U.S. v. Tex-La Elec. Co-op., Inc., TEX-LA

• Citation: 693 F.2d 392
• Decision Date: 26 November 1982
• Docket Number: 82-2014,Nos. 81-3715,TEX-LA,s. 81-3715
• Parties: UNITED STATES of America, Plaintiff-Appellant, v.ELECTRIC COOPERATIVE, INC., Defendant-Appellee. UNITED STATES of America, Plaintiff-Appellant, v. NORTHEAST TEXAS ELECTRIC COOPERATIVE, INC., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 392

693 F.2d 392

UNITED STATES of America, Plaintiff-Appellant, v. TEX-LA ELECTRIC COOPERATIVE, INC., Defendant-Appellee.

UNITED STATES of America, Plaintiff-Appellant, v. NORTHEAST TEXAS ELECTRIC COOPERATIVE, INC., Defendant-Appellee.

Nos. 81-3715, 82-2014.

United States Court of Appeals Fifth Circuit.

Nov. 26, 1982.

Leland Ware, Dept. of Justice, Civil Division, Federal Programs Branch, Leonard Schaitman, Atty., Appellate Staff, Civil

Div., Bruce G. Forrest, Dept. of Justice, Washington, D.C., for plaintiff-appellant.

Ralph J. Gillis, Plymouth, Mass., for defendant-appellee.

Appeal from the United States District Court for the Eastern District of Louisiana.

Appeal from the United States District Court for the Southern District of Texas.

Before WISDOM, BROWN and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

These consolidated cases come to us on appeal from the Eastern District of Louisiana and the Southern District of Texas. The single appellee, ¹ Tex-La Electric Cooperative, Inc., has thus far successfully challenged the validity of the government's new system for setting and raising the rates set out in the schedules according to which federally owned hydroelectric power is sold.

The novel situation that this case presents is this: in 1979, for the first time ever, new and higher federal electricity rates calculated pursuant to the Flood Control Act of 1944 were put into effect on an interim basis without an independent review by an independent agency. Section 5 of the Flood Control Act of 1944, 16 U.S.C. Sec. 825s (1976 & Supp. IV 1980), imposes a requirement that rates first be prepared by the Secretary of the Interior and then approved and confirmed by the independent Federal Power Commission before becoming effective. It is the practical effect of this bifurcated scheme that forms the basis for this suit. The principal question before us is whether today, when the Federal Power Commission no longer exists (and when its functions have been largely taken over by the Federal Energy Regulatory Commission), "approved and confirmed" can be interpreted to vest interim rate implementing authority in the hands of the Secretary of the Interior's successor, the Secretary of Energy.

Although we reject many of the government's arguments and accept all of Tex-La's except one, ² we hold for the reasons given below that the Secretary does have interim ratemaking authority under section 5 of the Flood Control Act of 1944. The decisions of the two district courts are therefore reversed.

I. HOW THIS CASE HAS ARISEN.

The key to the instant case lies in its history. What follows is not simply "background." Without the complex mix of partly conflicting statutes, rules, and unwritten practices that have come into being since the middle 1930s, this case simply would not have arisen.

A. Developments in the Law.

At least since the New Deal Congress has from time to time provided for the construction of various dams to control flooding, encourage commerce and navigation, and provide water for farming and other purposes. The hydroelectric potential of these early projects, so important today, was then often purely secondary and, in the case of the Flood Control Act of 1944 that governs the present case, was nearly forgotten entirely. See S.Rep.No. 1030, 78th Cong., 2d Sess. 3 (1944) (adding section 5 of the Act to the House bill, which had overlooked the fact that the proposed dams would produce electricity that would have to be sold). Many of these dams were built and run by the Army Corps of Engineers. The Corps was directed to turn over any surplus hydroelectric power to the Secretary of the Interior. The Secretary, in turn, had the responsibility for preparing appropriate rate schedules for the sale of the power. He was required to fix the schedules at the lowest level possible sufficient to pay for the cost of producing and transmitting the power while also amortizing that part of the dam construction costs that could be fairly attributable to the production of power. Flood Control Act of 1944, Sec. 5, 16 U.S.C. Sec. 825s. The hydroelectric facilities, in other words, were statutorily designed to be entirely self-supporting.

In order to sell the hydroelectric power turned over to him by the Corps of Engineers, the Secretary of the Interior created what eventually became five regional Power Marketing Administrations. ³ The immediate defendant in this suit, the Southwestern Power Administration (SWPA), was created in 1943, see 8 Fed.Reg. 12,142 (1943), and was given the authority to manage all of the Corps of Engineers hydroelectric facilities in Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas, see 10 Fed.Reg. 14,527-28 (1945). The administrator of SWPA was delegated the responsibility, among other things, of preparing rate schedules and of doing the necessary accounting and cost allocation studies.

