Legal Document

487 U.S. 354 108 S.Ct. 2428 101 L.Ed.2d 322 MISSISSIPPI POWER & LIGHT COMPANY, Appellantv.MISSISSIPPI ex rel. Michael C. MOORE, Attorney General of Mississippi, and Mississippi Legal Services Coalition. No. 86-1970. Argued Feb. 22, 1988. Decided June 24, Syllabus Appellant (MP L), a subsidiary Middle South Utilities (MSU), engages in wholesale sales electricity, which are regulated by the Federal Energy Regulatory Commission (FERC), retail sales, subject to jurisdiction Public Service (MPSC). MSU formed new subsidiary, Energy, Inc. (MSE), undertake construction nuclear powerplant, Grand Gulf, Mississippi. Although appellant was operate plant, Gulf planned designed meet need entire system for diversified expanded fuel base. The MPSC approved application MP L MSE build Gulf. As neared completion, filed FERC's approval agreements allocating Gulf's capacity among its four operating subsidiaries setting forth, inter alia, rates sale energy. Following extensive hearings parties representing consumer interests various state regulatory agencies, including MPSC, participated, FERC entered an order costs members proportion their relative demand energy generated as whole. required purchase 33% plant's output at determined be just reasonable. On review, United States Court Appeals District Columbia Circuit affirmed. After public hearings, granted increase enable it recover purchasing FERC-mandated allocation power. certain other consumers appealed Supreme Court, charging that, under law, had exceeded authority adopting pay expenses without first determining that were prudently incurred. court agreed remanded case, concluding requiring review prudence management decisions incurring associated with would not violate Supremacy Clause Constitution. rejected appellant's argument foreclosed decision Nantahala Power Light Co. v. Thorn- burg, 476 953, 106 2349, 90 943, barred State from did take into account power between two related utility companies. Held: proceedings pre-empted inquiry MPSC. rests on foundation is broad enough support here require treat payments reasonably incurred purpose rates. relied fundamental pre-emption principles, applicable here, has exclusive determine reasonableness rates; applies only but also allocations affect may bar utilities passing through compels permit reasonable expense result paying FERC-determined rate erred view pre-emptive effect turned whether particular matter (here, "prudence" question) actually proceedings. collaterally attacked or federal courts. Here, question discussed before because no party raised issue, beyond scope jurisdiction. Moreover, did, fact, consider reject some aspects directed conduct. Pp. 369-377. 506 So.2d 978 (Miss.1987) reversed. STEVENS, J., delivered opinion REHNQUIST, C.J., WHITE, O'CONNOR, KENNEDY, JJ., joined. SCALIA, concurring judgment, post, p. 377. BRENNAN, dissenting opinion, MARSHALL BLACKMUN, joined, 383. Rex Lee, Washington, D.C., appellant. Louis R. Cohen, F.E.R.C., amici curiae, supporting appellant, special leave Court. John L. Maxey, II, Jackson, Miss., appellees. Justice STEVENS 1 July 1, 1985, Unit major nuclear-power plant located Port Gibson, began commercial operations. An (FERC) Company L) (MPSC) subsequently cost purchases appeal, held error grant examining led completion 1. presented us have such Commission. For reasons similar those set forth Thornburg, 943 (1986), we conclude therefore reverse. 2 * one companies whose voting stock wholly owned holding company.1 engaged both electricity each outside separate service areas Louisiana, Arkansas, Missouri, Through integrated pool, all being distributed single dispatch center Pine Bluff, Arkansas. Wholesale transactions historically been governed succession three "System Agreements," 1951, 1973, 1982. System Agreements provided basis planning companies' generating units single-system equalizing imbalances 3 more local agencies. example, Arkansas (AP sells Missouri L's 4 1950's 1960's, most system's plants fueled oil gas. In late sought projected increases diversify base adding coal units. It originally contemplated finance construct facility.2 Consistent this scheme, assigned facilities 2.3 project, however, proved too large company finance. finance, own, acquired full title hired design, construct, facilities. 