Power Authority of State of N.Y. v. F.E.R.C., s. 909
| Decision Date | 15 August 1984 |
| Docket Number | 968,Nos. 909,s. 909 |
| Citation | 743 F.2d 93 |
| Parties | POWER AUTHORITY OF the STATE OF NEW YORK, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. NIAGARA MOHAWK POWER CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. NEW YORK STATE ELECTRIC & GAS CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Municipal Electric Utilities Association of New York, State of New York Public Service Commission, Expansion Power Industries, Metropolitan Transportation Authority, Massachusetts Municipal Wholesale Electric Company, Connecticut Municipal Electric Energy Cooperative, Bethlehem Steel Corp., General Motors Corp., Occidental Chemical Corp., Hooker Industrial & Specialty Chemicals, Olin Corp. and Union Carbide Corp., Vermont Department of Public Service, Borough of Lansdale, Pennsylvania, Consolidated Edison Company of New York, Port Authority of New York and New Jersey, Intervenors. to 981, Dockets 83-4051, 83-4061, 83-4063, 83-4065, 83-4067, 83-4069, 83-4103, 83-4105, 83-4109, 83-4111, 83-4113, 83-4115, 83-4131, 83-4139, 83-4141, 83-4163. |
| Court | U.S. Court of Appeals — Second Circuit |
Thomas M. Lemberg, Washington, D.C. (Joseph C. Swidler, Swidler, Berlin & Strelow, Chartered, Washington, D.C., Frederic H. Lawrence, Kenneth M. Jasinski, Huber, Lawrence & Abell, New York City, of counsel), for New York State Electric & Gas Corporation.
J. Cathy Lichtenberg, Washington, D.C. (Wallace L. Duncan, Mark S. Laufman, Duncan, Weinberg & Miller, P.C., Washington, D.C., of counsel), for Municipal Electric Utilities Association of New York State.
Joshua Z. Rokach, Federal Energy Regulatory Commission, Washington, D.C. (Stephen R. Melton, Acting Gen. Counsel, Jerome M. Feit, Sol., Robert F. Shapiro, Atty., Federal Energy Regulatory Commission, Washington, D.C., of counsel), for Federal Energy Regulatory Commission.
Jaeckle, Fleischmann & Mugel, Buffalo, N.Y. (John Stenger, Buffalo, N.Y., of counsel), for Niagara Mohawk Power Corp.
Law Offices of Algird F. White, Jr., Albany, N.Y. (Algird F. White, Jr., Barbara S. Brenner, Albany, N.Y., of counsel), for intervenors Bethlehem Steel Corp., General Motors Corp., Occidental Chemical Corp., Olin Corp. and Union Carbide Corp.
Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, N.Y. (Victor T. Fuzak, Richard F. Campbell, Jerrold S. Brown, Buffalo, N.Y., of counsel), for intervenors Expansion Power Industries Airco, Inc., et al.
Patterson, Belknap, Webb & Tyler, New York City, McCarthy, Sweeney & Harkaway, Washington, D.C., Gerald Tarrant, Vermont Dept. of Public Service, Montpelier, Vt., for intervenor Vermont Department of Public Service.
David E. Blabey, Timothy P. Sheehan, New York State Public Service Commission, Albany, N.Y., for New York State Public Service Commission.
Nixon, Hargrave, Devans & Doyle, Rochester, N.Y. (Richard N. George, Paula M. Connelly, Rochester, N.Y., of counsel), for Rochester Gas and Electric Corp.
Spiegel & McDiarmid, Washington, D.C. (David R. Straus, Scott H. Strauss, Washington, D.C., of counsel), for intervenors Massachusetts Municipal Wholesale Electric Co. and Connecticut Municipal Electric Energy Cooperative.
Before LUMBARD, MANSFIELD and WINTER, Circuit Judges.
Petitions have been filed by various parties to this proceeding for review of a series of decisions of the Federal Energy Regulatory Commission ("FERC", or "the Commission") concerning the allocation of inexpensive hydroelectric power from the Niagara Power Project. 1 The project is administered by the Power Authority of the State of New York ("PASNY"), a New York State agency, under a license from FERC. The federal legislation that created the Niagara Power Project, the Niagara Redevelopment Act, 16 U.S.C. Secs. 836-836a (the "Act" or "NRA"), requires that in disposing of 50% of the power generated by the project the licensee should give preference to public bodies and non-profit cooperatives; that requirement is in turn a condition of PASNY's license. This case is essentially a dispute over whether PASNY allocated sufficient power in 1960-61 to these "preference customers", i.e., municipalities or cooperative electric systems as distinguished from private investor-owned utilities (e.g., Niagara Mohawk Power Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation).
