Council of the City of New Orleans v. Federal Energy Regulatory Commission
692 F.3d 172
D.C. Cir.2012Background
- The Entergy System Agreement governs six operating companies in Arkansas, Louisiana, Mississippi, and Texas, and creates a centralized rate schedule and process for building new plants.
- Each Operating Company owns generation facilities necessary to serve its own customers and bears its own costs, with excess capacity available to sister companies as a backstop.
- Since 1982, FERC interpreted the Agreement to require roughly equal production costs among the Operating Companies, with lower-cost producers making payments to higher-cost producers to equalize costs.
- In 2005, FERC ordered offset payments when cost differences exceeded 11% of the system average, prompting Entergy Arkansas to announce an eight-year withdrawal and Entergy Mississippi to announce a subsequent eight-year withdrawal.
- In 2009, FERC accepted the withdrawal notices, holding that the Agreement required no further conditions beyond the 96-month notice; petitioners challenge the absence of exit fees or continued rough-equalization payments.
- The court has jurisdiction under 16 U.S.C. § 825l(b) to review the FERC order under the Administrative Procedure Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exit fees are required on withdrawal | Petitioners argue exit fees are implied by the Agreement's purposes. | FERC held no explicit or implicit exit fees are required by the Agreement. | No exit fees required under the Agreement. |
| Whether rough equalization payments must continue after withdrawal | Rough equalization payments should continue post-withdrawal due to contractual history. | Rough equalization is tied to the Agreement and does not bind withdrawing companies after withdrawal. | Rough equalization payments need not continue after withdrawal. |
| Whether FERC reasonably interpreted the Agreement | Petitioners contend FERC misread the Agreement and created pre-withdrawal conditions not present in text. | FERC reasonably construed the Agreement to require 96 months notice and no pre-withdrawal conditions beyond that. | FERC's interpretation was reasonable. |
Key Cases Cited
- Louisiana IV, 522 F.3d 378 (D.C. Cir. 2008) (contract interpretation and system-cost balancing under the System Agreement)
- Louisiana I, 174 F.3d 218 (D.C. Cir. 1999) (ownership and cost responsibilities under the System Agreement)
- Louisiana V, 551 F.3d 1042 (D.C. Cir. 2008) (rough equalization and affiliate cost sharing under the System Agreement)
- Entergy Servs., Inc. v. FERC, 568 F.3d 978 (D.C. Cir. 2009) (Chevron deference to agency contract-interpretation decisions)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (U.S. Supreme Court 1984) (establishes framework for reviewing agency interpretations of statutes/agreements)
- Citizens Against Burlington, Inc. v. Busey, 938 F.2d 190 (D.C. Cir. 1991) (agency must define goals within a range of reasonable choices)