Nantahala P. & L. v. Thornburg, 476 U.S. 953 (1986)

Nantahala Power & Light Co. v. Thornburg

No. 85-568

Argued April 21, 1985
Decided June 17, 1986
476 U.S. 953

APPEAL FROM THE SUPREME COURT OF NORTH CAROLINA

Syllabus

Appellants Nantahala Power & Light Co and Tapoco, Inc., are wholly owned subsidiaries of appellant Aluminum Co. of America (Alcoa). Each owns hydroelectric powerplants on the Little Tennessee River, which the Tennessee Valley Authority operates in exchange for providing them jointly with a fixed supply of low-cost "entitlement power." In addition, Nantahala buys a variable amount of high-cost "purchased power" from the TVA’s power grid. Tapoco sells all its power to an Alcoa plant in Tennessee, and Nantahala serves public customers in North Carolina. For the purpose of calculating the rate to be charged Nantahala’s retail customers, the North Carolina Utilities Commission (NCUC) issued an order allocating entitlement and purchased power between Tapoco and Nantahala that differs from the allocation of entitlement power between them ordered by the Federal Energy Regulatory Commission (FERC) in a wholesale ratemaking proceeding. The NCUC’s order resulted from Nantahala’s request to raise its intrastate retail rates. The North Carolina Supreme Court affirmed that order.

Held: NCUC’s allocation of entitlement and purchase power is preempted by federal law. Pp. 962-972.

(a) FERC has exclusive jurisdiction over the rates to be charged Nantahala’s interstate wholesale customers. Once FERC sets such a rate, a State may not conclude in setting retail rates that the FERC-approved wholesale rates are unreasonable. Rather, a State must give effect to Congress’ desire to give FERC plenary authority over interstate wholesale rates, and to ensure that the States do not interfere with this authority. The "filed rate" doctrine, under which interstate power rates filed with or fixed by FERC must be given binding effect by state utility commissions in determining intrastate rates, is not limited to "rates" per se. Here, FERC’s decision directly affected Nantahala’s wholesale rates by determining the amount of low-cost power that it may include in its source of power, and FERC required Nantahala’s wholesale rates to be filed in accordance with that allocation. FERC’s allocation of entitlement power is therefore presumptively entitled to more than the negligible weight given it by NCUC. Pp. 962-967.

(b) NCUC’s decision that Nantahala should have included more of the low-cost, FERC-regulated power than it in fact can under FERC’s order runs directly counter to that order, and therefore cannot withstand its preemptive force. Moreover, NCUC’s order impermissibly interferes with the scheme of federal regulation. Since Congress intended FERC’s allocation of power in wholesale interstate ratemakings to preempt any inconsistent state ratemakings, it is FERC’s order, rather than NCUC’s, that must be given effect. Pp. 967-972.

313 N.C. 614, 332 S.E.2d 397, reversed and remanded.

O’CONNOR, J., delivered the opinion of the Court, in which all other Members joined, except POWELL and STEVENS, JJ., who took no part in the consideration or decision of the case.