that the PUC had agreed with the defendants' position but that the matter was still on appeal.
STANDARD OF REVIEW
Either party to a lawsuit may file a motion for summary judgment, and the court will grant it "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). "Facts that could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Ideal Dairy Farms, Inc. v. John Lebatt, LTD., 90 F.3d 737, 743 (3d Cir. 1996) (citation omitted). When a court evaluates a motion for summary judgment, "[t]he evidence of the non-movant is to be believed," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and "all justifiable inferences are to be drawn in [the non-movant's] favor." Id. Additionally, "[s]ummary judgment may not be granted . . . if there is a disagreement over what inferences can be reasonably drawn from the facts even if the facts are undisputed." Ideal Dairy, 90 F.3d at 744 (citation omitted). However, "an inference based upon a speculation or conjecture does not create a material factual dispute sufficient to defeat entry of summary judgment." Robertson v. Allied Signal, Inc., 914 F.2d 360, 382 n. 12 (3d Cir. 1990).
To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must go beyond the pleadings and present "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion. Williams v. Borough of W. Chester, 891 F.2d 458, 460 (3d Cir. 1989) (citing Celotex v. Catrett, 477 U.S. 317, 325 (1986)). Further, the non-moving party has the burden of producing evidence to establish prima facie each element of his claim. Celotex, 477 U.S. at 322-23. The non-movant must show more than "[t]he mere existence of a scintilla of evidence" for elements on which he bears the burden of production. Anderson, 477 U.S. at 252. Thus, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted).
DISCUSSION
I. Defendants' Motion for Summary Judgment on Plaintiff's Antitrust Claims A. Violation of the Sherman Act § 1
Defendants argue that plaintiff has failed to provide any evidence in support of its vague allegation that defendants violated § 1 of the Sherman Act, codified at 15 U.S.C. § 1. As the statute and corresponding case law make clear, in order to establish a violation of the Sherman Act § 1 plaintiff must prove the existence of a "contract, combination . . . or conspiracy [which results] in restraint of trade or commerce among the several States." 15 U.S.C. § 1; see also, e.g., Standard Oil Co. v. United States, 221 U.S. 1, 59 (1911). In response to defendants' argument plaintiff points to (1) letter agreements in which various companies promised PPL that they would not oppose the position of PPL before the PUC, Pl. Br. 15; Pl. Ex. 6; and (2) an agreement between PPL and "its competitor power suppliers in Pennsylvania in 1998 whereby each of these power suppliers agreed to provide electricity service restricted to their existing retail customers for a period through December 31, 2009 at fixed rates not based on its cost of service." Pl. Br. 14-15; Pl. Ex. 5. In other words, as plaintiff itself clarifies, plaintiff asserts there is sufficient evidence on the record to survive summary judgment on its claim that defendants engaged in illegal price fixing and division of markets. I disagree with plaintiff for the reasons that follow and, accordingly, defendants' motion for summary judgment on plaintiff's claim for violation of the Sherman Act § 1 will be granted.
1. Letter Agreements
Plaintiff asserts that defendants "entered into letter agreements supporting long-term fixed POLR rates for each existing retail customer" and such agreements "were never filed with the PUC." Pl. Br. 15. Upon review of the letter agreements to which plaintiff appears to be referring, Pl. Ex. 6, it is unclear what language in the letters leads plaintiff to its conclusion. The letters do not make any reference to POLR service, nor do they mention "rates" or "customers." Pl. Ex. 6. Rather, the letters evidence agreements between certain companies, including PPL, not to oppose each others' restructuring orders before the PUC. Pl. Ex. 6. In other words, the letters simply memorialize the signatory party's intent to sign the Joint Petition, in exchange for PPL agreeing not to oppose the signatory party's restructuring order before the PUC. Plaintiff fails to explain how the letter agreements evidence either market allocation or price fixing. I address the agreement between PPL and its competitors in the next section.
2. The Agreement
While discussing the "Settlement Agreement" in its memorandum plaintiff fails to make clear that the agreement was actually a "Joint Petition for Full Settlement of PPL, Inc.'s Restructuring Plan and Related Court Proceedings" which was filed before the Pennsylvania Public Utility Commission ("PUC"). Pl. Ex. 5. As defendants point out, the Joint Petition did not set any prices, but rather requested the PUC to make changes to PPL rates the Commission had approved in prior restructuring orders. The PUC did, in fact, approve those changes in an order dated August 27, 1998, concluding, "Consistent with the fundamental goals of [the Electric Competition Act, 66 Pa. Cons. Stat. § 2801 et seq.], the settlement provides for an orderly transition . . . to a structure under which retail consumers will have direct access to a competitive market for the generation of electricity." Def. Ex. U at 7 (emphasis added). In other words, the PUC recognized that the rates contained in the Joint Petition actually increased competition.
