Task: songer_initiate

What follows is an opinion from a United States Court of Appeals. Your task is to identify what party initiated the appeal. For cases with cross appeals or multiple docket numbers, if the opinion does not explicitly indicate which appeal was filed first, assumes that the first litigant listed as the "appellant" or "petitioner" was the first to file the appeal. In federal habeas corpus petitions, consider the prisoner to be the plaintiff.

PER CURIAM:
We consider eighteen consolidated petitions for review of two orders of the Federal Energy Regulatory Commission (FERC or the Commission). In the orders under review the Commission held that the four operating companies of the Middle South Utilities (MSU) system must share the costs of MSU’s investment in nuclear energy in proportion to their relative demand for energy generated by the system as a whole. The Commission implemented this scheme by reallocating responsibility for investment costs associated with the catastrophically uneconomical Grand Gulf I nuclear plant. The parties attack both the Commission’s jurisdiction and the rationality of its decision. Although the Commission’s allocation of nuclear investment costs is subject to reasonable dispute, we do not think such criticisms warrant reversal of FERC’s orders. We therefore affirm.
I. Background
The controversy facing the court today stems from the pattern of power generation investment cost sharing practiced by Middle South Utilities and its operating companies. In order to address fully the proper allocation of the costs of nuclear power generation among those companies, we review MSU’s structure, the history of its involvement in nuclear power generation, and the record of the proceedings below.
A. The Middle South System,
1. Corporate structure. Middle South Utilities, Inc. is a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA). 15 U.S.C. § 79 et seq. (1982). It owns outright four utility operating companies: Louisiana Power & Light Co. (LP & L), New Orleans Public Service, Inc. (NOPSI), Arkansas Power & Light Co. (AP & L), and Mississippi Power & Light Co. (MP & L). See Middle South Energy, Inc., 26 FERC ¶ 63,044, 65,098 (1984). The operating companies sell electricity, both wholesale and retail, in the states of Louisiana, Arkansas, Missouri, and Mississippi.
Although each operating company has a separate board of directors, the sole stockholder, MSU, selects each director. In addition, the various companies do have common or overlapping officers and directors. The Chairman and Chief Executive Officer (CEO) of MSU is a member of the board of each operating company and the CEOs of the operating companies are members of the board of MSU. Other MSU board members are also board members of individual operating companies. Middle South Services, Inc., 30 FERC ¶ 63,030, 65,142 (Docket No. ER82-463-000) (ALJ Head).
Transactions among the various operating companies are governed by a System Agreement. Over its history, MSU has filed three successive System Agreements — in 1951, 1973, and 1982. The Commission scrutinizes the System Agreement and modifies it when necessary. See, e.g., Middle South Services, Inc., 16 FERC ¶ 61,101 (1981) (modifying the 1973 System Agreement), aff'd, Louisiana Public Service Commission v. FERC, 688 F.2d 357 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 343 (1983). Section 3.01 of the Agreement states the system’s general goal of operating as a coherent unit:
The purpose of this Agreement is to provide the contractual basis for the continued planning, construction, and operation of the electric generation * * * facilities of the Companies in such a manner as to achieve economies consistent with the highest practicable reliability of service * * *. This agreement also provides a basis for equalizing among the Companies any imbalance of cost associated with the construction, ownership and operation of such facilities as are used for the mutual benefit of all the Companies.
483-R. 7117, VII Joint Appendix (JA) 1569. In light of this language, Administrative Law Judge (ALJ) Head found that the MSU system has sought to coordinate the addition of operating capacity by each individual operating company while achieving the greatest economies of scale. As he observed:
The System Agreements * * * clearly permit and encourage, for efficiency, reliability, and other economies of scale, that the individual companies from time to time build larger facilities than are necessary to meet their own native load, to benefit all the generating companies by having lower costs and greater reliabili- ^ ^ ^
30 FERC at 65,142.
All three System Agreements have assigned the task of coordinating the planning of new generating capacity to a systemwide Operating Committee. The CEO of each operating company designates one member of the committee, as does MSU. The members representing the operating companies control 80% of the votes on the committee, apportioned according to each individual company’s share of the system’s investment in generating capacity. The representative of MSU votes the remaining 20%. Under Section 5.04 of the System Agreement, the Operating Committee can now take action on the basis of a bare majority. 483-R. 7129, VII JA 1581.
