Consol. Edison Co. v Pataki, 060502 FED2, 00-9358

Docket Nº:00-9358
Party Name:Consol. Edison Co. v Pataki
Case Date:May 21, 2001
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., PLAINTIFF-APPELLEE,

v.

GEORGE E. PATAKI, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF NEW YORK, MAUREEN O. HELMER, IN HER OFFICIAL CAPACITY AS CHAIRMAN OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION, THOMAS J. DUNLEAVY, JAMES D. BENNETT, LEONARD D. WEISS AND NEAL N. GALVIN IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION, DEFENDANTS-APPELLANTS,

RICHARD L. BRODSKY, NEW YORK STATE ASSEMBLY MEMBER AND SHELDON SILVER, NEW YORK STATE ASSEMBLY SPEAKER, INTERVENORS-DEFENDANTS-APPELLANTS.

Docket Nos. 00-9358(L), 00-9426(CON), 00-9442(CON)

August Term 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: May 21, 2001

June 5, 2002

Defendant state officials appeal from a judgment of the United States District Court for the Northern District of New York (Lawrence E. Kahn, District Judge) permanently enjoining enforcement of a state statute against plaintiff Consolidated Edison Company of New York, Inc. on the grounds that the statute violated the Equal Protection Clause of the Fourteenth Amendment and the Bill of Attainder Clause of Article I, Section 10 of the United States Constitution.

Affirmed and remanded for correction of judgment.

Laura Etlinger, Assistant Solicitor General of the State of New York (Eliot Spitzer, Attorney General of the State of New York, Daniel Smirlock, Deputy Solicitor General of the State of New York, Peter H. Schiff, Senior Counsel, on the brief), Albany, Ny, for Defendant-Appellant Governor Pataki.

Lawrence G. Malone, Public Service Commission of the State of New York (Diane T. Dean, on the brief), Albany, Ny, for Defendants-Appellants Commissioners of the Public Service Commission.

Richard L. Brodsky, Esq., New York State Assembly, Counsel to the Majority (Rosemary Perez Jaquith, on the brief), Albany, Ny, for Intervenors-Defendants-Appellants.

Guy Miller Struve, Davis, Polk & Wardwell (James D. Liss, Florence A. Crisp, Zachary D. Stern, Davis, Polk & Wardwell, Charles E. McTiernan, Jr., Richard J. Giglio, Scott A. Levinson, Roxana Barsalona, Consolidated Edison Company of New York, Inc., on the brief), New York, Ny, for Plaintiff-Appellee.

John C. Rice, Esq., Rice & Justice (Lawrence P. Justice, Bradley F. Rice, on the brief), Albany, Ny, for Amicus Curiae Business Council of New York State, Inc.

Michael F. Mcbride, LeBoeuf, Lamb, Greene & MacRae, Llp (Bruce W. Neely, Martin G. Malsch, John W. Lawrence, LeBoeuf, Lamb, Greene & MacRae, Llp, Edward H. Comer and Henri Bartholmot, Edison Electric Institute, Robert W. Bishop and Ellen C. Ginsberg Nuclear Energy Institute, on the brief) Washington, Dc, for Amici Curiae Edison Electric Institute and Nuclear Energy Institute.

Before: Walker, Chief Judge, Jacobs, Circuit Judge, Larimer, Chief District Judge.(FN1)

John M. Walker, Jr., Chief Judge

Defendant state officials appeal from a judgment of the United States District Court for the Northern District of New York (Lawrence E. Kahn, District Judge) permanently enjoining enforcement of a New York state statute against plaintiff Consolidated Edison Company of New York, Inc. ("Con Ed") on the grounds that the statute violated the Equal Protection Clause of the Fourteenth Amendment and the Bill of Attainder Clause of Article I, Section 10 of the United States Constitution. We affirm solely on the basis of Art. I, § 10, but remand to the district court to correct a scrivener's error in the judgment.

BACKGROUND

Plaintiff Con Ed is a public utility that provides electrical power to New York City. Among Con Ed's power plants is the Indian Point 2 Nuclear Generating Facility ("IP2") located in Westchester County, New York. The statute at the heart of this appeal was enacted in response to a power outage at IP2 caused by a defective generator.

Until recently, IP2 produced electricity with four "Model 44" steam generators that Con Ed had purchased from the Westinghouse Corporation ("Westinghouse") in 1972. In the late 1970s, Westinghouse learned that the steam generator tubes on both its Model 44 and 51 steam generators were subject to corrosion and failure. By 1997, seven of the eight nuclear power plants using the Model 44 had replaced their generators. Although other power plants apparently continued to use the similarly flawed Model 51 steam generators, only IP2 continued to use the flawed Model 44 generators. Con Ed purchased replacement generators for IP2 in 1985, but, prior to the incident at issue in this litigation, had never installed them.