Plaintiff highlights the fact that PPL sought a 4% reduction in its retail rates for 1999. Pl. Statement of Facts ¶ 12. Again, however, plaintiff fails to present the entire picture. First, plaintiff does not mention that PPL sought to increase the retail rates for 2000-2004. Next, and more importantly, although the bundled rate decreased for 1999, the shopping credit, or generation component of the bundled rate, actually increased. In other words, the Joint Petition effectively decreased the portion of the bundled rate attributed to transmission and distribution charges, which benefits all customers, regardless of who supplies the customer's power. Additionally, the Joint Petition increased the chance that customers would be able to effectively "shop" for electricity from alternative suppliers, i.e. find a supplier whose generation rates were better than those of PPL, by increasing the shopping credit or generation rate of PPL. See Constellation New Energy, Inc. v. Public Service Comm'n of State, 825 A.2d 872, 882-83 (Del.Super.Ct. 2003). So, the rate changes proposed in the Joint Petition and subsequently approved by the PUC simultaneously decreased transmission and distribution charges for all customers (a market for which there is no competition) and increased the opportunity for customers to save themselves money by finding an alternative supplier. The Joint Petition raised the shopping credits each year from 1999 through 2007 (except for 2005, when the shopping credit proposed in the Joint Petition is marginally higher ($0.0003, or less than 1%)), which makes it easier for the Borough to compete with PPL for the supply of power to retail customers by contracting with other generators of electrical power. How such changes could be considered anticompetitive is not explained by plaintiff.
Defendants argue further that the petition is protected under the Noerr-Pennington doctrine, which holds that "[a] party who petitions the government for redress generally is immune from antitrust liability." Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 122 (3d Cir. 1999), cert. denied, 528 U.S. 871 (1999). More specifically, "parties are immune from liability arising from the antitrust injuries caused by government action which results from the petitioning." A.D. Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 251 (3d Cir. 2001). Plaintiff is clearly most concerned with the aspect of the petition that concerns PPL's rates. However, defendants point out that the petition itself did not effectuate any changes to the rates, but rather requested the PUC to make changes to PPL rates. In other words, the act of setting the rates contained in the petition was not completed by the parties to the petition, but rather by the PUC, a government entity. Hence, even if plaintiff could show that the rates requested in the petition and ultimately approved by the PUC had an anticompetitive effect, defendants are immune from antitrust liability under the Noerr-Pennington doctrine for any injuries resulting from the PUC setting PPL's rates at those requested in the petition.
Plaintiff's allegation of "market allocation" is totally specious. Defendants' agreement to remain "the provider of last resort for all retail electric customers in its service territory that do not choose or cannot choose to purchase power from alternative suppliers," Pl. Ex. 5 at 15-16, does not restrict competition. Rather, this agreement simply complies with the requirement of 66 Pa. Cons. Stat. § 2807 that "[w]hile an electric distribution company collects either a competitive transition charge or an intangible transition charge . . . the electric distribution company shall continue to have the full obligation to serve. . . ." 66 Pa. Cons. Stat. § 2807(e). Further, the remainder of the section of the Joint Petition concerning PPL's status as a POLR explains the process by which a percentage of PPL's residential customers will be assigned (by the PUC) an alternative POLR in the future. Pl. Ex. 5 at 16-20. Hence, plaintiff provides no support, either in the letters referenced above, Pl. Ex. 6, or in the Joint Petition, Pl. Ex. 5, for its contention that PPL engaged in market allocation.
"There is a `sham' exception to the Noerr-Pennington doctrine which holds that using the petitioning process simply as an anticompetitive tool without legitimately seeking a positive outcome to the petitioning destroys [i]mmunity. There is no suggestion that the sham exception applies here." A.D. Bedell, 263 F.3d at 250 n. 29 (internal citation omitted).
Neither the letter agreements nor the Joint Petition raises a genuine issue of material fact concerning whether defendants engaged in either illegal price fixing or market allocation. Hence, plaintiff has not produced evidence that would allow a reasonable fact finder to conclude that defendants violated the Sherman Act § 1. Accordingly, defendants' motion for summary judgment on plaintiff's claims for violation of the Sherman Act § 1 will be granted.
B. Violation of the Clayton Act § 2
Section 2 of the Clayton Act prohibits "discriminat[ion] in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly." 15 U.S.C. § 13(a). Defendants argue that plaintiff's claim that PPL violated § 2 of the Clayton Act, 15 U.S.C. § 13, is legally defective, and to the extent that it is not legally defective, plaintiff has failed to produce any evidence in support of its claim. Defendants' argument is complicated by the fact that plaintiff seems to make more than one vague allegation concerning defendants' actions and the Clayton Act § 2 . First, in its complaint plaintiff alleges that "[d]efendants have maintained discriminatory price differentials between sales to wholesale customers and its direct sales to large retail customers which have in the past, and continue, to substantially lessen competition in violation of Section 2 of the Clayton Act." Compl. ¶ 12. However, in its response to defendants' motion for summary judgment, plaintiff alleges that PPL does not directly sell retail power to the Park customers, but rather PPL sells wholesale power to its own subsidiaries, which then turn around and sell retail power to those customers. These subsidiaries, then, would be in direct competition with the Borough (as they have the exact same relationship with PPL) and any price differentials between what PPL charges its subsidiaries and what it charges the Borough would fit the discrimination provisions of 15 U.S.C. § 13(a). Pl. Br. 19-20. Defendants argue that this new argument is also defective. The two claims will be addressed in turn.
1. Borough Does Not Compete with Industrial Park Retail Customers
Defendants argue that summary judgment should be granted on plaintiff's claim for violation of the Clayton Act § 2 (as it is phrased in the complaint) because plaintiff cannot establish the legal requirements for a price discrimination claim. Defendants point to the Third Circuit's opinion in Stelwagon Mfg. Co. v. Tarmac Roofing Systems, Inc., in which the court explained that in order to prove a price discrimination claim of the type in the instant case, "a plaintiff must first prove that, as the disfavored purchaser, it was engaged in actual competition with the favored purchaser(s) as of the time of the price differential." Stelwagon, 63 F.3d 1267, 1271 (3d Cir. 1995). Further, even if the favored and the disfavored purchaser were in competition at the time of the price differential, "it must be shown that . . . [they] competed at the same functional level, i.e., all wholesalers or all retailers, and within the same geographic market." Id. Defendants argue that "[t]he Borough and the Park customers are neither at the same level of distribution nor in competition with each other." Def. Br. 15.
