Court Opinion

ID: 2821181
Source: CourtListenerOpinion
Date Created: 2015-07-29 03:29:26.512023+00
Date Added: 2024-06-11T12:11:49.271401
License: Public Domain

Concurring opinion issued July 28, 2015

                                  In The

                            Court of Appeals
                                  For The

                        First District of Texas
                         ————————————
                           NO. 01-12-00470-CV
                         ———————————
  ENTERGY CORPORATION, ENTERGY SERVICES, INC., ENTERGY
   POWER, INC., ENTERGY POWER MARKETING CORPORATION,
 ENTERGY ARKANSAS, INC., AND ENTERGY TEXAS, INC., Appellants
                                    V.
 DAVID JENKINS, GEORGE W. STRONG, FRANCIS N. GANS, AND
GARY M. GANS, INDIVIDUALLY AND ON BEHALF OF ALL PERSONS
               SIMILARLY SITUATED, Appellees

                  On Appeal from the 344th District Court
                        Chambers County, Texas
                      Trial Court Case No. CV20666

                    CONCURRING O P I N I O N
      I concur in the judgment of this Court, but write separately because I believe

that FERC’s exclusive jurisdiction has expanded since Jenkins I was decided and

now encompasses the dispute before us.

                               FERC’s Jurisdiction

      Under the Federal Power Act (“FPA”), FERC has exclusive jurisdiction of

the wholesale sale or transmission of electricity in interstate commerce. See 16

U.S.C. § 824(a), (b)(1); Entergy La., Inc. v. La. Pub. Serv. Comm’n, 539 U.S. 39,

41 (2003).    FERC’s jurisdiction encompasses the determination of just and

reasonable rates—including all classifications, practices, regulations, and contracts

affecting rates, as well as the authority to hear complaints that an existing rate (or

associated charge, classification, rule, regulation, practice or contract) is unjust,

unreasonable, unduly discriminatory or preferential. See 16 U.S.C. §§ 824d, 824e.

Many aspects of the interstate “transmission” or “sale” of wholesale energy fall

within FERC’s exclusive jurisdiction. See Jenkins v. Entergy Corp., 187 S.W.3d
785, 802 (Tex. App.—Corpus Christi 2006, pet. denied) (“Jenkins I”). One such

aspect over which FERC exercises its jurisdiction is power allocation that affects

wholesale rates. See Miss. Power & Light Co. v. Miss. ex rel. Moore, 487 U.S.
354, 371 (1988).

      The Jenkins I court considered Entergy’s argument that FERC jurisdiction

was exclusive because the federal tariff at issue—the Entergy Systems Agreement

                                          2
(“ESA”)—provided a centralized control mechanism for purchases of power by the

participating Entergy companies. See Jenkins, 187 S.W.3d at 802. The court

reviewed the portions of the agreement cited by Entergy which reflected the

following: (1) the companies, with the consent of or under conditions specified by

the operating committee, may agree to purchase capacity or energy from outside

sources and if purchased by the operating company, shall be allocated amongst the

companies in any manner mutually agreeable to them; (2) the operating committee

may purchase energy under economic dispatch or emergency conditions; (3) the

operating committee is to ensure the continuous supply or capacity of energy,

provide for and coordinate safe dispatching, the proper distribution of reserves,

coordinate negotiations for the interchange and sale of power and energy,

including the sale and delivery to others on a profitable basis of power and energy

not required for system purposes, and to secure power from external sources as

may be required or will result in savings to the companies; and (4) the operating

committee shall determine availability of energy for purchase from or sale to

outside systems in an economical manner.        See id. at 806.    The court then

concluded that the system allowed the broad exercise of discretion and that “FERC

has specifically declined to consider the prudency or wisdom of a purchaser’s

choices between available power supply options, or whether a purchaser ‘has made

the best deal available.’” Id. (citing Pa. Power and Light Co., 23 FERC ¶ 61,325

                                        3
at 61,716 (1983) and Cent. Vt. Pub. Serv. Corp., 84 FERC ¶ 61,194 at 61,975

(1998)).

