Freehold Cogeneration Associates, L.P. v. Board of Regulatory Commissioners of New Jersey ( 1995 )


Menu:
  •                                                                                                                            Opinions of the United
    1995 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    1-9-1995
    Freehold v Bd Regulatory Comm
    Precedential or Non-Precedential:
    Docket 94-5168
    Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
    Recommended Citation
    "Freehold v Bd Regulatory Comm" (1995). 1995 Decisions. Paper 7.
    http://digitalcommons.law.villanova.edu/thirdcircuit_1995/7
    This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
    University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova
    University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    ____________
    NO. 94-5168
    ____________
    FREEHOLD COGENERATION ASSOCIATES, L.P.,
    Appellant
    v.
    BOARD OF REGULATORY COMMISSIONERS OF THE STATE OF NEW JERSEY;
    JERSEY CENTRAL POWER AND LIGHT COMPANY
    ____________
    Appeal from the United States District Court
    for the District of New Jersey
    D.C. No. 94-cv-00375
    ____________
    Argued October 28, 1994
    Before:    STAPLETON, HUTCHINSON, and ROSENN, Circuit Judges
    Opinion Filed January 9, 1995
    ____________
    ROBERT F. SHAPIRO, ESQ. (Argued)
    LYNN N. HARGIS, ESQ.
    DAVID C. DICKEY, ESQ.
    Chadbourne & Parke
    1101 Vermont Avenue, N.W.
    Washington, D.C. 20005
    CHARLES J. WALSH, ESQ.
    Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A.
    One Riverfront Plaza
    Newark, NJ 07102-5400
    Attorneys for Appellant
    STEVEN E. GREENBAUM, ESQ. (Argued)
    JOHN P. BIEDERMANN, ESQ.
    Berlack, Israels & Liberman
    120 West 45th Street
    New York, New York 10036
    Attorneys for Jersey Central Power & Light Co.
    THEODORE C. GRANGER, PUBLIC ADVOCATE (Argued)
    Department of the Public Advocate of New Jersey
    31 Clinton Street
    Newark, NJ 07109
    DEBORAH T. PORITZ, ATTORNEY GENERAL
    ANDREA M. SILKOWITZ, ASSISTANT ATTORNEY GENERAL
    HELENE S. WALLENSTEIN, DEPUTY ATTORNEY GENERAL (Argued)
    R.J. Hughes Justice Complex
    Trenton, NJ 08625
    Attorneys for Board of Regulatory Commissioners
    SAMUEL SOOPER, ESQ.
    Federal Energy Regulatory Commission
    Room 3000
    825 North Capitol Street, N.E.
    Washington, DC 20426
    Attorney for Federal Energy Regulatory Commission
    ____________
    OPINION OF THE COURT
    ROSENN, Circuit Judge.
    This case has its genesis in Congress' creative effort
    to promote the use of alternative energy sources by state and
    federal utility authorities.    To make the nation more energy
    independent, Congress sought to encourage small power production
    facilities that use renewable fuels, such as solar, wind, biomass
    and water, and cogeneration facilities that use traditional fuels
    more efficiently by sequentially producing both electricity and
    steam or other useful thermal energy.       Freehold Cogeneration
    Associates, L.P. ("Freehold") is the type of facility that
    Congress wished to promote.
    On January 19, 1994, Freehold sought a declaratory
    judgment in the United States District Court for the District of
    New Jersey that the Board of Regulatory Commissioners of the
    State of New Jersey (the "BRC") was preempted by the Federal
    Public Utilities Regulatory Policies Act ("PURPA") from modifying
    the terms of a previously approved power purchase agreement
    ("PPA") between Freehold and Jersey Central Power and Light
    Company ("JCP&L"), a New Jersey public utility.   Freehold also
    sought an order enjoining the ongoing BRC proceedings.   Freehold
    moved for summary judgment, and the BRC and JCP&L moved to
    dismiss on various grounds.   The district court denied Freehold's
    motion for summary judgment and granted the defendants' motion to
    dismiss, holding that it lacked subject matter jurisdiction to
    hear the matter.   Freehold filed a timely appeal to this court.1
    We reverse.
    I.
    Under the Federal Power Act, 16 U.S.C. § 791a et seq.,
    the Federal Energy Regulatory Commission (the "FERC") had the
    exclusive authority to regulate "public utilities" that sell
    electric power at wholesale in interstate commerce.   Id. at §
    824(e).   In 1978, Congress modified the Federal Power Act with
    the enactment of the Public Utility Regulatory Policies Act, 16
    U.S.C. § 823a et seq., as part of a comprehensive legislative
    effort to combat a nationwide energy crisis.   PURPA is intended
    to control power generation costs and ensure long-term economic
    growth by reducing the nation's reliance on oil and gas and
    increasing the use of more abundant domestically produced fuels.
    In enacting PURPA, Congress directed the FERC to promulgate rules
    1
    . This court has jurisdiction pursuant to 
    28 U.S.C. § 1291
     over
    this appeal from the district court's final judgment. The
    jurisdiction of the district court is discussed in section II,
    infra.
    and regulations requiring public utilities to buy electric energy
    from, and to sell electric energy to, qualifying cogeneration
    facilities ("QFs").    16 U.S.C. § 824a-3.2   Congress directed
    state regulatory authorities, such as the BRC, to implement the
    rules and regulations promulgated by the FERC.     Id.
    In early 1988, pursuant to the then-effective
    cogeneration policies and procedures of the New Jersey Board of
    Public Utilities (the "BPU"), the predecessor agency to the BRC,
    Freehold commenced negotiations with JCP&L concerning a potential
    power purchase agreement.    During the pendency of these
    negotiations, the BPU adopted certain competitive bidding
    guidelines which replaced negotiation as the method by which
    utilities were to procure long-term power purchase agreements
    with cogeneration facilities such as Freehold.
    After these competitive bidding guidelines took effect,
    Freehold petitioned the BPU to "grandfather" or exempt it from
    the newly adopted guidelines.    JCP&L opposed the petition.      By
    Order dated July 31, 1989, the BPU agreed to grandfather
    Freehold.    Freehold's negotiations with JCP&L were thereby
    governed by the pre-existing policies and procedures, which
    allowed Freehold and JCP&L to negotiate the terms of a power
    2
    . A cogeneration facility is one which produces electrical
    energy, and steam or forms of useful energy which are used for
    industrial commercial, heating, or cooling purposes. 
    16 U.S.C. § 796
    (18)(A). In order to qualify as a QF, a facility must meet
    the requirements set forth by the FERC, 
    18 C.F.R. § 292.101
    , et
    seq., and the facility must be owned by an entity not primarily
    engaged in the generation or sale of electrical power, 
    16 U.S.C. § 796
    (18)(B). Freehold is a QF.
    purchase agreement.   On March 26, 1992, after three years of
    extensive negotiations, Freehold and JCP&L entered into a power
    purchase agreement (the "PPA"), to commence on the date of BRC
    approval and to continue thereafter for a period of twenty years.
    The BRC approved the PPA by order dated July 8, 1992.3
    Under the terms of the PPA, JCP&L is to pay Freehold
    100% of JCP&L's 1989 avoided cost for the purchase of electrical
    power.   Avoided cost is the cost which JCP&L avoids by purchasing
    energy from Freehold rather than generating the energy itself or
    purchasing it from some other source. 16 U.S.C. § 824a-3(d).
    On April 12, 1993, in response to decreases in the cost
    of obtaining electrical power, the BRC directed public utilities
    to notify it of any power supply contracts which were no longer
    economically beneficial.   The BRC wished to encourage buy outs
    and other remedial measures to reduce power costs.
    After reviewing its contract with Freehold, JCP&L
    concluded that the PPA should be modified.   On April 16, 1993,
    JCP&L contacted Freehold and proposed a buy out of the PPA.
    Freehold rejected the proposal.   On May 12, 1993, JCP&L notified
    the BRC that the PPA was no longer an economically beneficial
    3
    . JCP&L challenges the BRC's 1988 order grandfathering Freehold
    from the 1988 rate guidelines, and the 1992 BRC order approving
    the rates. However, both of these orders are now final and
    nonappealable.
    Additionally, we will not address the Division of the Ratepayer
    Advocate's ("DRA") argument that the BRC's approval of a 1989
    avoided cost in 1992 was ultra vires because the DRA is making
    this argument for the first time on appeal. See Patterson v.
    Cuyler, 
    729 F.2d 925
    , 929 (3d Cir. 1984).
    contract because the contractual avoided cost was significantly
    higher than the current avoided cost due to the decrease in the
    cost of obtaining electrical power.    On September 22, 1993, JCP&L
    again proposed a buy out to Freehold, which Freehold again
    rejected.    The BRC then unsuccessfully attempted to formulate a
    joint agreement between the parties modifying the PPA.    By order
    dated January 5, 1994, the BRC directed the parties to
    renegotiate the purchase rate term of the PPA or, in the
    alternative, to negotiate an appropriate buy out of the PPA.    The
    order further provided that if the parties did not reach an
    agreement within 30 days of the order, the BRC would commence an
    evidentiary hearing to consider various courses of action.
    Freehold filed this action on January 14, 1994, seeking
    a judgment declaring that the BRC's order is preempted by PURPA
    and a court order enjoining the enforcement of that order.     The
    district court granted the defendants' motion to dismiss, holding
    that section 210(g) of PURPA, 18 U.S.C. § 824a-3(g), and the
    Johnson Act, 
    28 U.S.C. § 1342
    , divested it of subject matter
    jurisdiction.    The court further found that the PPA, which refers
    disputes under the agreement to "the BRC or a court of competent
    jurisdiction in the State of New Jersey," supported its finding
    that there was no federal jurisdiction.    The district court did
    not address the preemption argument in its opinion.
    II.
    In enacting PURPA, Congress sought to overcome
    traditional electric utilities' reluctance to purchase power from
    nontraditional electric generation facilities and to reduce the
    financial burden of state and federal regulation on
    nontraditional facilities. FERC v. Mississippi, 
    456 U.S. 742
    ,
    750-51 (1982).    To overcome the first impediment to developing
    nontraditional sources of power, section 210(a) of PURPA, 16
    U.S.C. § 824a-3, requires the FERC to prescribe "such rules as it
    determines necessary to encourage cogeneration and small power
    production," including rules requiring traditional utilities to
    purchase electricity from QFs.     FERC v. Mississippi, 
    456 U.S. at 751
    .    State regulatory authorities will then implement these
    rules.    16 U.S.C. § 824a-3(f).
    To surmount the second obstacle, section 210(e) of
    PURPA requires the FERC to implement regulations exempting QFs
    from federal regulation to which traditional electric utilities
    are subject, including most provisions of the Federal Power Act
    and "[s]tate laws and regulations respecting the rates, or
    respecting the financial or organizational regulation, of
    electric utilities."   16 U.S.C. § 824a-3(a)(1).    In accordance
    with these provisions of PURPA, the FERC promulgated regulations
    governing transactions between utilities and QFs, including a
    specific requirement that a utility must purchase electricity
    made available by QFs at a rate up to the utility's full avoided
    cost.    
    18 C.F.R. §§ 292.303-304
     (1993).
    Acting pursuant to section 210(e)(1) of PURPA, the FERC
    also promulgated regulations exempting QFs from various federal
    and state regulatory requirements.     The regulations state in
    pertinent part:
    (1) Any [QF] shall be exempted . . . from
    State law or regulation respecting:
    (i) The rates of electric
    utilities; and
    (ii) The financial and
    organizational regulation of
    electric utilities.
    
