Aluminum Co. of America v. Utilities Com'n of State of N.C.
| Decision Date | 28 July 1983 |
| Docket Number | Nos. 82-1733,AFL-CIO,s. 82-1733 |
| Citation | 713 F.2d 1024 |
| Parties | ALUMINUM COMPANY OF AMERICA, a Pennsylvania Corporation, and Tapoco, Inc., a Tennessee Corporation, Appellants, v. UTILITIES COMMISSION OF the STATE OF NORTH CAROLINA; Robert K. Koger, Leigh M. Hammond, Sarah Lindsay Tate, John W. Winter, Edward B. Hipp, A. Hartwell Campbell, and Douglas O. Leary, in their respective official capacities as Chairman and Commissioners of the North Carolina Utilities Commission, Appellees, Rufus L. Edmisten, Attorney General of North Carolina, Amicus Curiae, United Steelworkers of America,, and Local Union 309, Amicus Curiae. STATE OF TENNESSEE, Tennessee Office of Economic and Community Development, Appellants, and Aluminum Company of America, a Pennsylvania Corporation, and Tapoco, Inc., a Tennessee Corporation, Plaintiffs, v. UTILITIES COMMISSION OF STATE OF NORTH CAROLINA, Robert L. Koger, Leigh M. Hammond, Sarah Lindsay Tate, John W. Winter, Edward B. Hipp, A. Hartwell Campbell and Douglas O. Leary, in their respective official capacities as Chairman and Commissioners of the North Carolina Utilities Commission, Appellees, Rufus L. Edmisten, Attorney General of North Carolina, Amicus Curiae, United Steelworkers of America,, and Local Union 309, Amicus Curiae. (L), 82-1765. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Grant S. Lewis, New York City (Ronald D. Jones, David R. Pope, John S. Kinzey, LeBoeuf, Lamb, Leiby & MacRae, New York City, on brief), Charles L. Lewis, Asst. Atty. Gen., Nashville, Tenn. (William M. Leech, Jr., Atty. Gen., William B. Hubbard, Chief Deputy Atty. Gen., Nashville, Tenn., I. Edward Johnson, Raleigh, N.C., Richard L. Holz, Asst. Gen. Counsel, Pittsburgh, Pa., on brief), for appellants.
Jerry W. Amos and Reid L. Phillips, Greensboro, N.C. (Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, N.C., on brief), for appellees; (Cooper, Mitch & Crawford, Birmingham, Ala., Jonathan R. Harkavy, Smith, Patterson, Follin, Curtis, James & Harkavy, Greensboro, N.C., Carl B. Frankel, United Steelworkers of America, AFL-CIO, Pittsburgh, Pa., on brief), as amicus curiae United Steelworkers of America, AFL-CIO; (William T. Crisp, Robert F. Page, Crisp, Davis, Schwentker & Page; Rufus L. Edmisten, Atty. Gen., Richard L. Griffin, Asst. Atty. Gen., Raleigh, N.C., on brief), as amicus curiae Rufus L. Edmisten.
Before MURNAGHAN and ERVIN, Circuit Judges, and KELLAM, District Judge. *
The Aluminum Company of America ("Alcoa") and its wholly owned subsidiary, Tapoco, Inc. ("Tapoco") appeal from the United States District Court for the Eastern District of North Carolina wherein their action against the Utilities Commission of the State of North Carolina ("NCUC") was dismissed on abstention grounds. Alcoa and Tapoco brought this action seeking to enjoin the enforcement of an NCUC order which allegedly interferes with the operation of a preemptive federal regulatory scheme and impermissibly burdens interstate commerce. Because we conclude that abstention was appropriate under Burford v. Sun Oil Company, 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), we affirm. 1
Alcoa operates a large aluminum smelting plant in eastern Tennessee and wholly owns two nearby electric utility companies, Tapoco and Nantahala Power and Light Company ("Nantahala"). Nantahala is incorporated in North Carolina and owns 11 hydroelectric plants in that state. Nantahala provides retail electric service in six counties in western North Carolina. NCUC regulates Nantahala's retail rates. Tapoco is a Tennessee corporation which owns four hydroelectric power plants, two in North Carolina and two in Tennessee. Tapoco provides electricity exclusively to Alcoa's smelting plant, which requires an enormous amount of energy.
The Tapoco and Nantahala dams are on streams which are a part of the larger Tennessee River watershed which has been developed for hydroelectric power production by the Tennessee Valley Authority ("TVA"). In 1941, Alcoa and TVA entered into an agreement, the "Fontana Agreement," whereby TVA was given the right to operate Tapoco's and Nantahala's dams. The agreement provided that the electricity generated at those dams would be transferred to TVA and that TVA would transfer back to Alcoa an equal amount of electricity at specified times and amounts. This agreement was superseded in 1963 by the "New Fontana Agreement," effective through December 31, 1982, under which TVA continued to operate the dams, but returned to Alcoa a fixed entitlement of electricity regardless of the amount generated at the Alcoa dams. A supplemental agreement between Alcoa, Nantahala, and Tapoco apportioned the TVA fixed entitlement between Tapoco and Nantahala. Under that supplemental agreement, Nantahala received electricity at the favorable entitlement prices in an amount equal to the greater of Nantahala's actual production or the theoretical minimum production of the Nantahala system. If Nantahala needed more electricity than its TVA entitlement, Nantahala had to purchase that additional electricity from the TVA at a price substantially higher than the entitlement price.
