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NEW ORLEANS PUBLIC SERVICE v. COUNCIL CITY NEW ORLEANS ET AL.

decided: June 19, 1989.

NEW ORLEANS PUBLIC SERVICE, INC
v.
COUNCIL OF THE CITY OF NEW ORLEANS ET AL.



CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Scalia, J., delivered the opinion of the Court, in which Brennan, White, Marshall, Stevens, O'Connor, and Kennedy, JJ., joined, and in Parts I and II-B of which Rehnquist, C. J., joined. Brennan, J., filed a concurring opinion, in which Marshall, J., joined, post, p. 373. Rehnquist, C. J., filed an opinion concurring in part and concurring in the judgment, post, p. 373. Blackmun, J., filed an opinion concurring in the judgment, post, p. 374.

Author: Scalia

[ 491 U.S. Page 352]

 JUSTICE SCALIA delivered the opinion of the Court.

In Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986), we held that for purposes of setting intrastate retail rates a State may not differ from the Federal Energy Regulatory Commission's allocations of wholesale power by imposing its own judgment of what would be just and reasonable. Last Term, in Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354 (1988), we held that FERC's allocation of the $3 billion-plus cost of the Grand Gulf 1 nuclear reactor among the operating companies that jointly agreed to finance its construction and operation pre-empted Mississippi's inquiry into the prudence of a utility retailer's decision to participate in the joint venture. Today we confront once again a legal issue arising from the question of who must pay for Grand Gulf 1. Here the state ratemaking authority deferred to FERC's implicit finding that New Orleans Public Service, Inc.'s decision to participate in the Grand Gulf venture was reasonable, but determined that the costs incurred thereby should not be completely reimbursed because, it asserted, the utility's management was negligent in failing later to diversify its supply portfolio by selling a

[ 491 U.S. Page 353]

     portion of its Grand Gulf power. Whether the State's decision to provide less than full reimbursement for the FERC-allocated wholesale costs conflicts with our holdings in Nantahala and Mississippi Power & Light is not at issue in this case. Rather, we address the threshold question whether the District Court, which the utility petitioned for declaratory and injunctive relief from the state ratemaking authority's order, properly abstained from exercising jurisdiction in deference to the state review process.

I

Because the abstention questions at stake here have little to do with the intricacies of the factual and procedural history underlying the controversy, we may sketch the background of this case in brief.*fn1 Petitioner New Orleans Public Service, Inc. , a producer, wholesaler, and retailer of electricity that provides retail electrical service to the city of New Orleans, is one of four wholly owned operating subsidiaries of Middle South Utilities, Inc. Middle South operates an integrated "power pool" in which each of the four operating companies transmits produced electricity to a central dispatch center and draws back from the dispatch center the power it needs to meet customer demand. In 1974, NOPSI and its fellow operating companies entered a contract with Middle South Energy, Inc. (MSE), another wholly owned Middle South subsidiary, whereby the operating companies agreed to finance MSE's construction and operation of two 1250 megawatt nuclear reactors, Grand Gulf 1 and 2, in return for the right to the reactors' electrical output. The estimated cost of completing the two reactors was $1.2 billion.

During the late 1970's, consumer demand turned out to be far lower than expected, and regulatory delays, enhanced construction requirements, and high inflation led to spiraling

[ 491 U.S. Page 354]

     costs. As a result, construction of Grand Gulf 2 was suspended, and the cost of completing Grand Gulf 1 alone eventually exceeded $3 billion. Not surprisingly, the cost of the electricity produced by the reactor greatly exceeded that of power generated by Middle South's conventional facilities.

Acting pursuant to its exclusive regulatory authority over interstate wholesale power transactions, 49 Stat. 847, as amended, 16 U. S. C. § 824 et seq., FERC conducted extensive proceedings to determine "just and reasonable" rates for Grand Gulf 1 power and to prescribe a "just, reasonable, and nondiscriminatory" allocation of Grand Gulf's costs and output. In June 1985, the Commission issued a final order, Middle South Energy, Inc., 31 FERC para. 61,305, rehearing denied, 32 FERC para. 61,425 (1985), aff'd sub nom. Mississippi Industries v. FERC, 257 U. S. App. D.C. 244, 808 F.2d 1525, rehearing granted and vacated in part, 262 U. S. App. D.C. 42, 822 F.2d 1104, cert. denied, 484 U.S. 985 (1987), in which it concluded that, because the planned nuclear reactors had been designed "to meet overall System needs and objectives," 31 FERC, p. 61,655, the Middle South subsidiaries should pay for the Grand Gulf project "roughly in proportion to each company's share of System demand," id., at 61,655-61,656. The Commission allocated 17 percent of Grand Gulf costs (approximately $13 million per month) to NOPSI, rejecting Middle South's proposal of 29.8 percent as well as the 9 percent figure favored by the respondent here, the New Orleans City Council.