    18 C.F.R. § 292.602
    (c).
    A.
    Freehold asserts that the district court had federal
    question jurisdiction over this case pursuant to 
    28 U.S.C. § 1331
    because Freehold claimed that the BRC proceeding violated its
    federally-established PURPA rights.   As support, Freehold relies
    on Shaw v. Delta Air Lines, Inc., 
    463 U.S. 85
     (1983), in which
    the Court stated:
    It is beyond dispute that federal courts have
    jurisdiction over suits to enjoin state
    officials from interfering with federal
    rights. . . . A plaintiff who seeks
    injunctive relief from state regulation, on
    the ground that such regulation is pre-empted
    by a federal statute which, by virtue of the
    Supremacy Clause of the Constitution, must
    prevail, thus presents a federal question
    which the federal courts have jurisdiction
    under 
    28 U.S.C. § 1331
     to resolve.
    
    Id.
     at 96 n.14 (citations omitted).   Accord Airco Industrial
    Gases, Inc. Div. of BOC Group, Inc. v. Teamsters Health & Welfare
    Pension Fund, 
    850 F.2d 1028
    , 1032-34 (3d Cir. 1988) (district
    court subject matter jurisdiction under section 1331 turns on
    whether cause of action arises under laws of United States).
    The district court did not address section 1331
    jurisdiction, but rather read section 210(g) of PURPA as carving
    out an exception to federal jurisdiction over all PURPA claims
    except those involving judicial review of a final decision by the
    FERC.   The district court reasoned that:
    [B]y enacting [section 210(g)], Congress
    specifically provided that judicial review of
    orders by the State regulatory authorities
    was to be made only by the state courts or
    FERC. The only instance where Congress
    provided for federal court jurisdiction is
    where a party seeks judicial review of a
    decision by FERC. Here, FERC has made no
    determination which this Court might review,
    nor does Freehold allege this as a basis for
    jurisdiction. Thus, under PURPA, this Court
    does not have jurisdiction over Freehold's
    challenge to the BRC's order.
    Section 210(g)'s language, however, shows that it is
    more limited in scope than the district court believed.    Section
    210(g) provides:
    (1) Judicial review may be obtained
    respecting any proceeding conducted by a
    State regulatory authority or nonregulated
    electric utility for purposes of implementing
    any requirement of a rule under subsection
    (a) . . . [under the same requirements as
    judicial review may be obtained under 
    16 U.S.C. § 2633
    ] (emphasis added).
    Thus, section 210(g)(1) applies only to review of proceedings by
    state regulators or nonregulated utilities designed to implement
    any requirement of rules promulgated by the FERC pursuant to
    section 210(a), 16 U.S.C. § 824a-3(a).   Section 210(a) requires
    utilities to purchase energy from and sell energy to qualifying
    facilities at certain prices.4
    4
    . Section 210(g)(2) is not applicable to this action.     That
    section provides:
    The parties disagree as to whether Freehold is
    challenging the BRC's implementation of the FERC's rules under
    section 210(a) or whether it is challenging the BRC's actions
    under section 210(e) and supporting regulations.    Freehold
    argues, and the FERC, as amicus, agrees, that Freehold is not
    challenging the validity of state action implementing the rules
    adopted by the FERC pursuant to section 210(a).     Rather, it
    alleges that the BRC proceeding is inconsistent with and
    preempted by section 210(e) and the FERC regulations promulgated
    thereunder, which exempt QFs from state utility regulation.      See
    16 U.S.C. § 824a-3(e)(1); 
    18 C.F.R. § 292.602
    (c).
    The defendants argue that Freehold's complaint was
    brought under section 210(a) of PURPA because the complaint
    refers to the FERC's rules implemented under subsection (a).
    Before the district court, Freehold clearly relied upon FERC's
    rules implemented under section 210(a) in arguing that the BRC's
    actions were preempted.   As noted by Freehold, however, such
    (..continued)
    Any person (including the Secretary) may
    bring an action against any electric utility,
    qualifying small power producer, or
    qualifying cogenerator to enforce any
    requirement established by a State regulatory
    authority or nonregulated electric utility
    pursuant to subsection (f). [Such action
    shall be brought under the same requirements
    as judicial review may be obtained under 
    16 U.S.C. § 2633
    ].
    This case does not involve a state regulation promulgated
    pursuant to section 210(f), which governs the sale and purchase
    of electricity between utilities and QFs, nor was it brought by a
    person against a QF to enforce such a regulation.
    references were necessary to explain what the FERC's PURPA rules
    provided in order to establish that the BRC's actions were
    outside those rules.   The pleadings reasonably can be read to
    assert a claim that the BRC proceeding is inconsistent with and
    preempted by section 210(e) of PURPA and the FERC regulations
    promulgated thereunder, which exempt QFs from state utility
    regulation.   See Bristol Energy Corp. v. New Hampshire Pub.
    Utils. Comm'n, 
    13 F.3d 471
    , 474 (1st Cir. 1994) (even though
    defendant sent out data requests pursuant to a certain statute
    which precluded federal jurisdiction, the court agreed with
    plaintiffs that the case did not "arise under" that statute, but
    rather implicated principles of preemption relating to the QF
    exemption and the Supremacy Clause, which triggered federal
    question jurisdiction).
    The BRC actually concedes that Freehold's complaint was
    not brought to obtain review of a Board proceeding to implement
    the FERC rules as required by the jurisdictional limitation in
    section 210(g) of PURPA.   Relying on Greensboro Lumber Co. v.
    Georgia Power Co., 
    643 F. Supp. 1345
     (N.D. Ga. 1986), aff'd, 
    844 F.2d 1538
     (11th Cir. 1988), however, the BRC argues that
    Freehold's complaint contends that the BRC has failed to adhere
    to its own implementation plan under the FERC regulations by
    attempting to revoke or modify its prior approval of the PPA.
    Thus, the BRC submits that "Freehold's complaint [involves] a
    claim with regard to the Board's Order implementing the FERC
    rules."
    The district court also relied on Greensboro.    In that
    case, the District Court for the Northern District of Georgia
    held that section 210(g) divested it of jurisdiction over a QF's
    claim that a nonregulated utility failed to adhere to its own
    implementation plan in its dealings with the QF.   Greensboro, 
    643 F. Supp. at 1374
    .    The court held that PURPA requires that such
    an "as applied" claim "must be bought (sic) in state court, which
    has exclusive jurisdiction 'to enforce any requirement' of a
    nonregulated utility's implementation plan."   
    Id.
     (citing 16
    U.S.C. § 824a-3(g)(2)).    Thus, PURPA divested the court of
    jurisdiction because the case involved a claim arising under
    section 210(f)(1).
    In contrast, this case does not involve a claim arising
    under section 210(f), see supra note 4, but rather a claim
    arising under section 210(e).    Freehold does not allege that an
    unregulated authority has failed to provide service to it in
    violation of the authority's implementation plan, or otherwise
    challenge the BRC's implementation of FERC rules "as applied."
    Rather, Freehold complains that the BRC has interfered with its
    federally-granted right to be exempt from certain utility-type
    state regulation.    See Independent Energy Producers Ass'n v.
    California Pub. Utils. Comm'n, No. C-91-2644 MHP, 
    1992 WL 533058
    (N.D. Cal. June 3, 1992), rev'd on other grounds, 
    36 F.3d 848
    (9th Cir. 1994).
    Because Freehold is essentially claiming that the BRC
    is subjecting it to regulations precluded by section 210(e), the
    jurisdictional limitations of sections 210(g)(1) regarding state
    proceedings implementing any requirement of a rule enacted under
    subsection (a) are not relevant to the district court's
    jurisdiction.    Thus, it was error to dismiss Freehold's complaint
    on the basis of PURPA's jurisdictional limitations.     The district
    court possessed jurisdiction to hear Freehold's preemption claim
    pursuant to 
    28 U.S.C. § 1331
    .
    B.
    The district court also found that it must dismiss
    Freehold's complaint because the Johnson Act, 
    28 U.S.C. § 1342
    ,
    eliminated jurisdiction.    In enacting the Johnson Act, Congress
    intended to seriously curtail federal jurisdiction over the
    subject of state utility rates.    See Zucker v. Bell Telephone
    Co., 
    373 F. Supp. 748
    , 750 (E.D.Pa. 1974), aff'd, 
    510 F.2d 971
    (3d Cir.), cert. denied, 
    422 U.S. 1027
     (1975).      The Johnson Act
    provides:
    The district courts shall not enjoin, suspend
    or restrain the operation of, or compliance
    with, any order affecting rates chargeable by
    a public utility and made by a State
    administrative agency or a rate-making body
    of a State political subdivision where:
    (1) Jurisdiction is based solely on
    diversity of citizenship or repugnance of the
    order to the Federal Constitution; and,
    (2) The order does not interfere with
    interstate commerce; and,
    (3) The order has been made after reasonable
    notice and hearing; and,
    (4) A plain, speedy and efficient remedy may
    be had in the courts of such State.
    All four of the Act's criteria must be met for it to apply.    See
