STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
FLORIDA POWER AND LIGHT )
COMPANY, )
)
Petitioner, )
)
vs. ) Case No. 06-2871RP
) DEPARTMENT OF ENVIRONMENTAL ) PROTECTION, )
)
Respondent. )
)
and )
) GULF POWER COMPANY; FLORIDA ) POWER CORPORATION, d/b/a ) PROGRESS ENERGY FLORIDA, INC.; ) SEMINOLE ELECTRIC COOPERATIVE, ) INC.; TAMPA ELECTRIC COMPANY; ) JACKSONVILLE ELECTRIC )
AUTHORITY; CEDAR BAY ) GENERATING COMPANY, L.P., and ) INDIANTOWN COGENERATION, L.P., )
)
Intervenors. )
)
FINAL ORDER
Pursuant to notice, this matter was heard before the Division of Administrative Hearings by its assigned Administrative Law Judge, Donald R. Alexander, on November 14, 15, 16, and 17, 2006, in Tallahassee, Florida.
APPEARANCES
For Petitioner: Daniel H. Thompson, Esquire
Berger Singerman, P.A.
315 South Calhoun Street, Suite 712 Tallahassee, Florida 32301-1872
Gabriel E. Nieto, Esquire Berger Singerman, P.A.
200 South Biscayne Boulevard, Suite 1000 Miami, Florida 33131-2310
John T. Butler, Esquire
Florida Power and Light Company 700 Universe Boulevard
Jupiter, Florida 33408-0420
For Respondent: Gregory M. Munson, General Counsel
Jack Chisholm, Esquire
Department of Environmental Protection 3900 Commonwealth Boulevard
Mail Station 35
Tallahassee, Florida 32399-3000
For Intervenors: Lawrence N. Curtin, Esquire (Gulf, FPC, Holland & Knight, LLP Seminole, TECO, Post Office Drawer 810
and JEA) Tallahassee, Florida 32302-0810
For Intervenors: David S. Dee, Esquire (Indiantown and Young Van Assenderp, P.A. Cedar Bay) Post Office Box 1833
Tallahassee, Florida 32302-1833 ISSUE
The issue is whether certain provisions within proposed rule 62-296.470 are an invalid exercise of delegated legislative authority, as alleged in the Petition for Administrative Determination of Invalidity of Specific Provisions of a Proposed Rule (Petition) filed by Petitioner, Florida Power and Light Company (FPL), on August 16, 2006.
BACKGROUND
This matter began on June 29, 2006, when the Department of Environmental Protection (Department), through the Environmental Regulation Commission (ERC), approved for adoption proposed rule 62-296.470, which establishes procedures and requirements for the Department's implementation of the Clean Air Interstate Rule (CAIR) of the United States Environmental Protection Agency (EPA). In very brief terms, the proposed rule provides that the State will participate in a multi-state trading system for pollutant emissions, in which the EPA allocates emission allowances to the State of Florida, which, in turn, assigns those allowances through a methodology which includes fuel adjustment factors to electric generating units (EGUs) owned and operated by FPL, Intervenors, and other entities. On July 21, 2006, the Department published a Notice of Change and Notice of Availability of Statement of Estimated Regulatory Cost, which made certain changes to the proposed rule and set out the final rule language.
On August 10, 2006, FPL filed its Petition under Section 120.56(2), Florida Statutes (2006)1, alleging that subparagraphs (3)(d)3.(i)(B) through (D) and (5)(d)3.(i)(B) through (D) of the proposed rule, which contain the fuel adjustment factors, were an invalid exercise of delegated
legislative authority on the grounds the proposed rule exceeds
the Department's grant of rulemaking authority; the proposed rule enlarges, modifies, or contravenes the specific provisions of law implemented; the proposed rule is arbitrary and capricious; the Statement of Estimated Regulatory Cost (SERC) was improperly prepared; and the proposed rule imposes excess regulatory costs upon FPL and the public as a whole in violation of Section 120.54(1)(d), Florida Statutes. On August 14, 2006, Robert J. Cohen, Chief Judge of the Division of Administrative Hearings, determined that the Petition was in compliance with the requirements of Section 120.56(2), Florida Statutes, and assigned the case to Administrative Law Judge Donald R. Alexander.
By written agreement filed on August 21, 2006, the parties waived the requirement in Section 120.56(1)(c), Florida Statutes, that a final hearing be held within thirty days after assignment of the matter to an administrative law judge. By Notice of Hearing dated August 24, 2006, a final hearing was scheduled on November 14-17, 2006, in Tallahassee, Florida.
On August 30, 2006, the Department filed a Motion to Dismiss FPL on the ground FPL lacked standing to challenge the proposed rule. The Motion to Dismiss was denied by Order dated September 20, 2006. However, at hearing, the Department renewed its contention that FPL lacks standing to participate in this matter and has presented further argument on this issue. Again,
for reasons expressed infra, the Department's contention is found to be without merit.
On September 19, 2006, the Department's Unopposed Motion for Official Recognition was granted, and official notice was taken of the following materials from the Federal Register: the Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone (also known as the CAIR), published in 70 Federal Register 25162-25405 (May 12, 2005); and the Air Pollution Control - Transport of Emissions of Nitrogen Oxides (NOx) and Sulfur Dioxide (SO2), published in 71 Federal Register 25328- 25469 (April 28, 2006).
On September 25, 2006, Intervenors, Gulf Power Company (Gulf), Florida Power Corporation, d/b/a Progress Energy Florida, Inc. (FPC), Tampa Electric Company (TECO), Seminole Electric Cooperative, Inc. (Seminole), and Jacksonville Electric Authority (JEA), filed their Petition for Leave to Intervene in Proceeding for Administrative Determination of Invalidity of Specific Provisions of a Proposed Rule in support of the proposed rule. By Order dated September 26, 2006, intervention was allowed.
On October 4, 2006, Petitions to Intervene in support of the proposed rule were filed on behalf of Indiantown Cogeneration, L.P. (Indiantown) and Cedar Bay Generating
Company, L.P. (Cedar Bay). Intervention was authorized by Order dated October 5, 2006.
On November 8, 2006, the Department filed a Motion in Limine to Exclude Evidence of Petitioner's Costs of Compliance and Motion in Limine to Exclude Evidence of Petitioner's Model Results. Both Motions were denied on November 14, 2006, at the outset of the final hearing.
At the final hearing, FPL presented the testimony of Randall R. LaBauve, FPL's Vice-President for Environmental Services; Rayburn L. Butts, FPL's Manager of Strategic and Regulatory Planning and accepted as an expert; John C. Hampp, a Principal Environmental Specialist for FPL and accepted as an expert; Dr. John H. Landon, an economist and accepted as an expert; and Thomas G. Rodgers, a Department Environmental Administrator. Also it offered Petitioner's Exhibits 8, 20, 22,
23, 40-49, 52-54, 80, 84, 86, 90, 93, 101, 102, 109, 116, 117,
120, 124, 125, 129, and 130, which were received in evidence. The Department presented the testimony of Thomas G. Rogers, Environmental Administrator of the Air Modeling and Data Assessment Section of the Division of Air Resource Management and accepted as an expert; Lawrence A. George, Program Administrator in the Division of Air Resource Management and accepted as an expert; and Dr. Paul M. Sotkiewicz, a regulatory economist and accepted as an expert. Also, it offered
Department Exhibits 1, 3, 5-16, 18-30, 32-38, 40-43, 45, 47-49,
, 56-66, 72-74, and 76, which were received in evidence. Finally, the parties offered Joint Exhibits 1-7, which were received in evidence. (At the undersigned's request, on February 26, 2007, the parties submitted a correct copy of Joint Exhibit 3, which is the draft SERC prepared by the Department prior to the adoption of the rule.)
At the conclusion of its case-in-chief, FPL sought to introduce into evidence all or designated portions of four depositions, including those of three Department employees and its outside consultant. A ruling on the admissibility of the depositions was reserved pending the filing of written argument by the parties. By Order dated December 20, 2006, the depositions were received as a part of the record, subject to specific objections by Respondent and Intervenors.
The Transcript of the hearing (seven volumes) was filed on November 30, 2006. By agreement of the parties, the time for filing proposed findings of fact and conclusions of law was extended to February 9, 2007. A Joint Proposed Final Order (by the Department and Intervenors) and a Proposed Final Order (by FPL) were timely filed and have been considered by the undersigned in the preparation of this Final Order.
On February 19, 2007, FPL filed its Motion to Strike Portions of Joint Proposed Final Order of DEP and Intervenors
(Motion). A Response in opposition to the Motion was filed by the Department and Intervenors on February 26, 2007. The Motion
is hereby denied.
FINDINGS OF FACT
Based on the evidence presented by the parties, the following findings of fact are made:
The Parties
FPL is Florida's largest electric utility, serving over four million residential, commercial, and industrial accounts in thirty-five counties throughout southern and eastern Florida, or approximately forty percent of the state population. Its business address is 700 Universe Boulevard, Juno Beach, Florida. It owns and operates over 20,000 megawatts (MW) of electric generating capacity. Approximately seventy-seven percent of FPL's self-generated energy comes from fossil fuels, primarily oil and natural gas. The remaining twenty-three percent of
self-generation comes from nuclear power or is produced from non-polluting renewable sources. Approximately sixty-six percent of the fossil fuel self-generation relies on clean- burning natural gas, with oil making up another twenty-seven percent. About seven percent comes from coal, with two-thirds of that generated from the Southern Company's Scherer Unit 4, which is located in Georgia. Only 232 MW, or 1.1 percent of FPL's total capacity comes from coal plants in Florida. FPL has
an additional 1,144 MW generating unit set to come on-line in 2007, which also relies on natural gas generation.