The two most common types of price discrimination claims based on the Clayton Act § 2 involve either secondary line injury or primary line injury. "Secondary line injury cases are characterized by price discrimination by a seller in sales to competing buyers." J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1526 (3d Cir. 1990). In other words, secondary line injury results from a seller charging different prices to two purchasers who are in competition with one another. In contrast, primary line injury cases involve injuries incurred by a direct competitor of the allegedly discriminating seller. See Brooke Group Ltd. v. Brown Williamson Tobacco Corp., 509 U.S. 209, 220 (1993). The Supreme Court has explained that the essence of a Clayton Act primary line claim is that "[a] business rival has priced its products in an unfair manner with an object to eliminate or retard competition and thereby gain and exercise control over prices in the relevant market." Id. at 222. As defendant points out, plaintiff does not make, either in its complaint or in its response to defendants' motion for summary judgment, "any of the allegations necessary to support a primary-line predation case." Def. Br. 15 n. 24. Hence, plaintiff's vague price discrimination claim will be interpreted and treated as a secondary line injury case.
Plaintiff does not directly address this argument, but rather simply points out that in Hasbrouck v. Texaco, Inc. the Supreme Court construed § 2 of the Clayton Act "as providing a remedy even where the oil company discriminated in price between wholesale buyers and retailers, where the discrimination had a prohibitive effect on competition." Pl. Br. 19 (citing Hasbrouck, 496 U.S. 543, 566-67 (1990)). Plaintiff's reliance on Hasbrouck is misguided. First, the Third Circuit decided Stelwagon five years after the Supreme Court decided Hasbrouck, which makes Stelwagon the controlling law in the instant case. More importantly, in Hasbrouck, Texaco sold gasoline both to retailers directly and to wholesale distributors who in turn sold to retailers, which is the same situation as in the instant case. However, even though the Court ultimately concluded that the price discrimination between the wholesale distributor (i.e. the Borough) and the retail customers (i.e. the Park customers) constituted a violation of the Clayton Act § 2, the decision was based on the effect this price discrimination had on competition. More specifically, the court looked at the competition between the wholesale distributors' customers (who were themselves retail customers) and the retail customers who purchased oil directly from Texaco. As the Fifth Circuit has astutely summarized, "The Supreme Court focused on whether the price discrimination caused injury to competition regardless of whether the favored purchaser was a direct competitor at the same functional level as the disadvantaged purchaser." Lycon, Inc. v. Juenke, 250 F.3d 285, 289 (5th Cir. 2001). In the instant case, as in Lycon, the alleged price discrimination was between a wholesale purchaser and reseller (the Borough) and retail end users (Park customers), as opposed to two customers who ultimately resold the product (whether at wholesale or retail), as in Hasbrouck. Since the Park customers never resold the energy they received from PPL, they were never in competition with the Borough. Hence, competition could not have been harmed by the alleged price discrimination. Further, the Borough and the Park customers do not exist at the same functional level, as required by the Third Circuit in Stelwagon. See Stelwagon, 63 F.3d at 1271. Accordingly, on the undisputed facts this version of plaintiff's Clayton Act § 2 claim must fail and defendant's motion for summary judgment on this particular claim will be granted.
Plaintiff has not produced the one piece of evidence upon which its entire claim rests — the prices charged to the Borough and the Park customers, respectively. Again, however, for the sake of efficiency I focus on the legal arguments put forth rather than on any factual deficiencies.
2. Intra-Corporate Transfers Cannot Form the Basis of a § 2 Claim
In its response in opposition to defendants' second motion for summary judgment plaintiff argues that "the Borough itself is indistinguishable from those subsidiaries of PPL which are distributing electric power to retail customers in the Borough for whom the Borough is competing to serve." Pl. Br. 19. In other words, the Borough attempts to cure the defect in its original Clayton Act § 2 claim, i.e. that it does not compete with the allegedly favored purchasers, by arguing that the "favored purchasers" are not the Park retail customers, but rather the PPL subsidiaries which actually sell the retail electricity to the Park customers. However, even if plaintiff could show that PPL charged its subsidiaries and the Borough different prices for the same energy (and, again, plaintiff has provided no evidence to support this contention), "the federal courts of appeals have unanimously adopted a per se rule that `intra-corporate transfers' — i.e., a parent corporation's transfer of goods to its wholly-owned subsidiary — cannot form the basis of a [Clayton Act § 2] claim." Accurate Control Systems v. Neopost, Inc., 2002 WL 1379132, at *1 (N.D. Ill. 2002) (citing cases from the First, Fifth, Sixth, Seventh and Eighth Circuits). The reasoning behind these decisions, although not binding, is convincing. As then-Judge (now Justice) Breyer concluded in Caribe BMW, Inc. v. BMW, based in significant part on the Supreme Court's decision in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), a firm and its wholly-owned subsidiary are a single entity for purposes of price discrimination analysis, thereby eliminating the potential for a Clayton Act § 2 "sale" that could reflect a price discrimination. Caribe, 19 F.3d 745, 749-51 (1st Cir. 1994) (relying on the Supreme Court's reasoning in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984)).
