Cajun Elec. Power Coop., Inc. v. F.E.R.C.

• Decision Date: 08 February 1991
• Docket Number: No. 90-1035,90-1035
• Citation: 924 F.2d 1132
• Parties: CAJUN ELECTRIC POWER COOPERATIVE, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Gulf States Utilities Company, Louisiana Public Service Commission, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1132

924 F.2d 1132

288 U.S.App.D.C. 175

CAJUN ELECTRIC POWER COOPERATIVE, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Gulf States Utilities Company, Louisiana Public Service Commission, Intervenors.

No. 90-1035.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 10, 1991.

Decided Feb. 8, 1991.

Bernhardt K. Wruble, with whom J. Cathy Fogel and Terrence J. McCartin, Washington, D.C., were on the brief, for petitioner. Lisa Gefen, Washington, D.C., also entered an appearance, for petitioner.

Katherine Waldbauer, Atty., F.E.R.C., with whom William S. Scherman, Gen. Counsel, and Joseph S. Davies, Deputy Sol., F.E.R.C., Washington, D.C., were on the brief, for respondent. Jerome M. Feit, Atty., F.E.R.C., Washington, D.C., also entered an appearance, for respondent.

Barry S. Spector, Washington, D.C., for intervenor Gulf States Utilities Co.

Michael R. Fontham, New Orleans, La., entered an appearance, for intervenor Louisiana Public Service Com'n.

Before RUTH BADER GINSBURG, SILBERMAN and THOMAS, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

Cajun Electric Power Cooperative, Inc. challenges the Federal Energy Regulatory Commission's interpretation of a contract between Cajun and Gulf States Utilities Company, which was filed as a rate schedule with FERC. Cajun filed a complaint asking FERC to order enforcement of the contract pursuant to Sections 205 and 306 of the Federal Power Act, 16 U.S.C. Secs. 824d, 825e. The Commission, stating that the contract unambiguously supported Gulf States' position, denied Cajun's request for a hearing to adduce evidence regarding the contract's meaning and granted summary judgment for Gulf States. See 49 F.E.R.C. p 61,089 (1989), reh'g denied, 50 F.E.R.C. p 61,076 (1990). We believe the contract is ambiguous and therefore remand for further proceedings.

I.

Cajun is a rural electric cooperative engaged in the generation and transmission of power to its members, thirteen "distribution" electric cooperatives. These member cooperatives in turn supply electric power to their retail customers, which include large industrial and commercial consumers. Gulf States is an investor-owned utility which owns and operates transmission and distribution facilities. These two entities had a troubled relationship stretching back to the early 1960s, when Cajun first attempted to establish itself as an alternative to Gulf States' position as the monopoly supplier of electrical power in rural Louisiana. ¹ After prolonged litigation in multiple judicial and administrative fora, which both in duration and in intensity of hostilities approached that of the religious wars of the seventeenth century, a truce was reached between the combatants. The history and the outcome of these related litigations is memorialized in the Federal Pow er Commission's opinion announcing to the world the conditions of the truce and the FPC's approval of those conditions as consonant with the public interest. See Gulf States Utilities Co., 55 F.P.C. 1803 (1975). Among the terms of this latter-day Treaty of Westphalia was the requirement that the Gulf States transmission system carry electrical power (generated by Cajun's own facilities or delivered from the outside bulk power suppliers) to the individual members of Cajun and their customers. This provision was rooted in the apparent inability of Cajun to finance the construction of both generating capacity and a distribution network of its own, the inability allegedly caused by the delays resulting from the prolonged litigation with Gulf States.

Gulf States' various obligations under this provision are contained in several transmission service schedules; ² the obligations at issue in this case were originally defined by the following provision of a Service Schedule CSTS:

To assure the applicability of all the standards and conditions for transmission service hereunder, ..., it is agreed that for purposes of this Service Schedule, all delivery points initially included in Exhibit "A" of Rate Schedule CSTS and added by mutual agreement of the parties shall be limited to delivery points on an integrated part of the system of a rural electric cooperative ... which is an active member of [Cajun].

Section 5.1.

