Petition for Writ of Certiorari — Metropolitan Transportation Authority v. Federal Energy Regulatory Commission

wd / NOV 3 4996

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

METROPOLITAN TRANSPORTATION AUTHORITY,

Petitioner,

FEDERAL ENERGY REGULATORY COMMISSION, et al.

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

RENEE SCHWARTZ

Counsel of Record

Ezio SCALDAFERRI

BOTEIN HAYS & SKLAR

200 Park Avenue

New York, New York 10166

(212) 867-5500

Attorneys for Petitioner

QUESTIONS PRESENTED

Whether the term “public body” as used in the Niagara Rede-

velopment Act includes a government agency which uses the

hydropower itself but does not resell the hydropower to other

consumers of electricity.

Whether in interpreting the provisions of the Niagara Redevel-

opment Act, the Federal Energy Regulatory Commission is

required to harmonize that interpretation with national policies in

favor of conservation and mass transportation.

li

STATEMENT PURSUANT TO SUPREME COURT

RULES 21 AND 28.1

The following parties may have an interest in the outcome of

this proceeding:

Federal Energy Regulatory Commission

Power Authority of the State of New York

Connecticut Municipal Electric Energy Cooperative

Allegheny Electric Cooperative, Inc.

New Jersey Board of Public Utilities

Boston Edison Company

Eastern Edison Company

Fitchburg Gas and Electric Light Company

Massachusetts Electric Company

Municipal Electric Utilities Association of New York

State

Vermont Department of Public Service

Public Service Electric and Gas Company

Massachusetts Municipal Wholesale Electric Company

City of Cleveland, Ohio

Bethlehem Steel Corporation

Borough of Lansdale

Arlene Violet, Attorney General of Rhode Island and

Rhode Island Public Utilities Commission

Sussex Rural Electric Cooperative

Rockland Electric Company

New Jersey Preference Boroughs

General Motors Corporation

Occidental Chemical Corporation

Olin Corporation

Union Carbide Corporation

Attorneys for the above parties and the Solicitor General have

been served with copies of this petition.

ill

The Metropolitan Transportation Authority (“MTA”), peti-

tioner herein, is a public benefit corporation created under the

laws of the State of New York. N.Y. Pub. Auth. L.

§ 1263(1)(a). Members of the MTA’s board serve ex officio as

members of the boards of the following entities:

New York City Transit Authority

Metro North Commuter Railroad Co.

Long Island Railroad

Triborough Bridge and Tunnel Authority

Staten Island Rapid Transit Authority

Manhattan and Bronx Surface Transit Operating

Authority

iV

TABLE OF CONTENTS

OPER EGP Uae PURE OD shcntissscecnicisasaeniscenssasnnonnnnies

STATEMENT PURSUANT TO SUPREME COURT

PEGI EE PANNE ED saccdnspevccistesdunicndinteaitolsiantsiacciniens

I. THE OUTCOME OF THIS CASE AF-

FECTS THE ALLOCATION OF MIL-

LIONS OF DOLLARS OF VALUABLE AS-

SETS AND SHOULD NOT TURN ON A

STRAINED INTERPRETATION OF LEG-

EOAREE VR BOGE ESIUEN cipnscvesrinsaiccancsnsnsdncrnsnene

Il. THE DEFINITION OF “PUBLIC BODY”

UNDER THE NRA AND OTHER FEDER-

AL POWER ACTS IS AN ISSUE OF FIRST

IMPRESSION, AND SHOULD BE DECID-

ED BY THE COURT NOW TO AVOID

POSSIBLE IRREPARABLE INJURY TO

OTHER GOVERNMENT AGENCIES

WHICH MAY BE ELIGIBLE FOR HY-

DROPOWER ALLOCATIONS UNDER

THE NRA OR OTHER FEDERAL PREF-

CPOs EPR OS OMI essintiverciacsssasenaninabcacasess

III. THESECOND CIRCUIT’S INTERPRETA-

TION OF THE NRA VIOLATES THE

PLAIN MEANING RULE OF STATUTO-

RY CONSTRUCTION; MOREOVER, IF

ANY LEGISLATIVE HISTORY IS TO BE

CONSIDERED, IT HAS BEEN MISCON-

EF Sr coicniacinoaaciagslaiaridataiitecmnauaeonane)

IV. FERC IS REQUIRED TO CONSIDER

FEDERAL POLICIES IN FAVOR OF

MASS TRANSPORTATION AND ENER-

GY CONSERVATION IN REVIEWING

THE POWER AUTHORITY’S ALLOCA-

TRONS UNDER THE NIRA ccccissncsncccrcssioses

ROO ee sash ec camenssean/sussasearcercassentiiaicirass tv eaatoeen

NN NN <

1]

20

24

v

TABLE OF AUTHORITIES

Cases

American Federation of Musicians v. Wittstein, 379

Rhus BF Doe RED Neanssasaceccuchscmmanouaeteananoipelanansnen

Appalachian Power Co. v. United States, 607 F.2d

935 (Ct. Cl. 1979), cert. denied, 446 U.S. 935

PPSIO PD - sidccccdpiccrtcteaneneiiaaabinineaeetainnnntaesss

Bread Political Action Committee v. FEC, 455 U.S.

TT CRIED: scccsaccsasiscsigunasiiaeaieainnneoares

Burnet v. Guggenheim, 288 U.S. 280 (1933) ......

Chapman v. Houston Welfare Rights Ors. 441 US.

600 GRIPE ssssincucsnntiunid eoneateetas Geecenetnteeraeneriees

Chemical Mfrs. Ass'n v. Natural ees De-

fense Council, 470 U.S. 116 (1985)...

City of Santa Clara v. Andrus, 572 F.2d 660 (9th

Cir.), cert. denied, 439 U.S. 859 (1978) ..........

Consumer Product Safety Commission v. GTE Syl-

vania Inc., 447 U.S. 102 CESGB) sccssseccsisanccsccscs.

Eck v. United Arab Airlines, Inc., 360 F.2d 804 (2d

Cit. SPGGD icici ceunuinodmunniaasaemens

Forelaws on Board v. Johnson, 743 F.2d 677 (9th

Cir. 1984), cert. denied, U.S. ,106S. Ct.

