Mississippi Industries v. F.E.R.C., s. 85-1611
| Citation | 257 U.S. App.D.C. 244,808 F.2d 1525 |
| Decision Date | 03 April 1987 |
| Docket Number | 85-1620,Nos. 85-1611,85-1615,85-1613,85-1621,s. 85-1611 |
| Parties | MISSISSIPPI INDUSTRIES, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Missouri Public Service Commission, Mississippi Power & Light Company, Louisiana Power & Light Company, et al., City of New Orleans, Louisiana, Mississippi Public Service Commission, State of Arkansas, Union Carbide Corporation, Occidental Chemical Corporation, Arkansas & Missouri Congressional Delegations, Louisiana Public Service Commission, Arkansas Public Service Commission, Jefferson Parish, Louisiana, Arkansas Power & Light Company, Middle South Energy, Inc., Middle South Services, Inc., and Cities of Conway and West Memphis, Arkansas, Intervenors. MISSISSIPPI PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. ARKANSAS POWER & LIGHT COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. MISSISSIPPI POWER & LIGHT COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. LOUISIANA PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. OCCIDENTAL CHEMICAL CORPORATION, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. REYNOLDS METALS COMPANY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Edwin Lloyd PITTMAN, Attorney General of the State of Mississippi, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. ARKANSAS AND MISSOURI CONGRESSIONAL DELEGATIONS, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. ARKANSAS PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. STATE OF ARKANSAS, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. MISSISSIPPI LEGAL SERVICES COALITION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. CITY OF NEW ORLEANS, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. MISSOURI PUBLIC SERVICE COMMISSION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Representative Webb |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
James P. Murphy, with whom Michael T. Mishkin, Washington, D.C., James V. Selna, Newport Beach, Fla., Donald T. Bliss, and David T. Beddow, Washington, D.C., were on the brief, for petitioner Arkansas Industries.
Carl D. Hobelman, Washington, D.C., with whom Jerry D. Jackson, Little Rock, Ark., M. Remy Ancarrow, Washington, D.C., and Robert J. Glasser, New York City, were on the brief, for petitioner Arkansas Power & Light Co.
J. Cathy Lichtenberg, with whom Wallace L. Duncan, James D. Pembroke, Janice L. Lower, Washington, D.C., Martin C. Rothfelder, Jefferson City, Mo., William Massey, Steve Clark, and Mary B. Stallcup, Little Rock, Ark., were on the brief, for petitioners Arkansas Public Service Com'n, et al.
Hiram C. Eastland, Jr., with whom Edwin L. Pittman, Frank Spencer, John L. Maxey, II, Jackson, Miss., and Alfred Chaplin were on the brief, for petitioners Mississippi Public Service Com'n, et al.
James K. Child, Jr., Jackson, Miss., with whom Paul H. Keck, Michael F. Healy, Douglas L. Beresford, Robert R. Nordhaus, Adam Wenner, Howard Eliot Shapiro, and Margaret A. Moore, Washington, D.C., were on the brief, for petitioners Mississippi Industries, et al.
Glen L. Ortman, with whom Clinton A. Vince and Paul E. Nordstrom, Washington, D.C., were on the brief, for petitioner City of New Orleans.
Michael R. Fontham, New Orleans, La., with whom David B. Robinson, Washington, D.C., and Paul L. Zimmering, New Orleans, La., were on the brief, for petitioner Louisiana Public Service Com'n.
Peter C. Kissel, Richard G. Morgan, Earle H. O'Donnell, and Robert R. Morrow, Washington, D.C., were on the brief for petitioners Occidential Chemical Corp., et al.
A. Karen Hill, Atty., F.E.R.C., with whom William H. Satterfield, Gen. Counsel, Jerome M. Feit, Sol., and John N. Estes, III, Atty., F.E.R.C., Washington, D.C., were on the brief, for respondent.
Richard M. Merriman, Robert S. Waters, and James K. Mitchell, Washington, D.C., were on the brief for intervenors Middle South Services, Inc., et al.
William A. Chesnutt, Harrisburg, Pa., entered an appearance for intervenor Union Carbide Corp.
Before EDWARDS and BORK, Circuit Judges, and WRIGHT, Senior Circuit Judge.