"Although it did not expressly discuss the 'prudence' of constructing Grand Gulf and bringing it on line, FERC implicitly accepted the uncontroverted testimony of [Middle South] executives who explained why they believed the decisions to construct and to complete Grand Gulf 1 were sound, and approved the finding that 'continuing construction of Grand Gulf Unit No. 1 was prudent because Middle South's executives believed Grand

[ 491 U.S. Page 355]

     Gulf would enable the Middle South system to diversify its base load fuel mix and, it was projected, at the same time, produce power for a total cost (capacity and energy) which would be less than existing alternatives on the system.'" Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S., at 363, quoting Middle South Energy, Inc., 26 FERC para. 63,044, pp. 65,112-65,113 (1984).

When NOPSI sought from the New Orleans City Council (Council) -- the local ratemaking body with final authority over the utility's retail rates, see 16 U. S. C. § 824(b); La. Rev. Stat. Ann. §§ 33:4405, 33:4495 (West 1988); Home Rule Charter of the City of New Orleans § 4-1604 (1986), as amended by Ordinance No. 8264 M. C. S., as amended by Ordinance No. 10340 M. C. S. -- a rate increase to cover the increase in wholesale rates resulting from FERC's allocation of Grand Gulf costs, the Council denied an immediate rate adjustment, explaining that a public hearing was necessary to explore "'the legality and prudency [sic] of the [contracts relating to Grand Gulf 1, and] the prudency [sic] and reasonableness of the said expenses.'" Brief for United States et al. as Amici Curiae 5, quoting Council Resolution R-85-423. NOPSI responded by filing an action for injunctive and declaratory relief in the United States District Court for the Eastern District of Louisiana, asserting that federal law required the Council to allow it to recover, through an increase in retail rates, its FERC-allocated share of the Grand Gulf expenses.

The District Court granted the Council's motion to dismiss, holding that pursuant to the Johnson Act, 28 U. S. C. § 1342, it had no jurisdiction to entertain the action, and that even if it had jurisdiction it would be compelled by Burford v. Sun Oil Co., 319 U.S. 315 (1943), to abstain. On appeal, the Fifth Circuit initially reversed on both grounds, but later, on its own motion, vacated its earlier opinion in part and held that abstention was proper both under Burford and under

[ 491 U.S. Page 356]

     March 1979, "by selling all or part of its share off-system," id., at 24-25.

Upon receipt of the Council's decree, NOPSI turned once again to the District Court for the Eastern District of Louisiana, seeking declaratory and injunctive relief on the ground that, in light of this Court's recent decision in Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986), the Council's rate order was pre-empted by federal law. Although the District Court expressed considerable doubt as to the merits of the Council's position on the pre-emption question,*fn2 it concluded that, notwithstanding Nantahala, it should still abstain from deciding the suit.

Anticipating that the District Court might again abstain, NOPSI had filed a petition for review of the Council's order in the Civil District Court for the Parish of Orleans, Louisiana. As filed, NOPSI's petition raised only state-law claims and federal due process and takings claims, but NOPSI informed

[ 491 U.S. Page 358]

     the state court by letter that it would amend to raise its federal pre-emption claim if the federal court once again dismissed its complaint. When that happened, it did so.*fn3

In the parallel federal proceedings, the Fifth Circuit affirmed the District Court's dismissal, agreeing that the case was effectively controlled by NOPSI I, i. e., that Burford and Younger abstention applied. 850 F.2d 1069 (1988). We granted certiorari. 488 U.S. 1003 (1989).

II

Before proceeding to the merits of the abstention issues, it bears emphasis that the Council does not dispute the District Court's jurisdiction to decide NOPSI's pre-emption claim. Our cases have long supported the proposition that federal courts lack the authority to abstain from the exercise of jurisdiction that has been conferred. For example: "We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given. The one or the other would be treason to the Constitution." Cohens v. Virginia, 6 Wheat. 264, 404 (1821). "'[T]he courts of the United States are bound to proceed to judgment and to afford redress to suitors before them in every case to which their jurisdiction extends. They cannot abdicate their authority or duty in any case in favor of another jurisdiction.'" Chicot County v. Sherwood, 148 U.S. 529, 534 (1893) (citations omitted). "When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to

[ 491 U.S. Page 359]

     take such jurisdiction. . . . The right of a party plaintiff to choose a Federal court where there is a choice cannot be properly denied." Willcox v. Consolidated Gas Co., 212 U.S. 19, 40 (1909) (citations omitted). Underlying these assertions is the undisputed constitutional principle that Congress, and not the Judiciary, defines the scope of federal jurisdiction ...


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