3208 TIGRE ictal

General Motors Corp. v. District of Columbia, 380

CT. aed POS rece eee

Griffin v. Oceanic Contractors, Inc., 458 U.S. 564

EEL) | ssisksccasemincscescanccrducatsinueneunseren neni

Kossick v. United Fruit Co., 365 U.S. 731 (1961)

MTA v. FERC,796 F.2d 584 (2d Cir. 1986) .......

PASNY v. FERC, 743 F.2d 93 (2d Cir. 1984) ...

United States v. Locke, 471 U.S. 84 (1985) .......

United States v. Standard Oil Co., 332 U.S. 301

CEORTY. atic Saecasasenccenetenseaaectee eee ee

United States v. Turkette, 452 U.S. 576 (1981) ..

PAGE

13

9

passim

4,9

13

8,9

12

vi

Regulatory Agency Opinions and Orders

Opinion No. 229-A; Opinion and Order on Rehear-

ing Clarifying Declaratory Opinion in Part, and

Granting Petitions to Intervene Out of Time, 32

FERC (CCH) 161,194 (July 30, 1985) .........

Opinion No. 229; Declaratory Opinion and Order

Affirming With Modifications Initial Decision on

Niagara Preference Power for States Neighbor-

ing New York, 30 FERC (CCH) 161,323

Go A RRR ere Neelam etemicae min voron

Re Consolidated Edison Company of New York, 29

PUR Sth 327 (06,0 A. COTO © svcccconsicnscssiens

Re Test Periods In Rate Cases, 2 PUR 4th 611

(NY Pes: RCTS ics eaten

State of Vermont Public Service Board v. Power

Authority of the State of New York, 55 F.P.C.

PIP CG TOF ccasansansansinnmeienetneneienes

Statutes

Federal

Bonneville Project Act, 16 U.S.C. § 832 et seq. ...

Department of Energy Organization Act, 42 U.S.C.

OT EIZ AUT > ccicoen eaten

Flood Control Act of 1944, 16 U.S.C. § 825 et seq.

Fort Peck Project Act, 16 U.S.C. § 8336 ....0c00....

National Environmental Policy Act of 1969, 42-

US S40) 0 D6. scccminaacconmand

Niagara Redevelopment Act of 1957,-16 U.S.C.

6330 0 ME. adn ean

Public Utilities Regulatory Policies Act of 1978, 16

SAL. 3 2) OF OE ccicsvccsoiencertencs

Urban Mass Transportation Act of 1970, 49 U.S.C.

© GE OF BOR anciseucvistaednreaiein ee

State

IY. Pe. A BE accretneecaree

N.Y. Pee AUR Ce. 8 Pe siren

NY. Pee PAE. Gis SO Ee aerccetccece

BY A Be eccentrics

PAGE

passim

21

Vil

Legislative Materials

S. Rep. No. 141 95th Cong. 2d Sess. (1977), re-

printed in 1978 U.S. Code & Cong. Ad. News

FIDO initiniicueutginishceacenuaeaiaaindt on eadelasemainadeeninia cane

LOS Com ee. POT CGS ccsarcctcrnrccdosmeernetes

805 Come: FRG. TORE CUGIT } scsiiccsccrsccccesstsvanessaree

Articles and Miscellaneous

Llewellyn, Remarks on the Theory of Appellate De-

cision and the Rules or Canons about How Stat-

utes are to be Construed, 3 Vand. L. Rev. 395

CTS: siciisncsesskacancetsasntoanteanesaaeesammenapnamnalaadan

Phelps, Factors Influencing Judges in Interpreting

Statutes, 3 Vand. L. Rev. 456 (1950) «0...

E. Erlich, Are Utilities Obsolete? A Troubled Sys-

tem Faces Radical Change, Business Week, May

Zh, Frese © 2G Givin:

Letter to the New York Times from Alfred Kahn,

Former Chairman of the N.Y.S. Public Service

Commission, November 25, 1983 p. 30 .............

1985 Power Authority of the State of New York

PN. RR G8 rciccceerceoenccceudisaneeneaans

PAGE

18-19

16

IN THE

Supreme @ourt of the United States

OCTOBER TERM, 1986

die

METROPOLITAN TRANSPORTATION AUTHORITY,

Petitioner,

-V-

FEDERAL ENERGY REGULATORY COMMISSION, et al.

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

OPINIONS BELOW

This petition for a writ of certiorari seeks review by this Court

of an opinion and judgment of the United States Court of Appeals

for the Second Circuit filed June 17, 1986. MTA v. FERC, 796

F.2d 584 (2d Cir. 1986) (Al-A20).' A petition for rehearing

and suggestion for rehearing en banc was denied by that court on

August 6, 1986 (A21-A22).

The opinion affirmed two decisions of respondent Federal

Energy Regulatory Commission (“FERC”), Opinion No. 229;

Declaratory Opinion and Order Affirming With Modifications

[Initial Decision on Niagara Preference Power for States Neigh-

boring New York, 30 FERC (CCH) {4 61,323 (March 27, 1985)

(A49-A85) (“Opinion No. 229”), and Opinion No. 229-A; Opin-

ion and Order on Rehearing Clarifying Declaratory Opinion in

Part, and Granting Petitions to Intervene Out of Time, 32 FERC

(CCH) 161,194 (July 30, 1985) (A23-A48) (“Opinion No.

229-...”), which had affirmed, with modifications, /nitial Decision

1. References to“A ~” are to the Appendix filed herein.

2

of the Administrative Law Judge, 22 FERC (CCH) 163,087

(March 9, 1983) (A86-A140).

