Document: 461 U.S. 402 103 S.Ct. 1921 76 L.Ed.2d 22 AMERICAN PAPER INSTITUTE, INC., Petitioner,v.AMERICAN ELECTRIC POWER SERVICE CORPORATION et al. FEDERAL ENERGY REGULATORY COMMISSION, Petitioner, v. Nos. 82-34, 82-226. Argued March 22, 1983. Decided May 16, Syllabus Section 210 of the Public Utility Regulatory Policies Act 1978 (PURPA) was designed to encourage development cogeneration facilities and small power production reduce demand for fossil fuels. 210(a) directs Federal Energy Commission (FERC) prescribe rules requiring electric utilities deal with qualifying facilities. With respect utilities' purchases electricity from such facilities, § 210(b) provides that rates set by FERC "shall be just reasonable consumers utility in public interest," shall not discriminate against qualified exceed "the incremental cost alternative energy." Following rulemaking proceedings, promulgated a rule purchase energy facility at rate equal utility's "full avoided cost," i.e., which, but facility, would incurred generating itself or purchasing another source. also make physical interconnections cogenerators producers as are necessary effect sales authorized PURPA. Upon review, Court Appeals vacated both rules, holding had adequately explained its adoption full-avoided-cost rule, it exceeded statutory authority promulgating interconnection view 210(e)(3) PURPA, which "[n]o may exempted under this subsection from" specified provisions Power (FPA) require afford an opportunity hearing before ordering interconnection. Held: 1. did act arbitrarily capriciously is maximum permissible 210(b). Such plainly satisfies requirement why "just interest." Both language legislative history confirm Congress intend impose traditional ratemaking concepts on utilities. And although recognized directly provide any savings consumers, reasonably deemed more important time significant incentive production, ratepayers nation whole will benefit decreased reliance scarce fuels efficient use energy. Pp. 412-418. 2. Nor rule. The granted promulgate encompasses connections interpreted forbidding exempt being "target" applications other FPA, grant right obtain PURPA without applying order FPA. interpretation supported purposes scheme created Acts. 418-423. 219 U.S.App.D.C. 1, 675 F.2d 1226, reversed remanded. Mr. Paul M. Bator, Cambridge, Mass., petitioners. Edward Berlin, Washington, D.C., respondents. Justice MARSHALL delivered opinion Court. 1 This case concerns two pursuant (PURPA), 16 U.S.C. 824a-3 (Supp. V). first requires full cost, have generated purchased second held 1221 (CADC 1982). We reverse. 2 * A. 3 facilities.1 As we noted Mississippi, --- ---, 102 2126, 2132, 72 532 (1982) (footnote omitted), "Congress believed increased these sources fuels," traditionally been "reluctant from, sell to, nontraditional facilities." Accordingly, directed prescribe, within one year statute's enactment, 210(a), 824a-3(a) provided 4 "(1) interest, 5 (2) producers. 6 No prescribed (a) section exceeds 210(b), 824a-3(b) 7 regulations governing transactions between those designated "qualifying facilities," 18 CFR 292.201-292.207, invoke 8 regulation issue case, 292.304(b)(2) (1982), cost. cogenerator producer, generate source." 210(d), 824a-3(d) See 292.101(b)(6) (the term "avoided costs" used equivalent "incremental energy" 210(d) PURPA). In accompanying promulgation decision rather than level result direct customers permitting less producing 45 Fed.Reg. 12214 (Feb. 15, 1980). emphasized need incentives production: 9 "[I]n most instances, if part were allocated among ratepayers, reductions insignificant individual consumer. On hand, relatively class producers, they higher growth technologies." Id., 12222. 10 "ratepayers fuels, oil gas, Ibid. rejected proposals fixed percentage cost: 11 situations, producer only produce marginal price he receives output. If some used, cease additional units when costs paid utility. occurs, forced operate either consume fuel consumed cost." 12222-12223. 12 here, 292.303 made available upon request, and, present purposes, "make accomplish subpart." 292.303(c)(1) (1982). An connection allows flow entity another.2 13 contention evidentiary unwilling has invoked enter into sale relevant part: "No from— 14 15 (B) . 