Niagara Mohawk Power v. Federal Energy Regulatory

• Decision Date: 25 September 2002
• Docket Number: Docket No. 01-6215.
• Citation: 306 F.3d 1264
• Parties: NIAGARA MOHAWK POWER CORPORATION, Plaintiff-Appellant, New York State Electric & Gas Corporation, Intervenor-Plaintiff, v. FEDERAL ENERGY REGULATORY COMMISSION, New York State Public Service Commission, Harold A. Jerry, Jr., Lisa Rosenblum, William D. Cotter, Raymond O'Connor, and John O'Mara, Defendants-Appellees, Independent Power Producers of New York, Inc., Intervenor-Defendant-Appellee, Cogen Energy Technology L.P., American Ref-Fuel Company, Power City Partners, L.P., AG-Energy, L.P., Seneca Power Partners, L.P., Sterling Power Partners, L.P., P & N Partners, L.P. (Collectively, the "Sithe Intervenors"), Onondaga Cogeneration Limited Partnership, and Project Orange Associates, L.P. (Collectively, the "Syracuse Intervenors"), and United Development Group-Niagara, L.P. ("UDG"), Intervenors-Defendants.
• Court: U.S. Court of Appeals — Second Circuit

306 F.3d 1264

NIAGARA MOHAWK POWER CORPORATION, Plaintiff-Appellant, New York State Electric & Gas Corporation, Intervenor-Plaintiff, v. FEDERAL ENERGY REGULATORY COMMISSION, New York State Public Service Commission, Harold A. Jerry, Jr., Lisa Rosenblum, William D. Cotter, Raymond O'Connor, and John O'Mara, Defendants-Appellees, Independent Power Producers of New York, Inc., Intervenor-Defendant-Appellee, Cogen Energy Technology L.P., American Ref-Fuel Company, Power City Partners, L.P., AG-Energy, L.P., Seneca Power Partners, L.P., Sterling Power Partners, L.P., P & N Partners, L.P. (Collectively, the "Sithe Intervenors"), Onondaga Cogeneration Limited Partnership, and Project Orange Associates, L.P. (Collectively, the "Syracuse Intervenors"), and United Development Group-Niagara, L.P. ("UDG"), Intervenors-Defendants.

Docket No. 01-6215.

United States Court of Appeals, Second Circuit.

Argued: June 19, 2002.

Decided: September 25, 2002.

Edward Berlin (Robert V. Zener, on the brief), Swidler Berlin Shereff Friedman, LLP, Washington, DC, for Plaintiff-Appellant Niagara Mohawk Power Corporation.

Beth G. Pacella (Cynthia A. Marlette, Dennis Lane, on the brief), Federal Energy Regulatory Commission, Washington, DC, for Defendant-Appellee Federal Energy Regulatory Commission.

Jonathan D. Feinberg (Lawrence G. Malone, on the brief), Public Service Commission of the State of New York, Albany, NY, for Defendant-Appellee New York State Public Service Commission.

Howard J. Read (Steven D. Wilson, on the brief), Read and Laniado, LLP, Albany, NY, for Intervenor-Defendant-Appellee Independent Power Producers of New York, Inc.

Before CALABRESI, SACK, and PARKER, Jr., Circuit Judges.

PARKER, Jr., Circuit Judge.

Plaintiff Niagara Mohawk Power Corporation ("Niagara") is a utility engaged in the business of generating and distributing electric power to consumers in the State of New York. Seeking relief from a number of long-term contracts¹ that it had entered into with qualifying cogeneration facilities ("QFs")², Niagara sued the Federal Energy Regulatory Commission ("FERC"), the New York State Public Service Commission (the "PSC"), and the individual commissioners of the PSC. Niagara's claims derive in large part from the Public Utility Regulatory Policies Act of 1978 ("PURPA"), 16 U.S.C. § 2601 et seq., which Congress enacted "to promote long-term economic growth by reducing the nation's reliance on oil and gas, to encourage the development of alternative energy sources and thereby to combat a nationwide energy crisis." Niagara Mohawk Power Corp. v. Fed. Energy Regulatory Comm'n, 162 F.Supp.2d 107, 110 (N.D.N.Y.2001) ("Niagara").

Section 210 of PURPA's Title II, 16 U.S.C. § 824a-3, encourages the development of cogeneration and small power production facilities, which Congress believed would reduce the demand for traditional fossil fuels. Section 210(a), 16 U.S.C. § 824a-3(a), directs FERC, in consultation with state regulatory authorities, to promulgate rules necessary to encourage such power production, including rules requiring utilities to offer to sell electricity to, and purchase electricity from, QFs. Section 210(f)(1) obligates state regulatory agencies such as the PSC to implement FERC rules through their own rulemaking, in particular those pertaining to electric utilities' obligation to purchase power from QFs. 16 U.S.C. § 824a-3(f)(1) (2000).

PURPA and its regulations prohibit FERC from "provid[ing] for a rate which exceeds the incremental cost to the electric utility of alternative electric energy." 16 U.S.C. § 824a-3(b). An electric utility's incremental cost is the cost that the utility would incur in generating the electric energy itself or purchasing it from another source. 16 U.S.C. § 824a-3(d). Incremental cost is also referred to as avoided cost. 18 C.F.R. § 292.101(b)(6) (2001).