JURISDICTION

The judgment of the United States Court of Appeais for the

Second Circuit was entered on June 17, 1985. The Court of

Appeals denied a petition for rehearing by order filed August 6,

1986. Jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

STATUTORY PROVISION INVOLVED

The statutory provision whose interpretation is at issue is Sec-

tion 1(b)(1)} of the Niagara Redevelopment Act of 1957, 16

U.S.C. § 836(b) (1), which provides in relevant part:

In order to assure that at least 50 per centum of the project

power skall be available for sale and distribution primarily

for the benefit of the people as consumers, particularly

domestic and rural consumers, to whom such power shall

be made available at the lowest rates reasonably possible

and in such manner as to encourage the widest possible

use, the licensee in disposing of 50 per centum of the

project power shall give preference and priority to public

bodies and nonprofit cooperatives within economic trans-

mission distance...

STATEMENT OF THE CASE

With the passage of the Niagara Redevelopment Act in 1957

(“NRA”), Congress authorized the Power Authority of the State

of New York (“Power Authority”) to finance, construct, and

operate a hydroelectric power project on the Niagara River. 16

U.S.C. § 836. Because the river was considered a federal

resource but the financial responsibility for the project was placed

on New York state, a compromise was reached pursuant to which

50% of the power would be distributed under a federal preference

to “public bodies and non-profit cooperatives” (with up to 20% of

that part to be sold outside of New York State), and the other

50% would be distributed as determined by the Power Authority,

3

presumably to investor-owned utilities. /d. § 836(b). This peti-

tion arises as a result of the first judicial interpretation of the term

“public bodies” as used to define preference customers in the

NRA. MTA v. FERC, 796 F.2d 584 (2d Cir. 1986) (A1-A20).

The MTA is the New York State agency primarily responsible

for substantially all of the mass transportation services in the

New York Metropolitan area. It was established in 1965 to

stabilize, improve and coordinate mass transportation services,

and it provides overall coordination for a mass transit system

which includes the New York City Transit Authority, Metro

North, and the Long Island Railroad. N.Y. Pub. Auth. L.

§§ 1260, 1264. These entities annually carry roughly six times

the population of the United States to and from work, shopping,

family, etc. No one seriously questions that the MTA has all the

indicia cf and is considered a “public body” as that term is gener-

ally used.

The MTA is one of the largest users of electricity in the State of

New York. Its annual electric bill is in excess of $110 million.

The largest part of the power, approximately 85%, is used by the

New York City Transit Authority to operate the subway system,

the largest mass transportation system in the world. Prior to

1976, the MTA had been a tariff customer of investor-owned

utilities. The energy crisis of the early 1970's, coupled with

financial problems experienced by the investor-owned utilities,

led the New York State legislature in 1976 to authorize the Power

Authority to purchase generating facilities from Consolidated

Edison and to serve certain designated public agencies, including

the MTA. N.Y. Pub. Auth. L. § 1001. In accordance with the

Power Authority’s tariffs, the MTA may resell the power it

purchases to its subsidiaries or affiliates, but it does not resell

power to other users. See Power Authority Service Tariff No. 9,

Paragraph D., pp. 11-12; R. 622-23.

2. Referencesto“R ~” are to the Deferred Appendix filed in the

court below.

4

During 1976-81 the cost of conventional energy continued to

rise. Therefore, in keeping with its effort to promote mass trans-

portation by holding down as much as possible any rate increase

to the MTA, in 1981 the Power Authority allocated to the MTA

up to 35 mw and 175,000 mwh per year of interruptible Niagara

hydropower. R. 535-36.

At roughly the same time, in March of 1980 certain out-of-

state municipal utilities challenged as insufficient the amount of

hydropower allocated to the out-of-state preference customers by

the Power Authority. In determining whether out-of-state pref-

erence customers should receive a portion of or the total 10% of

hydropower,’ FERC reviewed the allocations of hydropower to

in-state and other out-of-state preference customers. The ques-

tion of the allocation of the hydropower, in turn, raised the ques-

tion of whether the MTA, an end user of electricity, was a “public

body” and hence a proper recipient of preference power under the

NRA.

Throughout the first twenty or more years since the enactment

of the NRA, FERC had given the term “public bodies” its plain

meaning interpretation. State of Vermont Public Service Board

v. Power Authority of the State of New York, 55 F.P.C. 1109

(1976); see Opinion No. 229-A, 30 FERC at 61,194 (A28).

Ignoring the plain meaning of the words Congress used and its

prior holdings, and relying on a decision of the Second Circuit in

PASNY v. FERC, 743 F.2d 93 (2d Cir. 1984) for guidance as to

Congressional intent, FERC concluded here that the MTA was

not a “public body” because “only publicly-owned distributors

and sellers of electricity who are capable of selling and distribut-

ing this power to the people as consumers of electricity” qualified

as public bodies. Opinion No. 229, 30 FERC at 61,652 (A67).

The MTA and certain Massachusetts utilities‘ appealed FERC’s

decision on this point pursuant to 12 U.S.C. § 825L.

3. Section 836(b)(2) provides that the out-of-state entities should

receive a reasonable portion up to 20% of the 50% of preference power.

4. 796 F.2d at 591 n.4. (All)

a"

The Second Circuit affirmed FERC’s decision although it

acknowledged that, read literally, the term “public body” would

include government bodies like the MTA. 796 F.2d at 591

(Al2).2 Rather, the court emphasized what it believed to be the

fundamental concept behind Congress’ enactment of the

NRA—“yardstick cornpetition,” a theory which suggests that if

electric power were in “public” hands, privately owned utilities

would be forced to lower their rates thereby benefitting the public

at large. Id. at 591-92 (A12-Al13). By its decision, the Second

Circuit denied Niagara preference power and, by analogy, prefer-

ence power under any other federal preference statute, to the

MTA and to any other government agency which is not a reseller

of energy.

5. The Second Circuit also affirmed FERC’s holdings that (i) the

term “neighboring states” should be read literally; and (ii) the out-of-

state preference entities were not entitled to retroactive relief. 796 F.2d

at 593-94 (A16-A20). The court declined to rule on the issue of

whether the Power Authority must allocate 10% of the project power to

out-of-state preference entities because the issue is “currently aca-

demic.” Jd. at 593 (A18). Those issues are not part of this petition.

6

REASONS FOR GRANTING THE WRIT

There are at least four reasons why the petition should be

granted:

The determination affects an extremely valuable national

resource and imposes millions of dollars of additional expense on

the very government agencies that are least likely to be able to

afford such expense.