2. Investment cost sharing. As ALJ Liebman noted, the MSU system planning approach to new generating capacity inevitably results in certain operating companies having less generating capacity than do others for varying periods of time. See 26 FERC at 65,098 (Docket No. ER82-616000. If a company does not have enough capacity to meet the needs of its consumers, the deficient operating company can always draw on the excess capacity of the other companies on the system. This system also benefits those companies that have built more capacity than necessary to meet current demand. Such companies generally find willing buyers of their surplus among the other companies on the system.
Under the system planning approach, it is inevitable that an operating company will, from time to time, provide a proportionate share of the system’s investment in generating capacity that is more or less than its proportionate demand for the system’s energy. If a company’s share of the system’s generating capacity is greater than its share of the energy actually generated and distributed by the system as a whole, the company is deemed to be “long.” If the company’s share of the system’s generating capacity is less than its percentage of the system’s energy, the company is deemed “short.” 26 FERC at 65,099.
Since 1951 the MSU system has sought to iron out the inequities that would otherwise result where some companies were long while other companies were short through a system of “equalization payments.” Prior to 1973 each “short” company made a payment to the “long” companies based on a fixed dollar amount per kilowatt of capacity that the company was short. In 1973 the System Agreement was amended to provide for capacity equalization payments calculated under the “participation unit” formula, a formula that based payments on the ownership costs of the latest unit constructed by the “long” company. See id.; see also 30 FERC at 65,122-23.
Importantly, this new system did not call for equalization payments based on the relative number of dollars each company had invested in generating capacity. Instead, the relative number of kilowatts of generating capacity owned by each company formed the basis for the payments. Because kilowatts can vary in cost, the system potentially perpetuated the operating companies’ relatively unequal investment in generating capacity.
For over twenty-five years, however, the system largely avoided this potential inequity. Notwithstanding its limitations, the equalization payment approach managed to produce the effect of roughly equalizing the cost of investing in new capacity from the 1950’s through the 1970’s. During the years in which the 1951 System Agreement was in force the cost of creating such capacity was relatively uniform and relatively constant. See 616-R. 1332-33, I JA 140-41; 30 FERC at 65,168. As a consequence, the System Agreement’s allocation of equalization payments based on a constant dollar per kilowatt of short capacity served to equalize investment costs. Although in the 1970’s the cost of new units began to exceed that of older facilities by a substantial margin, the 1973 System Agreement balanced this development by basing equalization payments on the costs of the newest (and more expensive) units of the “long” companies. 26 FERC at 65,-100.
3. The shift to nuclear energy and its consequences. In the 1950’s and 1960’s the MSU system tended to add new generating units in the southern part of the system to take advantage of cheap oil and gas reserves in Louisiana. See 26 FERC at 65,100; 30 FERC at 65,143. In the late 1960’s, however, the system began a program of adding coal and nuclear generating capacity, 30 FERC at 65,144, that eventually resulted in the collapse of the investment equalization program.
AP & L was the first operating company to make such an investment in nuclear power. AP & L had historically been both a short company and one with insufficient capacity to meet the requirements of its customers. 30 FERC at 65,143. Moreover, AP & L had been losing its long-term gas contracts while Louisiana and Mississippi continued to have an adequate supply of gas and oil. 26 FERC at 65,101. In December 1974 AP & L brought on line MSU’s first nuclear plant, Arkansas Nuclear One (ANO) Unit 1.
Although ANO l’s capacity was substantially more expensive than that of non-nuclear generating units built at the time, 26 FERC at 65,100-01, the lower fuel costs of a nuclear unit made the total generation costs of ANO 1 comparable to those of other plants brought on line in the 1970’s. Thus it is fair to say that the basic system of roughly equalizing the costs and benefits derived from the system’s investment in new capacity remained intact.