5 April 1974, applied certificate convenience necessity authorizing plant. certificate, noting part "an electric system" "the Project [would] serve source baseload pooling arrangement."4 App. Motion Dismiss 36-37. 6 By 1970's became apparent systemwide ensuing years lower than forecast, making unnecessary. delays, additional requirements, severe inflation frustrated project. Management decided halt 2, complete largely assumption relatively low make overall per kilowatt hour alternative sources. out, completing about six times greater projected.5 Consequently, greatly exceeds produced 7 considered methods 1982 FERC. Agreement, terms conditions coordinated operations companies, scheme "capacity equalization payments," ensure contribute proportionately total system. Transactions included Agreement. second agreement Sales Agreement (UPSA), MSE's Under UPSA, AP obligated any capacity; LP 38.57%, NOPSI 29.8%, 31.63%. Proceedings 8 different Administrative Law Judges, who charged task "just reasonable" within meaning Act.6 Extensive ALJ, numerous agencies participated. Both judges concluded needs system, failure distribute rendered unduly discriminatory should allocated company's demand.7 Services, Inc., 30 ¶ 63,030, pp. 65,170-65,173 (1985) (1982 Agreement); 26 63,044, 65,105-65,108 (1984) (UPSA). 9 consolidated Judges issued 1985. 31 61,305. acknowledged difficult issues there "no easy answers." equitable adopt ALJ Liebman's formula costs. 10 affirmed adopted findings highly pool. integration coordination "planning, construction, [were] conducted primarily whole." Id., 61,645. Because found "planned objectives," "that form [was] necessary achieve just, reasonable, non-discriminatory companies." 61,655. UPSA together produce proper allocation, conjunction "achieve results." Ibid. Thus expressly discuss constructing bringing line, implicitly accepted uncontroverted testimony executives explained why they believed sound, finding "continuing prudent South's load mix and, projected, same time, (capacity energy) less existing alternatives system." FERC, 65,112-65,113; see 61,666 (affirming extent modified). 11 later clarified previous course considering several petitions rehearing. contentions exercise destroy effective regulation Specifically, claims could action "precluded judging denied say return imposed these costs" "imping[e] State's paramount certification regarding need, type, facilities." 32 61,425, 61,951 (1985). asserted careful balancing involved" paid "careful heed impact [its] states." 61,951-61,952. went based individual needed capacity. Since constructed goals reasoned must rest 'needs' company, rather principles non-discriminatory, non-preferential rates." 61,958. emphasized voluntarily "alter limited means possible agreed-upon 61,961. 12 share investment challenges restructure parties' allocations, Act (FPA) gave authority. then rational Commission's range discretion remedy Industries 257 App.D.C. 244, 285, 808 F.2d 1525, 1566 (1987).8 13 November 16, 1984, completed, substantial portion requested 31.63% high-cost when unit accordance UPSA. 14, allowing revenues, denying relief Juris. Statement 33a. 14 27, rehearing insofar expected, line consistent net $27 million month petition, become insolvent if allowed go annual revenue deficiency $327 million. predicated entirely revenues cover purchased See id., 39a. 15 noted pending continuing challenge 28a. stated intended "to vigorously pursue every available legal challenging validity fairness L," 51a, appropriate adjustments made changed. reference 16 establish will lead fair utility. Miss.Code Ann. § 77-3-39 (Supp.1987). "A which, economical management, utility." Southern Bell Tel. Comm'n, 237 Miss. 157, 241, 113 622, 656 (1959); Comm'n Co., 429 883 (Miss.1983). appealing charged, "retail incurred." Pittman 978, 979 (Miss.1987). agreed, rejecting sister parent "using jurisdictional relationship completely evade prudency either case further determination obligate approve pass-through review.9 17 North Carolina review. Nantahala, concluded, simply force "MPSC operation (nuclear otherwise) generates price prudent." So.2d, 985. assumed fact out-of-state corporation opposed created rob distinguished concerned low-cost power, hydroelectric never issue. 