Case No. VFA-0591, 28 DOE ¶ 80,105

July 31, 2000

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Appeal

Name of Petitioner: Niagara Mohawk Power Corporation

Date of Filing: July 3, 2000

Case Number: VFA-0591

On July 3, 2000, Niagara Mohawk Power Corporation (NMPC) filed an Appeal from a determination the Energy Information Administration (EIA) of the Department of Energy (DOE) issued to it on June 1, 2000. In that determination, EIA released redacted versions of copies of Form EIA-867 submitted by certain firms.(1) NMPC had requested this information under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, as implemented by the DOE in 10 C.F.R. Part 1004. The FOIA requires that a federal agency generally release documents to the public upon request. The FOIA, however, lists nine exemptions that set forth the types of information that a federal agency may withhold at its discretion. 5 U.S.C. § 552(b); 10 C.F.R. § 1004.10(b).

I. Background

In a March 3, 1995 request for information, NMPC sought copies of Form EIA-867 that certain firms had filed and any predecessor forms filed by those same firms for any year prior to 1995. Request Letter dated March 3, 1995, from William J. Mertens, Swidler & Berlin, Chartered, Attorney for NMPC, to Freedom of Information Act Officer, DOE. On May 19, 1995, after EIA had failed to issue a determination within the regulatory deadline, NMPC filed suit in the United States District Court for the District of Columbia, where summary judgment was granted to the DOE and the interveners. Appeal Letter dated June 30, 2000, from William J. Mertens, Esq., Asbill, Junkin, Moffitt & Boss, Chtd., Counsel for NMPC, to Director, Office of Hearings and Appeals (OHA), DOE (Appeal Letter). Following NMPC’s appeal of the summary judgment order, the United States Court of Appeals for the District of Columbia Circuit granted the appeal and remanded the matter to the District Court for a determination on the merits. Niagara Mohawk Power Corp. v. Department of Energy, 169 F.3d. 16 (D.C. Cir. 1999). As a result of an mediation process at the District

Court, the parties agreed to stay the case until the completion of the administrative proceedings at DOE, specifically EIA’s issuance of a determination letter on the NMPC FOIA request and any subsequent appeal to the OHA by NMPC. Niagara Mohawk Power Corp. v. Department of Energy, Dkt. No. 95CV00952 (D.D.C. February 23, 2000). On June 1, 2000, EIA issued the determination letter releasing the redacted copies of the Form EIA- 867 to NMPC. Determination Letter dated June 1, 2000, from John Geidl, Director, Office of Coal, Nuclear, Electric, and Alternate Fuels, EIA, DOE, to William J. Mertens, Esq. Asbill, Junkin, Moffitt & Boss, Chtd., Counsel for NMPC (Determination Letter). NMPC then filed this Appeal.

In the June 1, 2000 determination, EIA withheld portions of Form EIA-867 submitted by Ellicottville Energy, Inc. (Laidlaw), General Mills, Inc. (General Mills), Oxbow Power of Tonawanda New York, Inc. (Oxbow), and Sithe Independence Station (Sithe) (collectively the submitters).(2) The four submitters involved in this Appeal all operate cogeneration plants. A cogeneration plant produces electricity for its own use and sells any extra electricity to customers, such as NMPC. In this case, the submitters are involved in manufacturing lumber and food products and in agriculture production. Sithe operates a cogeneration plant that supplies electricity and produces steam for a thermal host, i.e., a company which purchases the steam to operate its business.

In its determination, EIA rejected NMPC’s claim that the same or substantially similar information to that withheld is already in the public domain. Determination Letter at 1. EIA also determined that the withheld information is confidential because release of this information would cause competitive harm to the four submitters by revealing plant operational processes and costs of service and profit margins. The EIA states that releasing the information would put the submitters at a competitive disadvantage in contract renegotiations involving the sale of power to NMPC. Also, the EIA states that the submitters would be at a competitive disadvantage in their respective industries and as energy producers in direct competition with utilities such as NMPC. Id. at 2-3. In addition, EIA states that release of the information would have a chilling effect on its ability to obtain the information in the future. Id. at 3. Finally, EIA states that discretionary disclosure of this information would not be in the public interest. Id.

