Nos. 00-568 and 00-809 

In the Supreme Court of the United States 

STATE OF NEW YORK, ET AL., PETITIONERS 

v. 
FEDERAL ENERGY REGULATORY COMMISSION, ET AL. 

ENRON POWER MARKETING, INC., PETITIONER 

v. 
FEDERAL ENERGY REGULATORY COMMISSION, ET AL. 

ON WRITS OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE DISTRICT OF COLUMBIA CIRCUIT 

BRIEF FOR THE FEDERAL ENERGY REGULATORY 
COMMISSION 

KEVIN P. MADDEN 

General Counsel 
CYNTHIA A. MARLETTE 

Deputy General Counsel 

SUSAN J. COURT 

Associate Solicitor 
TIMM L. ABENDROTH 
DAVID H.COFFMAN 

Attorneys 
Federal Energy Regulatory 

Commission 
Washington, D.C. 20426 
BARBARA D. UNDERWOOD 

Acting Solicitor General 

Counsel of Record 
EDWIN S. KNEEDLER 

Deputy Solicitor General 
AUSTIN C. SCHLICK 

Assistant to the Solicitor 

General 
Department of Justice 
Washington, D.C. 20530-0001 
(202) 514–2217 

QUESTIONS PRESENTED 

In its Order No. 888, the Federal Energy Regulatory 
Commission found that public utilities subject to its juris- 
diction under the Federal Power Act (FPA or Act), 16 
U.S.C. 791a et seq., had discriminated unlawfully in providing 
access to their facilities for transmitting electric power, and 
had the ability and incentive to continue to do so. As a 
remedy, Order No. 888 requires those utilities to provide 
nondiscriminatory access to their transmission systems, 
thereby facilitating competition in the market for electric 
energy. 

1. In No. 00-568, the question presented is whether the 
court of appeals correctly determined that Section 201 of the 
FPA, 16 U.S.C. 824, authorizes the Commission to exercise 
jurisdiction over the service of transmitting in interstate 
commerce electric energy that is sold at retail, where the 
transmission service is “unbundled” from the State-regu- 
lated retail sale of energy and the retail customer has the 
ability to choose a preferred power supplier. 

2. In No. 00-809, the question presented is whether the 
court of appeals properly deferred to the Commission’s 
determination that it lacks jurisdiction over retail transmis- 
sion service that is sold together with electric energy in a 
single “bundled” transaction between a public utility and its 
retail customer, where the retail customer cannot choose a 
preferred power supplier. 

(I) 

II 

PARTIES TO THE PROCEEDING 

The petitioners and intervenors in the court of appeals are 
set forth in Volume II of the Petition Appendix in No. 00-568 
at R1-R7 and in Volume II of the Petition Appendix in No. 
00-809 at 683a-688a. 

TABLE OF CONTENTS 

Page 

Opinions below ............................................................................... 
1 

Jurisdiction ...................................................................................... 2 

Statutory Provisions Involved .................................................... 

2 

Statement ........................................................................................ 2 

Summary of argument .................................................................. 

20 

Argument ........................................................................................ 22 

I. The Commission correctly interpreted the Federal 
Power Act as establishing Federal jurisdiction over 
unbundled transmission of electric energy in 

interstate commerce .......................................................... 
23 

A. Transmission by a utility that utilizes an 
interstate grid is “in interstate commerce” ........... 
23 

B. Congress did not exclude unbundled retail 
transmission from the commission’s jurisdic- 
tion over interstate transmission ............................. 
28 

C. The Commission’s jurisdictional holding is 
consistent with Congress’s purposes in 
enacting section 201 .................................................... 
34 

D. Policy considerations also do not support New 

York’s interpretation ................................................. 

43 

II. The Commission reasonably concluded that Congress 

has not authorized Federal regulation of the trans- 
mission component of bundled retail sales of electric 
energy .................................................................................. 45 

Conclusion ....................................................................................... 50 

TABLE OF AUTHORITIES 

Cases: Page 

Arcadia v. Ohio Power Co., 498 U.S. 73 (1990) ................ 
6 

Arkansas La. Gas Co. v. Hall, 453 U.S. 571 (1981) ......... 
29 

(1981) ........................................................................................ 

(III) 

IV 

Cases—Continued: Page 

Arkansas Elec. Coop. Corp. v. Arkansas Pub. Serv. 
Comm’n., 461 U.S. 375 (1983) ................................... 
24, 39, 42 

Attleboro Steam & Elec. Co. v. Public Utils. Comm’n 
129 A. 495 (R.I. 1925), aff ’d, 273 U.S. 83 (1927) ............... 
38 

California v. FERC, 495 U.S. 490 (1990) .......................... 
41 

California v. Lo-Vaca Gathering Co., 379 U.S. 366 
(1965) ........................................................................................ 27 

CFTC v. Schor, 478 U.S. 833 (1986) ................................... 

94 

Chemehuevi Tribe of Indians v. FPC, 420 U.S. 395 
(1975) ........................................................................................ 43 

Chevron U.S.A. Inc. v. Natural Res. Def. Council, 

Inc., 467 U.S. 837 (1984) ..................................... 
18, 46, 49, 50 

Connecticut Light & Power Co. v. FPC, 324 U.S. 
515 (1945) ...................................... 

4, 5, 24, 25, 28, 30, 33, 35, 41 

Dole v. United Steelworkers, 494 U.S. 26 (1990) .............. 

49 

FERC v. Mississippi, 456 U.S. 742 (1982) ........................ 
10 

FPC v. Conway, 426 U.S. 271 (1976) ................................. 
44 

FPC v. East Ohio Gas Co., 338 U.S. 464 (1950) ..... 
30, 33-34 

FPC v. Florida Power & Light Co., 404 U.S. 453 
(1972) ............................................................ 

18, 20, 25, 26-27, 28 

FPC v. Louisiana Power & Light Co., 406 U.S. 621 
(1972) ............................................................ 

20, 30, 34, 39, 42, 48 

FPC v. Southern Cal. Edison Co., 376 U.S. 205 
(1964) ........................................................................... 
8, 31, 33, 35 

FPC v. Sunray DX Oil Co., 391 U.S. 9 (1968) ................. 
28 

General Motors Corp. v. Tracy, 519 U.S. 278 (1997) ....... 
34 

Glover v. United States, 121 S. Ct. 696 (2001) .................. 

Gulf States Utils. Co. v. FPC, 411 U.S. 747 (1973) .......... 

6 

Indiana Mich. Power Co., 64 F.E.R.C. ¶ 61,184 (1993) .... 
5 

Jersey Cent. Power & Light Co. v. FPC, 319 U.S. 61 
(1943) .................................................................................... 
18, 25 

Louisiana Pub. Serv. Comm’n v. FCC, 476 U.S. 355 
(1986) ........................................................................................ 42 

Maislin Indus., Inc. v. Primary Steel, Inc., 497 

U.S. 116 (1990) ........................................................................ 41 

V 

Cases—Continued: Page 

Mississippi Power & Light Co. v. Mississippi, 487 

U.S. 354 (1988) ........................................................................ 
49 

NLRB v. City Disposal Sys., Inc., 834 F.2d 191 (D.C. 

Cir. 1987) ................................................................................. 
49 

New England Power Co. v. New Hampshire, 455 

U.S. 331 (1982) ..................................................... 
8, 9, 24, 42, 47 

Northern States Power Co. v. FERC, 176 F.3d 1090 
(8th Cir. 1999), cert. denied, 528 U.S. 1182 (2000) ........... 
48 

Panhandle E. Pipeline Co. v. Public Serv. Comm’n, 
332 U.S. 507 (1947) ................................................................ 
30 

Pennsylvania Gas Co. v. Public Serv. Comm’n, 
252 U.S. 23 (1920) ................................................................... 
34 

Public Utils., Comm’n v. Attleboro Steam & Elec. 

Co., 273 U.S. 83 (1927) ......................................................... 

5, 8 

San Diego Gas & Elec. Co. v. Sellers of Energy 
& Ancillary Servs. into Markets Operated by the 
Cal. Sys. Operator and the Cal. Power Exch., 93 
F.E.R.C. ¶¶ 61,121, 61,351, 61,353, 61,360 , man- 
damus denied, 245 F.3d 1110 (9th Cir. 2001) .................... 
45 

Solid Waste Agency v. United States Army Corps 
of Eng’rs, 121 S. Ct. 675 (2001) ........................................... 
41 

United Distribution Cos. v. FERC, 88 F.3d 1105 
(D.C. Cir. 1996) ....................................................................... 
29 

United States v. Public Utils. Comm’n, 345 U.S. 
295 (1953) .................................................................... 
5, 35, 42, 47 

West v. Gibson, 527 U.S. 212 (1999) .................................... 
40 

Western Power Trading Forum v. FERC, 245 F.3d 
798 (D.C. Cir. 2001) ............................................................... 
45 

Constitution, statutes, regulations and rule: 

U.S. Const. Art. I, § 8, Cl. 2 (Commerce Clause) ................ 