18 aspect action, " 'examine matters determined, impliedly, FERC.' 986 (quoting Appeal Sinclair Machine Products, 126 N.H. 822, 833, 498 A.2d 696, 704 (1985)). '[a]s resolved preempted contradict undermine determinations interests, impose inconsistent obligations involved.' 986. "was continued operation, prudent" ibid. affirming "made regard issue presented." 987 (emphasis original). analysis, "for investment." specified "determine L, [MSE] acted light change sudden escalation costs." examine domestic foreign corporations "in conditions." 19 contends our FPA, Commerce recognize allocate interstate expenses.10 essence asserts pre-empts do Appellees contend does preclude managerial create gap Congress, Constitution, II 20 We hold Court's judgment ordering conduct law reversed.11 21 reallocated respective shares affiliated entitlement selling customers Carolina, 20% Tennessee Valley Authority (TVA), while 80% reserved affiliate customer common parent. unfair ordered file schedule 22.5% TVA. Subsequently, proceeding, reexamined 24.5% calculate ratemaking purposes though received deny right over rates, de facto reallocation 'well field engendered "bright line" Act.' U.S., 961, S.Ct., 2354 313 N.C. 614, 687-688, 332 S.E.2d 397, 440-441 contradicting finding. arguments. reasoning equal conclusion—States alter FERC-ordered substituting own what fair. binding States, 22 Our concerning regulation. First, now settled 'the files fixes, . except orders, [a] can assume ground one.' 963-964, 2355 Montana-Dakota Northwestern 341 246, 251-252, 71 692, 695, 95 L.Ed. 912 (1951)). This principle binds courts former respect mandated Clause. 963, 2355. Second, 966, 2356-2357. Third, "The doctrine ensures sellers payment FERC-set When sets seller wholesaler-as-buyer, undoubted prevent wholesaler-as-seller recovering FERC-approved rate. Such 'trapping' prohibited." 970, 2359. These "trapping" federally pre-empted. Today compel enter deciding order.12 23 facts distinguishable way relevance above. cases concern orders adjusting interest voluntary entities. involved fixing utility's acquire power; involves obligation "determined Nantahala's average obtained TVA entitlements other," 971, 2359 added); other. attempted entitled it. Here seeks purchase. 24 "a commission prices allow, expenses, price. Once rate, unreasonable. A give Congress' desire plenary interfere authority." 965, 25 seek characterize falling Nantahala. Without purporting : "[W]e quantity procured deemed unreasonably excessive lower-cost elsewhere, even higher-cost FERC-approved, price." 972, 2360 assumed, might well unreasonable unnecessary quantities refuse buy But integrity preserved, obviously cannot procure high-priced for. Just obtain amount equally clear long sort 'case-by-case analysis upon national interest' cases. 2356-2357 FPC California Edison 376 205, 215-216, 84 644, 651, 638 (1964)). Congress drawn bright regulate where properly exercised insure affecting adjust established.13 therefore, allocation. 27 forum reviewing order. attached considerable significance investing Circuit. discussed, characterized effort "us[e] agency." 979. offer evidence subterfuge. very appellees urged participants recognized Despite recognition, failed raise easily recoup 100% New England 61,047, 61,081-61,084 (1985), enf'd, 800 280 (CA1 1986). 