Appalachian Power Co. v. Public Service Com'n of West Virginia
| Decision Date | 04 March 1987 |
| Docket Number | 86-2541,Nos. 86-2540,s. 86-2540 |
| Citation | 812 F.2d 898 |
| Parties | APPALACHIAN POWER COMPANY; American Electric Power Company, Inc.; Kentucky Power Company; Columbus and Southern Ohio Electric Co.; Indiana & Michigan Electric Company; Ohio Power Company, Appellees, v. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA; Otis D. Casto, as a member of Public Service Commission of West Virginia; Michael D. Greer, as a member of Public Service Commission of West Virginia, Defendants, and Consumer Advocate Division of the West Virginia Public Service Commission, Appellant. Federal Energy Regulatory Commission, Amicus Curiae. APPALACHIAN POWER COMPANY; American Electric Power Company, Inc.; Kentucky Power Company; Columbus and Southern Ohio Electric Co.; Indiana & Michigan Electric Company; Ohio Power Company, Appellees, v. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA; Otis D. Casto, as a member of Public Service Commission of West Virginia; Michael D. Greer, as a member of Public Service Commission of West Virginia, Appellants, and Consumer Advocate Division of the West Virginia Public Service Commission, Defendant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Richard E. Hitt, Jackson, Miss., Billy Jack Gregg, Culloden, W. Va. (Mark G. Thessin, on brief), for appellants.
Charles McElwee, Charleston, W. Va., (William C. Porth, Robinson & McElwee, Charleston, W. Va., A. Joseph Dowd, Edward J. Brady, New York City, Kevin F. Duffy, on brief), for appellees.
(William H. Satterfield, General Counsel; Jerome M. Feit, Sol., Joanne Leveque, Washington, D.C., on brief), for amicus curiae.
Before PHILLIPS and ERVIN, Circuit Judges, and BUTZNER, Senior Circuit Judge.
Appalachian Power Company, Inc. (APC), its parent, American Electric Power Company, Inc. (AEP), and their various affiliates 1 filed suit in the United States District Court for the Southern District of West Virginia seeking declaratory and injunctive relief against the Public Service Commission of West Virginia (PSC) 2 regarding a December 28, 1984, PSC order. The complaint alleged that the PSC order violated the supremacy clause of the United States Constitution insofar as it asserted state authority to scrutinize an agreement allocating among utility companies operating in several states the cost burdens of an interstate energy transmission network. The power companies argued that scrutiny of the agreement is a matter exclusively reserved to the Federal Energy Regulatory Commission (FERC) by subchapter II of the Federal Power Act (FPA), 16 U.S.C. Sec. 824 et seq. and thus that state authority is preempted by that Act. They additionally challenged the PSC order as violative of the interstate commerce and due process clauses of the constitution. In granting the companies' motion for summary judgment, the district court found violations of both the supremacy clause and the interstate commerce clause and declined to consider the due process claim. We agree that the PSC's assertion of authority is preempted by the FPA, that FERC has exclusive jurisdiction to consider the merits of the interstate agreement. As did the district court, 630 F.Supp. 656, we decline to consider the due process claim and additionally do not measure the impact of the challenged PSC order upon interstate commerce.
APC, an electric generating company selling power to residential, commercial, and industrial customers throughout the states of Virginia and West Virginia, is a member of a highly integrated network for the transmission of electricity in interstate commerce. The network is comprised of a parent holding company, AEP, and various utility companies, such as APC, located in several states and wholly owned by AEP. These affiliated utilities are interconnected by means of an extra-high voltage (EHV) interstate electric transmission system over which energy can be transmitted in bulk from one location to another. The network stretches some four hundred miles from the Illinois border in the west to the Pennsylvania border in the east, and some five hundred miles from southwest Michigan in the north to the North Carolina border in the south. The system is operated with central dispatch, the least-cost units being operated first to permit the most economical use of the system as a whole. Each constituent company is subject to both FERC regulation pursuant to the FPA, 16 U.S.C. Sec. 824 et seq., and to regulation by the utility commission in its state of operation, e.g., W. Va. Code ch. 24 (1986). APC is the only affiliate subject to regulation by the West Virginia PSC.
