United States v. Tex-La Elec. Co-op., Inc., Civ. A. No. 80-2813.

• Decision Date: 09 September 1981
• Docket Number: Civ. A. No. 80-2813.
• Citation: 524 F. Supp. 409
• Parties: UNITED STATES of America v. TEX-LA ELECTRIC COOPERATIVE, INC.
• Court: U.S. District Court — Eastern District of Louisiana

524 F. Supp. 409

UNITED STATES of America v. TEX-LA ELECTRIC COOPERATIVE, INC.

Civ. A. No. 80-2813.

United States District Court, E. D. Louisiana.

September 9, 1981.

COPYRIGHT MATERIAL OMITTED

James M. Tompkins, McGlincey, Stafford, Mintz, New Orleans, La., Ralph J. Gillis, Plymouth, Mass., Northcutt Ely, Frederick H. Ritts, Washington, D.C., for defendant.

Elizabeth O'Connell, Marc J. Yellin, Asst. U.S. Atty., New Orleans, La., Leland Ware, C. Max Vassanelli, Alice Daniel, Asst. Atty. Gen., U.S. Dept. of Justice, Washington, D.C., for plaintiff.

OPINION

ARCENEAUX, District Judge.

At the preliminary pre-trial conference held in this matter, it was stipulated by both parties that there are no disputed issues of material fact. Accordingly, the Court's decision relative to the parties' cross motions for summary judgment is dispositive of the case.

Oral argument was heard on April 22, 1981, and the parties were allowed to further supplement their numerous pre-trial memoranda.

Having reviewed the applicable law, the facts of the case, and the comprehensive memoranda submitted by both parties, IT IS ORDERED that the summary judgment of defendant Tex-La Electric Cooperative, Inc. (Tex-La) be GRANTED, and the corresponding motion of plaintiff be DENIED.

BACKGROUND

Section 5 of the 1944 Flood Control Act, 16 U.S.C. § 825s¹ establishes the governmental functions which are to be exercised in the sale of federal hydropower from reservoir projects constructed by the Army. They include:

1) the transmission and disposal of power and energy;

2) the formulation of appropriate rate schedules; and,

3) the confirmation and approval of rates.

From 1944 to 1977, the first two functions were exercised by the Secretary of the Interior, while the third was under the control of the Federal Power Commission (FPC).

In 1977, the Department of Energy Organization Act (DEOA), 42 U.S.C. § 7151 et seq.,² transferred the Department of the Interior's power marketing responsibilities and the FPC's rate confirmation and approval functions under the Flood Control Act to the Department of Energy. In December of 1978, the Secretary of Energy delegated his authority to establish rates under the Flood Control Act to the Assistant Secretary for Resource Applications. Delegation Order No. 0204-33, 43 Fed.Reg. 60636-37 (1978).³ By the same order, the Secretary delegated authority for final confirmation of rates to the Federal Energy Regulatory Commission (FERC). The latter was created in 1977 as an independent entity in the Department of Energy.

The Southwestern Power Administration (SWPA) became, by order of the Department of the Interior, the agency responsible for the marketing of reservoir power in the southwestern region of the United States. This region includes Texas and Louisiana. A federal study, completed in 1978, determined that costs were not being recovered for SWPA's sales of hydroelectric power. On March 1, 1979, the Assistant Secretary for Resource Applications issued a rate order which increased power and energy rates for SWPA's customers, and placed the new rates into effect on an interim basis, subject to final confirmation by FERC. Order Confirming, Approving and Placing Rates in Effect on an Interim Basis, Rate Order No. SWPA-1 March 1, 1979, 44 Fed.Reg. 13068.

Tex-La, one of those customers, has refused to pay the interim rates until they receive final confirmation and approval by FERC. As a result of this refusal, plaintiff instituted this action pursuant to 28 U.S.C. § 1345. Jurisdiction and venue are uncontested.

There are two Tex-La/U.S. power sale contracts which are pertinent. The first, Contract No. 14-02-001-864 (# 864),⁴ was entered into in 1958, and provides for the sale of "firm SWPA system power". This contract contains the provision that rates may be increased or decreased subject to confirmation and approval by the FPC. The second contract, Contract No. 14-02-0001-921 (# 921),⁵ entered into in 1960, provides for the purchase and sale of other energy amounts and requires that any modification of an existing rate be "in accordance with and on the effective date specified in the final order of the FPC containing such confirmation and approval."

