Supreme Court Docket Report, October Term, 2002 - Number 7

by Miriam R. Nemetz and Robert L. Bronston

Recently, the Supreme Court granted certiorari in two cases of potential interest to the business community. Amicus briefs in support of the petitioners are due on Monday, March 3, 2003, and amicus briefs in support of the respondents are due on Wednesday, April 2, 2003.

1. Public Utilities - Preemption - Recovery of Rates Allocated by FERC. The Supreme Court granted certiorari in Entergy Louisiana Inc. v. Louisiana Public Service Commission, No. 02-299, to decide whether a state public utility commission has jurisdiction to deny an electric utility member of a multi-state power system the right to recover, in its retail rates, payments made to other utilities under a System Agreement approved by the Federal Energy Regulatory Commission ("FERC"), based on the state commission's decision that the payments did not comply with the System Agreement and thus that it was "imprudent" for the utility to incur those costs.

Entergy Louisiana Inc. ("ELI") is an electric utility which, together with other subsidiaries of Entergy Corporation, operates an integrated electric generation and transmission system serving parts of Louisiana, Arkansas, Mississippi, and Texas. The five Entergy operating companies cooperate and share costs under a System Agreement, which has been filed as a federal tariff and approved by FERC. Schedule MSS-1 of the System Agreement establishes a formula for determining how much power-supply capability each company must contribute to the system and provides that when a company supplies less than its allocated capacity it must make deficiency payments to those system members that cure the shortfall. During the 1980's, the Entergy companies implemented an Extended Reserve Shutdown ("ERS") Program to place excess generating units into inactive status, but decided that units in ERS status should be considered "available" for purposes of evaluating a company's capacity and calculating MSS-1 payments. As a result, ELI made higher MSS-1 payments then it would have made if none of the ERS units had been included in the MSS-1 computation.

In 1993, FERC initiated a proceeding to determine whether the inclusion of ERS units in the MSS-1 computations violated the System Agreement. On August 5, 1997, FERC issued an order concluding that the ERS facilities could not be considered "available" under the language of the Agreement. However, FERC declined to order a refund of past payments, and it...