8 

Energy Policy Act of 1992, Pub. L. No. 102-486, 
106 Stat. 2776 .......................................................................... 
11 

Federal Power Act, 16 U.S.C. 791a et seq. ........................... 
6 

Pt. II, 16 U.S.C. 824-824m .................................................... 
2 

§§ 201-214, 16 U.S.C. 824-824m ...................................... 6 

VI 

Statutes, regulations and rule—Continued: 
Page 

§ 201, 16 U.S.C. 824 ..................................................... 
passim 

§ 201(a), 16 U.S.C. 824(a) ................................ 
6, 7, 34, 35, 47 

§ 201(b), 16 U.S.C. 824(b) ........................................... 
passim 

§ 201(b)(1), 16 U.S.C. 824(b)(1) ................................. 
passim 

§ 201(c), 16 U.S.C. 824(c) .......................................... 
7, 23, 26 

§ 201(d), 16 U.S.C. 824(d) ................................................. 
8 

§ 201(e), 16 U.S.C. 824(e) ................................................. 
6 

§ 201(f), 16 U.S.C. 824(f) .................................................. 
6 

§ 205, 16 U.S.C. 824d .................................................... 
12, 26 

§ 205(a), 16 U.S.C. 824d(a) ............................................... 
7 

§ 205(b), 16 U.S.C. 824d(b) .............................................. 
7 

§ 205(c), 16 U.S.C. 824d(c) ............................................... 
7 

§ 206, 16 U.S.C. 824e ............................................... 
12, 26, 49 

§ 206(a), 16 U.S.C. 824e(a) ............................................... 
7 

§ 206(d), 16 U.S.C. 824e(d) ..................................... 
36, 37, 38 

§ 211, 16 U.S.C. 824j ......................................................... 
11 

§ 212, 16 U.S.C. 824k ........................................................ 
11 

§ 212(h), 16 U.S.C. 824k(h) .......................................... 
16, 37 

§ 212(h)(1), 16 U.S.C. 824k(h)(1) ..................................... 
16 

§ 213, 16 U.S.C. 825l(b) .................................................... 
28 

Natural Gas Act, 15 U.S.C. 717 et seq. .................................. 
29 

§ 1(b), 15 U.S.C. 717(b) .................................... 
20, 29, 30, 33 

§ 1(c), 15 U.S.C. 717(c) ...................................................... 
34 

Public Utility Act of 1935, ch. 687, 49 Stat. 803 ................... 
6 

Public Utility Holding Company Act, ch. 687, Tit. I, 
§§ 1-33, 15 U.S.C. 79 et seq. .................................................. 
6 

Public Utility Regulatory Policies Act of 1978, Pub. 

L. No. 95-617, 92 Stat. 3117 ................................................. 

10 

§ 210, 16 U.S.C. 824a-3 ..................................................... 
10 

18 C.F.R. 35.28(c) ...................................................................... 
44 

Sup. Ct. Rule 14(a) .................................................................... 
29 

Miscellaneous: 

Energy Information Administration, U.S. Dep’t of 

Energy, Status of State Electric Industry Restruct- 
ing Activity as of May 2001 (May 2001) ............................ 45 

VII 

Miscellaneous—Continued: Page 

Energy Information Administration, U.S. Dep’t of 

Energy, The Changing Structure of the Electric 
Power Industry 2000: An Update (Oct. 2000) .................. 
4, 5, 

61 Fed. Reg.: 

p. 21,694 ................................................................................... 

44 

pp. 21,628-21,664 .................................................................... 
13 

pp. 21,706-21,724 .................................................................... 
13 

pp. 21,708 ................................................................................. 
37 

p. 21,718 ................................................................................... 
44 

H.R. Rep. No. 1318, 74th Cong., 1st Sess. (1935) .......... 
9, 36-37 

Public Util. Holding Co. Act of 1935: Hearings on 

S. 1725 Before the Senate Comm. on Interstate 
Commerce, 74th Cong., 1st Sess., Pt. 2 (1935) ............ 

27, 40 
Regional Transmission Organizations, Order No. 2000, 
65 Fed. Reg. 809 (1999), on reh’g, Order No. 2000-A, 
65 Fed. Reg. 12,088 (2000), appeal pending sub mon. 
Public Utils. District No. 1 v. FERC, No. 00-1174 
(D.C. Cir. to be argued Oct. 17, 2001) .............................. 
49-50 

H. Rustebakke, Electric Utility Systems and Practices 
(4th ed. 1983) .......................................................................... 
4, 32 

S. Rep. No. 621, 74th Cong., 1st Sess. (1935): 

Pt. 1 ......................................................................... 

9, 31, 38, 39 

Pt. 2 ...................................................................................... 
27 

R. Sarikas, Introduction to Electrical Theory and 

Power Transmission (1995) ................................................ 5 

In the Supreme Court of the United States 
No. 00-568 
STATE OF NEW YORK, ET AL., PETITIONERS 

v. 
FEDERAL ENERGY REGULATORY COMMISSION, ET AL. 

No. 00-809 
ENRON POWER MARKETING, INC., PETITIONER 

v. 
FEDERAL ENERGY REGULATORY COMMISSION, ET AL. 

ON WRITS OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE DISTRICT OF COLUMBIA CIRCUIT 

BRIEF FOR THE FEDERAL ENERGY REGULATORY 
COMMISSION 

OPINIONS BELOW 

The opinion of the court of appeals (Pet. App. 3a-121a)1 is 
reported at 225 F.3d 667. The relevant orders of the Federal 
Energy Regulatory Commission are reported as follows: 
Order No. 888, 61 Fed. Reg. 21,540 (1996) (excerpted at Pet. 
App. 125a-369a), and Order No. 888-A, 62 Fed. Reg. 12,274 
(1997) (excerpted at Pet. App. 371a-551a). 

1 Unless otherwise indicated, all references to “Pet. App.” are to the 
petition appendix in No. 00-809. We refer to the state petitioners in No. 
00-568, collectively, as “New York.” 

(1) 

2 

JURISDICTION 

The judgment of the court of appeals (Pet. App. 1a-2a) 
was entered on June 30, 2000. Petitions for rehearing were 
denied on August 22, 2000 (Pet. App. 123a-124a). The peti- 
tion for a writ of certiorari in No. 00-568 was filed on October 
12, 2000. The petition in No. 00-809 was filed on November 
20, 2000. The petitions were granted on February 26, 2001. 
The jurisdiction of this Court rests on 28 U.S.C. 1254(1). 

STATUTORY PROVISIONS INVOLVED 

Relevant provisions of Part II of the Federal Power Act, 
16 U.S.C. 824-824m, are set out at Pet. App. 652a-681a. 

STATEMENT 

This case involves one of the critical jurisdictional under- 
pinnings of the Federal Energy Regulatory Commission’s 
program for promoting competition in the electric power 
industry. Commission Order No. 888 requires public utilities 
to “unbundle” their generation and wholesale sales of elec- 
tric power from their wholesale transmission of electric 
power, and to provide other power suppliers nondiscrimina- 
tory access to their transmission systems. Unbundling and 
“open access” to transmission systems enable energy pro- 
ducers to deliver electric power across the Nation’s 
interstate power grids, and prevent public utilities from 
using their control over essential transmission systems to 
undermine the increasingly competitive market for electric 
energy. 

When crafting Order No. 888, the Commission exercised 
its jurisdiction in accordance with Part II of the Federal 
Power Act (FPA or Act), 16 U.S.C. 824-824m. Broadly 
speaking, Section 201 of the FPA gives the Commission 
jurisdiction over the transmission and wholesale sale of 
electric energy in interstate commerce, while leaving regula- 
tion of local distribution and retail sales of electric energy to 

3 

the States. 16 U.S.C. 824. The Commission interpreted 
Section 201 as preserving the States’ historical jurisdiction 
over traditional monopoly arrangements—under which retail 
customers buy electric energy, transmission service, and 
local distribution service from a single, regulated supplier for 
a single charge. Accordingly, under Order No. 888, States 
may continue to regulate the entirety of those bundled retail 
sales, just as before. But if a public utility voluntarily per- 
mits retail customers to purchase power from competing 
suppliers, or if a State chooses to require such competition, 
then the Commission’s new open-access rule would extend to 
the utility’s separately offered service of transmitting 
electric energy in interstate commerce in connection with 
the unbundled retail sale of energy. Even in that case, how- 
ever, the State would continue to have exclusive jurisdiction 
over the retail sale of energy and over local distribution of 
the energy. 

The court of appeals found that the Commission’s ap- 
proach is consistent with the jurisdictional rules established 
by Congress in the FPA. Pet. App. 27a-39a. The court 
rejected the argument of some States that the Commission 
may not regulate unbundled transmission of electric power 
that is associated with retail sales. At the same time, the 
court rejected the argument of some industry members that 
the Commission was required to apply federal nondis- 
crimination rules to bundled retail sales that historically 
have been regulated by the States. 

1. Electric power systems have three fundamental func- 
tions: generating electric energy, transmitting the energy in 
bulk, and distributing the energy to consumers. Electric 
energy is generated at a generating station, and its voltage 
is increased (“stepped up”) for transmission over high- 
voltage lines. After the energy travels to the vicinity of the 
end user over transmission lines, its voltage is reduced 

4 

(“stepped down”) for delivery over a local distribution 
system.2 

Power systems in the continental United States are orga- 
nized into three major networks, or “grids”: the Eastern 
Interconnect, the Western Interconnect, and the Texas 
Interconnect (which covers most of Texas). Each grid is 
formed by high-voltage connections that are used to transfer 
electric energy from one utility on the grid to another. The 
Eastern Interconnect and the Western Interconnect are 
themselves connected. See Electric Power Industry 2000 13- 
14 & Fig. 7. Wholesale exchanges of power over the grids 
enable utilities to obtain electric energy from sources other 
than their own generating plants. The grids therefore 
provide utilities with access to lower-cost sources of power 
and improve the reliability of the utilities’ services. Id. at 23. 
Today, “[v]irtually all” utilities in the continental United 
States are connected to a major grid. Id. at 14. Physically 
isolated power systems “have become a thing of the past.” 
Pet. App. 584a-585a. 

