470 U. S. 116
, 470 U. S. 123
, 470 U. S. 125
, 470 U. S. 126
(1985). In particular, it is settled law that the rule of deference applies even to an agency's interpretation of its own statutory authority or jurisdiction. See Commodity Futures Trading Comm'n v. Schor, 478 U. S. 833
, 478 U. S. 844
-845, (1986); NLRB v. City Disposal Systems, Inc., 465 U. S. 822
, 465 U. S. 830
, n. 7 (1984) ("We have never . . . held that such an exception [for issues of statutory jurisdiction] exists to the normal standard of review . . .; indeed, we have not hesitated to defer . . ."); see also, e.g., City of New York v. FCC, 486 U. S. 57
, 486 U. S. 64
(1988); Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691
, 467 U. S. 700
(1984); CBS, Inc. v. FCC, 453 U. S. 367
, 453 U. S. 382
(1981); Red Lion Broadcasting Co. v. FCC, 395 U. S. 367
, 395 U. S. 379
-381 (1969); FTC v. Bunte Brothers, Inc., 312 U. S. 349
, 312 U. S. 352
(1941) (dictum). In fact, the arguments relied on by the dissent post
at 487 U. S. 386
-387, have been expressly rejected by this Court -- namely, that agencies can claim no special expertise in interpreting their authorizing statutes if an issue can be characterized as jurisdictional, see Schor, supra,
at 478 U. S. 845
, and that the usual reliance on the agency to resolve conflicting policies is inappropriate if the resolution involves defining the limits of the agency's authority, see, e.g., City of New York v. FCC, supra,
at 486 U. S. 64
, rather than (what is really no different) defining the limits of application of authority it plainly has. Rather, it is plain that giving deference to an administrative interpretation of its statutory jurisdiction or authority is both necessary and appropriate. It is necessary
because there is no discernible line between an agency's exceeding its authority and an agency's exceeding authorized application of its authority. To exceed authorized application is to exceed authority. Virtually any administrative action can be characterized as either the one or the other, depending upon how generally one wishes to describe the "authority." Cf. NLRB v. City Disposal Systems, Inc., supra,
at 465 U. S. 830
, n. 7. And deference is appropriate, because it is consistent with the general rationale for deference: Congress would naturally expect
Page 487 U. S. 382
that the agency would be responsible, within broad limits, for resolving ambiguities in its statutory authority or jurisdiction. Cf. Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., supra,
at 467 U. S. 843
-844. Congress would neither anticipate nor desire that every ambiguity in statutory authority would be addressed de novo
by the courts. To be sure, in defining agency jurisdiction, Congress sometimes speaks in plain terms, in which case the agency has no discretion. But the dissent concedes that, in this case, "[i]f agency deference applied, . . . these prudency issues are sufficiently intertwined that we should defer to FERC's conclusion." Post
at 487 U. S. 386
FERC's interpretation in the present case satisfies the conditions for deference. Under 16 U.S.C. § 824e(a), FERC is responsible for assuring that the rates charged to purchasers of electric energy at wholesale, and the contracts affecting such rates, are not "unjust, unreasonable, unduly discriminatory or preferential." Perhaps (we need not decide the point today) it cannot be considered "unjust, unreasonable, unduly discriminatory or preferential" to hold the participant in a joint venture to that fair proportion of the costs which it contracted in arm's-length negotiations to bear, even though its entry into the contract may have been imprudent. But I think it assuredly can be considered "unjust, unreasonable, unduly discriminatory or preferential" (for purposes of the ends served by the Federal Power Act) to make a participant bear such costs under an imprudent contract it was essentially assigned, through a process in which the overall interests of the affiliated group, rather than the particular interest of the individual affiliate, was paramount. It is entirely reasonable to think that the fairness of rates and contracts relating to joint ventures among affiliated companies cannot be separated from an inquiry into the prudence of each affiliate's participation.
Appellees rely upon the language in § 824(b)(1), which states that FERC
"shall not have jurisdiction, except as specifically
Page 487 U. S. 383
provided in this subchapter [the FPA] . . over facilities used for the generation of electric energy."
But this does not plainly contradict FERC's assertion of jurisdiction. First, it is reasonable to regard FERC's § 824e(a) authority to set wholesale rates as precisely an example of jurisdiction "specifically provided." And second, it is reasonable to say that FERC is not exercising jurisdiction over the electrical generating facility, but merely over the sale of the power created by that facility.
