Federal Agency to Decide State Utility Rate Disputes

The federal government, and not state regulatory agencies, is empowered to decide disputes over electricity rates involving more than one state, the Supreme Court ruled Tuesday.

In a 7-0 decision, the justices agreed with the Reagan Administration that the Federal Energy Regulatory Commission has exclusive jurisdiction in a case involving millions of dollars in electricity rates for North Carolina and Tennessee customers.

Justice Sandra Day O’Connor, writing for the court, said the North Carolina Utilities Commission improperly interfered with federal regulations by ordering lower rates for in-state customers than those recommended by the FERC.

State Court Ruling

The Administration was joined by Alcoa Aluminum in challenging a ruling by the North Carolina Supreme Court.

The state court ruled in 1985 that North Carolina regulators had the power to order lower rates than those recommended by the federal government. It ordered Nantahala Power & Light Co., Alcoa’s North Carolina subsidiary, to refund about $45 million as of Oct. 1, 1985, to electricity users in that state.

Chief Justice Warren E. Burger had suspended the order pending Tuesday’s ruling.

Alcoa also has a utility company subsidiary in Tennessee, Tapoco Inc. Both subsidiaries are part of the Tennessee Valley Authority system.

The companies pay the TVA two separate rates for hydroelectric power. Supplemental power received from the TVA costs about three times more than the utilities’ regular allotment.

‘Neutral Umpire’

The North Carolina Utilities Commission ordered Nantahala Power & Light to provide additional cheap electricity for its customers, and the order was upheld by that state’s supreme court.

The Administration and Alcoa said the ruling gave North Carolina citizens a bigger share of the low-cost power, thus depriving Tennessee customers of their fair share. The Administration and Alcoa argued that the FERC was the proper “neutral umpire” to decide who gets low-cost and high-cost power.

In agreeing with that position Tuesday, O’Connor said: “The fact that the North Carolina Utilities Commission is setting retail rates does not give it license to ignore the limitations that FERC has placed upon Nantahala’s available sources of low-cost power.”