Since the wholly-owned subsidiary (here PPL Electric Utilities, Inc., formerly PPL, Inc.) does not qualify as a purchaser of the parent company's product (PPL's electricity), there needs to be another purchaser who competes for resale with the Borough. As discussed above, no such competitor exists because the purchasers involved here are the Park customers who do not resell the electricity purchased from PPL. And as concluded above, since there was no competition between the Park customers and the Borough, competition could not have been harmed by the price discrimination and summary judgment on this version of plaintiff's Clayton Act § 2 is appropriate and will be granted.
C. Violation of the Sherman Act § 2
Defendants argue that plaintiff has failed to provide any evidence in support of its allegation that defendants violated § 2 of the Sherman Act, which prohibits monopolization or attempted monopolization of a trade, either single-handedly or via a combination or conspiracy. 15 U.S.C. § 2. Plaintiff appears to make two separate claims. First, plaintiff specifically alleges that defendants created a "price squeeze" by requiring plaintiff "to pay wholesale prices for electric power substantially higher than the retail prices the Defendants charge for comparable service to its commercial and industrial customers, based on the additional charge demanded of Plaintiff by Defendants." Compl. ¶ 17. Plaintiff also seems to make the more general claim that defendants have monopolized or attempted to monopolize the wholesale power market. Compl. ¶¶ 12, 22(b), 22(c). For the reasons that follow, I will grant defendants' motion for summary judgment on plaintiff's price squeeze claim with prejudice. However, I will grant defendants' motion for summary judgment on plaintiff's more general Sherman Act § 2 claim without prejudice to plaintiff's right to pursue the claim in the Lansdale action.
1. Price Squeeze
It is generally accepted that a "price squeeze involves a defendant who as a monopolist supplies the plaintiff at one level (e.g., wholesale), competes at another (e.g., retail), and seeks to destroy the plaintiff by holding up the wholesale price to the plaintiff while depressing the retail price to common customers." Utilimax.com, Inc. v. PPL Energy Plus, LLC, 273 F. Supp.2d 573, 582 (E.D. Pa. 2003) (quoting Town of Norwood v. New England Power Co., 202 F.3d 408, 418 (1st Cir. 2000)); see also Boroughs of Ellwood City v. FERC, 701 F.2d 266, 268 n. 4 (3d Cir. 1983) ("`Price squeeze' is defined as a situation in which a wholesale supplier also selling at the retail level charges discriminatorily high rates to a wholesale customer to prevent competition by that customer at retail."). Implied in this definition is an intent requirement, which the Third Circuit has, in fact, explicitly required. The court explained in Bonjorno v. Kaiser Aluminum Chem. Corp., that "[t]he plaintiff must present evidence that the defendants deliberately produced the effect, sufficient to provide a reasonable basis for the jury to conclude that the `squeeze' was not the result of natural market forces such as supply and demand or legitimate competition." Bonjorno, 752 F.2d 802, 809 (3d Cir. 1984).
So, for plaintiff to prevail on its price squeeze claim it must prove: (1) it could not profitably compete with PPL for Park customers because the difference between PPL's retail rate charged to the Park customers and its wholesale rate charged to the Borough was too small or non-existent (i.e. that there was, in fact, a price squeeze); (2) PPL had monopoly power at the wholesale level; and (3) PPL intended to create a price squeeze to eliminate the Borough as a competitor at the retail level. Defendants claim that plaintiff has not produced sufficient evidence on any of these factors to survive summary judgment. Obviously, failure to produce sufficient evidence to allow a reasonable jury to find in plaintiff's favor on any one facet of this § 2 Sherman Act claim is fatal to the entire claim. Because plaintiff neither disputes defendants' evidence regarding the prices actually charged to both the Park customers (retail) and the Borough (wholesale), Def. Ex. D at ¶¶ 13-16, nor offers evidence that would otherwise contradict that evidence, and defendants' evidence shows that there was, in fact, no price squeeze, defendants' motion for summary judgment on this claim will be granted.
Defendants have submitted the affidavit of Oliver G. Kasper, the manager of pricing and contract information at PPL, in support of their position that a price squeeze did not, in fact, exist. Def. Ex. D at ¶¶ 13-16. Kasper summarized the charges incurred by retail Park customers for the period of February 1999 through October 2002 and compared them to the Borough's bills for wholesale power. Id. Exclusive of stranded costs, the Park customer that paid the lowest price per kilowatt hour still paid more than what the Borough paid per kilowatt hour for the same energy. Id. Although the Park customer would still have to pay the retail stranded costs to PPL even if it buys its power from the Borough (a point in contention that will be discussed in Part II.A of this opinion), there is no allegation or evidence that the stranded cost charge would change. Since the retail stranded cost charge the Park customers would be required to pay is the same regardless of the final energy provider (i.e. PPL or the Borough), it drops out of the equation. The only charge that matters is the charge for the actual energy received. Hence, if the wholesale rate charged to the Borough is less than the retail rate that would otherwise be charged to the Park customers, there is arguably room for the Borough to turn around and resell the electricity at a profit. This effectively disproves the Borough's price squeeze claim.