After today, the battle will no longer be over who has jurisdiction, FERC or the States, to evaluate the prudence of a particular utility's entering pooling arrangements with affiliated companies for the sharing of electrical generating capacity or the creation and wholesaling of electrical energy. FERC has asserted that jurisdiction and has been vindicated. What goes along with the jurisdiction is the responsibility, where the issue is appropriately raised, to protect against allocations that have the effect of making the ratepayers of one State subsidize those of another.
* The dissent's assertion that,
"[i]n conducting this litigation, FERC originally took the position that it had no jurisdiction over the prudence of a pool member's purchase decision,"
at 487 U. S. 388
, is contradicted by the passage cited by the dissent from the Administrative Law Judge hearings. To be sure, appellees asserted before the ALJ that FERC had no jurisdiction over this prudency issue, see
App. to Motion to Dismiss 52-53, 54, 56, 60, 61, 62, but the ALJ gave clear indications that he would address such an issue if a party pressed it:
"MR. EASTLAND [for MPSC]: . . . [W]hat we say we can do is that you set a wholesale charge, . . . but it is not necessarily proper or prudent for that utility, for purposes of utilizing that power in retail sales, to buy that power."
"That's what we're saying that we have the jurisdiction to make decisions with respect to."
"PRESIDING JUDGE: . . . I would not get into a prudency argument unless one of the Intervenors raises a prudency question."
"I mean, we have prudency questions in the gas cases now all over the place, with customers screaming that the purchasing practices of the pipelines were imprudent, and those prudency issues have been set for hearing in rate cases as an initial determination as to the justness and reasonableness of the rates and rate design, and what you should do if there is imprudence. So it comes into the justness and reasonableness."
"But if you are not going to argue that -- if the Intervenors themselves are not going to argue imprudence on behalf of the company, MSE or the operating companies, I'm not going to get into that issue."
"MR. VINCE [for Council of the City of New Orleans (not a party here)]: Would your Honor be examining the issue of prudency in the subject of allocation?"
"PRESIDING JUDGE: Not unless you raise it."
"MR. VINCE: Your Honor, New Orleans . . . would perhaps propose to take this one step further, and say that the allocation, first of all with reference to AP&L, was imprudent, and secondly, with reference to the individual operating companies, was imprudent, and the methodology for the allocation was imprudent."
"PRESIDING JUDGE: Okay. If you raise that question, then I will have to decide the prudency issue in the context of deciding whether or not such alleged imprudency would justify a finding of unjust unreasonableness in the allocation or discrimination with respect to the allocation."
"So you are raising the prudency issue?"
"MR. VINCE: With respect to allocation, yes."
"PRESIDING JUDGE: Okay. So it's in."
JUSTICE BRENNAN, with whom JUSTICE MARSHALL and JUSTICE BLACKMUN join, dissenting.
This case involves two separate prudency issues: one is governed by Nantahala Power & Light Co. v. Thornburg, 476 U. S. 953
(1986); the other is not. The first issue is whether the state utility commission has jurisdiction to determine whether, treating appellant's participation in the Grand Gulf project as a given, it was imprudent for appellant to purchase such a high amount of expensive Grand Gulf power. I agree with the Court that the portions of the Mississippi Supreme Court's opinion suggesting that the state commission does have this jurisdiction are in error. Mississippi ex rel. Pittman v. Mississippi Public Service Comm'n, 506 So. 2d 978
, 984-985 (1987). The State cannot second-guess the prudency of the amount of power purchased because FERC's order imposed this allocation of power on appellant. The issue is precisely analogous to that decided in
Page 487 U. S. 384
where a state utility commission setting retail rates refused to allow a utility to recover its full wholesale costs on the theory that the utility should have purchased more low-cost power than it was allocated under a FERC order. Just as in Nantahala
the utility's purchases of high-cost power could not be deemed unreasonably large, because the utility could not have purchased any more low-cost power than FERC had allocated it, 476 U.S. at 476 U. S. 972
-973, so here, given that appellant had entered into and completed the Grand Gulf project, appellant's purchases of high-cost power could not be deemed unreasonably large, because it could not have purchased any less high-cost power than FERC's allocation order compelled it to purchase.
