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Metropolitan Transportation Authority v. Federal Energy Regulatory Commission

decided: June 17, 1986.

METROPOLITAN TRANSPORTATION AUTHORITY, POWER AUTHORITY OF THE STATE OF NEW YORK, CONNECTICUT MUNICIPAL ELECTRIC ENERGY COOPERATIVE, ALLEGHENY ELECTRIC COOPERATIVE, INC., NEW JERSEY BOARD OF PUBLIC UTILITIES, BOSTON EDISON COMPANY, EASTERN EDISON COMPANY, FITCHBURG GAS AND ELECTRIC LIGHT COMPANY, AND MASSACHUSETTS ELECTRIC COMPANY, PETITIONERS,
v.
FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT, MUNICIPAL ELECTRIC UTILITIES ASSOCIATION OF NEW YORK STATE, VERMONT DEPARTMENT OF PUBLIC SERVICE, ALLEGHENY ELECTRIC COOPERATIVE INC., PUBLIC SERVICE ELECTRIC AND GAS COMPANY, CONNECTICUT MUNICIPAL ELECTRIC ENERGY COOPERATIVE, MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COMPANY, CITY OF CLEVELAND, OHIO, NEW JERSEY BOARD OF PUBLIC UTILITIES, BETHLEHEM STEEL CORPORATION, BOROUGH OF LANDSDALE, ARLENE VIOLET, ATTORNEY GENERAL OF RHODE ISLAND AND RHODE ISLAND PUBLIC UTILITIES COMMISSION, BOSTON EDISON COMPANY, EASTERN EDISON COMPANY, FITCHBURG GAS AND ELECTRIC LIGHT COMPANY, MASSACHUSETTS ELECTRIC COMPANY, AND SUSSEX RURAL ELECTRIC COMPANY, INTERVENORS



Several utilities, state power authorities and the Metropolitan Transportation Authority appeal from orders of the Federal Energy Regulatory Commission establishing the amount of Niagara Project hydropower which the Power Authority of the State of New York is required by the Niagara Redevelopment Act, 16 U.S.C. § 836, et seq., to sell to "public bodies in neighboring states" and defining the meaning of those terms. Affirmed.

Author: Mansfield

Before: LUMBARD, MANSFIELD and MESKILL, Circuit Judges.

MANSFIELD, Circuit Judge:

Nine parties to this proceeding have filed petitions for review of two decisions of the Federal Energy Regulatory Commission ("FERC") concerning the allocation of hydropower produced by the Niagara Power Project ("the Project").*fn1 The Niagara Redevelopment Act, 16 U.S.C. § 836, et seq., requires the Power Authority of the State of New York ("PASNY"), the licensee authorized to operate the Project, to allocate "a reasonable portion" of the Project power, which may not be more than 10%, to "public bodies and nonprofit cooperatives . . . within reasonable economic transmission distance in neighboring states." The petitions challenge FERC's holding that (i) "public bodies" are "publicly-owned sellers and distributors of electricity at retail", (ii) neighboring states include, at least, those states which border New York, (iii) PASNY is required to sell a "reasonable portion" of the Project's power, up to 10%, to public bodies and non-profit cooperatives outside of New York, and that 10% of the Project's power was such a reasonable portion under current circumstances, and (iv) public bodies and non-profit cooperatives outside of New York are not entitled to an extra allotment of power as retroactive relief for PASNY's past failure to sell them 10% of the Project power. We affirm.

BACKGROUND

FERC has licensed PASNY to administer the Niagara Power Project, which generates hydro-electric power from the Niagara River near Niagara Falls. The Niagara Redevelopment Act (the "NRA"), under which the license was issued, provides in pertinent part:

"(1) In order to assure that at least 50 per centum of the project power shall be available for sale and distribution primarily for the benefit of the people as consumers, particularly domestic and rural consumers, to whom such power shall be made available at the lowest rates reasonably possible and in such manner as to encourage the widest possible use, the licensee in disposing of 50 per centum of the project power shall give preference and priority to public bodies and nonprofit cooperatives within economic transmission distance . . . .