The Borough does not directly address this argument. Rather, plaintiff reiterates its claims without citing supporting evidence. Simply using the phrase "the evidence clearly demonstrates . . ." does not cure this defect. Pl. Br. 11. Although not controlling in this case, the elements of the prima facie case of a price squeeze required for the FERC to consider such a claim in a rate proceeding are instructive. See 18 C.F.R. § 2.17. The wholesale customer alleging a price squeeze must present, inter alia, "[a] showing that the retail rates are lower than the proposed wholesale rates for comparable service; [and t]he wholesale customer's prospective rate for comparable retail service, i.e. the rate necessary to recover bulk power costs (at the proposed wholesale rate) and distribution costs." 18 C.F.R. § 2.17. The Borough presents none of this information, neither directly nor through its experts' affidavit opinions. Although plaintiff has filed many papers in opposition to defendants' two motions for summary judgment and has provided a number of documents in support of its position, it does not provide either PPL's retail rates to the Park customers or PPL's wholesale rates to the Borough. Obviously, then, the Borough cannot (and does not) compare the two prices to show that it is impossible for the Borough to resell the electricity to the Park customers for a profit.
The regulation uses the phrase "price discrimination and anticompetitive effect" as a synonym of "price squeeze." 18 C.F.R. § 2.17.
Plaintiff also relies on the reports of its experts, Whitfield Russell, Pl. Ex. 1, and Dr. John Wilson, Pl. Ex. 3, which allegedly set forth "[t]he detailed substantial evidence supporting these price squeeze claims." Pl. Br. 9. These expert opinions, however, are insufficient to survive defendants' motion for summary judgment. First, Dr. Wilson's opinion "addresses the price-squeeze allegation in a single, conclusory paragraph that contains neither any price information nor any references to supportive data or evidence." Def. Resp. 7 (citing Pl. Ex. 3 at ¶ 31). In fact, Dr. Wilson does not cite a single piece of evidence that would support his conclusions, nor does plaintiff. As the Third Circuit has previously held, "[T]he factual predicate of an expert's opinion must find some support in the record." Pennsylvania Dental Ass'n v. Medical Service Ass'n of Pennsylvania, 745 F.2d 248, 262 (3d Cir. 1984) (citing with approval Merit Motors, Inc. v. Chrysler Corp., 569 F.2d 666 (D.C. Cir. 1977)). The court in Merit made clear that to hold a court is precluded "from granting summary judgment against a party who relies solely on an expert's opinion that has no more basis in or out of the record than . . . theoretical speculations would seriously undermine the policies of Rule 56." Merit, 569 F.2d at 673. As the court concluded in Pennsylvania Dental, the Wilson "affidavit [does] not raise an issue of material fact," Pennsylvania Dental, 745 F.2d at 262, and therefore does not support plaintiff's opposition to defendants' motion for summary judgment on plaintiff's claim for an illegal price squeeze.
The report of plaintiff's other expert, Whitfield Russell, does not support plaintiff's position, either. First, although Russell concludes that "PPL engaged in activities that drove up the price of wholesale power" and "PPL has designed [retail] rates to enable it to retain retail loads to the detriment of competition and Olyphant," Pl. Ex. 1 at 4-5, he does not explicitly state that PPL's wholesale and retail pricing schemes created a price squeeze. Rather, Russell explains that PPL's actions " may either (a) create a price squeeze between the cost of wholesale and retail power at the time in which the current contract with Olyphant expires or (b) create barriers to competition that will increase the price of wholesale power above competitive price levels." Id. at 5 (emphases added). In other words, PPL's alleged anticompetitive actions may create a price squeeze in the future. Russell does not say, nor support with evidence, that PPL's actions had the effect of creating a price squeeze in the past. In fact, Russell focuses on the amount of money the Borough could have saved had the wholesale prices been different. Russell does not mention (or attach) wholesale and retail prices specifically nor vaguely opine that the Borough could not in the past profitably purchase energy from PPL at wholesale and resell that energy to Park customers at retail. Russell does not set forth "[t]he detailed substantial evidence supporting these price squeeze claims." Pl. Br. 9. As with Dr. Wilson's affidavit, the Russell "affidavit [does] not raise an issue of material fact," Pennsylvania Dental, 745 F.2d at 262, and therefore does not support plaintiff's opposition to defendants' motion for summary judgment on plaintiff's claim for an illegal price squeeze.
At oral argument, I granted plaintiff permission to provide the power prices for the Borough and the Park customers, respectively, which were contained in a spreadsheet accidentally omitted from Russell's report. The spreadsheet provided in the Borough's April 14, 2004 letter does not appear to be the same spreadsheet as the one purportedly inadvertently omitted in the first place, and hence violates this court's prohibition of adding documents to the current record. For the sake of efficiency, however, I will consider it. As defendants point out in their reply letter of April 20, 2004, the rates listed in the spreadsheet actually confirm PPL's position that the rates paid by the Borough were substantially less than those paid by the Park customers who received 12 kV power. See pages 5 and 6 of spreadsheets attached to plaintiff's April 14, 2004 letter. The largest Park customer, WEA Manufacturing, Inc., received lower rates, but since it received 69 kV power and not 12 kV power like every other customer, including the Borough, these price differences are not comparable.
Further, the Borough has failed to produce any evidence that PPL in fact had a monopoly on wholesale power. In fact, at the status conference, plaintiff conceded that there are seven to eight alternative wholesale suppliers from whom the Borough could purchase power. Since the Borough could arguably go elsewhere to purchase wholesale power, or, at least, has failed to produce evidence that it is unable to purchase wholesale power from alternative suppliers, plaintiff's price squeeze claim must fail as a matter of law.
