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CONSOLIDATED EDISON OF NEW YORK, INC. v. PATAKI

October 10, 2000

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., PLAINTIFF,
V.
GEORGE E. PATAKI, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF NEW YORK; MAUREEN O. HELMER, IN HER OFFICIAL CAPACITY AS CHAIRMAN OF THE NEW YORK PUBLIC SERVICE COMMISSION; AND THOMAS J. DUNLEAVY, JAMES D. BENNETT, LEONARD WEISS AND NEAL N. GALVIN IN THEIR OFFICIAL CAPACITIES AS COMMISSIONERS OF THE NEW YORK PUBLIC SERVICE COMMISSION, DEFENDANTS. SHELDON SILVER, SPEAKER OF THE NEW YORK STATE ASSEMBLY, AND RICHARD L. BRODSKY, MEMBER OF THE NEW YORK STATE ASSEMBLY, INTERVENOR-DEFENDANTS.



The opinion of the court was delivered by: Kahn, District Judge.

MEMORANDUM — DECISION AND ORDER

Presently before the Court is Plaintiff's motion for a preliminary and permanent injunction enjoining enforcement of Chapter 190 of the Laws of 2000.*fn1 For the reasons set forth below, Plaintiff's motion for a permanent injunction is GRANTED and its motion for a preliminary injunction is DENIED as moot.

I. Background

A. Indian Point Nuclear Power Plant

In 1972, Plaintiff purchased Model 44 steam generators from Westinghouse and installed them in its Indian Point 2 Nuclear Plant. In the mid to late 1970's, Westinghouse discovered that the metal alloy used to make the steam generator tubes in Model 44 and Model 51 steam generators was susceptible to corrosion. Approximately 30 nuclear plants in the United States were using these two types of generators at the time of this discovery. By January 1, 1997, 13 plants had replaced the defective generators, 16 had not, and one plant had ceased operation. Plaintiff did not replace its generators because of its mistaken belief that they could safely remain in operation for many more years.

On February 15, 2000, one of the tubes located in the Model 44 generators in the Indian Point Plant suffered a 2-inch tear that allowed radioactive fluid to leak through a tube wall and mix with water and steam in one of the steam generators. The Indian Point Plant was shut down pending review of the incident by the Nuclear Regulatory Commission. In the interim, Plaintiff has decided to replace the existing model 44 generators with replacement generators purchased in 1988. Until these replacement generators are in place, Plaintiff will have to purchase power from other utilities to replace the power lost due to the Indian Point Plant's inability to operate. These replacement costs will cost Plaintiff between $165 million and $200 million.

B. New York Regulatory Framework

New York law allows the New York Public Service Commission ("PSC") to set energy rates that Plaintiff charges to its retail customers. These rates are set pursuant to the terms of a five-year Settlement Agreement approved by the PSC in 1997. Under the Agreement's terms, variations in costs Plaintiff incurs each month as it generates or purchases power can be passed onto its customers. The mechanism allowing this to occur is known as a Fuel Adjustment Clause ("FAC") (now called a Monthly Adjustment Charge).

PSC practice codified by state statute enables the PSC to retroactively adjust monthly utility rates charged to Plaintiff's customers (following a hearing) if the PSC determines that a utility like Plaintiff collected unreasonable charges under the FAC. When Plaintiff began reflecting the costs of Indian Point replacement power purchases in the FAC, the PSC commenced a proceeding to review the reasonableness of those charges. Had this proceeding determined that Plaintiff acted negligently in failing to replace the generators at Indian Point, the PSC would have ordered it to refund to its customers all costs associated with purchasing Indian Point replacement power.

C. The Indian Point Law

Plaintiff has asked this Court for a preliminary and permanent injunction enjoining enforcement of the Indian Point Law. Furthermore, Plaintiff has asked this Court to declare the Indian Point Law violative of (1) the Equal Protection Clause of the 14th Amendment; (2) the Procedural Due Process requirements of the 14th Amendment; (3) the Supremacy Clause; (4) the Contracts Clause contained in Article 1, § 10; and (5) the Prohibition on Bill of Attainder also contained in Article 1, § 10.

II. Equal Protection

A. Standard

The Equal Protection Clause of the Fourteenth Amendment provides that "no State shall . . . deny to any person within its jurisdiction the equal protection of the laws." U.S. Const. amend. XIV, § 15. The clause "is essentially a direction that all persons similarly situated should be treated alike." City of Cleburne v. Cleburne Living Center, 473 U.S. 432, 439, 105 S.Ct. 3249, 87 L.Ed.2d 313 (1985) (citing Plyler v. Doe, 457 U.S. 202, 216, 102 S.Ct. 2382, 72 L.Ed.2d 786 (1982)). Legislation that does not restrict a fundamental right or employ a suspect classification, like the social and economic legislation at issue in this case, is presumed valid as long as it is rationally related to a legitimate government interest. See Cleburne Living Center, 473 U.S. at 440, 105 S.Ct. 3249; Romer v. Evans, 517 U.S. 620, 631, 116 S.Ct. 1620, 134 L.Ed.2d 855 (1996).