212 authorities enforcement provision ." Sections (FPA), §§ 824i 824k V), describe procedure followed utility, marketing agency, cogenerator, applies that, receipt application interconnection, notice each affected State regulatory authority, owner operator public, 210(b)(1), 824i(b)(1) hearing, 210(b)(2), 824i(b)(2) approving determines approval 17 would— 19 (A) overall conservation capital, 20 optimize efficiency resources, 21 (C) improve reliability system agency applies, (3) meets requirements [§ FPA]." issued likely ascertainable uncompensated loss undue burden unreasonably impair ability supply adequate service customers.3 23 concluding FPA required prior complete reasoned "provides general mandate production." Fed.Reg., 12221. "a basic purpose market cogenerators," "to go through complex procedures forth would, circumstances, significantly frustrate" achievement purpose. 24 filing several petitions rehearing, adhering 33958 (May B 25 Respondents American Electric Service Corp., Consolidated Edison Co. New York, Inc., Colorado-Ute Association, sought review Commission's United States District Columbia. rules. 1226 26 concluded demonstrated consistent utility" "in F.2d, 1232. "By every has, convincing explanation, simply adopted uniform statute." 1233.4 court stressed "FERC should allocate benefits evenly can demonstrate approach, allocation heavily favoring interest disproportionately discourage cogeneration." While acknowledging approach calculation cogenerator's case-by-case basis "would indeed veer toward utilities-style setting wanted avoid," given consideration percentage-of-avoided-cost whereby establish range state commission could fix precise percentage. Ibid.5 27 "relatively specific limitation must control over 212(e)." 1240 (emphasis original). interested parties requested facility. 28 denial rehearing en banc,6 certiorari filed Paper Institute, national trade association pulp, paper paperboard industry, accounts large share today. petitions. 206, 75 ---- II 29 question us whether FERC's action "arbitrary, capricious, [or] abuse discretion." 706(2)(A).7 cannot answer noting established adopt sets prescribe. Whether properly exercised separate issue. To decide discretion," determine considered factors choosing best serve statute, committed clear error judgment." Citizens Preserve Overton Park Volpe, 401 402, 416, 91 814, 823, 136 (1971). 30 explanation reasons examined light criteria interest" facilities.8 Since nondiscrimination requirement, consider 31 accept respondents' suggestion, Brief n. 4, reasonable" intended " 'at lowest possible maintenance interest.' Atlantic Refining Comm'n 360 378, 388, 79 1246, 1253, 1312 (1959), quoting original version Natural Gas Act. Simply language, reluctant infer terms reasonable," frequently associated cost-of-service ratemaking, see, e.g., NAACP FPC, 425 662, 666, 96 1806, 1809, 48 284 (1976), very different context confirms, moreover, Conference Report states pertinent 32 "It intention conferees become subject type examination what receive their power. recognize utilities, guaranteed return activities generally vis-a-vis whose risk proceeding forward enterprise recoverable. 33 ". [C]ogeneration encouraged therefore apply producer's burdened same applications, burdensome manner. establishment them disincentive firms H.R.Conf.Rep. No. 95-1750, supra, 97-98, U.S.Code Cong. & Admin.News 1978, pp. 7831-7832. 34 contrast, subsequent passage explicitly 210(c), 824a-3(c), "is refer concepts." 95-1750,supra, 98, p. 7832 added). 35 ignore receiving equitable rates." 97, 7831.9 "provide rate" "these energy."10 explained, pay whereas retain so long 36 encountered considerable difficulty attempted appropriate A wide variety technologies including internal combustion engines, steam turbines, windmills, solar cells, hydro turbines. Facilities vary greatly capacity. It extremely difficult, impossible, useful estimate amount discouraged lower 37 bears emphasizing inflexible might appear glance. First, nonregulated waiver applicant demonstrates unnecessary production. 292.403 Second, negotiate contract rate. 202.301(b)(1) Because revision obtains experience effects often long-term establishes absence contractual agreement. 38 Under circumstances unreasonable PURPA.11 makes judgment entire country ultimately resulting decrease nation's dependence stated U.S., 669, S.Ct., 1811, words 'public interest' statute take meaning legislation." increase utilization 2132. At early stage implementation thereby III 39 Absent there no doubt validity 40 "such offer to— 41 (1) 42 43 consummate completed buyer seller. 44 contrary, negated give conduct adjudicatory proceedings orders interconnections. matter, existence proceed adjudication way inconsistent statute. Moreover, nothing suggest determining obligations jurisdiction expressly 212(e) 824k(e) construed "as person utilize 210] lieu law," limiting, impairing, otherwise affecting law." critical question, therefore, deprives invalid, relied took literal meaning" 210(e)(3), 1240, 46 47 49 mean interconnect instead sale. 50 interpreted, strongly support contrary reading provision. unlikely Evidentiary hearings entail determination proposed systems. 