Amicus Brief — Federal Energy Regulatory Commission v. Mississippi

No. 80-1749 FILE

IN THE

Supreme Court of the ite ean

Office - Supreme Court, U.S.

D

SEP 25 1961

STEVAS.

OcTOBER TERM, 1980

FEDERAL ENERGY REGULATORY COMMISSION AND

JAMES B. EDWARDS, SECRETARY OF ENERGY,

Appellants,

Vv.

THE STATE OF Mississippi, ef al.,

Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

BRIEF OF AMICI CURIAE UTILITIES:

HOUSTON LIGHTING & POWER COMPANY, IDAHO

POWER COMPANY, IOWA POWER AND LIGHT

COMPANY, IOWA PUBLIC SERVICE COMPANY,

THE MONTANA POWER COMPANY, and

OKLAHOMA GAS AND ELECTRIC COMPANY

IN SUPPORT OF APPELLEES

a

Of Counsel: R. Gorpon Goocn*

JouNn P. MATHIS

Ms canal Ae — J. PATRICK BERRY

HucH Hewitt

Houston Lighting & BAKER & BoTTs

eune bos aoe 1701 Pennsylvania Avenue, N.W.

H Texas 77002 Washington, D.C. 20006

ouston, (202) 457-5500

PAUL L. sear Attorneys for Amici Utilities:

em noeay Com Houston Lighting & Power Company,

Post Office Box — oad Idaho Power Company,

Boise, Idaho 83707 Iowa Power and Light Company,

’ Iowa Public Service Company,

Kansas Gas and Electric Company,

[Additional Counsel The Montana Power Company, and

Listed Inside Cover] Oklahoma Gas and Electric Company

*Counsel of Record

aie oanimemememememememmmmm meneame

ADCcOonmP, inc. ARLINGTON, VIRGINIA (703) 641.0655

Post Office Box 657

Des Moines, Iowa 50303

Ira E. DELK

Associate General Counsel

Iowa Public Service

Company

Post Office Box 778

Sioux City, Iowa 51102

JAMEs F. HAINES

Kansas Gas and Electric

Company

Post Office Box 208

Wichita, Kansas 67201

RoBert E. SULLIVAN

Vice President and

General Counsel

The Montana Power Company

Post Office Box 1338

Butte, Montana 59701

H. DUANE STRATTON

Senior Vice President—Law

Oklahoma Gas and Electric

Company

Post Office Box 321

Oklahoma City, Oklahoma 73101

i

TABLE OF CONTENTS

Page

TABLE OF CITATIONS ..........cseeeeeeeeeeeeneees i

INTEREST OF AMICI CURIAE ........0.seeeeeeeeees 1

STATEMENT .....cccccccccvcccccvcvcccvcesssseescs 3

ARGUMENT

PURPA’s Regulation of the States Violates the Tenth

Amendment to the Constitution As Interpreted by Directly-

Applicable Precedents of this Court .........+.s+e00: 6

CONCLUSION ncccccvcccccccccccccccccsccccceccsene 20

TABLE OF CITATIONS

Cases

Bethlehem Steel Co. v. New York State Labor Relations Bd.,

330 U.S. 767, 67 S.Ct. 1026, 91 L.Ed. 1234 (1947) .... 11

Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624, 93

SER. 1854, 36 LE. 36 S47 CIDTS) 2. ccccccvcccess 11

Cleveland v. United States, 329 U.S. 14, 67 S.Ct. 13, 91 L.Ed.

Da EEE cee eee bee téaboccccesgnccedeneagpanae 6

FPC v. Southern California Edison Co., 376 U.S. 205, 84 S.Ct.

eee & Ff £6. | rrr 5

Fry v. United States, 421 U.S. 542, 95 S.Ct. 1792, 44 L.Ed. 2d

BO BERET waded ben vbdvevbes bcccceccecneceeneees 6, 18

Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241,

85 S.Ct. 348, 13 L.Ed. 2d 258 (1964) ...........55.

Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581

LEEEe eda D és ea cause 6466000) hee0coReRanee ll

Hodel v. Virginia Surface Mining and Reclamation Association,

Inc.. —— U.S. ——, 101 S.Ct. 2352, 69 L.Ed. 2d 1

(1981) ..... TEITTTITITITELITE TTT TT LTT passim

ii

Cases Continued

Page

Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 51

L.Bd. 26 G04 (IDTT) ..cccccccccccccccccccccccees 11

Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.

BE BBO CIES) occccccrcccccccccccccccccccccccece 6

Maryland v. Wirtz, 392 U.S. 183, 205, 88 S.Ct. 2017, 2028,

20 L.Ed. 2d 1020, 1036 (1968) 20... . ccc cecceeeeeee 7

National Labor Relations Board v. Jones and Laughlin Steel

Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893 (1937)... 6

National League of Cities v. Usery, 426 U.S. 833, 96 S.Ct.

2465, 49 L.Ed. 2d 245 (1976) ..... cece ceeeeeees passim

New York v. United States, 326 U.S. 572, 66 S.Ct. 310, 90

L.Ed. 326 (1946) ...cccccccvcccsecscccsseececs 11,13

Parden v. Terminal Railway of the Alabama State Docks De-

partment, 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed. 2d 233

C19G4) wncccccccccccscccccccccccsescccccecccese 10

Perez v. Cambell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed. 2d

[SS CIDTL) wcccccccccccccccccccvvcvccccscsececs 11

Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.