Within each grid, electric energy follows the path of least 
resistance. The energy divides among multiple parallel 
paths—which may or may not be owned by the utility that 
generates or sells the power—in order to find the path of 
least resistence between the generating station and the 
demand for power (“load”). Pet. App. 612a & n.144. That 
flow of electric energy over parallel paths, known as “loop 
flow,” is inevitable unless there is a direct (or “radial”) 
connection between the generation facility, at one end, and 

2 See H. Rustebakke, Electric Utility Systems and Practices 1, 13-26 
(4th ed. 1983) (describing typical power systems); Energy Information 
Administration, U.S. Dep’t of Energy, The Changing Structure of 
the Electric Power Industry 2000: An Update (Electric Power Industry 
2000) 9-16 (Oct. 2000) (<http://www.eia.doe.gov/cneaf/electricity/chg_stru_ 
update/update2000.html>); see also Connecticut Light & Power Co. v. 

FPC, 324 U.S. 515, 519-521 (1945) (describing utility’s facilities). 

5 

the load, at the other. See ibid.; R. Sarikas, Introduction to 
Electrical Theory and Power Transmission 56-57 (1995) 
(discussing radial transmission). Accordingly, “if any part of 
a supply of electric energy comes from outside of a state it is, 
or may be, present in every connected distribution facility.” 
Connecticut Light & Power Co. v. FPC, 324 U.S. 515, 529 
(1945).3 

2. The interconnected nature of transmission grids, and 
their use in interstate commerce, have increased dramati- 
cally since 1935, when Congress enacted the relevant provi- 
sions of the FPA. At that time, the electric power industry 
was composed of largely self-sufficient utilities with their 
own generation, transmission, and distribution facilities. 
Vertically integrated electric utilities were deemed natural 
monopolies, and they sold their generation, transmission, 
and distribution services as a single bundled service to 
wholesale and retail customers, under the oversight of state 
regulators. Pet. App. 217a-218a, 578a; Electric Power Indus- 
try 2000 5. Because electric energy could not yet be trans- 
mitted efficiently over long distances, local utilities were not 
linked into large, centralized systems. See United States v. 
Public Utils. Comm’n (California PUC), 345 U.S. 295, 302 
(1953). Nevertheless, local monopolies did interconnect with 
neighboring utilities, and issues arose around exchanges of 
electric energy in interstate commerce, which were beyond 
the States’ power to regulate. See, e.g., Public Util. 
Comm’n v. Attleboro Steam & Elec. Co., 273 U.S. 83 (1927). 
States likewise were unable to regulate the financial prac- 
tices of the interstate holding companies that controlled 
many local utilities. The practices of those holding com- 

3 Utilities typically contract to transmit power for each other “as if 
power flowed along one series of lines belonging to specific owners.” Pet. 
App. 612a. But “in reality power flows are rarely confined to a designated 
contract path.” Id. at 612a n.144 (quoting Indiana Mich. Power Co., 64 
F.E.R.C. ¶ 61,184 (1993)). 

6 

panies came under heavy criticism during the 1920s and 
early 1930s. See Gulf States Utils. Co. v. FPC, 411 U.S. 747, 
758 (1973); Electric Power Industry 2000 5. 

Congress enacted the Public Utility Act of 1935, ch. 687, 
49 Stat. 803, to address those concerns. The Public Utility 
Act “had two primary and related purposes.” Gulf States 
Utils., 411 U.S. at 758. First, Congress sought “to curb abu- 
sive practices of public utility companies by bringing them 
under effective control,” which was the subject of Title I of 
the 1935 Act, known as the Public Utility Holding Company 
Act (§§ 1-33, 15 U.S.C. 791a et seq.). See Arcadia v. Ohio 
Power Co., 498 U.S. 73, 75 (1990). Second, Congress wanted 
“to provide effective federal regulation of the expanding 
business of transmitting and selling electric power in inter- 
state commerce,” which was the subject of the provisions of 
the 1935 Act that became Part II of the FPA. Gulf States 
Utils., 411 U.S. at 758. Part II of the FPA (§§ 201-214, 16 
U.S.C. 824-824m) conferred on the Commission’s predeces- 
sor (the Federal Power Commission (FPC)) jurisdiction over 
specified activities of “public utilit[ies],” which as a practical 
matter meant investor-owned utilities as distinguished from, 
for example, municipal utilities. See 16 U.S.C. 824(e) and 
(f ).4 

In Section 201(a) of the FPA, 16 U.S.C. 824(a), Congress 
“declared that the business of transmitting and selling elec- 
tric energy for ultimate distribution to the public is affected 
with a public interest.” Congress further declared that 
federal regulation of power generation, transmission of elec- 
tric energy in interstate commerce, and the sale of electric 
energy at wholesale in interstate commerce, as provided in 
the Act, “is necessary in the public interest, such Federal 

4 The Public Utility Act of 1935 also amended the hydroelectric power 
provisions now found in Part I of the FPA, 16 U.S.C. 791a et. seq. 

7 

regulation, however, to extend only to those matters which 
are not subject to regulation by the States.” Ibid. 

Section 201(b), the principal jurisdictional provision of 
Part II of the FPA, provides in pertinent part that the 
federal regulatory scheme “shall apply to the transmission of 
electric energy in interstate commerce and to the sale of 
electric energy at wholesale in interstate commerce, but 
[with limited exceptions] shall not apply to any other sale of 
electric energy.” 16 U.S.C. 824(b)(1). Section 201(b) further 
grants the Commission “jurisdiction over all facilities for 
such transmission or sale of electric energy,” but generally 
denies the Commission jurisdiction “over facilities used for 
the generation of electric energy or over facilities used in 
local distribution or only for the transmission of electric 
energy in intrastate commerce.” 16 U.S.C. 824(b)(1). 

Section 201(c) provides that electric energy is transmitted 
in interstate commerce, for purposes of Part II, if it is 
“transmitted from a State and consumed at any point outside 
thereof” (but within the United States). 16 U.S.C. 824(c). 

The substantive provisions of Part II prohibit, among 
other things, unjust or unreasonable rates, and undue dis- 
crimination “with respect to any transmission or sale subject 
to the jurisdiction of the Commission.” 16 U.S.C. 824d(a) and 
(b) (FPA Section 205(a) and (b)). Section 205(c) of the FPA 
requires public utilities to file tariff schedules with the Com- 
mission, under such rules and in such form as the Commis- 
sion may prescribe, showing their rates and terms for 
service, along with related contracts for service. 16 U.S.C. 
824d(c). If the Commission finds that a public utility’s rate 
“for any transmission or sale subject to the jurisdiction of 
the Commission,” or any practice “affect[ing] such rate,” is 
“unjust, unreasonable, unduly discriminatory or preferen- 
tial,” the Commission must prescribe a lawful rate or prac- 
tice for the future. 16 U.S.C. 824e(a) (FPA Section 206(a)). 

8 

Part II of the FPA was intended in part to “fill the gap” 
between federal and state jurisdiction created by Public 
Utilities Commission v. Attleboro Steam & Electric Co., 
supra. New England Power Co. v. New Hampshire, 455 U.S. 
331, 340 (1982). In Attleboro, the Court had held that the 
Commerce Clause prohibited Rhode Island (or Massachu- 
setts) from regulating the rates charged by a Rhode Island 
utility for electricity delivered to a separate utility in 
Massachusetts, and that only Congress could regulate that 
wholesale transaction across state lines. See 273 U.S. at 84, 
89-90. Part II of the Act filled the jurisdictional void created 
by Attleboro by establishing exclusive federal jurisdiction 
over such transactions. New England Power, 455 U.S. at 
340. 

When drafting the FPA, Congress understood that 
Attleboro and earlier cases established that the States could 
not regulate “any wholesale [power] transaction in interstate 
commerce.” FPC v. Southern Cal. Edison Co. (Colton), 376 
U.S. 205, 213 n.8 (1964) (citing legislative history). Congress 
therefore extended federal regulation “to the sale of electric 
energy at wholesale in interstate commerce.” 16 U.S.C. 
824(b)(1) (FPA Section 201(b)(1)). Distinguishing wholesale 
sales from retail sales drew “a bright line easily ascertained” 
between federal and state jurisdiction. Colton, 376 U.S. at 
215; see 16 U.S.C. 824(d) (defining “sale of electric energy at 
wholesale” to mean “a sale of electric energy to any person 
for resale”). 

The Attleboro Court also had broadly held that “[t]he 
transmission of electric current from one State to another 

* * * is interstate commerce.” 273 U.S. at 86. Accordingly, 
and consistent with its goal of simplifying the process of 
deciding whether a particular transaction is subject to 
federal or state regulation, see Colton, 376 U.S. at 214-216, 
Congress included in Section 201(b) an additional grant of 
federal jurisdiction over “interstate transmission,” without 

9 

any language limiting that jurisdiction to wholesale transac- 
tions. 16 U.S.C. 824(b)(1); see S. Rep. No. 621, 74th Cong., 
1st Sess., Pt. 1 at 17, 19 (1935) (noting that “[o]ther features 
of th[e] interstate utility business,” besides interstate whole- 
sale transactions, are “immune from State control,” and that 
federal jurisdiction under Section 201(b) “includes interstate 
transmission where there is no sale”). 