This presumption of validity is buttressed by the notion that governments are entitled to wide deference when enacting social and economic legislation. See Cleburne Living Center, 473 U.S. at 439, 105 S.Ct. 3249. It is not the job of a federal court to ascertain the wisdom of a challenged statute or the utility of a questioned law. See id.; Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 469, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981). This does not mean that this Court is stripped of its power to substantively review the legitimacy of social and economic legislation. See, e.g., Dep't of Agriculture v. Moreno, 413 U.S. 528, 532, 93 S.Ct. 2821, 37 L.Ed.2d 782 (1973) (striking down a state statute which limited receipt of food stamps to households of related individuals while excluding households containing unrelated individuals as not rationally related to the stated purposes of the Food Stamp Act); see generally Zobel v. Williams, 457 U.S. 55, 102 S.Ct. 2309, 72 L.Ed.2d 672 (1982).

Rather, this Court must ascertain whether any set of facts exist that may reasonably justify the challenged law. See McGowan v. Maryland, 366 U.S. 420, 425-426, 81 S.Ct. 1101, 6 L.Ed.2d 393 (1961). If this. Court determines that a reasonable justification for the law exists, it is required to uphold it. See, e.g., Vacco v. Quill, 521 U.S. 793, 807, 117 S.Ct. 2293, 138 L.Ed.2d 834 (1997) (finding a reasonable justification to warrant classifying terminally ill patients who refuse medical treatment differently from patients who wish to engage in physician assisted suicide). Conversely, if this Court determines that the legislature acted arbitrarily or classified Plaintiff upon some ground not having a fair and substantial relation to the object of the act, such that similarly situated persons are treated differently, it must strike down the statute. See Reed v. Reed, 404 U.S. 71, 76, 92 S.Ct. 251, 30 L.Ed.2d 225 (1971); see also, F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415, 40 S.Ct. 560, 64 L.Ed. 989 (1920).

Defendants' lawyers contend that the legislature's determination to create a statute directed at Plaintiff is simply a response to its continued use of Westinghouse Model 44 steam generators. According to them, because Plaintiff is the only nuclear operator in New York using such generators, it is impossible for any other utility to pass similar costs to its ratepayers. Therefore, the legislature rationally determined that Plaintiff is a legitimate class of one.

Although this Court recognizes that after-the-fact rationalizations of statutory classifications by lawyers and judges may serve to uphold the validity of a challenged statute, see McDonald v. Board of Election, 394 U.S. 802, 809, 89 S.Ct. 1404, 22 L.Ed.2d 739 (1969), this rationalization makes little sense when examined in light of the express legislative findings accompanying the statute. According to these findings, "the Con-Edison Company failed to exercise reasonable care on behalf of the health, safety and economic interests of its customers." Therefore, the legislature concluded, "it would not be in the public interest for the company to recover from ratepayers any costs resulting from the" Indian Point outage.

Hence, the Indian Point Law was not passed simply as a response to Plaintiff's continued use of Model 44 generators. Instead, it was passed in response to Plaintiff's failure to exercise reasonable care on behalf of the health, safety, and economic interests of its customers. As such, this Court must determine 1) whether any legitimate state interest underlies this finding and 2) if the classification of Plaintiff is rationally related to any such legitimate state interest.

B. Legitimate State Interest

To determine the legitimacy of a state interest, this Court should begin its inquiry by examining the statute itself and its legislative history. See Johnson v. Robison, 415 U.S. 361, 376, 94 S.Ct. 1160, 39 L.Ed.2d 389 (1974). As long as the purposes of the statute can be easily ascertained from these sources, this Court should limit its inquiry to them. See id. If these purposes do not offend specific constitutional prohibitions, "when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive." Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 238, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984) (quoting Berman v. Parker, 348 U.S. 26, 32, 75 S.Ct. 98, 99 L.Ed. 27 (1954).)

The stated purposes of the Indian Point Law are found in Section 1 of the statute and the accompanying memorandum in support of the law. According to Section 1 of the statute, it is not in the public interest for the company to recover from ratepayers any costs resulting from Plaintiff's failure to exercise reasonable care on behalf of its customers. The memorandum in support of the law declares that the purpose of the bill is to "protect rate-payers from costs related to ...


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