Source: http://supreme.justia.com/cases/federal/us/461/402/case.html
Timestamp: 2014-03-10 04:25:51
Document Index: 686855701

Matched Legal Cases: ['§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 210', '§ 824', '§ 210', '§ 824', '§ 210', '§ 824', '§ 292', '§ 292']

Amer. Paper Instit. v. AEP Svc. Corp. - 461 U.S. 402 (1983) :: Justia US Supreme Court Center
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Amer. Paper Instit. v. AEP Svc. Corp. - 461 U.S. 402 (1983)
Case	U.S. Supreme CourtAmer. Paper Instit. v. AEP Svc. Corp., 461 U.S. 402 (1983)American Paper Institute, Inc. v.American Electric Power Service Corp.No. 82-34Argued March 22, 1983Decided May 16, 1983*461 U.S. 402CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
Section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) was designed to encourage the development of cogeneration facilities and small power production facilities and to reduce the demand for fossil fuels. Section 210(a) directs the Federal Energy Regulatory Commission (FERC) to prescribe rules requiring electric utilities to deal with qualifying cogeneration and small power facilities. With respect to utilities' purchases of electricity from such facilities, § 210(b) provides that rates set by FERC "shall be just and reasonable to the electric consumers of the electric utility and in the public interest," shall not discriminate against qualified cogeneration and small power facilities, and shall not exceed "the incremental cost to the electric utility of alternative electric energy." Following rulemaking proceedings, FERC promulgated a rule requiring utilities to purchase electric energy from a qualifying facility at a rate equal to the utility's "full avoided cost," i.e., the cost to the utility which, but for the purchase from the qualifying facility, would be incurred by the utility in generating the electricity itself or purchasing the electricity from another source. FERC also promulgated a rule requiring utilities to make such physical interconnections with cogenerators and small power producers as are necessary to effect purchases or sales of electricity authorized by PURPA. Upon review, the Court of Appeals vacated both rules, holding that FERC had not adequately explained its adoption of the full-avoided-cost rule, and that it exceeded its statutory authority in promulgating the interconnection rule, in view of § 210(e)(3) of PURPA, which provides that "[n]o qualifying small power production facility or qualifying cogeneration facility may be exempted under this subsection from" specified provisions of the Federal Power Act (FPA) which require FERC to afford an opportunity for a hearing before ordering an interconnection.
1. FERC did not act arbitrarily or capriciously in promulgating the full-avoided-cost rule, which is the maximum rate permissible under Page 461 U. S. 403 § 210(b). Such rule plainly satisfies the requirement of § 210(b) that the rate not discriminate against qualifying cogeneration and small power production facilities. FERC also adequately explained why the rate is "just and reasonable to the electric consumers of the electric utility and in the public interest." Both the statutory language and the legislative history confirm that Congress did not intend to impose traditional ratemaking concepts on sales by qualifying facilities to utilities. And although FERC recognized that the rule would not directly provide any rate savings to consumers, it reasonably deemed it more important at this time that the rule would provide a significant incentive for the development of cogeneration and small power production, and that ratepayers and the Nation as a whole will benefit from the decreased reliance on scarce fossil fuels and the more efficient use of energy. Pp. 461 U. S. 412-418.
2. Nor did FERC exceed its authority in promulgating the interconnection rule. The authority granted by § 210(a) to promulgate such rules as are necessary to require utilities to deal with qualifying facilities plainly encompasses the power to promulgate rules requiring utilities to make physical connections with such facilities, and FERC reasonably interpreted § 210(e)(3) as forbidding it to exempt qualifying facilities from being the "target" of interconnection applications by other facilities under the FPA, but not as forbidding it to grant qualifying facilities the right to obtain interconnections under PURPA without applying for an order under the FPA. Such interpretation is supported by the purposes of PURPA and the statutory scheme created by both Acts. Pp. 461 U. S. 418-423.
219 U.S.App.D.C. 1, 675 F.2d 1226, reversed and remanded.
MARSHALL, J., delivered the opinion of the Court, in which all other Members joined, except POWELL, J., who took no part in the consideration or decision of the cases. Page 461 U. S. 404
This case concerns two rules promulgated by the Federal Energy Regulatory Commission (FERC) pursuant to § 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA), 92 Stat. 3144, as amended, 16 U.S.C. § 824a-3 (1976 ed., Supp. V). The first rule requires electric utilities to purchase electric energy from cogenerators and small power producers at a rate equal to the purchasing utility's full avoided cost, i.e., the cost the utility would have incurred had it generated the electricity itself or purchased the electricity from another source. The second rule requires utilities to make such interconnections with cogenerators and small power producers as are necessary to effect purchases or sales of electricity authorized by PURPA. The Court of Appeals held that FERC had not adequately explained its adoption of the full-avoided-cost rule, and that it exceeded its statutory authority in promulgating the interconnection rule. 219 U.S.App.D.C. 1, 675 F.2d 1226 (1982). We reverse.
Section 210 of PURPA was designed to encourage the development of cogeneration and small power production facilities. [Footnote 1] Page 461 U. S. 405 As we noted in FERC v. Mississippi, 456 U. S. 742, 456 U. S. 750 (1982) (footnote omitted), "Congress believed that increased use of these sources of energy would reduce the demand for traditional fossil fuels," and it recognized that electric utilities had traditionally been "reluctant to purchase power from, and to sell power to, the nontraditional facilities." Accordingly, Congress directed FERC to prescribe, within one year of the statute's enactment, rules requiring electric utilities to deal with qualifying cogeneration and small power production facilities. PURPA § 210(a), 16 U.S.C. § 824a-3(a) (1976 ed., Supp. V). With respect to the purchase of electricity from cogeneration and small power production facilities, Congress provided that the rate to be set by the Commission
"(1) shall be just and reasonable to the electric consumers of the electric utility and in the public interest, and"
"(2) shall not discriminate against qualifying cogenerators or qualifying small power producers."
"No such rule prescribed under subsection (a) of this section shall provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy."
PURPA § 210(b), 16 U.S.C. § 824a-3(b) (1976 ed., Supp. V). Following rulemaking proceedings, FERC promulgated regulations governing transactions between utilities and those cogeneration and small power production facilities, designated as "qualifying facilities," 18 CFR §§ 292.201-292.207 Page 461 U. S. 406 (1982), that may invoke the provisions of PURPA to sell electricity to and purchase electricity from utilities.
The first regulation at issue in this case, 18 CFR § 292.304(b)(2) (1982), requires a utility to purchase electricity from a qualifying facility at a rate equal to the utility's full avoided cost. The utility's full avoided cost is
"the cost to the electric utility of the electric energy which, but for the purchase from such cogenerator or small power producer, such utility would generate or purchase from another so