At the same time, Congress intended to “tak[e] no author- 
ity from State commissions.” New England Power, 455 U.S. 
at 341 (quoting H.R. Rep. No. 1318, 74th Cong., 1st Sess. 8 
(1935)) (emphasis omitted). It instead wanted to establish 
federal regulation “over those matters which cannot effec- 
tively be controlled by the States.” S. Rep. No. 621, supra, 
Pt. 1 at 18. To that end, Congress provided that (as a gen- 
eral matter) the Commission’s jurisdiction would not extend 
“to any other sale of electric energy” not made the subject of 
federal regulation in Section 201(b). 16 U.S.C. 824(b)(1). 
Furthermore, while federal regulators would “have juris- 
diction over all facilities for such transmission or sale of 
electric energy” within their jurisdiction,5 as noted above 
they were denied general jurisdiction “over facilities used 
for the generation of electric energy or over facilities used in 
local distribution or only for the transmission of electric 
energy in intrastate commerce.” 16 U.S.C. 824(b)(1).6 

3. By the 1970s, technological changes were beginning to 
erode the natural monopoly character of the vertically inte- 
grated utilities. Relatively small and inexpensive generating 

5 The Senate Report explained that “[j]urisdiction is asserted also 
over all interstate transmission lines whether or not there is sale of the 
energy carried by those lines,” so that “steps can be taken to secure the 
planned coordination of this industry on a regional scale.” S. Rep. No. 621, 

supra, Pt. 1 at 48. 

6 Congress likewise did not assert federal jurisdiction “over facilities 
for the transmission of electric energy consumed wholly by the transmit- 
ter.” 16 U.S.C. 824(b)(1). 

10 

plants, generally fueled by natural gas, came over time to 
provide a cost-competitive alternative to the utilities’ large, 
capital-intensive plants. See Pet. App. 141a-146a; Electric 
Power Industry 2000 44-45. Continued improvements in 
transmission technologies made it possible to transmit 
electric power at higher voltages over longer distances, so 
that utilities with lower-cost plants or excess capacity could 
sell their power to customers as many as 1000 miles away. 
Pet. App. 147a. 

Federal legislation accelerated competition in the genera- 
tion of electric power. Congress enacted the Public Utility 
Regulatory Policies Act of 1978 (PURPA), Pub. L. No. 95- 
617, 92 Stat. 3117, to promote the development of alternative 
generating facilities that conserve traditional fossil fuels. 
Pet. App. 147a-149a; see FERC v. Mississippi, 456 U.S. 742, 
745-751 (1982). Among other things, PURPA required 
utilities to purchase power from the new alternative produc- 
ers. See 16 U.S.C. 824a-3. The ensuing proliferation of 
alternative generation facilities demonstrated that vertically 
integrated public utilities need not be the only source of 
reliable power. Pet. App. 149a. 

Other non-traditional sellers of electric power entered the 
market as well. They included independent power produc- 
ers, which do not own any transmission or distribution facili- 
ties; affiliates of traditional utilities; and power marketers 
(such as Enron Power Marketing, Inc., the petitioner in No. 
00-809), which sell power without owning the physical 
facilities used in connection with the sale. See Pet. App. 
149a-151a. 

By the 1990s, problems involving access to the traditional 
utilities’ transmission facilities had become a critical obstacle 
to the continued development of cheaper and more efficient 
sources of electric power. Pet. App. 152a-154a. As the court 
of appeals explained in this case, “[p]ower generators not 
permitted to use utilities’ transmission lines on reasonable 

11 

terms have no way to transmit their power to customers.” 
Id. at 11a. In the Energy Policy Act of 1992, Pub. L. No. 
102-486, 106 Stat. 2776, Congress authorized the Commission 
to order utilities to provide transmission service, known as 
“wheeling,” on a case-by-case basis for wholesale transac- 
tions. See 16 U.S.C. 824j, 824k (FPA Sections 211, 212); Pet. 
App. 154a-155a. In practice, however, case-by-case consid- 
eration of wheeling requests entailed significant delays that 
limited the practical value of wheeling. Pet. App. 157a-159a. 
So too, the Commission’s powers to require nondiscrimina- 
tion when utilities voluntarily offered transmission services 
to other generators, and in connection with utility mergers, 
were limited because they could be exercised only in those 
contexts. See generally id. at 159a-164a. 

4. a. By the mid-1990s, new generation facilities were pro- 
ducing power at as little as one-fifth of the cost of electricity 
generated by the traditional utilities’ most expensive large 
plants. See Pet. App. 170a. Consumers (particularly large 
industrial users) who paid high electric rates were demand- 
ing access to lower-priced energy. Id. at 171a; see Electric 
Power Industry 2000 41-44. 

The Commission responded by, among other things, issu- 
ing in March 1995 the notice of proposed rulemaking (Pet. 
App. 553a-644a) that led to Order No. 888.7 The Commission 
proposed to require public utilities to offer nondiscrimina- 
tory transmission services for wholesale power sales under 
standard tariff terms. See id. at 559a-560a. In proposing 
“open access,” the Commission reasoned that the traditional 
utilities’ exercise of “market power through control of trans- 
mission is the single greatest impediment to competition” in 

7 The Commission also initiated other proceedings “[t]o address the 
fact that the electric industry is becoming more competitive, and to 
remove barriers that might inhibit a more competitive industry.” Pet. 
App. 165a-166a (listing Commission initiatives). 

12 

bulk power markets. Id. at 558a. “Transmission is the vital 
link between sellers and buyers,” the Commission explained. 
Ibid. “To achieve the benefits of robust, competitive bulk 
power markets, all wholesale buyers and sellers must have 
equal access to the transmission grid. Otherwise, efficient 
trades cannot take place and ratepayers will bear unneces- 
sary costs.” Ibid. 

b. In April 1996, the Commission issued Order No. 888 
(Pet. App. 125a-369a). Based on comments submitted in re- 
sponse to its notice of proposed rulemaking, the Commission 
found that public utilities were commonly discriminating in 
violation of Section 205 of the FPA, 16 U.S.C. 824d, by 
denying access to their transmission networks or providing 
only inferior access. Pet. App. 207a-218a. The Commission 
determined that such discrimination would likely “increase 
as competitive pressures continue to grow in the industry, 
unless the Commission acts now to prevent such practices.” 
Id. at 213a. 

Invoking its authority under Sections 205 and 206 of the 
FPA to remedy the unlawful discrimination it had identified, 
the Commission required “functional unbundling” of whole- 
sale interstate transmission services. Pet. App. 178a. Spe- 
cifically, a public utility that owns or controls transmission 
facilities must: (1) obtain transmission service for its own 
wholesale transactions under terms and conditions set out in 
the same tariff of general applicability that the utility offers 
to unaffiliated transmission customers; (2) separately state 
rates for wholesale generation and transmission, as well as 
for “ancillary services” (such as scheduling and correction of 
energy imbalances) that are needed in connection with basic 
transmission service; and (3) when using the generally 
available transmission service, obtain information about its 
own transmission system by means of the same electronic 
information network that is made available to unaffiliated 
transmission customers. Ibid. The Commission published a 

13 

pro forma tariff containing minimum terms and conditions 
for nondiscriminatory open-access service, and required 
utilities to file tariffs containing those terms. Id. at 134a; see 
61 Fed. Reg. at 21,706-21,724 (pro forma tariff). The Com- 
mission declined, however, to order “a more intrusive and 
potentially more costly mechanism” for addressing discrimi- 
nation—requiring the utilities to divest their transmission 
facilities. Pet. App. 180a.8 

The Commission estimated that, as a result of its open- 
access requirement, consumers would realize cost savings of 
approximately $3.8 to $5.4 billion per year. Pet. App. 172a. 
The Commission also noted that at least 12 States, respond- 
ing to the same market opportunities for consumer savings 
and economic growth, had taken steps to give retail cus- 
tomers a choice of power suppliers. Id. at 169a & n.101. 

The Commission recognized that its unbundling rule 
implicated the allocation of jurisdiction over electric power 
services between the federal government and the States. In 
its lengthy analysis of jurisdictional issues, see Pet. App. 
332a-369a, the Commission concluded that when a public 
utility delivers electric energy in interstate commerce from a 
third-party supplier to a purchaser who will resell it, Section 
201(b) of the FPA provides the Commission exclusive juris- 
diction over the rates, terms, and conditions of that trans- 
mission service and any facilities used to provide it, even if 
those facilities might also be labeled “local distribution” 
facilities. Id. at 365a-366a. 

8 The Commission additionally addressed the problem of “stranded 
costs,” i.e., a utility’s inability to recoup its sunk costs when wholesale cus- 
tomers take advantage of open access to purchase power from other 
suppliers. In general, Order No. 888 allows a utility to recover such costs 
from a former customer if the utility is able to show a “reasonable expecta- 
tion” that, absent open access, it would have continued to sell power to the 
customer. See 61 Fed. Reg. at 21,628-21,664. 

14 

The Commission next concluded that it also has juris- 
diction over unbundled transmission services, and the facili- 
ties used to provide those services, where the power is 
transmitted in interstate commerce to retail customers who 
have the ability to choose their energy supplier. The Com- 
mission found it particularly “compelling” that Section 201 
gives the Commission jurisdiction over public utilities’ trans- 
mission of energy in interstate commerce “without qualifi- 
cation” and, in particular, without any limitation to transmis- 
sion in connection with wholesale transactions. Pet. App. 
306a. The Commission considered the illustrative example of 
a retail customer who purchases energy in interstate com- 
merce from a distant supplier, using the lines of intermediate 
utilities as well as the lines of the customer’s previous power 
supplier. Id. at 366a. In that situation, the Commission 
determined that it would have jurisdiction over all the 
transmission facilities used by the intervening utilities to 
deliver the power. Id. at 366a-367a. 

“The more difficult issue,” however, was “whether some 
portion of the facilities used to transmit energy from the 
transmitting utility in closest proximity to the end user (the 
former supplier of the bundled product) [would be] local 
distribution facilities,” and thus expressly subject to state 
regulation under Section 201(b)(1). Pet. App. 367a. The 
Commission concluded that “in most, if not all circumstances, 
some portion will be local distribution facilities.” Ibid.; see 
also id. at 305a. The Commission therefore identified seven 
“indicators” it will consider in determining whether particu- 
lar facilities a public utility uses for its unbundled transmis- 
sion of power for sale at retail are transmission facilities 
subject to federal jurisdiction in that context, or local 
distribution facilities subject to state jurisdiction. Id. at 

15 

368a; see id. at 309a-313a.9 The Commission stated, how- 
ever, that, in order to avoid regulatory conflict and to take 
advantage of state regulators’ expertise, it would defer to 
recommendations by state commissions when applying its 
seven factors. Id. at 311a-312a. 

