Summary
The Eighth Circuit considered whether Missouri was required by the Federal Power Act to permit an immediate pass-through to retail customers of wholesale electric costs imposed by FERC. The court held that the federal courts had jurisdiction and properly declined to abstain, but that Missouri’s ordinary statutory process of suspending and investigating retail-rate filings was not preempted. The judgment ordering immediate interim relief was reversed and remanded for consideration of refunds.
Topics
Practice areas
Questions Presented
- Whether the appeal remained justiciable after the Commission issued a permanent rate order and AP&L refunded part of the interim collections.
- Whether the Johnson Act, 28 U.S.C. § 1342, deprived the federal courts of jurisdiction over AP&L's claim that Missouri's interim-rate procedures were preempted by the Federal Power Act.
- Whether the district court should have abstained in favor of Missouri administrative or judicial proceedings.
- Whether the Federal Power Act preempted Missouri's ordinary statutory process of suspending and investigating retail-rate filings before allowing them to take effect.
- Whether the district court's immediate-pass-through injunction should be reversed and the case remanded for determination of an appropriate refund.
Holdings
- The appeal was not moot because AP&L retained approximately three-quarters of a million dollars collected under the district court's interim-rate injunction, and the disposition of that amount depended on the appeal.
- The Johnson Act did not bar federal jurisdiction because AP&L's jurisdictional basis was not solely diversity of citizenship or repugnance of a state rate order to the Federal Constitution; it included a substantial claim of federal statutory preemption under the Federal Power Act.
- The district court properly exercised its jurisdiction and did not err by declining to abstain.
- Under the circumstances presented, the Federal Power Act did not preempt Missouri's ordinary state-law process of suspending and investigating a retail-rate filing before allowing the rates to take effect.
- The court did not decide whether a state commission may evaluate the prudence or reasonableness of AP&L's decision to purchase capacity from MSE, and it did not decide the validity of the underlying FERC allocation order.
Key quotations
“State rate-making authorities are free to take account of federally ordered costs in accordance with procedures customarily used for ordinary rate cases.” (1446)
“State commissions, in other words, must respect, defer to, and accept FERC’s determinations with respect to wholesale rates, and may not reexamine the reasonableness of those determinations in the context of a retail-rate proceeding.” (1452)
“Ultimately, unless savings in other areas are shown by the record, the FERC-approved costs must be passed through.” (1452)
“We are unable to make such a finding here.” (1453)
Factual background
The Federal Energy Regulatory Commission replaced a contractual allocation under which Arkansas Power & Light would not pay for Grand Gulf Unit 1 with an allocation requiring AP&L to bear 36 percent of Middle South Energy's share of the plant's costs. AP&L began paying approximately $33 million per month to MSE and estimated that approximately $1 million per month was allocable to its Missouri operations. AP&L sought a Missouri retail rate increase reflecting those costs, but the Missouri Public Service Commission suspended the filing for investigation and denied emergency interim relief. The district court then ordered immediate interim pass-through, after which the Commission's permanent rate order allowed the Grand Gulf costs but required refunds of excess interim collections.
Procedural history
Arkansas Power & Light sought an interim retail rate increase from the Missouri Public Service Commission to recover costs imposed by a Federal Energy Regulatory Commission allocation order. The Commission suspended the rate filing under Missouri law and denied emergency interim relief. AP&L sued in the United States District Court for the Western District of Missouri, which exercised jurisdiction, declined to abstain, and ordered immediate interim pass-through of the FERC-ordered costs. During the appeal, the Commission issued a permanent rate order allowing the FERC-related costs but requiring a refund of excess interim collections. The Eighth Circuit rejected mootness and Johnson Act challenges, affirmed federal jurisdiction and the decision not to abstain, reversed the injunction on the merits, and remanded for further proceedings concerning refunds.
Remand instructions
The case was remanded to the district court for further proceedings consistent with the opinion, including consideration of how the portion of the interim rate increase retained by AP&L should be refunded to Missouri retail customers. Each party was ordered to bear its own costs on appeal.