New York v. Federal Energy Regulatory Commission

PETITIONER: New York
RESPONDENT: Federal Energy Regulatory Commission
LOCATION: York County Court

DOCKET NO.: 00-568
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

CITATION: 535 US 1 (2002)
ARGUED: Oct 03, 2001
DECIDED: Mar 04, 2002

ADVOCATES:
Louis R. Cohen - Argued the cause for the petitioner in No. 00-809
Edwin S. Kneedler - Argued the cause for the respondents
Louis R. Cohen - argued the cause and filed briefs for petitioner in No. 00-809 and a brief for respondent Enron Power Marketing, Inc., in No. 00-568
Lawrence G. Malone - New York State Public Service Commission, argued the cause for the petitioners in No. 00-568

Facts of the case

In 1935, when the Federal Power Act (FPA) became law, most electric utilities operated as separate, local monopolies subject to state or local regulation and their sales were bundled, meaning that consumers paid a single charge for both the cost of the electricity and the cost of its delivery. Section 201(b) of the FPA provides the Federal Energy Regulatory Commission (FERC) with jurisdiction over "the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce" and section 205 prohibits unreasonable rates and undue discrimination "with respect to any transmission or sale subject to the [Commission's] jurisdiction." Currently, public utilities still retain ownership of the transmission lines that their competitors must use to deliver electricity to wholesale and retail customers and thus can refuse to deliver their competitors' energy or deliver that power on terms and conditions less favorable than those they apply to their own transmissions. In Order No. 888, FERC found such practices discriminatory under section 205. FERC then ordered the unbundling of wholesale generation and transmission services, which means that each utility must state separate rates for its wholesale generation, transmission, and ancillary services; imposed a similar open access requirement on unbundled retail transmissions in interstate commerce; and declined to extend the open access requirement to the transmission component of bundled retail sales. Ultimately, the Court of Appeals upheld the order.

Question

May the Federal Energy Regulatory Commission require a public utility to transmit competitors' electricity over its lines on the same terms that the utility applies to its own energy transmissions, if the utility unbundles, or separates, the cost of transmission from the cost of electrical energy when billing its retail customers? Must FERC impose that requirement on utilities that continue to offer only bundled retail sales?

Media for New York v. Federal Energy Regulatory Commission

Audio Transcription for Oral Argument - October 03, 2001 in New York v. Federal Energy Regulatory Commission

Audio Transcription for Opinion Announcement - March 04, 2002 in New York v. Federal Energy Regulatory Commission

William H. Rehnquist:

I have the opinion for the court to announce in No. 00-568, New York versus Federal Energy Regulatory Commission and 00-809 Enron Power Marketing versus the Federal Energy Commission.

The two cases were consolidated for argument.

We granted certiorari to review a decision of the Court of Appeals for the District of Columbia Circuit, upholding an order of the commission that primarily focused on the wholesale electricity market.

Three aspects of the order are relevant to our review: first, FERC ordered functional unbundling of wholesale energy sales which means that utilities must state separate rates for energy transmission and other services provided, and must accept transmission of their own wholesale sales at the same rate that others are charged.

The parties do not dispute the validity of this part of the order.

Second, FERC imposed a similar open access requirement on unbundled retail sales in interstate commerce.

New York challenges this part of the order in case No. 00-568.

Third, FERC declined to extend the open access requirement to the transmission component of retail sales that remained bundled under state law concluding that unbundling such transmissions was unnecessary to remedy the discrimination in the wholesale market that FERC had found.

Enron challenges this portion of the order in case No. 00-809.

In an opinion authored by Justice Stevens, we reject both these challenges to FERC’s order and affirm the decision of the District of Columbia Circuit.

With respect to New York’s claim that FERC’s exercise of jurisdiction exceeded the bounds of the Federal Power Act, New York argues that retail electricity transactions are subject only to State regulation.

However, Section 201(b) of the Act gives FERC jurisdiction over their transmission of electric energy and interstate commerce, and the unbundled transmission that FERC has decided to regulate fall within the plain meaning of that section in light of the interconnected nature of the national grid for electricity nowadays.

No statutory language limits FERC’s transmission jurisdiction to the wholesale market and in the absence of such language, New York’s argument that the statute draws a bright line between retail and wholesale transmission is unpersuasive.

With respect to Enron’s challenge to FERC’s decision not to regulate bundled retail transmissions, we conclude that FERC’s decision was a statutorally permissible one.

FERC did not hold itself powerless to assert jurisdiction over bundled retail transmissions as Enron alleges.

Instead it reasonably decided not to assert such jurisdiction in the present proceedings for two reasons: first, it is said that such measures were unnecessary to remedy the discrimination in the wholesale market that it found; second, it is said that to do so would raise complicated jurisdictional questions.

The portions of our opinion discussing the New York case are unanimous.

With respect to the Enron case, Justice Thomas joined by Justice Scalia and Justice Kennedy has filed a dissenting opinion.