Nantahala Power and Light Company v. Thornburg

Decision Date17 June 1986
Docket NumberNo. 85-568,85-568
Citation90 L.Ed.2d 943,476 U.S. 953,106 S.Ct. 2349
PartiesNANTAHALA POWER AND LIGHT COMPANY, et al., Appellants v. Lacy H. THORNBURG, Attorney General of North Carolina, et al
CourtU.S. Supreme Court
Syllabus

Appellants Nantahala Power & Light Co. and Tapoco, Inc., are wholly owned subsidiaries of appellant Aluminum Co. of America (Alcoa). Each owns hydroelectric powerplants on the Little Tennessee River, which the Tennessee Valley Authority operates in exchange for providing them jointly with a fixed supply of low-cost "entitlement power." In addition, Nantahala buys a variable amount of high-cost "purchased power" from the TVA's power grid. Tapoco sells all its power to an Alcoa plant in Tennessee, and Nantahala serves public customers in North Carolina. For the purpose of calculating the rate to be charged Nantahala's retail customers, the North Carolina Utilities Commission (NCUC) issued an order allocating entitlement and purchased power between Tapoco and Nantahala that differs from the allocation of entitlement power between them ordered by the Federal Energy Regulatory Commission (FERC) in a wholesale ratemaking proceeding. The NCUC's order resulted from Nantahala's request to raise its intrastate retail rates. The North Carolina Supreme Court affirmed that order.

Held: NCUC's allocation of entitlement and purchase power is pre-empted by federal law. Pp. 962-972.

(a) FERC has exclusive jurisdiction over the rates to be charged Nantahala's interstate wholesale customers. Once FERC sets such a rate, a State may not conclude in setting retail rates that the FERC-approved wholesale rates are unreasonable. Rather, a State must give effect to Congress' desire to give FERC plenary authority over interstate wholesale rates, and to ensure that the States do not interfere with this authority. The "filed rate" doctrine, under which interstate power rates filed with or fixed by FERC must be given binding effect by state utility commissions in determining intrastate rates, is not limited to "rates" per se. Here, FERC's decision directly affected Nantahala's wholesale rates by determining the amount of low-cost power that it may include in its source of power, and FERC required Nantahala's wholesale rates to be filed in accordance with that allocation. FERC's allocation of entitlement power is therefore presumptively entitled to more than the negligible weight given it by NCUC. Pp. 962-967.

(b) NCUC's decision that Nantahala should have included more of the low-cost, FERC-regulated power than it in fact can under FERC's order, runs directly counter to that order and therefore cannot withstand its pre-emptive force. Moreover, NCUC's order impermissibly interferes with the scheme of federal regulation. Since Congress intended FERC's allocation of power in wholesale interstate ratemakings to pre-empt any inconsistent state ratemakings, it is FERC's order rather than NCUC's that must be given effect. Pp. 967-972.

313 N.C. 614, 332 S.E.2d 397, reversed and remanded.

O'CONNOR, J., delivered the opinion of the Court, in which all other Members joined, except POWELL and STEVENS, JJ., who took no part in the consideration or decision of the case.

Rex E. Lee, Washington, D.C., for appellants.

Louis R. Cohen, Washington, D.C., for U.S., as amicus curiae, by special leave of Court.

William T. Crisp, Raleigh, N.C., for appellees.

Justice O'CONNOR delivered the opinion of the Court.

The Nantahala Power & Light Company (Nantahala) and Tapoco, Inc. (Tapoco), are both wholly owned subsidiaries of the Aluminum Company of America (Alcoa). Tapoco and Nantahala each own hydroelectric powerplants on the Little Tennessee River. Almost all of the power that they produce goes to the Tennessee Valley Authority (TVA). In exchange for allowing TVA to pour into its grid the variable quantity of power produced by Tapoco's and Nantahala's facilities, Tapoco and Nantahala jointly receive a fixed supply of low-cost "entitlement power" from TVA. In addition, Nantahala buys a variable amount of high-cost "purchased power" from the TVA grid. Tapoco sells all its power to Alcoa; Nantahala serves public customers.

