487 U. S. 354
June 24, 1988
This was probably the most brutal case I’ve ever confronted. Quite honesty, I couldn’t even read the whole thing because I was so lost, and I had to rely on the syllabus to get the gist. Apologies.
Basically, FERC, a federal energy agency told a Mississippi power company how much electricity it needed to buy, and at what rate. A Mississippi agency then set retail rates based on what would enable the company to recover its expenditures. But it was argued that the company had imprudently wasted money building a nuclear power plant, and that only prudent expenditures could be passed on to consumers. The question was whether FERC’s setting of wholesale rates preempted state agencies from considering whether the expenditures of power companies were prudent, and adjusting retail rates accordingly.
The Court ruled 6-3 that there was preemption. Stevens said that the case was pretty much controlled by a precedent called Nantahala, which generally disallowed state agencies from setting retail rates that wouldn’t allow power companies to recoup the investment made in buying the set quota of energy at rates set by FERC. Stevens said that any differences between that case and the instant case were negligible. He thought that FERC was entitled to take the prudence of a power company’s projects and expenditures into account when setting wholesale rates, and that states could not attack FERC’s final judgment by re-litigating the question of prudence after the fact, and monkeying with the retail rates to relieve consumers.
Scalia concurred in judgment. To him, it was a simple Chevron case. FERC had asserted the power to review the prudence of the decisions of power companies when setting wholesale rates, and since this was not flatly inconsistent with the underlying statutes, FERC deserved the Court’s deference. Brennan, joined by Marshall and Blackmun, did not find any statutory authority for FERC to deal with questions of prudence, and contended that it was still the domain of states, at least as it related to setting retail rates. It was simply beyond agency purview, and thus not entitled to Chevron deference. Furthermore, the central question of prudence served as an adequate basis to distinguish Nantahala, which did not squarely address that precise issue.