Cajun Elec. Power Co-op., Inc., Matter of, 95-30941
| Decision Date | 09 April 1997 |
| Docket Number | No. 95-30941,95-30941 |
| Parties | Util. L. Rep. P 14,153 In the Matter of CAJUN ELECTRIC POWER COOPERATIVE, INCORPORATED, Debtor. UNITED STATES of America, on Behalf of the RURAL UTILITIES SERVICE, Appellant, v. CAJUN ELECTRIC POWER COOPERATIVE, INCORPORATED; Louisiana Public Service Commission; Concordia Electric Cooperative, Inc.; Dixie Electric Membership Corporation; Valley Electric Membership Corporation; Pointe Coupee Electric Membership Corporation; Washington St. Tammany; Teche Electric Cooperative, Inc.; South Louisiana Electric; Northeast Louisiana Power Cooperative, Inc.; Claiborne Electric Cooperative, Inc.; Jefferson Davis Electric Cooperative, Inc.; Beauregard Electric Cooperative, Inc.; Southwest Louisiana Electric Membership Corporation; Cajun Electric Members Committee, Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Douglas N. Letter, Washington, DC, William Kanter, U.S. Dept. of Justice, Civ. Div., Washington, DC, for Appellant.
David H. Kleiman, James P. Moloy, Dann, Pecar, Newman & Kleiman, Indianapolis, IN, for Appellees Cajun Elec. Power Co-op., Inc., Concordia Elec. Co-op., Inc., Dixie Elec. Membership Corp., Valley Elec. Membership Corp., Pointe Coupee Elec. Membership Corp., Washington St. Tammany, South Louisiana Elec., Northeast Louisiana Power Co-op., Inc., Jefferson Davis Elec. Co-op., Inc., Beauregard Elec. Co-op., Inc., Southwest Louisiana Elec. Membership Corp. and Cajun Elec. Members Committee.
John C. Weitnauer, Alston & Bird, Atlanta, GA, William Hardy Patrick, III, William H. Patrick, John Schwab, Schwab & Walter, Baton Rouge, LA, for Cajun Elec. Power Co-op., Inc.
Michael R. Fontham, Noel Joseph Darce, Laurie A. Barcelona, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, LA, Brian Andrew Eddington, Louisiana Public Service Com'n, Baton Rouge, LA, for Louisiana Public Service Com'n.
V. Russell Purvis, Smith, Taliaferro & Purvis, Jonesville, LA, for Concordia Elec. Co-op., Inc.
John M. Sharp, Baton Rouge, LA, for Dixie Elec. Membership Corp. Henry Cole Gahagan, Jr., Natchitoches, LA, for Valley Elec. Membership Corp.
James B. Supple, Biggs, Trowbridge, Supple & Cremaldi, Franklin, LA, for Pointe Coupee Elec. Membership Corp.
J. Wendell Clark, Joseph H. Kavanaugh, Adams & Reese, Baton Rouge, LA, for Washington St. Tammany.
Nicholas F. LaRocca, Jr., Morgan City, LA, for Teche Elec. Co-op., Inc.
James Madison Funderburk, Duval, Funderburk, Sundbery & Lovell, Houma, LA, for South Louisiana Elec.
Edwin Rudolph McIntyre, Jr., Winnsboro, LA, for Northeast Louisiana Power Co-op., Inc.
William Marshall Shaw, Sr., Patrick Edgerton Henry, Shaw, Weaver & Henry, Homer, LA, for Claiborne Elec. Co-op., Inc.
Carl Harmon Hanchey, Jones, Tete, Nolen, Hanchey, Swift & Spears, Lake Charles, LA, for Beauregard Elec. Co-op., Inc.
James J. Davidson, III, Davidson, Meaux, Sonnier, McElligott and Swift, Lafayette, LA, for Southwest Louisiana Elec. Membership Corp.
Appeal from the United States District Court for the Middle District of Louisiana.
Before BENAVIDES, STEWART and DENNIS, Circuit Judges.
Under the Rural Electrification Act of 1936, as amended, 7 U.S.C. § 901 et seq., ("RE Act") the Secretary of Agriculture ("Secretary") is empowered to make and guarantee loans to wholesale power supply borrowers that generate electric energy for retail electrical systems which furnish electricity to persons in rural areas. The principal issue in the present case is whether the RE Act authorizes the Secretary by regulation to (1) pre-empt a state regulatory agency's jurisdiction over a borrower's rates if the Secretary determines that the borrower has failed to pay as required on loans made or guaranteed pursuant to the RE Act and that the borrower's rates are inadequate to permit it to do so; and (2) require the borrower to establish rates sufficient to satisfy the loan requirements. Alternatively, we are asked to decide whether the RE Act, under the circumstances of this case, implicitly pre-empts state ratemaking jurisdiction.
The Secretary (through the Rural Utilities Service ("RUS") of the Department of Agriculture), pursuant to 7 C.F.R. § 1717.300 et seq., notified a power supply borrower, Cajun Electric Cooperative Corporation ("Cajun"), and the Louisiana Public Service Commission ("LPSC") that Cajun had failed to pay as required, Cajun's rates were found to be inadequate, the LPSC's jurisdiction over Cajun's rates was pre-empted, and Cajun was required to immediately establish rates sufficient to satisfy the requirements of its RE Act loans. Cajun brought this action for a declaratory judgment to decide whether it must comply with the Secretary's regulation or the state commission's rate order. The District Court held that the LPSC rate order was not pre-empted because the Secretary's regulation was invalid. We affirm.
