Citizens for an Orderly Energy Policy, Inc. v. Cuomo, 1

CourtNew York Supreme Court Appellate Division
Citation159 A.D.2d 141,559 N.Y.S.2d 381
Docket NumberNo. 1,No. 2,1,2
PartiesIn the Matter of CITIZENS FOR AN ORDERLY ENERGY POLICY, INC., et al., Appellants, v. Mario M. CUOMO, as Governor of the State of New York, et al., Respondents, and Public Service Commission of the State of New York, Intervenor-Respondent. (Proceeding) In the Matter of J. Kenneth DOLLARD et al., Petitioners, and United States of America, Intervenor-Petitioner, v. LONG ISLAND POWER AUTHORITY et al., Respondents. (Proceeding)
Decision Date12 July 1990

Page 381

559 N.Y.S.2d 381
159 A.D.2d 141
INC., et al., Appellants,
Mario M. CUOMO, as Governor of the State of New York, et
al., Respondents,
Public Service Commission of the State of New York,
(Proceeding No. 1.)
In the Matter of J. Kenneth DOLLARD et al., Petitioners,
United States of America, Intervenor-Petitioner,
(Proceeding No. 2.)
Supreme Court, Appellate Division,
Third Department.
July 12, 1990.

Page 382

[159 A.D.2d 145] Lewis & Greer (Lou Lewis, of counsel), Poughkeepsie, for appellants.

Page 383

Martin S. Kaufman, Atlantic Legal Foundation, New York City, for petitioners.

Robert Abrams, Atty. Gen. (Samuel Cherniak, of counsel), New York City, for Mario M. Cuomo, respondent.

Stanley B. Klimberg, and Skadden, Arps, Slate, Meagher & Flom (George A. Zimmerman, of counsel), New York City, for Long Island Power Authority, respondent.

Charles M. Pratt (Arthur T. Cambouris, of counsel), New York City, for Power Authority of the State of N.Y., respondent.

Victor A. Staffieri (Richard A. Rapp, Jr., of counsel), Hicksville, for Long Island Lighting Co., respondent.

Jacob Lewis, U.S. Dept. of Justice, Civ. Div., Appellate Staff, Washington, D.C., for intervenor-petitioner.

William J. Cowan (Lawrence G. Malone, of counsel), Albany, for Public Service Com'n of State of N.Y., intervenor-respondent.



Petitioners commenced these CPLR article 78 proceedings to challenge determinations by respondents Governor of New York, Long Island Power Authority (hereinafter LIPA), Power [159 A.D.2d 146] Authority of the State of New York (hereinafter PASNY), Long Island Lighting Company, Inc. (hereinafter LILCO) and Public Service Commission (hereinafter the PSC) approving or executing agreements involving the closing and decommissioning of the Shoreham Nuclear Power Station in the Town of Brookhaven, Suffolk County. Specifically, petitioners contend that the agreements are in excess of the public respondents' statutory and constitutional authority and that they were adopted in accordance with improper procedures. The proceedings were commenced by two different sets of petitioners, each of which includes individuals, business groups and interest groups. 1 The claims raised in each proceeding are essentially the same, although petitioners in proceeding No. 2 raise additional claims under the State Environmental Quality Review Act (ECL art. 8) (hereinafter SEQRA). For convenience, we shall not distinguish among petitioners. Because of the far reaching social and political ramifications of this dispute and the complicated nature of the case, we shall provide a detailed background.


In 1986, the Long Island Power Authority Act (hereinafter the Act) was enacted (L.1986, ch. 517). The Act began with the Legislature's declaration that excessive electricity rates have caused "a serious threat to the economic well-being, health and safety" in the Long Island service area of LILCO, an investor-owned utility servicing Suffolk, Nassau and part of Queens Counties (Public Authorities Law § 1020-a; see, Public Authorities Law § 1020-b[10], [17]. 2 LILCO's investment in Shoreham specifically was declared "imprudent" and the cause of "significant rate increases" (PAL § 1020-a). Shoreham's ability to operate was questioned, as was its ability to provide sufficient electricity if it does operate (see, id.). For these and other reasons, the Legislature declared that "a situation threatening the economy, health and safety exists in the service area" (id.). To ensure an adequate, reliable and efficient economic electrical supply, to retain business and to attract new business, the Legislature declared the situation to be a matter of State concern under NY Constitution, article IX, § 3(a)(3) (see, id.).

The Legislature found that the situation "best can be dealt [159 A.D.2d 147] with by replacing [LILCO] with a publicly owned power authority" (id.) and created LIPA as a political subdivision of the State to be operated on a nonprofit basis (see, PAL § 1020-c[1], [3]. LIPA is authorized to acquire LILCO's securities or assets through negotiated

Page 384

agreement, tender offer or eminent domain (see, PAL § 1020-h). It is specifically empowered to acquire "all or any part of the securities or assets of LILCO" provided that it determines that "the rates projected to be charged after such acquisition and for such reasonable period of time as [LIPA] may determine will not be higher than the rates projected to be charged by LILCO during such period if such acquisition had not occurred" (PAL § 1020-h[2].