The picture changed radically with the development of two new nuclear units — the Waterford 3 unit (assigned to LP & L) and Grand Gulf 1 (initially assigned to MP & L). Grand Gulf was initially projected to cost $1.2 billion for two generating units. Regulatory delays, additional construction requirements, and severe inflation ran up Grand Gulf costs to in excess of $3 billion for one unit. Similar cost over-runs marred the construction of Waterford 3. See Middle South Energy, Inc. and Middle South Services, Inc., 31 FERC ¶ 61,305, 61,654 (1985). These units produce the most expensive energy on the MSU system. Measured in dollars per kilowatt of generating capacity, the new units were five times costlier than the ANO units installed by AP & L. Most important, although these two plants have been estimated to represent over 70% of the production costs of the MSU system, they apparently will produce only 13% of the electricity used on the system. 30 FERC at 65,121.
Under these conditions, continued application of a capacity equalization scheme that only sought to equalize kilowatts could no longer come close to equalizing investment dollars. Any operating company saddled with responsibility for Waterford 3 and/or Grand Gulf would likely find itself paying far more per kilowatt of capacity than would an operating company that was free of such a burden. 26 FERC at 65,100.
It is true that MSU filed a new System Agreement in 1982 altering its previous equalization scheme. Unlike the 1973 Agreement, which had pegged equalization payments to the cost of the long company’s most recent generating addition, the 1982 Agreement provided for equalization payments based on the long company’s “intermediate” (ie., oil and gas) units. 483-R. 7137-50, VII JA 1589-96. This change reduced the burden on any company that might be both short and have substantial responsibility for the new nuclear plants. But, as discussed below, this change did not eliminate the major inequities that nuclear power introduced to the MSU system.
4. The Grand Gulf plant. The Grand Gulf project was initiated by MSU to meet the then projected demand for electricity by the system as a whole. 26 FERC at 65,101-02. By the late 1970’s, however, it became clear that projected demand would fall well short of previous expectations. Nonetheless, MSU continued to build Grand Gulf 1 on the assumption that the overall cost per kilowatt hour would be less than that of alternative energy sources. 26 FERC at 65,102.
Initially the plant had been assigned to MP & L. It soon became apparent, however, that MP & L did not have the resources to finance the construction of the plant. As a consequence, MSU made a system decision to form Middle South Energy (MSE) in 1974 as a vehicle for financing Grand Gulf. MSE acquired full title to Grand Gulf. In June of 1974 all four Middle South operating companies entered into an “Availability Agreement” under which each operating company put its credit behind Grand Gulf.
Notwithstanding this initial agreement, at the time MSE was first formed no clear plan existed to allocate responsibility for Grand Gulf’s capacity to each of the companies. Over the years various allocation plans were put forward, ultimately resulting in the Unit Power Sales Agreement (UPSA) at issue in this case.
At first it was contemplated that MSE would become a party to the System Agreement. Under this plan all of Grand Gulf would be a “participation unit” and responsibility for the plant’s capacity would shift among the operating companies to the degree they were short. 616-R. 4122-23, II JA 505.
In 1979 MSU officials, having come to the conclusion that a fixed allocation of capacity was preferable to a scheme of shifting responsibilities, recommended a plan that would have allocated a share of Grand Gulf capacity to all of the operating companies. But by early 1980 the MSU officers were moving toward a scheme absolving AP & L of all responsibility for Grand Gulf. In July of 1980 the CEOs of the MSU operating companies signed a Memorandum of Understanding, freeing AP & 1/ of all responsibility for Grand Gulf. Although this Memorandum was never submitted to the Coordinating Committee, and therefore never became final, its basic terms were set forth in a “Reallocation Agreement” executed in July 1981. 616-R. 3275,1 JA 268. Under the Reallocation Agreement AP & L assigned its entitlement to purchase Grand Gulf power to the other companies. In addition, NOPSI, LP & L, and MP & L agreed to indemnify AP & L for any obligation it might incur to MSE’s creditors. The Reallocation Agreement thus relieved AP & L of any responsibility for Grand Gulf capacity costs and provided the basis for the Unit Power Sales Agreement. 26 FERC at 65,103.
