## Facts

- Public Service Company of Indiana (PSI), a regulated electric utility, filed with the Federal Energy Regulatory Commission (FERC) seeking authority to make wholesale sales of up to 450 megawatts of power at market-based rates.
- PSI’s proposal included a pricing limit: the market-based rate would be capped at the purchasing utility’s avoided cost (the buyer would not pay more than its cost of the next-best supply alternative).
- UtilCo Group, Inc. (UtilCo) opposed PSI’s request and challenged the legality of approving a market-based wholesale rate for a regulated utility when the ceiling was tied to the buyer’s avoided cost rather than derived from the seller’s cost-of-service data.
- After FERC granted PSI’s request, UtilCo sought an evidentiary hearing, arguing that FERC exceeded its authority under Federal Power Act (FPA) §§ 205 and 206 by accepting a wholesale rate structure not grounded in the seller’s costs.

## Issues

1. Whether, under FPA §§ 205 and 206, FERC may approve as “just and reasonable” a market-based wholesale rate filed by a regulated public utility when the rate is capped at the buyer’s avoided cost rather than established through traditional seller cost-of-service measures.
2. Whether UtilCo was entitled to an evidentiary hearing on its challenge to PSI’s proposed rate structure.

## Decision

- FERC approved PSI’s request to sell up to 450 megawatts of wholesale power at market-based rates subject to a cap tied to the buyer’s avoided cost.
- FERC rejected UtilCo’s argument that a just-and-reasonable wholesale rate determination under the FPA must be based only on a range of the seller’s costs.
- FERC treated the avoided-cost cap as a limiting condition that restrains the price a buyer could be required to pay.
- FERC denied UtilCo’s request for an evidentiary hearing, resolving the challenge on the written record.

## Legal Principles

- Under FPA §§ 205–206, the “just and reasonable” standard does not require a single ratemaking method in every case.
- FERC may accept a market-based wholesale rate for a regulated utility when the Commission concludes the resulting rate level satisfies the FPA standard.
- A cap tied to the buyer’s avoided cost can function as a ceiling that limits wholesale prices and can be considered in FERC’s just-and-reasonable analysis.
- An evidentiary hearing is not required where the objection presents a legal challenge that can be decided on the existing record and does not raise material disputed facts.

## Conclusion

Public Service Commission of Indiana, 51 FERC ¶ 61,367 (1990), holds that FERC may approve a regulated utility’s market-based wholesale rate capped at the purchaser’s avoided cost as just and reasonable under FPA §§ 205–206, and it may deny a request for hearing when the objections do not require fact finding beyond the written submissions.