2d GBG (CIDT1) 2. crccccccccccccccccccccccesesece 6

Polish National Alliance v. NLRB, 322 U.S. 643, 64 S.Ct.

1196, 88 L.Ed. 1509 (1944) 2... .. cc ceeeeeeeeeeees 6

United States v. Baltimore & O. Railroad Co., 17 Wall. 322,

21 L.Ed. S97 (1873) ...cccccccccccccccccccccceces 12

United States v. California, 297 U.S. 175, 56 S.Ct. 421, 80

LB. S67 (1936) 2. ccccccccccccccccccccccccececs 10

United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed.

GOD (1941) once ccc ccce en eeeeeeeees YTTTTTitiy 6

Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575,

66 S.Ct. 1176, 90 L.Ed. 1447 (1946) ......... ce cees 6

Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122

(1942) nce ceeeeee occccccccccceces TITTTiTiTT 6

iii

Page

United States Constitution

Article I, Section 8 (Commerce Clause) ...........505: passim

I 6 i ado 0 006400 bE Cccccececceds esas passim

Statutes

Economic Stabilization Act of 1970, Pub. L. No. 91-379, 84

Stat. 799, as amended, 12 U.S.C. § 1904 note ......... 18

Fair Labor Standards Act, 29 U.S.C. § 201 ef seg. .......... 8

Federal Power Act, 16 U.S.C. § 791a et seq. ... 6.6.6.0 000 7,15

Public Utility Regulatory Policies Act of 1978, Pub. L. No.

SP ey CC ENT OT I Vic ccccccienttesesocs passim

Surface Mining Control and Reclamation Act of 1977, 30

USC. (Supp. TE) § 1201 of Be. wc ccccccccccccccccs

Rogulations

SO Sn ED SoeaUdkss cocceescesseetedecad’ 5

Other Source Materials

Public Utility Rate Proposals of President Carter's Energy Pro-

gram: Hearings on S. 122, S. 1300, S. 1363, S. 1364,

S. 1469 (Part E), Before the Subcomm, on Energy Con-

servation and Regulation of the Senate Comm. on Energy

and Natural Resources, 95th Cong., 1st Session (Part I)

STEEL Cab GRNEbA ECU LN HEE 0446d00 000 SE ebbEENe 16, 19

Tribe, Laurence H., Unravelling National League of Cities:

The New Federalism and Affirmative Rights to Essential

Government Services, 90 Harvard Law Review 1065

SUPEEE cb ut PEhhdb wed bas eh ovektebeecs chivaaues 8

IN THE

Supreme Court of the United States

OcToBER TERM, 1980

No. 80-1749

FEDERAL ENERGY REGULATORY COMMISSION AND

JAMES B. EDWARDS, SECRETARY OF ENERGY,

Appellants,

v.

THE STATE OF MiISssISSsIPP!, ef al.,

Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

BRIEF OF AMICI CURIAE UTILITIES:

HOUSTON LIGHTING & POWER COMPANY, IDAHO

POWER COMPANY, IOWA POWER AND LIGHT

COMPANY, IOWA PUBLIC SERVICE COMPANY,

THE MONTANA POWER COMPANY, and

OKLAHOMA GAS AND ELECTRIC COMPANY

IN SUPPORT OF APPELLEES

INTEREST OF AMICI CURIAE

This amici curiae brief is filed on behalf of the several

utilities listed above and described below. For the Court's

convenience, they shall be referred to as “Amici Utilities.”

Houston Lighting & Power Company, based in Houston,

Texas, is an investor-owned electric utility that serves

2

nearly one-fourth of the population of Texas. The Com-

pany’s facilities and its service area are located exclu-

sively within the State. Its rates are regulated both by

the Texas Public Utility Commission and the incorporated

municipalities that it serves.

Idaho Power Company is an investor-owned electric

utility based in Boise, Idaho, that owns and operates facili-

ties in five Western States: Idaho, Oregon, Nevada, Wyom-

ing and Montana. Since the Company provides electricity

for sale in Idaho, Oregon and Nevada, its retail rates are

regulated by the state public utility commissions of those

three States.

Iowa Power and Light Company is an investor-owned

combination gas and electric utility company based in

Des Moines, Iowa. It provides gas and electric service to

central and southwestern Iowa. Its retail rates are regu-

lated by the Iowa State Commerce Commission.

Iowa Public Service Company, based in Sioux City,

Iowa, is also an investor-owned combination gas and elec-

tric utility. It provides gas and electric service in lowa

and South Dakota. Its retail rates are regulated by the

Iowa State Commerce Commission and the South Dakota

Public Service Commission.

Kansas Gas and Electric Company, based in Wichita,

Kansas, is an investor-owned electric utility that provides

electric service to central and southeastern Kansas. Its

rates are regulated by the State Corporation Commission

of Kansas.

The Montana Power Company, based in Butte, Mon-

tana, is an investor-owned combination gas and electric

utility that provides service to the western two-thirds of

the State of Montana. Its rates are regulated by the Mon-

tana Public Service Commission.

Oklahoma Gas and Electric Company, based in Okla-

homa City, Oklahoma, is an investor-owned electric utility

that provides electricity for sale in Oklahoma and western

Arkansas. Its retail rates are regulated by the Oklahoma

Corporation Commission and the Arkansas Public Service

Commission.