Opinion PER CURIAM.
We consider eighteen consolidated petitions for review of two orders of the Federal Energy Regulatory Commission (FERC or the Commission). 1 In the orders under review the Commission held that the four operating companies of the Middle South Utilities (MSU) system must share the costs of MSU's investment in nuclear energy in proportion to their relative demand for energy generated by the system as a whole. The Commission implemented this scheme by reallocating responsibility for investment costs associated with the catastrophically uneconomical Grand Gulf I nuclear plant. The parties attack both the Commission's jurisdiction and the rationality of its decision. Although the Commission's allocation of nuclear investment costs is subject to reasonable dispute, we do not think such criticisms warrant reversal of FERC's orders. We therefore affirm.
The controversy facing the court today stems from the pattern of power generation investment cost sharing practiced by Middle South Utilities and its operating companies. In order to address fully the proper allocation of the costs of nuclear power generation among those companies, we review MSU's structure, the history of its involvement in nuclear power generation, and the record of the proceedings below.
1. Corporate structure. Middle South Utilities, Inc. is a registered holding company under the Public Utility Holding Company Act of 1935 (PUHCA). 15 U.S.C. Sec. 79 et seq. (1982). It owns outright four utility operating companies: Louisiana Power & Light Co. (LP & L), New Orleans Public Service, Inc. (NOPSI), Arkansas Power & Light Co. (AP & L), and Mississippi Power & Light Co. (MP & L). See Middle South Energy, Inc., 26 FERC p 63,044, 65,098 (1984). The operating companies sell electricity, both wholesale and retail, in the states of Louisiana, Arkansas, Missouri, and Mississippi. 2
Although each operating company has a separate board of directors, the sole stockholder, MSU, selects each director. In addition, the various companies do have common or overlapping officers and directors. The Chairman and Chief Executive Officer (CEO) of MSU is a member of the board of each operating company and the CEOs of the operating companies are members of the board of MSU. Other MSU board members are also board members of individual operating companies. Middle South Services, Inc., 30 FERC p 63,030, 65,142 (Docket No. ER82-463-000) (ALJ Head).
Transactions among the various operating companies are governed by a System Agreement. Over its history, MSU has filed three successive System Agreements--in 1951, 1973, and 1982. The Commission scrutinizes the System Agreement and modifies it when necessary. See, e.g., Middle South Services, Inc., 16 FERC p 61,101 (1981) (modifying the 1973 System Agreement), aff'd, Louisiana Public Service Commission v. FERC, 688 F.2d 357 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 343 (1983). Section 3.01 of the Agreement states the system's general goal of operating as a coherent unit:
The purpose of this Agreement is to provide the contractual basis for the continued planning, construction, and operation of the electric generation * * * facilities of the Companies in such a manner as to achieve economies consistent with the highest practicable reliability of service * * *. This agreement also provides a basis for equalizing among the Companies any imbalance of cost associated with the construction, ownership and operation of such facilities as are used for the mutual benefit of all the Companies.
483-R. 7117, VII Joint Appendix (JA) 1569. 3 In light of this language, Administrative Law Judge (ALJ) Head found that the MSU system has sought to coordinate the addition of operating capacity by each individual operating company while achieving the greatest economies of scale. 4 As he observed:
The System Agreements * * * clearly permit and encourage, for efficiency, reliability, and other economies of scale, that the individual companies from time to time build larger facilities than are necessary to meet their own native load, to benefit all the generating companies by having lower costs and greater reliability. * * *
All three System Agreements have assigned the task of coordinating the planning of new generating capacity to a systemwide Operating Committee. 5 The CEO of each operating company designates one member of the committee, as does MSU. The members representing the operating companies control 80% of the votes on the committee, apportioned according to each individual company's share of the system's investment in generating capacity. The representative of MSU votes the remaining 20%. Under Section 5.04 of the System Agreement, the Operating Committee can now take action on the basis of a bare majority. 483-R. 7129, VII JA 1581.
2. Investment cost sharing. As ALJ Liebman noted, the MSU system planning approach to new generating capacity inevitably results in certain operating companies having less generating capacity than do others for varying periods of time. See 26 FERC at 65,098 (Docket No....
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