Long Island Lighting Co. v. Cuomo, 87-CV-39.

• Citation: 666 F. Supp. 370
• Decision Date: 04 August 1987
• Docket Number: No. 87-CV-39.,87-CV-39.
• Parties: LONG ISLAND LIGHTING COMPANY, Plaintiff, v. Mario M. CUOMO, in his official capacity as Governor of the State of New York, Paul L. Gioia, in his official capacity as Chairman of the New York Public Service Commission, Harold A. Jerry, Jr., Anne F. Mead, Gail Garfield Schwartz and John Doe, in their official capacities as Commissioners of the New York Public Service Commission, the Long Island Power Authority, and William L. Mack, Irving Like, Nora Bredes, Leon Campo, Richard Kessel, Stephen Liss, Vincent Tese, John Adam Kanas, and Martha Bernstein, in their official capacities as Trustees of the Long Island Power Authority, Defendants, and Shoreham-Wading River Central School District, and the Assessor and the Board of Assessment for the Town of Brookhaven, Intervenor-Defendants.
• Court: United States District Courts. 2nd Circuit. United States District Court of Northern District of New York

666 F. Supp. 370

LONG ISLAND LIGHTING COMPANY, Plaintiff,
v.
Mario M. CUOMO, in his official capacity as Governor of the State of New York, Paul L. Gioia, in his official capacity as Chairman of the New York Public Service Commission, Harold A. Jerry, Jr., Anne F. Mead, Gail Garfield Schwartz and John Doe, in their official capacities as Commissioners of the New York Public Service Commission, the Long Island Power Authority, and William L. Mack, Irving Like, Nora Bredes, Leon Campo, Richard Kessel, Stephen Liss, Vincent Tese, John Adam Kanas, and Martha Bernstein, in their official capacities as Trustees of the Long Island Power Authority, Defendants,
and
Shoreham-Wading River Central School District, and the Assessor and the Board of Assessment for the Town of Brookhaven, Intervenor-Defendants.

No. 87-CV-39.

United States District Court, N.D. New York.

August 4, 1987.

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Shea & Gould, Hunton & Williams, New York City, Anthony F. Earley, Hicksville, N.Y., Shea & Gould, Albany, N.Y., for plaintiff; Michael Lesch, Kurt Hunciker, John G. Nicolich, Barry V. Sautman, Dennis Sisk, Edward M. Barrett, George V. Cook, Adeeb Fadil, New York City, of counsel

Robert Abrams, Atty. Gen. of the State of N.Y., New York City, for defendant Cuomo; Peter Bienstock, Mary M. Gundrum, Alfred L. Nardelli, Samuel A. Cherniak, Asst. Attys. Gen., of counsel.

Fabian Palomino, New York City, Special Counsel to the Governor.

Kirkpatrick & Lockhart, Pittsburgh, Pa., Kirkpatrick & Lockhart, Washington, D.C., for defendants Long Island Power Authority and Individual Trustees; David A. Brownlee, Kenneth M. Argentieri, Pittsburgh, Pa., Herbert H. Brown, Lawrence C. Lanpher, Washington, D.C., of counsel.

Rutnik & Rutnik, Albany, N.Y., Local Counsel, for defendants Long Island Power Authority and Individual Trustees; Douglas P. Rutnik, of counsel.

Robert Simpson, Albany, N.Y., Acting Counsel, for Dept. of Public Service and Individual Com'n Members; David E. Blabey, James W. Brew, Lawrence G. Malone, Jonathan D. Feinberg, Marilyn M. Faulkner, of counsel.

Lou Lewis, P.C., Poughkeepsie, N.Y., for intervenor-defendant School Dist.; Lou Lewis, J. Scott Greer, of counsel.

Allen I. Sak, Brookhaven Town Atty., Medford, N.Y., for intervenor-defendant Bd. of Assessment; Francis J. Gluchowski, Asst. Town Atty., of counsel.

MUNSON, Chief Judge.

MEMORANDUM-DECISION AND ORDER

This action is the latest in a series of legal conflicts centering around the Shoreham Nuclear Power Station ("Shoreham"), an unlicensed nuclear reactor located on the north shore of Long Island in the Town of Shoreham, New York. See, e.g., Long Island Lighting Co. v. County of Suffolk, 628 F.Supp. 654 (E.D.N.Y.1986); Citizens for an Orderly Energy Policy, Inc. v. County of Suffolk, 604 F.Supp. 1084 (E.D. N.Y.1985), aff'd, 813 F.2d 570 (2d Cir.1987); Long Island Lighting Co. v. County of Suffolk, 604 F.Supp. 759 (E.D.N.Y.1985); Cuomo v. Nuclear Regulatory Comm'n, 772 F.2d 972 (D.C.Cir.1985); County of Suffolk v. Long Island Lighting Co., 589 F.Supp. 1387 (E.D.N.Y.1984); see also Kessell v. Public Service Comm'n, 123 A.D.2d 203, 511 N.Y.S.2d 441 (3d Dept.1987).