The question of who may be considered a preference customer

under a federal preference provision is a case of first impression.

If the erroneous determination is permitted to stand, it will

adversely impact government agencies nationwide that seek

hydropower from federal projects with similar preference provi-

sions. This Court should not wait for a conflict in the Circuits in

interpreting the federal preference laws, because any delay may

cause government agencies seeking preference power irreparable

harm, since the hydropower allocations are not retroactive, and

the government agencies might be excluded from receiving

hydropower in the interim period.

The possibility of reversal on review is real. The statutory

interpretation adopted below is inconsistent with plain meaning

statutory interpretation ruies previously announced by this Court.

Further, even if it were correct not to use the plain meaning rule

of statutory interpretation in this instance, the legislative history

does not compel the conclusions which have been reached below.

Finally, in reviewing the NRA or other legislation allocating

hydropower, FERC should be directed to interpret such acts

consistently, if possible, with the policies set forth under the

National Environmental Policy Act and the Urban Mass Trans-

portation Act. FERC admittedly has considered neither the

environment nor the importance of mass transportation in reach-

ing its conclusions.

:

THE OUTCOME OF THIS CASE AFFECTS THE ALLOCATION OF

MILLIONS OF DOLLARS OF VALUABLE ASSETS AND SHOULD

NOT TURN ON A STRAINED INTERPRETATION OF LEGISLA-

TIVE HISTORY.

At least eighteen entities, plus FERC and the Power Authority,

participated in the proceedings below. Some of the parties are

associations with many members, bringing the total number of

entities interested in obtaining the precious resource even higher.’

It is not surprising that so many parties have been willing to

bear the expense of such a protracted litigation; the prize is worth

it. If electricity is a significant element of the cost of providing

service, then the ability to obtain hydropower is crucial. As

FERC’s Commissioner Stalon noted in his dissent, “[t] he Niag-

ara Project’s value to the preference customers is immense.

[They] save several hundred million dollars annually by buying

preference power instead of having to generate or purchase power

at current cost.” Opinion No. 229, 30 FERC at 61,659 (Stalon,

dissenting) (A79).

The total savings from the allocation of hydropower differs

from year to year depending on the actual amount of hydropower

received, the base price of conventional energy, and the cost of

alternate fossil fuel used to generate conventional energy. To use

the example used before the Circuit Court, in 1985 the average

price for conventional power purchased from the Power Author-

ity was 6.4 cents per kilowatthour, while the price of the same unit

of hydropower was less than four-tenths of a cent. In other

words, the conventional power was /6 times more expensive than

the hydropower. The difference between the two rates dimin-

ished in 1986 because both the Power Authority’s conventional

rate and the price of oil (the alternate fuel used to generate

conventional energy) have dropped, but the rate difference as of

September, 1986 was still very substantial—4¢ per kilowatthou,.

6. The Second Circuit particularly noted the quantity of interven-

ors. MTA v. FERC, 796 F.2d 584, 588-89 n.3 (2d Cir. 1986) (A6).

8

for conventional fuel and 4.6 tenths of a cent per kilowatthour for

hydropower.’

To put it another way, if 175,000 mwhrs of hydropower pur-

chased from the Power Authority today cost approximately

$800,000, an equivalent amount of conventional power would

cost $7 million. During 1985, the Power Authority sold a total of

over 14.6 billion kilowatthours from the Niagara project, roughly

one half to preference customers. 1985 Power Authority of the

State of New York Ann. Rep. 44. Thus, the savings to preference

customers by reason of receiving hydropower (compared to the

cost of Power Authority conventional power) could equal over a

quarter of a billion dollars. That amount would of course

increase if all the other hydropower projects with federal prefer-

ence clauses were to be added.

While the fact that the stakes involved translate into hundreds

of millions of dollars may not, standing alone, be a sufficient

reason for certiorari review, the economic impact of the lower

court’s decision is an important factor in determining whether to

grant the writ. Cf. United States v. Standard Oil Co. 332 US.

301, 302 n.2 (1947); General Motors Corp. v. District of Colum-

bia, 380 U.S. 553, 557 (1965). When the significant economic

impact is coupled with both an error in statutory interpretation

(see Point III, infra) and a failure to consider a potentially

adverse impact on the environment (see Point IV, infra) the

combination should be irresistible.

7. The Second Circuit took judicial notice of the decline in the price

of oil as a source of private power, MTA v. FERC, 796 F.2d at 593

(A15), but that decline does not make the difference in cost unimpor-

tant, for that difference is still enormous.

9

II.

THE DEFINITION OF “PUBLIC BODY” UNDER THE NRA AND

OTHER FEDERAL POWER ACTS IS AN ISSUE OF FIRST

IMPRESSION AND SHOULD BE DECIDED BY THE COURT

NOW TO AVOID POSSIBLE IRREPARABLE INJURY TO OTHER

GOVERNMENT AGENCIES WHICH MAY BE ELIGIBLE FOR

HYDROPOWER ALLOCATIONS UNDER THE NRA OR OTHER

FEDERAL PREFERENCE STATUTES.

The language of the NRA which is the subject of this proceed-

ing is quoted above at page 2. In interpreting this section the

Second Circuit has held, as we have said, that “public bodies,”

those entitled to preference power, includes only publicly-owned

entities that are capable of selling and distributing power directly

to consumers of electricity at retail, not ultimate consumers or

brokers. 796 F.2d at 593 (Al6). The court cites no case to

support its position, for none exists.° Important cases of first

impression are particularly appropriate for review. E.g., Ameri-

can Federation of Musicians v. Wittstein, 379 U.S. 171, 175

(1964) (granting certiorari because the question was “an impor-

tant one of first impression under” a Federal act); Kossick v.

United Fruit Co., 365 U.S. 731, 733 (1961) (“novel questions” );

United States v. Standard Oil Co., 332 U.S. 301, 302 (1947)

(“novelty and importance of the principal question”).

