New Orleans Pub. Svc. v. City Council
491 U.S. 350 (1989)

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U.S. Supreme Court

New Orleans Pub. Svc. v. City Council, 491 U.S. 350 (1989)

New Orleans Public Service, Inc. v.

Council of the City of New Orleans

No. 88-348

Argued April 25, 1989

Decided June 19, 1989

491 U.S. 350

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

Syllabus

The Federal Energy Regulatory Commission (FERC) allocated the cost of the Grand Gulf 1 nuclear reactor among several jointly owned companies, including petitioner New Orleans Public Service, Inc. (NOPSI), that had agreed to finance the reactor's construction and operation. NOPSI, which provides retail electrical service to New Orleans, then sought from respondent New Orleans City Council (Council), the local ratemaking body, a rate increase to cover the increase in its wholesale rates resulting from FERC's allocation of Grand Gulf costs. Although deferring to FERC's implicit finding that NOPSI's decision to participate in the Grand Gulf venture was reasonable, the Council determined that the costs incurred thereby should not be completely reimbursed through a rate increase because NOPSI's management was negligent in failing, after the risks of nuclear power became apparent, to diversify its supply portfolio by selling a portion of its Grand Gulf power. NOPSI filed a petition in state court for review of the Council's final rate order. In parallel federal proceedings in the District Court, NOPSI sought declaratory and injunctive relief on the ground that the Council's order was preempted by federal law under Nantahala Power & Light Co. v. Thornburg,476 U. S. 953, which held that, for purpose of setting intrastate retail rates, a State may not differ from FERC's allocations of wholesale power by imposing its own judgment of what would be just and reasonable. The District Court concluded that it should abstain from deciding the suit under Burford v. Sun Oil Co.,319 U. S. 315, and Younger v. Harris,401 U. S. 37. The Court of Appeals affirmed.

Held: The District Court erred in abstaining from exercising jurisdiction. Pp. 491 U. S. 358-373.

(a) The Burford abstention doctrine -- under which federal equity courts must decline to interfere with complex state regulatory schemes in cases involving (1) difficult state law questions bearing on policy problems of substantial public import, or (2) efforts to establish a coherent state policy regarding a matter of substantial public concern -- is not applicable. This case does not involve a state law claim, nor even an assertion that NOPSI's federal claims are in any way entangled in a skein of state law that must be unraveled before the federal case can

Page 491 U. S. 351

proceed. Because NOPSI's facial preemption claim may be resolved without venturing beyond the four corners of the Council's rate order, federal adjudication of the claim would not unduly intrude into state governmental process or undermine the State's ability to maintain desired uniformity in the treatment of essentially local problems. Although NOPSI's alternative claim -- that the rate order's nominal emphasis on NOPSI's failure to diversify its power supply was merely a cover for the determination that the original Grand Gulf investment was itself unwise -- cannot be resolved on the face of the order, resolution of that claim does not demand significant familiarity with, and will not disrupt state resolution of, distinctively local facts or policies, since wholesale electricity is not bought and sold within a predominantly local market. Pp. 491 U. S. 360-364.

(b) Nor is abstention appropriate under Younger, which held that, absent extraordinary circumstances, traditional equity concerns and principles of comity require federal courts to refrain from enjoining pending state criminal prosecutions. This Court has expanded Younger abstention beyond criminal proceedings, and even beyond proceedings in courts, but never to proceedings that are not "judicial in nature." The Council proceedings at issue here are not judicial in nature, since ratemaking, which establishes a rule for the future, is essentially a legislative act. See, e.g., Prentis v. Atlantic Coast Line Co.,211 U. S. 210, 211 U. S. 226-227. Nor can the proceedings in this case be considered a unitary and still-to-be-completed legislative process by virtue of the ongoing state court review proceedings. There is no contention here that the Louisiana courts' review involves anything other than a judicial act -- that is, the declaration of NOPSI's rights vis-a-vis the Council on present or past facts under existing law. NOPSI's preemption claim was therefore ripe for federal review when the Council completed the legislative action by entering its final order. Pp. 491 U. S. 364-373.

