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Louisiana Public Service Commission v. Federal Energy Regulatory Commission

United States Court of Appeals, Fifth Circuit

August 1, 2014


Page 541

For Louisiana Public Service Commission, Petitioner (13-60140, 13-60141): Michael Fontham, Esq., Noel Joseph Darce, Esq., Stone Pigman Walther Wittmann, L.L.C., New Orleans, LA; Brandon Mark Frey, Louisiana Public Service Commission, Baton Rouge, LA.

For Arkansas Public Service Commission, Intervenor (13-60140, 13-60141): P. Randolph Hightower, Counsel, Arkansas Public Service Commission, Little Rock, AR; Dennis Lane, Stinson Morrison & Hecker, L.L.P., Washington, DC.

For Federal Energy Regulatory Commission, Respondent (13-60140, 13-60141): Carol Jayne Banta, Robert Harris Solomon, Esq., Solicitor, Federal Energy Regulatory Commission, Washington, DC.

For Entergy Services, Incorporated, Intervenor (13-60140, 13-60141): Kathryn Ann Washington, Entergy Services, Incorporated, Legal Services, New Orleans, LA; David Chapman Duggins, Patrick Joseph Pearsall, Mark P. Strain, Duggins Wren Mann & Romero, L.L.P., Austin, TX.

Before WIENER, HAYNES, and HIGGINSON, Circuit Judges.


Page 542

On Petition for Review of Orders of the Federal Energy Regulatory Commission

HIGGINSON, Circuit Judge

In these petitions for review the Louisiana Public Service Commission (the " Louisiana Commission" ) challenges the Federal Energy Regulatory Commission's (" FERC" ) interpretation of contractual language. Holding, among other things, that FERC's interpretation is not arbitrary, unreasonable, or contrary to law, we DENY in part and DISMISS in part the Louisiana Commission's petitions for review.


A. The Entergy System and the System Agreement

Entergy Corporation (" Entergy Corporation" )[1] sells electricity in Arkansas, Louisiana, Mississippi, and Texas through its six operating companies. 120 FERC ¶ 61,079 at PP 1, 3 (2007). The " System Agreement," which was first executed in 1951, governs dealings between the operating companies and establishes an operating committee that comprises representatives from Entergy Corporation and each operating company. La. Pub. Serv. Comm'n v. FERC, 522 F.3d 378, 383, 380 U.S.App. D.C. 353 (D.C. Cir. 2008) (" La. 2008" ). Each operating company accounts for the costs of generation plants in its jurisdiction, and the committee spreads investment costs among the operating companies by assigning new plants on a rotating basis and dispersing costs associated with facilities that benefit the entire Entergy System. Id.; see Entergy La., Inc. v. La. Pub. Serv. Comm'n, 539 U.S. 39, 42, 123 S.Ct. 2050, 156 L.Ed.2d 34 (2003). These efforts ideally achieve a rough equalization of costs among the operating companies.

B. FERC's Regulatory Role

The Federal Power Act (" FPA" ), 16 U.S.C. § § 824-824w, provides FERC statutory authority over the transmission and sale of electric energy at wholesale in interstate commerce. FERC regulates all rates and charges within its jurisdiction by confirming that they are " just and reasonable"

Page 543

and not unduly discriminatory or preferential. § § 824d, 824e; see also New York v. FERC, 535 U.S. 1, 33, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002) (Thomas, J., dissenting) (noting FERC's " statutory mandate to regulate when it finds unjust, unreasonable, unduly discriminatory, or preferential treatment" ). Section 206 of the FPA provides FERC authority to independently investigate rates, § 824d(e), but a complainant may urge FERC to investigate a rate in a Section 206 proceeding. In a Section 206 proceeding the burden is on the complainant to demonstrate that the rate is " unjust, unreasonable, unduly discriminatory, or preferential." § 824e(b). If FERC finds that the rate is unlawful, it must set a just, reasonable, nondiscriminatory rate. § 824e(a).

C. Entergy Louisiana Acquires the Vidalia Power Plant

In 1985, Entergy Louisiana purchased most of the output from the Vidalia Hydroelectric Power Plant (" Vidalia" ). " Vidalia was a local affair" ; Entergy Corporation was minimally involved in the purchase, and the Entergy System made no efforts to rely on resources similar to Vidalia. La. 2008, 522 F.3d at 396. The Louisiana Commission " approved a phased-in rate schedule for the costs of the plant, which limited its costs to Entergy Louisiana initially, but then increased them until they leveled off at the end of the long-term contract." Id. at 385. The Louisiana Commission also guaranteed the " full recovery of [Vidalia's] costs through Louisiana ratepayers." Id. at 396.

In 2002, the Louisiana Commission entered a settlement with Entergy Louisiana " granting the latter exclusive retention of Vidalia's accelerated tax deductions for the remaining life of the contract," which allowed tax benefits to flow to Louisiana ratepayers. Id. Another component of the settlement provided that Entergy Louisiana would " maintain its pre-existing capital structure" in any rate proceeding for a ten-year period. In re Entergy La., No. U-20925, 2002 WL 31618829, at *10 (Sept. 18, 2002) (" La. Pub. Serv. Comm'n 2002 " ). Accordingly, and as discussed in detail below, " [a]s part of a rate case subsequent to that order," Entergy ...

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