FPL participated in the rulemaking process before the Department and ERC and objected to the use of fuel adjustment factors in the rule. FPL also informed the Department and ERC of the economic impact to its customers of the proposed rule, and the Department addressed FPL's comments in its SERC.
The Department is the state agency charged with the responsibility of regulating discharges from the EGUs, including those of FPL. It must also implement the programs required under the federal Clean Air Act. See § 403.061(35), Fla. Stat. ("The Department of Environmental Protection shall implement the programs required under the federal Clean Air Act"). Among other things, that Act requires the Department to develop rules to implement the CAIR, including reductions in emissions of SO2 and NOx from EGUs in the State.
Gulf is an investor-owned electric utility with a service territory that is bounded on the Alabama border on the west and runs to the Apalachicola River on the east, and from the Alabama border on the north to the Gulf of Mexico to the south. It serves approximately 394,722 retail customers directly and an additional 14,128 customers through the wholesale delivery of electricity to one investor-owned electric utility and one municipality. Gulf serves customers in seventy-
one towns and communities. Its total generating capacity is 2,711,900 kilowatts (KW) and its thirteen units are fueled by coal and natural gas. Gulf participated in the proceedings which culminated in the proposed rule and supports the Department's position.
FPC is an investor-owned electric utility with coal- fired, gas-fired, and oil-fired generating units whose service area is in central and northern peninsular Florida. It presently serves 1,583,000 customers and has a total generating capacity of 9,365 MW. FPC also supports the proposed rule.
TECO is an investor-owned electric utility with 4,400 MW of generating capacity serving over 645,000 residential, commercial, and industrial customers in the Tampa Bay area. Its plants use coal, natural gas, and oil for the generation of electric power. TECO has intervened in support of the proposed rule.
Seminole is a generation and transmission cooperative.
It operates the Seminole Generating Station and the Payne Creek Generating Station with capacities of 1,300 and 500 MW, respectively. In addition, construction is nearing completion on 310 MW of combustion turbine peaking units at the Payne Creek Generating Station site. The Seminole Generating Station is fired by coal, while the Payne Creek Generating Station is fired by natural gas and Number 2 fuel oil. Seminole provides service
to an estimated 1,600,000 customers in forty-six counties. It supports the proposed rule.
JEA owns, operates, and manages the electric system established by the City of Jacksonville and is the largest community-owned utility in the State. JEA serves in excess of 366,000 customers in Jacksonville and parts of three adjacent counties. The generating plants are fueled by coal, petroleum coke, oil, and natural gas. JEA supports the proposed rule.
Cedar Bay owns and operates a cogeneration facility located in Jacksonville, Florida. The facility burns crushed coal to generate approximately 258 MW (net output) of electricity and provides steam to a kraft paper recycling mill. Cedar Bay will be regulated by the proposed rule and supports its adoption.
Indiantown owns and operates a cogeneration facility located near the community of Indiantown in the southwestern portion of Martin County, Florida. The facility burns pulverized coal to generate approximately 330 MW (net output) of electricity and provides steam to a citrus processing facility. Indiantown is also regulated by the rule and supports the proposed rule.
The Department is unwilling to stipulate to the facts that would form the basis for FPL's standing to challenge the rule. (If FPL lacks standing to challenge the rule under the
theory posited by the Department, then Intervenors likewise lack standing to support the rule.) The record shows, however, that FPL and Intervenors own EGUs or cogeneration facilities, those facilities will be regulated by the proposed rule, and their substantial interests will accordingly be affected by the implementation of the rule.
Background
The underlying history which prompted the adoption of the proposed rule in issue is lengthy and somewhat complex. The federal Clean Air Act (42 U.S.C. §§ 7401 et seq.) was enacted in 1970 and forms the primary legal basis for air pollution programs in the United States. Section 110 of the Clean Air Act (42 U.S.C. § 7410) requires every state to adopt a state implementation plan (SIP) for implementing the requirements of the Clean Air Act. Among other things, the SIP must describe how each state will achieve compliance with National Ambient Air Quality Standards (NAAQS) promulgated by the EPA. One provision of the Clean Air Act, commonly referred to as the "Good Neighbor Provision," provides that emissions from one state shall not significantly interfere with another state's attainment of compliance with the NAAQS. See 42 U.S.C. § 7410(a)(2)(D)(i).
In 2004, the EPA began rulemaking to address the non- attainment of NAAQS in a number of states where non-attainment was caused or contributed to by airborne emissions from upwind
states. Among other things, the EPA determined that Florida EGUs contribute significantly to non-attainment of NAAQS in a small number of counties in Georgia and Alabama, including those counties in which the cities of Birmingham, Alabama, and Atlanta and Macon, Georgia, are located.
On May 12, 2005, CAIR was promulgated by the EPA and generally requires (through implementation in two phases, the first of which begins in 2009) reductions in emissions of SO2 and/or NOx from EGUs in twenty-eight eastern states, including the State of Florida, and the District of Columbia, all of whom are considered upwind states.
In adopting CAIR, the EPA determined that Florida, and other upwind states, contribute significantly to the non- attainment by downwind states of NAAQS for fine particles and/or 8-hour ozone, and they interfere with the maintenance of those standards. The CAIR requires Florida (and other affected states) to revise its SIP to include control measures to reduce emissions of SO2 and NOx so as to enable the downwind states to achieve and maintain the required standards. CAIR provides that in the event a state does not timely file a SIP modification satisfactory to EPA by September 2006, a federal implementation plan will apply within the state until proper modifications are filed. (Presumably, the Department complied with this requirement by adopting a rule before September 2006, even
though the rule is now subject to a challenge which may not be concluded, after court appeals, until 2007 or even 2008. In addition, and probably in late 2005, FPL filed suit in the United States Court of Appeals for the District of Columbia challenging EPA's CAIR. That matter still remains pending as of this time.)
Under CAIR, EPA determined "budgets" (or numerical limitations) for the pollutants that each state could emit consistent with its goal of avoiding significant contributions to downwind non-attainment. With respect to NOx emissions, which are at issue here, the CAIR states were allocated a share of the region-wide pool of available NOx allowances based on the heat input of the fuel burned by EGUs within the state, with fuel adjustment factors applied to adjust the heat input based on the type of fuel burned. In other words, EPA based its distribution scheme on heat input, subject to fuel adjustment factors. This is referred to as the fuel-adjusted heat input allocation method.
The specific fuel adjustment factors used by EPA for allocation to the states were 100 percent for coal, 60 percent for oil, and 40 percent for gas. These factors, when multiplied by heat input, determine the proportion of available allowances to each utility. As the numbers imply, under this methodology more emission credits are allocated to coal-fired units than to
EGUs that rely on gas and oil generation. In choosing these percentage factors, the EPA concluded that they take into account the relatively greater burden on coal-fired units to control emissions, that the allocation methodology will have little effect on overall compliance costs or environmental outcome, and that the fuel adjustment factors provide a more equitable budget distribution methodology for allocation credits. See Joint Exhibit 5. Thus, under the EPA distribution scheme, utilities with a higher proportion of coal-fired EGUs (such as Intervenors) would receive a higher proportion of allowances to continue operating and provide fuel diversity, while FPL, which has very little coal-fired electric generation, will receive fewer pollution allowances. Indeed, FPL claims that due to its heavy reliance on oil and gas, the redirection of credits to coal plants under the challenged provisions will cause it to "lose" 7,000 pollution credits to other utilities, and its regulatory costs will rise around $13 million per year.
Although states are encouraged by the EPA to use the above fuel adjustment factors, a state is allowed to allocate NOx allowances to EGUs on whatever basis it chooses so long as it substantially complies with CAIR. For example, it may use other allowance methodologies, such as one which allocates allowances based on the electricity generated by EGUs rather
than the heat used for generation (as found in EPA's Model Rule).
For the State of Florida, EPA allocated 99,445 NOx allowances for the years 2009-2014 (phase 1) and 82,871 allowances for 2015 and subsequent years (phase 2). EPA's allocation of NOx allowances establishes the state cap, that is, the total amount of NOx that may be emitted by all of the EGUs in Florida combined, unless allowances are acquired from out-of- state sources in a cap and trade system. Florida's cap is less than the current annual NOx emissions from the EGUs in Florida.
In a cap and trade system, which the Department has chosen to use, the regulator (EPA) sets a cap on emissions in a geographic area and then allocates allowances to the facilities in the State that is subject to the cap. Both FPL and Intervenors (and other entities operating EGUs or cogeneration facilities) are subject to the cap and are required to have at least one allowance for each ton of emissions. The proposed rule acts as an absolute bar to any emissions of NOx for Florida EGUs which do not have sufficient allowances. If a regulated facility does not receive enough allowances from the state, the facility may reduce its emissions by reducing operations or installing air pollution control systems. The facility may also purchase allowances from anyone that has a surplus of allowances. If a regulated facility has a surplus of
allowances, the facility may sell its allowances or a facility may save, or bank, its allowances and then use or sell the allowances in a subsequent year. Although EPA has not mandated that states use a cap and trade system for the CAIR, as noted above, it has encouraged states to do so and has prepared a Model Rule that states may adopt to implement a CAIR cap and trade system. States adopting EPA's Model Rule will be deemed to be in compliance with the CAIR.
To opt into the federal cap and trade system, the Department was required to either adopt the EPA Model Rule or adopt other regulations substantially identical to the Model Rule. On May 26, 2006, the Department published a Notice of Proposed Rulemaking (Notice) in the Florida Administrative Weekly advising that it intended to create a new rule 62-296.470 which implements the CAIR, that it would opt into the cap and trade system, and that it would use the fuel adjustment factors found in EPA's Model Rule.