By enacting and amending the Rural Electrification Act of 1936 (RE Act), 7 U.S.C. § 901 et seq., Congress did not authorize the Secretary to pre-empt the jurisdiction of a state regulatory authority over a power supply borrower's rates for the purpose of raising the rates and revenues of the borrower to enable it to make payments on loans made or guaranteed pursuant to the RE Act. The RE Act does not expressly authorize the Secretary to regulate the rates of power supply borrowers. If the Act delegates that power implicitly, it requires the Secretary to exercise it comprehensively to further the primary purpose of the statute, i.e., to provide rural America with low cost electricity, and to fix just and reasonable rates after balancing the consumer and other interests involved. The RE Act itself does not implicitly pre-empt the LPSC's ratemaking jurisdiction under the circumstances of this case.
In 1936 Congress enacted the Rural Electrification Act ("RE Act"), presently codified Cajun Electrical Cooperative Corporation ("Cajun") is a G & T cooperative that provides wholesale electricity to 12 rural retail cooperative owner-members. Cajun's retail cooperative members, Beauregard Electric Coop., Inc., Claiborne Electric Coop., Inc., Concordia Electric Coop., Inc., Dixie Electric Coop., Inc., Jefferson Davis Electric Coop., Inc., Northeast Louisiana Electric Coop., Inc., Pointe Coupee Electric Membership Corp., South Louisiana Electric Coop. Association, Southwest Louisiana Electric Membership Corp., Teche Electric Coop., Inc., Valley Electric Membership Corp., and Washington-St. Tammany Electric Coop., Inc., provide electricity to one million ultimate consumers in areas comprising 80% of Louisiana lands.
at 7 U.S.C. § 901 et seq., empowering the Rural Electrification Administration ("REA"), an independent federal agency, to provide rural America with low cost electricity and telephone service by lending funds to rural electric and telephone systems directly at below market interest rates. See, e.g., Morgan City v. South Louisiana Elec. Coop., Ass'n. 31 F.3d 319, 322 (5th Cir.1994), reh'g denied 49 F.3d 1074 (5th Cir.), cert. denied, --- U.S. ----, 116 S.Ct. 275, 133 L.Ed.2d 196 (1995); Alabama Power Co. v. Alabama Electric Co-op. Inc., 394 F.2d 672, 677 (5th Cir.1968), reh'g denied, 397 F.2d 809 (5th Cir.), cert. denied, 393 U.S. 1000, 89 S.Ct. 488, 21 L.Ed.2d 465 (1968); Wabash Valley Power Ass'n., Inc. v. Rural Electrification Administration, 988 F.2d 1480, 1490 (7th Cir.1993); Public Utility Dist. No. 1 of Pend Oreille County v. United States, 417 F.2d 200 (9th Cir.1969); Salt River Project Agr., Imp. & Power Dist. v. Federal Power Comm., 391 F.2d 470, 473 (D.C.Cir.1968). In 1939, pursuant to the Reorganization Plan No. 2 of 1939, the REA was transferred to the Department of Agriculture and was placed under the supervision and direction of the Secretary of Agriculture. 5 U.S.C. § 903. The REA was later renamed as the Rural Utilities Service ("RUS") by the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994. In response to the RE Act and its precursor Executive Branch order, cooperative electrical systems were formed to seek government subsidized loans and deliver electricity to rural consumers. Concomitantly, groups of rural electrical cooperative systems formed central generation and transmission cooperatives ("G & Ts") which also borrow under the RE Act for the purpose of generating and purchasing electric energy for sale at wholesale to their respective rural electrical cooperative members that retail electricity to ultimate consumers. See, e.g., Morgan City, 31 F.3d at 322.
In 1979, Cajun, at the behest of the REA, purchased a 30% interest in Gulf States Utilities Co.'s unfinished River Bend nuclear power plant in St. Francisville, Louisiana. In 1981, the REA loaned Cajun $1.6 billion to finance Cajun's investment in River Bend. Before approving the loan, the REA conducted site visits at River Bend, reviewed cost and other data submitted by GSU and others, and provided Cajun with financial and technical assistance and advice. The REA, and subsequently the Secretary, have required, as a condition to making or guaranteeing any loans to power supply borrowers, that the borrower enter into wholesale power contracts with its several members and assign and pledge the contracts as security for the repayment of the loans. 7 C.F.R. § 1717.301. See, e.g., Fuchs v. Rural Electric Convenience Co-op., 858 F.2d 1210 1212 n. 8 (7th Cir.1988), cert. denied, 490 U.S. 1020, 109 S.Ct. 1744, 104 L.Ed.2d 181 (1989).
Article IV, § 21(B) of The Louisiana Constitution of 1974 provides that the Louisiana Public Service Commission ("LPSC") "shall regulate all common carriers and public utilities and have such other regulatory authority as provided by law." The LPSC, however, did not assert its constitutional jurisdiction over Cajun as a public utility until September 3, 1987, when it initiated an examination of Cajun's rates and the prudence of Cajun's River Bend...
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