For the purposes of calculating the rate to be charged Nantahala's retail customers, all of whom are in North Carolina, the Utilities Commission of North Carolina (NCUC) chose an allocation of entitlement and purchased power between Tapoco and Nantahala that differs from the allocation of entitlement power between Tapoco and Nantahala adopted by the Federal Energy Regulatory Commission (FERC) in a wholesale ratemaking proceeding. The North Carolina Supreme Court upheld NCUC's allocation. We noted probable jurisdiction to decide whether NCUC's allocation may stand in light of FERC's ruling. 474 U.S. 1018, 106 S.Ct. 565, 88 L.Ed.2d 550 (1985). We hold that NCUC's allocation of entitlement and purchased power is pre-empted by federal law.

I
A.

This case involves a number of agreements, all of which concern the power grid of TVA. Under the New Fontana Agreement (NFA), to which TVA, Tapoco, and Nantahala are parties, TVA operates all of Tapoco's hydroelectric facilities and 8 of the 11 dams owned by Nantahala. The facilities operated by TVA produce an amount of power that varies in magnitude with the fullness of the harnessed streams. The NFA gives TVA the right to pour all that power into the TVA grid. In exchange, TVA provides jointly to Tapoco and Nantahala a constant annual allocation of low-cost "enti- tlement power" of 1.8 billion kilowatt-hours per year. The NFA is on file with FERC as a rate schedule. Nantahala Power & Light Co., 19 FERC ¶ 61,152, p. 61,274 (1982).

Under the 1971 Apportionment Agreement (AA), to which Tapoco and Nantahala are parties, Tapoco is entitled to 1.44 billion kilowatt-hours per year of the entitlement power, and Nantahala is entitled to the remaining 0.36 billion kilowatt-hours per year. The AA therefore allocates 80% of the entitlement power to Tapoco and 20% of the entitlement power to Nantahala. The AA was filed with FERC in 1980 as an appendix to a proposed wholesale rate schedule filed with FERC. Id., at 61,275.

Under a Purchase Agreement to which TVA and Nantahala are parties, Nantahala may purchase additional power from the TVA grid. This "purchased power" is generated in part by nonhydroelectric plants, which is generally a more expensive way to produce electricity than the hydroelectric generation used to produce the entitlement power. As a result, purchased power is about three times as expensive to generate as is entitlement power. Tapoco does not itself purchase additional power from TVA, although Alcoa purchases some high-cost power directly from TVA and uses some of Tapoco's equipment to obtain that power.

Tapoco's only customer is an Alcoa plant in Alcoa, Tennessee, while Nantahala serves various wholesale and retail customers in North Carolina. Tapoco's sales to Alcoa and Nantahala's sales to its wholesale customers are governed by FERC-filed rates, while Nantahala's rates to its retail customers are set by NCUC.

B

In 1976, Nantahala filed a proposed wholesale rate increase with FERC, which has exclusive jurisdiction over interstate wholesale power rates. 16 U.S.C. § 824(b). See also §§ 824d, 824e. FERC is to determine a "just and reasonable" rate for such power, § 824d(a), and Congress has speci- fied various procedures for, and limitations on, the filing of such proposed and approved rates, §§ 824d(c), (d), (e).

In 1978, the town of Highlands (Highlands), a wholesale customer of Nantahala, filed a complaint with FERC. See § 824e(a). This complaint alleged that Alcoa, Tapoco, and Nantahala had violated the Federal Power Act by diverting, to Alcoa's private use, hydroelectric power and facilities dedicated to the public service. The Attorney General of North Carolina intervened in support of Highlands' position on behalf of Nantahala's customers. Because both the proceedings concerning the proposed wholesale rate increase and the proceedings concerning the Highlands complaint eventually involved allegations that Nantahala's costs had been unreasonably increased by misuse of the corporate form, FERC consolidated the two proceedings and resolved them in an opinion issued in May 1982. 19 FERC ¶ 61,152.

Highlands asked FERC to treat the commonly owned Tapoco and Nantahala as a single entity for ratemaking purposes, and to "roll in" their separate costs into the same rate base:

"Highlands contends that because Nantahala and Tapoco have commingled their assets and liabilities under the NFA, it is not possible to derive a rational method of apportioning costs and benefits on any basis other than a rolled-in cost of service. The town asks [FERC] to pierce the corporate veil between the two utilities and treat them as one entity for ratemaking purposes, to set aside the [AA], to develop Nantahala's rates on a rolled-in cost of service basis, and to order Alcoa and Tapoco to establish an interconnection with Highlands." Id., at 61,275.