The proposed rule was approved for adoption by the ERC on June 29, 2006, subject to certain minor modifications. The ERC exercises the standard-setting authority of the Department under Chapter 403, Florida Statutes. See § 403.804(1), Fla. Stat.
On July 21, 2006, the Department published in the Florida Administrative Weekly a Notice of Change, which
reflected minor revisions to the proposed rule not relevant here and set out its final language.
The Notice of Change indicates that the Department relied upon Sections 403.061 and 403.087, Florida Statutes, as the specific authority for adopting the rule and
Sections 403.031, 403.061, and 403.087, Florida Statutes, as the laws being implemented. In the Joint Proposed Final Order, as well as various exhibits, the Department has more precisely identified Section 403.061(35), Florida Statutes, as the statute which grants it specific authority to adopt the rule in question and the statute which is being implemented. That provision states that the Department must "[e]xercise the duties, powers, and responsibilities required of the state under the federal Clean Air Act, 42 U.S.C. ss. 7401 et seq. The department shall implement the programs required under that act in conjunction with its other powers and duties."
The Challenged Provisions
The entire proposed rule is lengthy and need not be repeated in full here. Relevant to this controversy are subparagraphs (B) through (D) of paragraph (3)(d)3.(i), which contain the challenged fuel adjustment factors. The latter paragraph, including the challenged provisions, reads as follows:
(3) * * * *
The baseline heat input (in mmBtu) used with respect to CAIR NOx allowance allocations under paragraph (b) of this section for each CAIR NOx unit will be:
For units commencing operation before January 1, 2000: the average of the 3 highest amounts of the unit's adjusted control period heat input for 2000 through 2004; for units commencing operation on or after January 1, 2000, and before January 1, 2007: the average of the 3 highest amounts of the unit's adjusted control period heat input over the first 5 calendar years following the year in which the unit commenced operation, or the average of the 2 highest amounts of the of the unit's adjusted control period heat input over the first 4 calendar years following the year in which the unit commenced operation, or the maximum adjusted control period heat input over the first 1 to 3 calendar years following the year in which the unit commenced operation, depending on the maximum number (1 to 5) of such calendar years of data available to the permitting authority for determination of allowance allocations pursuant to sections 96.141(a) or 96.141(b); with the adjusted control period heat input for each year calculated as follows:
If the unit is 85 percent or more (on a BTU basis) biomass-fired during the year and is subject to best available control technology (BACT) for NOx emissions, the unit's control period heat input for such year is multiplied by 150 percent;
If the unit is coal-fired during the year, and not subject to paragraph (a)(1)(i)(A) of this section for the year, the unit's control period heat input for such year is multiplied by 100 percent;
If the unit is oil-fired during the year, the unit's control period heat input for such year is multiplied by 60 percent; and
If the unit is not subject to paragraph (a)(1)(i)(A), (B), or (C) of this section, the unit's control period heat input for such year is multiplied by 40 percent.
Identical language regarding the challenged fuel adjustment factors is also found in subparagraphs (B) through
of paragraph (5)(d)3.(i), which reads as follows: (5) * * * *
The baseline heat input (in mmBtu) used with respect to CAIR NOx Ozone Season allowance allocations under paragraph (b) of this section for each CAIR NOx Ozone Season unit will be:
For units commencing operation before January 1, 2000: the average of the 3 highest amounts of the unit's adjusted control period heat input for 2000 through 2004; for units commencing operation on or after January 1, 2000, and before January 1, 2007: the average of the 3 highest amounts of the unit's adjusted control period heat input over the first 5 calendar years following the year in which the unit commenced operation, or the average of the 2 highest amounts of the of the unit's adjusted control period heat input over the first 4 calendar years following the year in which the unit commenced operation, or the maximum adjusted control period heat input over the first 1 to 3 calendar years following the year in which the unit commenced operation, depending on the maximum number (1 to 5) of such calendar years of data available to the permitting authority for determination of allowance allocations pursuant to sections 96.141(a)
or 96.141(b); with the adjusted control period heat input for each year calculated as follows:
If the unit is 85 percent or more (on a BTU basis) biomass-fired during the year and is subject to best available control technology (BACT) for NOx emissions, the unit's control period heat input for such year is multiplied by 150 percent;
If the unit is coal-fired during the year, and not subject to paragraph (a)(1)(i)(A) of this section for the year, the unit's control period heat input for such year is multiplied by 100 percent;
If the unit is oil-fired during the year, the unit's control period heat input for such year is multiplied by 60 percent; and
If the unit is not subject to paragraph (a)(1)(i)(A), (B), or (C) of this section, the unit's control period heat input for such year is multiplied by 40 percent.
On August 10, 2006, FPL filed its Petition challenging subparagraphs (B) through (D) of paragraphs (3) and (5) on the ground they constitute an invalid exercise of delegated legislative authority. More specifically, the Petition alleged in relevant part that for the following reasons, the challenged provisions constitute an invalid exercise of delegated authority:
The agency exceeded its grant of rulemaking authority in including fuel adjustment factors set out in the Challenged Provisions.
The Challenged Provisions enlarge, modify, or contravene the specific provisions of law implemented, have no basis in any explicit power or duty identified in the statutory language and go beyond the particular powers and duties conferred to DEP.
The Challenged Provisions are arbitrary and capricious, are unsupported by necessary facts or logic and without thought or reason or irrational, and are therefore an invalid exercise of delegated legislative authority. See Fla. Stat. § 120.52(8)(e).
In employing fuel-biased allocation factors to adjust the allocation of compliance costs in a manner divorced from any incremental environmental benefit and, inter alia, lessening compliance costs for certain fuel types at the expense of others, creating economic incentives for certain fuels, creating disincentives for fuels that are already at a cost advantage, and setting up a system of cross subsidies among fuel types, DEP went beyond the particular powers and duties conferred upon it, and also impinged in the statutory jurisdiction of the Florida Public Service Commission set out in sections 366.04 and 366.05, Florida Statutes.
The Challenged Provisions impose excess regulatory costs upon FPL and the public as a whole that are not justified by any incremental environmental benefit. The inclusion of the Challenged Provisions in the proposed rule fails to adhere to the agency's duty to consider economic impacts and weigh the relative risks and benefits to the public and the environment pursuant to section 403.804(1), Florida Statutes, and imposes excess regulatory costs in violation of section 120.541(1)(d), Florida Statutes.
Petition, paragraphs 45-49.
In short, FPL contended in its initial pleading that the inclusion of the fuel adjustment factors that EPA encourages states to use is outside the rulemaking authority of the Department, is arbitrary and capricious, contravenes the legislative purpose, and imposes excess regulatory costs that could otherwise be avoided. In addition, the Petition alleged that the SERC was improperly prepared by the Department in several respects. Besides Section 120.52(8), Florida Statutes2, the Petition also cited Sections 120.54, 120.541, 120.56(1) and (2), 120.57, 366.04, 366.05, 403.021, 403.031, 403.061, 403.087, and 403.804, Florida Statutes, as the provisions which require that the proposed rule be invalidated.
Does the rule exceed the statutory grant of authority?
FPL has alleged that the rule goes beyond the specific powers and duties conferred upon the Department by Chapter 403, Florida Statutes, to promulgate regulations implementing CAIR. As noted above, the Department has cited Section 403.061(35), Florida Statutes, as the underlying grant of authority for adopting the rule. That statute requires the Department to "[e]xercise the duties, powers, and responsibilities required of the state under the federal Clean Air Act, 42 U.S.C. ss. 7401 et seq. The department shall implement the programs required under that act in conjunction with the other powers and duties."
The Clean Air Act gives EPA authority to require submission of an appropriate SIP from any state that contributes to a violation of NAAQS in any other state. Using this authority, EPA promulgated CAIR. Florida is considered an upwind state and is therefore subject to these new standards. Thus, the Department must "implement the programs required under that act."
CAIR provides Florida with the option of achieving compliance with the new standards by either mandating reductions of NOx at each source by requiring each EGU to alter production or operations, or to participate in an interstate cap and trade program. Florida has opted to participate in the cap and trade program, and the rule was tailored to do so. Under CAIR, EPA requires states participating in the cap and trade program to allocate a fixed number of allowances to the state EGUs. FPL concedes that the proposed rule, including the challenged provisions, will comply with this federal requirement because the Department essentially adopted the federal Model Rules. Although the Department could have complied with the federal requirement in a way more favorable to FPL, the rule, as written, is clearly within the grant of authority given under Section 403.061(35), Florida Statutes, since it does nothing more than "implement the programs required under the [Clean Air Act]."
Does the rule enlarge, modify, or contravene the specific provisions of the law implemented?
FPL further contends that because the proposed rule uses a fuel-biased allocation method not required under the statute, and it does not serve an environmental purpose, the challenged provisions enlarge the specific provisions of the law being implemented.
As noted above, Section 403.061(35), Florida Statutes, requires that the Department adopt rules to implement the requirements of the Clean Air Act. While FPL may quarrel with the fuel adjustment factors in the rule which favor coal-fired units, the Department's decision to adopt the EPA's Model Rule is consistent with its statutory authority to implement EPA's programs under the Clean Air Act.
Is the rule arbitrary and capricious?
FPL next contends that coal EGUs do not need a subsidy; there are significant defects in the Department's economic analysis; the Department incorrectly concluded that FPL would not bear any net compliance costs; the Department's proposal will be more costly than estimated; and these erroneous considerations collectively led to an arbitrary and capricious decision to utilize the fuel adjustment factors in violation of Section 120.52(8)(e), Florida Statutes. To overcome this claim, there must be evidence in the record showing that the rule is
supported by facts and logic, and that the Department's decision was reached after giving thought or reason to the matter.
