Court Opinion

ID: 9431416
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:32:15.245606+00
Date Added: 2024-06-11T17:23:28.394699
License: Public Domain

Justice Brennan,
with whom Justice Marshall and Justice Blackmun join, dissenting.
This case involves two separate prudency issues: one is governed by Nantahala Power & Light Co. v. Thornburg, 476 U. S. 953 (1986); the other is not. The first issue is whether the state utility commission has jurisdiction to determine whether, treating appellant’s participation in the Grand Gulf project as a given, it was imprudent for appellant to purchase such a high amount of expensive Grand Gulf power. I agree with the Court that the portions of the Mississippi Supreme Court’s opinion suggesting that the state commission does have this jurisdiction are in error. Mississippi ex rel. Pittman v. Mississippi Public Service Comm’n, 506 So. 2d 978, 984-985 (1987). The State cannot second-guess the prudency of the amount of power purchased because FERC’s order imposed this allocation of power on appellant. The issue is precisely analogous to that decided in *384Nantahala, where a state utility commission setting retail rates refused to allow a utility to recover its full wholesale costs on the theory that the utility should have purchased more low-cost power than it was allocated under a FERC order. Just as in Nantahala the utility’s purchases of high-cost power could not be deemed unreasonably large because the utility could not have purchased any more low-cost power than FERC had allocated it, 476 U. S., at 972-973, so here, given that appellant had entered into and completed the Grand Gulf project, appellant’s purchases of high-cost power could not be deemed unreasonably large because it could not have purchased any less high-cost power than FERC’s allocation order compelled it to purchase.
That issue is distinct, however, from the issue whether, to the extent appellant’s decision to participate in the Grand Gulf project involved the purchase decision of a retail utility, a state utility commission has jurisdiction to review the prudency of that purchase. This issue cannot be resolved by simple reference to Nantahala, for FERC did not order appellant to participate in the Grand Gulf project, and although FERC’s order determines the allocation of the costs incurred in the project, the question remains whether appellant imprudently incurred those costs in the first place. I am convinced that the state utility commission does have jurisdiction over this prudency issue, and thus I would affirm the Mississippi Supreme Court’s judgment remanding for a prudency determination. The question is, however, a complicated one, which forces us to confront the issue of how the normal jurisdictional principles of the Federal Power Act apply to the- rather special situation of an interstate electricity pool.
In direct response to decisions of this Court concluding that, under the Commerce Clause, States can regulate interstate sales of energy at retail but not at wholesale, Congress enacted the Federal Power Act, which filled the regulatory gap and incorporated the wholesale/retail line by providing *385FERC with regulatory jurisdiction over wholesale interstate sales of electricity and leaving retail sales to state regulation. See 16 U. S. C. §§ 824(a) and (b)(1); Arkansas Electric Cooperative Corp. v. Arkansas Public Service Comm’n, 461 U. S. 375, 377-380 (1983). Where retailing and wholesaling utilities are independent, the impact of this wholesale/retail division on federal and state jurisdiction to conduct prudency review is clear and undisputed. FERC has jurisdiction to determine whether a wholesaling utility has incurred costs imprudently. See, e. g., Arizona Public Service Co., 27 FERC ¶ 61,185 (1984). If FERC determines that costs were prudently incurred, it allows the wholesale rates to reflect those costs; otherwise, the wholesale rates cannot reflect those costs, and the wholesaler’s stockholders, rather than its customers, must bear the burden of the utility’s imprudence. See, e. g., Violet v. FERC, 800 F. 2d 280 (CA1 1986). FERC does not, however, have jurisdiction to determine whether it might be imprudent, given other purchasing options, for a retailing utility to purchase power at the FERC-approved wholesale rate. See, e. g., Southern Company Services, Inc., 28 FERC ¶61,349 (1984). The state utility commissions have jurisdiction to determine, for example, that the retail utility does not need the power or could ob-' tain power from other sources at a lower cost. Nantahala, supra, at 972. Thus, although a state utility commission cannot decide that a retail utility should have bought wholesale power from a given source at other than the FERC-approved wholesale rate, it can decide that the utility should not have bought power from that source at all. See, e. g., Pike County Light & Power Co. v. Pennsylvania Public Utility Comm’n, 77 Pa. Commw. 268, 273-274, 465 A. 2d 735, 737-738 (1983). In short, the reasonableness of charging a rate as a wholesaler is distinct from the reasonableness of incurring that charge as a purchaser. See, e. g., Appeal of Sinclair Machine Products, Inc., 126 N. H. 822, 498 A. 2d 696 (1985).