Because certain provisions of the Public Utility Regu-

latory Policies Act (PURPA) order the several state regula-

tory authorities listed above to take certain actions affecting

the electric utilities subject to their jurisdiction, Amici

Utilities have a direct and vital interest in any judicial

proceeding interpreting those provisions, especially an in-

terpretation declaring them unconstitutional. Written con-

sents from all parties to the filing of this brief are on

file with the Clerk.

STATEMENT

As a general proposition, PURPA requires state regu-

latory authorities to undertake certain actions with respect

to certain matters within a certain time. For example, six

separate federal ratemaking standards are established in

Section 111 of PURPA.’ All six standards must be con-

sidered for adoption by state regulatory authorities; this

consideration must begin within two years of enactment

of the statute and must be completed within three years."

State authorities must comply with detailed federal rules

when undertaking their consideration’ and must file an-

nual reports to the Secretary of the Department of Energy

116 U.S.C. (Supp. III) § 2621.

*16 U.S.C, (Supp. III) § 2622(b). An additional five standards are

established not for consideration, but for adoption within two years

of enactment of the statute unless a state affirmatively chooses not

to do so. 16 U.S.C. (Supp. III) § 2623.

*16 U.S.C. (Supp. III) § 2625.

4

(DOE) summarizing the “determinations made and ac-

tions taken with respect to each such standard on a

utility-by-utility basis.” *

PURPA grants certain persons an almost unrestricted

right to intervene in any state ratemaking proceeding re-

gardless of state law.’ Actions to enforce this right of

intervention may be brought in federal court.’ In addi-

tion, any person, including the Secretary of DOE, who

participated in a state proceeding considering a federal

standard is authorized to obtain review in a state court

of any determination made with respect to a particular

utility.’ The Secretary is granted the additional right to

“participate as an amicus curiae in any review by any

court of an action” arising under the provisions of the

statute creating federal standards or arising under the

provisions establishing intervention and judicial review."

Finally, Section 210 of PURPA requires the Federal

Energy Regulatory Commission (FERC) to promulgate

rules to encourage energy cogeneration and small power

*16 U.S.C, (Supp. III) § 2626(a).

*16 U.S.C, (Supp. III) § 2631. Such intervention must be at least

to initiate or to participate in the consideration of any of the federal

standards or “other concepts which contribute to the achievement of

the purposes of this chapter.” § 2631(a). Since the broad purposes

of Title I range from encouraging equitable rates for electric con-

sumers to encouraging electric utilities’ conservation of energy and

efficient use of resources and facilities, 16 U.S.C. (Supp. III)

§ 2611, it is difficult to imagine many concepts that could not be

characterized as contributing to the achievement of these purposes.

*16 U.S.C, (Supp. III) § 2633(b). The Secretary of DOE may pro-

ceed directly to federal court; other persons must first seck relief

from a state court.

"16 U.S.C, (Supp. Il) § 2633(c)(1).

*16 U.S.C, (Supp. III) § 2633(c) (3).

production.’ Within one year after any rule is promul-

gated or revised, every state regulatory authority shall

“implement such rule (or revised rule) for each electric

utility for which it has ratemaking authority.” If the

FERC does not enforce this requirement, private parties

may bring an enforcement action in federal court.”

Neither the wisdom of the various standards established

by PURPA nor the purposes that the statute was designed

to achieve are before the Court. What is before the Court

is whether the federal standards and rules are required

to be implemented by the States.

PURPA is no mere collection of suggestions—no simple

study offered to the States as a useful tool in their inde-

pendent deliberations. Rather PURPA’s language is the

language of command, its dictates those of a higher au-

thority to a lesser one. It is a direct and substantial fed-

eral intrusion into what have traditionally been areas of

state concern, areas that have been recognized by this

Court.” It is an intrusion that makes burdensome de-

mands upon the States. The question for the Court is

whether those demands are constitutional.

*16 U.S.C. (Supp. IIT) § 824a-3.

16 U.S.C. (Supp. III) § 824a-3(f)(1). Although the currently

effective regulations of the FERC provide options for state imple-

mentation of the federal rules, 18 C.F.R. § 292.401(a), there is

no option not to implement the federal rules. And it is the FERC—

not the state regulatory authority—that determines whether the

option actually exercised by a particular state adequately imple-

ments the federal rule,

™ 16 U.S.C, (Supp. III) § 824a-3(h) (2).

™ See, e.g., FPC v. Southern California Edison Co., 376 U.S. 205,

84 S.Ct. 644, 11 L.Ed. 2d 638 (1964) (since there is a bright

line easily ascertained between state and federal jurisdiction, case-

by-case analysis is unnecessary).

6

The answer to this question raises profound implica-

tions not only for the state regulatory authorities upon

whom these demands are made, but for the utilities—

and their customers—upon whom the impact of these

demands is ultimately imposed. It is for this reason, and

to further “the public interest in the administration of

justice,” Universal Oil Products Co. v. Root Refining

Co., 328 U.S. 575, 581, 66 S.Ct. 1176, 1179, 90 L.Ed.

1447, 1453 (1946), that Amici Utilities have chosen to

participate in this proceeding. To facilitate the Court's

consideration, Amici Utilities will focus on the single issue

of whether PURPA’s regulation of the States violates the

Tenth Amendment to the Constitution.