After EPA adopted CAIR in May 2005, the Department began its rule development process by meeting with utilities and other interested parties interested in the implementation of CAIR. It also conducted three public meetings or workshops and encouraged the utilities to reach a consensus on how to distribute the CAIR allowances. Early on, the Department decided to participate in the cap and trade program, a decision supported by all parties, including FPL.
No consensus was reached on how to distribute the pollution allowances, as the parties aligned themselves in the manner in which they are in this case: the utilities that primarily burn coal versus the utilities that primarily burn natural gas. After concluding that a consensus would probably not be reached, the Department hired a consultant, Dr. Paul M. Sotkiewicz, to assist it in analyzing the implementation options for CAIR and the Clean Air Mercury Rule (CAMR), which is not in issue here.
Although the Department considered using a number of variations of the proposed rule during the rule adoption process, and relied on several different bases for doing so, it finally concluded that, with some minor changes, the EPA's Model Rule should be adopted. (For example, the Department considered
using a heat input approach with fuel adjustment factors adopted by EPA; a heat input approach with no fuel adjustment factors; and an output approach, based upon the amount of fuel required to produce a unit of electricity.) During the entire process, the Department carefully considered the information presented by FPL and other parties and as well as a number of policy issues, including energy efficiency, fuel diversity, economic impacts, and environmental impacts. It also relied upon Dr. Sotkiewicz's conclusion, accepted by the undersigned as being credible, that the overall cost of compliance with CAIR in Florida would be the same under each of the proposed allocation schemes being evaluated by the Department and that the overall effect on ratepayers would be same. As to FPL, if the proposed rule becomes effective, the impact on its customers will be de
minimus, that is, it will add approximately $0.33 per month for a customer using 1,000 killowatt hours of electricity. On the other hand, if FPL's proposal were accepted, there would be a financial impact on the customers of the utilities that utilize large percentages of coal-fired electric generation.
In choosing to adopt the rule as finally proposed, the Department was guided by five broad principles: protecting the state's status as an attainment area for air quality standards; accommodating the state's future growth in demand for electricity; promoting new, more efficient power production
technologies; maintaining fuel diversification across the fleet of EGUs in the State; and minimizing the impact of CAIR on the utility customers. These principles constitute rational and valid concerns to consider when adopting a rule such as this.
The greater weight of evidence supports a finding that air quality will be protected because EGUs will comply with the cap on the state's NOx emissions; the environmental benefits of CAIR will be achieved in accordance with EPA's plan; the rule's approach to allocation of allowances encourages the use of more efficient power production technologies in new EGUs; the rule will not materially affect fuel diversification in the state's existing fleet of EGUs; the rule will not likely affect a utility's decision regarding the type of EGU to build in the future; and it protects the state's ratepayers because it allows the EGUs to participate in a cap and trade program.
The proposed rule is very similar to the EPA Model Rule, except for certain exceptions which address issues unique to a high growth state such as Florida.
In addition, the evidence shows that coal-fired EGUs will bear the greatest costs when complying with CAIR. This is true no matter which allocation scheme is selected by the Department. It was not illogical for the Department to adopt a distribution system for NOx allowances that places more NOx allowances with the utilities who will need them the most.
Based on sound public policy, this same approach was taken by the EPA when distributing NOx allowances to the States, when creating the Model Rule, and when adopting the federal implementation plan.
The fact that fuel costs for coal-fired EGUs are currently lower than the fuel costs for gas and oil-fired EGUs does not require the adoption of a different system for distributing NOx allowances. Indeed, fuel costs are only one component of the total cost of generating electricity. Although FPL generates electricity primarily by using oil and natural gas-fired units, its customers enjoy some of the lowest costs for electricity in the State. Placing NOx allowances with the other utilities is not irrational.
FPL contends that the Department should have adopted the system advocated by FPL for the distribution of NOx allowances. However, this proposal was considered and rejected by the EPA, ERC, and Department. Even if the challenged provisions are applied to FPL, it will receive NOx allowances, as a percentage of emissions, at a level that is above the average for all utilities. On average, each utility will receive NOx allowances under the proposed rule equal to 44.4 percent of their NOx emissions in 2004. FPL will receive 45.8 percent, or more than the average utility. If FPL's proposed allocation had been adopted, it would receive allowances equal
to 64.4 percent of its emissions, while Intervenors and others would continue to receive 44.4 percent.
The evidence supports a finding that there are facts and logic which support the Department's decision to adopt the proposed rule, and that its decision was made with thought and reason.
Issues Surrounding the SERC
FPL has raised two arguments related to the SERC: that the use of the Department's fuel adjustment factors in the rule imposes regulatory costs on FPL that could be reduced by adopting FPL's own proposal (allowances based upon an unadjusted heat input approach); and that the Department's SERC does not comply with the requirements of Section 120.541(1)(b) and (2)(c), Florida Statutes, because the Department failed to adopt FPL's alternative proposal or provide a statement of the reasons for its rejection, and it failed to include an estimate of the transactional costs to be incurred by affected individuals and entities in complying with the rule. Because the Department and Intervenors contend that FPL has waived its right to raise either argument by failing to request a SERC or timely filing a LCRA, and omitting at least one of the issues from the Pre- Hearing Stipulation, a brief history of the preparation of the SERC, the issues raised in the Petition, and the issues recited in the parties' Pre-Hearing Stipulation is appropriate.
The Preparation of the SERC
Following the publication of CAIR in May 2005, the Department began the process to adopt a rule which would modify Florida's SIP, as required by federal law. A public workshop was held on November 29, 2005, at which time the Department presented a rule proposal using a transitional basis to allocate NOx allowances, that is, the allowances would be initially allocated using the fuel adjustment heat input method, but would switch to an output method in 2012. At the end of the workshop, the Department invited written comments from all interested parties. FPL submitted comments on January 6, 2006, objecting to the initial part of the proposal, but supporting the switch that would occur in 2012.
After further study regarding the issues, on March 2, 2006, the Department conducted another workshop, at which it announced that it intended to use the fuel adjusted heat input method on a permanent, rather than a transitional, basis. The Department again invited comments from interested parties. In response to that invitation, on March 20, 2006, the Florida Electric Power Coordinating Group (FCG), an organization representing major electric utilities in the State, including FPL, submitted a two and one-half page letter in which it offered comments regarding the implementation of CAIR and CAMR. Among other things, the letter noted that it expected the
Department to adopt a rule implementing CAIR that would be consistent with EPA's rule. Also, it specifically requested that the Department prepare a "[SERC] for its proposals to implement both CAIR and CAMR, in accordance with Sections 120.54(3)(b)[1.] and 120.541." Department Exhibit 29, page 2. The letter went on to say that its "prior comments [contained in letters dated October 7, 2005, January 6, 2006, and February 7, 2006], as well as this letter, constitute a 'good faith written proposal for a lower cost regulatory alternative' which accomplishes the objectives of CAIR and CAMR." Id.
On March 17, 2006, or three days earlier, FPL also submitted a four and one-half page letter which reiterated in part its earlier comments contained in a letter of January 6, 2006, and which "endorses and incorporates by reference the comments submitted on behalf of . . . FCG pertaining to both the CAIR and CAMR." FPL Exhibit 22, page 1. (Obviously, FPL was anticipating that FCG would be filing comments within a few days.) FPL's letter made no specific reference to a SERC, and those portions of the letter objecting to the Department's use of fuel adjustment factors and the associated economic impact on the utility were not labeled or otherwise identified as a LCRA. Even so, FPL takes the position that by "endorsing" FCG's comments, it was likewise requesting that a SERC be prepared.
It also takes the position that its comments regarding the cost
effect of the challenged provisions constituted a bona fide LCRA within the meaning of the law.
Among other things, FPL's letter specifically objected to the Department's decision to retain the EPA's fuel adjustment factors in the rule and pointed out that this would cost FPL "tens of millions of dollars each year"; that the Department's proposal was "inequitable" to its customers; that it required FPL's customers to pay a disproportionate share of the implementation of CAIR; and that many of the assumptions made by the EPA when it adopted the Model Rule were erroneous. (By now, FPL had filed suit in federal court seeking to overturn the EPA rule; FPL reminded the Department that this litigation was ongoing.)
The Department conducted another workshop on April 13, 2006, at which time it announced that it intended to propose fuel adjustment factors in the rule. Following that workshop, on April 28, 2006, the FCG submitted comments similar to the ones contained in its letter of March 20, 2006, and again requested that a SERC be prepared. Joint Exhibit 3, page 23. On the same day, FPL filed a four and one-half page letter containing comments relating to both CAIR and CAMR, although most of the letter focused on CAIR. Among other things, FPL stated that it continued to oppose the Department's decision to utilize fuel adjustment factors for the allocation of
allowances; that it should include language in the rule that would require a modification of the rule if FPL prevailed in its federal suit against the EPA; that the fuel adjustment factors were "inequitable" to its customers and allocated a disproportionate share of allowances to the coal-fired units; that neither the Department nor the EPA had ever presented a rational justification for the methodology being used; that the proposed rule would result in "an annual cost to our customers of approximately $15 million"; that compliance with CAIR would not reverse the competitive advantage of coal; and that as a compromise, the Department should increase the fuel adjustment factors for oil and gas units from 60 and 40 percent, respectively, to 80 percent for each. FPL Exhibit 23. The letter made no reference to a SERC, and while it referred to lower regulatory costs that it would experience if its proposal was adopted, it did not characterize the comments as a LCRA that would substantially accomplish the statutory objectives.