Under the Act, LIPA must close and decommission Shoreham and consider possible alternative uses "[a]s soon as practicable after [it] has acquired sufficient shares of LILCO stock to do so or after it has acquired all the property of LILCO" (PAL § 1020-h[9]. The Act further prohibits LIPA from constructing or operating a nuclear power plant in the service area (see, PAL § 1020-t), although it has power "to determine the location, type, size, construction, lease, purchase, ownership, acquisition, use and operation of any generating, transmission or other related facility" (PAL § 1020-g[c], and "[t]o proceed with the physical construction or completion of any generating, transmission or related facility" (PAL § 1020-g[d]. Since the Act and this resulting controversy centers largely around Shoreham, it is appropriate to consider this facility in some detail.


The Shoreham Nuclear Power Station is an 809-megawatt nuclear-powered electricity generating facility on the north shore of Long Island. It initially was proposed by LILCO in 1965 to help meet substantially increasing electricity demand in the burgeoning New York City suburbs on Long Island. First conceived of as a 540-megawatt nuclear reactor, Shoreham was to cost $124 million and be operational in 1973. Throughout the 1960s and 1970s, construction delays, some with legal origins and others caused by labor, management or construction problems, occurred so that by 1979 the PSC had commenced a proceeding to investigate whether the cost of Shoreham had been incurred prudently. By this time, Shoreham's[159 A.D.2d 148] cost had exceeded $2 billion with a completion date sometime in the early 1980s (see generally, Matter of Long Is. Light. Co. v. Public Serv. Commn. of State of N.Y., 134 A.D.2d 135, 523 N.Y.S.2d 615).

In 1979, an accident involving Unit 2 at the Three Mile Island Nuclear Power Station in Pennsylvania occurred. This incident served to raise public consciousness about nuclear power safety. In response, stringent emergency plan requirements were imposed as part of the licensing procedure by the Nuclear Regulatory Commission (hereinafter the NRC) for nuclear-powered plants (Pub.L. 96-295, 94 U.S.Stat. 780). Concerned about the ability to meet these, or even any, emergency plan requirements, the Governor and Suffolk County have not assisted LILCO in devising or presenting an emergency plan since 1983 and this controversy over the plan continued throughout the 1980s while construction continued (see, e.g., Cuomo v. Long Is. Light. Co., 71 N.Y.2d 349, 525 N.Y.S.2d 828, 520 N.E.2d 546). Further delays resulting from construction problems occurred throughout the early 1980s but, by 1984, Shoreham was substantially completed. By 1986, preliminary licenses for Shoreham's operation were authorized by the NRC despite the Governor's opposition (see, Cuomo v. Nuclear Regulatory Commn., 772 F.2d 972). The emergency plan remained essentially the only impediment to Shoreham's full operation. By this time, Shoreham had cost almost $5 billion with carrying costs of some $30 million per month. LILCO's financial condition deteriorated throughout this period.

The licensing process continued and, in April 1989, following protracted, detailed and hotly contested administrative hearings (see, e.g., Matter of Long Is. Light. Co. [ Shoreham Nuclear Power Station, Unit 1 ], 29 NRC 211), the NRC granted LILCO a full operating license for Shoreham. By the time these proceedings were commenced shortly after issuance of the license, Shoreham costs had totaled some $5.5 billion. During these latter phases of the controversy and following enactment of the Act, LIPA began to pursue a takeover of LILCO and acquisition of its assets.

Page 385

This phase of these proceedings will now be addressed.


Following enactment of the Act, LIPA apparently commenced a tender offer in an attempt to acquire control of LILCO. This effort was unsuccessful. Through negotiations, however, respondents and others executed a settlement agreement in 1988. This agreement provided for the transfer of [159 A.D.2d 149] Shoreham to LIPA for $1, established a schedule of rate increases for LILCO to be submitted to the PSC for its approval and incorporated by reference a "memorandum of understanding concerning proposed agreements on power supply for Long Island" between PASNY and LILCO which set forth, inter alia, the terms and conditions upon which PASNY would construct power plants for LILCO. This agreement was expressly conditioned upon approval of the PSC, LILCO's shareholders and the Legislature. Although the PSC approved the agreement, the Legislature failed to act so that the agreement lapsed.

Additional settlement negotiations ensued which culminated in a new settlement agreement signed by LILCO and the Governor in February 1989. This 1989 agreement provided that LILCO would transfer Shoreham to LIPA for $1 pursuant to an "amended and restated asset transfer agreement" and that it would not operate Shoreham pending the transfer. The parties to the 1989 agreement intended for LILCO to "be returned to investment-grade financial...

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