New Orleans Public Service, Inc. v. Council Of City Of New Orleans

491 U.S. 350 (1989)

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Nature of the Case

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Facts

This was on ongoing administrative nightmare and disaster related to the payment of the building of a nuclear power generating plant called Grand Gulf I. The state ratemaking authority deferred to FERC’s finding that New Orleans Public Service, Inc.’s (P) decision to participate in the venture of building the plant was reasonable. The sordid factual details of the original transaction entered into by P are listed in Re 5th edition pages 210-211. Eventually, the FERC got involved because it had exclusive regulatory authority over interstate wholesale power transaction. FERC issued its final order, which allocated 17% of the final costs of Grand Gulf I to P. The Council of the City of New Orleans (D) wanted that number to be 9%. P then sought a rate increase from D to cover the increase in wholesale rates resulting from the FERC’s ruling. After a prudence review, D denied the rate increase because it found that P’s management was negligent in failing to diversify its supply portfolio by selling a portion of its Grand Gulf power. P then petitioned the District Court for declaratory and injunctive relief from P’s determination that $135 million in costs should be disallowed. The District Court then abstained from exercising jurisdiction in deference to the state review process. The Fifth Circuit affirmed the dismissal by the District Court agreeing that the Burford and Younger abstention doctrines applied. The Supreme Court granted certiorari.