On May 26, 2006, the Department published its Notice in the Florida Administrative Weekly to satisfy the requirements of Section 120.54(3)(a)1., Florida Statutes. (That provision requires an agency to publish such a notice prior to the adoption, amendment, or repeal of a rule.) No relevant changes to the proposed rule were made as a result of FPL's comments. The Notice stated that the ERC would hold a rule adoption
hearing on June 29, 2006. The Notice also stated that the Department had "begun preparation of a [SERC] as outlined in section 120.541 of the Florida Statutes . . . ." By making this statement, it is fair to infer that the Department had treated FCG's earlier request for preparation of a SERC as a valid request and that it intended to prepare one to satisfy the statutory requirement. In addition, because of the complexity of the subject matter and the widely differing views presented by the parties on how to comply with CAIR, the Department, as a matter of good regulatory practice, believed that a complex rule such as this warranted a companion SERC for the benefit of the ERC and interested parties even if one had not been formally requested. (The Department has continued to take the position that the SERC was prepared voluntarily and that no appropriate request for one was ever made.) The Notice also borrowed language from Section 120.541(1)(a), Florida Statutes, by stating that "[a]ny person who wishes to provide information regarding the estimated regulatory costs, or to provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice."
At hearing, FPL conceded that it never formally requested that a SERC be prepared in any document filed during the rule development phase or in accordance with the instruction in the Notice. Also, while not conceding this point, it failed
to specifically characterize any comments in its letters of March 17 or April 28, 2006, as a LCRA within the meaning of Section 120.541(1)(a), Florida Statutes. However, it is fair to infer that the Department considered FPL's comments as a LCRA since it summarized those comments in its draft SERC prepared shortly thereafter, and it later gave reasons for rejecting the proposal in a revised SERC. See Findings of Fact 55 and 57, infra. Here, the undersigned rejects the contention by FPL that its "endorsement" of FCG's letter of March 20, 2006, was equivalent to a formal request by FPL for a SERC. Had FPL desired to request one, it could have easily included that request in any of its written submissions to the Department during the lengthy rule development process, or even after the Notice was issued.
Section 120.541(1)(a), Florida Statutes, provides that "a substantially affected person, within 21 days after publication of the notice provided under s. 120.54(3)(a), may submit to an agency a good faith written proposal for a [LCRA] to a proposed rule which substantially accomplishes the objectives of the law being implemented." Subsection (1)(b) goes on to provide that if a LCRA is filed within that time limitation, the agency must prepare a SERC (assuming one has not yet been prepared) "or shall revise its prior [SERC], and either adopt the alternative or give a statement of the reasons for
rejecting the alternative in favor of the proposed rule." No substantially affected party in this proceeding submitted to the Department a good faith written proposal for a LCRA within the time limitation described in the statute. As noted elsewhere, however, the Department treated FCG's letter of March 20, 2006, as a request to prepare a SERC, and it obviously construed the comments submitted by FPL as a LCRA.
On June 21, 2006, the Department submitted to the ERC a memorandum summarizing its rationale for the proposed rule. Attached to the memorandum was its initial SERC, which the Department refers to as a "draft" SERC, and which has been received in evidence as Joint Exhibit 3. The SERC was prepared by the Department's in-house economist, Dr. Nicholas Stratis, and represented a good faith effort by the Department to estimate the economic impacts associated with the adoption of the rule.
Beginning on page 23 of the draft SERC and continuing through page 25, the report included a section which was intended to comply with the requirement that, with respect to LRCAs submitted by other persons, the agency must either adopt the alternative proposal or state the reasons for its rejection. Since no alternative proposals were submitted after the Notice was published on May 26, 2006, this portion of the SERC was directed to the comments filed by interested parties during the
rule development phase of the process. The SERC noted that only FCG had requested a SERC in its letter dated March 20, 2006, and then went on to summarize the comments contained in FCG's letter, as well as additional comments made by FCG in a letter dated April 28, 2006. Also, the report noted comments submitted by another organization, the Florida Municipal Electric Association, on behalf of its 33 members, as well comments submitted by other utilities. Finally, the Department summarized the concerns raised by FPL in its comments dated March 17 and April 28, 2006, which opposed the Department's adjusted heat input proposal. While the Department gave its rationale for adopting the proposed rule, the SERC did not state the reasons for rejecting FPL's LCRA.
In the parties' Pre-Hearing Stipulation filed on November 13, 2006, FPL admits without dispute that the Department "addressed FPL's comments in its Statement of Estimated Regulatory Costs" submitted to the ERC prior to the adoption of the rule. See Pre-Hearing Stipulation, page 10, paragraph E.14.d. See also Finding of Fact 2, supra.
On the first day of the final hearing, the Department submitted a revised SERC for the purpose of correcting what it considered to be "minor" errors contained in the draft SERC, which surfaced when FPL deposed Dr. Stratis during preparation for the final hearing. That document has been received in
evidence as Joint Exhibit 7. (According to counsel, preparation of the revised SERC was completed on November 9, 2006.) While the SERC again summarized the arguments of FPL at length, it also responded to FPL's LCRA by concluding that "DEP's modeling shows that the total cost of the proposed regulation for 2009- 2021 for all utilities is the same under DEP's proposal and under the unadjusted heat input allocation proposal. While the unadjusted heat input approach would result in lower costs for FP&L, it would not result in lower costs for the entire regulation, and DEP rejects the alternative proposed by FP&L." It is fair to assume that the SERC was revised as a matter of caution in the event FPL's comments in its two letters were deemed to be a LCRA, and that it was filed on a timely basis.
The Petition and Pre-Hearing Stipulation
In its Petition filed on August 10, 2006, FPL identified as disputed issues of material fact "[w]hether DEP's [SERC] complied with the requirements of section 120.541, Florida Statutes," and "[w]hether FPL's proposal for a fuel- neutral system without the fuel adjustment factors in the Challenged Provisions constitutes a lower cost alternative that would substantially accomplish the statutory objectives[.]" See paragraphs 19k. and m., Petition. Therefore, both issues were clearly raised in the initial Petition.
On November 13, 2006, or just before the final hearing, the parties filed a Pre-Hearing Stipulation, a document which controls the issues to be adjudicated at final hearing. See, e.g., Heartland Environmental Council, Inc. v. Department of Community Affairs et al., DOAH Case No. 94-2095GM (DOAH Oct. 15, 1996, DCA Nov. 25, 1996), 1996 Fla. Div. Adm. Hear. LEXIS 3152 at *49 ("[a party] is bound by the allegations in its Petition for Hearing as to the alleged deficiencies in the [rule], as further limited by the Prehearing Stipulation filed in [the] case")(Emphasis added). Among other things, the stipulation contains a concise statement of the nature of the controversy, a brief statement of each party's position, a list of each party's exhibits and witnesses, facts admitted or requiring no proof at hearing, issues of law upon which there is agreement, issues of fact which remain to be litigated, and issues of law which remain for determination. The issues of fact which remained for determination included "[w]hether FPL's proposal for an allocation system without the fuel adjustment factors in the Challenged Provisions constitutes a lower cost alternative that will substantially accomplish the statutory objectives." The parties likewise stipulated that under
Section 120.54(1)(d), Florida Statutes, the Department "is required to adopt the least-cost regulatory alternative that substantially accomplishes the statutory objectives." Pre-
Hearing Stipulation, paragraphs 15.c. and 16.c. Whether intentionally or through oversight, the document fails to include, explicitly or otherwise, the issue of whether the SERC was prepared in accordance with the requirements of Section 120.541, Florida Statutes. Therefore, the original allegation in the Petition was limited by the parties' Pre-Hearing Stipulation, and the issue was not preserved.
Whether FPL's proposal constitutes a lower cost alternative that will substantially accomplish the statutory objectives?
FPL contends the challenged provisions are invalid under Section 120.52(8)(f), Florida Statutes, because its alternative proposal imposes lower regulatory costs on FPL and substantially accomplishes the statutory objectives. Accepting the premise that FPL's two letters filed during the rule development process constituted timely-filed LCRAs within the meaning of the law, this contention must still be rejected since it is not supported by the more credible evidence.
As noted earlier, the Department considered several alternative methodologies for allocating NOx allowances under CAIR, including: (a) using the heat input approach with the fuel adjustment factors adopted by EPA; (b) using a heat input approach with no fuel adjustment factors or differentiation between fuels; and (c) using an output approach, based upon the amount of fuel required to produce a unit of electricity.
During this process, the Department's rationale for using the fuel adjustment factors changed. For example, it initially took the position that a lack of agreement among the parties on an alternative proposal justified the use of the EPA model. The Department finally concluded that the fuel adjustment factors allocated the pollution allowances in a more equitable manner.
As is common with cap and trade programs, there are a variety of ways in which an individual utility or an individual EGU may meet the requirements of CAIR and the proposed rule. These options include the installation of control technology, the purchasing or banking of allowances, repowering or fuel switching, or a combination of these approaches. The decision on how best to comply will be made by each individual utility or facility owner, and depends on many factors. These factors include such things as cost, equipment availability, operational difficulty, unit dispatch, and the overall philosophy of the entity making the decisions regarding compliance strategy. Although some of the regulated entities in Florida have preliminary plans on how they intend to comply with CAIR, FPL has not yet settled on a definitive compliance strategy.
During the course of the rulemaking, the Department was aware of some of the proposals and methods by which individual EGUs would achieve compliance. However, the Department did not have a final compliance plan for each company
and EGU, and this information was not provided to the Department by all of the regulated interests. Even if the Department had requested such information, the compilation of the information would have been exceedingly time-consuming and expensive.