850 F.2d 1069, reversed and remanded.

SCALIA, J., delivered the opinion of the Court, in which BRENNAN, WHITE, MARSHALL, STEVENS, O'CONNOR, and KENNEDY, JJ., joined, and in Parts I and II-B of which REHNQUIST, C.J., joined. BRENNAN, J., filed a concurring opinion, in which MARSHALL, J., joined, post, p. 491 U. S. 373. REHNQUIST, C.J., filed an opinion concurring in part and concurring in the judgment, post, p. 491 U. S. 373. BLACKMUN, J., filed an opinion concurring in the judgment, post, p. 491 U. S. 374.

Page 491 U. S. 352

JUSTICE SCALIA delivered the opinion of the Court.

In Nantahala Power & Light Co. v. Thornburg,476 U. S. 953 (1986), we held that, for purposes of setting intrastate retail rates, a State may not differ from the Federal Energy Regulatory Commission's allocations of wholesale power by imposing its own judgment of what would be just and reasonable. Last Term, in Mississippi Power & Light Co. v. Mississippi ex rel. Moore,487 U. S. 354 (1988), we held that FERC's allocation of the $3 billion-plus cost of the Grand Gulf 1 nuclear reactor among the operating companies that jointly agreed to finance its construction and operation preempted Mississippi's inquiry into the prudence of a utility retailer's decision to participate in the joint venture. Today we confront once again a legal issue arising from the question of who must pay for Grand Gulf 1. Here the state ratemaking authority deferred to FERC's implicit finding that New Orleans Public Service, Inc.'s decision to participate in the Grand Gulf venture was reasonable, but determined that the costs incurred thereby should not be completely reimbursed because, it asserted, the utility's management was negligent in failing later to diversify its supply portfolio by selling a

Page 491 U. S. 353

portion of its Grand Gulf power. Whether the State's decision to provide less than full reimbursement for the FERC-allocated wholesale costs conflicts with our holdings in Nantahala and Mississippi Power & Light is not at issue in this case. Rather, we address the threshold question whether the District Court, which the utility petitioned for declaratory and injunctive relief from the state ratemaking authority's order, properly abstained from exercising jurisdiction in deference to the state review process.

I

Because the abstention questions at stake here have little to do with the intricacies of the factual and procedural history underlying the controversy, we may sketch the background of this case in brief. [Footnote 1] Petitioner New Orleans Public Service, Inc. (NOPSI), a producer, wholesaler, and retailer of electricity that provides retail electrical service to the city of New Orleans, is one of four wholly owned operating subsidiaries of Middle South Utilities, Inc. Middle South operates an integrated "power pool" in which each of the four operating companies transmits produced electricity to a central dispatch center and draws back from the dispatch center the power it needs to meet customer demand. In 1974, NOPSI and its fellow operating companies entered a contract with Middle South Energy, Inc. (MSE), another wholly owned Middle South subsidiary, whereby the operating companies agreed to finance MSE's construction and operation of two 1250 megawatt nuclear reactors, Grand Gulf 1 and 2, in return for the right to the reactors' electrical output. The estimated cost of completing the two reactors was $1.2 billion.

During the late 1970s, consumer demand turned out to be far lower than expected, and regulatory delays, enhanced construction requirements, and high inflation led to spiraling

Page 491 U. S. 354

costs. As a result, construction of Grand Gulf 2 was suspended, and the cost of completing Grand Gulf 1 alone eventually exceeded $3 billion. Not surprisingly, the cost of the electricity produced by the reactor greatly exceeded that of power generated by Middle South's conventional facilities.

Acting pursuant to its exclusive regulatory authority over interstate wholesale power transactions, 49 Stat. 847, as amended, 16 U.S.C. § 824 et seq., FERC conducted extensive proceedings to determine "just and reasonable" rates for Grand Gulf 1 power and to prescribe a "just, reasonable, and nondiscriminatory" allocation of Grand Gulf's costs and output. In June, 1985, the Commission issued a final order, Middle South Energy, Inc., 31 FERC § 61,305, rehearing denied, 32 FERC

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