The Unit Power Sales Agreement was executed on June 10,1982. Although all of the operating companies are signatories to the UPSA, it only provides for sale of Grand Gulf capacity and energy by MSE to three of the operating companies: LP & L, MP & L, and NOPSI, but not to AP & L. 26 FERC at 65,095.
B. The Proceedings Below
In April 1982 MSU filed with the Commission the 1982 System Agreement, which set the general rules governing transactions between the operating companies, including capacity equalization payments and the rates governing the exchange of energy between the operating companies. FERC set the proceeding for hearing before AU Head. In June 1982 MSU filed the Unit Power Sales Agreement with the Commission, governing the sales of Grand Gulf capacity and energy by MSE to the four operating companies. This proceeding was set for hearing before AU Liebman. AU Liebman issued his opinion on February 3, 1984, Middle South Energy, Inc., 26 FERC 1163,044 (1984), and AU Head issued his opinion a year later, on February 4, 1985. Middle South Services, Inc., 30 FERC ¶ 63,030 (1985). Both decisions touched on the allocation of Grand Gulf Power, and FERC reviewed both decisions in an opinion issued June 13,1985. Middle South Energy, Inc. and Middle South Services, Inc., 31 FERC ¶ 61,305 (1985). It revisited the issue following petitions for rehearing in an opinion issued September 28, 1985. Middle South Energy, Inc. and Middle South Services, Inc., 32 FERC ¶ 61,425 (1985).
1. ALJ Liebman’s decision in the UPSA case (ER82-616). The principal issue in ER82-616 was whether the UPSA’s proposed allocation of Grand Gulf investment costs was reasonable and, if not, how such costs should be allocated. As a threshold matter, however, AU Liebman rejected a series of arguments suggesting that FERC did not have jurisdiction or statutory authority to amend this aspect of the UPSA.
Having found jurisdiction, AU Liebman found that the UPSA was “unduly discriminatory” under Section 206(a) of the Federal Power Act, 16 U.S.C. § 824e(a) (1982), because it failed to allocate any portion of Grand Gulf’s capacity costs to AP & L. He based this decision on his view of the MSU system as a highly integrated operation that made critical decisions — such as the decision to move into nuclear power — as a unit. Under that view AU Liebman thought it only fair that AP & L pay its share of the company’s decision to build nuclear capacity. Having rejected the UPSA’s allocation of Grand Gulf costs, AU Liebman was faced with three alternatives:
(1) Making Grand Gulf a participation unit, with floating responsibility among the short(er) companies.
(2) Allocating responsibility for Grand Gulf capacity proportionate to each operating company’s relative share of system demand, as fixed in 1982.
(3) Allocating responsibility for Grand Gulf such that each operating company bore a share of the cost of all the nuclear units on the MSU system proportionate to that company’s relative share of system demand, as fixed in 1982.
26 FERC at 65,109.
AU Liebman chose the last proposal. As the Commission noted, this approach did not merely allocate the cost of Grand Gulf. By including the total system investment in nuclear power in his formula, AU Liebman effectively reallocated the costs of all nuclear capacity on the MSU system. 31 FERC at 61,633.
AU Liebman justified his exclusive focus on nuclear capacity costs — rather than on equalizing the costs of all capacity investment or, even more sweeping, equalizing all generating costs — by claiming that the differences among non-nuclear base load generation costs were minor eompared to the cost differences among the nuclear generating facilities. 26 FERC at 65,110. He suggested that even under his proposal AP & L would still have the low- total generation costs on the system, at 65,119. He justified his decision to reallocate costs of Grand Gulf primarily by reference to the fact that the UPSA perpetuated discrimination caused by the timing of nuclear units by forcing the Louisiana and Mississippi ratepayers to pay about four times more for nuclear capacity than the Arkansas ratepayers would pay for their nuclear kilowatts. Id. at 65,107.