Moreover, the petitioner is not the only entity affected. Unless

corrected, this erroneous restrictive reading of the words “public

body” may also be applied in interpreting other similarly worded

federal preference statutes, such as the Bonneville Project Act, 16

U.S.C. § 832d, the Flood Control Act, 16 U.S.C. § 825s, and the

Fort Peck Project Act, 16 U.S.C. § 833c. If there were already a

Circuit Court determination that government agencies under one

of the other federal preference acts were entitled to be considered

8. The Second Circuit seemed to rely on its own prior decision in

Power Authority of the State of N.Y. v. FERC, 743 F.2d 105 (2d Cir.

1984) (“PASNY”). However, the “public body” question had not been

considered in that case. See MTA v. FERC, 796 F.2d at 589 (A8-A9).

10

“public bodies” and “preference customers,” there would be little

question that the Second Circuit’s determination would be

reviewed as an important “conflict” between Circuits. If the

Second Circuit’s reading of “public body” is allowed to stand

pending such a conflict, certain otherwise eligible consumers may

be deprived of a hydropower allocation. As such errors ordina-

rily do not result in retroactive correction, see 796 F.2d at 595

(A19), that would be a permanent loss to the government agency

for the year in question. Therefore, here, where the stakes are

high and hardship will come to those government agencies which

are excluded from preference status, the Court should not wait

for review until another Circuit considers the issue and rules

otherwise than the Second Circuit has ruled.

11

III.

THE SECOND CIRCUIT’S INTERPRETATION OF THE NRA

VIOLATES THE PLAIN MEANING RULE OF STATUTORY

CONSTRUCTION; MOREOVER, IF ANY LEGISLATIVE HISTORY

IS TO BE CONSIDERED, IT HAS BEEN MISCONSTRUED.

We appreciate that this Court cannot correct every error made

below and that errors alone may not suffice for certiorari review.

We note, however, that even a brief consideration of the merits

here reveals that reversal is warranted. We will outline some of

the errors in the opinion below insofar as they impact on the plain

meaning rule of construction, and the legislative history relied on

by the Second Circuit in respect of its crucial yardstick

competition holding. There are other arguments to be made in

respect of the legislative history of the NRA, the interpretation of

the language of the NRA and the interpretation of federal

preference statutes generally, but we will leave them to the brief

on the merits.

A. The language of the NRA is clear and unambiguous and

the plain meaning rule of construction should have been

applied to it.

The Second Circuit stated clearly in its opinion that, literally,

the term “public bodies” is not limited to “publicly owned entities

that are capable of selling and distributing power directly to

consumers of electricity at retail” 796 F.2d at 591 (A12); thus, if

the plain meaning rule were adopted the court would have had to

come to the conclusion diametrically opposite to the conclusion it

reached concerning the MTA and other government agencies.

As we have said, no one seriously questions that the MTA is a

“public body” in the literal sense.

Since the court did not restrict itself to the plain meaning in

interpreting the statute, it must have come to the conclusion that

there exists in the legislative history some overriding principle of

such clarity and vigor as to overcome the presumption in favor of

the plain meaning. We will show below that no such compulsion

of clear purpose exists in the legislative history. See pp. 14-19

12

infra. Before we do so, however, we note that in each of the seven

cases relied on by the Second Circuit in support of its statutory

interpretation, 796 F.2d at 591 (Al11-A12), this Court actuaily

held that unless there simply was none, the plain meaning should

prevail. In United States v. Turkette, 452 U.S. 576 (1981), for

example, this Court held that the word “enterprise” in the

Racketeer Influenced and Corrupt Organizations Act included

both legitimate and illegitimate enterprises. The Court noted

that:

Had Congress not intended to reach criminal associations,

it could easily have narrowed the sweep of the definition by

inserting a single word, “legitimate.” But it did nothing

to indicate [such a restriction].

Id. at 581. Similarly here, had Congress intended to limit

“public bodies” to resellers, it could easily have done so by using

the term “municipal utilities” as it has done, for example, in the

Department of Energy Organization Act, 42 U.S.C. § 7112(17).

It used a much broader phrase here. And the authorities relied

on by the court below, taken together, are a powerful argument

that in this Court there is a marked reluctance to allow

ambiguous legislative history to override plain meaning under the

guise of congressional intent.’

9. In Chemical Mfrs. Ass'nv. Natural Resources Defense Council,

470 U.S.116, ,105S.Ct. 1102, 1108 (1985) the word “modify” in the

Clean Water Act was thought to be ambiguous, but the Court found that

neither the /anguage nor the legislative history demonstrated a clear

intent to forbid the EPA’s variance mechanism. The legislative history

was not found at odds with even an ambiguous statute, and a sensible

reliance on the EPA’s administrative expertise was allowed.

In Chapman v. Houston Welfare Rights Org. 441 U.S. 600, 608

(1979), the issue was whether the jurisdiction granted Federal district

courts over certain civil rights encompassed a claim that a state welfare

regulation was invalid. In determining this narrow jurisdictional

question there was no plain meaning interpretation involved. But

Justice Stevens went out of his way to point out that even if Congress

never considered the question of federal jurisdiction of claims

arising under the broad scope of federal substantive authority

that en...ged many years later, [that did] not mean that

jurisdiction cannot be found to encompass claims nonexistent in

1871 or 1874.

(footnote continued )

13

There is no exceptional Congressional purpose expressed in the

NRA’s history here and the Second Circuit has not outlined any

valid reason for failing to read the term “public bodies” literally

to include government agencies such as the MTA. Indeed, the

Second Circuit resolved the issue of the meaning to be given to the

words “neighboring states” in this proceeding by utilizing the

plain meaning rule, despite the fact that Pennsylvania and Ohio

are mentioned throughout the legislative history, whereas

(footnote continued}

441 U.S. at 612. The Court went on to point out that new claims must

clearly fit within the terms of the statute. /d.

In Griffin v. Oceanic Contractors, Inc. 458 U.S. 564, 571 (1982), the

Supreme Court held that where the Jones Act authorized seamen to

recover double wages for each day that payment was delayed without

cause, the District Court had no discretion to limit the period during

which the penalty is assessed. The Court found the statute to be

straightforward in its terms, and rejected the view that it should not be

interpreted literally to produce a monetary award in excess of an

equitable remedy.