28 "MSU 987. rejected, appropriately approach basis, whereby component parts plan [and that] [i]mplementation require[d] subsumed System." specifically bars agency evaluating conditions" alone. "complete [MSE], MSU, expense." transactions, comprise evaluated lacks reevaluate transactions. evaluate MSU's invest bring traversing squarely jurisdiction.14 29 There "can divided commerce acts supreme exclusive." Pacific Stroud, 267 404, 408, 45 243, 245, 69 683 (1925). agency's "efforts fall conflict activity." Chicago Western Transp. Kalo Brick Tile 450 311, 318-319, 1124, 1131, 67 258 (1981). Mississippi's invade province rejected. so ordered. judgment. I concur write separately fully me critical case: participate facility prudent. 33 subject, subject. 962-967, 2354-2357, (1986). joint venture pool electrical capacity, facility, resulting transfers wholesales Act, U.S.C. 791a et seq. disputed venture, Nor seriously contested general Cf. supra, central controverted present participation 34 context AEP Generating 36 61,226 asked prudence, availability supplies," Kentucky Company's 15% other, affiliated, utilities. 61,549. so, inseparable Power's entering arrangement supplies. 61,550-61,551. transaction utilities, integrated, arrangement" "[u]nder circumstances, complex, interrelated questions arise characterizes interpretation [of basic agreements], clearly overriding implement schedules." 61,550. 35 makes plain type ante, 357, n. 1—a companies—FERC inquire arrangement. Nothing said assertion Its statement "needs" 61,958 merely rejects according current incompatible utilities' basis. That nothing joining place examined. true, course, examination case; but, discusses, 375, neither ask so. out recommit States.* What comes down to, then, supported provisions Act. If fill, calculating chargeable customers. defer, silence ambiguity. See, e.g., K Mart Corp. Cartier, 486 281, 291-292, 1811, 1817-1818, 100 (1988); Chevron U.S.A. Natural Resources Defense Council, 467 837, 842-844, 104 2778, 2781-2783, 81 694 (1984). 37 Contrary dissent, 386-387, rule deference statute confine Japan Whaling Assn. American Cetacean Society, 478 221, 226, 233, 2860, 2867-2868, 92 166 (1986); Chemical Manufacturers 470 116, 123, 125, 126, 105 1102, 1106-1107, 1107-1108, 1108, particular, statutory Commodity Futures Trading Schor, 844-845, 3245, 3253-3254, 675 NLRB City Disposal Systems, 465 830, 7, 1505, 1510, 79 839 ("We exception [for jurisdiction] exists normal standard .; indeed, hesitated defer. ."); also, York FCC, 57, 64, 1637, 1642-1643, 48 Capital Cities Cable, Crisp, 691, 700, 2694, 2700-2701, 580 (1984); CBS, 453 367, 382, 2813, 2823, 706 (1981); Red Lion Broadcasting 395 379-381, 89 1794, 1800-1802, 371 (1969); FTC Bunte Brothers, 312 349, 352, 61 580, 582, 85 881 (1941) (dictum). arguments Court—namely, claim expertise interpreting statutes jurisdictional, 845, 3254 usual reliance resolve conflicting policies inappropriate resolution defining limits authority, see, (what really different) plainly has. Rather, giving administrative appropriate. discernible exceeding authorized To exceed Virtually depending how generally wishes describe "authority." 7. And rationale deference: naturally expect responsible, limits, resolving ambiguities 843-844, 2782. anticipate nor ambiguity addressed, novo, sure, sometimes speaks terms, discretion. dissent concedes "[i]f applied, sufficiently intertwined defer conclusion." Post, 386. 38 satisfies deference. 824e(a), responsible assuring purchasers wholesale, contracts "unjust, unreasonable, preferential." Perhaps (we decide point today) preferential" participant contracted arm's-length negotiations bear, entry contract imprudent. think assuredly (for ends served Act) bear imprudent essentially assigned, process group paramount. relating ventures separated affiliate's participation. 39 rely language 824(b)(1) states "shall jurisdiction, subchapter [the Act] ., used generation energy." 824e(a) precisely example "specifically provided." second, exercising facility. 40 today, battle longer arrangements sharing creation wholesaling vindicated. goes along responsibility, raised, protect against ratepayers subsidize another. 41 whom BLACKMUN join, dissenting. 42 issues: not. whether, treating project given, high expensive agree portions suggesting error. 