Moreover, because the method of compliance is left up to the individual utility or regulated entity, even if this information had been provided, the Department would not have any way of ensuring that the proposed methodology ultimately would be implemented.
As noted earlier, to assist with its economic analysis of the proposed rule, the Department retained Dr. Paul M. Sotkiewicz, an expert in economics and economic modeling, electric utility regulation, and emission trading in electricity markets. Dr. Sotkiewicz's primary role was to provide advice to the agency on the various schemes that were under consideration for allocating NOx allowances.
During the rule development process, the Department concluded that some economic modeling should be performed to assist in the analysis. Dr. Sotkiewicz developed computer model programs to confirm that the allocation methodologies under consideration by the Department would not lead to a different overall compliance cost for the state, and to determine how the cost burdens among the affected utilities would change with the different allowance allocation schemes.
Models do not provide a literal depiction of the real world and its attendant complexities, but models are nevertheless useful analytical tools. Factors to be considered when constructing a model include the availability of data to input into the model and the amount of computational complexity necessary to capture the issues being examined.
Any modeling effort involves certain assumptions.
Among the primary assumptions for the models in this case are that the utilities will follow optimizing behavior and act to minimize the cost of compliance with CAIR. For the models created by Dr. Sotkiewicz, pollution control technologies are assumed to be installed only when they become cost effective over the remaining time horizon of the models. As a result, some sources do not install pollution control technology immediately upon the effective date of the proposed rule, but rather at some future date. The models also assume no uncertainty and, as such, are perfect foresight models.
Finally, the models assume no banking of allowances because of the computational complexity that banking would add and the limited time available to perform the modeling. Dr. Sotkiewicz testified that, even if the model accounted for banking, this issue would not have changed the outcome of his analysis.
Dr. Sotkiewicz assumed a NOx allowance price of
$2,500.00 in the models. He did not have the data, or the time
to collect the data, from all affected sources in the 28 states subject to the CAIR program, which would have been necessary to construct an equilibrium model that determines the price of the allowances. However, this analysis had already been completed by EPA in its model. The $2,500.00 figure used by Dr. Sotkiewicz was a conservative estimate because it is high enough to represent a reasonable "worst case" scenario for the allowance price. This amount also is the midpoint of the range of $1,500.00 to $3,500.00 used by FPL in its analyses.
Dr. Sotkiewicz's models assumed that oil and gas steam generating units would only install selective catalytic reduction technology or selective non-catalytic reduction technology to reduce NOx emissions. This approach is consistent with the approach taken by EPA in its analyses. Natural gas combustion turbines could install selective catalytic reduction, selective non-catalytic reduction, dry low NOx burners, water injection technology, or a combination of these emission controls. Control efficiency information was derived from the data published by the United States Energy Information Administration, publications from the United States Department of Energy, and EPA modeling data.
The models required input on future utility demand growth. This information was obtained from the Department and
the ten-year site plans submitted to the Florida Public Service Commission (PSC) by the electric utilities.
Dr. Sotkiewicz assigned a certain generation rate for each of the EGUs using historical data from the year 2004 as a base for existing units and using information from the Department for new units not yet in service. Fuel usage for each EGU was assumed to be in the same proportion as it was during the years from 2000 to 2004. The same time period was used to estimate EGU efficiencies.
The models compared a number of different scenarios, including the allocation methodology in the challenged provisions and the methodology proposed by FPL (heat input without fuel adjustment factors). The model showed that when optimizing behavior is present, that is, allowing EGUs to install pollution control technologies as well as engaging in transactions in the emission trading market, the emissions will be the same under both allocation schemes. This result is also supported by general economic theory without the models. Based on his experience with emissions trading markets and his modeling, Dr. Sotkiewicz established that the method of allocating NOx allowances "will have no effect on the ultimate emissions outcome, will have no effect on which [pollution control] technologies will be installed by particular generating
units, and will not lead to any differences in overall compliance costs."
Dr. Sotkiewicz's model demonstrates that the overall cost of compliance with CAIR will be the same under either allocation methodology for distributing NOx allowances. This conclusion is consistent with EPA's determination that the method of distributing NOx allowances will not affect the environmental impact of the CAIR program or the economic cost of compliance. There will be variations in the costs to individual utilities, depending upon what scheme is adopted and what assumptions are made as to the compliance methodology. The overall cost of compliance, however, will not be reduced by FPL's proposal.
FPL criticized the models because they do not account for all of the site-specific information held by FPL and other utilities. One advantage of emissions trading, however, is that the Department and other regulators do not need to know the specific costs of controls for individual utilities. FPL complained that the cost of pollution control equipment will be greater than the values used in Dr. Sotkiewicz's models. Even if this assertion is true, however, it does not change the "overall qualitative results [of the model] that the allocation scheme will not affect overall costs."
In its Petition, FPL also raised the issue of whether certain transaction costs associated with the compliance decisions for utilities had been taken into account in the Department's modeling. The transaction costs include such things as broker fees for allowances and trades, and costs associated with planning, engineering, and construction in cases in which control technology is to be installed. Dr. Sotkiewicz explained that these transaction costs will not affect the overall cost of compliance in this case. Utilities preparing to comply with the proposed rule will undertake many of these costs, regardless of the allocation scheme, and by the time the program is in effect, those costs will have already been expended. Brokerage fees and the like are generally incurred per allowance transaction. The empirical evidence gathered from the sulfur dioxide trading program administered by EPA suggests that transaction costs have not been a factor at all in the decisions made by utilities to participate in the market or in their trading activity in the market.
FPL's expert (Dr. Landon) testified that the method of compliance could be affected by the treatment a utility could expect to receive from the PSC for the costs expended. He testified that one could not assume the PSC would approve such expenditures as being "prudent" and provided examples of several types of transactions in which the utility's prudence may be
called into question. However, the testimony from other FPL witnesses made it clear that the cost recovery process at the PSC is ongoing, that the PSC is kept informed of the decisions as they are made by FPL, and that those costs are pre-approved by the PSC. FPL acknowledged that it did not know of any instance in which costs expended in this manner were not authorized to be recovered. Moreover, the Department met with PSC staff during the rulemaking process to reassure them that the cost recovery information that was then being submitted was legitimate, even though the rule was not yet adopted, and the time to comply would be short. The testimony of FPL's other witnesses discredits Dr. Landon's concerns about this issue.
Dr. Landon further opined there will be an increase in the total CAIR compliance costs if, hypothetically, there is no trading of NOx allowances. Dr. Landon admitted his hypothetical involved an "extreme" scenario because it is undisputed that trading will occur under CAIR, as it does under the existing trading programs for NOx and SO2. FPL witness LaBauve confirmed that FPL favors the CAIR cap and trade program, and FPL has observed that other such systems have worked effectively. On cross-examination, Dr. Landon conceded that he had not quantified the actual CAIR compliance costs that will be incurred under realistic conditions. Further, Dr. Sotkiewicz explained that Landon's "no trading" hypothetical was based on
assumptions reflecting a "command and control" regulatory regime, which would be expected to have higher compliance costs than the cap and trading system proposed by the Department.
Although Dr. Landon was critical of the Sotkiewicz models, he did not perform any modeling himself because it would be time-consuming and expensive. He further questioned the assumptions used by Dr. Sotkiewicz concerning perfect foresight, perfect competition, and no transaction costs. The record demonstrates, however, that the assumptions used by
Dr. Sotkiewicz are reasonable and appropriate. Dr. Sotkiewicz used the same assumptions that EPA used in its model. Even Dr. Landon acknowledged that the EPA model is an appropriate model for use in this case.
The purpose of CAIR is to reduce the emissions of certain pollutants by imposing a statewide cap on those emissions. The EPA's cap operates as an allocation of NOx allowances to the individual states. Each state must distribute the allowances among the affected utilities and entities in accordance with one of the allocation methodologies available. The individual regulated entities are then free to decide for themselves how best to comply with the cap on each EGU, in accordance with their own goals, objectives, and decision-making processes.
Each individual entity may approach the decision- making process differently, but the factors that generally are considered in this process appear to be the kinds of factors that would be considered by all such entities. Nevertheless, each entity will make voluntary decisions on what is best for it and its customers. These voluntary decisions are generally unaffected by the allocation scheme for allowances because the decisions are based on multiple considerations, such as the regulated entity's individual projections about the cost and availability of NOx allowances in the market, the cost of construction and the availability of construction workers and materials for pollution control systems, and the general philosophy of the entity with regard to its tolerance for risk. A utility with a high tolerance for risk may choose a path that is more uncertain and perhaps less costly, while one with a lower tolerance for risk would opt for more certainty. These voluntary decisions may well affect the cost of compliance for each individual utility.
Although FPL criticized the assumptions used by
Dr. Sotkiewicz in his model, it represents a good faith estimate by the Department of the economic impacts associated with the proposed rule. Even if the model results are not precisely accurate, the results provided useful information to the Department. Moreover, even if the model results are disregarded
entirely, thirty years of experience with emission trading programs and general economic theory demonstrates that the allocation of allowances in a fixed baseline trading system, like the one proposed by the Department, will not affect the overall cost of compliance with the proposed rule. For all of these reasons, FPL's proposed allocation methodology does not constitute a lower cost alternative in this case.
g. Whether the SERC Complies with the Law?
For the reasons stated above, the issue of whether the SERC complies with the law has not been preserved. That issue, as originally framed by FPL, is whether the Department's SERC fails to satisfy the requirements of Section 120.541(1)(b) and (2)(c), Florida Statutes, because the Department failed to adopt FPL's alternative method or include a statement of the reasons for rejecting that alternative in favor of the proposed rule, and it failed to provide a good faith estimate of the transactional costs that would be incurred by regulated persons or entities in complying with the rule's requirements.