The Commission emphasized that it was not claiming 
authority over any part of traditional arrangements in which 
the public utility bundles the retail sale of power together 
with the transmission of that power. “[W]hen transmission 
is sold at retail as part and parcel of the delivered product 
called electric energy,” the Commission explained, “the 
transaction is a sale of electric energy at retail,” and there- 
fore regulated by the States under Section 201(b). Pet. App. 
306a. But when electric energy is sold separately from 
transmission, potentially by another supplier, “the jurisdic- 
tional lines change.” Ibid. “In this situation,” the Commis- 
sion reasoned, “the state clearly retains jurisdiction over the 
sale of the power. However, the unbundled transmission 
service involves only the provision of ‘transmission in inter- 
state commerce’ which, under the FPA, is exclusively within 
the jurisdiction of the Commission.” Ibid. 

10 

9 The seven indicators are that: (1) “[l]ocal distribution facilities are 
normally in close proximity to retail customers;” (2) local distribution fa- 
cilities are primarily radial in character; (3) power flows into local distribu- 
tion systems, but rarely out; (4) power that enters a local distribution 
system is not reconsigned or transported on to some other market; 
(5) power entering a local distribution system is consumed in a compara- 
tively restricted geographical area; (6) meters measure flows into the local 
distribution system; and (7) local distribution systems have reduced 
voltage. Pet. App. 282a-283a. 

10 In practice, a power supplier that competes with the local public 
utility to serve an ordinary retail consumer typically serves that consumer 
by: generating or purchasing the necessary power; purchasing federally 
tariffed transmission service from the local public utility (and potentially 
other utilities as well) to deliver the power; purchasing local distribution 
service from the local public utility to deliver the power; and selling the 
power in a State-regulated retail transaction. The consumer would choose 

16 

Relatedly, the Commission emphasized that in asserting 
jurisdiction over the rates, terms, and conditions of the un- 
bundled transmission of power for sale at retail, it was not 
asserting jurisdiction to order utilities to unbundle their 
retail services, or to order transmission to any retail con- 
sumer. Pet. App. 306a; see also id. at 234a-235a. Indeed, in 
the Commission’s view, Section 212(h) of the FPA, 16 U.S.C. 
824k(h), “clearly prohibits” the Commission from ordering 
transmission to an ultimate consumer. Id. at 306a. 

11 The 
Commission explained that its jurisdiction attaches only if 
the utility provides unbundled transmission in interstate 
commerce for energy sold at retail. Ibid. Therefore, a utility 
need not file a federal tariff for transmission in connection 
with retail sales unless it is ordered by the State to provide 
such transmission, or it offers that service voluntarily. Ibid. 

The Commission observed that its jurisdiction over the 
rates, terms, and conditions of unbundled transmission 
would not affect the States’ authority to regulate matters 
traditionally within their jurisdiction, such as the siting of 
public utilities’ facilities, standards for local service reliabil- 
ity, and the availability of local retail electric service. Pet. 
App. 308a & nn.543, 544. Jurisdiction over such matters re- 
mains with the States, which “have jurisdiction in all cir- 
cumstances over the service of delivering energy to end 
users.” Id. at 311a. 

c. In Order No. 888-A (Pet. App. 371a-551a), the Com- 
mission addressed petitions for rehearing of Order No. 888 
and reaffirmed and clarified its jurisdictional holdings. See 
id. at 453a-456a, 465a-491a. The Commission rejected the 
argument that, by asserting jurisdiction over all unbundled 

between energy suppliers based on the price and quality of their delivered 
power. 

11 Section 212(h)(1) prohibits the Commission from issuing orders that 
are “condition[ed] upon or require the transmission of electric energy 

* * * directly to an ultimate consumer.” 16 U.S.C. 824k(h)(1). 

17 

transmission in interstate commerce, it was “taking away” 
state jurisdiction over transmission in connection with retail 
sales. In the Commission’s view, “[t]he fact that states 
historically regulated most retail transmission service as a 
part of a bundled retail power sale is * * * the practical 
result of the way electricity has historically been bought and 
sold,” but power markets are “rapidly changing.” Id. at 476. 
The Commission explained that it was not intruding upon 
the States’ historical jurisdiction, but rather applying the 
FPA to a new paradigm—not specifically contemplated by 
Congress in 1935—in which transmission service is provided 
in a separate transaction from the retail sale of energy, and 
sometimes by a separate provider. In “[t]oday’s unbundled 
world,” the Commission concluded, the States’ jurisdiction 
over retail sales of electric energy does not necessarily in- 
clude jurisdiction over associated transmission. Id. at 476a- 
478a. 

12 

5. The court of appeals affirmed Orders No. 888 and 888- 
A in all relevant respects. Pet. App. 3a-121a. In particular, 
the court rejected arguments by some States that the Com- 
mission asserted too much jurisdiction over unbundled trans- 
actions, and from some industry members that the Commis- 
sion asserted too little jurisdiction over bundled trans- 
actions. Id. at 27a-35a. 

The state petitioners argued that Section 201 of the FPA 
gives the Commission authority to regulate transmission of 
electric energy only when the energy is consumed in a State 
other than the one in which it was generated, and only when 
the transmission has not historically been regulated by the 
States. The States therefore maintained that the Com- 
mission exceeded its statutory authority by exercising juris- 

12 In Order No. 888-B (00-568 Pet. App. F1-F21), the Commission con- 
sidered petitions for rehearing of Order No. 888-A. Order No. 888-B is not 
material to the jurisdictional issues in these cases. 

18 

diction over the transmission component of all unbundled 
retail power transactions in interstate commerce. Pet. App. 
30a. 

Addressing those arguments, the court observed that 
“[b]oth FPA § 201(a) and (b) clearly and unambiguously 
confer upon [the Commission] jurisdiction over the ‘trans- 
mission of electric energy in interstate commerce.’ ” 
Pet. 

App. 32a. Furthermore, the court of appeals explained, in 
Jersey Central Power & Light Co. v. FPC, 319 U.S. 61 
(1943), and FPC v. Florida Power & Light Co., 404 U.S. 453 
(1972), this Court upheld assertions of federal jurisdiction 
over public utilities based upon their interstate interconnec- 
tion and the resulting energy flows. Pet. App. 32a-34a. 
Following those decisions, the court of appeals “conclude[d] 
that the FPA gives [the Commission] the authority to 
regulate [the unbundled] transmissions at issue here, 
whether retail or wholesale.” Id. at 34a. In the alternative, 
and even if this Court’s decisions and the text of the FPA did 
not clearly compel the Commission’s assertion of jurisdiction 
over the interstate transmission component of unbundled 
retail transactions, the court stated that it would be “hard 
pressed” to find the Commission’s construction of the FPA 
“unreasonable or impermissible,” and, accordingly, the court 
would defer to the Commission’s construction under Chevron 
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 
U.S. 837, 843 (1984). Pet. App. 35a. 

The court of appeals also rejected the private petitioners’ 
arguments that the Commission erred by not asserting juris- 
diction over transmission in bundled as well as unbundled 
retail transactions, and, on that basis, subjecting retail ser- 
vice that currently is bundled to the rates, terms, and 
conditions of the pro forma tariff set out in Order No. 888. 
Pet. App. 30a-31a, 35a. The court explained that Section 201 
of the FPA clearly establishes federal jurisdiction over 
transmission, and clearly preserves state jurisdiction over 

19 

local distribution facilities and retail sales, but “[t]he statute 
is much less clear about exactly where the lines between 
those activities are to be drawn.” Ibid. 

In the court’s view, 

“[a] regulator could reasonably construe transmissions bun- 
dled with generation and delivery services and sold to a 
consumer for a single charge as either transmission services 
in interstate commerce or as an integral component of a 
retail sale.” Ibid. The Commission’s decision to treat the 
transmission component of bundled retail sales as part of the 
retail sale of energy therefore “represents a statutorily 
permissible policy choice to which we must also defer under 
Chevron.” Ibid. 

The court of appeals next upheld, against challenge by the 
petitioner States, the Commission’s assertion of exclusive ju- 
risdiction over the transmission of electricity to a wholesale 
purchaser, to the extent that it occurs over facilities that 
would be State-regulated “local distribution” facilities in the 
context of a retail transaction. Pet. App. 35a-39a. The court 
determined that “FPA § 201(a) makes clear that all aspects 
of wholesale sales are subject to federal regulation, regard- 
less of the facilities used.” Id. at 38a. 

Finally, the court of appeals upheld the Commission’s 
approach to distinguishing local distribution facilities from 
transmission facilities in the context of unbundled retail 
transactions. Pet. App. 39a. The court pointed out that 
while Section 201(b)(1) assigns the States jurisdiction over 
“facilities used in local distribution,” Congress did not define 
this statutory phrase. Ibid. Because the Commission’s 
multi-factor approach to interpreting and applying “unde- 
fined and ambiguous” statutory language was reasonable, 
the court concluded that it warrants Chevron deference. 
Ibid. 