On February 15, 2000, a steam tube in one of IP2's Model 44s developed a crack which released radioactive steam into the surrounding nonradioactive water that is converted to steam to turn IP2's power-generating turbines. A subsequent investigation by the federal Nuclear Regulatory Commission ("NRC") and the New York State Public Service Commission ("PSC" or "the Commission") revealed no evidence of elevated radiation levels offsite due to the incident. The cracked tube was promptly discovered and Con Ed took IP2 offline to replace the generator. By January 2001, it had finished replacing the damaged generator with one purchased in 1985 and restarted IP2. To cover electricity demand while IP2 was offline, Con Ed was forced to purchase electricity from other sources.

Con Ed operates IP2 in a complex regulatory environment. The public health and safety aspects of its operations are regulated by the NRC under the Atomic Energy Act of 1954, 42 U.S.C. § 2011 et seq. (1994). The rates that Con Ed charges its customers are regulated by the PSC, an independent state regulatory body created early in the twentieth century.

A 1997 settlement agreement resolved a number of outstanding disputes between Con Ed and the PSC that have no bearing on this appeal. The agreement amended Con Ed's rate and was adopted in the form of a rate order by consent. Of relevance to this appeal, the agreement includes a so-called "fuel adjustment clause" ("FAC"), which allows Con Ed to pass certain costs along to its ratepayers in the form of temporary rate increases. Con Ed's authority to pass costs through to ratepayers under the FAC is subject to statutory review by the PSC to determine whether those costs are prudently or "reasonably" incurred, in order to ensure just and reasonable rates. N.Y. Pub. Serv. Law § 66(12)(k) (2001); see Long Island Lighting Co. v. Pub. Serv. Comm'n, 523 N.Y.S.2d 615, 620 (N.Y. App. Div. 1987). The PSC is empowered to bar Con Ed from passing imprudently incurred costs along to ratepayers and to force the utility to refund imprudently incurred costs already recouped. N.Y. Pub. Serv. Law § 66(12)(k) (2001).

Pursuant to the FAC, Con Ed increased its rates to incorporate the cost of purchasing replacement electricity and the other costs associated with the outage. Soon after the incident, the PSC staff began a prudence investigation of the IP2 outage, and on March 30, 2000, the PSC itself initiated a prudence review. It is our understanding that this review is still incomplete as of the issuance of this opinion.

On February 18, 2000, three days after the outage, the New York State Assembly issued a notice of a joint public hearing of the Assembly Committees of Energy, Environmental Conservation, and Corporations, Authorities, and Commissions, to be held on a variety of topics related to the outage and Con Ed's operation of IP2. The notice listed potential topics including: the environmental effects of the incident, deterioration of facilities at IP2, the need for greater regulatory oversight of nuclear power in New York, and the potential sale of the IP2 plant. The hearing was held on March 3, 2000, and it covered the range of topics listed in the notice. Con Ed's Chief Operating Officer, J. Michael Evans, and its Vice President of Maintenance and Construction, Stephen Quinn, testified. They later supplemented their testimony in a six-page letter to several members of the committee.

On March 20, 2000, intervenors-defendants Representatives Brodsky and Silver introduced the bill that is the subject of the present lawsuit. See A. 10096, 2000 Assembly (N.Y. 2000). One week later, on March 27, the Assembly and Senate passed the bill without amendment. Governor Pataki signed it into law on August 8 as Chapter 190 of the Laws of 2000 ("Chapter 190"). See Act of Aug. 8, 2000, ch. 190, 2000 N.Y. Laws, (hereinafter, 2000 N.Y. Laws 190). Chapter 190 reads, in full, as follows:

§ 1. Declaration of legislative findings. The operator of a nuclear generating facility has a high duty of care to protect the health, safety and economic interests of its customers. Rate regulation of nuclear operators should discourage the taking of risks with regard to potential threats to public health and safety.

By continuing to operate steam generators known to be defective, and thereby increasing the risk of a radioactive release and/or an expensive plant outage, the Consolidated Edison Company failed to exercise reasonable care on behalf of the health, safety and economic interests of its customers. Therefore it would not be in the public interest for the company to recover from ratepayers any costs resulting from the February 15, 2000 outage at the Indian Point 2 Nuclear Facility.

§ 2. With respect to the February 15, 2000 outage at the Indian Point 2 Nuclear Facility, the New York state public service commission shall prohibit the Consolidated Edison Company from recovering from its ratepayers any costs associated with replacing the power from such facility. Such prohibition shall apply to any such costs incurred until the conclusion of such outage, or incurred at any time until all defective steam...

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