Louisiana Energy and Power Authority v. F.E.R.C.

• Decision Date: 24 April 1998
• Docket Number: No. 97-1098,97-1098
• Parties: , Util. L. Rep. P 1498 LOUISIANA ENERGY AND POWER AUTHORITY, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Central Louisiana Electric Company, Inc., Intervenor for Respondent
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 364

141 F.3d 364

329 U.S.App.D.C. 401, Util. L. Rep. P 1498

LOUISIANA ENERGY AND POWER AUTHORITY, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent

Central Louisiana Electric Company, Inc., Intervenor for Respondent

No. 97-1098.

United States Court of Appeals,

District of Columbia Circuit.

Argued Jan. 22, 1998.

Decided April 24, 1998.

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

Milton J. Grossman argued the cause for petitioner, with whom Wallace Edward Brand was on the briefs.

Timm L. Abendroth, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent, with whom John H. Conway, Deputy Solicitor, was on the brief.

John T. Stough, Jr., and Thadd A. Prisco were on the brief for intervenor Central Louisiana Electric Company, Inc.

Before: WILLIAMS, HENDERSON and GARLAND, Circuit Judges.

GARLAND, Circuit Judge:

The Federal Power Act requires that all rates demanded by public utilities for the transmission or sale of electric energy be "just and reasonable." 16 U.S.C. § 824d(a). Where there is a competitive market, the Federal Energy Regulatory Commission (FERC) may rely on market-based rates in lieu of cost-of-service regulation to ensure that rates satisfy this requirement. Cf. Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870 (D.C.Cir.1993) (discussing "just and reasonable" rate requirement of Natural Gas Act). Under its precedents, the Commission approves applications to sell electric energy at market-based rates only if the seller and its affiliates do not have, or adequately have mitigated, market power ¹ in the generation and transmission of such energy, and cannot erect other barriers to entry by potential competitors. See, e.g., Heartland Energy Servs., Inc., 68 FERC p 61,223 at 62,060 (1994); Louisville Gas & Elec. Co., 62 FERC p 61,016 at 61,143-44 (1993).

Without holding an evidentiary hearing, FERC approved an application by Central Louisiana Electric Company (CLECO) to sell electric energy at market-based rates. Louisiana Electric & Power Authority (LEPA), a competitor and customer of CLECO, challenges that approval as arbitrary and capricious, arguing that CLECO does in fact have market power. ² LEPA's express concern is that by leaving CLECO's rates unregulated, the Commission has freed CLECO to use predatory pricing ³ to lure away LEPA's customers. CLECO, on the other hand, argues that LEPA's "true motive" is not to prevent predatory pricing, but rather "to force CLECO to sell ... at a higher price, so that LEPA itself can sell at a higher [noncompetitive] price without losing load to CLECO." Our review is limited to determining whether FERC's decision was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Michigan Consol. Gas Co. v. FERC, 883 F.2d 117, 120 (D.C.Cir.1989) (quoting 5 U.S.C. § 706(2)(A)). Because the Commission's approval of CLECO's application for market-based rates was none of these, we deny the petition for review.

I

FERC interposes a threshold objection to LEPA's petition, asserting that LEPA is not a party "aggrieved" by the Commission's order and hence not entitled to petition for judicial review under the Federal Power Act, 16 U.S.C. § 825l. A party is "aggrieved" under this statute if it satisfies both the constitutional and prudential requirements for standing. See Liquid Carbonic Indus. Corp. v. FERC, 29 F.3d 697, 701-04 (D.C.Cir.1994); cf. Moreau v. FERC, 982 F.2d 556, 564 (D.C.Cir.1993) (interpreting similar language in Natural Gas Act). As the Supreme Court recently has restated, the three constitutional requirements are:

(1) that the plaintiff have suffered an "injury in fact"--an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of--the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Bennett v. Spear, 520 U.S. 154, ----, 117 S.Ct. 1154, 1163, 137 L.Ed.2d 281 (1997). The prudential requirement relevant here is that "the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute" in question. Id. at ----, 117 S.Ct. at 1167.

LEPA counters that it is in fact a party "aggrieved" by the Commission's order. It alleges that it will be injured by the increased price competition from CLECO that will flow from FERC's unlawful lifting of regulatory controls. And in support of its contention that such pricing will be predatory, LEPA asserts a history of oligopolistic collusion in which CLECO participated, alleges a relatively recent example of predatory pricing by the oligopoly, and presents an expert's opinion that the oligopoly will continue to exercise substantial market power.