2. ALJ Head’s decision in the System Agreement case (ER82-483). The principal issue in the System Agreement proceeding was whether FERC should approve that Agreement as filed or whether it should equalize all or part of the production costs on the system. 30 FERC at 65,120. AU Head also considered a series of arguments militating against FERC jurisdiction over the reallocation of Grand Gulf costs and rejected them.
Having found that FERC had the authority to reallocate production costs, AU Head faced the following alternatives:
(1) Adoption of the System Agreement as filed. This would entail allocating none of the Grand Gulf costs to AP & L and only equalizing the costs of capacity between “long” and “short” companies, with equalization payments pegged to the cost of the long companies’ oil and gas investment costs.
(2) Equalization of production costs. The basic concept, presented by the Louisiana Public Service Commission, was to allocate responsibility for a share of all production costs on the MSU system proportionate to each company’s share of the system’s total load.
(3) Making Grand Gulf a participation unit. This proposal would allocate responsibility for Grand Gulf capacity to each operating company to the degree that the company in question was “short.” Under this scheme responsibility for Grand Gulf capacity would shift over time.
AU Head rejected all of these proposals. He rejected the concept of making Grand Gulf 1 a participation unit primarily because it would allow long companies (e.g., MP & L) to avoid completely the high front-end costs associated with that plant. 30 FERC at 65,166-67. He rejected the equalization proposals on the ground that overall cost equalization would be inconsistent with the general “pattern of autonomy * * * particularly as to * * * specific plant site locations, fuel and financing” that he found characterized the operating companies in the MSU system. Id. at 65,168.
AU Head found support for his finding of a “pattern of autonomy” in two circumstances. First, he stressed that the historic practice in the MSU system was to equalize only excess capacity. Id. at 65,167. Second, he insisted that “generation additions in almost every instance (except for Grand Gulf) were made primarily to satisfy individual company needs.” Id. at 65,168.
AU Head, however, found that Grand Gulf constituted an “anomaly” in the MSU system:
Grand Gulf from its inception was planned, presented to the licensing authorities and constructed as a system plant not only to serve the needs of MP & L but to serve the needs of all the operating companies on the system.
30 FERC at 65,170.
He therefore deemed it appropriate to reject the System Agreement as filed and to allocate the costs of the Grand Gulf investment among all of the operating companies. Unlike AU Liebman, however, he held that this allocation should fluctuate from year to year to track each company’s relative demand for the system’s energy. 30 FERC at 65,172.
3. FERC’s initial decision. In Order No. 234 the Commission summarily affirmed both AUs on the threshold issue of its own jurisdiction to amend the Sales Agreement and the System Agreement. 31 FERC at 61,643-46. On the merits, the Commission affirmed both AUs’ findings that MSU constituted an “integrated electric system.” 31 FERC at 61,645. The Commission, however, specifically rejected AU Head’s finding that the MSU system displayed a “pattern of autonomy” with regard to the planning and construction of generating units. Id.
The Commission conceded that MSU’s system of overlapping officers and directors and the representation of the operating companies on the System Operating Committee gave the operating companies substantial influence in the development of the system’s plans. Id. at 61,646. FERC further observed that the individual companies used their influence to seek the addition of generating units that met their particular needs, and that Section 4.01 of the System Agreement made each operating company responsible for financing the ownership or purchase of the generating capacity necessary to service its customers. Id. at 61,649. The Commission nonetheless concluded that “major critical decisions, including decisions to build new generating units, are made by the Operating Committee for the benefit of the system as a whole.” Id. at 61,646. See also id. at 61,650.
The Commission buttressed its conclusion with the following evidentiary support: (1) Section 4.01 of the 1982 System Agreement provides that the Operating Committee shall “determine” the system generation addition plans; (2) at least five witnesses testified that new units were added to address the needs of the system as a whole, id. at 61,646-48; and (3) the Operating Committee minutes over a twenty-year period revealed that the Committee had the responsibility and the authority to make the “critical decisions” concerning the addition of generating capacity. Id. at 61,648-49.
