Entergy Louisiana, Inc. v. Louisiana Public Service Commission

Entergy Louisiana, Inc. v. Louisiana Public Service Commission
Entergy Louisiana, Inc. v. Louisiana Public Service Commission
	Supreme Court of the United States
Argued April 28, 2003; Decided June 2, 2003
Full case name	Entergy Louisiana, Inc. v. Louisiana Public Service Commission et al.
Citations	539 U.S. 39 ( more ) 123 S. Ct. 2050; 156 L. Ed. 2d 34
Case history
Prior	815 So.2d 27 (La. 2002); cert. granted, 537 U.S. 1152(2003).
Holding
	Federal agency approved tariff that delegated to regulated entity the discretion to determine cost allocations between affiliated public utilities preempted under the filed rate doctrine a state public utilities commission rate order denying recovery of the costs as imprudent.
Court membership
	Chief Justice William Rehnquist Associate Justices John P. Stevens · Sandra Day O'Connor ; Antonin Scalia · Anthony Kennedy ; David Souter · Clarence Thomas ; Ruth Bader Ginsburg · Stephen Breyer
Case opinion
Majority	Thomas, joined by unanimous
Laws applied
	Federal Power Act, 16 U.S.C. § 824d(f)

Last updated July 04, 2019

Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39 (2003), is a Supreme Court of the United States case holding that a federal administrative agency approved public utility tariff preempted a state public utilities commission rate order under the filed rate doctrine.^[1]

The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. Established pursuant to Article III of the U.S. Constitution in 1789, it has original jurisdiction over a narrow range of cases, including suits between two or more states and those involving ambassadors. It also has ultimate appellate jurisdiction over all federal court and state court cases that involve a point of federal constitutional or statutory law. The Court has the power of judicial review, the ability to invalidate a statute for violating a provision of the Constitution. Executive acts can be struck down by the Court for violating either the Constitution or federal law. However, it may act only within the context of a case in an area of law over which it has jurisdiction. The court may decide cases having political overtones, but it has ruled that it does not have power to decide non-justiciable political questions.

A public utility is an organization that maintains the infrastructure for a public service. Public utilities are subject to forms of public control and regulation ranging from local community-based groups to statewide government monopolies.

A tariff or customs duty is a tax on imported or exported goods.

Background

Entergy, a multistate holding company, allocated the costs of its electric generating capacity, including capacity held in extended reserve shutdown, among its five public utilities that it owned pursuant to a tariff schedule MSS-1 approved by the Federal Energy Regulatory Commission (FERC). The tariff delegated discretion to Entergy to determine the specific cost allocations. The resulting costs, which changed monthly, were then assigned under the Entergy System Operating Agreement to each of the five public utilities under an automatic adjustment clause in the tariff, so FERC review and approval of a specific cost allocation was not required.

Entergy Corporation is a Fortune 500 integrated energy company engaged primarily in electric power production and retail distribution operations in the Deep South of the United States. Entergy is headquartered in New Orleans, Louisiana, and generates and distributes electric power to 2.9 million customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of $11 billion employs more than 13,000 people.

A holding company is a company that owns other companies' outstanding stock. A holding company usually does not produce goods or services itself; rather, its purpose is to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.

The Federal Energy Regulatory Commission (FERC) is the United States federal agency that regulates the transmission and wholesale sale of electricity and natural gas in interstate commerce and regulates the transportation of oil by pipeline in interstate commerce. FERC also reviews proposals to build interstate natural gas pipelines, natural gas storage projects, and liquefied natural gas (LNG) terminals, in addition to licensing non-federal hydropower projects.

In May 1997 Entergy Louisiana, Inc., one of the five public utilities, filed its annual retail electric rate case with the Louisiana Public Service Commission (PSC). The PSC issued an order disallowing the costs associated with the electric generating units in extended shutdown reserve from being recovered in rates. The PSC concluded that since FERC had never determined that the allocation of costs as determined by Entergy was consistent with the Entergy System Operating Agreement, it could make this prudency decision without violating the Supremacy Clause of the United States Constitution. As a result of this decision, Entergy Louisiana was required to pay the allocated costs of the extended shutdown reserve generation but could not recover these costs in its retail electric rates.

Louisiana Public Service Commission (PSC) is an independent regulatory agency which manages public utilities and motor carriers in Louisiana. The commission has five elected members chosen in single-member districts for staggered six-year terms. Thus the commissioners have large constituencies, long terms, and close involvement with issues of intense consumer interest ; consequently membership on PSC has been known to serve as a springboard to even higher public office, as in the cases of Huey Long, Jimmie Davis, John McKeithen, and Kathleen Babineaux Blanco —PSC members who became governors of Louisiana.

