Legal Document

476 U.S. 953 106 S.Ct. 2349 90 L.Ed.2d 943 NANTAHALA POWER AND LIGHT COMPANY, et al., Appellantsv.Lacy H. THORNBURG, Attorney General of North Carolina, al. No. 85-568. Argued April 21, 1986. Decided June 17, Syllabus Appellants Nantahala Power & Light Co. and Tapoco, Inc., are wholly owned subsidiaries appellant Aluminum America (Alcoa). Each owns hydroelectric powerplants on the Little Tennessee River, which Valley Authority operates in exchange for providing them jointly with a fixed supply low-cost "entitlement power." In addition, buys variable amount high-cost "purchased power" from TVA's power grid. Tapoco sells all its to an Alcoa plant Tennessee, serves public customers Carolina. For purpose calculating rate be charged Nantahala's retail customers, Carolina Utilities Commission (NCUC) issued order allocating entitlement purchased between that differs allocation ordered by Federal Energy Regulatory (FERC) wholesale ratemaking proceeding. The NCUC's resulted request raise intrastate rates. Supreme Court affirmed order. Held: purchase is pre-empted federal law. Pp. 962-972. (a) FERC has exclusive jurisdiction over rates interstate customers. Once sets such rate, State may not conclude setting FERC-approved unreasonable. Rather, must give effect Congress' desire plenary authority rates, ensure States do interfere this authority. "filed rate" doctrine, under filed or given binding state utility commissions determining limited "rates" per se. Here, FERC's decision directly affected it include source power, required accordance allocation. therefore presumptively entitled more than negligible weight NCUC. 962-967. (b) should have included low-cost, FERC-regulated fact can order, runs counter cannot withstand pre-emptive force. Moreover, impermissibly interferes scheme regulation. Since Congress intended ratemakings pre-empt any inconsistent ratemakings, rather effect. 967-972. 313 N.C. 614, 332 S.E.2d 397, reversed remanded. 1 O'CONNOR, J., delivered opinion Court, other Members joined, except POWELL STEVENS, JJ., who took no part consideration case. 2 Rex E. Lee, Washington, D.C., appellants. 3 Louis R. Cohen, U.S., as amicus curiae, special leave Court. 4 William T. Crisp, Raleigh, N.C., appellees. 5 Justice O'CONNOR 6 Company (Nantahala) Inc. (Tapoco), both each own River. Almost they produce goes (TVA). allowing TVA pour into grid quantity produced Tapoco's facilities, receive TVA. Alcoa; 7 purposes whom chose adopted upheld We noted probable decide whether stand light ruling. 474 1018, 565, 88 550 (1985). hold 8 * A. 9 This case involves number agreements, concern Under New Fontana Agreement (NFA), TVA, parties, facilities 11 dams Nantahala. operated varies magnitude fullness harnessed streams. NFA gives right exchange, provides constant annual 1.8 billion kilowatt-hours year. file schedule. Co., 19 ¶ 61,152, p. 61,274 (1982). 10 1971 Apportionment (AA), 1.44 year remaining 0.36 AA allocates 80% 20% was 1980 appendix proposed schedule FERC. Id., at 61,275. Purchase additional generated nonhydroelectric plants, generally expensive way electricity generation used power. As result, about three times generate does itself although purchases some uses equipment obtain 12 only customer Alcoa, while various sales governed FERC-filed set B 13 1976, increase FERC, 16 U.S.C. § 824(b). See also §§ 824d, 824e. determine "just reasonable" 824d(a), specified procedures for, limitations on, filing approved 824d(c), (d), (e). 14 1978, town Highlands (Highlands), Nantahala, complaint 824e(a). alleged had violated Act diverting, Alcoa's private use, dedicated service. intervened support Highlands' position behalf Because proceedings concerning eventually involved allegations costs been unreasonably increased misuse corporate form, consolidated two resolved May 1982. 61,152. 15 asked treat commonly single entity purposes, "roll in" their separate same base: "Highlands contends because commingled assets liabilities NFA, possible derive rational method apportioning benefits basis rolled-in cost asks [FERC] pierce veil utilities one aside [AA], develop service basis, establish interconnection Highlands." 17 acknowledged entities disregarded when subvert clear legislative intent. Schenley Distillers Corp. v. United States, 326 432, 437, 66 247, 249, L.Ed. 181 (1946) (per curiam). Telephone 449 F.2d 846, 855 (CA5 1971). Nonetheless, declined veil. particular history well current separation management, led could "find identities frustrate Act, companies operate integrated system." 61,277. 18 concluded "the result arms' length bargaining." 