Assuming arguendo that the issue is viable, in both the initial and revised SERCs, the Department summarized all of FPL's objections to the use of fuel adjustment factors for allocating allowances, and in the revised SERC gave a statement of the reasons for rejecting FPL's proposal. While the reasons for rejecting that proposal are admittedly brief, and they
differ with the views advocated by FPL throughout the rule development process, the SERC concludes that the Department's modeling supports its allocation method by demonstrating that "the total cost of the proposed regulation for 2009-2021 for all utilities is the same under DEP's proposal and under the unadjusted heat input allocation proposal [of FPL]." It goes on to state that while FPL's proposal would obviously reduce FPL's overall costs or financial burden to comply with CAIR, the Department (and EPA) method of allocation "would not result in lower costs for the entire regulation, and DEP rejects the alternative propos[al] by FP&L." Accordingly, the evidence supports a finding that the SERC considered FPL's LCRA and stated the reasons for its rejection. Finally, both the initial and revised SERCs include a section which contains a good faith estimate of the transactional costs likely to be incurred by individuals and entities who must comply with the rule. See Joint Exhibit 3, pages 15-18; Joint Exhibit 7, pages 15 and 16.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over this matter pursuant to Sections 120.56(2), 120.569, and 120.57(1), Florida Statutes.
FPL has challenged the proposed rule in accordance with the definition of "invalid exercise of delegated
legislative authority" in Section 120.52(8)(b), Florida Statutes, which provides:
"Invalid exercise of delegated legislative authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one of the following applies:
The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this chapter;
The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)1.;
The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation which is required by s. 120.54(3)(a)1;
The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency;
The rule is arbitrary or capricious. A rule is arbitrary if it is not supported by logic or the necessary facts; a rule is capricious if it is adopted without thought or reason or is irrational; or
The rule imposes regulatory costs on the regulated person, county or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory directives.
A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by
the enabling statute. No agency shall have authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious and is within the agency's class of powers and duties, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of any agency shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the same statute.
As required by Section 120.56(2), Florida Statutes, the Petition challenging the proposed rule states with adequate particularity the objections to the challenged provisions.
(With the exception of one citation to paragraph (8)(e), neither the initial Petition nor the Pre-Hearing Stipulation identify by citation any other specific paragraphs within Section 120.52(8), Florida Statutes, that FPL contends the challenged provisions violate, though no objection was raised by any other party.) In its Proposed Final Order, however, FPL argues that paragraphs (8)(b), (c), (e), and (f) are in issue.
In a proceeding to challenge a proposed rule, the petitioner has the burden of going forward initially with proof that supports the allegations in the petition. The agency then has the burden to prove by a preponderance of the evidence that the proposed rule is not an invalid exercise of delegated legislative authority as to the objections raised. § 120.56(2),
Fla. Stat.; St. Johns River Water Management District v. Consolidated-Tomoka Land Co. et al., 717 So. 2d 72, 76 (Fla. 1st DCA 1998). The proposed rule is not presumed to be valid or invalid. § 120.56(2)(c), Fla. Stat.
Despite a preliminary Order rendered on September 20, 2006, which denied the Department's Motion to Dismiss FPL's Petition for lack of standing, at hearing, and in the Joint Proposed Final Order, the Department renewed its argument that FPL lacks standing. In the Order dated September 20, 2006, the undersigned simply noted that FPL is regulated by the rule and will be adversely affected by the challenged provisions; therefore, it has standing to challenge the proposed rule. At that time, the Department focused on the argument that FPL's customers, and not FPL itself, would suffer financial injury since FPL can recoup whatever increased costs it incurs through rate proceedings at the PSC. See § 366.8255, Fla. Stat. (electric utilities may recover environmental compliance costs prudently incurred by the utility in complying with Department or EPA environmental standards). Therefore, because the increased costs would be recovered as an environmental compliance cost and passed on to its customers, FPL itself would not suffer an injury-in-fact. (Under this theory, then, only an individual customer, or perhaps the Office of Public Counsel, which represents customers in utility rate disputes before the
PSC, would have standing to contest the rule. Even Intervenors would lack standing to participate in support of the rule since they would likewise be able to pass any increased costs on to their customers.) The Department essentially contends again (without the Intervenors' support) in paragraphs 117 through 128 of the Joint Proposed Final Order that FPL can demonstrate no injury-in-fact that it will suffer from the Department's proposed rule. The undersigned has carefully considered these arguments and concludes, as before, that FPL and Intervenors are clearly regulated by the content of the rule and will be substantially affected by its implementation; thus, they have standing to participate.3 The Department's argument is accordingly rejected.
Section 120.52(8)(b), Florida Statutes, states that a proposed rule is invalid where "[t]he agency has exceeded its grant of rulemaking authority, citation to which is required
. . . ." The same statute provides a set of general standards applicable to all subsections in determining rule validity.
These standards are contained in the closing paragraph of the statute and read as follows:
A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. No agency shall have
authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious and is within the agency's class of powers and duties, nor shall an agency have the authority to implement statutory provisions setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of any agency shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the same statute.
Under these general standards, the primary issue is "whether the statute contains a specific grant of legislative authority for the rule, not whether the grant of authority is specific enough." Southwest Fla. Water Management District et al. v. Save the Manatee Club, Inc. et al., 773 So. 2d 594, 599 (Fla. 1st DCA 2000). A rule must be based on an explicit power or duty identified in the enabling statute. Id. at 599. If it does not implement or interpret a specific power or duty conferred by the statute, the rule is invalid. Id. at 600. At the same time, a rule may not be invalidated simply because the governing statute, as opposed to the challenged rule, confers discretion upon the agency. Fla. Public Service Comm. et al. v. Fla. Waterworks Association et al., 731 So. 2d 836, 843 (Fla. 1st DCA 1999).
The statute granting the Department rulemaking authority is Section 403.061(35), Florida Statutes, which
authorizes the Department to "[e]xercise the duties, powers, and responsibilities required of the state under the federal Clean Air Act, 42 U.S.C. ss. 7401 et seq." Thus, the statute contains a specific grant of legislative authority to adopt the programs required under the Clean Air Act. By adopting the CAIR Model Rule (with minor exceptions), which EPA says constitutes compliance with the Clean Air Act, the Department has properly exercised that grant of authority.
A proposed rule may be invalidated if the "rule enlarges, modifies, or contravenes the specific provisions of law implemented . . . ." § 120.52(8)(c), Fla. Stat. In support of its argument that the challenged provisions enlarge, modify, or contravene the law being implemented, FPL argues that Section 403.061(35), Florida Statutes, relates solely to environmental protection and implementing the requirements of the Clean Air Act, and the challenged fuel adjustment factors do not fall under either category.
With certain exceptions not relevant here, the challenged fuel adjustment factors are virtually identical to those in the EPA's Model Rule. Further, the rule is specifically designed to protect the environment by requiring Florida EGUs to comply with the federal requirement that NOx emissions from upwind states be reduced so that downwind states can attain the EPA-prescribed NAAQS. Therefore, the challenged
provisions do not enlarge, modify, or contravene the law being implemented.
A rule is arbitrary if it is not supported by logic or necessary facts, while a rule is capricious if it is adopted without thought or reason. § 120.52(8)(e), Fla. Stat. The burden of proving that the challenged provisions are neither arbitrary or capricious is upon the Department. Consolidated- Tomoka at 77.
The preponderance of the evidence supports a conclusion that the challenged provisions are not arbitrary. As previously found, coal-fired EGUs will bear the greatest costs when complying with CAIR, no matter which allocation scheme is chosen. Therefore, it was not illogical or arbitrary for the Department (and EPA) to adopt a distribution system for NOx allowances that allocates more NOx allowances to coal-fired EGUs. In adopting the fuel adjustment factors, the Department considered a variety of complex policy issues, including energy efficiency, fuel diversity, economic impacts, and environmental impacts. These matters were carefully weighed and balanced during the rule development process which culminated in the adoption of the rule. Indeed, the arguments presented by FPL, which favor its EGUs to the detriment of those utilities who operate coal-fired EGUs, were considered and rejected by the EPA, ERC, and Department.
Based upon the greater weight of evidence, it is further concluded that the Department did not adopt the rule without thought or reason. As the record shows, the Department held multiple public meetings and workshops to discuss the proposed rule, accepted and considered comments throughout the lengthy process, considered the various proposals of all parties, including FPL, and changed the proposed rule based upon the comments it received and its own evaluation. Therefore, the Department did not act capriciously when it adopted the challenged provisions.
Finally, a rule may be invalidated if "the rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives." § 120.52(8)(f), Fla. Stat. This is consistent with the requirement in Section 120.54(1)(d), Florida Statutes, that "[i]n adopting rules, all agencies must, among the alternative approaches to any regulatory objective and to the extent allowed by law, choose the alternative that does not impose regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives." These provisions must also be read in conjunction
with Section 120.541(1)(a)-(c), Florida Statutes, which provides that:
A substantially affected person, within
21 days after publication of the notice provided under s. 120.54(3)(a), may submit to an agency a good faith written proposal for a lower cost regulatory alternative to a proposed rule which substantially accomplishes the objectives of the law being implemented. The proposal may include the alternative of not adopting any rule, so long as the proposal explains how the lower costs and objectives of the law will be achieved by not adopting any rule. If such proposal is submitted, the 90-day period for filing the rule is extended 21 days.