The Commission’s review of the Operating Committee minutes revealed that the Operating Committee did not merely rubber-stamp the requests of the individual operating companies concerning the addition of generating capacity. Id. at 61,649. The Commission found that the Operating Committee consistently based its generation plans on the needs of the system as a whole. Id. at 61,649-50. It found that the Operating Committee had authority over the general timing, location, and size of plant additions, while the individual operating companies retained authority to fill in the details of such fundamental decisions. Id. Thus FERC stated that there was no evidence in the record that an operating company had ever built a new plant without a recommendation from the Operating Committee or that one had ever refused to carry out such a recommendation. Id. at 61,651.
In light of this finding, FERC rejected AU Head’s contention that Grand Gulf was an “anomaly.” Instead it agreed with AU Liebman that Grand Gulf, like every other generating station, was built to serve the needs of the system as a whole and to attain the system-wide goal of diversifying MSU’s fuel mix. Id. at 61,653. MSE was deemed a mere financing shell that the Commission hypothesized would have been made available to any other operating company that suffered the financial difficulties encountered by MP & L. Id. at 61,654.
The Commission viewed the decision to move into nuclear power as a system-wide decision calculated to meet system-wide needs. It found that MSU’s nuclear project had run afoul of unforeseen economic difficulties that had disrupted the system’s historic rough equalization of generation costs. FERC therefore adopted AU Liebman’s scheme of allocating Grand Gulf costs so that each operating company would contribute proportionately to the system’s investment in nuclear capacity. Id. at 61,655.
4. FERC’s opinion on rehearing. In Opinion No. 234-A FERC clarified its position on the various jurisdictional arguments it had addressed in its initial decision. 32 FERC at 61,943-52. The Commission also addressed — and rejected — the argument raised by various Arkansas parties that FERC lacked jurisdiction as there was no interstate sale of power. The Commission suggested that, whatever the merits of such an argument where a “monolithic” system is concerned, there was no question but that the transfer of power among the MSU operating companies constitutes a “sale for resale.” Id. at 61,957.
Indeed, a major portion of the Commission’s opinion on rehearing was dedicated to clarifying the Commission’s essential finding concerning the “integrated” character of the MSU system. The Commission rejected any attempt to mischaracterize its decision as based on a view that MSU is a “monolith.” Id. at 61,952. FERC simply insisted that, whatever the powers of the individual operating companies, the MSU Operating Committee makes the “major critical decisions on the System, primarily for the System as a whole.” Id. at 61,953 (emphasis in original). The Commission emphasized that its opinion hinged on “a variety of factors including the manner in which decisions are made by the commonly owned affiliates, and for whose primary benefit those decisions are made.” Id. at 61,956.
Turning to the merits, the Commission addressed three challenges to the rationality of its allocation of Grand Gulf costs. It disputed the contention of the Arkansas parties that the allocation violated the spirit and practice of the MSU system, the System Agreement, and the intent of the parties to that Agreement. FERC responded that the clear intent of the System Agreement was to correct major cost imbalances while moving toward a mixed fuel base including nuclear and coal-fired facilities. The Commission insisted that it need not measure the rationality of its allocation from the vantage point of the parties at the time the UPSA was first negotiated. Id. at 61,957-59.
The Commission also addressed the argument of MP & L that the Commission’s order had only exacerbated the discrimination it would have suffered under the original UPSA scheme. MP & L noted that under the UPSA it would have been responsible for 31.63% of Grand Gulf, but under the Commission’s scheme it would be responsible for a full 33%. 31 FERC at 61,-959. Under the new scheme Mississippi would receive only 9.5% of the system’s nuclear capacity while paying for 15% of the system’s nuclear investment. 32 FERC at 61,964 n. 26.