    Zucker, 
    373 F. Supp. at 751
    .
    The district court concluded that all four elements
    were present in this case.     It held that the first requirement
    had been met because Freehold sought declaratory and injunctive
    relief on the basis that the BRC's Order was preempted by PURPA.
    The court concluded, "[i]t is apparent that Freehold alleges
    jurisdiction on the basis that the Order is repugnant to the
    Federal Constitution since Freehold claims that the Supremacy
    Clause mandates that   the Order give way to PURPA."
    The Johnson Act, however, requires that jurisdiction be
    based solely on the federal constitution.    Freehold's claim that
    the BRC's order is preempted does not rely solely on
    constitutional grounds, but also relies on PURPA, a federal
    statute.   In a similar case, the Eighth Circuit Court of Appeals
    held that the Johnson Act did not preclude federal jurisdiction
    over a claim that a public service commission's refusal of relief
    was in conflict with and preempted by the Federal Power Act.     The
    court reasoned:
    It is true, of course, that a federal statute
    overrides conflicting state law only because
    of the Supremacy Clause of the Federal
    Constitution. In a sense, therefore, a
    preemption claim always asserts repugnance of
    state law to the Federal Constitution. But
    such a claim does not usually require that
    the Constitution itself be interpreted.
    Rather, the meaning of federal statutes and
    of state law must be explored, and the extent
    of any conflict ascertained. A state law
    struck down on the basis of preemption is
    perhaps more aptly labeled "unstatutory" than
    "unconstitutional." In any case, whatever
    the theoretical arguments might be, all of
    the appellate authority in point of which we
    are aware upholds federal jurisdiction in
    utility rate cases where a substantial claim
    of federal statutory preemption is pleaded.
    Arkansas Power & Light Co. v. Missouri Pub. Serv. Comm'n, 
    829 F.2d 1444
    , 1449 (8th Cir. 1987) (citations omitted).5
    Thus, a statutorily-based preemption claim does not
    provide a basis for invoking the Johnson Act to deprive a federal
    court of jurisdiction.   Because this case does not meet the first
    prong of the Johnson Act analysis, it is not necessary for this
    court to reach the remaining prongs.
    C.
    The district court further concluded that it lacked
    subject matter jurisdiction because the PPA contains a choice of
    forum provision providing that all disputes arising under the PPA
    5
    . See also Hawaiian Tel. Co. v. Public Utils. Comm'n, 
    827 F.2d 1264
    , 1273 (9th Cir. 1987), cert. denied, 
    487 U.S. 1218
     (1988);
    New Orleans Pub. Serv., Inc. v. New Orleans, 
    782 F.2d 1236
    , 1242-
    42 (5th Cir. 1986), withdrawn in part on other grounds, 
    798 F.2d 858
     (5th Cir. 1986), cert. denied, 
    481 U.S. 1023
     (1987); Aluminum
    Co. of America v. Utilities Comm'n of North Carolina, 
    713 F.2d 1024
    , 1028 (4th Cir. 1983), cert. denied, 
    465 U.S. 1052
     (1984);
    International Bhd. of Elec. Workers, Local Union No. 1245 v.
    Public Serv. Comm'n, 
    614 F.2d 206
    , 210 (9th Cir. 1980); Kentucky
    West Virginia Gas Co. v. Pennsylvania Pub. Util. Comm'n, 
    620 F. Supp. 1458
    , 1460-61 (M.D. Pa. 1985), rev'd on other grounds, 
    791 F.2d 1111
     (3d Cir. 1986).
    In Kentucky West Virginia, the defendant did not appeal the
    district court's decision that the Johnson Act did not deprive it
    of jurisdiction, so this court did not discuss the issue. The
    cases cited by JCP&L are not to the contrary because none of them
    involve preemption claims. Rather, they involve claims under 
    42 U.S.C. § 1983
    , the gravamen of which is a violation of federal
    constitutional rights. The BRC has not raised the Johnson Act
    issue on appeal.
    would be resolved either by the BRC or by a New Jersey state
    court.   The court reasoned:
    The parties provided that the PPA "shall be
    governed by and construed in accordance with
    the laws of the State of New Jersey
    applicable to contracts made and to be
    performed in that State, irrespective of the
    application of any conflicts of laws
    provisions." Further, the parties "agree[d]
    that all disputes arising under [the PPA] not
    resolved between the parties shall be decided
    by a petition to the BRC or a court of
    competent jurisdiction in the State of New
    Jersey and [Freehold] hereby submits itself
    to the jurisdiction of the BRC or such court
    for such purposes.
    PURPA and its regulations do not prevent Freehold from
    waiving its statutory rights, see 
    18 C.F.R. § 292.301
    (b)(1), and
    thus Freehold may legally consent to have PPA disputes heard in
    state court.   The choice of law and choice of forum provisions
    quoted by the district court, however, merely demonstrate that
    Freehold agreed to submit disputes arising under the PPA to
    either the BRC or a court of competent jurisdiction of the State
    of New Jersey, not that it gave up its right to be exempt from
    state laws and regulation.   Freehold's complaint demonstrates
    that this is not an action to resolve a dispute under the PPA,
    but rather, a preemption claim against the BRC.    Thus, the
    district court erred in holding that the PPA supports a finding
    that it lacks jurisdiction to hear this matter.6
    6
    . On appeal, JCP&L also contends that a federal court should
    abstain from resolving the merits of this case even if it
    possesses subject matter jurisdiction. We disagree.
    Abstention under Younger v. Harris, 
    401 U.S. 37
     (1971), Burford
    v. Sun Oil Co., 
    319 U.S. 315
     (1943) and Railroad Com. of Texas v.
    III.
    The defendants argue that if the federal courts have
    jurisdiction and abstention is inapplicable, this court should
    not address the merits of the preemption question, but should
    remand for consideration to the district court.   JCP&L also
    argues that dismissal is mandated because Freehold's claim is
    moot and otherwise not ripe for adjudication.   JCP&L and the BRC
    additionally assert that there are disputes over material facts
    that preclude any grant of summary judgment for Freehold and
    there are no "exceptional circumstances" justifying a resolution
    by this court of Freehold's motion for summary judgment.
    On the other hand, Freehold asserts that its claim is
    ripe for adjudication as a matter of law because the BRC has been
    subjecting it to extensive state administrative, utility-type
    rate hearings and disclosure requirements since March 1994.
    Freehold vigorously argues that there are no factual issues to be
    (..continued)
    Pullman Co., 
    312 U.S. 496
     (1941) is "an extraordinary and narrow
    exception to the district court's duty to adjudicate a
    controversy properly before it, justified only in the exceptional
    circumstances where resort to state proceedings clearly serves an
    important countervailing interest." United Services Auto. Asso.
    v. Muir, 
    792 F.2d 356
    , 360-61 (3d Cir. 1986), cert. denied, 
    479 U.S. 1031
     (1987). The doctrine of discretionary abstention is
    predicated upon a federal policy of comity: federal courts of
    equity should exercise their discretionary power with proper
    consideration for the independence of state government in
    carrying out its governmental functions. In this case, however,
    our concern is with carrying out a federal statutory scheme
    promoting the development of alternative energy sources. The
    alleged intrusive action is not by the federal government, but,
    on the contrary, by a state regulatory agency. We conclude that
    abstention is not appropriate in this case and does not warrant
    any extended discussion.
    considered in addressing the legal question of preemption, and
    that the appellees have had ample opportunity to make every
    argument that they could in defense against Freehold's claim that
    PURPA preempts the BRC's order.    Freehold notes that the only
    alleged factual dispute that the BRC and JCP&L have been able to
    claim before this court is whether the so-called "regulatory out"
    clause permits the BRC to modify Freehold's contractual rates.
    Freehold, however, counters that the "regulatory-out" clause
    dispute requires no additional factfinding because it involves
    only a simple contract construction issue capable of resolution
    on the face of the PPA.   We agree; the clause is unambiguous and
    requires no extrinsic evidence for its construction.
    Freehold also contends that there are exceptional
    circumstances here that mandate disposition by this court of the
    preemption issue without remand to the district court.    It claims
    that the cogeneration project has already been delayed by the
    time-consuming and costly proceedings before the BRC and that
    every day adds immeasurably to the project's cost.    Freehold
    argues that interest rates are rising, equipment and construction
    costs are increasing, and the legal costs of this action and the
    action before the BRC are escalating, while the revenues from the
    project, if constructed, are fixed for the life of the contract
    with JCP&L.
    A.
    In light of the ongoing proceedings before the BRC, we
    see no merit whatsoever to the argument that the issue is moot.
    As to the question of ripeness, the Supreme Court stated in
    Abbott Labs. v. Gardner, 
    387 U.S. 136
     (1967), its leading
    discussion on the subject, and again reiterated in Pacific Gas &
    Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n,
    