In United States v. Locke, 471 U.S. 84 (1985), the Court held that

the Federal Land Policy and Management Act of 1976, which required

notice to be filed “prior to December 31,” was not complied with by

notice filed on December 31. The Court held that the literal meaning of

the statute governed, and refused to hold that the Congressional purpose

would also be served by a filing one day later.

In Bread Political Action Committee v. FEC, 455 U.S. 577 (1982)

the Court held that trade associations and political action committees

could not bring an expedited challenge to the validity of a section of the

Federal Election Campaign Act under § 310(a) of the Act as only

parties meeting the literal express requirement of 310(a) could invoke

its procedures absent clear evidence that Congress intended to make the

procedures available to categories of persons other than these listed in

oe No clearly expressed contrary legislative intention was

ound.

In Consumer Product Safety Commissionv. GTE Sylvania Inc., U.S.

102 (1980), Justice Rehnquist, in holding that the Consumer Product

Safety Act governs the disclosure of records by the Consumer Product

Safety Commission pursuant to an exception in the Freedom of

Information Act, stated the now oft quoted position on the plain

meaning rule:

We begin with the familiar canon of statutory construction that

the starting point for interpreting a statute is the language of the

statute itself. Absent a clearly expressed legislative intention to

the c:.rary, that language must ordinarily be regarded as

conclusive.

447 U.S. at 64. The opinion then went on to hold that the legislative

history failed to establish a reason for deviation.

14

Massachusetts, Connecticut or Rhode Island are mentioned

sparsely or not at all. 796 F.2d at 594-95 (A16-A18). In other

words, the court held that, despite the fact that in 1957 Congress

thought hydropower could only be transmitted economically to

parts of Pennsylvania and Ohio, this should not affect delivery of

power to those areas which are now within economic transmission

distance. It is unfortunate that the Second Circuit failed to see

the parallel between the application of the plain meaning rule to

“neighboring states” and its application to “public bodies.”

Perhaps we, and other intervenors, are also at fault for having

engaged in lengthy debates concerning a legislative history which

should never have been considered. And perhaps we are falling

into the same trap again by responding to the yardstick

competition argument now. However, we feel compelled to do

sO, since the court’s reliance on the “yardstick competition”

doctrine was conclusive and is so demonstrably wrong.

B. The concept of “‘yardstick competition” does not require

that the MTA be excluded from the preference customer

class.

According to the Second Circuit, “yardstick competition” was

the sine qua non in Congress’ adoption of the Niagara

Redevelopment Act; hence a preference recipient cannot be an

“end-user” of electricity because that would somehow thwart the

aim of yardstick competition. We disagree strongly that

Congress’ principal aim was to establish a “measure” to act as a

spur for investor-owned utilities. But the opinion below is based

almost exclusively on the assumed existence of a Congressional

belief that every preference customer must be a reseller of

electricity. However, even accepting arguendo that the need for

yardstick competition must somehow be harmonized with the

plain meaning of the NRA, we submit that such compatability

can and should be achieved without excluding from the class of

“public bodies” government agencies which are end users.

Further, if the Second Circuit is saying that it was Congress’

intention to create a competitive marketplace so that regulated

15

investor-owned utilities would somehow be less greedy, and that

this laudable purpose is somehow being frustrated by a literal

interpretation of the NRA, then there are additional responses to

be considered.

FIRST: The Seccnd Circuit urges that governmental bodies

cannot be preference customers because:

Indeed, if preference power were made available to all

government bodies, whether or not they distributed that

power to consumers, every town and local library would be

entitled to claim a direct share. Niagara hydropower

would be spread so thin that any competitive effect it

might have had would be lost.

796 F.2d at 592 (A13).

This argument is based on an incorrect understanding of how

the allocation process works. Just because a particular

government agency is a “public body” does not mean that it would

automatically be entitled to receive Niagara hydropower. The

Power Authority would still be required to review the request of

all potential recipients and allocate 50 percent of the power to

preference customers (in and out of state) in accordance with the

best use of the cheap power for the residents of the affected area

as a whole. There is no requirement that every government

agency, (that is, every potentially eligible preference customer )

receive the requested amount of power or indeed any power.

N.Y. Pub. Auth. L. § 1009. Thus, the feared anti-competitive

effect—dilution of the power—just disappears.

SECOND: The Second Circuit then states: “Yardstick

competition would exist if publicly-owned utilities competed

against privately-owned utilities in selling power to ultimate

consumers.” 796 F.2d at 592 (A113). But that is also just not

true even if end users were excluded as preference power

recipients.

For one reason, the State Public Service Commissions which

set the rates of inves.wr-owned utilities do not permit the use of

comparative rates, i.e., yardstick competition, in setting rates of

investor owned utilities. See, e.g, Re Consolidated Edison

16

Company of New York, 29 PUR 4th 327, 341 (N.Y.P.S.C.

1979); Re Test Periods In Rate Cases, 2 PUR 4th 611

(N.Y.P.S.C. 1977).

For another, despite the fact that the Second Circuit seems to

believe that Congress decided to have yardstick competition in

order to put economic pressure on the investor-owned utilities to

encourage them to become more efficient, 796 F.2d at 592 (A13),

such economic pressure is of no value today. The court may be

saying that when the NRA was enacted in 1957, the investor-

owned utilities had benefits which flowed from their larger size

and the then-perceived benefits of economies of scale, and that

Congress thought that by giving municipal utilities access to

somewhat cheaper power it would provide a balance enabling the

municipal utilities to compete for consumers on a more equal

footing. Jd. Maybe so, but that goal cannot be achieved today.

