Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39, 2 (2003)

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considered in setting ELI's retail rates. Confining its review to MSS-1 payments made after August 5, 1997, the LPSC concluded that it was not pre-empted from disallowing MSS-1 related costs as imprudent subsequent to that date. Thus, ELI was not permitted to charge retail rates that reflected the cost of its MSS-1 payments. The State District Court denied ELI's petition for review, and the State Supreme Court upheld the LPSC's decision.

Held: Nantahala and MP&L rest on a foundation that is broad enough to require pre-emption of the LPSC's order. Pp. 47-51.

(a) The filed rate doctrine requires "that interstate power rates filed with FERC or fixed by FERC must be given binding effect by state utility commissions determining intrastate rates," Nantahala, supra, at 962. In Nantahala and MP&L, this Court applied the doctrine to hold that FERC-mandated cost allocations could not be second-guessed by state regulators. The state order in Nantahala, which involved two corporate siblings, allocated more of Nantahala's purchases to low-cost power than the proportion approved by FERC. By requiring Nantahala to calculate its rates as if it needed to procure less high-cost power than under FERC's order, the state order "trapped" a portion of the costs incurred by Nantahala in procuring its power. This ran counter to the rationale for FERC approval of cost allocations because, when costs under a FERC tariff are categorically excluded from consideration in retail rates, the regulated entity cannot fully recover its costs of purchasing at the FERC-approved rate. In MP&L, the Court concluded that, contrary to the Mississippi Supreme Court's ruling, the pre-emptive effect of FERC jurisdiction does not turn on whether a particular matter was actually determined in FERC proceedings. Pp. 47-49.

(b) Applying Nantahala and MP&L here, the LPSC order impermissibly "traps" costs that have been allocated in a FERC tariff. That the operating committee has discretion to classify ERS units, while Nantahala and MP&L involved specific mandates, does not provide room for the LPSC's imprudence finding. The Federal Power Act specifically allows for the use of automatic adjustment clauses, and MSS-1 constitutes such a clause. The Louisiana Supreme Court's other basis for upholding the LPSC's order—that FERC had not specifically approved the MSS-1 cost allocation after August 5—revives precisely the same erroneous reasoning advanced by the Mississippi Supreme Court in MP&L. It matters not whether FERC has spoken to the precise classification of ERS units, but only whether the FERC tariff dictates how and by whom the classification should be made. Because the amended system agreement clearly does so, the LPSC's second-guessing of the

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