In sum, plaintiff has failed to show that there is a genuine issue of material fact that precludes summary judgment on its price squeeze claim. More specifically, plaintiff has not shown more than "[t]he mere existence of a scintilla of evidence," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986), such that a reasonable fact finder could conclude defendants created a price squeeze in violation of the Sherman Act § 2. Accordingly, defendants' motion for summary judgment on plaintiff's price squeeze claim will be granted.
2. Monopolization of Wholesale Power Market
Defendants did not initially address this claim in their motion for summary judgment, perhaps because plaintiff's claim is so vaguely stated in its complaint. However, in plaintiff's response in opposition to defendants' motion for summary judgment, the Borough spends a considerable amount of time defending its Sherman Act § 2 claim by arguing that "PPL used its monopoly power in the market for firm capacity of electric power to drive up the prices for such capacity, which resulted in substantial increases in the available price of firm electricity available in Pennsylvania." Pl. Br. 4. Plaintiff argues further that PPL's actions in this regard "resulted in no competitive power suppliers being available" to the Borough. Pl. Br. 6. Defendants argue in their reply to plaintiff's response that "the Borough's claim that PPL's activities in the PJM daily capacity auction could amount to a Sherman Act § 2 violation" is "devoid of factual support." Def. Resp. 10. Because this claim is reiterated in Borough of Lansdale v. PPL, Inc., No. 02-8012 (E.D. Pa. filed Oct. 22, 2002), in which plaintiff is a party, and there has been a development in the law since the papers concerning defendants' motion for summary judgment were filed, I will grant defendants' motion on this claim without prejudice to the right of the Borough to pursue this claim in the Lansdale action.
"Firm capacity" is "the ability to generate electric energy when called upon to do so." Utilimax.com v. PPL, 273 F. Supp.2d 573, 576 (2003). For a more complete explanation of the firm capacity market and how it works, see Utilimax.com, 273 F. Supp.2d at 576-77.
On July 18, 2003, the Honorable Anita B. Brody of this court issued an opinion in Utilimax.com, Inc. v. PPL, holding that plaintiff's claim (plaintiff was a wholesale customer) that PPL controlled the price of firm capacity in 2001 and thereby violated the antitrust laws was barred by the filed rate doctrine. Utilimax.com, 273 F. Supp.2d 573 (E.D. Pa. 2003). That decision has been appealed. At a status conference before this court on November 7, 2003, defendants stated that they did not think the Third Circuit's decision on the Utilimax.com appeal would impact the instant case and, thus, it was not necessary to stay the case until the Third Circuit issued its opinion. Upon further review, however, it appears that plaintiff's claim that defendants monopolized or attempted to monopolize the wholesale power market is dependent in significant part on PPL's actions in the ICAP market for firm capacity, which was considered and ruled upon in Utilimax.com. More specifically, plaintiff's claim seems to be that "it was forced to pay excessive rates when it purchased capacity in a market regulated by rates set by FERC," Utilimax.com, 273 F. Supp.2d at 585, a claim which the Utilimax.com court ruled is barred by the filed rate doctrine. Id. at 587. To the extent that plaintiff's claim is that PPL's actions in the firm capacity market, though not anticompetitive themselves, eliminated alternative wholesale power suppliers, plaintiff has not explained how this could happen. Additionally, at the status conference, plaintiff conceded that there are seven to eight alternative wholesale suppliers from whom the Borough could purchase power, though presently at an increased cost. Given the apparent significance of the Utilimax.com decision on plaintiff's general Sherman Act § 2 claim, and the fact that neither party has addressed the decision in detail, it is appropriate to grant defendants' motion, but without prejudice to the right of plaintiff to pursue this claim in the Lansdale action, which would allow the plaintiffs and the court to have the benefit of the Third Circuit's views in Utilimax.com.
II. Defendants' Motion for Summary Judgment on Plaintiff's Claim for Breach of Contract and/or Violation of Final Orders of FERC
In its complaint plaintiff alleges that defendants have breached the FERC settlement agreement dated January 29, 1998 and the five-year power supply agreement between the Borough and PPL dated December 8, 1998. Compl. ¶ 19-21. Hence, count II of the complaint appears to assert a claim for breach of contract. However, in response to defendants' first motion for summary judgment, plaintiff argues that the claim contained in count II of the complaint is not simply for breach of contract, but rather is a claim under section 317 of the Federal Power Act seeking to enforce the FERC's orders approving the agreements. Although the parties dispute the correct characterization of this claim, I do not address this issue. Rather, since the claim is reiterated in Borough of Lansdale v. PPL, Inc., No. 02-8012 (E.D. Pa. filed Oct. 22, 2002), for the sake of judicial efficiency I focus on the agreements to determine whether there is evidence that they were, in fact, breached by defendants. Plaintiff's specific claims are that defendants breached the contract by (1) informing the Borough that it or its customers would be required to pay a retail stranded cost charge for the Park customers if it became the retail power supplier for those customers, and (2) contending that the firm power supply defendants now deliver to the Borough could be of a lower quality than that which defendants presently provide directly to their own Park customers. Compl. ¶ 20-21. For the reasons that follow, I will grant defendants' motion for summary judgment on plaintiff's claims for breach of the FERC settlement agreement and the parties' power supply agreement.
