Court Opinion

ID: 9742736
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:19:17.823398+00
Date Added: 2024-06-11T07:24:35.761151
License: Public Domain

Lynch, J.
(dissenting). The Federal Power Act extends the scope of Federal regulatory jurisdiction “to the sale of electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824 (b) (1) (1982). However, Congress did not limit jurisdiction to sellers at wholesale, but rather conferred jurisdiction over wholesale transactions. See, e.g., Panhandle E. Pipe Line Co. v. Public Serv. Comm’n, 332 U.S. 507, 516-518 & nn. 13, 14 (1947); Appeal of Sinclair Mach. Prods., Inc., 126 N.H. 822, 829 (1985).
Because Congress evidenced “an intent to occupy” the field of wholesale transactions, inquiries relating to the prudence of such transactions (whether focusing upon buyer or seller) would be preempted, Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm’n, 461 U.S. 190, 203-204 (1983), were it not for the fact that Congress has given FERC the power to leave areas of its jurisdiction1 to the States. Arkansas Elec. Coop. v. Arkansas Pub. Serv. Comm’n, 461 U.S. 375, 383-385 (1983). FERC has unequivocally adopted the policy that issues of purchaser prudence are best left to the States, and has repeatedly withheld the assertion of jurisdiction over such questions. Consolidated Gas Co. of Fla., Inc. v. *383Florida Gas Transmission Co., 28 F.E.R.C. par. 61,350 (1984). Southern Co. Servs., Inc. 26 F.E.R.C. par. 61,360 at 61,795 (1984). Pennsylvania Power & Light Co., 23 F.E.R.C. par. 61,006 at 61,019 (1983). Philadelphia Elec. Co., 15 F.E.R.C. par. 61,264 at 61,601 (1981). Compare Eastern Edison Co. v. Department of Pub. Utils., 388 Mass. 292 (1983). FERC’s decision to leave purchaser prudence issues to the respective State commissions is predicated on the fact that the Federal Power Act only empowers FERC to review wholesale transactions for justness and reasonableness: a just and reasonable purchase may not be optimal.2 However, FERC could choose to review wholesale purchases for justness and reasonableness and preclude further State review of the wholesale transaction on any ground.
It follows therefore that State review of purchaser prudence is limited. “[M]atters actually determined, whether expressly or impliedly, by the FERC” are clearly preempted. Appeal of Sinclair Mach. Prods., Inc., supra at 833. Eastern Edison Co. v. Department of Pub. Utils., supra at 298-302. Even when FERC has chosen to leave purchaser prudence inquiries to the States, it has limited those inquiries. In Pennsylvania Power & Light Co., supra at 61,019, FERC stated:
“However, we note that power supply arrangements are often negotiated on a long-term basis. It requires many years to build a generating plant and the building utility must be able to rely on long-term sales contracts in making its own capacity plans just as the purchasing utility must be able to rely on long-term contracts for stability of supply. Demand forecasts may change dramatically and *384quickly, as we have seen in recent years. The prudence of a sales arrangement, therefore, should be judged on the circumstances prevailing at the time such a contract is entered into. If a State commission, this Commission, or a utility itself could release a party to a contract from its contractual commitments simply because the contract, based on hindsight and demand forecasts in later years, no longer appears economical, the utility industry would have no supply stability or reliable basis for constructing plant. We therefore suggest that evaluation of the prudence of a 1979 power contract on the basis of 1982 demand forecasts is neither fair nor appropriate. Thus, while we commend the New Jersey Board for its concern in protecting the ratepayers within its jurisdiction, we do not believe that this protection can be at the expense of Pennsylvania ratepayers and utilities. The latter are entitled to rely on the fact that New Jersey utilities will honor their contractual commitments to purchase capacity built at least partly to fulfill their contractual demand.”
Thus, FERC has made it clear that the prudence of entering a wholesale purchase contract at a particular purchase price level should be judged, not on hindsight but rather from the point of view of the time of the contract. Similarly, the prudence of entering into such a contract with particular provisions allocating operating/service responsibilities and risk of supply failure should not be judged on hindsight.
The majority, I submit, err in two ways. First, it was incumbent on the DPU to review the FERC order3 approving the agreement (F.P.C. Docket No. E-8138) to insure that FERC had not expressly or impliedly determined that the agreement was just and reasonable from the point of view of Commonwealth Electric. Because the DPU order, D.P.U. 1003-G-6, supra, did not consider that FERC order at all, the case should be remanded for consideration of that order. Second, the DPU held Commonwealth Electric imputedly liable for the subsequent *385imprudent acts of Boston Edison based on the policy, which the majority recognizes, ante at 368-369, that the form of the contract should not allow a company to limit its responsibility for providing service at the lowest possible cost since that would create “an untoward incentive for utilities to establish ownership forms that exempt them from liability.” D.P.U. 1003-G-6, supra at 18 n. 1. A categorical policy that accepting a contract which places the cost of the risk of supply failure on the ratepayers is imprudent ignores the myriad of factors which may or may not make entering such a bargain a prudent alternative at the time it is entered into. The DPU order does not consider the then available alternatives, in light of the purchase price, and therefore does not provide sufficient factual support for the conclusion that Commonwealth Electric was imprudent at the time it entered into the contract. The DPU order does not demonstrate, as it must, that that categorical policy, as applied in this case, did not introduce an element of impermissible hindsight. I therefore dissent. I would not reach the other objections raised by the plaintiff. I would remand the case to the DPU for action consistent with these two preemption precepts.

 Of course, FERC cannot delegate its jurisdiction to regulate in violation of the Federal Power Act nor, apart from that act, can States be given the power to regulate in violation of the commerce clause’s “implied limitation on the power of the States to interfere with or impose burdens on interstate commerce.” Western & S. Life Ins. Co. v. State Bd. of Equalization, 451 U.S. 648, 652 (1981). See Arkansas Elec. Coop. v. Arkansas Public Serv. Comm’n, 461 U.S. 375, 389 (1983).

 Thus, Pike County Light & Power Co. v. Pennyslvania Pub. Util. Comm’n, 77 Pa. Commw. 268, 273 (1983), and Spence v. Smyth, 686 P.2d 597 (Wyo. 1984), which hold that FERC has no power under the Federal Power Act to preempt State purchaser prudence inquiries are plainly wrong. Appeal of Sinclair Mach. Prods., Inc. 126 N.H. 822, 830-833 (1985), in citing both of those cases was careful not to rule out categorically the assertion of FERC jurisdiction, and articulated the rule that preemption only extends automatically to “those matters actually determined, whether expressly or impliedly, by the FERC” (emphasis in original).

 That order is not in the record.