That issue is distinct, however, from the issue whether, to the extent appellant's decision to participate in the Grand Gulf project involved the purchase decision of a retail utility, a state utility commission has jurisdiction to review the prudency of that purchase. This issue cannot be resolved by simple reference to Nantahala,
for FERC did not order appellant to participate in the Grand Gulf project, and although FERC's order determines the allocation of the costs incurred in the project, the question remains whether appellant imprudently incurred those costs in the first place. I am convinced that the state utility commission does have jurisdiction over this prudency issue, and thus I would affirm the Mississippi Supreme Court's judgment remanding for a prudency determination. The question is, however, a complicated one, which forces us to confront the issue of how the normal jurisdictional principles of the Federal Power Act apply to the rather special situation of an interstate electricity pool.
In direct response to decisions of this Court concluding that, under the Commerce Clause, States can regulate interstate sales of energy at retail but not at wholesale, Congress enacted the Federal Power Act, which filled the regulatory gap and incorporated the wholesale/retail line by providing
Page 487 U. S. 385
FERC with regulatory jurisdiction over wholesale interstate sales of electricity and leaving retail sales to state regulation. See
16 U.S.C. §§ 824(a) and (b)(1); Arkansas Electric Cooperative Corp. v. Arkansas Public Service Comm'n, 461 U. S. 375
, 461 U. S. 377
-380 (1983). Where retailing and wholesaling utilities are independent, the impact of this wholesale/retail division on federal and state jurisdiction to conduct prudency review is clear and undisputed. FERC has jurisdiction to determine whether a wholesaling utility has incurred costs imprudently. See, e.g., Arizona Public Service Co.,
27 FERC 61,185 (1984). If FERC determines that costs were prudently incurred, it allows the wholesale rates to reflect those costs; otherwise, the wholesale rates cannot reflect those costs, and the wholesaler's stockholders, rather than its customers, must bear the burden of the utility's imprudence. See, e.g., Violet v. FERC,
800 F.2d 280 (CA1 1986). FERC does not, however, have jurisdiction to determine whether it might be imprudent, given other purchasing options, for a retailing utility to purchase power at the FERC-approved wholesale rate. See, e.g., Southern Company Services, Inc.,
28 FERC 61,349 (1984). The state utility commissions have jurisdiction to determine, for example, that the retail utility does not need the power, or could obtain power from other sources at a lower cost. Nantahala, supra,
at 476 U. S. 972
. Thus, although a state utility commission cannot decide that a retail utility should have bought wholesale power from a given source at other than the FERC-approved wholesale rate, it can decide that the utility should not have bought power from that source at all. See, e.g., Pike County Light & Power Co. v. Pennsylvania Public Utility Comm'n,
77 Pa.Commw. 268, 273-274, 465 A.2d 735, 737-738 (1983). In short, the reasonableness of charging a rate as a wholesaler is distinct from the reasonableness of incurring that charge as a purchaser. See, e.g., Appeal of Sinclair Machine Products, Inc.,
126 N. H. 822, 498 A.2d 696 (1985).
Page 487 U. S. 386
Interstate electricity pools, however, present special difficulties for the wholesale/retail division of jurisdiction, because the "wholesale" transaction is from the pool to the utilities belonging to the pool, and thus the entities wholesaling the power are the same ones purchasing and retailing that power. As a result, a member utility's decision to participate in the pool's building or operation of a powerplant is simultaneously a decision to purchase the power generated by that plant. The purchasing aspects of such a decision would seem to be within the jurisdiction of state utility commissions to determine whether a retail utility's decision to purchase power is prudent under state law standards before those purchase costs can be passed on to retail customers. On the other hand, FERC would seem to have jurisdiction to determine the prudency of incurring these building or operation costs in order to determine whether those costs can be reflected in the wholesale rates the pool charges the member utilities.
If agency deference applied, I would conclude that these prudency issues are sufficiently intertwined that we should defer to FERC's conclusion that it has exclusive jurisdiction to determine all prudency issues concerning the participation of a retail utility in an interstate pool. I cannot, however, agree with JUSTICE SCALIA's conclusion that courts must defer to an agency's statutory construction even where, as here, the statute is designed to confine the scope of the agency's jurisdiction to the areas Congress intended it to occupy. Ante
at 487 U. S. 380
-382. Our agency deference cases have always been limited to statutes the agency was "entrusted to administer." Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837
, 467 U. S. 844
(1984); see also id.