ARGUMENT

PURPA’s Regulation of the States Violates the Tenth

Amendment to the Constitution As Interpreted by

Directly-Applicable Precedents of this Court

The chief instrument for expansion of federal power

at the expense of state authority has been the Commerce

Clause.” Through the use of this clause, the federal gov-

ernment established its ability to implement programs of

national scope in the areas of economics “ and civil rights.”

This expansion of federal power may be perceived as a

% Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed. 2d

686 (1971); Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377,

13 L.Ed. 2d 290 (1964); Cleveland v. United States, 329 U.S. 14,

67 S.Ct. 13, 91 L.Ed. 12 (1946); Polish National Alliance v.

NLRB, 322 U.S. 643, 64 S.Ct. 1196, 88 L.Ed. 1509 (1944);

sen v. Filburn, 317 U.S. 111, 63 S.Ct. 82, 87 L.Ed. 122

1942).

“Fry v. United States, 421 U.S. 542, 95 S.Ct. 1792, 44 L.Ed. 2d

363 (1975); United States v. Darby, 312 U.S. 100, 61 S.Ct. 451,

85 L.Ed. 609 (1941); National Labor Relations Board v. Jones

wasn Steel Corp., 301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893

* Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85

S.Ct. 348, 13 L.Ed. 2d 258 (1964).

7

necessary modernization of federalism, but it has not been

without its costs. One cost is a perception that the States

have a diminished stature, only a formalistic sovereignty.

Left unchecked, that perception, as embodied in con-

gressional lawmaking, could very well have, in the words

of Justice Douglas, “devour[ed] the essentials of state sov-

‘ ereignty, though that sovereignty is attested by the Tenth

Amendment.” **

This Court’s 1976 decision in National League of Cities

v. Usery " restored the cornerstone of federalism and an-

nounced to all that there are indeed constitutional limits

on the congressional exercise of authority under the Com-

merce Clause. In light of the Court’s unanimous decision

on June 15, 1981, in Hodel v. Virginia Surface Mining

and Reclamation Association, Inc.” that reaffirmed its

decision in National League of Cities, there can be no

doubt today that certain provisions of PURPA constitute

a form of federal regulation of the States prohibited by

the Tenth Amendment to the Constitution.”

48 Maryland v. Wirtz, 392 U.S. 183, 205, 88 S.Ct. 2017, 2028, 20

L.Ed. 2d 1020, 1036 (1968) (Douglas, J., dissenting).

7 426 U.S. 833, 96 S.Ct. 2465, 49 L.Ed. 2d 245 (1976).

1. U.S, ——,, 101 S.Ct. 2352, 69 L.Ed. 2d 1 (1981).

% These provisions are Title I, codified at 16 U.S.C. (Supp. IIT)

§§ 2611-2644 and at 42 U.S.C. (Supp. III) §§ 6801-6806; Title

III, codified at 15 U.S.C. (Supp. III) §§ 3201-3211; and Section

210 of Title II, codified at 16 U.S.C. (Supp. III) § 824a-3. To

the extent that these provisions require the States to take certain

actions to implement the federal mandates of the statute, they

should be declared unconstitutional. They should be contrasted

with other provisions of the statute, e.g., Sections 202 through 204,

that amend the Federal Power Act, 16 U.S.C. § 791a et seq., by

adding three new statutory provisions affecting federal—not state—

regulatory authorities. 16 U.S.C. (Supp. III) §§ 824i-k. No ques-

tion whatsoever is raised about the constitutionality of those pro-

visions. Unless expressly noted otherwise, references herein to

PURPA are limited to Title I, Title III, and Section 210 of Title II

as they apply to the States.

8

In National League of Cities, in striking down the 1974

amendments to the Fair Labor Standards Act, 29 U.S.C.

§ 201 et seq., in which the Congress had sought to im-

pose federal minimum wage and maximum hour standards

on almost all public employees of state governments, the

Court declared:

It is one thing to recognize the authority of Congress

to enact laws regulating individual businesses neces-

sarily subject to the dual sovereignty of the govern-

ment of the Nation and of the State in which they

reside. It is quite another to uphold a similar exer-

cise of congressional authority directed, not to private

citizens, but to the States as States. We have repeatedly

recognized that there are attributes of sovereignty

attaching to every state government which may not

be impaired by Congress, not because Congress may

lack an affirmative grant of legislative authority to

reach the matter, but because the Constitution pro-

hibits it from exercising the authority in that manner.”

Thus, the Tenth Amendment as a constitutional force was

vindicated in National League of Cities after nearly four

decades of neglect” and further vindicated in Hodel.

#° 426 U.S. at 845, 96 S.Ct. at 2471, 49 L.Ed. 2d at 253.

* Distinguished scholars, such as Professor Tribe, are willing to

acknowledge that “[i]f states are to have any real meaning, Con-

gress must . . . be prevented from acting in ways that would leave

a state formally intact but functionally a gutted shell.” Tribe, Lau-

rence H., Unravelling National League of Cities: The New Fed-

eralism and Affirmative Rights to Essential Government Services,

90 Harvard Law Review 1065, 1071 (1977). Although Professor

Tribe is hard pressed to develop a coherent description of the

States’ independent role in the federal system, he recognizes that

some areas are more apt to be within the penumbra of National

League of Cities than others. He observes, “[I]t is in the regulatory

area that the traditional justifications for a federal

intrinsic as well as instrumental values of diversity and experi-

mentation which can be achieved through decentralized decision-

making—find their greatest validity.” Id. at 1075.