984-985 (1987). second-guess analogous refused allow theory it, 972-973, 2359-2360, given completed compelled 43 distinct, utility, simple although determines remains imprudently place. am convinced thus affirm remanding determination. is, complicated one, forces confront apply situation 44 direct response Clause, enacted filled incorporated wholesale/retail providing leaving §§ 824(a) (b)(1); Electric Cooperative 461 377-380, 103 1905, 1908-1910, 76 (1983). Where retailing independent, division undisputed. imprudently. Arizona 61,185 incurred, allows reflect costs; otherwise, costs, wholesaler's stockholders, customers, burden imprudence. Violet not, imprudent, options, 61,349 commissions determine, sources cost. 2359-2360. Thus, bought all. Pike County Pennsylvania Utility 77 Pa.Commw. 268, 273-274, 735, 737-738 short, wholesaler distinct charge purchaser. 696 Interstate pools, difficulties "wholesale" belonging entities ones result, member pool's building powerplant simultaneously seem state-law standards passed hand, reflected charges 46 conclusion cannot, SCALIA's where, occupy. Ante, 380-382. always "entrusted administer." 844, 2782, 842, 2781; 2862, Agencies "administer" confining "entrusted" apply. conflicts committed care, cf. 65, 1642, Chevron, 843-845, 2781-2783; (1984), favor limiting definition, entrusted indeed advancing institutional expanding reasons, Finally, presume fill "gaps" since nature manifests unwillingness freedom define 841-847, 3252-3255, (citing legislative history demonstrating delegated counterclaims adjudicate); 829, (deferring employees' engage concerted activities National Labor Relations Act). surprising deferred 47 plainer prohibiting regulating sphere old 384—385. provides "Federal Regulation [is] extend States," 824(a), "[t]he shall transmission commerce, [with relevant here] energy," 824(b)(1). intent evident face reinforced history, before, shows "constant [the] Connecticut FPC, 324 515, 525-527, 65 749, 753-755, 1150 (1945). S.Rep. 621, 74th Cong., 1st Sess., (1935) ("[T]he policy impair diminish powers commission"); H.R.Rep. 1318, 8, ("The bill takes commissions"). Deference particularly preserve regulators, purposely care regulators. Furthermore, area contemporaneous enactment INS Cardoza-Fonseca, 480 421, 446-447, 30, 107 1207, 1221, 94 434 (1987); 3253. conducting litigation, took position member's 52-66.* has, SCALIA notes, 378-379, inevitably agreement. differs earlier litigation. 61,226, 61,550 49 position. note outset already shaky foundation. after all, builds retails electricity. nonetheless deem internal transfer. tension position, forcing upheld counts. U.S.App.D.C. 258-262, 264-266, 1539-1543, 1545-1547, cert. denied, 484 985, 500, 501, 98 499 Now circle asserting projects, leaves onto them via forced purchases. 50 us, them. Indeed, great deal sense read otherwise parochial incentive States. neutral mediator needed. logically borne increased stockholders. latter traditionally counseling intermediary. Nor, intrapool lies farthest reaches reason allocative expansively encompass traditional purview 51 wholesaler, many factors identical. happens enters medium-cost involve perspective, source. Even overlap, applying integral divest whenever belong pool—a squared (particularly foundation) 387-388. effectively pools span pick choose sell 52 regardless projects retain reverse Louisiana (LP Orleans Service, (NOPSI), L). Prior events rise instant controversy, owned, financed, constructed, operated despite whole, company. 61,305, 61,653 Originally, ANO 2; undertook Waterford 4; 1; near Orleans. incident, serious problems remaining Plans quickly overruns marred 3. site unsuitable responsibility unit, transferred MPSC's Order Granting Certificate Convenience Necessity appreciation dimensions stated, part: "Middle Utilities, ('Middle South') registered Holding 1935. owns outstanding principal subsidiaries: (Arkansas), Arkansas-Missouri (Ark-Mo), (Louisiana), [MP&L], (NOPSI). constitute (Middle System). properties strategically fuel, protection loads controlling economic factors. size basically growth System. [MP L's] capital structure magnitude. "In best investors subsidiaries, adequate dependable Company, unnecessarily complicating financial structure, [Middle Inc.] organized." 