    461 U.S. 190
    , 201 (1983), that the question of ripeness turns on
    "the fitness of the issue for judicial decision" and "the
    hardship to the parties of withholding court consideration."
    Abbott Labs., 
    387 U.S. at 149
    .
    In Presbytery of New Jersey of Orthodox Presbyterian
    Church v. Florio, No. 93-5559, 
    1994 WL 638864
     (3d Cir. 1994),
    this court adopted the three part test from Step-Saver Data
    Systems, Inc. v. Wyse Technology, 
    912 F.2d 643
    , 647 (3d Cir.
    1990), to determine whether we would engage in pre-enforcement
    review in the context of a declaratory judgment action:    (1) the
    adversity of the parties' interests, (2) the conclusiveness of
    the judicial judgment, and (3) the utility of that judgment.
    Slip. op. at 14.
    There can be no question here about the adversity of
    the parties' interests.    JCP&L seeks to alter or modify the PPA
    it entered into with Freehold on March 26, 1992.    The BRC, which
    had approved that contract consistent with PURPA's implementation
    requirements, subsequently directed Freehold and JCP&L to
    renegotiate the purchase price terms of the PPA or, in the
    alternative, to negotiate a buy out of the PPA.    Freehold
    rejected a renegotiation of the purchase price terms of the PPA
    and a buyout by JCP&L.    Since then, the BRC has commenced an
    extensive evidentiary proceeding to consider various courses of
    action, including the modification or revocation of its approval
    of the PPA.    In this litigation and on appeal, Freehold's
    position is diametrically opposed to that of the defendants.
    Thus, there is an actual concrete controversy "of sufficient
    immediacy and reality to warrant the issuance of a declaratory
    judgment."    Salvation Army v. Department of Community Affairs,
    
