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

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OCTOBER TERM, 2002

Syllabus

ENTERGY LOUISIANA, INC. v. LOUISIANA PUBLIC SERVICE COMMISSION et al.

certiorari to the supreme court of louisiana

No. 02-299. Argued April 28, 2003—Decided June 2, 2003

The Federal Energy Regulatory Commission (FERC), which regulates the sale of electricity at wholesale in interstate commerce, must ensure that wholesale rates are "just and reasonable," 16 U. S. C. 824d(a). Under the filed rate doctrine, FERC-approved cost allocations between affiliated energy companies may not be subjected to reevaluation in state ratemaking proceedings. Nantahala Power & Light Co. v. Thornburg, 476 U. S. 953; Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U. S. 354 (MP&L). Petitioner Entergy Louisiana, Inc. (ELI), one of five public utilities owned by Entergy Corporation (Entergy), shares capacity with its corporate siblings in other States, which allows each company to access additional capacity when demand exceeds the supply generated by that company alone. The resulting costs are allocated among the companies; and that allocation is critical to the setting of retail rates by state regulators, such as respondent Louisiana Public Service Commission (LPSC). Entergy allocates costs through a tariff approved by FERC called the system agreement. Service Schedule MSS-1, which is included in the system agreement, provides a formula under which those companies that use more capacity than they contribute make payments to companies that contribute more than their fair share of capacity. ELI has typically made, rather than received, MSS-1 payments. In the 1980's, the operating committee initiated the Extended Reserve Shutdown (ERS) program, which responded to systemwide overcapacity by allowing some generating units not immediately necessary for capacity needs to be effectively mothballed. Because ERS units could be reactivated if needed, they were considered available for purposes of calculating MSS-1 payments. On August 5, 1997, FERC found that Entergy had violated the system agreement in classifying ERS units as available, but determined that a refund was not due to ELI customers as a result of MSS-1 overpayments by ELI to other operating companies. FERC also approved an amendment to the system agreement allowing an ERS unit to be treated as available under MSS-1 if the operating committee determines it intends to return the unit to service at a future date. In 1997, ELI made its annual retail rate filing with the LPSC. One of the contested issues in this proceeding was whether the cost of ERS units should be

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