27-28, 30-31. estimated $500; time began, amounted $2,933. original estimate Gibson approximately $1.2 billion. requirements Three Mile Island disaster, inflation, ran up $3 billion unit. 250, 1531 Section 205 declares unlawful Stat. 851, amended, 824d(a). 206 hearing "any charge, classification, demanded, observed, collected Commission, rule, regulation, practice, classification unjust, preferential, thereafter observed force, fix order." 824e(a). FPA render reasonable." Industries, U.S.App.D.C., 259-260, F.2d, 1540-1541. Judge Liebman, reviewed "concluded overwhelming Missouri. He initiated load. Therefore, he shared equitably customers" discriminatory." 61,632-61,633 original); 65,106-65,108 proposal submitted equitable. roughly demand, fixed 65,109. percentage slightly higher contained Head, presided involving advocated production demand. "anomaly," reached conclusions system: "[Grand Gulf] planned, licensed, supply throughout [T]he ". [should integrated] having ratio bears demand." 65,172 added). proposition 1973 depend demands owning sufficient needs, "long" "short" Responsibility shift "shorter" "longer." predicted until sometime 1990's, depreciation substantially reduced Bork majority's dissented panel's affirmance specific adequately explain criteria undue discrimination discriminatory. panel voted rehearing, en banc vacated 259 814 773 Later, granting 262 41, 822 1103 At reversed order, reconsideration equalize explanation constitutes 42, 1104 remand, reaffirming explaining Resources, 61,238 pointed secured strength assumptions: operational 1980, $1.227 billion, needed." 984. Reliance assumptions unjustified: "Unit July, 1985; alone, $3.5 billion; MSU-controlled themselves Mississippians 1/3 cost." omitted). Of little us. note, deception MSE. initiated, anticipated enormous virtually nn. 5, supra. constitutionality (Supp.1987) appellate 1257(2). Relying presented, postponed consideration merits. 813, 63, briefs court, challenged 77-3-39; argued called speak express Peralta Heights Medical Center, 485 80, 84, 4, 896, 898, 99 75 (1988). dismiss appeal want However, papers question, "construing petition writ certiorari, petition." Addington Texas, 441 418, 422-423, 1804, 1807, 60 323 (1979); 2103. construed continue refer Peralta, Kulko Superior 436 90, 1690, 1695-1696, 56 132 (1978). "final" 1257 remand. question—whether effect—has, answered ripe Cox Cohn, 420 469, 477, 1029, 1037, 328 (1975). Stern, E. Gressman, S. Shapiro, Practice 129 (6th ed., "trapped" itself responded rescinding previously submit refunding prior recovery expenses. "trapping," stay Pittman, 483 1013, 3247, 97 752 unsuccessfully thorough level judicial 65,113-65,117; 61,643-61,644; 61,943-61,951; 1539-1543. addition arguing inquiry, argue estopped law. acquiring license representations allocated. false made, Brief Appellee 39, bound proceedings, 42; rather, "denied standing enforce represented secure certificate," 43. Representations subvert lacked 268-269, 1549-1550. dissent's "[i]n decision," 388, contradicted passage cited (ALJ) hearings. 52-53, 54, 56, 60, 61, 62, indications address pressed it: "MR. EASTLAND MPSC]: [W]hat you necessarily utilizing "That's we're saying to. "PRESIDING JUDGE: get unless Intervenors raises question. "I mean gas place, screaming practices pipelines initial justness So reasonableness. "But going that—If imprudence behalf I'm VINCE Council (not here) ]: Would your Honor allocation? Not VINCE: Your Honor, perhaps propose step secondly, methodology Okay. alleged imprudency justify unjust unreasonableness "So raising issue? With yes. it's in." 60-62. cites indicated his willingness "prudency issues," ante 379, n., stressed distinction former. 66. (and unclear), certainly demonstrated interpretation,

Classification Label: 7