In Hodel, the Court was called upon to consider the

constitutionality of the Surface Mining Control and Recla-

mation Act of 1977, 30 U.S.C. (Supp. III) § 1201 et seq.

In the Court’s words:

[The Act] establishes a two stage program for the

regulation of surface coal mining, an initial, or interim

regulatory phase, and a subsequent, permanent phase.

The interim program mandates immediate promulga-

tion and federal enforcement of some of the Act’s

environmental protection performance standards, com-

plemented by continuing state regulation. Under the

permanent phase, a regulatory program is to be

adopted for each State, mandating compliance with

the full panoply of federal performance standards,

with enforcement responsibility lying with either the

State or Federal Government.

The Court unanimously upheld the constitutionality of

this regulatory scheme. In doing so, however, the Court

was careful to observe:

[T]he States are not compelled to enforce the [fed-

eral] steep-slope standards, to expend any state funds,

or to participate in the federal regulatory program in

any manner whatsoever. If a State does not wish to

submit a proposed permanent program that complies

with the Act and implementing regulations, the full

regulatory burden will be borne by the Federal Gov-

ernment. Thus, there can be no suggestion that the

Act commandeers the legislative processes of the States

by directly compelling them to enact and enforce a

federal regulatory program.”

The Court thus reaffirmed the holding of National League

of Cities that there are limits beyond which the federal

government may not pass in its attempts to achieve a na-

= —— U.S, at ——, 101 S.Ct. at 2356, 69 L.Ed. 2d at 11.

“—— U.S. at ——, 101 S.Ct. at 2366, 69 L.Ed. 2d at 23-24,

10

tional regulatory policy. The Court detailed the test of

National League of Cities, by which the constitutionality

of federal intrusion into state affairs is to be determined,

in the following language:

It should be apparent from this discussion that in

order to succeed, a claim that congressional commerce

er legislation is invalid under the reasoning of

ational League of Cities must satisfy each of three

requirements. First, there must be a showing that the

challenged statute regulates the “States as States.” /d.,

at 854, 96 S.Ct., at 2475. Second, the federal regu-

lation must address matters that are indisputably

“attributes of state sovereignty.” /d., at 845, 96 S.Ct.,

at 2471. And, third, it must be apparent that the

States’ compliance with the federal law would directly

impair their ability “to structure integral operations

in areas of traditional functions.” Jd., at 852, 96

S.Ct., at 2472."

The constitutionality of PURPA must thus be judged

by determining whether the statute meets each of these

three tests and by further determining whether there are

any overriding considerations of federal interest.”

Let us step back at this time to review the various

categories of state activities that the Court has recognized.

First, there are those activities which partake of an entre-

preneurial quality, such as the operation of a railroad,”

™ Id. The Court observed in a footnote to the language quoted in

the text that “[dJjemonstrating that these three requirements are

met does not, however, guarantee that a Tenth Amendment chal-

lenge to congressional commerce power action will succeed. There

are situations in which the nature of the federal interest advanced

may be such that it justifies State submission.” /d., note 29.

** See note 24, supra.

* United States v. California, 297 U.S. 175, 56 S.Ct. 421, 80 L.Ed.

567 (1936). See also, Parden v. Terminal Railway of the Alabama

State Docks Department, 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed.

2d 233 (1964).

11

or the sale of natural resources,”” which can and have

been constitutionally regulated in part by the federal gov-

ernment.

Second, there are activities of the States, which while

sovereign in their character, such as the control of air-

space once was, can nevertheless be displaced by pre-

emptive federal regulation.” The States, when such a

displacement occurs, are in effect moved aside entirely

from the exercise of regulatory authority; the federal gov-

ernment completely replaces state control.

The third category comprises those activities which are

neither entrepreneurial, nor yet the subject of federal pre-

emption. Regarding policy towards these activities, and as-

suming a broad reach of the Commerce Clause, the fed-

eral government has two choices. It can choose to leave

intact the existing state regulatory structure, or it can

attempt to displace entirely the state’s control. If Congress

attempts the latter approach, it cannot displace in halves.

It cannot command the state regulatory authorities to do

A, B, and C in pursuit of federal objectives X, Y and Z.

To allow that would effectively terminate the independent

existence of the States. In his dissent in New York v.

United States,” Justice Douglas characterized the danger

of such a development as follows:

The notion that the sovereign position of the States

must find its protection in the will of a transient ma-

** New York v. United States, 326 U.S. 572, 66 S.Ct. 310, 90 L.Ed.

326 (1946).

** Burbank v. Lockheed Air Terminal, Inc., 411 U.S. 624, 93 S.Ct.

1854, 36 L.Ed, 2d 547 (1973); see also Jones v. Rath Packing

Co., 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed. 2d 604 (1977);

Perez v, Cambell, 402 U.S. 637,91 S.Ct. 1704, 29 L.Ed. 2d 233

(1971); Bethlehem Steel Co. v. New York State Labor Relations

Bd., 330 U.S. 767, 67 S.Ct. 1026, 91 L.Ed. 1234 (1947); Hines

v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581 (1941).