      In the cited case, Pennsylvania Power and Light Co., FERC stated, with

respect to its own jurisdiction, “We do not view our responsibilities under the

Federal Power Act as including a determination that the purchaser has purchased

wisely or has made the best deal available.” Pa. Power & Light Co., 23 FERC ¶

61,325 at 61,716 (1983). The Jenkins I court also referred to Central Vermont

Public Service Corp., in which the Commission cited Pennsylvania Power and

Light Co. and noted that “[FERC] has consistently recognized that wholesale

ratemaking does not, as a general matter, determine whether a purchaser has

prudently chosen from among available supply options.” Cent. Vt. Pub. Serv.

Corp., 84 FERC ¶ 61,194 at 61,975 (1998) (citing Pa. Power & Light Co., 23

FERC ¶ 61,325 at 61,716). Noting that “[t]hat is exactly what appears to be in

issue here,” the Jenkins I court concluded that FERC had not exercised jurisdiction

over this case. Jenkins, 187 S.W.3d at 805, 807.

      However, in the years since Jenkins I was decided, FERC has begun to

exercise its jurisdiction over complaints that Entergy imprudently operated its

centralized purchasing system by relying on its own power generation rather than

purchasing cheaper power from third parties. See Entergy Servs. Inc., 128 FERC ¶

63,015 (2009), aff’d in part, rev’d in part, 137 FERC ¶ 61,029 (2011); Entergy

                                        4
Servs. Inc., 124 FERC ¶ 63,026 (2008), aff’d in part, rev’d in part, 130 FERC

¶ 61,023 (2010), La. Pub. Serv. Comm’n v. Entergy Corp., 139 FERC ¶ 61,240

(2012). These regulatory decisions are the “changed circumstances” that plaintiffs

acknowledged might cause state court jurisdiction to give way.1 They also address

the statement in Jenkins I that FERC has “declined to consider the prudency or

wisdom of a purchaser’s choices between available power supply options . . . .”

Jenkins, 187 S.W.3d at 806.

      In Entergy Services, Inc., 128 FERC ¶ 63,015 (2009), aff’d in part, rev’d in

part, 137 FERC ¶ 61,029 (2011), the Commission considered, among other issues,

whether Entergy had “imprudently established [its] minimum capacity generation

levels for its generating units for making commitment and dispatch that exceed

actual minimum capacity values, thus decreasing the potential savings from off-

system purchases from merchants . . . .” Id. at ¶¶ 178–84. In its ruling on the

issue, FERC stated:

      As noted above, in its initial evidentiary filing, the Louisiana [Public
      Service Commission] raised the possibility that Entergy was not
      operating its generation units in a prudent manner. Entergy responded
      by explaining why its operations were prudent. At the hearing, [] the
      Louisiana PSC witness who first questioned Entergy’s operation,

1
      In its Brief for Respondents in Opposition to Petitioners’ Application for Writ of
      Certiorari to the United States Supreme Court, Jenkins stated, “Thus, it appears
      that, if petitioners were to seek a FERC determination that respondents’ complaint
      raises matters within its jurisdiction, and FERC decided to address those
      questions, state court jurisdiction might ultimately give way.”
                                          5
       testified that he could find no evidence supporting his initial allegation
       ....

       In view of the above, I find that the Louisiana PSC failed to carry its
       burden of proof on this issue.

Id. at ¶¶ 183–184.

       Jenkins argues that because Louisiana PSC failed to present evidence and

FERC made no findings on the issue, this case “does not reach, much less cover,

[Jenkins’s] claims.” The fact that FERC found that Louisiana PSC had failed to

carry its burden of proof before it is an evidentiary finding. The Commission’s

consideration of the issue and subsequent ruling constitute an exercise of FERC’s

jurisdiction over Entergy’s decisions to generate or purchase power from third

parties—the very decisions at issue here.

