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

• Citation: 78 N.Y.2d 398,576 N.Y.S.2d 185,582 N.E.2d 568
• Decision Date: 22 October 1991
• Docket Number: No. 1,No. 3,No. 2,1,2,3
• Parties: , 582 N.E.2d 568, Util. L. Rep. P 26,151 In 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., Appellants, and United States of America, Intervenor-Appellant, v. LONG ISLAND POWER AUTHORITY, et al., Respondents. (Proceeding) In the Matter of NASSAU SUFFOLK CONTRACTOR'S ASSOCIATION, INC., et al., Appellants, v. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, et al., Respondents. (Proceeding)
• Court: New York Court of Appeals Court of Appeals

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576 N.Y.S.2d 185 78 N.Y.2d 398, 582 N.E.2d 568, Util. L.
Rep. P 26,151 In 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 No. 1.)
In the Matter of J. Kenneth DOLLARD, et al., Appellants,
and
United States of America, Intervenor-Appellant,
v.
LONG ISLAND POWER AUTHORITY, et al., Respondents.
(Proceeding No. 2.)
In the Matter of NASSAU SUFFOLK CONTRACTOR'S ASSOCIATION,
INC., et al., Appellants,
v.
PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, et al.,
Respondents. (Proceeding No. 3.) Court of Appeals of New York. Oct. 22, 1991.

Page 186

[78 N.Y.2d 401] [582 N.E.2d 569] J. Scott Greer and Lou Lewis, Poughkeepsie, for appellants in proceeding No. 1.

Martin S. Kaufman, Douglas Foster, New York City and Malcolm Wilson, White Plains, for appellants in proceeding No. 2.

Lou Lewis, Michael J. Englert and Kenneth F. Peshkin, Poughkeepsie, for appellants in proceeding No. 3.

[78 N.Y.2d 402] Jacob M. Lewis, Stephen A. Wakefield, Marc Johnston, Percy H. Russell, Jr., Stuart M. Gerson, Frederick J. Scullin, Jr., and Leonard Schaitman, of the District of Columbia Bar, admitted pro hac vice, for intervenor-appellant in proceeding No. 2.

[78 N.Y.2d 403] Robert Abrams, Atty. Gen., New York City (Samuel A. Cherniak, O. Peter Sherwood, John W. Corwin, James Sevinsky, Charlie Donaldson and Leslie Allan, of counsel), for Mario M. Cuomo, respondent in proceedings Nos. 1 and 2.

George A. Zimmerman and Stanley B. Klimberg, New York City, for Long Island Power Authority, respondent in proceedings Nos. 1 and 2.

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[78 N.Y.2d 404] [582 N.E.2d 570] Wendy M. Lane, Arthur T. Cambouris and Charles M. Pratt, New York City, for Power Authority of the State of New York, respondent in proceedings Nos. 1 and 2.

[78 N.Y.2d 405] Richard A. Rapp, Jr., and Victor A. Staffieri, Hicksville, for Long Island Lighting Co., respondent in proceedings Nos. 1, 2 and 3.

Lawrence G. Malone, William J. Cowan, Eleanor Stein and Jonathan D. Feinberg, Albany, for Public Service Com'n, intervenor-respondent in proceeding No. 1 and respondent in proceedings Nos. 2 and 3.

[78 N.Y.2d 406] OPINION OF THE COURT

BELLACOSA, Judge.

The fundamental fulcrum of this case is the validity of the February, 1989 "Settlement Agreement", providing essentially for the Long Island Power Authority (LIPA) to acquire the Long Island Lighting Company's (LILCO) Shoreham Nuclear Plant and to close that plant. We affirm the lower courts' determinations unanimously upholding the Agreement against a host of challenges.

I. SHOREHAM

LILCO's nuclear reactor power plant, sited on Long Island Sound in the Shoreham community of the Town of Brookhaven, Suffolk County, was conceived in 1965 as a 540 megawatt nuclear operation to be built at a cost of $124 million. LILCO's original objective was to provide better and reasonable power service to over three million people and industries in its huge [78 N.Y.2d 407] suburban service area. The existing plant, enlarged to 809 megawatts, was substantially completed in 1984 at a mushroomed cost of $5.5 billion, with carrying costs of approximately $30 million a month. Persistent and complex problems plagued this titanic project for almost three decades. Among the problems were varied concerns of this nature: regulatory, licensing, legal, multijudicial, financing, safety, labor/management, consumer, national/State/local political, and providing a reasonable/adequate power supply. Two major events provide historical context as well: the 1979 accident at the Three Mile Island Nuclear Power Station in Pennsylvania and the 1986 accident at Chernobyl in the Soviet Union.

II. LIPA ACT--POLICY

To try to solve the chain of impasses and crises, the Governor and the Legislature negotiated and produced the LIPA Act (the Act) in 1986 (L.1986, ch. 517). The legislative findings specifically state that LILCO's decisions to commence and continue construction of Shoreham were "imprudent" and created "significant rate increases" which have resulted in "excessive" electricity costs to LILCO's service area customers (Public Authorities Law [582 N.E.2d 571] § 1020-a). The Legislature questioned whether Shoreham would ever operate or be capable of providing "sufficient, reliable and economic electric service" if it were to operate (Public Authorities Law § 1020-a; see, § 1020-h[1][g]. The Legislature declared in the Act that this crisis created "a situation [of State concern] threatening the economy, health and safety * * * in the service area" (Public Authorities Law § 1020-a).