Upon the submission of the lower cost regulatory alternative, the agency shall prepare a statement of estimated regulatory costs as provided in subsection (2), or shall revise its prior statement of estimated regulatory costs, and either adopt the alternative or give a statement of the reasons for rejecting the alternative in favor of the proposed rule. The failure of the agency to prepare or revise the statement of estimated regulatory costs as provided in this paragraph is a material failure to follow the applicable rulemaking procedures or requirements set forth in this chapter. An agency required to prepare or revise a statement of estimated regulatory costs as provided in this paragraph shall make it available to the person who submits the lower cost regulatory alternative and to the public prior to filing the rule for adoption.
No rule shall be declared invalid because it imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives, and no
rule shall be declared invalid based upon a challenge to the agency's statement of estimated regulatory costs, unless:
The issue is raised in an administrative proceeding within one year after the effective date of the rule; and
The substantial interests of the person challenging the agency's rejection of, or failure to consider, the lower cost regulatory alternative are materially affected by the rejection; and
3a. The agency has failed to prepare or revise the statement of estimated regulatory costs as required by paragraph (b); or
b. The challenge is to the agency's rejection under paragraph (b) of a lower cost regulatory alternative submitted under paragraph (a).
FPL has raised two SERC-related arguments which it contends require invalidation of the challenged provisions on the ground they violate Section 120.52(8)(f), Florida Statutes:
(a) that the rule imposes regulatory costs on FPL which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives; and (b) that the SERC was improperly prepared in violation of Section 120.541(1)(b) and (2)(c), Florida Statutes, because the Department did not adopt FPL's LCRA or provide a statement in the SERC of the reasons for its rejection, and the SERC fails to include a good faith estimate of the transactional costs likely to be incurred by individuals and entities, as required by
Section 120.541(2)(c), Florida Statutes. If the latter two SERC deficiencies were proven to be true, there would be a material failure by the Department to follow an applicable procedural requirement in violation of Section 120.52(8)(a), Florida Statutes, and not Section 120.52(8)(f), Florida Statutes, as alleged by FPL. See § 120.541(1)(b), Fla. Stat. ("[t]he failure of the agency to prepare or revise the [SERC] as provided in this paragraph is a material failure to follow the applicable rulemaking procedures or requirements set forth in this chapter"). However, neither the original Petition, the Pre- Hearing Stipulation, nor FPL's Proposed Final Order cite
Section 120.52(8)(a), Florida Statutes, as a statutory basis for invalidation of the challenged provisions.
In broad terms, a SERC is a statement prepared by an agency which considers the financial impact of the rules it adopts. The specific contents of a SERC are enumerated in Section 120.541(2)(a)-(f), Florida Statutes. Agencies are "encouraged to prepare a statement of estimated regulatory costs of the proposed rule prior to the adoption, amendment, or repeal of any rule other than an emergency rule." § 120.54(3)(b)1., Fla. Stat. They are required to prepare one, however, when a substantially affected person has submitted to the agency a bona fide written proposal for a lower cost regulatory alternative within the time limitations prescribed by law. § 120.541(1)(a),
Fla. Stat. Prior to adoption of a rule, the agency must advise the public that "any person who wishes to provide the agency with information regarding the [SERC], or to provide a proposal for a [LCRA] as provided by s. 120.541(1), must do so within 21 days after publication of the notice." § 120.54(3)(a)1., Fla. Stat. If a LCRA is submitted by a substantially affected person within the prescribed time period, and a SERC has been prepared either voluntarily by the agency or pursuant to a specific request, the agency is required to "revise its prior [SERC], and either adopt the alternative proposal or give a statement of the reasons for rejecting the alternative in favor of the rule."
§ 120.541(1)(b), Fla. Stat.
In construing this time limitation, however, it seems logical that once a SERC has been requested by a substantially affected person, or voluntarily prepared by the agency, a LCRA prepared by another person in the correct manner (by addressing cost issues) and submitted to the agency during the rule development phase should not be ignored or rejected simply because it was not filed a second time during the statutory time period. Here, even if the Department is correct that FCG's request for the preparation of a SERC on March 20, 2006, was deficient because it was not accompanied by a "bona fide" LCRA, the Department nonetheless voluntarily prepared a SERC, and a LCRA was filed (in the form of comments addressing cost issues)
by FPL on March 17 and April 28, 2006. Given this scenario, FPL did not waive its right to submit a LCRA and raise an allegation that a violation of Section 120.52(8)(f), Florida Statutes had occurred. The facts in this case differ from those presented in Florida Board of Medicine et al. v. Florida Academy of Cosmetic Surgery, Inc. et al., 808 So. 2d 243 (Fla. 1st DCA 2002).
There, the court held that where a LCRA had never been filed by any party (timely or otherwise), it was error for an administrative law judge to conclude from evidence presumably submitted at hearing that a lower cost alternative existed which would satisfy the statutory objectives, and thus a violation of Section 120.52(8)(g), Florida Statutes (1999), had occurred.
Id. at 258. The Department and Intervenors' reliance on that decision is misplaced.
For the reasons given in Findings of Fact 60 through 81, it is concluded that the Department did not violate Section 120.52(8)(f), Florida Statutes, by adopting a rule imposing regulatory costs on a person (FPL) that could be reduced by the adoption of a LCRA that substantially accomplishes the statutory objectives. FPL's proposal merely shifts the cost of compliance from FPL to other regulated utilities. Under this scenario, the Department would face a never-ending series of challenges by individual members of the regulated class that wish to shift the cost of CAIR compliance
to others. The relevant regulatory cost in this case is the cost imposed by the rule on all EGUs collectively, and not the cost on an individual EGU or company. Therefore, besides the impact on FPL, the Department had to consider the impacts of the proposed rule on all groups and associations. FPL did not provide the Department with a LCRA that would justify the rejection of the proposed rule.
In the parties' Pre-Hearing Stipulation, FPL failed to preserve the issue of whether the SERC was prepared in accordance with the requirements of Section 120.541, Florida Statutes. By doing so, it is precluded from raising that issue at this time. Heartland, supra.
Assuming arguendo that the issue has been preserved, the draft SERC, as later revised, nonetheless represents a good faith effort by the Department to estimate the economic impact of the proposed rule. The statute does not require that the SERC be prepared with absolute certainty or finite precision; rather it simply requires that a good faith effort be made to estimate the impact of the proposed rule. Here, the Department prepared a twenty-five page SERC which addresses all matters required by the statute, including "a statement of the reasons for rejecting [FPL's] alternative in favor of the proposed rule," and a good faith estimate of the transactional costs likely to be incurred by individuals and entities required to
comply with the rule. Joint Exhibits 3 and 7. While there may be minor errors in the SERC, they are not so substantial as to contravene the requirements of Section 120.541, Florida Statutes. Likewise, the fact that the revised SERC was not completed until just before the final hearing is not so material an error in procedure as to impair the fairness of the proceeding.
In summary, the proposed rule constitutes a valid exercise of delegated legislative authority and is determined to be valid.
Based on the foregoing Findings of Fact and Conclusions of Law, it is
ORDERED that the Petition challenging subparagraphs (3)(d)3.(i)(B-(D) and (5)(d)3.(i.)(B)-(D) in proposed rule 62-
296.470 is dismissed, and the proposed rule is determined to be a valid exercise of delegated legislative authority.
DONE AND ORDERED this 1st day of March, 2007, in Tallahassee, Leon County, Florida.
S
DONALD R. ALEXANDER
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 1st day of March, 2007.
ENDNOTES
1/ Except where otherwise noted, all references are to the 2006 version of the Florida Statutes.
2/ Except for one reference to paragraph (8)(e), the Petition provided no greater citation specificity than Section 120.52(8), Florida Statutes, as the primary ground for invalidating the challenged portions of the rule. See Petition, paragraph 47.
3/ Even if the Department's narrow view of standing is correct, it is assumed that FPL and Intervenors own and operate offices, buildings, and maintenance facilities, and like other customers, are consumers of power furnished by their own EGUs.
COPIES FURNISHED:
Daniel H. Thompson, Esquire Berger Singerman, P.A.
315 South Calhoun Street, Suite 712 Tallahassee, Florida 32301-1872
Gabriel E. Nieto, Esquire Berger Singerman, P.A.
200 South Biscayne Boulevard, Suite 1000 Miami, Florida 33131-2310
John T. Butler, Esquire
Florida Power and Light Company 700 Universe Boulevard
Jupiter, Florida 33408-0420
Gregory M. Munson, General Counsel Department of Environmental Protection 3900 Commonwealth Boulevard
Mail Station 35
Tallahassee, Florida 32399-3000
Jack Chisholm, Esquire
Department of Environmental Protection 3900 Commonwealth Boulevard
Mail Station 35
Tallahassee, Florida 32399-3007
Lawrence N. Curtin, Esquire Holland & Knight, LLP
Post Office Drawer 810 Tallahassee, Florida 32302-0810
David S. Dee, Esquire Young Van Assenderp, P.A. Post Office Box 1833
Tallahassee, Florida 32302-1833
F. Scott Boyd, Executive Director and General Counsel
Joint Administrative Procedures Committee Room 120, Holland Building
Tallahassee, Florida 32399-1300
Liz Cloud, Chief
Bureau of Laws and Administrative Code Department of State
R.A. Gray Building, Suite 101 Tallahassee, Florida 32399-0250
NOTICE OF RIGHT TO APPEAL
A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of appeal with the Clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.
| Issue Date | Document | Summary |
|---|---|---|
| Nov. 07, 2007 | Opinion | |
| Mar. 01, 2007 | DOAH Final Order | The proposed rule is not an invalid exercise of delegated legislative authority; the Statement of Estimated Regulatory Cost was prepared in a correct manner. |