20 

SUMMARY OF ARGUMENT 

I. A. Section 201(b) of the FPA authorizes the Com- 
mission to regulate “the transmission of electric energy in 
interstate commerce.” 16 U.S.C. 824(b)(1). Because electric 
energy “commingles” in interconnected power systems with- 
out regard to its source or the ultimate user of the energy, 
see FPC v. Florida Power & Light Co., 404 U.S. 453, 463 
(1972), Congress’s express grant of authority over interstate 
transmission allows the Commission to regulate all transmis- 
sions over power systems that are connected to an interstate 
power grid. New York never asked the Commission to 
consider its factual argument (Pet. Br. 45 n.28) that the 
electric energy of a particular generating station is used only 
by those consumers nearest to the station, and that argu- 
ment is contrary to precedent. 

B. New York’s claim that federal jurisdiction over inter- 
state transmission extends only to transmission associated 
with wholesale sales of energy likewise conflicts with the 
text of Section 201(b). Whereas Congress expressly confined 
the Commission’s jurisdiction over sales of energy in inter- 
state commerce to wholesale sales, the Commission’s juris- 
diction over interstate transmission is not similarly quali- 
fied. This Court’s interpretation of the analogous juris- 
dictional provision of the Natural Gas Act, 15 U.S.C. 717(b), 
confirms that the Commission’s jurisdiction over interstate 
transmission is in addition to, and is not limited by, the 
Commission’s jurisdiction over wholesale sales of energy. 
FPC v. Louisiana Power & Light Co., 406 U.S. 621, 636 
(1972). 

The FPA does reserve jurisdiction over non-wholesale 
sales of energy, and over facilities used in the local distri- 
bution of energy, to the States. But those carve-outs from 
federal jurisdiction do not limit the Commission’s jurisdiction 
over interstate transmission services. 

21 

C. Congress’s declaration of policy in Section 201(a) of the 
FPA, 16 U.S.C. 824(a), further confirms that the Commission 
has jurisdiction over wholesale sales of energy and, sepa- 
rately, over interstate transmission of energy (whether for 
wholesale sales or for retail sales). Although New York 
relies heavily on the FPA’s legislative history to support its 
contrary argument, New York has not identified a single 
statement in which a legislator asserted that the States 
would regulate interstate transmission if such transmission 
were offered separately from electric energy and consumers 
had a choice of energy suppliers. Because the legislators 
who drafted the FPA deemed vertically integrated public 
utilities to be natural monopolies, they did not contemplate 
the provision of transmission service for retail transactions 
separately from retail sales of energy. 

Relying on cases addressing federal preemption of tradi- 
tional state regulation, New York argues (Pet. Br. 13-17) 
that because Congress did not contemplate unbundled trans- 
mission in connection with retail sales of energy, it could not 
have made a sufficiently clear assertion of federal jurisdic- 
tion over that service. The absence of any historical tradi- 
tion of state regulation of the new service of unbundled 
transmission for retail transactions renders New York’s case 
law inapposite. In any event, Section 201(b) does unequivo- 
cally assign the Commission jurisdiction over “the transmis- 
sion of electric energy in interstate commerce.” 

D. Order No. 888 leaves traditional state regulation 
undisturbed. The Commission explained in Order No. 888 
(see Pet. App. 303a-315a) that its rules would not divest the 
States of jurisdiction over retail sales of electric energy or 
local distribution facilities, and that the States retain juris- 
diction over other local matters such as power production, 
siting of facilities, customer service, and local service 
reliability. The current energy crisis in California, more- 
over, does not support New York’s policy arguments against 

22 

Order No. 888. That situation involves supply and demand 
factors and rules governing power markets that are entirely 
unrelated to the allocation of jurisdiction over unbundled 
transmission service. 

II. Although Congress clearly intended to assign the 
Commission jurisdiction over transmission in interstate com- 
merce when that transmission is separate from a sale of 
electric energy, nothing in the FPA clearly resolves the 
question of whether—in a market where energy can poten- 
tially be purchased from suppliers other than the traditional 
local utility—a public utility’s bundled retail sale of energy 
and associated transmission should be treated as a single 
transaction subject to state regulation, or, instead, as both a 
transmission transaction subject to federal regulation and a 
retail sale of energy subject to state regulation. The Com- 
mission reasonably resolved that ambiguity in the statute by 
adhering to 65 years of practice under the FPA, and holding 
that transmission provided as part of a bundled retail sale of 
electric energy is subject to state jurisdiction. 

ARGUMENT 

Under the Commission’s jurisdictional holding, traditional 
state regulation is not disturbed, but the Commission is able 
to apply nondiscrimination rules uniformly to all unbundled 
interstate transmission, thus preventing public utilities from 
abusing their control over the transmission facilities that are 
needed to support competitive power markets. Wholesale 
customers, and retail customers in States that have author- 
ized competition in the retail market, can be served over 
interstate transmission grids on a nondiscriminatory basis, 
giving them a meaningful opportunity to consider alternative 
suppliers. When an incumbent utility operates as a tradi- 
tional monopoly utility and sells generation, transmission, 
and distribution to the consumer in a bundled package, how- 
ever, the State will continue to regulate that bundled retail 

23 

service. The Commission’s interpretation and application of 
the FPA in these circumstances establishes a sound and 
workable regulatory framework that fully complies with the 
text of the Federal Power Act and the underlying legislative 
intent. 

I. THE COMMISSION CORRECTLY INTERPRETED 
THE FEDERAL POWER ACT AS ESTABLISHING 
FEDERAL JURISDICTION OVER UNBUNDLED 

TRANSMISSION OF ELECTRIC ENERGY IN 
INTERSTATE COMMERCE 

New York, as petitioner in No. 00-568, argues (N.Y. Pet. 
Br. 10-11) that the Commission is “attempting to preempt” 
state jurisdiction over transmission that historically has 
been regulated by the States, and that the FPA precludes 
federal regulation of any aspect of retail service. New York 
failed to preserve the arguments on which it principally 
relies in this Court, and it is, in any event, incorrect on the 
merits. 

A. Transmission By A Utility That Utilizes An Inter- 
state Grid Is “In Interstate Commerce” 

The plain language of Section 201(b)(1) of the FPA estab- 
lishes federal jurisdiction over “the transmission of electric 
energy in interstate commerce” and “all facilities for such 
transmission,” but excludes from the Commission’s jurisdic- 
tion “facilities used * * * only for the transmission of 
electric energy in intrastate commerce.” 16 U.S.C. 824(b)(1). 
Section 201(c) provides that “electric energy shall be held to 
be transmitted in interstate commerce if transmitted from a 
State and consumed at any point [within the United States] 
outside thereof.” 16 U.S.C. 824(c). Therefore, subject to 
exclusions that preserve state jurisdiction over retail sales of 
energy and over local distribution facilities (which we dis- 
cuss in Part I.B., below), Congress vested the Commission 
with jurisdiction over all transmission of electric energy that 

24 

involves origination and consumption in different States, and 
over all the facilities used for such transmission. That 
express assertion of federal authority defeats New York’s 
claim of state jurisdiction. 

1. New York argues (New York Pet. Br. 36-37, 43-46) 
that Section 201(b)’s seemingly broad assignment of juris- 
diction over interstate transmission to the Commission is 
illusory, because the Commission may not assert jurisdiction 
over a public utility’s transmission service under that provi- 
sion unless it “show[s] that essentially every electron used 
by a retail customer in each state [served by the utility] 

* * * is generated in a different state” (id. at 45 n.27). This 
Court’s decisions foreclose New York’s exceedingly narrow 
view of the Commission’s transmission jurisdiction and 
establish the very different rule that when utilities connect 
their facilities to an interstate grid, their electricity pre- 
sumptively flows “in interstate commerce” for purposes of 
Section 201. See Pet. App. 336a (“[T]he highly integrated 
nature of the electric system * * * results in most trans- 
mission of electric energy being ‘in interstate commerce.’ ”). 

In Connecticut Light & Power Co. v. FPC, 324 U.S. 515 
(1945), the Court explained that the “[t]echnology of the 
business is such that if any part of a supply of electric energy 
comes from outside of a state it is, or may be, present in 
every connected distribution facility.” Id. at 529. Accord- 
ingly, the Court observed in Arkansas Electric Cooperative 
Corp. v. Arkansas Public Service Commission, 461 U.S. 375, 
381 (1983), that when a utility is “ultimately tied into a 
multicompany and multistate ‘grid,’ * * * it is difficult to 
say with any confidence that the power [the utility] provides 
to its [customers] at any particular moment originated 
entirely within the State.” See also New England Power Co. 

v. New Hampshire, 455 U.S. 331, 336 (1982) (when the utility 
is connected to a regional transmission network, it is 

25 

“impossible to contain” power generated by the utility 
within the State where it is generated). 

A utility may take extraordinary measures to isolate its 
operations from interstate transmission. In Connecticut 
Light & Power, for example, federal jurisdiction was put in 
doubt when “the [utility] rearranged its operations with 
intent to cut every connection and discontinue every facility 
whose continued operation would render it subject to the 
Federal Power Commission’s control.” 324 U.S. at 518-519. 
But such a quarantine from the interstate grid must be 
complete to be effective for jurisdictional purposes. In 
Jersey Central Power & Light Co. v. FPC, 319 U.S. 61 
(1943), Jersey Central was deemed to use its facilities “for 
the transmission of electric energy across state lines” even 
though it had no direct connection to any utility outside New 
Jersey, on the ground that one of Jersey Central’s in-state 
customers exchanged power (some of which came from 
Jersey Central) with a New York company. Id. at 63-67. 
Similarly, in FPC v. Florida Power & Light Co., 404 U.S. 453 
(1972), Florida Power was “unusually insular and indepen- 
dent” as a result of Florida’s “peninsular nature” and the 
risk of hurricane damage to transmission lines. But although 
Florida Power had no direct connection with any out-of-state 
utility, it did connect with an adjacent Florida utility that, in 
turn, connected to a Georgia utility and an interstate power 
grid. Id. at 456-457. The Court held that Florida Power 
transmitted electricity in interstate commerce if any of its 
power reached the Georgia company, or vice-versa, “no 
matter how small the quantity.” Id. at 454-455, 458, 461 n.10. 
Because Florida Power’s energy “commingled” with the 
Georgia company’s energy by virtue of the connection 
through the second Florida utility, this Court held that Flor- 
ida Power transmitted energy in interstate commerce and 
was subject to the Commission’s jurisdiction. Id. at 458, 461, 
463. 