In its Appeal, NMPC argues that EIA’s withholding of the information on the grounds that release of the information would negatively impact its ability to obtain the information in the future is “conclusory” and “failed to heed the express holding of the Court of Appeals.” Appeal Letter at 3-4. Secondly, NMPC claims that the Court of Appeals found there is no actual competition between the submitters and NMPC. Id. at 4-5. Further, NMPC argues that even if actual competition exists, because the information is historical in nature, i.e., from 1995 and earlier, substantial competitive injury to the submitters is unlikely. Id. at 5. NMPC also reasserts that the information has already been released in the Qualifying Facility Monitoring Report which the submitters are required to submit to NMPC under New York law. It asserts that the data in this report and in EIA Form-867 are identical or equivalent and DOE has already conceded that the information was substantially identical. Id. NMPC also argues that the Report is not confidential. Id. at 8.

II. Analysis

Exemption 4 exempts from mandatory public disclosure "trade secrets and commercial or financial information obtained from a person and privileged or confidential." 5 U.S.C. § 552(b)(4); 10 C.F.R. § 1004.10(b)(4). In order to qualify under Exemption 4, a document must contain either (a) trade secrets or (b) information that is (1) "commercial" or "financial," (2) "obtained from a person," and (3) "privileged or confidential." National Parks & Conservation Ass'n v. Morton, 498 F.2d 765 (D.C. Cir. 1974) (National Parks). In National Parks, the United States Court of Appeals for the District of Columbia Circuit found that commercial or financial information submitted to the federal government under non-voluntary conditions is "confidential" for purposes of Exemption 4 if disclosure of the information is likely either (i) to impair the government's ability to obtain necessary information in the future or (ii) to cause substantial harm to the competitive position of the person from whom the information was obtained. Id. at 770; Critical Mass Energy Project v. NRC, 975 F.2d 871, 879 (D.C. Cir. 1992), cert. denied, 113 S. Ct. 1579 (1993) (Critical Mass). By contrast, information that is provided to an agency voluntarily is considered "confidential" if "it is of a kind that the provider would not customarily make available to the public." Critical Mass, 975 F.2d at 879. Because Form EIA-867 is a mandatory filing under the Federal Energy Administration Act of 1974 (P.L. 93-275), we find that the withheld information was “involuntarily” submitted to EIA. BP Exploration, Inc., 27 DOE ¶ 80,216 at 80,796 (1999); see William E. Logan, Jr., 27 DOE ¶ 80,198 (1999). Thus, as we have held previously, for this information to be properly withheld under Exemption 4, the National Parks test must be met.

Under National Parks, the first requirement for Exemption 4 protection is that the withheld information must be “commercial or financial.” Courts have held that these terms should be given their ordinary meanings and that records are commercial so long as the submitter has a “commercial interest” in them. Public Citizen Health Research Group v. FDA, 704 F.2d 1280, 1290 (D.C. Cir. 1983) (citing Washington Post Co. v. HHS, 690 F.2d 252, 266 (D.C. Cir. 1982). The specific information submitted on Form EIA-867 by Laidlaw, General Mills, Oxbow, and Sithe is their respective facility’s generator rating in kilowatts, fuel information, thermal and generation information, and electric generator information. This information is commercial information. Second, the information must be “obtained from a person.” “Person” refers to a wide range of entities, including corporate entities. Comstock Int’l, Inc. v. Export-Import Bank, 464 F. Supp. 804, 806 (D.D.C. 1979). As we stated above, all of the submitters of the requested forms are either corporate entities or partnerships and, therefore, meet this requirement.

Finally, to qualify for Exemption 4 protection under National Parks, information must also be “confidential.” Withheld information is “confidential” if it meets the test set out in National Parks. In this case, the withheld information would be considered “confidential” if release would either (a) cause substantial harm to the competitive position of submitters or (b) impair EIA’s ability to obtain the necessary information in the future. In reviewing whether release would cause substantial competitive harm we analyze two elements: 1) the submitters must face actual competition and 2) disclosure would likely cause substantial competitive injury. National Parks and Conservation Ass’n v. Kleppe, 547 F.2d 673, 679 (1976) (National Parks II).

The first question is whether the submitters face actual competition. We believe that the submitters have shown that they do face competition. However, they have employed different methods to demonstrate competition. Laidlaw has convinced us that release of the information would cause it competitive harm within its primary industry, the manufacturing of lumber and wood products. In contrast, the other submitters have shown that release of the information would cause competitive harm within their secondary industry, the sale of electric power, in which they are in direct competition with NMPC.