    919 F.2d 183
    , 192 (3d Cir. 1990) (quoting Steffel v. Thompson,
    
    415 U.S. 452
    , 460 (1974)).
    Furthermore, a judgment of this court will be
    conclusive.    It will determine whether the BRC proceedings
    conflict with or are expressly preempted as a matter of law by
    section 210(e) of PURPA and FERC's implementing rules.    Moreover,
    we are not persuaded that factual developments at the BRC
    proceedings would add anything to the legal construction of
    PURPA.
    Finally, there remains for consideration the last of
    the Step-Saver three part test, the utility of such a judgment.
    Freehold convincingly contends that the BRC's proceeding is
    impeding Freehold's ability to obtain financing for its facility
    and jeopardizes not only the PPA, but also the project's
    financial viability.
    Freehold also argues that additional delay may make it
    impossible to meet the construction and other deadlines contained
    in project contracts and permits.    This argument is very
    persuasive.    It takes but little experience in financial markets
    to realize that lending institutions will not lend a borrower
    large sums of money when the life of the underlying project is
    threatened by extensive litigation.7   While the BRC litigation
    has been in process and this appeal pending, the Federal Reserve
    Bank has increased interest rates six times.8   Additional costs
    because of the delay -- not only in interest, but also in
    material and labor costs -- are irrecoverable under the terms of
    the PPA.   Moveover, Freehold cannot recover damages from the BRC
    if it prevails on the merits.
    In Pacific Gas & Elec. Co., 
    461 U.S. 190
    , a question of
    preemption arose under circumstances where California's
    traditional role of regulating the generation and sale of
    electrical production challenged a complex federal scheme to
    promote the development of civilian nuclear energy.   The
    plaintiff utilities filed an action in the federal district court
    seeking a declaration that certain California regulations were
    invalid under the Supremacy Clause because they were preempted by
    the Atomic Energy Act of 1994.   Ripeness became an issue in the
    federal courts because the state administrative agency had not
    yet resolved the proceedings before it.   In disposing of the
    7
    . In the submission to the BRC of the proposed joint
    modification agreement dated November 3, 1993, between Freehold
    and the Staff of the Board of Regulatory Commissioners, Freehold
    represented, and this representation was undisputed, that
    expeditious approval of the joint agreement "is necessary so that
    Freehold can go forward with the Project Financing. The lending
    company will not make commitments until the issue of rate
    reduction is resolved."
    8
    . See 80 Fed. Reserve Bulletin 610 and 913. See also John E.
    Woodruff, Fed jolts interest rates up, The Baltimore Sun, Nov.
    16, 1994, at 1A (discussing the Federal Reserve's increases in
    interest rates during 1994 and their effect on consumers and
    businesses).
    ripeness issue, the Court examined the Abbott Labs. test of the
    "fitness of the issue for judicial decision" and "the hardship to
    the parties of withholding court consideration" and concluded
    that both factors favored a finding that the issue was ripe for
    adjudication. It stated:
    The question of pre-emption is predominantly
    legal, and although it would be useful to
    have the benefit of California's
    interpretation of what constitutes a
    demonstrated technology or means for the
    disposal of high-level nuclear waste,
    resolution of the pre-emption issue need not
    await that development. Moreover,
    postponement of decision would likely work
    substantial hardship on the utilities.
    