12

jority of Congress is foreign to and a negation of

our constitutional system. There will often be vital

regional interests represented by no majority in Con-

gress. The Constitution was designed to keep the bal-

ance between the States and the Nation outside the

field of legislative controversy.”

One can argue that even less-than-dramatic attempts

to control state activities from Washington must be re-

sisted as an unconstitutional imposition of federal au-

thority upon the independence of the state governments.

The basis for this argument is found in United States

v. Baltimore & O. Railroad Co." where the Court ob-

served of the States that “[i]f they may be taxed lightly,

they may be taxed heavily; if justly, oppressively. Their

operation may be impeded and may be destroyed, if any

* 326 U.S. 572, 66 S.Ct. 310, 90 L.Ed. 326 (1946).

* 326 U.S. at 594, 66 S.Ct. at 320, 90 L.Ed. at 340.

In a sense, the Tenth Amendment is the check and balance on

federal action which complements the check and balance on state

action provided by the Commerce Clause itself when state action

constitutes a burden on interstate commerce or when the State

attempts to regulate interstate commerce. Thus, the federal govern-

ment is constrained by the Tenth Amendment and the state govern-

ment is constrained by the Commerce Clause. In this case, there

is no claim that state regulation of utility rates constitutes a burden

on interstate commerce, nor that the States are attempting to regu-

late interstate commerce.

Until now, the issue was one of preemption. Utilities have long

lived under a system of dual regulation, with the Congress deter-

the reach of federal regulation of interstate commerce.

PURPA now abandons dual regulation and seeks to require the

States to implement federal standards.

* 17 Wall. 322, 21 L.Ed. 597 (1873).

13

interference is permitted.” As it is with taxation, so

it is with regulation. If certain federal regulatory burdens

on the States are permitted, the power to regulate could

quickly be abused.

The regulation of “States as States” must be distin-

guished from the displacement of States from a particular

exercise of regulatory power. Displacement was the issue

in Hodel. There, the federal plan imposed no burdens on

the States which the States could not avoid should they

choose to do so. That the States were indeed given a

choice was crucial to the Court’s decision. If any State

cared to assign its money, time, and manpower to surface

mining regulation, it could join the federal program and

play by the federal rules. If a State chose not to join,

not one demand would be imposed. To repeat the Court’s

conclusion, “If a State does not wish to submit a proposed

permanent program that complies with the Act and imple-

menting regulations, the full regulatory burden will be

borne by the Federal Government. Thus there can be no

suggestion that the Act commandeers the legislative pro-

cesses of the States by directly compelling them to enact

and enforce a federal regulatory program.” ‘

With PURPA, no such conclusion can be drawn, The

public utility commissions of fifty states, their members,

their staffs, their monies, and their time are all “com-

mandeered” by PURPA's directives. Since there is no State

choice to “opt-out” of the regulatory program, the States

17 Wall. at 327, 21 L.Ed. at 599, quoted in New York v. United

States, 326 U.S. 572, 592-593, 66 S.Ct. 310, 319, 90 L.Ed. 326,

339 (1946) (Douglas, J., dissenting).

——— U.S, at ———, 101 S.Ct. at 2366, 69 L.Ed. 2d at 23-24 (em-

phasis added).

14

themselves are regulated by PURPA “as States.” The

statute thus meets the first test of Hodel.”

PURPA also meets the second test of Hodel that “the

federal regulation must address matters that are indisput-

ably ‘attributes of state sovereignty.’""* There can be no

doubt that the regulation of retail rates and services that

are charged and provided by electric utilities operating

within its borders is a traditional state function. The Ap-

pellants’ conclusion to the contrary because there is con-

current federal and state jurisdiction over public utilities ”

fails to recognize the separate nature of each government's

jurisdiction. The jurisdiction of the FERC is carefully cir-

™ Since there is no reference in the Appellants’ brief to the first test

of Hoael, apparently they concede that PURPA regulates the

“States as States.” In this connection, it is instructive to quote the

ae oceanic uty own description of what PURPA requires

tes:

mapenamilie ~ ay - 4 ty the oe

upon states, provisions at

issue do more than “allow” state regulation. Portions of

Titles I and II require state regulatory authorities to “con-

sider” whether or not to adopt and implement certain regu-

latory standards; the state commissions must adhere to certain

procedural requirements in considering these standards, must

t the Secretary of Energy to pa te in the proceed-

and must report to the Secretary their progress in the

consideration process. Section 210(f)(1) requires the state

authorities to implement the Federal Energy Regulatory Com-

mission’s rules concerning transactions between cogenerators

and electric utilities; the Commission is empowered under

Section ry to enforce this statutory responsibility

in federal court. for Appellants at 28-29 (footnote

).

In of this description, it is not surprising that the Appellants

chose not to discuss whether PURPA regulates the “States as

States.”

© U.S, at ——-, 101 S.Ct. at 2366, 69 L.Ed. 2d at 23.

* Brief for Appellants at 31.

15

cumscribed by Section 201 of the Federal Power Act.”

It is limited to the interstate transmission of energy and

to the sale of energy at wholesale in interstate commerce.

The States retain full authority to regulate intrastate retail

rates of utilities. And, of course, it is the retail rates of

electric utilities that are the subject of Title I of PURPA.

