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FERC Bows to Court on Hinshaw

FERC Bows to Court on Hinshaw

After much nudging from the courts, state regulators and industry, the Federal Energy Regulatory Commission last week conceded defeat in its battle to justify jurisdiction over a small lateral in Colorado.

The Commission vacated its 1997 orders that authorized KN Wattenberg Transmission LLC to construct a lateral in Colorado to serve two in-state industrial customers. In a complete turnabout, FERC last week bowed to the Tenth Circuit Court of Appeals, which reversed and remanded the orders citing the Commission's failure to adequately justify its assertion of jurisdiction over the lateral. The state and the municipal LDC bypassed by the lateral insisted the KN Wattenberg line was exempt from Commission jurisdiction under the Hinshaw amendment.

FERC all along had argued the Hinshaw exemption didn't apply separately to "discrete" facilities owned by a jurisdictional pipeline, as in this case. The lateral, which was completed in June 1998, is located 57 miles away from KN Wattenberg's jurisdictional mainline. But the court found that FERC's justification for asserting jurisdiction over the lateral appeared to be "inconsistent" with the "plain language of the Hinshaw amendment." The decision touched off a stir at the Commission, and launched a close review of the Hinshaw qualifications.

Upon a second glance, however, the Commission last Wednesday noted the lateral met the qualifications for a Hinshaw line. "...[W]hen viewed on a stand-alone basis, this lateral meets all the criteria for a Hinshaw exemption," the order said [CP97-256].

KN Wattenberg urged the Commission to continue exercising oversight over its lateral until the issues surrounding the Colorado Public Utilities Commission's (PUC) jurisdiction are resolved. FERC flatly rejected the request.

However, should the Colorado PUC decline to assert jurisdiction over the lateral, KN must notify FERC of the lack of state regulation. "This Commission would then step in and exercise its jurisdiction, filing in the regulatory gas," the order said.

HL&P Facing Hefty Jury Awards

Reliant Energy's Houston Lighting & Power (HL&P) could be on the hook for millions depending upon punitive damages assessed in a case that has hit the utility with $4.2 million in actual damages awarded to three Texas cities. Lawyers for the plaintiffs last week suggested a punitive award in the range of $40 million would be appropriate.

A Texas district court jury found that over decades HL&P intentionally underpaid the cities for its exclusive right to sell electricity. Not only does HL&P face millions in punitive damages after the jury reconvenes Tuesday, the utility could be liable for significantly more as 47 cities, including Houston, are suing in a class-action case that accuses HL&P of underpaying them by $113 million. The jury's findings in last week's case could be applied to the other cities as well.

"I would like to think that the jury would give us everything that we asked for," said Elizabeth Hawkins, an attorney with Houston law firm O'quinn & Laminack, which represents the cities. She noted the fact the jury asked to come back after the weekend to assess punitive damages does not bode well for HL&P. "I think that's sending a message right there to HL&P."

A Reliant Energy spokeswoman said the company could not comment on the verdict as the jury is still out to assess the punitive damages. She added there have been "some inappropriate comments put out there by the opposing counsel."

With regard to the other plaintiffs in the class action suit, Hawkins said it remains to be seen what the implications of last week's verdict will be. "We wanted the whole class to go, and the judge made a decision not to. I think the dust has to settle."

Joe Fisher, Houston

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