61,278. found AA, contrast, unfair relinquished certain received earlier agreement but apparently obtained compensation relinquishment. most equitable division entitlements would portion proportionate utility's actual contribution turned TVA." 22.5% estimation, allocated AA. 61,280. stated did "reform" "provide will just reasonable customers." Ibid. revised decision, refund excess amounts collected. September 1982, denied rehearing opinion. attempted introduce new evidence take fuller account differences kind best suited Tapoco. (Nantahala residential needs continuous, predictable supply. industrial customer—Alcoa requires minimum time efficiently, periodically cease operations if sufficient available.) refused consider submission evidence: "In . ., choose reform [AA] concerned mechanics how energy party, long party receives fair share based party's Our proper entitlement. entered a[n] we find unfair. company make otherwise made. bear consequences acts collected recover purchases." 20 61,430, 61,871 appeal Appeals Fourth Circuit. 727 1342, 1348 (1984). 21 direct bearing case, before us NCUC That jurisdiction. Some intervened. 22 contrast decided were "single, electric system," that, "for proceeding, systems treated respect matters affecting determination applicable operations." App. Juris. Statement 182a. 23 there extensive "concealed benefits" "extensive injustice" thereby resulted. 183a-197a. Similarly, concealed injustices resulting NFA. appropriate "reject [Tapoco's Nantahala's] methodology said material respects upon Tapoco-Nantahala Agreement." 205a. id., 215a. 24 instead roll-in intervenors, pooled sources available then according demand. pool Tapoco- Nantahala-owned despite gave lesser pool, excluded After accounting assumed transmission losses, calculated system 1.85 kilowatt-hours. 220a. 25 demand (from customers) approximately 0.45 Dividing produces ratio 24.5%. total system. 220a-221a. 26 differentially allocate Approximately 24.5% 75.5% Among course, therefore, calculate though expressly rejected fairness employed nowhere takes 27 here challenged courts. decision. admirably thorough myriad issues it, neither Supremacy nor Commerce Clause. ex rel. Comm'n. 397 It 686-687, S.E.2d, 440. nonetheless NCUC, deciding prevent recovering failure reach "well within field making engendered 'bright line' regulatory Act." 687-688, 441. emphasized disobey FERC: 28 "[NCUC's] examination undertaken effort either modify agreements reducing [NCUC] remedy reforming these award level nothing contained [NCUC's] purports change word several contracts involved, flow thereunder." 688, 440-441. 29 utilities' statutory pre-emption arguments rested misconception ruled 693, 444. Finally, court determined actions placed excessive burden commerce. 710-718, 454-458. II 30 argue Court's pertinent holds assert allocation, affirmance 31 developed doctrine genesis Montana-Dakota Northwestern Public Service 341 246, 251-252, 71 692, 695, 95 912 (1951). There, examined predecessor, (FPC). Montana-Dakota, interlocking directorates joint officers other's FPC reasonable. companies' paid high low provided. complaining laid blame allegedly fraudulent unlawful door previously brought suit court. 32 dismissed claim. Emphasizing reasonableness stated: 33 "[The company] what joined together. litigate judicial forum general ignoring qualification shall made specific exercise Commission's judgment, considerable element discretion. claim legal merely accepted Commission, even authorize commerce commodity terms. 34 "We files fixes, review orders, assume different ground opinion, one." S.Ct., 695. 35 existence management utilities, fraud, irrelevant: "Perhaps, absence approval, relationship presumption [of fraud] law, so where supervising arrangement." 253, 696. 36 held applies federal-court issue decisions application, rule administrative law designed courts agencies, matter enforcing Arkansas Louisiana Gas Hall, 453 571, 101 2925, 69 856 (1981), example, overturned court's damages breach-of-contract suit, thus allowed charge never FPC: 37 "[U]nder [FPC] alone empowered judgment reasonableness], until done so, charged. below, like [Chicago Western Transp. v.] Kalo Brick [& Tile 450 311, 1124, 67 258 (1981) ], consequently usurped function assigned body. Clause permit." 581-582, 2932. 38 Chicago similarly applied Interstate assisted enforcement supremacy law: 39 "The common rationale cases easily '[T]here divided commerce, subject supreme exclusive.' Missouri Pacific Stroud, 267 404, 408 [45 243, 245, 683] (1925). Consequently, efforts regulate fall conflict activity." 