Opinion ID: 2075970
Heading Depth: 1
Heading Rank: 1

Heading: Impermissible interference with FERC's jurisdiction

Text: It is undisputed that FERC has jurisdiction for setting rates for the transmission and sale (wholesale) of electricity by investor-owned utilities in interstate commerce. 53 Fed.Reg. at 24037-38; see also Mississippi Power & Light Co. v. Moore, 487 U.S. 354, 108 S.Ct. 2428, 2439, 101 L.Ed.2d 322 (1988) (FERC has exclusive authority to determine the reasonableness of wholesale rates.). Maine Yankee argues that the MPUC order directly conflicts with the valid exercise of this ratemaking jurisdiction in several significant respects. FERC's March 15, 1988 rate order included four specific components of Maine Yankee's costs of service: 1) the rate of return on common equity; 2) amortization of materials and supplies and last core nuclear fuel; 3) decommissioning expense; and 4) other depreciation. The MPUC order, retroactive to March 1, 1990, alters the effect of this order, fixing Maine Yankee's decommissioning expense at $719,961 more per year than the March 15, 1988 FERC order and providing for Maine Yankee's sponsors a lower rate of return. The decommissioning funding level is a stated amount which cannot vary without FERC approval. Cent. Vermont Pub. Serv. Corp., 44 F.E.R.C. ¶ 61,278 at p. 62,027 (1988); see also Yankee Atomic Electric Co., 30 F.E.R.C. ¶ 61,111, at p. 61,202 (1985). It is one cost of service component which contributes to the establishment of Maine Yankee's utility rate. Under the filed rate doctrine developed under federal law, a federally regulated utility is precluded from collecting any rate other than that on file with the Commission, and the MPUC cannot interfere with the rate set by FERC or the components that go into it. Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953, 963, 106 S.Ct. 2349, 2355, 90 L.Ed.2d 943 (1986); see also Mississippi Power & Light Co. v. Moore , 108 S.Ct. at 2438-39. FERC has held that decommissioning expense, like depreciation, should be collected from ratepayers as a cost of service. Indiana and Michigan Mun. Distrib. Ass'n v. Indiana Michigan Power Co., 49 F.E.R.C. ¶ 63,020 at p. 65,084 (1989); Middle South Energy, Inc., 31 F.E.R.C. ¶ 61,305 at p. 61,658 (1985). Pursuant to the stay-out provision in the March 15, 1988 FERC order, however, Maine Yankee cannot file for a rate increase that would become effective prior to February 16, 1991. Thus, the company is prevented from raising the revenues necessary to meet the demands of the MPUC order, retroactive to March 1, 1990, by FERC's requirement that decommissioning costs come from ratepayers and Maine Yankee's agreement to delay any rate increase until after February 16, 1991. Given this scenario, it is impossible for Maine Yankee to comply with both the March 15, 1988 FERC order and the February 22, 1990 MPUC order. Applying the principles of preemption set forth earlier, the MPUC order is preempted. Contrary to FERC policy, the MPUC has directed Maine Yankee to raise revenues from the company's own assets and the assets of its sponsors. FERC fixed the rate of return for Maine Yankee's sponsors at 12.9% in the March 15, 1988 order. In requiring that additional funding for decommissioning come from the assets of Maine Yankee and its sponsors, the MPUC is impermissibly mandating a reduction in the sponsors' rate of return and weakening the company's financial base. The MPUC has no authority to require a reduction in a component of Maine Yankee's rates, set exclusively by FERC. Any attempt to do so is preempted by FERC. See Safe Harbor Water Power Corp. v. Fed. Power Comm., 179 F.2d 179, 201 (3rd Cir.1949) (The amount of rate of return is preeminently a question for determination by the Commission. [2] ); F.P.C. v. Hope Natural Gas Co., 320 U.S. 591, 605, 64 S.Ct. 281, 289, 88 L.Ed. 333 (1944) (Setting valid rates enables a company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed.). Without merit is the MPUC's assertion that its order does not interfere with rate setting, but, like a state income tax, merely affects Maine Yankee's rates indirectly. The United States Supreme Court has held that the filed rate doctrine is not limited to `rates' per se. Nantahala v. Thornburg, 476 U.S. at 966, 106 S.Ct. at 2357. In Mississippi Power & Light Co. v. Moore , the Court stated that FERC's exclusive jurisdiction applies not only to rates, but to the components that affect wholesale rates. Mississippi Power & Light Co. v. Moore , 108 S.Ct. at 2439 (FERC's exclusive jurisdiction applies not only to rates, but also to power allocations that affect wholesale rates.) While in that case the component at issue was power allocations, the principle applies equally well to decommissioning financing. Both directly affect the calculation of reasonable wholesale rates over which FERC exercises exclusive jurisdiction. Furthermore, the impact of the decommissioning financing plan imposed by the MPUC cannot validly be compared to the impact of a state tax. State taxes are not set by the federal government while Maine Yankee's decommissioning expenses are and have been set by FERC. Thus, the MPUC order and the NDFA interfere impermissibly with FERC's exclusive jurisdiction over wholesale rates and are preempted by the supremacy clause of the United States Constitution.