New York v. FERC
Annotate this Case
535 U.S. 1 (2002)
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 2001
NEW YORK ET AL. v. FEDERAL ENERGY REGULATORY COMMISSION ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 00-568. Argued October 3, 200l-Decided March 4, 2002*
When the Federal Power Act (FPA) became law in 1935, most electric utilities operated as separate, local monopolies subject to state or local regulation; their sales were "bundled," meaning that consumers paid a single charge for both the cost of the electricity and the cost of its delivery; and there was little competition among utility companies. Section 201(b) of the FPA gave the Federal Power Commission (predecessor to respondent Federal Energy Regulatory Commission (FERC)) jurisdiction over "the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce"; § 205 prohibited, among other things, unreasonable rates and undue discrimination "with respect to any transmission or sale subject to the [Commission's] jurisdiction"; and § 206 gave the Commission the power to correct such unlawful practices. Since 1935, the number of electricity suppliers has increased dramatically and technological advances have allowed electricity to be delivered over three major "grids" in the continental United States. In all but three States, any electricity entering a grid becomes part of a vast pool of energy moving in interstate commerce. As a result, power companies can transmit electricity over long dis-
*Together with No. 00-809, Enron Power Marketing, Inc. v. Federal Energy Regulatory Commission et al., also on certiorari to the same court.
tances at a low cost. However, public utilities 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 § 205. Invoking its § 206 authority, FERC (1) ordered "functional unbundling" of wholesale generation and transmission services, which means that each utility must state separate rates for its wholesale generation, transmission, and ancillary services, and must take transmission of its own wholesale sales and purchases under a single general tariff applicable equally to itself and others; (2) imposed a similar open access requirement on unbundled retail transmissions in interstate commerce; and (3) declined to extend the open access requirement to the transmission component of bundled retail sales, concluding that unbundling such transmissions was unnecessary and would raise difficult jurisdictional issues that could be more appropriately considered in other proceedings. After consolidating a number of review petitions, the District of Columbia Circuit upheld most of Order No. 888. Here, the petition of New York et al. (collectively New York) questions FERC's assertion of jurisdiction over unbundled retail transmissions, and the petition of Enron Power Marketing, Inc. (Enron), questions FERC's refusal to assert jurisdiction over bundled retail transmissions.
1. FERC did not exceed its jurisdiction by including unbundled retail transmissions within the scope of Order No. 888's open access requirements. New York insists that retail transactions are subject only to state regulation, but the electric industry has changed since the FPA was enacted, at which time the electricity universe was neatly divided into spheres ofretail versus wholesale sales. The FPA's plain language readily supports FERC's jurisdiction claim. Section 201(b) gives FERC jurisdiction over "electric energy in interstate commerce," and the unbundled transmissions that FERC has targeted are made such transmissions by the national grid's nature. No statutory language limits FERC's transmission jurisdiction to the wholesale market, although the statute does limit FERC's sales jurisdiction to that market. In the face of this clear statutory language, New York's arguments supporting its contention that the statute draws a bright jurisdictional line between wholesale and retail transactions are unpersuasive. Its argument that the Court of Appeals applied an erroneous standard of review because it ignored the presumption against federal pre-emption of state law focuses on the wrong legal question. The type of pre-emption at issue
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