Because PURPA directs state regulators of electric utilities

to take certain actions involving their retail rates, there

can be no serious suggestion that PURPA does not

“address matters that are indisputably ‘attributes of state

sovereignty.’ »” oA

Appellants state that “[i]t is difficult to appreciate why

the statute should be more vulnerable because Congress

chose a less radical course out of concern that preemptive

federal regulation would constitute undue interference with

16 U.S.C, (Supp. IIT) § 824, Subsection (b)(1) provides:

The provisions of this subchapter shall apply to the trans-

mission of electric energy in interstate commerce and to the

sale of electric energy at wholesale in interstate commerce,

but except as provided in paragraph (2) shall not apply to

any other sale of electric energy or deprive a State or State

commission of its lawful authority now exercised over the

exportation of hydroelectric energy which is transmitted

across a State line. The Commission shall have jurisdiction

over all facilities for such transmission or sale of electric

, but shall not have jurisdiction, cones as specifically

pro in this subchapter and subchapter III of this chap-

ter, over facilities used for the generation of electric ene

or over facilities used in local distribution or only for the

ion of electric energy in intrastate commerce, or

over facilities for the transmission of electric energy consumed

wholly by the transmitter,

" Hodel, —— U.S. at ——, 101 S.Ct. at 2366, 69 L.Ed. 2d at 23.

Please note that the Court's test requires the federal regulation

merely to “address [these state] matters;” there is no requirement

that the plenary authority of the States to make determinations

essential to their separate and independent existence be abrogated.

Compare Brief for Appellants at 31.

16

the traditional authority of state regulatory commissions

over retail utility ratemaking.” Brief for Appellants at

31-32. Whether Congress has the constitutional power

under the Commerce Clause to preempt all State regula-

tion in this area is a question not before this Court.

For whatever reason, Congress did not choose to preempt

State authority.” Its choice instead to “commandeer” the

regulatory authorities and courts of the States to carry

out a federal program places the statute squarely within

the proscriptions of Hodel.

The State utility commissions are not merely a nuisance,

Mr. Chairman. If the State utility regulatory commissions did

not exist, would need to be invented. They take responsi-

bility for lems of local rates and services which the Fed-

eral Government should not shoulder, and which it is in-

pcr re hye I 29 tae te ge aah ae

made inevitable. U es ation, the State

agencies would be in a posi to aim responsibility,

peers by Ring ripe Ber wagget Pradeep ob ver magn

on

17

With respect to the third test of Hodel, had Congress

chosen merely to advise the state regulatory authorities

of what Congress believed to be the best regulatory ap-

proach, that is, had Congress offered counsel rather than

commands, PURPA probably would not have attracted

any constitutional challenge. But by burdening the state

commissions with federal agendas that have to be con-

sidered, by establishing federal timetables that have to be

kept, and in the case of Section 210, by promulgating

federal regulations that have to be enforced, it is un-

questionably apparent “that the States’ compliance with

the federal law would directly impair their ability ‘to struc-

ture integral operations in areas of traditional functions.’ ” *°

State government budgets are, of course, finite. So too

are the funds with which state regulatory authorities must

operate. Federal regulation of the States that forces them

to conduct investigations and hearings they would not

otherwise have conducted, or to implement federal regu-

lations which the States would not have promulgated, in-

evitably forces some allocation of funds to those pursuits."

0 U.S, at ———, 101 S.Ct. at 2366, 69 L.Ed. 2d at 23. The

flexibility of the federal regulations promulgated under Section

210 that is touted in the Appellants’ Brief at page 41 is irrelevant

to the constitutionality of the underlying statutory provision. The

regulations can always be changed to make them less flexible; in-

deed, the language of Section 210 expressly contemplates that the

regulations will be revised.

“It is a zero-sum transfer. If the State had, pre-PURPA, intended

an agenda of X items with a budget of Y dollars, and PURPA

commands an agenda of A items requiring an expenditure of B

dollars, then the state commission's autonomy is circumscribed to

the extent that it can only attempt an agenda of X-A length, and

do so with a budget of Y-B dollars. Of course, as A approaches

X in scope, or B approaches Y in amount, the State autonomy

diminishes. When A = X or B = Y, the State's independence

is terminated,

18

Likewise, if a state commission is ordered to address 365

days worth of standards in a single year, it will not address

any standard on its own initiative.

What is astounding about PURPA, perhaps more so

than any other fact, is the lack of any evidence in the

legislative history accompanying the statute of the size

of the burden being imposed upon the states. Without

regard to budgets, or States’ tax bases, or state commis-

sion resources, Congress laid down uniform standards and

uniform procedures that require the expenditure of State

funds to comply with the federal statute. While PURPA

purports to supply financial assistance to the States, there

is no guarantee of such funding and, of course, there is

no way the federal government can add hours to the

regulatory day. While the loss of initiative, time, and

independence does not admit of easy translation into bud-

get figures, it too is there in every State and for every

state commission. PURPA certainly impairs the States’

ability to structure their regulation of those utilities subject

to their jurisdiction. Indeed, “impair” is too mid a word.

Although each of the three tests outlined in Hodel for

declaring a statute unconstitutional is met by PURPA,

that does not end the matter. According to the Court,

there may be “situations in which the nature of the fed-

eral interest advanced may be such that it justifies State

submission.” “ Such an injgsast was present in Fry v.

United States,” a case discussed by the Court in National

League of Cities.