    Id. at 201
    .    The Court noted that one does not have to await the
    ultimate impact of the threatened injury to obtain preventive
    relief.    The imminence of the injury is sufficient.
    In Middle South Energy, Inc. v. Arkansas Pub. Serv.
    Comm'n, 
    772 F.2d 404
     (8th Cir. 1985), cert. denied, 
    474 U.S. 1102
    (1986), the complaint also raised a preemption challenge to state
    proceedings.    As in this case, the plaintiff did not challenge
    the state's ultimate substantive decision, but rather its
    authority to conduct proceedings to determine whether it should
    declare void ab initio certain contracts entered into by a
    utility pertaining to the purchase of power from, or payment for
    construction of, a nuclear power plant in Mississippi.   The court
    concluded that it "can hardly be doubted that a controversy
    sufficiently concrete for judicial review exists when the
    proceeding sought to be enjoined is already in progress."     
    Id. at 410-411
    .
    We also conclude that the issue here is ripe for
    adjudication.   The proceedings before the BRC have been ongoing
    for nearly one year.   The interest that Freehold seeks to
    vindicate in this proceeding is the right to be free from "state
    laws . . . respecting the rates . . . of electric utilities" and
    from the expense, delay, and uncertainty inherent in the
    administration of such laws.   If, as Freehold insists, the
    ongoing BRC proceedings constitute state regulation of utility
    rates and the burdens on Freehold occasioned by those proceedings
    are the kinds of burdens which Congress intended QFs to be
    spared, Congress' mandate would be frustrated if Freehold's right
    to judicial review were postponed.    There is a concrete dispute
    that has already worked a severe hardship upon Freehold, and a
    determination of the legal issue of preemption need not await any
    further developments before the BRC.
    B.
    The BRC and JCP&L rely on Equibank, N.A. v. Wheeling-
    Pittsburgh Steel Corp., 
    884 F.2d 80
    , 86 (3d Cir. 1989), for the
    proposition that this court generally has declined to address
    issues that were not decided by the trial court absent
    exceptional circumstances.   In Equibank, however, we declined to
    address the merits because they had not been fully briefed by the
    parties and additional factfinding might have been required by
    the district court.    In contrast, the original complaint in this
    case sought summary judgment on the sole legal question of
    whether PURPA preempted the BRC's order which directed a hearing
    on Freehold's previously approved rate.    The parties have fully
    and repeatedly briefed this issue in the district court where
    they also engaged in substantial oral argument on the merits.
    Moreover, as previously alluded to, the increasing financial
    pressure and rising costs imposed on Freehold because of the
    protracted delay, the escalating interest rates in the financial
    market, and the probability that the entire project will no
    longer be viable if we remand, constitute exceptional
    circumstances warranting our resolution of the preemption issue.9
    IV.
    Our task is not to examine the merits underlying the
    controversy between JCP&L and Freehold over whether the PPA
    negotiated and executed in 1993 may be now revised and altered.
    No claim of fraud or mutual mistake of fact is alleged in the
    negotiation and execution of the PPA.   We must determine only
    whether PURPA preempted the BRC order, dated January 5, 1994,
    directing the parties to renegotiate the purchase rate terms of
    the PPA or, in the alternative, to negotiate an appropriate
    9
    . Ford Motor Co. v. Summit Motor Prods., Inc., 
    930 F.2d 277
     (3d
    Cir.), cert. den. sub nom. Altran Corp. v. Ford Motor Co., 
    112 S.Ct. 374
     (1991), and Virgin Islands Conservation Soc. v. Virgin
    Islands Bd. of Land Use Appeals, 
    881 F.2d 28
     (3d Cir. 1989),
    cited by JCP&L for the proposition that there are no "exceptional
    circumstances" justifying the resolution by this court of
    Freehold's motion for summary judgment are inapposite. In both
    of these cases, this court only decided that it would not
    consider an issue raised for the first time on appeal without
    compelling circumstances. In neither of these cases was the
    matter of compelling circumstances analyzed or briefed as they
    are here.
    buyout of the PPA, failing which the BRC would and did commence
    proceedings now pending before it.   We conclude that it does.10
    A state law may not only be preempted expressly by
    Congress, but whenever it conflicts with federal law.    Fidelity
    Federal Sav. and Loan Ass'n v. de la Cuesta, 
    458 U.S. 141
    , 153
    (1982).   Under the Supremacy Clause of the United States
    Constitution, a federal agency acting within the scope of its
    congressionally delegated authority has the power to preempt
    state regulation and render unenforceable state or local laws
    which are otherwise not inconsistent with federal law.     Louisiana
    Public Service Com. v. FCC, 
    476 U.S. 355
    , 368-69 (1986).       Of
    course, the application of the preemption doctrine requires a
    determination of congressional intent in enacting a federal law.
    That intent is not necessarily dependent on express congressional
    authorization to nullify or render partially or wholly
    unenforceable an inconsistent state law or regulation.      It also
    occurs "where Congress has legislated comprehensively, thus
    occupying the entire field of regulation and leaving no room for
    the States to supplement federal law, or where the state law
    stands as an obstacle to the accomplishment and execution of the
    full objectives of Congress."   
    Id. at 368-69
     (citation omitted).
    10
    . The district court held that the dispute before the BRC
    arises under the PPA and presumed that it was not subject to
    preemption. Freehold, however, has no dispute under the PPA; it
    filed a complaint in the district court to protect the terms and
    integrity of the PPA from unwarranted intrusion by the BRC. The
    BRC is attempting to alter the terms of the PPA after having
    fully approved it in a final and non-appealable order. We do not
    believe that Freehold's claim can correctly be characterized as a
    dispute under the PPA.
    As we have previously stated in this opinion, Congress
    modified the Federal Power Act, which gave the FERC exclusive
    authority to regulate public utilities engaged in the sale of
    electric power at wholesale in interstate commerce, by enacting
    PURPA as part of a comprehensive legislative effort to solve a
    nationwide energy crisis and thus reduce the nation's dependence
    on fossil fuels.    In PURPA, Congress directed the FERC to
    promulgate regulations requiring public utilities to buy electric
    energy from and to sell electric energy to qualifying
    cogeneration facilities.    After extensive hearings, Congress
    concluded that the energy problem was nationwide in scope and
    therefore required "federal standards regarding retail sale of
    electricity, as well as federal attempts to encourage
    conservation and make efficient use of scarce energy resources."
    FERC v. Mississippi, 
    456 U.S. at 757
    .
    Section 210 of PURPA sets forth the benefit to which
    QFs are entitled.    It creates a market for their energy by
    requiring that the FERC establish regulations that obligate
    public utilities to sell electric energy to and purchase electric
    energy from QFs.    16 U.S.C. § 824a-3(a).    Section 210(b) requires
    the FERC to promulgate regulations to ensure that the rates for
    these purchases "shall be just and reasonable to the electric
    consumers of the electric utility in the public interest."      These
    rates may not exceed the incremental cost to the utility of
    purchasing alternative electric energy.      16 U.S.C. § 824a-3(b).11
    11
    . Where, as here, the PPA has a long-term, fixed price,
    tension may arise between this consumer protective provision of
    Pursuant to PURPA's requirements, the FERC issued
    regulations which define the minimum operating and efficiency
    standards that cogeneration facilities must meet and the benefits
    to which they are entitled.    
    18 C.F.R. §§ 292.101
    -.211.   The
    regulations also authorize the FERC to revoke QF status for non-
    compliance with its application and empower the FERC to waive
    operating and efficiency standards upon a showing that the QF
    produces significant energy savings.    
    18 C.F.R. § 292.205
    (c).
    Additionally, the regulations address the purchase of energy by
    utilities, and the cost to be paid to the QF supplying the energy
    and guidelines for calculating such costs.    
    18 C.F.R. § 292.301
    -
    .308.   Thus, PURPA and the implementing regulations establish an
    extensive federal system to encourage and regulate the sale of
    electrical energy by QFs.
    JCP&L claims that it and Freehold voluntarily agreed to
    the BRC's continuing jurisdiction over the PPA and the rates
    charged by Freehold thereunder.    This argument is based upon the
    BRC's unsuccessful effort in late 1993 to formulate a joint
    agreement between the parties modifying the PPA.    JCP&L also
    asserts that in the course of the ongoing proceeding initiated by
    the BRC to review the PPA, the BRC is reviewing documentary
    evidence and testimony concerning the meaning of the PPA's
    "regulatory-out" clause.    JCP&L maintains that the regulatory-out
    (..continued)
    PURPA and the FERC regulation permitting the parties to hold
    incremental avoidable cost at the level it has on the date the
    PPA is effective. Whatever problem this may create is, however,
    a matter for FERC, not the BRC. See also infra p. 30.
    clause grants the BRC continuing jurisdiction over rates.
    Finally, JCP&L argues that PURPA contains no express preemption
    claims and that implied preemption is not to be lightly presumed.
    In fact, it argues that there is a presumption against finding
    preemption of state law in areas traditionally regulated by the
    states.
    Although the states are required under the federal
    statutory scheme to implement the federal rules, section 210(e)
    of PURPA requires that the FERC prescribe rules exempting QFs
    "from state laws and regulations respecting the rates, or
    respecting the financial or organizational regulation of electric
    utilities, or from any construction of the foregoing, if the
    Commission determines such exemption is necessary to encourage
    cogeneration and small power production."   16 U.S.C. § 824a-
    3(a)(1).   As discussed earlier, the FERC promulgated regulations,
    pursuant to section 210(e)(1) of PURPA, exempting QFs from
    various federal and state regulatory requirements.
    The BRC concedes that in adopting the regulation
    exempting cogenerators from state utility regulation, the FERC
    described the exemption as broad.   It takes heart, however, in
    FERC language stating that the exemption is "not intended to
    divest a State regulatory agency of its authority to review
    contracts for purchases as part of its regulation of electric
    utilities."   
    45 Fed. Reg. 12,233
     (Feb. 25, 1980).   This
    misunderstands the interplay between sections 210(a) and 210(e).
    There is no dispute here that section 210(f) gives state
    regulatory authorities power to implement the requirements of
    section 210(a) and the relevant regulations.     In fact, both
    section 210(e)(3) and the applicable regulation, 
    18 C.F.R. § 292.602
    (c)(2), expressly limit the exemptions from state law
    that QFs enjoy under § 210(e):   QFs simply are not exempt from
    state laws and regulations enacted pursuant to § 210(f) and, with
    it, § 210(a).
    Thus, if a case concerns implementation procedures
    contemplated by § 210(f), then the action is properly covered by
    § 210(g), and, therefore, federal jurisdiction would be improper.
    Here, on the other hand, the BRC's implementation of FERC's §
    210(a)-type regulations ended with BRC's July 8, 1992 approval of
    the PPA.   The present attempt to either modify the PPA or revoke
    BRC approval is "utility-type" regulation -- exactly the type of
    regulation from which Freehold is immune under § 210(e).     As the
    explanatory note states, the regulations do not disturb the
    authority of state regulatory agencies "to review contracts for
    purchases" so long as those regulations are "consistent with the
    terms, policies and practices of sections 210 and 201 of PURPA
    and [FERC's] implementing regulations.   If the authority or its
    exercise is in conflict, . . . the State must yield to the
    Federal requirements."
    Absent legislative restriction, the BRC also asserts,
    reconsideration of its prior approval of the PPA is inherent in
    the authority of all administrative agencies and not necessarily
    a characteristic unique to rate-making bodies.    However, in this
    instance, there is specific federal statutory legislation, PURPA,
    that bars reconsideration of the prior approval of the PPA at
    least absent some basis in the law of contracts for setting aside
    the PPA.   No such basis is referred to here. Based on the overall
    scheme of PURPA and its stated goal, and especially section
    210(e) and the implementing rules promulgated by the FERC, we
    hold that Congress intended to exempt qualified cogenerators from
    state and federal utility rate regulations.
    Two recent cases support our conclusion.   In
    Independent Energy Producers, 
    36 F.3d 848
    , the Energy Producers
    sought an injunction in the federal district court to prevent the
    California Public Utilities Commission ("CPUC") from implementing
    an order which delegated to the defendant-utilities the authority
    to enforce federal operating and efficiency requirements set out
    in PURPA and in the regulations promulgated by the FERC.     As in
    this case, the plaintiff QF and the utilities entered into
    contracts for the sale and purchase of electric energy.    The
    contracts contained standardized terms and the rates to be paid
    the QFs.   In 1991, the utilities and the CPUC created a program
    which authorized the utilities to monitor the compliance with
    federal operating and efficiency standards by the QFs with which
    they had contracts.   If a utility determined that a QF did not
    meet federal operating and efficiency standards, it was
    authorized to suspend payment of the rates specified in the
    contract and substitute a lower alternative rate.     Independent
    Energy Producers challenged this program, contending that the
    FERC's authority is exclusive and the state program is preempted
    by federal law.   The district court disagreed and held there was
    no preemption.
    The court of appeals reversed.    It concluded that the
    FERC regulations carry out the statutory scheme reposed in its
    exclusive authority to make QF determinations for the revocation
    of QF status or waive compliance with QF standards, they nowhere
    "contemplate a role for the state in setting QF standards or
    determining QF status."    
    Id. at 854
    .   For reasons of policy, it
    held that a "uniform federal decision maker is necessary" in the
    public interest and that the CPUC program was preempted by
    federal law.   
    Id.
    One of the issues raised in Smith Cogeneration, Inc. v.
    Corporation Comm'n, 
    863 P.2d 1227
     (Okla. 1993), is even more
    analogous to this case.    A rule of the Oklahoma Corporation
    Commission required QFs and electrical utilities to include in
    their non-negotiated cogeneration purchase contracts a notice
    provision allowing reconsideration and modification by the
    Corporation Commission of avoided costs after the contract had
    been agreed upon.    The cogenerator argued that the Corporation
    Commission rule directly conflicted with PURPA and the FERC
    regulations, discouraged cogeneration, and was preempted by
    federal law.   Although the cogenerator acknowledged that states
    have broad authority to implement PURPA, it insisted that any
    utility-type regulation over cogeneration contracts directly
    conflicted with PURPA.
    As Freehold does here, the cogenerator in Smith argued
    that any attempt to revisit a cogeneration contract, as a result
    of changed circumstances, deprives QFs of the benefits of the
    bargain and that the state rule, unless waived, stands as a
    direct obstruction to obtain the necessary financing for the
    project.    The Corporation Commission and the utilities argued to
    the contrary.
    The Oklahoma court, after examining the preamble to the
    FERC regulations and PURPA, concluded that reconsideration of
    long term contracts with established estimated costs imposes
    utility-type regulations over QFs.     "PURPA and FERC regulations
    seek to prevent reconsideration of such contracts.     The
    legislative history behind PURPA confirms that Congress did not
    intend to impose traditional utility type rate-making concepts on
    sales by qualifying facilities to utilities."    
    Id. at 1240-1241
    .
    Accordingly, the court held that PURPA and FERC regulations
    preempted the State Commission rule.
    JCP&L attempts to distinguish this case from Smith on
    the ground that the challenged rule in Smith would impact on
    financing, but that in this case, the BRC's "pre-financing review
    of the PPA will have no such impact."    Such a distinction is
    illusory.   The Oklahoma court did not rest its preemption holding
    merely on the impact of the Commission rule on financing, but
    primarily on the obligation and rights of the parties under a
    negotiated and executed contract.    Here, the facts favor Freehold
    more strongly than they did the cogenerator in Smith.    In Smith,
    the cogenerator did not yet have a signed contract; Freehold does
    and the preemption issue is precisely the same.    Besides, we
    cannot disregard the impact on cogeneration financing if a
    purchase power agreement is at any time in the future subject to
    the arbitrary reconsideration by a state utility regulatory body.
    Finally, the defendants maintain that preemption is
    inappropriate because JCP&L and Freehold voluntarily agreed to
    exempt the PPA from PURPA.   They note correctly that FERC
    regulations specifically contemplate voluntary agreements outside
    of PURPA's umbrella.   See 
    18 C.F.R. § 292.301
    (b); see also
    American Paper Institute, Inc., 
    461 U.S. at 416
     (stating that "a
    qualifying facility and a utility may negotiate a contract" that
    constitutes "a waiver" of PURPA).   They claim that Freehold, in a
    "regulatory-out" clause,12 agreed to waive its section 210(e) and
    12
    .   The "regulatory-out" clause provides in pertinent part:
    20.2(a) The parties recognize and
    acknowledge that this agreement and the rates
    to be paid to the Seller [Freehold] for
    energy and capacity for the Facility are
    premised upon and subject to the Company's
    [JCP&L] continuing ability to timely and
    fully recover from its customers all such
    costs and charges paid to the Seller
    hereunder for energy and capacity throughout
    the term hereof. Consequently, in the event
    that the BRC, the FERC or any legislative,
    judicial, administrative or other
    governmental agency having jurisdiction over
    the parties, . . . should disallow in whole
    or in part or otherwise impair the full and
    timely recovery by the Company from its
    customers of any energy and capacity payments
    made or to be made to the Seller hereunder,
    then, at the option of the Seller, (i) the
    parties hereto shall promptly thereafter
    commence negotiations to approximately amend
    this Agreement to reduce the rates to be paid
    by the Company hereunder for energy and
    capacity to such rates as the BRC or such
    other governmental agency exercising
    jurisdiction shall have authorized the
    Company to recover through operation of its
    Levelized Energy Adjustment Clause ("LEAC") .
    . . on a full and timely basis or (ii) upon
    thirty (30) days prior written notice to the
    