824i(a)(1)(Supp. highly doubtful seeks hook up determined enacting help conserve capital ensure resources. 51 Providing seriously impede facilitate. Many operations. By definition capacity 80 megawatts, 796(17)(A)(ii) modest size. owners little needed average contested currently $57,000, see Notice Proposed Rulemaking, Docket RM 82-38-000, Fees Applicable Utilities, Cogenerators, Small Producers, 29-30 (Sept. 1982), private doubtless substantial. hold whenever effectuate "imput[ing] paralyze hand promote other." Clark Uebersee Finanz-Korporation, A.G., 332 480, 489, 68 174, 178, 92 L.Ed. 88 (1947). Cf. E.I. duPont deNemours Train, 430 112, 132-133, 97 965, 977-978, 204 (1977); Permian Basin Area Rate Cases, 390 747, 777, 1344, 1365, 312 (1968). 52 agree scheme, forbid target "requiring [a] connection," 210(a)(1), word "exempted" intent immunized "exemption" ordinarily denote relief duty service. See, Black's Law Dictionary 513 (5th ed. 1979) (to "exempt" relieve, excuse free imposed belongs"). obey connection." persons Significantly, does immunize do them—the provisions. Qualifying remain permits certain steps parties, namely, interconnections.12 53 represents contemporaneous construction men charged responsibility machinery motion, making parts work efficiently smoothly while yet untried new." Udall Tallman, 380 85 792, 801, 616 (1965), Reactor Development International Union Electrical, Radio Machine Workers, 367 396, 408, 81 1529, 1535, 924 (1961). uphold it, "we find [FERC's] one, even reached arisen instance judicial proceedings." Unemployment Compensation Aragon, 329 143, 153, 67 245, 250, (1946). Mourning Family Publications Service, 411 356, 371-372, 93 1652, 1661-1662, 318 (1973). conclude For above, erred rejecting interpretation. IV 54 remanded further opinion. 55 ordered. 56 POWELL cases. defines "cogeneration facility" produces form energy, heat. 796(18)(A) "small production" megawatts biomass, waste, renewable resources wind, water, 796(17)(A) regulation, "pay assess nondiscriminatory basis." 292.306(a). "(a) [FPA title unless order— be, order; place (4) render customers. paragraph based showing parties. compel enlargement "(b) ready, willing, able reimburse party title, party's anticipated order, "(d) applied shall, deny denial. "(e) treated— law, statement comparison rate, suggested failed "bear mind, surely knew, inevitably impact per consumer cogenerator." 1234. proceeded "outline raised address rulemaking." 1233. id., 1234-1236. denying petition declared "simply matter because explain 'its rationale process consideration.' 1246 suggestion banc denied vote three two, six active Circuit judges participating. entirely Appeals' standard applied, appears erroneously employed substantial-evidence standard. criticized failing factual basis," 1234, finding sharing insubstantial savings, cited footnote earlier test involving informal 1234 36, citing Systems FERC, 606 973 1979). event, arbitrary-and-capricious Unlike 825l (b), reviewing courts entered thereunder substantial evidence. command employ particular reviewed solely lenient Administrative Procedure rulemaking. FCC National Committee Broadcasting, 436 775, 803, 98 2096, 2116, 697 (1978). 95th Cong., 2d Sess. (1978), 7659, nondiscriminatory, alternate energy"). interpret potential consumers. Of course, charge increased, hypothesis themselves sources. existing authority. But follow necessarily utilities" Unless regarded mere surplusage, produced ceiling. reduction prices levels demand. permitted costs, expect reduced prices. reach conclusion though Appeals, note observation consumer," rate-making, typically increment dent consumer's pocket," FPC Texaco, 417 380, 399, 94 2315, 2327, 141 (1974), consequences whom paid. utility," 824a-3(b)(1), obviously reflects congressional changes great economic significance 2327 ("Even small-producer pocket, [Natural Gas] unlawful all reasonable, say unlawfulness permitted.") finds indications situation. Prior limited, 202(b) 824a(b), except emergencies, situations "person engaged directing interconnect. concerned refusal intrastate systems because, done so, interstate 124 Cong.Rec. 34763-34764 (1978) (Sen. Metzenbaum); 34770 Bartlett); 123 31194 (1977) Johnston); 32397-32398 (colloquy Sen. Johnston Domenici). 210, 211, enacted where enhance time, provided, 201(b)(2) 824(b)(2) compliance 211 There 210-212 exclusive means obtaining

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