The Supremacy Clause, Article VI, Clause 2 of the United States Constitution, establishes that the Constitution, federal laws made pursuant to it, and treaties made under its authority, constitute the supreme law of the land. It provides that state courts are bound by the supreme law; in case of conflict between federal and state law, the federal law must be applied. Even state constitutions are subordinate to federal law. In essence, it is a conflict-of-laws rule specifying that certain federal acts take priority over any state acts that conflict with federal law. In this respect, the Supremacy Clause follows the lead of Article XIII of the Articles of Confederation, which provided that "Every State shall abide by the determination of the United States in Congress Assembled, on all questions which by this confederation are submitted to them." A constitutional provision announcing the supremacy of federal law, the Supremacy Clause assumes the underlying priority of federal authority, at least when that authority is expressed in the Constitution itself. No matter what the federal government or the states might wish to do, they have to stay within the boundaries of the Constitution. This makes the Supremacy Clause the cornerstone of the whole American political structure.

Entergy Louisiana appealed the PSC order to the Supreme Court of Louisiana. The state court upheld the PSC order as not being barred by federal preemption because the PSC was not attempting to regulate interstate wholesale electric rates. The court also noted that FERC never ruled on the issue of whether Entergy Louisiana's decision to include the extended shutdown reserve generating units was a prudent one or whether to include these costs in rates was mandatory.

Opinion of the Court

The U.S. Supreme Court stated that it granted certiorari to determine whether its filed rate doctrine holdings in Nantahala Power and Light Co. v. Thornburg, 476 U.S. 953 (1986), and Mississippi Power and Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988), would lead to federal preemption of the Louisiana PSC order. The filed rate doctrine is an American administrative law rule that a court should not permit a collateral attack on a tariffed rate of a public utility that was determined by an agency, and that any litigation regarding the validity of that rate must be conducted before that agency. With the Supremacy Clause, any tariffed rate approved by a federal agency must be given effect by a state public utility commission that regulates a public utility and sets intrastate rates.

Certiorari is a court process to seek judicial review of a decision of a lower court or administrative agency. The term comes from the name of an English prerogative writ, issued by a superior court to direct that the record of the lower court be sent to the superior court for review.

Administrative law is the body of law that governs the activities of administrative agencies of government. Government agency action can include rule making, adjudication, or the enforcement of a specific regulatory agenda. Administrative law is considered a branch of public law.

Nantahala held that cost allocations related to a FERC approved power agreement must be followed by state agencies in setting public utility rates. In Mississippi Power, FERC had allocated the costs of the Grand Gulf Nuclear Generating Station among various public utility companies. The Supreme Court of Mississippi ruled that the state PSC could consider the prudence of the Grand Gulf costs allocated to a public utility since FERC had never ruled on the prudency of these costs. The U.S. Supreme Court disagreed, stating that FERC orders must be given preemptive effect regardless of whether a particular matter had been litigated and decided by FERC.

The Supreme Court of Mississippi is the highest court in the state of Mississippi. It was created in the first constitution of the state following its admission as a State of the Union in 1817. Initially it was known as the "High Court of Errors and Appeals." The court is an appellate court, as opposed to a trial court. The Court Building is located in downtown Jackson, Mississippi, the state capital.

Applying the Nantahala and Mississippi Power holdings to the Louisiana case, the Court noted that the PSC order impermissibly had the effect of trapping generation costs with the public utility by excluding them from recovery in rates. Although the Entergy System Operating Agreement differed from the tariffs in the Nantahala and Mississippi Power cases in that it left the classification of reserve generating units to an operating committee, this delegated discretion did not allow the PSC room for a finding of imprudence where a FERC mandated cost allocation would not. As Congress had permitted the use of automatic adjustment clauses in the Federal Power Act,^[2] the Court decided the MSS-1 schedule constituted such a clause. The Court then determined that there was no reason to create an exception to the filed rate doctrine for tariffs using this type of clause.

The U.S. Supreme Court also stated that the Louisiana Supreme Court ruling regarding the ability of the PSC to conduct prudency reviews was the same erroneous reasoning advanced by the Mississippi Supreme Court in the Mississippi Power case. The Court explained that it did not matter whether FERC had specifically ruled on the reserve generating units, but only whether the FERC approved tariff dictated how and by whom that classification should be made. For these reasons, the decision of the state court was reversed.

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References

↑ Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39 (2003).
↑ Federal Power Act, 16 U.S.C. § 824d(f) .

External links

Text of Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39(2003) is available from: Justia Library of Congress Oyez (oral argument audio)

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[1] Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39 (2003).

[2] Federal Power Act, 16 U.S.C. § 824d(f) .