    18 C.F.R. § 292.602
    (c)(1) rights to be free from state rate
    regulation or law.
    As we have noted, insofar as the issues in this case
    are concerned, we find the "regulatory-out" clause unambiguous.
    It merely describes what would happen in the event that during
    the 20-year contract term JCP&L should for any reason lose its
    right to pass costs on to its ratepayers.   When this clause was
    agreed upon, the parties clearly did not expect that this right
    could be lost as a result of BRC action absent some change in the
    governing law.13   But the important aspect for present purposes
    is that this clause does not purport to confer on the BRC any
    jurisdiction it would not otherwise have.   In particular, it
    reflects no intent on the part of Freehold to surrender any of
    the protection from state rate regulation conferred upon it by §
    210(a).
    V.
    In summary, we conclude that the district court had
    subject matter jurisdiction to consider Freehold's claims and
    (..continued)
    Company, the Seller may terminate this
    Agreement and neither party shall have any
    further liability or obligation hereunder
    except for amounts due prior to the date of
    termination . . . .
    13
    . In the BRC's 1992 order approving the PPA, the BRC committed
    itself and its successors to "allow JCP&L to flow-through and/or
    fully and timely recover the rates specified in [the PPA] and the
    costs resulting therefrom . . . ."
    A July 1, 1988, Stipulation and Settlement relied upon by the BRC
    in approving the present PPA states that the BRC will not
    readjust contract rates or preclude flow through.
    that the jurisdictional limits of section 210(g) of PURPA did not
    bar jurisdiction of this action.   We also hold that the district
    court erred in concluding that the Johnson Act precludes federal
    jurisdiction and that Freehold's claim involves solely a
    contractual dispute subject to the jurisdiction of the state
    utility regulatory agency under the choice of law and forum
    provisions of the PPA.   We reject the argument that any of the
    abstention doctrines apply in any manner to these proceedings.
    Finally, we hold that once the BRC approved the power purchase
    agreement between Freehold and JCP&L on the ground that the rates
    were consistent with avoided cost, just, reasonably, and
    prudentially incurred, any action or order by the BRC to
    reconsider its approval or to deny the passage of those rates to
    JCP&L's consumers under purported state authority was preempted
    by federal law.
    The order of the district court will be reversed and
    the case remanded with direction to enter summary judgment in
    favor of the appellant and for such further proceedings as are
    consistent with this opinion.   Costs taxed against the appellees.
    