Gulf States thus was obliged to supply the transmission services only to the members of Cajun or their customers who were specified by the schedule or added by a mutual agreement and were, in any event, within the integrated part of the system of a rural coop. ³ After this agreement was entered into, the parties began negotiating an additional agreement, which amended the 1978 contract when it was approved in 1980. It is contended that the new agreement was caused by Gulf States' desperate need for additional financing for the continuing construction of its River Bend nuclear power plant. Turning to its former foe for succor, Gulf States obtained $588 million from Cajun. To make that investment, Cajun took out loans which were guaranteed by the Rural Electrification Administration, and the REA, as a prerequisite to its guarantee, demanded the power to approve the financing/interconnection cluster of contracts before they were signed by Cajun. As part of the return on its investment, Cajun received an ownership stake in one of the Gulf States distribution systems (the so-called "backbone" system) and additional rights regarding the usage of a related distribution system. The present dispute arises over the scope of these additional usage rights, which were expressed by the following language in the Service Schedule CSTS:

If the parties fail to reach mutual agreement for [Gulf States] to furnish additional points of delivery or increases in capacity for whatever reasons, then [Cajun] shall have the option of providing the necessary distribution and transmission facilities to interconnect with [Gulf States'] existing transmission system at mutually agreeable points, subject to appropriate approvals and certifications by any regulatory authorities having jurisdiction. [Gulf States] shall have the right to contest such interconnection in any regulatory proceeding and otherwise.

Section 3.3(d) (emphasis added).

The new provision seems to be inconsistent with Section 5.1 of the same document--it would appear to give Cajun a right to insist on interconnection without Gulf States' agreement whether or not the interconnection is on a rural coop's integrated system.

One of Cajun's member cooperatives signed letters of intent to supply the power needs of two new large industrial customers which could not be served by the Cajun member's own transmission lines. After Gulf States refused to provide the transmission services necessary to enable Cajun to deliver this power, Cajun, relying on Section 5.1, filed a complaint with FERC. FERC rejected the complaint, issuing summary judgment sua sponte against Cajun, and resolving the apparent conflict between the provisions by declaring that the rights granted in 3.3(d) gave Cajun a right to build the interconnection facilities but that the facilities must still be located at points chosen by "mutual agreement" under Section 5.1. This determination preserved Gulf States' ability to prevent Cajun from offering its power to additional customers if the customers could not be served directly by Cajun's members.

The Commission refused to consider Cajun's argument that the very reason for adding Section 3.3(d) was to give Cajun additional ability to serve new customers and that this ability was a major part of the consideration Cajun obtained in return for its financing of the River Bend plant. Cajun was not permitted to put in evidence of the parties' bargaining, including the testimony of an REA officer whose affidavit supported Cajun's interpretation and even indicated that the REA had in fact demanded that Cajun be given the additional interconnection rights in return for REA's guarantee of Cajun's financing of Gulf States' project. (REA itself, however, has taken no position on the current Cajun-Gulf States controversy.) On rehearing, the Commission merely stated that "the contract is unambiguous" and "the extrinsic evidence shows, at best, that Cajun desired to contract for something else than what is provided for by the plain language of Service Schedule CSTS." 50 F.E.R.C. p 61,076 at p. 61,199. The Commission reiterates its plain meaning argument before this court.

II.

We are confronted, at the outset, with the claim that we are obliged to defer to the Commission's interpretation of the contract under the authority of National Fuel Gas Supply Corp. v. FERC, 811 F.2d 1563 (D.C.Cir.), cert. denied, 484 U.S. 869, 108 S.Ct. 200, 98 L.Ed.2d 151 (1987). The claim is made by the intervenor, not FERC, and we think FERC's litigating position was the wiser course.

We did hold in National Fuel that FERC's interpretation of a settlement agreement between the Commission's staff and a private party was entitled to deference. See id. at 1569-70. Relying on Chevron, we rejected the notion that because the meaning of the settlement agreement was purely a question of law we should review it de novo. We saw reasons similar to those which underlie the Chevron doctrine--that we must defer to an agency's reasonable interpretation of ambiguous legislation--supporting the same approach to agency interpretations of a settlement agreement. Perhaps most important, the settlement agreement had to be approved by FERC; ⁴ it was a good deal more than just an agreement between private parties and was rather more closely akin to an order of the Commission. See 811 F.2d at 1570-71. Any agreement that must be filed and approved by an agency loses its status as a strictly private contract and takes on a public interest gloss, see A/S Ivarans Rederi v. United States, 895 F.2d 1441, 1447 (D.C.Cir.1990). That means that when the agency...