In 1980, the New York legislature enacted New York Public Service Law § 66-c, which provided that the PSC would require state-regulated electric utilities to enter into agreements for the purchase of electricity from QFs. The PSC was charged with overseeing the contracting process, including approval of the contracts and setting power purchase rates. New York initially did not adopt PURPA's "avoided cost" ceiling for electricity purchases. In 1981, section 66-c was amended to require the PSC to establish a minimum sales price of at least six cents per kilowatt hour for power purchased from state qualifying QFs. This amendment is commonly referred to as the "Six-Cent Law." The New York legislature amended section 66-c again in 1992, partially repealing the Six-Cent Law. The 1992 amendment, however, preserved the six-cent minimum rate with respect to certain contracts executed and filed with the PSC on or before June 26, 1992, including the agreements at issue here. N.Y. Pub. Serv. Law § 66-c(2) (McKinney 2000).

Niagara initiated this action in May 1995. Its First Amended Complaint alleged that the incremental cost limitation contained in PURPA and FERC implementing regulations preempts both the New York legislature's ability to enact the Six-Cent Law and the PSC's ability to enforce it. The complaint alleged one claim against the PSC and its commissioners, for violations of PURPA, PURPA regulations, and the Supremacy Clause of the Constitution, U.S. Const. art. VI, cl. 2, and one claim against FERC, for violations of PURPA and the Administrative Procedure Act (the "APA"), 5 U.S.C. § 551 et seq.

Defendants moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1) and (6), arguing that there was no federal subject matter jurisdiction over Niagara's claims and that, in any event, Niagara failed to state a claim upon which relief could be granted. The District Court (Norman A. Mordue, Judge) granted defendants' motion and dismissed the complaint in its entirety, in part for a lack of subject matter jurisdiction and in part for failure to state a claim. Niagara, 162 F.Supp.2d 107. For a detailed discussion of the factual background and procedural history of this case, see the District Court's thorough opinion. Niagara, 162 F.Supp.2d at 110-24.

We affirm the District Court's dismissal of Niagara's complaint, albeit on slightly different reasoning. We agree with the District Court's analysis with respect to the claims against FERC, which were properly dismissed with prejudice, and the PURPA claim against the PSC and its commissioners, which was properly dismissed for lack of subject matter jurisdiction because of Niagara's failure to exhaust its administrative remedy by pursuing the claim with FERC in the first instance. We disagree, however, with the District Court's analysis with respect to the Supremacy Clause claim against the PSC and its commissioners, which also should have been dismissed for lack of subject matter jurisdiction because of Niagara's failure to exhaust its administrative remedy.

DISCUSSION

We review the District Court's dismissal of Niagara's complaint de novo, accepting all factual allegations contained in the complaint as true and drawing all reasonable inferences in Niagara's favor. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002). Dismissal is appropriate only if it appears beyond doubt that Niagara can prove no set of facts in support of its claim which would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

I. Claims Against FERC

Niagara alleges two claims against FERC, one for violation of PURPA and one for violation of the APA. While ostensibly independent of each other, these claims share a common legal theory: that "FERC's refusal to apply the incremental and avoided cost limitations of PURPA and its regulations under PURPA to Niagara's existing QF contracts constitutes a violation of [both PURPA and the APA]." (First Am. Compl. for Declaratory and Injunctive Relief ("Compl.") ¶ 38.) For the reasons discussed below, we believe that the District Court properly dismissed both of these claims. See Niagara, 162 F.Supp.2d at 124-34.

A. PURPA Claim

As the District Court held, Niagara cannot maintain a claim against FERC under PURPA for the simple reason that no such claim exists. The only private right of action under PURPA arises from § 210(h)(2)(B) of that statute. See 16 U.S.C. § 824a-3(h)(2)(B). That subsection permits "[a]ny electric utility, qualifying cogenerator, or qualifying small power producer" to petition FERC to enforce PURPA "against a State regulatory authority or nonregulated electric utility" and, if FERC does not initiate an enforcement action, to bring an action in district court "to require such State regulatory authority or nonregulated electric utility" to comply with PURPA. Id. Because FERC is neither a "State regulatory authority" nor a "nonregulated electric utility," Niagara may not sue FERC under PURPA. See Compl. ¶ 9 (stating that "[FERC] is an agency of the United States"); see also N.Y. State Elec. & Gas Corp. v. Saranac Power Partners, L.P., 117 F.Supp.2d 211, 255 (N.D.N.Y.2000) ("PSC cannot sue FERC under the guise of a Section 210(h) enforcement action."), aff'd, 267 F.3d 128 (2d Cir.2001) ("NYSEG"). Accordingly, the District Court correctly dismissed this claim.

B. APA Claim

Niagara also asserts a claim against FERC under the APA. In order to pursue such a claim, Niagara must show that either (1) the FERC action of which Niagara seeks judicial review is "made reviewable by statute" or (2) "there is no other adequate remedy in a court." 5 U.S.C. § 704 (2000). Niagara does not argue that any statute provides for judicial review of FERC decisions interpreting PURPA and, indeed, no statute so provides. Niagara does argue, however, that it has no other adequate judicial remedy. In particular, Niagara argues that unless it can obtain judicial review of FERC's ruling under the APA in an action against FERC, "its remedy against the PSC is not adequate." (Br. for Pl.-Appellant at 51.) We disagree...