"(2) The licensee shall make a reasonable portion of the project power subject to the preference provisions of paragraph (1) . . . available for use within

reasonable economic transmission distance in neighboring States, but this paragraph shall not be construed to require more than 20 per centum of the project power subject to such preference provisions to be made available for use in such States. 16 U.S.C. § 836(b)."

The "50 per centum" of project power set aside for "public bodies and nonprofit cooperatives" is called "preference power" and the entities eligible to receive it are "preference customers."

In March 1980 the Connecticut Municipal Electric Energy Cooperative ("CMEEC") and the Massachusetts Municipal Wholesale Electric Company ("MMWEC") filed complaints against PASNY and motions for partial summary judgment with FERC. Both MMWEC and CMEEC are political subdivisions of their respective states. Their states have designated them respective states. Their states have designated them bargaining agents "for the procurement" of Niagara power for preference customers in the state. 16 U.S.C. § 836(b)(2). The complaints accused PASNY of refusing, in violation of 16 U.S.C. § 836(b)(2), to sell preference power to the "neighboring states" of Connecticut and Massachusetts or to allocate a full 10% of the Project power to preference customers outside of New York.

In its answer PASNY conceded that Connecticut and Massachusetts were "neighboring states" and that it was allocating less than 10% of the Project's power to preference customers outside of New York. It argued, however, that its decision not to sell preference power to CMEEC and MMWEC was justified because it was already selling a "reasonable" portion of such power to preference customers outside of New York, even though the total amount sold was less than 10%. PASNY also noted that it was selling to the New York City Transit Authority ("NYCTA") and to the Metropolitan Transit Authority ("MTA") a portion of the preference power which it would otherwise have sold out-of-state. MTA is the New York State agency responsible for most of the mass transportation services available in the New York City metropolitan area.

On September 10, 1980, FERC consolidated MMWEC and CMEEC's complaints. It also granted several petitions to intervene, including those of Allegheny Electric Cooperative (Allegheny) and the Vermont Department of Public Service ("VDPS").*fn2 Allegheny is an organization of fourteen New Jersey and Pennsylvania rural electrical cooperatives. VDPS is a Vermont state agency responsible for purchasing power from PASNY and other power authorities. Vermont first requested Niagara power in 1960 and VDPS has been buying it since 1962. Unlike CMEEC and MMWEC, the bargaining agencies for Connecticut and Massachusetts, VDPS purchased preference power not only for preference customers but for Vermont consumers served by privately-owned utilities. Since VDPS did not own a distribution network, it did not distribute the power itself but resold the power to private utilities which in turn sold it to retail customers. It, however, "sought to assure that rural and domestic consumers within the State of Vermont [were] benefited by the low cost power made available by requiring the Vermont utilities, whether investor owned, municipals, or cooperatives, to effect rate reductions." State of Vermont Public Service Board v. Power Authority of the State of New York, 55 FPC 1109, 1122 (1976).*fn3

FERC ruled on CMEEC and MMWEC's complaints and motions for summary judgment on February 13, 1981. Order Granting in Part and Denying in Part Motions for Summary Disposition and Providing for Hearing, 14 FERC (CCH) para. 61,127 (Feb. 13, 1981). It held (1) that Connecticut and Massachusetts were "neighboring states" within the meaning of the NRA, (2) that PASNY could not make "substantially disproportionate allocations [of preference power] favor[ing] one neighboring state within economic transmission distance while excluding another state, [when] similar benefits are to be realized" and (3) that "although PASNY is not required to allocate a full 10 percent of Niagara Power to out-of-state entities, it is required to allocate a reasonable amount up to 10 percent." Id. at p. 61.232. FERC then ordered an evidentiary hearing on the question of whether PASNY was allocating a reasonable amount of preference power to out-of-state entities and whether, given the relative benefit the preference power would confer upon different neighboring states, CMEEC and MMWEC were entitled to any, and if so, how much, power. In response to Allegheny and to the application of CMEEC and MMWEC for a rehearing, FERC reaffirmed its holding that "out-of-state [preference] entities are not always entitled, as a matter of law, to ...


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