Laidlaw is a lumber company involved only secondarily in the electric industry. It is in direct competition with other entities engaged in the manufacturing of lumber and wood products other than furniture. Its competitors include Weyerhaeuser and Georgia Pacific. Finding that competition exists, we need to address whether the firm would face substantial competitive harm if the requested information were released. Laidlaw has provided sufficient information to show that release of the information would enable its competitors in the lumber industry to make accurate estimates of its energy consumption and, thereby, gain insight into its custom lumber drying operations. Letter dated March 17, 2000, from Craig M. Indyke, Esq., Read and Laniado, LLP, attorney for Laidlaw, to John Colligan, EIA. Release of the information would allow its competitors to discover its unique method of drying lumber and to replicate its methods. Laidlaw’s competitors should not be permitted to gain the advantage of its experience at little effort or expense. To do so would tend to discourage companies from developing better processes and products. Therefore, we believe that Laidlaw would suffer substantial competitive harm within the lumber industry were the information on Form EIA-867 released to NMPC.

Both Sithe and Oxbow have argued that disclosure of the requested information would cause them competitive harm in electricity sales made in competition with NMPC and other suppliers. With the promulgation of Rule 888 and 889, the Federal Energy Regulatory Commission (FERC) opened access to electric transmission lines. Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, 61 Fed. Reg 21539 (1996); Open Access Same-Time Information System (formerly Real-Time Information Networks) and Standards of Conduct, 61 Fed. Reg. 21737 (1996). The new structure of the wholesale market for power in New York State allows for market-based rates for sales of energy through a competitive bid-based market. Comment Letter at 2, dated March 21, 2000, from Curtis P. Lu, Latham & Watkins, Attorney for Sithe/Independence Power Partners, L.P. , to Robert Schnapp, Director, Electric Power Division, EIA, DOE (Sithe Comment Letter); Comment Letter at 1, dated March 7, 2000, from David W. Clark, Counsel, Oxbow, to Robert Schnapp, Director, Electric Power Division, EIA, DOE. According to Sithe, market participants in this highly competitive market can submit daily bids to the New York Independent System Operator (NYISO) to sell energy at market-based prices. Sithe Comment Letter. Thus, success for market participants hinges on who can offer the most competitive prices. Id. at 4. Again, finding competition in this industry, we must ascertain whether release of the withheld information would cause substantial competitive harm.

Release of the requested information would allow NMPC and other competitors in the energy market to determine the submitters’ costs of energy production and make an accurate estimate of their operating margins. With this information, a competitor of Sithe or Oxbow could accurately estimate their bids and thereby have a significant competitive advantage over each firm in future bids. Id. Neither Laidlaw nor General Mills made this specific argument. However, since the spot market in New York is open to any firm that generates electricity, we believe this argument is equally applicable to them.

We have also considered the following three arguments that NMPC has raised in its Appeal. NMPC’s first argument concerns EIA’s determination that disclosure of this information would put the four submitters at a competitive disadvantage when they renegotiate contracts with NMPC. EIA determined that disclosure of the requested information would reveal the submitters’ costs of production and allow NMPC to calculate accurate estimates of their operating margins. EIA found this information would give NMPC an advantage in its contract renegotiations with the submitters since NMPC would have confidential information normally not known to an adversary in a negotiation. However, NMPC argues that the potential risk of competitive harm that might result was too remote in the occasional renegotiation of long-term contracts. As the court in Niagara Mohawk pointed out, National Parks II looked at the long-term nature of the contracts involved in that case--30, 20, and 5 years--and determined that there would not be substantial commercial harm in releasing the information. National Parks II, 547 F.2d at 681 n.28. Similarly, the contracts involved here are of long duration. We contacted all of the submitters and determined that their electricity purchase contracts with NMPC are 15 and 30 years in length.(3) We, therefore, do not agree with this aspect of EIA’s determination.

We must also address NMPC’s argument that release of the historical data requested in the case will not cause harm. Appeal Letter at 5. We disagree. The information contained in the copies of Form EIA-867 that the four submitters have filed is only approximately five years old and does not change significantly from year to year. Memorandum of meeting held July 11, 2000, between Janet R. H. Fishman, Attorney-Examiner, OHA, Richard A. Cronin, Assistant Director, OHA, and William M. Schwartz, Attorney, OHA, and John C. Geidl, Director, Office of Coal, Nuclear, Electric and Alternate Fuels, EIA, Robert M. Schnapp, Director, Electric Power Division, EIA, and John G. Colligan, EIA. Therefore, disclosing this five to eight year old information to NMPC would in essence be disclosing current information to NMPC.