26 

New York asserts (N.Y. Pet. Br. 37-39, 40, 43-44) that 
Jersey Central and Florida Power addressed only the ques- 
tion of whether the public utility itself was subject to 
Commission jurisdiction, and did not hold that every 
transmission of electricity by an interconnected utility is 
subject to federal regulation. New York further suggests 
that considering transmissions to be “in interstate com- 
merce” on the basis that the utility is connected to an inter- 
state grid renders Section 201(c) of the FPA “[n]early 
[n]ugatory,” because virtually all transmission would be 
across state lines. Id. at 44-45. 

New York overlooks that the Commission’s open-access 
requirements apply only to “unbundled transmission in 
interstate commerce.” Pet. App. 332a (emphasis added); see 
id. at 479a (Order No. 888-A) (Commission has exercised 
jurisdiction over “retail wheeling in interstate commerce 
that is ordered by a state or that is provided voluntarily”). 
The Commission acknowledged that it has no jurisdiction 
under Sections 205 and 206 of the FPA over unbundled retail 
transmission in Alaska, Hawaii, and much of Texas, “since 
transactions in those areas are intrastate.” Pet. App. 305a 

n.541. In theory, moreover, any public utility could attempt 
to show that particular transmissions involve exclusively 
intrastate energy. Cf. Florida Power, 404 U.S. at 457 n.8, 
469 (discussing “tracing studies” and expert testimony used 
to establish federal jurisdiction); N.Y. Pet. Br. 45 n.28 
(noting the theoretical possibility of closed, “radial” 
transmission systems). 

The important point for present purposes, however, is the 
practical reality that physically isolated utilities “have be- 
come a thing of the past.” Pet. App. 585a. As utilities have 
connected to interstate networks, their electric energy has 
commingled with other energy in the networks “just as 
molecules of water from different sources (rains, streams, 
etc.) would be commingled in a reservoir.” Florida Power, 

27 

404 U.S. at 461. Consequently, the energy the intercon- 
nected utilities sell off of the interstate grids is in interstate 
commerce. See ibid.; cf. California v. Lo-Vaca Gathering 
Co., 379 U.S. 366 (1965) (commingling of natural gas within 
Commission jurisdiction with gas outside of Commission’s 
jurisdiction establishes Commission jurisdiction over all of 
the gas). Even New York’s amicus recognizes that fact. Cal. 
Br. 11 (“[W]hen any part of the electricity moves across 
state lines, transmission all the way to the retail customer is 
transmission in interstate commerce.”). 

The overwhelmingly interstate nature of electrical trans- 
mission therefore has to do with the evolution of electric 
power systems, not Order No. 888. Indeed, Congress was 
well aware in 1935 that the Act gave federal regulators 
broad jurisdiction over interconnected utilities and their 
transmission services. 

13 

New York concedes that the view “that all transactions 
affect the entire grid * * * is arguably accurate, from a 
theoretical standpoint” (N.Y. Resp. Br. 25), but nevertheless 

13 See S. Rep. No. 621, 74th Cong., 1st Sess., Pt. 2 at 5 (minority views) 
(stating that, because “it is almost always impossible to separate * * * 
transmission facilities between those used only for energy sold interstate 
and energy sold intrastate,” the FPA would cause “almost complete 
displacement of State jurisdiction over electric utilities”); 00-568 Pet. App. 
L-35 to L-36 (testimony of FPC Solicitor DeVane that the draft legislation 
“gives the Commission control over interstate transmission facilities” and 
that, “not withstanding 90 percent of the business is intrastate and 10 
percent is interstate, this bill gives [the FPC] the power to regulate”); 
Public Util. Holding Co. Act of 1935: Hearings on S. 1725 Before the 
House Comm. on Interstate Commerce, 74th Cong., 1st Sess. 241 (1935) 
(testimony of Solicitor DeVane that interconnection between power 
systems “would tend to greatly increase the percentage” of power trans- 
ferred across state lines); Enron Pet. Br. 30 n.20 (quoting House com- 
mittee hearings). In Florida Power, Justice Douglas stated in dissent that, 
in light of the Court’s holding, “every privately owned interconnected 
facility in the United States (except for those isolated in Texas) is within 
the FPC’s jurisdiction.” 404 U.S. at 471. 

28 

suggests that “[m]ost electricity used in the United States is 
generated in the state where it is used” (N.Y. Pet. Br. 5). See 
also id. at 45 n.28; N.Y. Resp. Br. 25-26. That argument 
echoes an argument this Court implicitly rejected in Florida 
Power. See 404 U.S. at 462 (noting Florida Power’s argu- 
ment that “all of [its] power will be exhausted * * * before 
the point, further down the line, where Georgia’s load inter- 
venes”); id. at 469 (upholding Commission finding that 
energy traveled across the Florida border). New York, 
moreover, did not present its factual claims about network 
operations to the Commission or to the court of appeals, and 
they therefore are not properly before this Court. See FPC 

v. Sunray DX Oil Co., 391 U.S. 9, 36 n.21 (1968); Glover v. 
United States, 121 S. Ct. 696, 701 (2001); see also 16 U.S.C. 
825l(b) (barring judicial review of claims not raised in peti- 
tion for rehearing). In any event, even if a particular utility 
could show that its transmission service involves mostly 
intrastate energy, that would not defeat federal jurisdiction, 
for “Congress has not ‘conditioned the jurisdiction of the 
Commission upon any particular volume or proportion of 
interstate energy involved.’ ” Florida Power, 404 U.S. at 461 

n.10 (quoting Connecticut Light & Power, 324 U.S. at 536). 
Indeed, under the express terms of Section 201(b)(1), trans- 
mission facilities (other than local distribution facilities) are 
within the Commission’s jurisdiction unless they are used 
“only for the transmission of electric energy in intrastate 
commerce.” 16 U.S.C. 824(b)(1) (emphasis added). 

B. Congress Did Not Exclude Unbundled Retail Trans- 
mission From The Commission’s Jurisdiction Over 
Interstate Transmission 

1. New York further argues (N.Y. Pet. Br. 30-31) that 
the Commission’s jurisdiction over interstate transmission is 
limited to transmission provided in connection with whole- 

29 

14 Section 201(b), however, states that 
“[t]he provisions of this subchapter shall apply to the 
transmission of electric energy in interstate commerce and 
to the sale of electric energy at wholesale in interstate 
commerce.” 16 U.S.C. 824(b)(1). As the court of appeals 
held, that plain language “clearly and unambiguously con- 
fer[s] upon [the Commission] jurisdiction over the ‘trans- 
mission of electric energy in interstate commerce,’ ” in addi- 
tion to “the sale of electric energy at wholesale in interstate 
commerce.” Pet. App. 32a, 34a. 

Decisions under the Natural Gas Act of 1938, 15 U.S.C. 
717 et seq., confirm that the Commission’s jurisdiction over 
wholesale sales of energy supplements the Commission’s ju- 
risdiction over transmission, rather than limiting that juris- 
diction. See Pet. App. 361a-365a. Because large portions of 
the Natural Gas Act “are in all material respects substan- 
tially identical” to the FPA, this Court “cit[es] inter- 
changeably decisions interpreting the pertinent sections of 
the two statutes.” Arkansas La. Gas Co. v. Hall, 453 U.S. 
571, 577 n.7 (1981). Moreover, as with the FPA, the Natural 
Gas Act was drafted in a time of bundled retail sales. See 
Pet. App. 304a, 362a-363a. 

15 Section 1(b) of the Natural Gas 
Act, which is relevant here, closely tracks Section 201(b) of 

14 That argument is outside the scope of the question on which this 
Court granted certiorari. See Sup. Ct. Rule 14(1)(a). Question 1 of New 
York’s petition in No. 00-568, on which this Court granted certiorari, 
raised only the question of the Commission’s power to assert jurisdiction 
over “intrastate retail transmissions of electric energy” transmitted “from 
generators to retail customers in the same state.” New York Pet. i 
(emphasis added). 

15 As under the FPA, however, the Commission has implemented an 
open-access program under the Natural Gas Act. That program is similar 
in many respects to the open-access program established by Order No. 
888. See generally United Distrib. Cos. v. FERC, 88 F.3d 1105 (D.C. Cir. 
1996) (addressing jurisdictional and other challenges to open-access pro- 
gram under Natural Gas Act). 

sale transactions. 

30 

the FPA: Commission jurisdiction extends to “the trans- 
portation of natural gas in interstate commerce, [and] to the 
sale in interstate commerce of natural gas for resale,” but 
“not * * * to any other transportation or sale of natural gas 
or to the local distribution of natural gas, or to the facilities 
used for such distribution.” 15 U.S.C. 717(b). In FPC v. 
Louisiana Power & Light Co., 406 U.S. 621 (1972), the Court 
explained that Section 1(b) establishes federal jurisdiction 
over: “(1) the transportation of natural gas in interstate 
commerce; (2) its sale in interstate commerce for resale; and 
(3) natural gas companies engaged in such transportation or 
sale.” Id. at 636 (quoting Panhandle E. Pipeline Co. v. Pub- 
lic Serv. Comm’n, 332 U.S. 507, 516 (1947)). Accordingly, the 
Natural Gas Act “applies to interstate ‘transportation’ re- 
gardless of whether the gas transported is ultimately sold 
retail or wholesale.” Ibid. (quoting FPC v. East Ohio Gas 
Co., 338 U.S. 464, 468 (1950)); see id. at 637-638. New York’s 
argument that the Commission has jurisdiction over inter- 
state transmission under the FPA only if the electric energy 
being transmitted is sold at wholesale fails under a parallel 
analysis. 