Document Info

Docket Number: 94-5168

Judges: Stapleton, Hutchinson, Rosenn

Filed Date: 1/9/1995

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (30)

salvation-army-the-v-department-of-community-affairs-of-the-state-of-new ( 1990 )

Equibank, N.A. And the Farmers' Home Administration v. ... ( 1989 )

middle-south-energy-inc-and-arkansas-power-and-light-company-v-arkansas ( 1985 )

virgin-islands-conservation-society-inc-v-virgin-islands-board-of-land ( 1989 )

Steffel v. Thompson ( 1974 )

Shaw v. Delta Air Lines, Inc. ( 1983 )

Winfield C. Patterson v. Julius T. Cuyler, Superintendent, ... ( 1984 )

New Orleans Public Service, Inc. v. The City of New Orleans,... ( 1986 )

arkansas-power-light-company-v-missouri-public-service-commission ( 1987 )

kentucky-west-virginia-gas-company-equitable-gas-company-a-division-of ( 1986 )

international-brotherhood-of-electrical-workers-local-union-no-1245-v ( 1980 )

independent-energy-producers-association-inc-v-california-public ( 1994 )

united-services-automobile-association-a-texas-reciprocal-interinsurance ( 1986 )

Younger v. Harris ( 1971 )

Justus v. Florida ( 1984 )

New Orleans Public Service, Inc. v. The City of New Orleans,... ( 1986 )

airco-industrial-gases-inc-division-of-the-boc-group-inc-v-the ( 1988 )

aluminum-company-of-america-a-pennsylvania-corporation-and-tapoco-inc ( 1983 )

Kentucky West Virginia Gas Co. v. Pennsylvania Public ... ( 1985 )

Zucker v. Bell Telephone Company of Pennsylvania ( 1974 )

View All Authorities »