Consolidated Edison Co. of New York, Inc. v. Public Service Com'n of State

• Decision Date: 25 October 1984
• Citation: 63 N.Y.2d 424,483 N.Y.S.2d 153,472 N.E.2d 981
• Parties: , 472 N.E.2d 981, 53 USLW 2251 In the Matter of CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Respondent, v. PUBLIC SERVICE COMMISSION OF STATE of New York, Appellant; Occidental Chemical Corporation, Intervenor; and Brooklyn Union Gas Company, Intervenor-Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 153

483 N.Y.S.2d 153

63 N.Y.2d 424, 472 N.E.2d 981, 53 USLW 2251

In the Matter of CONSOLIDATED EDISON COMPANY OF NEW YORK,

INC., Respondent, v. PUBLIC SERVICE COMMISSION OF STATE of New York, Appellant;

Occidental Chemical Corporation, Intervenor;

and

Brooklyn Union Gas Company, Intervenor-Respondent.

Court of Appeals of New York.

Oct. 25, 1984.

Timothy P. Sheehan and David E. Blabey, Albany, for appellant

Bernard L. Sanoff, Joy Tannian, Peter Garam, John D. McMahon and Celeste A. Contrucci, New York City, for respondent.

Earle H. O'Donnell, Washington, D.C., Michael Whiteman, Albany, Edward J. Grenier, Jr., John D. Sharer and Michael L. Denger, Washington, D.C., for intervenor.

Robert Abrams, Atty. Gen., Albany (Peter H. Schiff, Stanley B. Klimberg and Howard A. Fromer, Albany, of counsel), for New York State Energy Office, amicus curiae.

Zachary Shimer, New York City (John B. O'Sullivan, Washington, D.C., Rigdon H. Boykin, Bernays T. Barclay, Robert S. Shapiro, Robert McK. Hunziker, New York City, John T. Ferguson, II, Washington, D.C., John E. Murray, Binghamton, and Stephen J. Wing, Poughkeepsie, for International Paper Co. and others, amici curiae.

Peter W. Brown, New York City, for New York Alliance for Hydroelectric Energy, amicus curiae.

Herman B. Noll, Syracuse, for Niagara Mohawk Power Corp., amicus curiae.

OPINION OF THE COURT

COOKE, Chief Judge.

The Public Utility Regulatory Policies Act of 1978 (PURPA) (Pub.L. 95-617) does not preempt this State from requiring electric utilities to offer to buy energy from those alternate energy producers, that qualify under both Federal and State law, at a rate in excess of the maximum rate under PURPA. However, the State is preempted by provisions of the Federal Power Act (FPA) from requiring electric utilities to offer to purchase power from purely State qualifying alternate energy facilities.

Responding to the nationwide energy crisis, Congress enacted PURPA in 1978 for the purpose of encouraging the development of alternate energy sources, in order to reduce this country's dependence on traditional fossil fuels (see FERC v. Mississippi, 456 U.S. 742, 750, 102 S.Ct. 2126, 2132, 72 L.Ed.2d 532). Accordingly, section 210 of PURPA (16 U.S.C. § 824a-3) mandates the Federal Energy Regulatory Commission (FERC) to prescribe rules that will foster development of qualifying cogeneration facilities and qualifying small power production facilities. ¹ By further directing FERC to promulgate rules requiring electric utilities to offer to sell and purchase electric energy to and from such Federal qualifying facilities, Congress hoped to eliminate one of the central problems that had hindered the development of alternate energy sources: traditional electric utilities were reluctant to buy power from, or sell power to the alternate power producers (see FERC v. Mississippi, supra, at p. 750, and n. 12, 102 S.Ct., at p. 2132, and n. 12).

With respect to the regulatory rates established by FERC for purchases by electric utilities, PURPA directs that they be (1) just and reasonable to the electric consumers of the utility, (2) in the public interest, and (3) not discriminatory against qualifying cogenerators or small power producers (see 16 U.S.C. § 824a-3). PURPA further limits the purchase rate by providing that FERC may not establish a rate that exceeds the purchasing utility's "avoided cost" ² (see id.).

A second barrier to alternate energy producers was the applicability of voluminous Federal and State utility regulations, involving tremendous amounts of paperwork. To avoid financially and administratively overburdening qualifying facilities, section 210 of PURPA authorizes FERC to exempt many Federal qualifying facilities from certain Federal and State laws, including the Federal Power Act (FPA) (see 16 U.S.C. § 824a-3 18 CFR 292.601), when deemed necessary in order to encourage alternate power producers to enter the field (see FERC v. Mississippi, 456 U.S. 742, 750-751, 102 S.Ct. 2126, 2132-2133, 72 L.Ed.2d 532, supra; 1978 U.S.Code Cong. & Admin.News, pp. 7659, 7832).