*386Interstate electricity pools, however, present special difficulties for the wholesale/retail division of jurisdiction because the “wholesale” transaction is from the pool to the utilities belonging to the pool, and thus the entities wholesaling the power are the same ones purchasing and retailing that power. As a result, a member utility’s decision to participate in the pool’s building or operation of a powerplant is simultaneously a decision to purchase the power generated by that plant. The purchasing aspects of such a decision would seem to be within the jurisdiction of state utility commissions to determine whether a retail utility’s decision to purchase power is prudent under state-law standards before those purchase costs can be passed on to retail customers. On the other hand, FERC would seem to have jurisdiction to determine the prudency of incurring these building or operation costs in order to determine whether those costs can be reflected in the wholesale rates the pool charges the member utilities.
If agency deference applied, I would conclude that these prudency issues are sufficiently intertwined that we should defer to FERC’s conclusion that it has exclusive jurisdiction to determine all prudency issues concerning the participation of a retail utility in an interstate pool. I cannot, however, agree with Justice Scalia’s conclusion that courts must defer to an agency’s statutory construction even where, as here, the statute is designed to confine the scope of the agency’s jurisdiction to the areas Congress intended it to occupy. Ante, at 380-382. Our agency deference cases have always been limited to statutes the agency was “entrusted to administer.” Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844 (1984); see also id., at 842; Japan Whaling Assn. v. American Cetacean Society, 478 U. S. 221, 233 (1986); Chemical Manufacturers Assn. v. Natural Resources Defense Council, Inc., 470 U. S. 116, 125 (1985). Agencies do not “administer” statutes confining the scope of their jurisdiction, and such statutes are not “en*387trusted” to agencies. Nor.do the normal reasons for agency deference apply. First, statutes confining an agency’s jurisdiction do not reflect conflicts between policies that have been committed to the agency’s care, cf. City of New York v. FCC, 486 U. S. 57, 65 (1988); Chevron, supra, at 843-845; Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691, 700 (1984), but rather reflect policies in favor of limiting the agency’s jurisdiction that, by definition, have not been entrusted to the agency and that may indeed conflict not only with the statutory policies the agency has been charged with advancing but also with the agency’s institutional interests in expanding its own power. Second, for. similar reasons, agencies can claim no special expertise in interpreting a statute confining its jurisdiction. Finally, we cannot presume that Congress implicitly intended an agency to fill “gaps” in a statute confining the agency’s jurisdiction, Chevron, supra, at 843-844, since by its nature such a statute manifests an unwillingness to give the agency the freedom to define the scope of its own power. Cf. Commodity Futures Trading Comm'n v. Schor, 478 U. S. 833, 841-847 (1986) (citing statutory language and legislative history demonstrating that the agency was delegated broad authority to determine which counterclaims to adjudicate); NLRB v. City Disposal Systems, Inc., 465 U. S. 822, 829 (1984) (deferring to agency interpretation of statute defining the scope of employees’ right to engage in concerted activities under the National Labor Relations Act). It is thus not surprising that this Court has never deferred to an agency’s interpretation of a statute designed to confine the scope of its jurisdiction.
In this case, it could not be plainer that the statutes at issue were designed to confine the scope of FERC’s jurisdiction by prohibiting FERC from regulating matters within the sphere of authority States had to regulate retail utilities under our old Commerce Clause cases. See supra, at 384-385. The Act provides that “Federal Regulation [is] to extend only to those matters which are not subject to regula*388tion by the States,” 16 U. S. C. § 824(a), and that “[t]he provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but [with an exception not relevant here] shall not apply to any other sale of electric energy,” 16 U. S. C. § 824(b)(1). The intent evident from the face of the statute is only reinforced by the legislative history, which, as we have noted before, shows a “constant purpose to protect . . . [the] authority of the states.” Connecticut Light & Power Co. v. FPC, 324 U. S. 515, 525-527 (1945). See also S. Rep. No. 621, 74th Cong., 1st Sess., 48 (1935) (“[T]he policy of Congress [is]. . . not to impair or diminish the powers of any State commission”); H. R. Rep. No. 1318, 74th Cong., 1st Sess., 7, 8, 27 (1935) (“The bill takes no authority from State commissions”). Deference is particularly inappropriate where, as here, the statute is designed not merely to confine an agency’s jurisdiction but to preserve the jurisdiction of other regulators, for Congress could not have intended courts to defer to one agency’s interpretation of the jurisdictional division where the policies in conflict have purposely been committed to the care of different regulators.
Furthermore, FERC’s statutory construction in this area has not been consistent and was not contemporaneous with the enactment of the Federal Power Act. See generally INS v. Cardoza-Fonseca, 480 U. S. 421, 446-447, n. 30 (1987); Schor, supra, at 844-845. In conducting this litigation, FERC originally took the position that it had no jurisdiction over-the prudence of a pool member’s purchase decision and over whether the costs could be passed on to retail customers. App. to Motion to Dismiss 52-66.* Since then *389FERC has, as Justice Scalia notes, ante, at 378-379, issued an opinion concluding that in regulating an integrated interstate pool, FERC’s determination regarding the prudence of a wholesaler’s costs inevitably determines the prudence of the wholesale purchase and the decision to enter into a pooling agreement. But FERC specifically noted in that opinion that its present conclusion differs from the position it took earlier in that very litigation. AEP Generating Co., 36 FERC ¶ 61,226, p. 61,550 (1986).