FERC did not contest in its brief, and at oral argument explicitly conceded, that as a competitor and customer LEPA comes within the zone of interests of the Federal Power Act and hence has prudential standing to challenge the grant of CLECO's application. The Commission contends, however, that LEPA has failed to satisfy the "injury in fact" requirement for constitutional standing. More specifically, it contends that LEPA's injury remains "conjectural or hypothetical" because LEPA has not demonstrated that predatory pricing, as opposed to lower competitive pricing, "will occur" under CLECO's new tariff. LEPA must wait to sue, FERC argues, until it actually is injured by predatory pricing on the part of CLECO.

But LEPA will be injured by increased price competition from CLECO regardless whether that pricing turns out to be predatory, as LEPA warns, or simply competitive, as CLECO promises. ⁴ Such injury gives LEPA an "actual" and "imminent," rather than "conjectural or hypothetical," interest sufficient to establish injury in fact. Moreover, that injury also satisfies the other two constitutional requirements not contested here: it is fairly traceable to FERC's decision freeing CLECO to price at market-based rates; and it would be redressed by a favorable decision of this court vacating FERC's order. See Panhandle Producers & Royalty Owners Ass'n v. Economic Regulatory Admin., 822 F.2d 1105, 1108 (D.C.Cir.1987).

We repeatedly have held that parties suffer constitutional injury in fact when agencies lift regulatory restrictions on their competitors or otherwise allow increased competition. See, e.g., MD Pharm., Inc. v. DEA, 133 F.3d 8, 11 (D.C.Cir.1998) ("increased competition represents a cognizable Article III injury") (quoting Liquid Carbonic, 29 F.3d at 701); Old Town Trolley Tours, Inc. v. Washington Metro. Area Transit Comm'n, 129 F.3d 201, 202 (D.C.Cir.1997); First Nat'l Bank & Trust Co. v. National Credit Union Admin., 988 F.2d 1272, 1275 (D.C.Cir.1993); Associated Gas Distribs. v. FERC, 899 F.2d 1250, 1258 (D.C.Cir.1990); Investment Co. Inst. v. FDIC, 815 F.2d 1540, 1543 (D.C.Cir.1987); see also Investment Co. Inst. v. Camp, 401 U.S. 617, 620-21, 91 S.Ct. 1091, 1093-94, 28 L.Ed.2d 367 (1971). The lifting of such restrictions alone is generally sufficient, and we have not required litigants to wait until increased competition actually occurs. As we said in Associated Gas Distributors, "petitioners sufficiently establish their constitutional standing by showing that the challenged action authorizes allegedly illegal transactions that have the clear and immediate potential to compete with the petitioners' own sales. They need not wait for specific, allegedly illegal transactions to hurt them competitively." 899 F.2d at 1259 (emphasis added). Accord Panhandle Producers, 822 F.2d at 1108 (competitors will suffer injury in fact from agency order permitting increase in gas supply because "such an increase in supply is likely to depress the prices that [competitors] can secure").

None of this renders irrelevant the plausibility of LEPA's claim that predatory pricing will result from FERC's decision. But whether that pricing is likely to be predatory or simply competitive is a question that goes to the merits of FERC's decision to permit market-based rates and not to constitutional standing. ⁵ As we discuss below LEPA's allegation that FERC's decision will lead to predatory pricing, like its claim that a company with as much market power as CLECO should not be freed of price regulation, is the core of LEPA's argument that FERC's order was arbitrary and capricious, and hence unlawful. A party need not prove that the agency action it attacks is unlawful, however, in order to have standing to level that attack. ⁶ As we said in Claybrook v. Slater, 111 F.3d 904, 907 (D.C.Cir.1997), "[w]hether a plaintiff has a legally protected interest (and thus standing) does not depend on whether he can demonstrate that he will succeed on the merits. Otherwise, every unsuccessful plaintiff will have lacked standing in the first place." To be sure, claims that are "entirely frivolous," Steel Co. v. Citizens for a Better Env't, --- U.S. ----, ---- n. 2, 118 S.Ct. 1003, 1014 n. 2, 140 L.Ed.2d 210 (1998), or have "no foundation in law," Claybrook, 111 F.3d at 907, are insufficient to establish standing. LEPA's allegations, however, cannot be characterized as frivolous, and FERC does not suggest otherwise.

Nor are LEPA's claims unripe under our decision in Northern Indiana Public Service Co. (NIPSCO) v. FERC, 954 F.2d 736 (D.C.Cir.1992). In that case, NIPSCO challenged a FERC order approving an open-access transmission tariff for a neighboring utility, contending that open-access transmissions through that utility would put additional stress on NIPSCO's own facilities. We accepted FERC's interpretation of...