318-319, 1130-31. 40 Maryland Louisiana, 451 725, 2114, 68 576 (1981). 41 Even contexts addressed Gas, supra, many ratemakings. interplay electricity. Narragansett Electric Burke, 119 R.I. 559, 381 A.2d 1358 (1977), cert. denied, 435 972, 98 1614, 56 63 (1978); Eastern Edison Department Utilities, 388 Mass. 292, 446 N.E.2d 684 (1983). Others natural gas prices. Colorado Comm'n, 644 P.2d 933 (Colo.1982); Mississippi 240 Miss. 405, 127 So.2d 404 (1961); City Illinois Ill.2d 607, 150 776 (1958); Citizens Users Assn. Utility 165 Ohio St. 536, 138 383 (1956). contexts, commission prices allow, operating expenses, incurred paying FERC-determined price: 42 "[T]he FPC. [Citing (1951).] '[N]ot terms.' 251 [71 695]. Thus Narragansett, bonded [the supplier], constitutes expense viewed [state commission]." R.I., 566, A.2d, 1362. 43 Edison, Mass., 297-300, N.E.2d, 687-689; 938-940; Corp., Miss., 437-443, So.2d, 418-420; Chicago, Ill.2d, 615-616, 780-781; Assn., St., 538, 384. 44 Many closely related entities, uniformly regulation still 561, 567, 1359, 1362-1363 (retailer subsidiary wholesaler); 293, 685 (same); 442, 418, 420 609, 777, 780-781 100% supplier 70% another). These properly driven need enforce vested rates: 45 "[O]ur squarely view scope case-by-case analysis impact national interest. meant draw bright line ascertained, jurisdiction, unnecessary analysis. extending those explicitly States." Southern California 376 205, 215-216, 84 644, 651, 638 (1964). 46 No explicit exception here. clearly 824(b); England Hampshire, 455 331, 340, 102 1096, 1101, 188 A 47 se: "our inquiry end orders deal terms volumes Northern Natural Kansas Corporation 372 84, 90-91, 83 646, 649-50, 601 (1963). Here affects obtain, 48 aware "state considered question agreed reasonably rate." 443. reject conclusions reliance "misplaced" "to preclude automatically passed through consumers form higher rates." 693-694, interpretation oversimplification, event save action preemption. 49 observed lead Both stated, however, divergence occur decrease. 568, 1363 ("The treats filings investigate overall financial structure experienced savings areas might offset price") (emphasis added); P.2d, 941 ("[The commission] [increase] increases [and] [either companies] price consumers") added). 50 perfectly sensible. If, rises slightly retailer's transformation significantly decline, decrease purchasing increased. But finding indication obtaining decreased, operation dramatically. There assertion Such force 51 appellants' preemption argument "rest[s] faulty premise deemed latter 'unfair' permit base requested While description accurate far goes, bargain one: forth later reformed itself, require new, Indeed, [AA apportionment agreement] affecting, manner, charges Section 205(c) made." 61,280-61,281. reflected substitute conception memorialized simply approve without qualification. 52 acknowledge present typical application middleman faces FERC-fixed supplier. situation, agency disregard fully recognized market, forcing sell less agency. 53 relevant distributor. producing has, contracted control arrangement course document conjunction 77.5% From point view, then, situation quite similar purchaser certain, FERC-specified among license ignore 54 similarity apparent impermissible interference create ensures sellers payment FERC-set When seller wholesaler-as-buyer, undoubted wholesaler-as-seller rate. 964-966 (discussing cases). "trapping" prohibited. stand. 55 Although purport obviously affect directly, Entitlement cheap, dear. (and needed remainder purchased-power rates). prevents full acquiring scheme: procure procuring "trapped." relatively mere mix; lower mix cheap think actually materially alter adjust average unit is, essentially reformation itself. other. By adopting imputes notwithstanding unquestionably exposed "trapped" costs. must, pretend Thus, imposition carries risk underlies doctrine. 57 validity us. agree 61,869, least conceivable validly purposes—for regard constructing facilities. But, formulating customer. respected nonentitlement source, one. 58 Accordingly, erred relying treating of, Pike County Pennsylvania 77 Pa.Commw. 268, 273-274, 465 735, 737-738 (1983); Kansas-Nebraska Kan.App.2d 674, 679-680, 610 121, (1980). Without issue, procured elsewhere, FERC-approved, reasonable, price. felt large availability procurement having access eligible besides Purchased allegation receive. ruling conflicts manner refusal recognize ratemaking. 964-966. 59 disposition makes undue violation reasons reverse remand further 60 Reversed. 61 STEVENS

Classification Label: 9