In the present case, plaintiff Long Island Lighting Company ("LILCO" or "the utility"), a New York corporation engaged in the production and sale of electricity and the sole owner of the Shoreham plant, raises a number of facial constitutional challenges to two recent enactments passed by the New York legislature which the utility claims are designed to allow a newly-created public power authority to bypass New York State's eminent domain procedures and will result in the public takeover of LILCO without providing its shareholders fair and just compensation. The Used and Useful Act, Chapter 518 of the laws of 1986 (McKinney's Session Laws), amended § 66 of the Public Service Law and provides that if Shoreham is not in commercial operation at least by January 3, 1989,¹ LILCO cannot recover construction costs for the nuclear reactor through the rates it

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charges its customers. See N.Y.Pub. Serv.Law § 66(24) (McKinney Supp.1987). The Long Island Power Authority Act ("LIPA Act"), chapter 517 of the laws of 1986 (McKinney's Session Laws), establishes the Long Island Power Authority ("LIPA" or "the authority") and authorizes this newly-created public entity to acquire LILCO through a negotiated buy-out, hostile tender offer, or the exercise of eminent domain powers. See N.Y.Pub.Auth.Law § 1020 et seq. (McKinney Supp.1987). Before the court are motions by the various defendants to dismiss the complaint or for summary judgment and cross-motions by LILCO for partial summary judgment and a preliminary injunction preventing any actions by state officials pursuant to the LIPA Act

I. BACKGROUND

A. The History of the Shoreham Nuclear Reactor

LILCO is the sole owner of the Shoreham Nuclear Power Station, an 809 megawatt (MW) nuclear-powered electricity generating facility located on the north shore of Long Island in the County of Suffolk. As a utility possessing a natural monopoly over its service area, LILCO is subject to extensive regulation by the New York State Public Service Commission ("PSC") with respect to the rates it may charge its customers, the issuance and sale of its securities, and most details concerning its day-to-day and long-term operation. See generally N.Y.Pub.Serv.Law § 64 et seq. (McKinney 1955 & Supp.1987). Specifically, § 69 of the Public Service Law imposes on the PSC considerable responsibility in overseeing and approving an electric utility's issuance of "stocks, bonds, notes or other evidences of indebtedness" to finance "the construction, completion, extension or improvement of its plant or distributing system, or for the improvement or maintenance of its service...."² N.Y.Pub. Serv.Law § 69 (McKinney Supp.1987). With regard to the construction and operation

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of nuclear power plants, LILCO is subject to extensive regulations promulgated by the United States Nuclear Regulatory Commission ("NRC") pursuant to the Atomic Energy Act. 42 U.S.C. §§ 2011-2282; 10 C.F.R. Part 50 (1987). To build and operate a nuclear power generating plant in the United States, a utility must first obtain a construction permit from the NRC and, after construction has been completed, must apply for an operating license and satisfy all NRC licensing requirements. See 42 U.S.C. §§ 2035, 2131; 10 C.F.R. §§ 50.10, 50.33, 50.47. The standards for obtaining these permits have become increasingly stringent over the years since the Shoreham project began

Following the enactment of the Atomic Energy Act of 1954, LILCO gave serious consideration to the feasibility of nuclear reactor power generating facilities as an alternative to "traditional" fossil-fuel electricity generating plants. Case 27563, Long Island Lighting Co. — Shoreham Prudence Investigation, App. A at 1 (Opinion No. 85-23, Dec. 16, 1985) (hereinafter PSC Prudence Report) (see Doc. 18, Tab 10). In the 1960s, a marked escalation in the demand for electric energy in LILCO's service area reinforced the utility's movement toward nuclear energy sources. Between 1963 and 1973, LILCO's summer peak hour demand for electric energy increased from 1,099 MW to 2,620 MW, or 138 percent. Affidavit of Adam M. Madsen, Doc. 53, Exh. 2. In 1973, LILCO forecasted a continued increase in peak demand for its service area of 6.5 percent per year. Id. at ¶ 4. Yet, in 1971, LILCO operated electricity generating facilities with a total capacity of only 2,874 MW. Doc. 39, ¶ 1.

In 1965, LILCO took its first steps toward the construction of a nuclear power plant to service Long Island. In April of that year, the utility's Board of Directors informed LILCO's shareholders that the construction of a 500 MW nuclear reactor was being considered. Two months later, the Stone & Webster Engineering Corporation ("Stone & Webster") became the fledgling project's architect engineer. In July 1965 LILCO's Board of Directors approved the construction of a 540 MW nuclear reactor. The reactor was expected to commence commercial operation in 1973 and to cost $124 million to build. On March 30, 1966 LILCO's Board approved the purchase of the Shoreham site, and in May 1968 LILCO submitted a Preliminary Safety Analysis Report and an application for a construction permit to the Atomic Energy Commission, the predecessor to the NRC. PSC Prudence Report, App. A at 1.

In November 1968 LILCO notified the Atomic Energy Commission that it intended to construct a larger facility than originally contemplated at the Shoreham site. In March 1969 the LILCO Board authorized the construction of an 820 MW boiling water nuclear reactor. This larger plant was expected to cost $217 million and was slated to begin commercial operation in May 1975. Site clearing and grading began in July 1968; a revised cost estimate of $261 million was issued in September 1969. In 1970, the Advisory Committee on Reactor Safety and the Atomic Energy Commission issued favorable reports on the Shoreham project; that same year LILCO modified its contract with Stone & Webster to reflect that a larger plant than had been initially anticipated was to be constructed. The revised total cost estimate for the construction of the reactor rose to $300 million. PSC Prudence Report, App. A at 1-2.

In September 1970, hearings before the Atomic Safety and Licensing Board ("ASLB") of the Atomic Engergy Commission

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began. The Commission's issuance of construction permits was abruptly halted a short time thereafter, however, in the wake of a decision by the Court of Appeals for the District of Columbia Circuit holding that the National Environmental Policy Act of 1969, 42 U.S.C. § 4321 et seq., required the Atomic Energy...