As we have previously noted (pp. 7-8 supra), unlike 1957 when

the rates for conventional fuel and hydropower were fairly close

and some pressure might be exerted, the disparity in rates is now

so great that it would be extraordinarily unreasonable for even

the staunchest consumer advocate to expect that, solely by reason

of the pressure from competitive municipal utilities rates, a

private investor-owned utility could lower its costs to a point

where the rates for power generated by conventional or nuclear

plants could match or even come close to the per kilowatthour

cost of hydropower. This point has been succinctly mad: by

Alfred Kahn, respected former Chairman of the New York State

Public Service Commission and Professor of Political Economy at

Cornell University (New York Times, November 25, 1983,

p. 30):

I have long supported public power as a kind of symbolic,

competitive alternative to the private companies. But

George Orwell would surely appreciate the claim that

these entities’ preferential access to half-cent hydropower,

while their "vivate counterparts are forced to generate

electricity at costs of 5 to 10 cents a kilowatt-hour,

provides a yardstick against which to judge the

performance of the latter. Some yardstick!

17

Moreover, with possible de minimis exceptions, there is no

longer competition among utilities to obtain customers from each

other. The desirability of adding new electric load, a possible

goal in 1957 when the NRA was enacted, is long gone. Indeed,

for the most part, the investor-owned utilities are themselves

preaching “conservation” and those utilities that are currently

most successful are those which do not have to build new

generating plants to meet additional load. EE. Erlich, Are

Utilities Obsolete? A Troubled System Faces Radical Change,

Business Week, May 21, 1984, 117, 118, 122.

THIRD: If a compsrative economic measure or threat is

somehow still required, then the hydropower rates charged to the

MTA by the Power Authority can be compared with the rates

charged by investor-owned utilities for comparable traction

service, in exactly the same way that a municipal utility rate can

be compared with an investor-owned utility rate. For example,

comparing Long Island Lighting Company’s traction rates to

portions of the Long Island Railroad to the hydropower rate

charged by the Power Authority would be as relevant as a

comparison of a rate charged by a municipally owned utility to a

user of traction service, and would yield the same yardstick which

is sought to be preserved by the Second Circuit, meaningless

though it might be. Moreover, if the investor-owned utilities

rates are out of line for traction service, any traction customer can

petition to be served directly by the Power Authority. No further

yardstick influence could be developed if a municipal utility acted

as a conduit and the hydropower were first sold to such municipal

electric utility, marked up in cost, and then sold to the MTA, a

method FERC seems to approve. Opinion No. 229, 30 FERC at

61,652 (A66).

FOURTH: Lastly, the Second Circuit reasons _ that,

assuming the MTA is correct that “yardstick competition” makes

little sense in today’s energy market, it is not for the courts to

second yuess Congress’ basic determination and “{a]ny

rectification lies exclusively with Congress.” 796 F.2d at 593

(A15). Going to the Congress, however, is not the sole remedy.

a

18

It has long been recognized that if the original purpose of an act

can no longer be achieved, a court has the duty to interpret the act

in a manner which will best serve its underlying purpose. See,

Llewellyn, Remarks on The Theory Of Appellate Decision and

the Rules or Canons About How Statutes are to be Construed, 3

Vand. L. Rev. 395, 400 (1950). It is for this reason that a court

should

ask itself not only what the legislation means abstractly, or

even on the basis of legislative history, but also what it

ought to mean in terms of the needs and goals of our

present day society. This approach is required by the

insuperable difficulties of readjusting old legislation by the

legislative process and by the fact that it is obviously

impossible to secure an omniscient legislature. [emphasis

added }

Phelps, Factors Influencing Judges in Interpreting Statutes, 3

Vand. L. Rev. 456, 469 (1950); see also, Eck v. United Arab

Airlines, Inc., 360 F.2d 804, 813 (2d Cir. 1966), where the court,

in interpreting a Warsaw Convention provision regarding venue,

noted that “[c]ertainly the framers were not so remarkably

prescient that they foresaw future interline arrangements like

those implemented by the International Air Transport

Association”; and Burnet v. Guggenheim, 288 U.S. 280, 285

(1933) where Justice Cardozo suggested that in making

legislative interpretations courts and agencies must analyze

“[w]hich choice is it the more likely Congress would have

made?”

If the question is “what choice would Congress have made if

yardstick competition had not been a viable concept at the time of

enactment,” then we should consider the basic philosophy

underlying public power legislation. When enacted, the NRA’s

marketing policy was, as we have said, a compromise between the

public power advocates who wished the power to be marketed

under traditional federal preference rules, and private power

advocates who wished it to benefit the investor-owned utilities.

See 103 Cong. Rec. 14439 (August 12, 1957) (Remarks of

19

Senator Ives): 103 Cone Rec. 14451 (August 12, 1957)

(Remarks of Senator Kerr). If the universe were divided

between private investor-owned utilities on one side and “public

bodies” on the other, it seems clear that the MTA and other

agencies similarly situated would end up on the public side.

There is no philosophical reason to believe that the federal

preference should exclude a mass transportation government

agency and extend only to municipal utilities which resell power

to residential, commercial, and industrial retail customers.

20

IV.

FERC [S REQUIRED TO CONSIDER FEDERAL POLICIES IN

FAVOR OF MASS TRANSPORTATION AND ENERGY

CONSERVATION IN REVIEWING THE POWER AUTHORITY’S

ALLOCATIONS UNDER THE NRA.

The only environmental testimony in the record is that the

Power Authority granted the MTA Niagara preference power to

keep the total energy costs to the MTA as low as possible and

thereby to have a beneficial effect on public transportation and

energy consumption, and to reduce pollution. R. 535-36. The

minutes of the Power Authority’s meeting approving the alloca-

tion of the hydropower to tlhe MTA provided that one of the

specific purposes is “to encourage mass transit use as a means of

reducing dependence on imported oil in the metropolitan New

York area.” R. 437. Contrariwise, an increase in the MTA’s

overall power costs for whatever reason, including a diminution of

the amount of available hydropower, would have a substantial

negative effect on the MTA’s ability to maintain the same level of

service without increasing fares.’* To the extent that current

mass transportation users would then turn to driving their own

cars both pollution and energy consumption would be increased.

[t has been held that the Federal Power Act, which created the

Federal Power Commission (now FERC) “is not immune from

the effects of other subsequent acts of Congress of general appli-

cation.” Appalachian Power Co. v. United States, 607 F.2d 935,

941 (Ct. Cl. 1979), cert. denied, 446 U.S. 935 (1980).