In 1971, Nantahala and Tapoco entered into a new apportionment agreement, reducing Nantahala's TVA entitlement to an amount equal to Nantahala's theoretical minimum potential generation, regardless of actual production. The remainder of the entitlement goes to Tapoco for transfer to Alcoa's plant. Thus, under the 1971 agreement, Nantahala received less electricity from TVA at the lower entitlement price, increasing the cost to Nantahala's North Carolina retail customers, and Tapoco received more electricity from TVA at the lower entitlement price, decreasing the cost to Alcoa's plant.
In 1976, Nantahala applied to the NCUC for an increase in the rates it charges its retail customers. The NCUC permitted certain ratepayers along with the North Carolina Attorney General to intervene in the proceedings. The intervenors contended that the relationships between Nantahala, Tapoco, and Alcoa were unfair to Nantahala and its customers. In order to rectify the inequity, the intervenors recommended that the NCUC apply the "roll-in" method of rate making, that is, the NCUC should consider Tapoco and Nantahala as a single system for purposes of calculating Nantahala's rate base. The NCUC rejected the intervenors' contention of unfairness and did not consider the roll-in method.
On appeal by the intervenors, the North Carolina Court of Appeals and the North Carolina Supreme Court agreed with the intervenors and directed the NCUC to consider using a roll-in method. See Utilities Comm'n v. Edmisten, 40 N.C.App. 109, 252 S.E.2d 516, aff'd, 299 N.C. 432, 263 S.E.2d 583 (1980).
On remand, Alcoa and Tapoco were made parties to the proceedings, the NCUC heard additional evidence, and adopted the roll-in method. In so doing, the NCUC found that Nantahala and Tapoco constituted a single system, calculated the fair value of the entire system, and determined what portion of that total system is devoted to North Carolina intrastate retail service. Rates were based on the cost of service calculated from that apportionment. On September 2, 1981, the NCUC entered an order reducing Nantahala's rates and requiring Nantahala to pay $18,962,000 in refunds to its customers for the earlier years' overpayments. The NCUC joined Alcoa and Tapoco to the refund order because the NCUC concluded that "Nantahala is financially unable to make all the refunds required."
Nantahala, Tapoco, and Alcoa petitioned the NCUC to reconsider its September 2 order. On January 28, 1981, the NCUC issued an affirmance of the September 2 order. The NCUC orders then were appealed to the North Carolina Court of Appeals. Nantahala, Alcoa, and Tapoco have submitted their appellate briefs to that court, raising therein, among other issues, the federal issues argued in this action.
Contemporaneously with the NCUC proceedings, the Federal Energy Regulatory Commission ("FERC") was holding proceedings on the New Fontana and 1971 apportionment agreements. Under the Federal Power Act, 16 U.S.C. §§ 791a, et seq., the FERC oversees the licensing of the Nantahala and Tapoco plants, their sale of electricity in interstate commerce, and their wholesale of electricity. In 1976, Nantahala applied to FERC for an increase in wholesale rates, and in response, two wholesale customers and the North Carolina Attorney General intervened, charging that Alcoa, Nantahala, and Tapoco "are in violation of the Federal Power Act by diverting for the benefit and private use of Alcoa, hydroelectric power and facilities." FERC declined to apply the roll-in method of rate making, but did find that "the alleged fairness of the 1971 apportionment agreement is not supported by the record" and modified that agreement "to provide [TVA] entitlements to Nantahala which will result in just and reasonable rates to its wholesale customers." Nantahala has appealed the FERC decision to this court. Nantahala Power & Light Co. v. F.E.R.C., No. 82-1872.
On January 26, 1982, two days prior to the NCUC affirmance of its September 2 order, Alcoa and Tapoco filed this action in the United States District Court for the Eastern District of Tennessee. By order dated April 12, 1982, the action was transferred to the Eastern District of North Carolina. On July 29, 1982, the district court dismissed the action. The district court rejected NCUC's arguments for dismissal for lack of jurisdiction, but granted the dismissal on abstention grounds. This appeal followed.
We are now confronted with two questions. First, did the district court possess jurisdiction? Second, if so, did the district court properly abstain from the exercise of that jurisdiction? We answer both questions in the affirmative.
The NCUC puts forth three arguments in support of the claim that the district court lacked jurisdiction: (1) th...
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