Traditionally, each constituent company has owned, maintained, and borne the entire cost of that portion of the EHV lines located in its state or designated service area. 3 This arrangement began to change on April 1, 1984, when the AEP companies entered into the Transmission Equalization Agreement (TEA), which allocates costs according to a formula that accounts for the demand each company places on the system. Under the TEA, those members of the system whose actual investments in the transmission network exceed their share of the total AEP system investment are deemed "surplus" members, and those having an investment less than their share of the total are "deficit" members. Through monthly equalization payments, the TEA anticipates that "deficit" companies will make payments to "surplus" companies. As a "deficit" company, APC's share of costs for the EHV system under the TEA are greater than under the former arrangement.
Pursuant to the FPA, which gives FERC jurisdiction to regulate the transmission and wholesale sale of electric energy in interstate commerce and the facilities for such transmission, 16 U.S.C. Sec. 824(b)(1) the utility companies submitted the TEA for FERC approval on March 29, 1984. On August 21, 1984, FERC accepted the agreement for filing as a rate schedule and provided that it would become effective January 22, 1985, subject to refund if thereafter FERC found the terms of the TEA unjust or unreasonable. The PSC and the Consumer Advocate Division of the Public Service Commission of West Virginia (CAD) both intervened in the FERC proceedings. FERC's decision on the merits of the TEA is still pending.
In a state retail rate setting case, APC requested that the PSC allow APC's retail rates to reflect the costs incurred under the TEA. On September 28, 1984, the PSC agreed to pass the TEA costs to APC's customers, subject to refund if FERC, in the pending proceedings, found the TEA unjust or unreasonable. In its September 28 order, the PSC deferred to FERC because it believed state consideration of the TEA's merits was preempted by federal law. In a reconsideration of the September 28 order, prompted by a request from the CAD, the PSC reversed its position on the preemption issue and decided that APC did have to submit the TEA for PSC approval, pursuant to W. Va. Code Sec. 24-2-12(f), which requires state approval of contracts among affiliated utility companies. In a revised order entered on December 28, 1984, the PSC also denied APC retail rate recovery of $1.6 million in costs incurred under the agreement, pending the required PSC approval.
APC and its affiliates instituted this action on January 18, 1985, challenging the December 28 order and seeking declaratory and injunctive relief. APC claimed that the PSC's authority to consider the TEA was preempted by the FPA. APC also alleged that the December 28 order impermissibly burdened interstate commerce and violated the due process clause. The CAD intervened on the side of defendants.
In an effort to clarify the jurisdictional issue upon which the efficacy of its December 28 order depended, the PSC filed a motion with FERC on March 19, 1985, requesting that FERC limit its consideration of the TEA to whether the terms of the agreement were just and reasonable and determine what regulatory body has power to assess the "prudence" of the agreement. The isolated "prudence" inquiry, which the PSC asserts authority to make, focuses upon whether a company such as APC made a prudent choice among alternative arrangements for energy supply when it signed the agreement. This inquiry is urged by PSC to be distinct from the FERC determination whether the terms of the TEA are fair.
On February 22, 1985, before FERC responded to the PSC's request, the district court granted APC a preliminary injunction, effectively reinstating the September 28, 1984, PSC order. This court affirmed the district court's action on July 25, 1985. Appalachian Power Co. v. Consumer Advocate Division of the West Virginia Public Service Commission, 770 F.2d 159 (4th Cir.1985).
While the preliminary injunction was in effect, but before entry of final judgment in the district court, FERC responded to the PSC's March 19, 1985, motion to clarify the jurisdictional issue, ruling that the issue of the TEA's prudence was not one that state commissions could consider. The PSC then requested that FERC rehear the issue, and, in an October 1, 1986, order, FERC reiterated its position that state authority to consider the TEA's "prudence" is preempted by the FPA.
On August 12, 1985, the PSC filed a motion with the district court to stay its proceedings, arguing that the jurisdictional issue still was pending before FERC and was more appropriately decided in the administrative setting. This motion was denied.
On November 22, 1985, while the preliminary injunction was in effect, the PSC issued a new order granting APC's rate increase request, including the costs incurred under the TEA. As had the September 28, 1984, order, the newest order made recovery of the TEA's rates subject to refund if FERC found the TEA unjust or unreasonable. The November 22 order also released APC from the requirement of submitting the TEA for PSC approval.
On February 14, 1986, the district court granted APC's motions for summary judgment on the...
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