The Commission responded by asserting that the mere fact that FERC’s order increased MP & L’s burden did not make it more discriminatory., It is completely rational, argued the Commission, that a smaller burden can be discriminatory and, with a change in the relative standing of the parties, a larger burden can be fair. The original allocation was discriminatory, in the Commission’s view, because AP & L had failed to share the burden of Grand Gulf. Although the Commission’s order would increase MP & L’s allocation somewhat, it would spread the overall burden of Grand Gulf more equitably by making AP & L carry a portion of the burden.
The Commission suggested that its refusal to reallocate the capacity of all nuclear units (as well as their costs) was justified by the MSU system’s historic aversion to equalizing all costs per kilowatt. Id. at 61,959. It stressed the same point in responding to the arguments of various Louisiana parties that it should have adopted full cost equalization. Id. at 61,961. Thus the Commission depicted its opinion as an attempt to balance
the need to provide an equitable sharing of the investment costs of units that have (or could have) become unforeseeably high due to the unique problems associated with nuclear construction, and the need to recognize the efforts of individual companies on the System and allow them to retain the benefits of units they own to the fullest extent possible.
Id.
Dissatisfied with this rationale, petitioners sought review in this court.
II. Jurisdiction
The petitioners from Arkansas, Missouri and Mississippi raise certain threshold challenges to the Commission’s decision. They contend that FERC lacks jurisdiction to modify the allocation of the capacity costs of Grand Gulf embodied in the Unit Power Sales Agreement (“UPSA”). We disagree, and hold that the Federal Power Act (“FPA” or “the Act”) provides FERC with authority to issue the orders in question. Initially, we will set forth the affirmative basis of FERC’s jurisdiction; thereafter, we will address (and reject) each individual counterargument raised by petitioners.
A. The Jurisdiction of the Commission
Section 201 of the Act contains the Commission’s basic jurisdictional grant. It provides that “[t]he provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce” and that “[t]he Commission shall have jurisdiction over all facilities for such transmission or sale____” This section also defines “public utility” as “any person who owns or operates facilities subject to the jurisdiction of the Commission under this subchapter.” The facts here reveal that MSE sells Grand Gulfs energy to the affiliated operating companies of the MSU system at wholesale in interstate commerce. Thus, under section 201 of the Act, MSE is a “public utility” and FERC retains jurisdiction over its sales and facilities.
Sections 205 and 206 of the Act set forth the Commission’s remedial authority. Section 205(a) establishes a threshold requirement that all “rates and charges” made by a public utility, and “all rules and regulations affecting or pertaining to such rates and charges,” must be “just and reasonable,” or they will be deemed “unlawful.” Most significantly for our purposes, section 206 provides that when the Commission, after a hearing, determines that
any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order.
The combined force of these provisions leads inexorably to the conclusion that, under the circumstances presented in the instant case, FERC had jurisdiction to modify the Grand Gulf allocation set forth in the UPSA.
The distribution of Grand Gulf costs and capacity in the UPSA inevitably affects each operating company’s generation costs and, by extension, their wholesale rates. When, as here, generation capacity has been built and planned on a profoundly integrated basis, the Commission properly may examine its allocation as a cost component affecting wholesale rates. For this purpose, the UPSA cannot be examined in isolation. As the Commission stated, the UPSA is “an agreement which ‘supplements or supersedes’ the coordination arrangements among the MSU utilities, and... is a contract ‘affecting’ rates under the 1982 System Agreement.”
The UPSA serves to distribute the Grand Gulf capacity available to MSE — and its cost — among the MSU operating companies. When the Commission acted to modify the UPSA and reallocate the capacity of Grand Gulf, it altered the relative amount of system capacity ultimately paid for by each affiliate. Concurrently, the 1982 System Agreement (Service Schedule MSS-1) established the terms of reserve capacity cost-sharing among the same group. Any change in the allocation of the capacity costs of Grand Gulf in the UPSA will change the relative “longness” or “shortness” of each company under the System Agreement, thus altering the equalization payments made and received for capacity under Service Schedule MSS-1. In the instant case, the cost burden of system generating capacity has been shifted among the affiliates, by virtue of Commission action and system agreement, in order to insure an equitable distribution. This equitable distribution is mandated by the FPA because of the historical integration of the MSU system.