Section 317 of the Federal Power Act reads in pertinent part, "The District Courts of the United States . . . shall have exclusive jurisdiction of . . . of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of, [the FPA] or any rule, regulation, or order thereunder." 16 U.S.C.A. § 825p. Plaintiff has submitted no authority supporting its argument that a breach of the FERC settlement agreement would be a breach of the FERC order approving the settlement agreement reached by the parties.
A. Retail Stranded Costs
Plaintiff's first claim stems from a clause in the FERC settlement agreement that reads, "PPL will not seek any stranded cost recovery or exit fee against any of the Parties to this Settlement Agreement, and hereby waives any present or future rights to any such claims." Settlement Agreement § 2.6 (alternatively phrased at § 6.2). The agreement does not otherwise mention stranded costs and the parties' power supply agreement does not discuss stranded costs at all. In the complaint, plaintiff claims that PPL would require the Borough to pay retail stranded costs for the Park customers if it became the energy supplier for any of the those customers. The Borough contends this would clearly violate the settlement agreement. However, the Borough has not produced any evidence in support of this allegation. In contrast, the proposed letter from PPL to Park customers, Pl. Ex. 1 at PPL Doc. 0066915-16, clearly explains that the customers themselves, as opposed to the Borough, would be required to continue paying the retail stranded cost charges currently incurred. Id. In opposition to defendants' motion for summary judgment, plaintiff expands its allegation to include the claim that requiring Park customers to continue paying retail stranded costs even after the Borough becomes the energy supplier would similarly violate the agreement. This issue was the topic of PPL's petition to the FERC for a declaratory order. Although not binding on this court, the FERC's reasoning in this instance is convincing.
The FERC primarily looked at the plain language of the agreement, focusing on the phrase "Parties to this Agreement." The FERC noted that "the parties to the Settlement Agreement were PPL's wholesale requirements customers (who initiated the proceeding in which the Settlement Agreement was approved to pursue their rights to wholesale services)." 75 F.E.R.C. ¶ 61,370 at ¶ 14. Based on this fact, the FERC concluded that the agreement did "not address — and thus would not limit or preclude — PPL's ability to recover retail stranded costs from its existing retail customers." Id. In other words, the FERC came to the logical conclusion that since no retail customer of PPL was a party to the settlement agreement, the agreement does not bind PPL in any way with respect to PPL's ability to recover retail stranded costs from its retail customers. Plaintiff has failed to produce an argument that could convince this court or any reasonable fact finder otherwise. The FERC settlement agreement clearly and unambiguously refers only to wholesale stranded costs and not to retail stranded costs.
The FERC has explained the difference between "wholesale stranded cost" and "retail stranded cost" in the following manner:
[A]s the definitions of those terms makes clear, it is not the nature of the costs (wholesale vs. retail) that is controlling for purposes of stranded cost recovery under [Order No. 888]. Rather, the controlling factors are the status of the customer (wholesale transmission services customer vs. retail transmission services customer) with whom the costs are associated, and whether the transmission tariffs used by the customer to escape its former power supplier (thus causing the stranded costs to occur) were required by [the FERC] or by a state commission. As a result, "retail stranded costs" refers to stranded costs associated with retail wheeling customers.
Since Park customers that would purchase energy from the Borough, as opposed to from PPL directly, would be retail wheeling customers, any stranded costs sought to be collected from Park customers would be considered retail stranded costs.
PPL's ability to recover retail stranded costs from Park customers who seek to receive service from the Borough will be governed, instead, by the PUC's ruling on this issue. Def. Ex. U. Since neither party has asserted a claim based on this final order, I need not address the specifics of it. The unambiguous FERC settlement agreement does not restrict PPL's ability to recover retail stranded costs from Park customers who seek service from the Borough, and so defendants' position that they are entitled to such costs could not constitute a breach of that agreement. No reasonable fact finder could conclude otherwise. Accordingly, defendants' motion for summary judgment on plaintiff's claim that defendant breached the settlement agreement by seeking retail stranded costs from Park customers who might purchase energy from the Borough will be granted.
The FERC's interpretation of the PUC order and the FERC settlement agreement, however, perfectly captures my sentiment: "Olyphant's strained interpretation of the Settlement Agreement would effectively nullify [the PUC] order in a way not contemplated by the Settlement Agreement and not contemplated by [the FERC's] policies regarding the recovery of stranded costs under Order No. 888." 75 F.E.R.C. ¶ 61,370 at ¶ 15. Of course, plaintiff does not mention the Joint Petition and corresponding PUC order when discussing this issue, which specifically address retail stranded costs, even though it relies so heavily on the Joint Petition for other claims. See Part I.A.2; Pl. Ex. 5 at 9-12. Further, the PUC issued an order on December 18, 2003, in which it agreed with the defendants' position on retail stranded costs. That decision, however, is currently on appeal.