I thus examine the jurisdictional issue without any special deference to the agency’s position. I note at the outset that FERC’s position rests on an already shaky jurisdictional foundation. FERC does not, after all, have any jurisdiction over a utility that simply builds its own generating facility and retails the electricity. FERC nonetheless asserts jurisdiction over transactions between a pool’s generating facility and the utilities belonging to the pool on the theory that the pool and the member utilities are sufficiently separate to deem the transaction a wholesale transaction rather than an internal transfer. In some tension with this position, it then asserts jurisdiction to allocate power in a way that forces purchases from the pool on the theory that the member utilities are sufficiently integrated in the pool so that it is merely allocating costs rather than forcing purchases on retail utilities. The United States Court of Appeals for the District of Columbia Circuit upheld FERC’s jurisdiction on both counts. Mississippi Industries v. FERC, 257 U. S. App. D. C. 244, 258-262, 264-266, 808 F. 2d 1525, 1539-1543, 1545-1547, cert. denied, 484 U. S. 985 (1987). Now FERC seeks to complete the jurisdictional circle by asserting that the state *390utility commissions do not even have the authority to question whether retail utilities have made imprudent purchase decisions by deciding to participate in pool projects, even though those decisions are what leaves the retail utilities in the position to have part of the incurred costs allocated onto them by FERC via forced purchases.
The jurisdictional decisions of the United States Court of Appeals for the District of Columbia Circuit are not before us, and I do not question them. Indeed, it makes a great deal of sense to read the statute as allowing FERC to exercise jurisdiction over the allocation of costs among interstate pool members because otherwise every state commission would have a parochial incentive to claim that the costs must be imposed on the utilities located in other States. A neutral federal mediator is needed. The issue of allocation is logically distinct, however, from the issue whether the costs allocated to a particular utility should be borne by the retail customers, through increased rates, or by the utility’s stockholders. The latter issue is the type over which States traditionally exercise jurisdiction, and there are no special reasons counseling for a neutral federal intermediary. Nor, given that FERC’s asserted authority to force intrapool purchases by retail utilities already lies at the farthest reaches of its jurisdiction, is there any reason to read this allocative authority expansively to encompass matters within the traditional purview of the States.
To be sure, in regulating the wholesale rates of an integrated interstate pool and determining the prudence of the costs the pool incurred as the wholesaler, FERC will examine many of the same factors a state utility commission would examine in reviewing the prudence of the decision to purchase that is part of entering into and continuing a pool project. But the issues are not identical. For example, if one retail utility happens to have a low-cost source and enters into an agreement to build a medium-cost plant, the construction of the medium-cost plant may not involve any impru*391dently incurred costs from the wholesaling perspective, but the medium-cost purchase would be imprudent for the retail utility with the low-cost source. Even to the extent the prudency issues do overlap, I see no reason why FERC’s review should bar States from applying state-law standards of prudency to the purchase decisions that are an integral part of a member retail utility’s participation in an interstate pool. FERC’s interpretation of the Act would divest States of authority to determine the prudence of costs incurred by retail utilities whenever those utilities belong to an interstate pool — a result that I do not think can be squared (particularly given FERC’s shaky jurisdictional foundation) with the clear intent of Congress to preserve the authority of States to regulate retail utilities. See supra, at 387-388. Moreover, allowing only FERC review of interstate pool decisions would effectively allow retail utilities that either belong to interstate pools or span more than one State to pick and choose between state and federal regulation by deciding whether to form subsidiaries to operate their generating facilities and sell them “wholesale” electricity.
I thus conclude that regardless of FERC’s jurisdiction to allocate incurred costs among member utilities and regardless of its jurisdiction to review the prudency of an interstate pool’s projects in order to set wholesale rates for intrapool transactions, state utility commissions retain jurisdiction to determine whether incurring those costs involved prudent purchase decisions that can be passed on to retail customers. I thus dissent from the Court’s decision to reverse the Mississippi Supreme Court’s judgment remanding for a prudency determination.

 Although Justice Scalia cites language from the Administrative Law Judge (ALJ) hearing demonstrating that the ALJ indicated his willingness to address certain “prudency issues,” ante at 379, n., the ALJ stressed throughout the hearing the distinction between prudency issues relevant to setting wholesale rates and issues regarding the prudency of power pur*389chases and their effect on retail rates, and stated several times that he and FERC would and could only address the former. App. to Motion to Dismiss 61, 63, 66. At any rate, regardless of FERC’s position in this case (and it was at best unclear), FERC has certainly not demonstrated a consistent agency interpretation, nor one that was contemporaneous with the enactment of the Federal Power Act.