Energy regulator powers upheld
By - The Washington Times - Tuesday, March 5, 2002
The Supreme Court yesterday upheld federal regulators' power to decide when power traders such as Enron must get access to grids to deliver electricity sold in competition with power-line owners.
"Whether or not the 1935 Congress foresaw the dramatic changes in the power industry that have occurred in recent decades, we are persuaded, as was the Court of Appeals, that the [Federal Energy Regulatory Commission] properly construed its statutory authority," the court said.
In another important business case, justices agreed to decide next term if the government or the bankrupt NextWave Telecom Inc. owns rights to cell-phone frequencies auctioned to NextWave for $4.7 billion in 1996.
The case involves efforts to reclaim 63 wireless licenses from NextWave on which the Federal Communications Commission since has taken new bids totaling $15.9 billion from 21 companies, including Verizon, AT&T; Wireless and Cingular Wireless. The license areas include New York, Los Angeles, Boston and Washington.
Solicitor General Theodore Olson said in seeking Supreme Court review that other wireless-communications cases will be affected, involving holders of 337 licenses that declared bankruptcy while owing $6.9 billion.
In the electricity case, the court deferred to the discretion of the Federal Energy Regulatory Commission (FERC) on how consumers may choose electricity suppliers. The court rejected two separate appeals.
In one, FERC was challenged by New York, Virginia, Florida, Idaho, New Jersey, North Carolina, Washington, Vermont and Wyoming. The other pitted FERC against Enron Power Marketing Inc., one of the nation's key traders of electricity before parent Enron sought bankruptcy-court protection in December.
Enron lawyers said at an Oct. 3 hearing, before the company's collapse became public, that the access federal regulators allowed power-marketing companies in 1996 was not comparable to that held by traditional, state-regulated utilities. It said state-regulated utilities would "hog" the transmission lines with power they generate and also sell retail.
The opinion, written by Justice John Paul Stevens, was unanimous on the main issue of permitting separation or "unbundling" of costs to transmit power from the costs of generating it.
Justices split 6-3 on the separate issue of calculating costs for bundled retail sales of electricity. The dissent was written by Justice Clarence Thomas, joined by Justices Antonin Scalia and Anthony M. Kennedy.
"I believe that the court fails to properly assess both the commission's jurisdictional analysis and its justification for excluding bundled retail transmission from the Open Access Transmission Tariff. FERC's explanations are inadequate and do not warrant our deference," Justice Thomas wrote.
In affirming decisions by the U.S. Circuit Court of Appeals for the District of Columbia, the justices also rejected the plea by nine states that FERC overstepped its authority by ordering utilities to let competitors use their power lines.
The NextWave case, to be heard in the fall, resumes a battle over communications frequencies reportedly worth $16 billion. In that case, the D.C. Circuit ruled that regulators must take their place in line to be paid and cannot simply revoke the licenses for resale.
NextWave reportedly negotiated to sell its interest last year to Verizon Wireless for $5 billion, but that settlement position was "grossly impaired" by the court's decision to hear the case, Washington telecommunications lawyer Christopher J. Wright, a former general counsel of the Federal Communications Commission, told Bloomberg News.