       In Entergy Services Inc., 124 FERC ¶ 63,026 (2008), aff’d in part, rev’d in

part, 130 FERC ¶ 61,023 (2010), the Commission considered Louisiana PSC’s

claim that Entergy had acted imprudently in deciding not to purchase one of its

generation units. See id. at ¶ 280. The administrative law judge (“ALJ”) found

that Louisiana PSC had failed to raise serious doubts of imprudence and that, even

if it had, Entergy’s evidence rebutted that position and established that “Entergy

has reasonably operated its system so as to minimize production costs, and to

maintain reliability . . . .” Id. at ¶ 317.

                                              6
      In its brief, Jenkins first notes that Entergy failed to cite the subsequent

opinion in which the full Commission rejected Entergy’s request that the ALJ’s

general finding regarding Entergy’s purchasing decisions bar prudence claims

raised in the future.2 Jenkins then concludes that the original decision “does not

affect any of the Jenkins [I] court’s conclusions.” However, this FERC decision

explicitly addresses the Entergy System’s purchasing decisions. The Commission

determined that Louisiana PSC had failed to satisfy its evidentiary burden which

bears directly on the issue of whether FERC has exercised jurisdiction over the

subject matter. This case is another instance in which FERC has asserted its

jurisdiction over Entergy’s purchasing practices and the prudence of its

decisions—the very subject matter of Jenkins’s claims.

      In a third case, Louisiana Public Service Commission v. Entergy Corp., 139

FERC ¶ 61,240 (2012), FERC considered a complaint that an Entergy company

had engaged in imprudent conduct by selling inexpensive Entergy-generated power

to third-party marketers. Id. at ¶ 1–2. The ALJ found that the company had acted

imprudently, in violation of the ESA, and ordered refunds. See id. This decision is

2
      In the Initial Decision, the ALJ found that Entergy “historically has generally
      purchased power, including economy energy, from third parties instead of running
      its own facilities when it is economic to do so and is consistent with operational
      and reliability requirement[s].” Id. at ¶ 668 (footnote omitted). The full
      Commission subsequently rejected Entergy’s request that it find future prudence
      claims barred by res judicata. Entergy Servs., Inc., 130 FERC ¶ 61,023, at ¶ 70.

                                          7
another example of FERC exercising its jurisdiction over claims that Entergy

engaged in imprudent operating practices.3

      The Jenkins I court presciently recognized that “FERC jurisdiction could

potentially expand to encompass this dispute . . . .” Jenkins, 187 S.W.3d at 807. In

light of the decisions discussed above, it is clear that it has done so. If FERC

exercises jurisdiction over a particular issue, then under the FPA regulatory

scheme, it has exclusive jurisdiction. See Miss. Power & Light Co., 487 U.S. at

374, 108 S. Ct. at 2440 (concluding states may not regulate in areas where FERC

has properly exercised its jurisdiction to determine just and reasonable wholesale

rates or to insure that agreements affecting wholesale rates are reasonable). Given

these changed circumstances, we are not bound to follow the decision in Jenkins I.

See Briscoe v. Goodmark Corp., 102 S.W.3d 714, 716 (Tex. 2003). I believe these

decisions demonstrate that FERC has preemptive jurisdiction over Jenkins’s

claims. Accordingly, I join the majority opinion.

3
      Jenkins points out that, during the proceedings of that case, Entergy argued that
      the matters at issue did not raise the same issues as those before the Louisiana PSC
      in Delaney v. Entergy Louisiana, Inc., Docket No. U-23366 (La. P.S.C. 2000), in
      which Louisiana asserted claims similar to Jenkins’s claims here. Jenkins then
      notes that FERC agreed with Entergy, and that FERC’s discussion of Delaney,
      which included no criticism of Louisiana’s exercise of jurisdiction in that case, “is
      clear evidence that claims like Plaintiffs’ in this case bear no relevance to the
      proceedings before FERC.” The Delaney decision was issued in 2000—six years
      before Jenkins I and well before the FERC decisions discussed here.
                                            8
                                            Russell Lloyd
                                            Justice

Panel consists of Justices Keyes, Huddle, and Lloyd.

Justice Lloyd, concurring.

                                        9