B. Firm Power Supply
Plaintiff alleges that defendants have breached the contractual requirement (found in both the FERC settlement agreement and the parties' power supply agreement) that PPL provide the Borough with its "`firm power requirements' by contending that the firm power supply that Defendants deliver to the Plaintiff for service to its customers located within the Borough can be of lower quality than that which Defendants would provide to the retail customers Defendants seek to directly serve." Compl. ¶ 21. Plaintiff claims in its opposition to defendants' motion for summary judgment that PPL has somehow converted the Borough's firm-power service into an interruptible service. Pl. Br. 25. As defendants explain, "Firm power is power that is ` intended to be available at all times during the period covered by a commitment, even under adverse conditions.'" Def. Br. 23 (quoting Edison Electric Institute, GLOSSARY OF ELECTRIC UTILITY TERMS 50 (1995)); see also Borough of Lansdale v. Philadelphia Electric Co., 692 F.2d 307, 310 n. 3 (3d Cir. 1982) (defining "firm electric power" as "power which the consumer is assured will be available on demand"). Plaintiff does not object to this definition nor provide any conflicting definition of "firm power." As defendants point out, the parties' power supply agreement delineates PPL's obligation to provide continuous, uninterrupted service to the Borough: "PPL shall use reasonable diligence to maintain uninterrupted supply of electric power and energy to Olyphant." Power Supply Agreement ¶ 10. Plaintiff does not allege, nor produce evidence in support of an allegation, that defendants have ever interrupted service in breach of this agreement. In fact, defendants highlight testimony from a number of Borough officials who have maintained that PPL's service to the Borough has been "extremely reliable." Def. Br. 22. Plaintiff has not produced any evidence that PPL has ever interrupted the Borough's service and thereby breached PPL's obligation under the agreements to provide the Borough's firm power requirements.
Plaintiff attached a January 8, 2003 affidavit from Whitfield Russell to its post-oral argument April 14, 2004 letter, to which Russell attached a list of outages in the Borough from February 1999 through November 2002. All of these outages, however, occurred for reasons beyond the control of PPL. For example, outages occurred due to lightning strikes, a vehicle accident, an instance where a squirrel interfered with the lines, and attempts by PPL to make changes to the lines. These types of outages are not those considered to be "interruptions" by PPL, and hence they do not serve as evidence that PPL has ever interrupted the Borough's service in breach of the "firm power" requirement in the contract.
Plaintiff appears to make the claim that even if its power has not yet been interrupted, the fact that PPL has only a single line transmitting the firm power requirements to the Borough renders PPL's "firm power" service unsatisfactory and inferior to PPL's firm power service to its retail customers. Pl. Br. 24-25. Plaintiff then uses this argument to support its contention that PPL must build a second line to provide service to the Borough. PL. Br. 25. However, plaintiff does not point to any terms in the contract that would require such an addition by PPL at PPL's expense. Rather, plaintiff relies on its "inferior firm power" argument. Again, though, plaintiff has not produced any evidence that its firm power service is inferior to that of PPL's retail customers. A reasonable fact finder could neither conclude that PPL failed to provide the Borough's firm power requirements in violation of the agreements, nor find that PPL will likely fail to provide the Borough's firm power requirements in the future because of an inferior distribution system. Accordingly, defendants' motion for summary judgment on plaintiff's claim of breach of contract and/or final orders of FERC will be granted.
At oral argument, plaintiff contended that there are a number of cases where the FERC found two-line service is necessary to meet the "firm power" requirement, and that, therefore, one-line service, as the Borough currently has, does not meet the firm power requirement. I gave plaintiff the opportunity to provide copies of these cases in support of this argument. Plaintiff, however, has failed to do so. Instead, plaintiff submits an article by Whitfield Russell, which does not compare the ability of one-line and two-line systems to provide "firm power," but rather discusses the declining standards of "reliability" in the national electric power market generally. This article is irrelevant and will be disregarded.
CONCLUSION
Defendants' motion for summary judgment will be granted. Although plaintiff has filed a number of documents in opposition to defendants' motion for summary judgment, it appears that rather than making a reasonable attempt to demonstrate a genuine issue of material fact, plaintiff has instead relied on conclusory allegations. Plaintiff fails to produce even an iota of evidence in support of most of its claims and much of the evidence actually cited by plaintiff does not support the contentions plaintiff purports it supports. For these reasons, defendants' motion for summary judgment will be granted on plaintiff's claims for violation of the Sherman Act § 1, the Sherman Act § 2 via a price squeeze, and the Clayton Act § 2, as well as plaintiff's claim for breach of contract and/or violation of final orders of the FERC. However, because there has been a development in the law since the papers concerning defendants' motion for summary judgment were filed, I will grant defendants' motion on plaintiff's claim that defendants monopolized or attempted to monopolize the wholesale power market in violation of the Sherman Act § 2 without prejudice. An appropriate order follows.
ORDER
And now, this ____ day of May, 2004, upon consideration of the motions for summary judgment of defendants PPL, Inc., PPL Corporation, PPL Electric Utilities Corporation and PPL Generation, L.L.C., the accompanying memoranda of law, and statements of facts, the responses in opposition thereto of the Borough of Olyphant, Pennsylvania, plaintiff's accompanying statements of facts, and defendants' reply memoranda in further support of their motions for summary judgment and after oral argument on April 8, 2004, it is hereby ORDERED that the defendants' motion is GRANTED. Judgment is ENTERED in favor of PPL, Inc., PPL Corporation, PPL Electric Utilities Corporation and PPL Generation, L.L.C. and against the Borough of Olyphant on plaintiff's claims for violation of the Sherman Act § 1, the Sherman Act § 2 via a price squeeze, and the Clayton Act § 2, as well as plaintiff's claim for breach of contract and/or violation of final orders of the FERC. Defendants' motion for summary judgment is also GRANTED on plaintiff's claim that defendants monopolized or attempted to monopolize the wholesale power market in violation of the Sherman Act § 2, but without prejudice to the right of plaintiff to pursue the claim in Borough of Lansdale v. PPL, No. 02-8012 (E.D. Pa. filed Oct. 22, 2002).The court will arrange a telephone conference concerning defendants' counterclaims for June 1, 2004, at 4 p.m.