Capacity costs are a large component of wholesale rates. Thus, the capacity costs of the system carried by each affiliate will significantly affect the wholesale price it pays for energy on the MSU system. In the Commission’s view, the UPSA’s allocation of Grand Gulf, combined with the provisions of the 1982 System Agreement, created serious inequities in the division of costs of power resources among the operating companies in light of the integrated planning for generating capability on a system basis. Unreasonable disparities in the shares borne by affiliates of the total costs of the system’s generating capacity plainly “affect” the wholesale rates at which the operating companies exchange energy, and therefore require remedial action by the Commission pursuant to section 206.
A case involving the Northern States Power (“NSP”) Companies, State of Minnesota v. FERC, provides a helpful illustration of how agreements among affiliates can “affect” rates. The NSP Companies develop and operate both generation and transmission facilities on an integrated basis through participation in a Coordinating Agreement which, inter alia, establishes procedures for sharing costs on the system. In 1982, the Companies filed an amendment to that Agreement with FERC proposing a methodology for determining the rate of return on investment as a component of the fixed costs shared under that Agreement. The Minnesota Public Utilities Commission (“MPUC”) intervened and contended that FERC lacked jurisdiction to review the amendment because the Coordinating Agreement does not establish a wholesale rate. Specifically, MPUC argued that FERC “exceeded its authority under the Federal Power Act and intruded upon retail ratemaking functions by accepting a filing that sets a rate of return on capital as part of a cost allocation agreement between affiliated power companies.”
The Eighth Circuit observed that “MPUC’s challenge to the Commission’s jurisdiction rests on its contention that the Coordinating Agreement serves simply as a mechanism for allocating costs among the NSP Companies and does not establish a wholesale rate for the resale of electricity.” However, the court agreed with the Commission that the Coordinating Agreement “eontain[ed] numerous provisions authorizing the NSP Companies to exchange electric power among themselves in return for payment,” i.e., interstate wholesale transactions. Thus, the Eighth Circuit held that the Coordinating Agreement established a wholesale rate and that, “[bjecause a change in the rate of return on investment affects the wholesale rate under the Coordinating Agreement, the Commission possessed jurisdiction to review and approve the proposed amendment.”
We are in total accord with the Eighth Circuit’s view of FERC’s jurisdiction as enunciated in State of Minnesota. In the instant case, the petitioners concede that wholesale rates are established in the disputed contracts governing the MSU system; but petitioners nonetheless contend that the Commission does not have jurisdiction here because other portions of these same agreements allocate generation costs among the MSU companies and these particular provisions do not themselves establish a wholesale rate. However, the petitioners ignore the critical point here that, while these provisions do not fix wholesale rates, their terms do directly and significantly affect the wholesale rates at which the operating companies exchange energy, due to the highly integrated nature of the MSU system. We conclude that, because the allocation of Grand Gulf capacity and costs, like the rate of return on capital in State of Minnesota, significantly affects the wholesale rates at which the operating companies exchange energy due to the combined effect of the UPSA and the 1982 System Agreement, that allocation is plainly within Commission jurisdiction.
The Supreme Court quite recently confirmed the propriety of this analysis in Nantahala Power & Light Co. v. Thornburg. In that case, FERC examined an agreement between two affiliated power companies, which allocated certain low-cost entitlement power between them. FERC found that the agreement was unfair to one of the companies, Nantahala, and increased the percentage of low-cost entitlement power that it should receive. Although FERC did not specifically “reform” the agreement, Nantahala was required to file revised rates, reflecting its increased entitlement to low-cost power. The North Carolina Utilities Commission (“NCUC”) not only rejected the actual apportionment agreed to by the companies, but also “employed an allocation of entitlement power that nowhere [took] into account FERC’s allocation

Question: What party initiated the appeal?
A. Original plaintiff
B. Original defendant
C. Federal agency representing plaintiff
D. Federal agency representing defendant
E. Intervenor
F. Not applicable
G. Not ascertained
Answer:

Answer: B