After the rate schedules were drawn up, but before they could become effective, they were submitted to the independent Federal Power Commission for review. The Flood Control Act specifically provides that the schedules were "to become effective upon confirmation and approval by the Federal Power Commission." Flood Control Act Sec. 5. (This is the statutory provision that lies at the heart of this suit.) The Commission would generally hold public hearings, and then render a formal opinion either approving the rates and putting them into effect, or remanding the case to the appropriate Power Marketing Administration for further consideration. ⁴

Under this system, all remained relatively peaceful until the mid-1970s. Then two things happened. First, the days of cheap energy ended and those of rapid inflation began, thus making it necessary for the Power Marketing Administrations to raise rates higher and more often than had ever before been necessary. Compare United States Department of the Interior, Bonneville Power Administration, Docket Nos. E-6611, E-6905 & E-7242, 34 F.P.C. 1462, 1464 (1965) (big administrative to-do over three percent rate increase), with Secretary of Energy, Bonneville Power Administration, Docket No. EF-80-2011, 45 Fed.Reg. 79,545, 79,546 (1980) (big administrative to-do over eighty-eight percent increase). And second, in 1977 Congress enacted the Department of Energy Organization Act, Pub.L.No. 95-91, 91 Stat. 565 (codified at 42 U.S.C. Secs. 7101 to 7352 (Supp. IV 1980)). The enactment of the DOE Act has given the parties here something to fight about; the rapid rise in the cost of everything over the past few years has made it worth their while. ⁵

Because of the way it affects the above-quoted provisions of the Flood Control Act, the DOE Act has created the uncertainty that has produced the present suit. Congress passed the DOE Act because it found that "responsibility for energy policy, regulation, and research, development and demonstration is fragmented in many departments and agencies and thus does not allow for the comprehensive, centralized focus necessary for effective coordination of energy supply and conservation programs." DOE Act Sec. 101(4), 42 U.S.C. Sec. 7111(4). The idea behind the Act was centralization and administrative streamlining, but the result for those charged with interpreting the Flood Control Act has been confusion.

The DOE Act transfers the Flood Control Act functions of both the Secretary of the Interior and the Federal Power Commission. With respect to the Secretary of the Interior, the Act plainly provides:

There are hereby transferred to, and vested in, the Secretary [of Energy] all functions of the Secretary of the Interior under section 5 of the Flood Control Act of 1944, and all other functions of the Secretary of the Interior, and officers and components of the Department of the Interior, with respect to ... the Southwestern Power Administration.

DOE Act Sec. 302(a)(1), 42 U.S.C. Sec. 7152(a)(1). The Secretary of Energy thus unquestionably has the power to prepare rates through his newly acquired designee, the Administrator of SWPA.

The provisions for the functions of the old Federal Power Commission, now abolished in favor of the new (and also independent) Federal Energy Regulatory Commission, are a little more complicated. At a first reading, Title IV of the DOE Act appears to transfer all of the hydroelectric power regulating functions of the Federal Power Commission to the new FERC. See United States v. Sam Rayburn Dam Electric Cooperative, Inc., No. H-80-1781, typescript op. at 7-8 (S.D. Tex. Aug. 19, 1982) (explaining how misleading a first reading can be). A closer reading, however, reveals that the only hydroelectric regulatory powers given to the FERC, see DOE Act Sec. 402, 42 U.S.C. Sec. 7172, are those included in the Federal Power Act of 1935. The Flood Control Act of 1944, the 1937 Bonneville Power Act, 16 U.S.C. Sec. 832e (1976 & Supp. IV 1980), and the 1974 Federal Columbia River Transmission System Act, 16 U.S.C. Sec. 838g (1976 & Supp. IV 1980), all of which regulate literally scores of federal hydroelectric projects, are not mentioned anywhere in the FERC provisions (title IV) of the DOE Act. We are therefore forced to turn to the "general transfers" section, which provides in pertinent part:

Except as provided in title IV [the FERC provisions], there are hereby transferred to, and vested in, the Secretary [of Energy] the function of the Federal Power Commission, or of the members, officers, or components thereof.

DOE Act Sec. 301(b), 42 U.S.C. Sec. 7151(b). The legislative history of this section states in plain language that the section "transfers to the Secretary [of Energy] all functions of the Federal Power Commission, except those transferred to or vested in the Federal Energy Regulatory Commission in Section 402." H.R.Rep. No. 539, 95th Cong., 1st Sess. 65 (1977), reprinted in 1977 U.S.Code Cong. & Ad.News 925, 936 (Conference Report). See S.Rep.No. 164, 95th Cong., 1st Sess. 29 (1977), reprinted...