PLAINTIFF'S CONTENTIONS

In its simplest outlines, plaintiff's argument is as follows:

1) The interim rate increase was necessary for compliance with the terms of the Flood Control Act; and,

2) Such an increase is authorized under the contracts extant between the parties, as well as by the terms of the DEOA. The DEOA grants to the Secretary for the Department of Energy the authority to modify and establish power rates for energy generated by federally owned reservoir projects and also authorizes him to establish rate modification on an interim basis.

The underpinning asserted by plaintiff for the last tenet arises from the administrative odyssey which the Flood Control Act has undergone. As stated above, that act originally provided that rates for energy sale become effective upon confirmation and approval by the FPC. When that body was abolished in 1977, its Flood Control Act functions were transferred to the Secretary of Energy. While some FPC functions were transferred to FERC, the authority to confirm and approve rates under Section 5 of the Flood Control Act was not. Rather, that authority went directly to the Secretary of Energy. He is now vested with the authority to both establish and approve rates.

Plaintiff also asserts that interim rate authority is inherent in the Secretary's general rate-making authority. Plaintiff cites Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942), as evidence of the FPC's analagous authority to impose interim rates under the Natural Gas Act. The Court's decision in that case was based upon its conclusion that the authority to order rate decreases on an interim basis is implicit in the express authority to set rates.

Plaintiff also places much reliance on Pacific Power & Light Co. v. Duncan, et al., 499 F.Supp. 672 (D.Or.1980) and The Montanta Power Co., et al. v. Edwards, et al., Civil Action # 80-842 PA. (D.Or. May 19, 1981). Plaintiff claims that these two cases, arising in the same district court in Oregon, "expressly affirmed the Secretary's interim rate authority". The Pacific Power & Light Co. case concluded that the DEOA transferred the Department of the Interior's rate-making authority, as well as the FPC's rate approval functions, to the Department of Energy. Plaintiff contends that this conclusion supports its contention that interim rate authority is inherent in general rate-setting authority. Plaintiff also points to rules of statutory construction for additional support of its "inherency" argument.

Plaintiff candidly describes the financial dilemma facing the Department of Energy, which prompted the imposition of interim rates. FERC's review of any application for a permanent increase will be a lengthy process; one result of any such delay would be the "erosion" of the DOE's power and marketing agencies' financial position. Since "there is no statutory limitation on the Secretary's general rate-making authority", and "the use of interim rates is an essential element of the rate-setting process", the Secretary's present course of action is, plaintiff urges, legal and proper.

Plaintiff also concludes that the imposition of interim rates is permitted by the Tex-La contracts. Since those contracts refer to FPC authority, and since that entity no longer exists and has been effectively replaced by the Department of Energy ("DOE"), the DOE is properly "constructively" substituted for the FPC.

In response to defendant's arguments, discussed infra, plaintiff denies that FERC has, by law, assumed the FPC's confirmation function. Plaintiff also disputes defendant's contention that this rate order is the first governmental exercise of the imposition of interim rate authority. It cites to other instances of FPC rate modification on an interim basis, which modifications allegedly established an interim rate procedure. Instead of altering that procedure, Congress provided, by enacting the DEOA, "additional statutory support for the utilization of the interim rates".

In reference to defendant's argument that the increase in question would result in contractual breach, plaintiff reiterates that the DOE is the FPC successor. The fact that FERC possesses final confirmation authority does not, plaintiff argues, preclude imposition of interim rates, nor does it "resurrect in FERC the FPC's rate confirmation authority". Plaintiff then disputes defendant's reliance on Arkansas Power & Light Co., et al. v. Schlesinger, et al., Civil Action # 79-1263 (D.D.C., October 20, 1980), contending that this case is distinguishable. This distinction arises, plaintiff contends, because the contracts involved in Arkansas Power specifically prohibited rate increases relative to a predetermined ceiling. No such prohibition appears in the contracts at issue here.

Plaintiff also emphasizes that the Secretary's order delegating his authority to establish interim rates to the Assistant Secretary for Resource Applications, and delegating authority for final confirmation of those rates to FERC, was proper, since the Secretary is, by statute, empowered to delegate authority as may be necessary to effectuate the purposes of the DEOA. Yet those delegations do not diminish the Secretary's interim rate authority. The authority delegated to FERC did not reestablish in FERC the FPC's final confirmation authority.

Plaintiff also cites this Court to the 1981 decision of the District Court for the District of Columbia in Colorado River Energy Distributors Ass'n, et al. v. Lewis, et al., 516 F.Supp. 926 (1981). Plaintiff recites the factual similarities extant between that case and this one, and summarizes that Court's conclusions:

1) that the Secretary for the DOE has authority to establish...