III. THE LIPA ACT

The Act created LIPA, a not-for-profit public corporation, to implement the Legislature's multiple objectives and policies (Public Authorities Law § 1020-c[1]. It conferred broad authority and power on LIPA to fulfill the primary statutory objectives: closing Shoreham, replacing LILCO as the provider of electric and gas power on Long Island, reducing power costs, or all of these (Public Authorities Law §§ 1020-f, 1020-g, 1020-h). The Act authorized LIPA to acquire "all or any part" of LILCO's securities or assets--including, of course, Shoreham--to further the legislative findings "as [LIPA] in its sole discretion may determine" providing that prior to "any such acquisition" LIPA determines that higher utility rates will not [78 N.Y.2d 408] result (Public Authorities Law § 1020-h[2] [emphasis added]. LIPA is authorized to acquire LILCO's securities or assets through negotiated instrument,tender offer or eminent domain (Public Authorities Law

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§ 1020-h). The Act mandated that LIPA close and decommission Shoreham "forthwith" upon acquisition and consider possible alternative uses (Public Authorities Law § 1020-h[9]. It expressly prohibited LIPA from operating a nuclear power facility (Public Authorities Law § 1020-t), and gave LIPA the power "to determine the location, type, size, construction, lease, purchase, ownership, acquisition, use and operation of any generating, transmission or other related facility" (Public Authorities Law § 1020-g[c].

Under the Act, LIPA is authorized to make and execute agreements and contracts "necessary or convenient in the exercise of [its] powers and functions" (Public Authorities Law § 1020-f[h] and all State agencies are authorized "to enter into and do all things necessary to perform any such agreement" (Public Authorities Law § 1020-f[h].

IV. THE 1989 SETTLEMENT AGREEMENT

After an unsuccessful effort in 1988 to reach agreement resolving the Shoreham crisis, and after an unsuccessful tender offer by LIPA to acquire LILCO (see, Public Authorities Law § 1020-h[3], LILCO and the Governor signed the 1989 Settlement Agreement at issue in this case. The Agreement provided that LILCO would transfer the Shoreham plant to LIPA for $1 and LILCO would pay for all costs associated with Shoreham, pursuant to an "asset transfer agreement" incorporated in the Agreement. The Agreement provided that LIPA would contract with the Power Authority of the State of New York (PASNY) for the technical expertise necessary to close Shoreham. This was in furtherance of the legislative objective of closing Shoreham "forthwith" (Public Authorities Law §§ 1020-a, 1020-h[9]. The Agreement reflected the intent that LILCO be returned to an investment-grade financial condition as an investor-owned electric and gas company, and provided for LIPA to advise LILCO in developing a comprehensive least-cost power supply. PASNY agreed to construct additional power-generating facilities for LILCO if requested. The Agreement noted the Public Service Commission's (PSC) approval of a temporary LILCO rate increase for that rate year and expressed the understanding that LILCO's subsequent rate increases would be minimal. It provided for settlement of [78 N.Y.2d 409] related litigation, including LILCO's appeal to the Second Circuit Court of Appeals from a declaration that the Act was constitutional (Long Is. Light Co. v. Cuomo, 666 F.Supp. 370, appeal dismissed and judgment vacated 888 F.2d 230). LILCO retained the right to seek reinstatement of its Federal court appeal in the event LIPA exercised its statutory authority to acquire LILCO--still a viable, statutory authorization not precluded by the Agreement.

The 1989 Agreement was buttressed by an independent study, commissioned by LIPA, which demonstrated that LILCO's rates, freed of the Shoreham albatross, would be cheaper than LILCO's rates with Shoreham, thus satisfying the only condition legislatively imposed on LIPA's authority to acquire "all or any part of" LILCO's assets (see, Public Authorities Law § 1020-h[2]. The Agreement was subsequently evaluated and approved as required by the PSC, LIPA, PASNY and LILCO.

Petitioners, representing individuals, business groups and interest groups, commenced three separate CPLR article 78 proceedings challenging the execution and approval of this Settlement Agreement on various grounds.

We conclude that the essential rationale of the Per Curiam opinion at the Appellate Division (159 A.D.2d 141, 559 N.Y.S.2d 381) dealing with LIPA's authority and SEQRA is sound. Its core conclusion bears emphasis: "[o]ne would be hard pressed to find language more clearly conveying legislative intent to give the implementing agency the broadest flexibility in administering the statute, including the discretion not to proceed with a full LILCO takeover " (159 A.D.2d, at 156, 559 N.Y.S.2d 381 [emphasis added]. We also affirm and agree with the result and reasoning of the second determination brought up for our review and

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[582 N.E.2d 572] reflected in the Per Curiam opinion at 163 A.D.2d 700, 559 N.Y.S.2d 393.

The Citizens for an Orderly Energy Policy and the Dollard petitioners contend that the Settlement Agreement contravenes the LIPA Act, subverts its legislative...