New Orleans Public Service, Inc. v. Council of City of New Orleans

• Decision Date: 11 December 1987
• Docket Number: No. 87-3049,87-3049
• Citation: 833 F.2d 583
• Parties: NEW ORLEANS PUBLIC SERVICE, INC., and System Energy Resources, Inc., Plaintiffs-Appellants, v. The COUNCIL OF the CITY OF NEW ORLEANS, Sidney J. Barthelemy, Joseph I. Giarrusso, Bryan Wagner, Lambert C. Boissiere, Jr., Michael Early, James Singleton, and Ulysses Williams, Defendants- Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 583

833 F.2d 583

NEW ORLEANS PUBLIC SERVICE, INC., and System Energy Resources, Inc., Plaintiffs-Appellants, v. The COUNCIL OF the CITY OF NEW ORLEANS, Sidney J Barthelemy, Joseph I. Giarrusso, Bryan Wagner Lambert C. Boissiere, Jr., Michael Early, James Singleton, and Ulysses Williams Defendants- Appellees.

No. 87-3049.

United States Court of Appeals Fifth Circuit.

Dec. 11, 1987.

Rehearing Denied Jan. 19, 1988.

Herschel L. Abbott, Jr., Jones, Walter, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., Joseph L. Blount, Jackson, Miss., Thomas O. Lind, Wm. D. Meriwether, Jr., New Orleans, La., for plaintiffs-appellants.

Clinton A. Vince, Washington, D.C., Bruce E. Naccari, Beverly Jackson Zervigon, Augustine, Bagert, McConduit & Hilferty, Olka Jones, II, City Atty., New Orleans, La., L. John Osborn, Bernhardt K. Wruble, Nancy A. Wodka, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before GOLDBERG, JOHNSON, and WILLIAMS, Circuit Judges.

JOHNSON, Circuit Judge:

New Orleans Public Service, Inc. (NOPSI), and System Energy Resources, Inc. (SERI), two privately held utility companies, appeal the dismissal of their suit to enjoin the New Orleans City Council from forcing the companies to absorb the costs of an ill-fated nuclear power plant. Because we agree with the district court that the controversy is not ripe for resolution, we affirm.

I. BACKGROUND

SERI, formerly Middle South Energy, Inc., owns ninety percent of Grand Gulf 1, a nuclear generating station. Power from Grand Gulf 1 is wholesaled to NOPSI and other utility companies, which resell the power to consumers. NOPSI, Louisiana Power & Light, Mississippi Power & Light and Arkansas Power & Light, are retail utility companies wholly owned by Middle South Utilities, Inc., a public utility holding company. Middle South Utilities also wholly owns SERI.

In 1974, NOPSI committed itself to sharing the costs of a nuclear power plant for the Middle South system. During the years of the plant's construction, it became clear that demand would be less and costs drastically more than originally anticipated. In 1982, the Middle South companies submitted to the Federal Energy Regulatory Commission (FERC) a Unit Power Sales Agreement (UPSA) allocating 29.8 percent of Grand Gulf costs to NOPSI. In hearings before an administrative law judge, the public utility regulating bodies of the affected state entities appeared and argued that their consumers should be required to pay for less of the by-now undesirable nuclear energy.

In 1985 FERC issued an order modifying the UPSA to provide for the following allocation: 17 percent to NOPSI, 14 percent to Louisiana Power & Light, 33 percent to Mississippi Power & Light, and 36 percent to Arkansas Power & Light. Opinion and Order Setting Just Reasonable and Non-Discriminatory Rates, 31 F.E.R.C. (CCH) 61,305 (June 13, 1985) (Opinion No. 234). The D.C. Circuit Court of Appeals affirmed the FERC order, but granted rehearing en banc to reconsider whether the specific cost figures were reasonable. Mississippi Industries v. FERC, 808 F.2d 1525 (D.C.Cir.), reh'g en banc granted on other grounds, 814 F.2d 773 (D.C.Cir.1987), U.S. appeal pending. ¹ The New Orleans City Council, which has state regulatory authority over NOPSI, participated in these appeals.

In May 1985, NOPSI applied to the New Orleans City Council for a retail rate increase to cover the wholesale costs stemming from Grand Gulf 1. The Council responded with Resolution No. R-85-636, initiating an investigation into "all aspects of NOPSI's prudence regarding its decisions to enter into its arrangements to purchase a portion of Grand Gulf 1 for the purpose of determining what portion, if any, of NOPSI's Grand Gulf 1 expense shall be assumed by its shareholders, rather than passed through to its retail ratepayers." Record Vol. 1 at 25 (the "Prudence Resolution"). NOPSI sought an injunction in federal district court. The district court dismissed the suit, determining that subject matter jurisdiction was lacking and abstention advisable. This Court initially reversed both determinations. New Orleans Public Service, Inc. v. City of New Orleans, 782 F.2d 1236 (5th Cir.1986), modified on reh'g, 798 F.2d 858, cert. denied, --- U.S. ----, 107 S.Ct. 1910, 95 L.Ed.2d 515 (1987). On rehearing, this Court affirmed the district court's decision to abstain, in order to avoid interfering with a comprehensive state regulatory scheme. New Orleans Public Service, Inc. v. City of New Orleans, 798 F.2d 858 (5th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 1910, 95 L.Ed.2d 515 (1987) (NOPSI I).