Fry involved a challenge to the Economic Stabiliza-

tion Act of 1970 (ESA), a challenge that was rebuffed

by the Court for a number of reasons, as explained by

#*——- U.S, at ———, 101 S.Ct, at 2366, 69 L.Ed. 2d at 23, note 29.

* 421 U.S. 542, 95 S.Ct. 1792, 44 L.Ed. 2d 363 (1975).

19

its opinion in National League of Cities. First, the ESA

“was occasioned by an extremely serious problem which

endangered the well-being of all component parts of our

federal system and which only collective action by the

National Government might forestall.” ** No similar claim

can be made for PURPA. Indeed, the very flexibility and

independence that the Appellants attribute to individual

States under the regulatory scheme of PURPA argue against

the need for “collective action” by the federal government.”

Second, the ESA was “carefully drafted so as not to

interfere with the States’ freedom beyond a very limited,

specific period of time.” ** No one can assert that claim

with respect to PURPA; its right of intervention, for

example, is a mandate etched in federal stone.

Third, “the ESA displaced no state choices as to how

governmental operations should be structured, nor did it

force the States to remake such choices themselves. In-

stead, it merely required that the wage scales and employ-

ment relationships which the States themselves had chosen

be maintained during the period of the emergency.” “

That is, state choices were honored, and simply extended.

* 426 U.S. at 853, 96 S.Ct. at 2475, 49 L.Ed. 2d at 258.

“There is the more fundamental question of whether PURPA

actually would result in any additional individual initiatives at the

state level. As the Chairman of the Texas Public Utility Commis-

sion testified:

ais ofthe bi it appears that most of the more desirable

om of the _ are epidly being implemented by state com-

missions due to public pressure and participation in current

rate cases, and that the two-tiered ody ound ha

current bills is a poor solution to the balance of the problems

raised, and will substantially increase the cost of electricity to

the consumer, Senate Hearings at 435.

“ 426 US. at 853, 96 S.Ct. at 2475, 49 L.Ed. 2d at 258.

"Id,

20

That process preserved at least some degree of account-

ability—the States after all had already implemented their

policy. With PURPA, policy initiative is taken from the

States although policy responsibility is not. The States are

“commandeered” to implement the federal program.

“Finally, the Economic Stabilization Act operated to

reduce the pressures upon state budgets rather than in-

crease them.” “ PURPA, of course, achieves the opposite

result.”

Because PURPA regulates the States as States in an

area that possesses the attributes of state sovereignty, be-

cause compliance with that regulation impairs the ability

of the States “to structure integral operations in areas of

traditional functions,” and because there is no federal

interest involved to justify State submission to the fed-

eral regulatory scheme, the provisions of the statute as

they apply to the States” should be declared unconsti-

tutional.

CONCLUSION

The decision of the district court should be affirmed.

21

Respectfully submitted,

Of Counsel: /s/ R. Gordon Gooch

WILLIAM R. Brown R. Gorpon Goocu

General Counsel Joun P. MATHIS

Houston Lighting & J. PATRICK Berry

Power Company Huon Hewitt

3000 One Shell Plaza Baker & Botts

Houston, Texas 77002 1701 Pennsylvania Avenue, N.W.

Washington, D.C, 20006

Paut L. Jaurgout

Geneess Couneat (202) 457-5500

Idaho Power Company Attorneys for Amici Utilities:

Post Office Box 70 Houston Lighting & Power Company,

Boise, Idaho 83707 Idaho Power Company,

Lyne Voasace Iowa Power and Light Company,

Vice President and Iowa Public Service Company,

G ic " Kansas Gas and Electric Company,

lowa Power and Light The Montana Power Company, and

Company Oklahoma Gas and Electric Company

Post Office Box 657

Des Moines, Iowa 50303

Tra E. DELk

Associate General Counsel

Iowa Public Service

Company

Post Office Box 778

Sioux City, lowa 51102

James F. HAINes

Kansas Gas and Electric

Company

Post Office Box 208

Wichita, Kansas 67201

Rosert E, SULLIVAN

Vice President and

General Counsel

The Montana Power

Post Office Box 1338

Butte, Montana 59701

H. Duane STRATTON

Senior Vice President—Law

Oklahoma Gas and Electric

Post Ofbce Box 321

Oklahoma City, Oklahoma 73101

22

CERTIFICATE OF SERVICE

I hereby certify that I am a member of the Bar of

this Court and that, pursuant to Rule 28 of the Rules

of this Court, I have this day caused to be served, by

first-class mail postage prepaid, three (3) copies of the

foregoing Brief of Amici Curiae Utilities in Support of

Appellees upon the following counsel for the parties to

this proceeding: Rex E. Lee, Solicitor General, Depart-

ment of Justice, Washington, D.C. 20530; Charles A.

Moore, General Counsel, Federal Energy Regulatory Com-

mission, Washington, D.C. 20426; Alex Alston, Jr., P.O.

Drawer 1532, Jackson, MS 39205; Hiram C. Eastland,

Jr., 100 Court Street, Indianola, MS 38751; Joshua Green,

P.O. Box 1666, Jackson, MS 39205; and James K. Child,

Jr., P.O. Box 651, Jackson, MS 39205.

/s/ R. Gordon Gooch

R. Gorpon Goocu

September 25, 1981

Washington, D.C.