After the enactment of PURPA, New York State passed a similar law in 1980 (L.1980, ch. 553, § 7, as amd. by L.1981, ch. 843, § 9, Public Service Law, § 66-c). Its purpose is to promote State energy goals of development of alternate energy production facilities, cogeneration facilities, and small hydro facilities (see Public Service Law, § 66-c; State Energy Master Plan, Final Report, vol. I, pp. 5-10, 29-30 ). To encourage this development, the law requires electric utilities to both sell and purchase power produced by State qualifying facilities (see Public Service Law, § 66-c, subd. 1). Generally, those facilities that qualify under PURPA in this State also qualify under the State law (see Public Service Law, § 2, subds. 2-a, 2-b, 2-c). ³

Like PURPA, section 66-c of the Public Service Law requires that the purchasing rates by a utility from a State qualifying facility be just, nondiscriminatory, and in furtherance of the public policy behind the legislation. The State statute differs from PURPA, however, in that it prescribes a uniform minimum purchase price of 6 cents per kilowatt hour for electricity purchased by a utility from a State qualifying facility, rather than PURPA's variable avoided-cost purchase rate. This State's minimum purchase rate may at times exceed a utility's avoided cost, the maximum purchase rate for energy from a Federal qualifying facility that can be required by FERC under PURPA (see 16 U.S.C. § 824a-3 18 CFR 292.304).

After conducting hearings to implement the Federal and State legislation and regulations, respondent Public Service Commission (PSC) determined, among other things, that petitioner Consolidated Edison must offer to purchase electric energy from on-site generation facilities ⁴ that qualify under either Federal or State law, or both. It also required petitioner, under State law, to offer to purchase at a rate of at least 6 cents per kilowatt hour from State qualifying facilities and at a rate of at least avoided cost from any purely Federal qualifying facility under PURPA.

On September 9, 1982, petitioner commenced this article 78 proceeding challenging, on Federal preemption grounds, these two aspects of the PSC's determination.

The Appellate Division granted the petition, in part, holding that the FPA and PURPA preempted the area and, therefore, that FERC had exclusive jurisdiction to determine rates for sales of electricity at wholesale by on-site generators. The court modified the determination of the PSC by declaring that the State could only require petitioner to offer to purchase electricity from on-site generators that were Federal qualifying facilities. The required purchase of electricity from purely State qualifying facilities, however, was deemed to be under the preemptive blanket of the FPA. Further, the State requirement of a 6 cents per kilowatt hour minimum purchase rate was held invalid to the extent it conflicted with the Federally mandated maximum rate of avoided costs.

The first issue is whether PURPA preempts State regulation requiring electric utilities to purchase power from Federal qualifying facilities at a rate in excess of the avoided cost purchase rate required under PURPA. This court holds that PURPA has no such effect.

Based upon the Supremacy Clause of the United States Constitution (see U.S. Const., art. VI, cl. 2), Federal law will prohibit the enforcement of State regulation in several circumstances. Preemption ⁵ will arise if the Federal statute contains express language indicating Congressional intent to preempt the field sought to be regulated by State law (see Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604). In the absence of express preemption, such may be implied from the comprehensive and pervasive nature of the Federal legislation that indicates an intention by Congress to leave "no room for the States to supplement" Federal law, or if the Federal law concerns a dominant Federal interest (see Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447). Preemption may also be found when compliance with both Federal and State law is an impossibility (see Florida Avocado Growers v. Paul, 373 U.S. 132, 142-143, 83 S.Ct. 1210, 1217-1218, 10 L.Ed.2d 248). Indeed, if the State law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress", as expressed in the conflicting Federal statute, it must fall (Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581; see, also, Capital Cities Cable v. Crisp, 467 U.S. ----, ----, 104 S.Ct. 2694, 2700, 81 L.Ed.2d 580).

Analysis under the supremacy clause, however, begins with the assumption that Congress did not intend to prohibit State action (see Maryland v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 2128, 68 L.Ed.2d 576; Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258). This is especially so when the Federal enactment would displace a State statute governing an area historically regulated under the State's police power (see Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447, supra ). The regulation of local electric utilities has been recognized as ordinarily arising under a State's police power (see Arkansas Elec. Coop. v. Arkansas Public Comm., 461 U.S. 375, 387, 103 S.Ct. 1905, 1914, 76 L.Ed.2d 1).

On its appeal, the PSC maintains that section 210 of PURPA does not expressly, or impliedly by reason of a pervasive scheme of Federal regulation, preempt the minimum rate provision of section 66-c of the Public Service Law. Petitioner does not contest this but, instead, asserts preemption on two other grounds: first, on the basis that there is a direct conflict between PURPA's maximum avoided-cost purchase rate and the 6 cents...