In March 1986, the New Orleans City Council and NOPSI entered into a partial settlement under which NOPSI agreed to absorb about $51,200,000 of the Grand Gulf costs, and the Council allowed NOPSI to phase in an interim rate increase, subject to the results of the Council's prudence inquiry. In April 1987, the New Orleans City Council completed its record of the inquiry and began deliberations. NOPSI again sought an injunction from the federal district court, arguing that the Council was unreasonably delaying a decision and that the Council's inquiry encroached on areas of exclusive FERC jurisdiction. By an amended complaint, NOPSI dropped its request for an injunction against the prudence inquiry itself. NOPSI requested only an injunction against any action by the New Orleans City Council that would force NOPSI's shareholders to absorb Grand Gulf costs in contradiction to FERC Opinion No. 234. The district court denied an injunction, on grounds of ripeness and abstention. The district court also dismissed SERI as a party, holding that SERI lacked standing. This appeal followed. At the time this case was orally argued, in September 1987, the New Orleans City Council had yet to act on the request for a permanent rate increase, although action was expected in late October 1987.

II. DISCUSSION

NOPSI argues that the announced purpose of the New Orleans City Council's prudence inquiry intrudes upon an area under the exclusive jurisdiction of the FERC. The Federal Power Act grants the FERC authority to regulate the interstate wholesaling of electricity. 16 U.S.C. Sec. 824(b)(1). This FERC jurisdiction is exclusive. Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 2357, 90 L.Ed.2d 943 (1986); Gulf States Utilities Co. v. Alabama Power Co., 824 F.2d 1465, 1468 (5th Cir.1987). On the other hand, the states retain their traditional police power to regulate intrastate retail electricity sales. Pacific Gas & Electric Co. v. State Energy Resources Conservation & Development Comm'n, 461 U.S. 190, 205-06, 103 S.Ct. 1713, 1723, 75 L.Ed.2d 752 (1983).

In a case decided while the New Orleans City Council's prudence inquiry was pending, the United States Supreme Court made it clear that, once the FERC has allocated wholesale power, a state regulatory body may not refuse to recognize that allocation. Nantahala, 106 S.Ct. at 2357-60. The state may not, for example, find the allocation unreasonable and "trap" any extra costs by refusing to allow the utility to pass those costs on to consumers. Nantahala, 106 S.Ct. at 2358-59; Appalachian Power Co. v. Public Service Comm'n of West Virginia, 812 F.2d 898, 904-05 (4th Cir.1987). Local regulators may, however, consider whether other savings counterbalance any increases caused by the FERC order. Nantahala, 106 S.Ct. at 2357. The regulators may also phase in the increase over time. Arkansas Power & Light Co. v. Missouri Public Service Comm'n, 829 F.2d 1444, 1448-49 (8th Cir.1987).

The New Orleans City Council resolution of October 1985 can certainly be interpreted as directed toward areas now off-limits to state regulators. However, at oral argument on the instant case, the attorney for the New Orleans City Council stated that the inquiry now accepted the FERC allocation as a "given" and was focussing on ways that NOPSI could reduce its other costs on the retail level. For example, it was argued that the New Orleans City Council was looking into the possibility that NOPSI could make "off-system sales" and operational economies. The New Orleans City Council assured the Court by the statement of its attorney, "We are not getting into the issue of whether Grand Gulf should have been constructed." ²

A court should dismiss a case for lack of "ripeness" when the case is abstract or hypothetical. Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 105 S.Ct. 3325, 3333, 87 L.Ed.2d 409 (1985); Socialist Labor Party v. Gilligan, 406 U.S. 583, 588-89, 92 S.Ct. 1716, 1719-20, 32 L.Ed.2d 317 (1972). The key considerations are "the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration." Abbott Laboratories v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967); Placid Oil Co. v. Federal Energy Regulatory Commission, 666 F.2d 976, 981 (5th Cir.1982). A case is generally ripe if any remaining questions are purely legal ones; conversely, a case is not ripe if further factual development is required. Thomas, 105 S.Ct. at 3333.

In the instant case, the New Orleans City Council has yet to disallow any part of NOPSI's request for a permanent rate increase. Some aspects of the New Orleans City Council's inquiry--for example, cost savings in other areas--are concededly within the Council's authority. The New Orleans City Council's attorney assured this Court that the inquiry accepts FERC-ordered wholesale rates as a given. This Court is not prepared to assume that the New Orleans City Council will go beyond its express statements and its legal authority. Should the New Orleans City Council act contrary to statements made in this Court, NOPSI could make use of estoppel and similar legal arguments.

NOPSI cites several cases holding that exposure to illegal proceedings may...