FERC acknowledged that corporate entities may be disregarded when used to subvert clear legislative intent. See Schenley Distillers Corp. v. United States, 326 U.S. 432, 437, 66 S.Ct. 247, 249, 90 L.Ed. 181 (1946) (per curiam). See also General Telephone Co. v. United States, 449 F.2d 846, 855 (CA5 1971). Nonetheless FERC declined to pierce the corporate veil. The particular history of Tapoco and Nantahala, as well as their current separation of customers and management, led FERC to conclude that it could not "find that Alcoa has used the separate corporate identities of Nantahala and Tapoco to frustrate the purposes of the Federal Power Act, or that the two companies operate as an integrated system." 19 FERC, at 61,277.

FERC concluded that the NFA was "the result of arms' length bargaining." Id., at 61,278. FERC found that the AA, in contrast, was unfair to Nantahala. In the AA, Nantahala relinquished certain benefits it had...

To continue reading

Request your trial
195 cases
  • Phillips v. Virginia Bd. of Medicine, Civ. A. No. 90-1007-A.
    • United States
    • U.S. District Court — Eastern District of Virginia
    • November 1, 1990
    ...New Orleans city council on grounds that the council's order was preempted by federal law under Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986) (which held that, for purposes of setting intrastate retail rates, a state may not differ from the Fe......
  • Metro. Edison Co. v. Pa. Pub. Util. Comm'n
    • United States
    • U.S. Court of Appeals — Third Circuit
    • September 16, 2014
    ...FERC must be given binding effect by state utility commissions determining intrastate rates.” Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 962, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986). The filed rate doctrine thus “concern[s] the pre-emptive impact of federal jurisdiction ... on st......
  • Westmarc Com. v. Conn. Dept. of Public Utility
    • United States
    • U.S. District Court — District of Connecticut
    • June 20, 1990
    ...Power & Light Co. v. Mississippi, 487 U.S. 354, 108 S.Ct. 2428, 101 L.Ed.2d 322 (1988); Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 970, 106 S.Ct. 2349, 2359, 90 L.Ed.2d 943 (1986) ("when the Federal Energy Regulatory Commission sets an interstate rate between a seller of power ......
  • New Orleans Public Service, Inc v. Council of City of New Orleans
    • United States
    • U.S. Supreme Court
    • June 19, 1989
    ...and injunctive relief on the ground that the Council's order was pre-empted by federal law under Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986), which held that, for purpose of setting intrastate retail rates, a State may not differ from FERC's......
  • Request a trial to view additional results
12 books & journal articles
  • The Keogh or 'Filed-Rate' Doctrine
    • United States
    • ABA Antitrust Library Handbook on the Scope of Antitrust Doctrines of implicit repeal
    • January 1, 2015
    ...U.S. 214, 216 (1998); Mississippi Power & Light Co. v. Miss. ex rel Moore, 487 U.S. 354 (1988); Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986); Chicago & Nw. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981). 27. See EINER R. ELHAUGE, U.S. ANTITRUST LAW & ECONOMICS 38......
  • Table of Cases
    • United States
    • ABA Antitrust Library Telecom Antitrust Handbook. Third Edition
    • December 9, 2019
    ...Cir. 2004), 140 Multi Commc’n Media Inc. v. AT&T Corp . , 1997 WL 188938 (S.D.N.Y. 1997), 396 N Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986), 394 Nat’l Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005), 95 Nat’l Cable Satellite Corp., 947 F. S......
  • Table of cases
    • United States
    • ABA Antitrust Library Energy Antitrust Handbook
    • January 1, 2017
    ...v. Southridge Capital Mgmt., LLC, 2002 U.S. Dist. LEXIS 24049 (S.D.N.Y. 2002), 220, 221, 225 Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986), 205 , 206 National Dairy Prods. Corp. v. United States, 350 F.2d 321 (8th Cir. 1965), vacated , 384 U.S. 883 (1966), 123 National Fuel ......
  • Antitrust Immunities and Defenses
    • United States
    • ABA Antitrust Library Energy Antitrust Handbook
    • January 1, 2017
    ...damages which can be measured “only by determining what would be a reasonable rate”). 61 . See Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966 (1986) (holding that “the filed rate doctrine is not limited to ‘rates’ per se ”). 62 . Arkansas La. Gas Co ., 453 U.S. at 573. 63. Texa......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT