American Paper Institute, Inc. v. American Electric Power Service Corporation

PETITIONER: American Paper Institute, Inc.
RESPONDENT: American Electric Power Service Corporation
LOCATION: Internal Revenue Service

DOCKET NO.: 82-34
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 461 US 402 (1983)
ARGUED: Mar 22, 1983
DECIDED: May 16, 1983

ADVOCATES:
Edward Berlin - on behalf of the Respondent
Paul M. Bator - on behalf of the Petitioners

Facts of the case

Question

Media for American Paper Institute, Inc. v. American Electric Power Service Corporation

Audio Transcription for Oral Argument - March 22, 1983 in American Paper Institute, Inc. v. American Electric Power Service Corporation

Warren E. Burger:

We will hear arguments next in American Paper Institute against the American Electric Power Service Corporation.

Mr. Bator, I think you can proceed when you are ready.

Paul M. Bator:

Mr. Chief Justice, and may it please the Court:

This case involves the validity of two rules issued by the Federal Energy Regulatory Commission, FERC.

Under Section 210 of the statute commonly known as PURPA, the Public Utility Regulatory Policies Act of 1978.

The Government is here because the Court of Appeals for the District of Columbia circuit held these rules invalid.

It is the submission of the Government that the Court of Appeals misread the statute, that the rules are valid, and that the ruling of that Court threatens to cripple an important and an exciting experiment that Congress set on when it enacted PURPA.

I want to start by giving some background to put the arguments made in our brief and our reply brief in context.

This Court is of course familiar with PURPA from its decision last term in FERC and Mississippi.

In PURPA Congress embarked on an ambitious attempt to encourage the development of innovative energy efficient technology for producing electric power.

The central point was to lessen the country's dependance on foreign oil, to end the waste of nonrenewable fossil fuel, and to encourage energy efficiency.

More specifically, Congress sought to tap the tremendous reservoir of potential energy potentially available from renewable sources and from wasted heat produced in industrial and domestic settings.

There are two technologies involved.

Cogeneration is the simultaneous production of electricity on the one hand and thermal energy, heat and steam, on the other.

Small power production is the generation of relatively small amounts, less than 80 megawatts of electricity, from non-fossil fuel and renewable sources, wind, water, sun, organic materials, and waste.

Cogenerators and small power producers together are referred to as qualifying facilities, QF's for purposes of this case.

In enacting PURPA, Congress found that cogeneration of small power production was hindered historically in this country by two things: the traditional electrical utilities, the interests represented by the Respondent here, sought to preserve their monopoly in the production of electricity by refusing to buy electricity from or selling back of electricity to QF's.

Secondly, an uneconomical and rigid regulatory environment deterred firms from entering the business of unconventional power production.

Behind these two labels, cogeneration and small power production, there is a world of hundreds of variagated technologies.

Cogenerators and small power producers come in all sizes and shapes from the $5,000 back-yard windmill producing maybe 10 kilowatts to the enormous paper mill generating maybe 300 to 400 kilowatts of power that may cost several hundred million dollars to build.

QF's use dozens of different fuels from walnut shells to garbage, from sawdust to geothermal brine.

Every facility that needs a fair amount of heat is a potential co-generator, every hospital, school, every laundry, every apartment house.

This is a wide-open road.

It is open to all comers.

It is exactly the opposite of the traditional monopolistic electric utility business.

Now, there are three critical elements in the congressional plan for encouraging cogeneration and small power production.

First, Section 210 of PURPA creates a legal obligation on utilities to buy to and sell from QF's.

Second, Congress instructed FERC to relieve QF's from the constricting regulatory environment that surrounded the commerce in electrical energy.

The third element in the congressional plan was decentralization.

The states are to play a critical role.