at 467 U. S. 842
; Japan Whaling Assn. v. American Cetacean Society, 478 U. S. 221
, 478 U. S. 233
(1986); Chemical Manufacturers Assn. v. Natural Resources Defense Council, Inc., 470 U. S. 116
, 470 U. S. 125
(1985). Agencies do not "administer" statutes confining the scope of their jurisdiction, and such statutes are not "entrusted"
Page 487 U. S. 387
to agencies. Nor do the normal reasons for agency deference apply. First, statutes confining an agency's jurisdiction do not reflect conflicts between policies that have been committed to the agency's care, compare City of New York v. FCC, 486 U. S. 57
, 486 U. S. 65
(1988); Chevron, supra,
at 467 U. S. 843
-845; Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691
, 467 U. S. 700
(1984), but rather reflect policies in favor of limiting the agency's jurisdiction that, by definition, have not been entrusted to the agency, and that may indeed conflict not only with the statutory policies the agency has
been charged with advancing, but also with the agency's institutional interests in expanding its own power. Second, for similar reasons, agencies can claim no special expertise in interpreting a statute confining its jurisdiction. Finally, we cannot presume that Congress implicitly intended an agency to fill "gaps" in a statute confining the agency's jurisdiction, Chevron, supra,
at 467 U. S. 843
-844, since, by its nature, such a statute manifests an unwillingness to give the agency the freedom to define the scope of its own power. Compare Commodity Futures Trading Comm'n v. Schor, 478 U. S. 833
, 478 U. S. 841
-847 (1986) (citing statutory language and legislative history demonstrating that the agency was delegated broad authority to determine which counterclaims to adjudicate); NLRB v. City Disposal Systems, Inc., 465 U. S. 822
, 465 U. S. 829
(1984) (deferring to agency interpretation of statute defining the scope of employees' right to engage in concerted activities under the National Labor Relations Act). It is thus not surprising that this Court has never deferred to an agency's interpretation of a statute designed to confine the scope of its jurisdiction.
In this case, it could not be plainer that the statutes at issue were designed to confine the scope of FERC's jurisdiction by prohibiting FERC from regulating matters within the sphere of authority States had to regulate retail utilities under our old Commerce Clause cases. See supra,
at 487 U. S. 384
-385. The Act provides that "Federal Regulation [is] to extend only to those matters which are not subject to regulation
Page 487 U. S. 388
by the States," 16 U.S.C. § 824(a), and that
"[t]he provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but [with an exception not relevant here] shall not apply to any other sale of electric energy,"
16 U.S.C. § 824(b)(1). The intent evident from the face of the statute is only reinforced by the legislative history, which, as we have noted before, shows a "constant purpose to protect . . . [the] authority of the states." Connecticut Light & Power Co. v. FPC, 324 U. S. 515
, 324 U. S. 525
-527 (1945). See also
S.Rep. No. 621, 74th Cong., 1st Sess., 48 (1935) ("[T]he policy of Congress [is] . . . not to impair or diminish the powers of any State commission"); H.R.Rep. No. 1318, 74th Cong., 1st Sess., 7, 8, 27 (1935) ("The bill takes no authority from State commissions"). Deference is particularly inappropriate where, as here, the statute is designed not merely to confine an agency's jurisdiction, but to preserve the jurisdiction of other regulators, for Congress could not have intended courts to defer to one agency's interpretation of the jurisdictional division where the policies in conflict have purposely been committed to the care of different regulators.
Furthermore, FERC's statutory construction in this area has not been consistent, and was not contemporaneous with the enactment of the Federal Power Act. See generally INS v. Cardoza-Fonseca, 480 U. S. 421
, 480 U. S. 446
-447, n. 30 (1987); Schor, supra,
at 478 U. S. 844
-845. In conducting this litigation, FERC originally took the position that it had no jurisdiction over the prudence of a pool member's purchase decision and over whether the costs could be passed on to retail customers. App. to Motion to Dismiss 52-66. *
Page 487 U. S. 389
FERC has, as JUSTICE SCALIA notes, ante
at 487 U. S. 378
-379, issued an opinion concluding that, in regulating an integrated interstate pool, FERC's determination regarding the prudence of a wholesaler's costs inevitably determines the prudence of the wholesale purchase and the decision to enter into a pooling agreement. But FERC specifically noted in that opinion that its present conclusion differs from the position it took earlier in that very litigation. AEP Generating Co.,