The National Environmental Policy Act of 1969, 42 U.S.C.

§ 4321 et seg. (“NEPA”) requires that FERC

to the fullest extent possible. ... [ensure that] the policies,

regulations and public laws of the United States shall be

interpreted and administered in accordance with the poli-

cies set forth in [NEPA].

10. At the present time, the Power Authority has assigned the MTA

175,000 mwh of interruptible power from the non-preference half of the

available hydropower, but the MTA would petition the Power Authority

for additional hydropower if it were eligible to be considered a prefer-

ence customer.

42 U.S.C. § 4332(2).

In enacting the Urban Mass Transportation Act of 1970, 49

U.S.C. § 1601 et seq. Congress specifically provided:

the termination of [mass transportation] service or the

continued increase in its cost to the user is undesirable,

and may have a particularly serious adverse effect upon

the welfare of substantial number of lower income per-

sons....

49 U.S.C. § 1601(b) (5).

Similarly, in the Public Utilities Regulatory Policies Act of

1978 (“PURPA”), 16 U.S.C. § 2601 et seg., Congress expressed

its concern that the United States consumes over twice as much

energy per capita as do European countries, mostlv because of the

use of cars and trucks.’ Accordingly, one important element of

the national program for energy conservation has been Federal

assistance for mass transit.”

The Second Circuit responded to the MTA’s arguments that

FERC ought to consider environmental and mass transportation

issues when considering its interpretations of the NRA by saying

“Congress’ intent controls.” 796 F.2d at 594 n.8 (Al6). But

here where the Congressional intent is inconclusive and there are

significant anti-pollution and pro-mass transit policies which also

reflect Congressional intent, the NRA should be read in a way

which is consistent with all three policies.

FERC argued that there was no environmental consideration

involved, citing City of Santa Clarav. Andrus, 572 F.2d 660 (9th

Cir.), cert. denied, 439 U.S. 859 (1978), and the Second Circuit

adopted FERC’s wholly illogical position, as follows:

Moreover, even if MTA’s subways were permitted to buy

the cheaper hydropower directly (rather than from a dis-

tributor of preference power), other customers would then

be forced to use the more expensive fuel claimed to pollute

the environment.

11. S. Rep. No. 141, 95th Cong. 2d Sess. 7 (1977) reprinted in 1978

U.S. Code and Cong. Ad. News 7659, 7676.

12. S. Rep. No. 141, 95th Cong. 2d Sess. 9-10, reprinted in 1978

U.S. Code & Cong. Ad. News 7659, 7678-79.

22

796 F.2d at 593-94 n.8 (A16).

But the situation in the instant case is quite different from the

position of the City of Santa Clara. The Ninth Circuit rejected

Santa Clara’s claim that it should receive low cost power for

environmental reasons on the grounds that it did not matter

whether Santa Clara or some other preference entity received the

power since the power was finite and ultimately additional gener-

ating plants would have to be constructed with similar adverse

environmental consequences. The court there said:

{W]e think it highly improbable that one allocation

scheme will have a more deleterious impact than any other

when the total geographic area served by the CVP is con-

sidered. As the court stated (citing authorities) an

agency must consider “in deciding whether a major fed-

eral action will significantly affect the quality of human

environment . . . the absolute quantitative adverse environ-

mental effects of the action itself.” No such absolute

effects are threatened by the Secretary’s decision to allo-

cate CVP power in one way rather than another.

Santa Clara, 572 F.2d at 680 (citations omitted). In the instant

case, however, the absolute quantitative adverse impact is quite

different depending on whether the MTA or some other entity

such as a municipal utility receives the hydropower. The effect

on the environment is not the construction of additional generat-

ing facilities—because the fossil fuel generated power is available

in this geographic area if hydropower is not. Rather, depriving

the MTA of the cheap power raises the MTA’s expense, dimin-

ishes the number of passengers it carries, and immediately results

in increased automobile use. Hence, there is an immediate cause

and effect impact on the environment in terms of increased energy

consumption and pollution which would not result if the same

amount of hydropower were withdrawn from other consumers.

Moreover, even the Ninth Circuit has modified Santa Clara on

similar grounds. In Forelaws on Board v. Johnson, 743 F.2d 677

(9th Cir. 1984), cert. denied, US. ,106S. Ct. 3293 (1986),

there was a challenge to the Bonneville Power Administration’s

(“BPA”) offer of long term contracts without compliance or

23

consideration of NEPA. BPA also relied on the Santa Clara

decision and argued that, as a matter of law, power allocations do

not affect the environment. 743 F.2d at 681-82. The Ninth

Circuit, however, refused to accept that argument and distin-

guished Santa Clara on the grounds that (i) the long term con-

tract allocations would ultimately “help determine the magnitude

of BPA power obligations in the future and thus will have an

impact upon long-range region energy plans”; and (11) the BPA’s

action “significantly affectfed] the environment because [it]

involve{d] important policy choices affecting energy conserva-

tion.” 743 F.2d at 682.

FERC, and in turn the courts, have an obligation to harmonize

all the competing environmental concerns and public policy con-

siderations in favor of mass transportation. The avoidance of a

strained construction of “public bodies” pursuant to the NRA

would go a long way towards avoiding conflicting federal

principles.

24

CONCLUSION

The Second Circuit’s interpretation of the term “public body’

in the NRA affects the allocation of vast amounts of a very

valuable resource, 's a case of first impression, affects governmen

agencies under other federal preference power acts, violates the

plain meaning canon of statutory construction, completely misin.

terprets the legislative history, and fails to consider the impact o}

the statutory construction on mass transportation and the envi.

ronment. For these reasons, the MTA respectfully requests tha’

this Court grant the petition for a writ of certiorari.

Dated: November 3, 1986

Respectfully submitted,

RENEE SCHWARTZ

Counsel of Record

EZIO SCALDAFERRI

BOTEIN Hays & SKLAR

200 Park Avenue

New York, New York 10166

(212) 867-5500