Finally, NMPC argues that the requested information is already in the public domain, because the same information is collected periodically on the New York Public Service Commission (PSC) Qualifying Facility Monitoring Report (QFM). EIA determined that the information is not the same and further, that the QFM Report is not public information. We agree with EIA that the QFM Report is not public. Each Qualifying Facility–in this case, Laidlaw, General Mills, Oxbow, and Sithe-- sends a copy of the form to the relevant electric utility--in this case, NMPC. The Report is not filed with the PSC nor is it made public in any way. Simply because NMPC may have the ability to make the information public does not mean that the information is public. As Laidlaw stated in its comments, it is highly unlikely that one of its competitors would approach NMPC for a copy of the QFM Report, and even more unlikely that NMPC would provide it to the competitor. Comment Letter dated July 17, 2000, to Director, OHA, DOE, from Craig M. Indyke, Read and Laniado, LLP, Attorney for Laidlaw. Because we find that the QFM Report is not in the public domain, we find that confidentiality of the information in the report has not been waived. We need not address whether the information contained in it is the same as that on the requested EIA form.(4)

III. Conclusion

EIA determined that release of the requested information would put the submitters at a substantial competitive disadvantage. We agree. The submitters would be competitively harmed either in their primary industry or in direct competition with NMPC and others for the sale of electricity in the deregulated energy market in New York State. However, we do not agree with EIA that competitive harm may also occur in the renegotiation of contracts between the submitters and NMPC. Finally, despite NMPC’s assertions, we have determined that the requested information, though at least five years old, reflects current data and that it is not already in the public domain. Therefore, we find that the information EIA withheld from NMPC is exempt from mandatory disclosure under Exemption 4. In cases involving material determined to be exempt from mandatory disclosure under Exemption 4, we do not make the usual inquiry into whether release of the material would be in the public interest. Disclosure of confidential information that an agency can withhold pursuant to Exemption 4 would constitute a violation of the Trade Secrets Act, 18 U.S.C. § 1905, and is therefore prohibited. See e.g., Vladeck, Waldmas, Elias & Engelhard, P.C., 27 DOE ¶ 80,230 at 80,835 (1999). Accordingly, we may not consider whether the public interest warrants discretionary release of the information properly withheld under Exemption 4. Consequently, we uphold EIA’s June 1 determination and shall deny the NMPC Appeal.

It Is Therefore Ordered That:

(1) The Freedom of Information Act Appeal filed by Niagara Mohawk Power Corporation, on July 3, 2000, Case No. VFA-0591, is hereby denied.

(2) This is a final Order of the Department of Energy from which any aggrieved party may seek judicial review pursuant to 5 U.S.C. § 552(a)(4)(B). Judicial review may be sought in the district in which the requester resides or has a principal place of business, or in which the agency records are situated, or in the District of Columbia.

George B. Breznay

Director

Office of Hearings and Appeals

Date: July 31, 2000

(1)NMPC originally requested copies of all the Forms EIA-867, titled “Annual Nonutility Power Producer Reports,” submitted by any facility listing NMPC “as the electric utility which serves or will serve the facility, or as a utility to which the facility has delivered or will deliver electricity.” Request Letter dated March 3, 1995, from William J. Mertens, Swidler & Berlin, Chartered, Attorney for NMPC, to Freedom of Information Act Officer, DOE. By the time of this Appeal, NMPC was requesting copies of the Form EIA-867 submitted by only four firms.

(2)We find these entities are either corporations or partnerships. At least two of these companies have had a name change since NMPC filed its original request. The names we have listed are those on Form EIA-867. Ellicottville Energy, Inc., was sold to Laidlaw Energy & Environmental, Inc. Sithe is referred to in many different ways in the various filings in this case. We will refer to it as Sithe.

(3)Sithe’s contract, although of long duration, has a thirty day written notice of cancellation clause. Sithe Comment Letter at 2.

(4)Since we have found that the requested information can be withheld under the first prong of the National Parks test, whether its disclosure would cause competitive harm, we need not address the second prong of the National Parks test, whether release of the information will impair the government’s ability to acquire similar information in the future.