36 FERC 61,226, p. 61,550 (1986).
I thus examine the jurisdictional issue without any special deference to the agency's position. I note at the outset that FERC's position rests on an already shaky jurisdictional foundation. FERC does not, after all, have any jurisdiction over a utility that simply builds its own generating facility and retails the electricity. FERC nonetheless asserts jurisdiction over transactions between a pool's generating facility and the utilities belonging to the pool on the theory that the pool and the member utilities are sufficiently separate to deem the transaction a wholesale transaction, rather than an internal transfer. In some tension with this position, it then asserts jurisdiction to allocate power in a way that forces purchases from the pool on the theory that the member utilities are sufficiently integrated in the pool so that it is merely allocating costs, rather than forcing purchases on retail utilities. The United States Court of Appeals for the District of Columbia Circuit upheld FERC's jurisdiction on both counts. Mississippi Industries v. FERC,
257 U.S.App.D.C. 244, 258-262, 264-266, 808 F.2d 1525, 1539-1543, 1545-1547, cert. denied,
484 U.S. 985 (1987). Now FERC seeks to complete the jurisdictional circle by asserting that the state
Page 487 U. S. 390
utility commissions do not even have the authority to question whether retail utilities have made imprudent purchase decisions by deciding to participate in pool projects, even though those decisions are what leaves the retail utilities in the position to have part of the incurred costs allocated onto them by FERC via forced purchases.
The jurisdictional decisions of the United States Court of Appeals for the District of Columbia Circuit are not before us, and I do not question them. Indeed, it makes a great deal of sense to read the statute as allowing FERC to exercise jurisdiction over the allocation of costs among interstate pool members, because otherwise every state commission would have a parochial incentive to claim that the costs must be imposed on the utilities located in other States. A neutral federal mediator is needed. The issue of allocation is logically distinct, however, from the issue of whether the costs allocated to a particular utility should be borne by the retail customers, through increased rates, or by the utility's stockholders. The latter issue is the type over which States traditionally exercise jurisdiction, and there are no special reasons counseling for a neutral federal intermediary. Nor, given that FERC's asserted authority to force intrapool purchases by retail utilities already lies at the farthest reaches of its jurisdiction, is there any reason to read this allocative authority expansively to encompass matters within the traditional purview of the States.
To be sure, in regulating the wholesale rates of an integrated interstate pool and determining the prudence of the costs the pool incurred as the wholesaler, FERC will examine many of the same factors a state utility commission would examine in reviewing the prudence of the decision to purchase that is part of entering into and continuing a pool project. But the issues are not identical. For example, if one retail utility happens to have a low-cost source and enters into an agreement to build a medium-cost plant, the construction of the medium-cost plant may not involve any imprudently
Page 487 U. S. 391
incurred costs from the wholesaling perspective, but the medium-cost purchase would be imprudent for the retail utility with the low-cost source. Even to the extent the prudency issues do overlap, I see no reason why FERC's review should bar States from applying state law standards of prudency to the purchase decisions that are an integral part of a member retail utility's participation in an interstate pool. FERC's interpretation of the Act would divest States of authority to determine the prudence of costs incurred by retail utilities whenever those utilities belong to an interstate pool -- a result that I do not think can be squared (particularly given FERC's shaky jurisdictional foundation) with the clear intent of Congress to preserve the authority of States to regulate retail utilities. See supra
at 487 U. S. 387
-388. Moreover, allowing only FERC review of interstate pool decisions would effectively allow retail utilities that either belong to interstate pools or span more than one State to pick and choose between state and federal regulation by deciding whether to form subsidiaries to operate their generating facilities and sell them "wholesale" electricity.
I thus conclude that, regardless of FERC's jurisdiction to allocate incurred costs among member utilities and regardless of its jurisdiction to review the prudency of an interstate pool's projects in order to set wholesale rates for intrapool transactions, state utility commissions retain jurisdiction to determine whether incurring those costs involved prudent purchase decisions that can be passed on to retail customers. I thus dissent from the Court's decision to reverse the Mississippi Supreme Court's judgment remanding for a prudency determination.
* Although JUSTICE SCALIA cites language from the Administrative Law Judge hearing demonstrating that the ALJ indicated his willingness to address certain "prudency issues," ante
at 487 U. S. 379
, n., the ALJ stressed throughout the hearing the distinction between prudency issues relevant to setting wholesale rates and issues regarding the prudency of power purchases and their effect on retail rates, and stated several times that he and FERC would and could only address the former. App. to Motion to Dismiss 61, 63, 66. At any rate, regardless of FERC's position in this case (and it was, at best, unclear), FERC has certainly not demonstrated a consistent agency interpretation, nor one that was contemporaneous with the enactment of the Federal Power Act.