Entergy Louisiana, Inc. v. Louisiana Public Service Commission, 539 U.S. 39, 4 (2003)

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42

ENTERGY LA., INC. v. LOUISIANA PUB. SERV. COMM'N

Opinion of the Court

nies may not be subjected to reevaluation in state rate-making proceedings. We consider today whether a FERC tariff that delegates discretion to the regulated entity to determine the precise cost allocation similarly pre-empts an order that adjudges those costs imprudent.

I

Petitioner Entergy Louisiana, Inc. (ELI), is one of five public utilities owned by Entergy Corporation (Entergy), a multistate holding company. ELI operates in the State of Louisiana and shares capacity with its corporate siblings operating in Arkansas, Mississippi, and Texas (collectively, the operating companies). This sharing arrangement allows each operating company to access additional capacity when demand exceeds the supply generated by that company alone. But keeping excess capacity available for use by all is a benefit shared by the operating companies, and the costs associated with this benefit must be allocated among them. State regulators establish the rates each operating company may charge in its retail sales, allowing each company to recover its costs and a reasonable rate of return. Thus, the cost allocation between operating companies is critical to the setting of retail rates.

Entergy allocates costs through the system agreement, a tariff approved by FERC under 205 of the Federal Power Act (FPA), 41 Stat. 1063, 16 U. S. C. 824d. The system agreement is administered by the Entergy operating committee, which includes one representative from each operating company and one from Entergy Services, a subsidiary of Entergy that provides administrative services to the system. Service Schedule MSS-1, which is included as 10 of the system agreement, allows for cost equalization of shared capacity through a formula that dictates that those operating companies contributing less than their fair share, i. e., using more capacity than they contribute, make payments to the others

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