In May 1978 the Municipal Electric Utilities Association (MEUA), which represents the preference customers, filed a complaint alleging that they had not received all the preference power to which they were entitled; PASNY denied that that was the case. After a series of orders FERC eventually found a middle ground. The Commission agreed that PASNY had failed to fulfill the requirements imposed by its license to meet the "reasonably foreseeable" needs of preference customers when it forecast those needs in 1960-61. However, it also found that PASNY had nevertheless managed to provide MEUA members with enough equivalently priced hydropower from the St. Lawrence Project, which is also administered by PASNY, to meet MEUA's needs through mid-1985; thus, the Commission ruled that no remedy was needed before 1985. For the period following 1985, however, FERC declared void PASNY's contracts with the private utilities and ordered it to supply additional power to MEUA from the Niagara Power Project.
Both PASNY (along with the three private, non-preference utilities to which it sells power) and MEUA seek review. 2 PASNY contends that FERC has allocated
to MEUA an excessive amount of power, while MEUA claims that FERC has failed to allocate to it all the power to which it is entitled. Both sides raise a barrage of statutory, procedural and equitable considerations in support of their respective positions. We modify FERC's remedy for the post-1985 period to make it consistent with the pre-1985 remedy and direct that if a modification of PASNY's contracts with the private utilities becomes necessary, so-called "expansion power" is not to be exempted from withdrawal for preference customers. We affirm the Commission's orders in all other respects.
An understanding of the factual and legislative history of the Niagara Power Project is necessary for consideration of the legal questions presented by this petition. The project can be traced back to 1950, when the United States and Canada signed a treaty providing for expanded use of the Niagara River for hydropower generation. In contrast to the rapid development undertaken by the Canadians, Congress considered several bills during the 1950's but made little progress. The impasse was due to a dispute over whether the river constituted a national or a state resource. Both New York and the federal government already had established power agencies in place. PASNY had been created as an agency of the State of New York in 1931 to develop the St. Lawrence Power Project. See generally New York Public Authorities Law Secs. 1000, et seq. FERC's predecessor, the Federal Power Commission, had been in existence since 1920, when it was created by the Federal Water Power Act. 16 U.S.C. Secs. 791 et seq. 3
The need to develop the Niagara River took on new urgency when the Schoellkopf generating station located at Niagara Falls was destroyed by a rock slide on June 7, 1956. Power was restored to the region only by importing Canadian power at high rates, thereby threatening the viability of Northern New York State's industry, much of which was defense-related. By 1957, two bills were introduced in the Senate, both of which provided for development of the project by PASNY under a license from the Commission. Senator Clark of Pennsylvania introduced S. 512, which was characterized by a "federal preference," such as that contained in the TVA and Bonneville Power Projects. A "federal preference" requires that the project power be sold to rural cooperatives and municipal utilities, on the theory that the price charged by those bodies will provide a "yardstick" that will force down the rates charged by private utilities to domestic and rural consumers. The alternative bill, S. 1037, was introduced by Senators Ives and Javits of New York. Rather than create a "yardstick" as a means of indirectly benefiting consumers, the Ives/Javits bill contained a "state preference" under which priority was given directly to consumers as end-users. That bill was drafted to conform with New York law, which requires that PASNY:
develop, maintain, manage, and operate those parts of the ... projects ... in such manner as to give effect to the policy hereby declared ... that in the development of hydro-electric power ... such projects shall be considered primarily as for the benefit of the people of the state as a whole and particularly the domestic and rural consumers to whom the power can economically be made available, and accordingly that sale to and use by industry shall be a secondary purpose, to be utilized principally to secure a sufficiently high load factor and revenue returns to permit domestic and rural use at the lowest possible rates and in such manner as to encourage increased domestic and rural use of electricity.
New York Public Authorities Law Sec. 1005(5). For a more detailed discussion of the two bills and their historical setting, see Development of Power at Niagara Falls, N.Y.: Hearings on S. 512 and S. 1037 Before a Subcommittee of the Committee on Public Works, 85th Cong., 1st Sess. (1957) (hereinafter "1957 Senate Hearings").
Following hearings on the two bills, the Senate Public Works Committee reported out a compromise bill, S. 2406. An identical bill, H.R. 8643,...
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