2. The Commission recognized (see generally Pet. App. 
332a-369a) that Congress, having established “broad” federal 
jurisdiction as a general matter over interstate transmission, 
wholesale sales, and associated facilities in Section 201(b)(1), 
then confined that grant in specified ways in order “to re- 
spect state rights and local institutions.” Connecticut Light 
& Power, 324 U.S. at 530. As relevant here, Congress 
carved out from the Commission’s sphere, and reserved to 
the States, jurisdiction over (1) “any other sale of electric 
energy” and (2) “facilities used in local distribution.” 16 
U.S.C. 824(b)(1). Neither of those exclusions denies the 
Commission the authority to regulate unbundled interstate 
transmission in connection with retail sales. 

31 

a. “Any Other Sale of Energy.” New York does not 
suggest that transmission in connection with retail sales is 
an “other sale of electric energy” for purposes of Section 
201(b)(1). That reservation of state jurisdiction refers back 
to Congress’s assertion, earlier in Section 201(b)(1), of fed- 
eral jurisdiction over “the sale of electric energy at whole- 
sale in interstate commerce.” 16 U.S.C. 824(b)(1). Together, 
those two provisions establish the “bright line” between 
wholesale and retail sales of which this Court has spoken. 
Colton, 376 U.S. at 215; see S. Rep. No. 621, supra, Pt. 1 at 
48 (noting that Section 201(b) establishes federal jurisdiction 
over wholesale sales but not retail sales). The “sales” 
provisions simply do not address the Commission’s jurisdic- 
tion over transmission. Transmission consists of 
transporting energy in bulk from generating stations, 
typically to the local distribution facilities that serve most 
end users; although transmission service may be sold with 
energy on a bundled basis, transmission is not itself a sale of 
energy. See Pet. App. 305a-306a, 334a-335a 

b. “Facilities Used In Local Distribution.” The Com- 
mission identified seven indicators that will guide its deter- 
mination whether particular facilities of a public utility are 
transmission facilities subject to federal jurisdiction, or, 
alternatively, local distribution facilities subject exclusively 
to state jurisdiction when used in connection with a retail 
sale of energy. See Pet. App. 365a-369a. Without challeng- 
ing the specifics of that test, California suggests (Br. 7-17) 
that, when Congress assigned jurisdiction over “facilities 
used in local distribution” to the States, it disclaimed federal 
regulation of each and every facility, including transmission 
facilities, that supports retail electric service. See also N.Y. 
Pet. Br. 31-33. 

California’s theory cannot be reconciled with the text of 
Section 201(b)(1). As discussed above, that section limits the 
Commission’s jurisdiction over interstate sales of energy to 

32 

sales “at wholesale,” but does not similarly limit the Com- 
mission’s jurisdiction over interstate transmission and trans- 
mission facilities. 16 U.S.C. 824(b)(1). If Congress had 
intended to limit the Commission’s transmission jurisdiction 
to transmission in connection with wholesale sales, it would 
have done so explicitly, just as it did when limiting the Com- 
mission’s sales jurisdiction to wholesale transactions. Con- 
gress would not have hidden its intent regarding transmis- 
sion service associated with retail sales in a reference to 
“facilities used in local distribution.” 16 U.S.C.(b)(1). 

16 

California’s argument that all facilities used to provide 
transmission in connection with retail sales are “used in local 
distribution” also is contrary to industry usage of the term 
“distribution,” which refers to lower-voltage circuits that 
provide electricity to customers over relatively short dis- 
tances. Compare H. Rustebakke, supra, at 122 (defining 
“transmission”) with id. at 199 (defining “distribution sys- 
tem”). Indeed, legislative history that New York quotes 
selectively (N.Y. Pet. Br. 33), when read in full, confirms 
that Congress drew a jurisdictional line based on the 
physical distinction between transmission systems and local 
distribution facilities. See 00-568 Pet. App. L-32 (testimony 
of FPC Solicitor DeVane that “[t]he bill does not give the 
Commission any jurisdiction whatever over facilities used in 
local distribution or the transmission facilities that are used 
in connection with such local distribution, unless they are 
also a part of the facilities that are used in interstate com- 
merce.”) (emphasis added). 

16 If Congress had intended to limit the Commission’s transmission 
jurisdiction as California suggests, it logically would have begun Section 
201(b) by saying something like: “The provisions of this subchapter shall 
apply to the sale of electric energy at wholesale in interstate commerce 
and to the transmission of electric energy in interstate commerce for such 
sales * * * .” 

33 

This Court’s cases further foreclose California’s claim that 
transmission facilities used for retail sales are local distribu- 
tion facilities. In Connecticut Light & Power, the Court 
reviewed an FPC determination that local distribution be- 
gins where “the function of conveyance in bulk over a dis- 
tance, which is the essential characteristic of ‘transmission,’ 
is completed and the process of subdividing the energy to 
serve ultimate consumers * * * is begun.” 324 U.S. at 533 
(quoting FPC order). Although the Court found the FPC’s 
rationale for its jurisdictional line insufficient, both the 
majority and the dissenting Justices agreed with the FPC 
that distinguishing transmission facilities from facilities used 
in local distribution was a matter of identifying an “exact 
point” of demarcation in the network. Id. at 534, 539, 541. 
Similarly, the Court held in Colton that deciding whether 
facilities are used in local distribution implicates “the 
specialized experience of the FPC in determining such 
questions.” 376 U.S. at 210 n.6. Neither case suggests that a 
facility is “local” simply because it is used in connection with 
a retail transaction. 

FPC v. East Ohio Gas Co. likewise undermines Califor- 
nia’s theory that the retail or wholesale nature of the sale of 
energy determines whether facilities are used in local 
distribution. The natural gas company in that case sold gas 
recovered from wells in various States, but the company had 
facilities only in Ohio and sold its gas only at retail within 
Ohio. 338 U.S. at 467-468. The company argued that all of 
its facilities were local distribution facilities subject to 
exclusive state jurisdiction under Section 1(b) of the Natural 
Gas Act, 15 U.S.C. 717(b). Id. at 468-469. The Court 
rejected that argument, holding that federal jurisdiction 
extends to the transportation of gas in interstate commerce 
through high-pressure transmission lines for delivery to 
retail customers, and that local distribution does not begin 
until the point where the gas enters local mains. Id. at 468- 

34 

470. The fact that the company sold “direct to consumers 
rather than for resale” was “immaterial.” Id. at 473. 

Contrary to California’s contention (Br. 24-25), East Ohio 
remains good law. In Louisiana Power & Light, the Court 
explicitly relied upon East Ohio’s jurisdictional analysis and 
quoted it at length. 406 U.S. at 636-637 & n.13. And East 
Ohio has been “repudiated” (Cal. Br. 24) only in the sense 
that Congress later amended the Natural Gas Act by adding 
a new provision that effectively overturned East Ohio in the 
natural gas context. See General Motors Corp. v. Tracy, 519 
U.S. 278, 293 (1997). Congress has never made a parallel 
amendment to the FPA. 

17 Finally, there is no inconsistency 
between the rule of East Ohio and the holding of Pennsylva- 
nia Gas Co. v. Public Service Commission, 252 U.S. 23 
(1920). See Cal. Br. 9-10, 24-25. Pennsylvania Gas, which 
predates both the FPA and the Natural Gas Act, stands for 
the proposition that “the furnishing of natural gas to local 
consumers within [a] city” is local service subject to state 
regulation. 252 U.S. at 31. Consistent with that principle, 
Order No. 888 reaffirmed that the States have jurisdiction 
over sales of energy to retail customers. See Pet. App. 306a. 

C. The Commission’s Jurisdictional Holding Is Con- 
sistent With Congress’s Purposes In Enacting 
Section 201 

1. New York places great weight on Section 201(a), 
which “declare[s] * * * that Federal regulation * * * of 
the transmission of electric energy in interstate commerce 

17 The so-called “Hinshaw Amendment” added a new Section 1(c), 
15 U.S.C. 717(c), to the Natural Gas Act. Section 1(c) provides, among 
other things, that facilities used in the transportation of natural gas in 
interstate commerce, or in the sale of natural gas in interstate commerce 
for resale, are exempt from the Commission’s jurisdiction if the gas is 
received within or at the boundary of a State and is consumed within the 
State, and if the State has asserted jurisdiction. New York is, in effect, 
asking this Court to write a similar amendment into the FPA. 

35 

and the sale of such energy at wholesale in interstate com- 
merce is necessary in the public interest, such Federal 
regulation, however, to extend only to those matters which 
are not subject to regulation by the States.” 16 U.S.C. 
824(a); see N.Y. Pet. Br. 16, 18-26, 27-28, 30-34. 

Congress’s declaration of policy does not trump the 
specific jurisdictional rules set out in Section 201(b). In FPC 

v. Southern Cal. Edison Co., 376 U.S. 205 (1964), the Court 
explained that whereas “Section 201(b) embodies a clear 
grant of power,” Section 201(a) is “merely a ‘policy declara- 
tion . . . of great generality’” that “cannot nullify a clear 
and specific grant of jurisdiction, even if the particular grant 
seems inconsistent with the broadly expressed purpose.” Id. 
at 215 (quoting Connecticut Light & Power, 324 U.S. at 527). 
In any event, Section 201(a) states the same rule as Sec- 
tion 201(b): the Commission has jurisdiction over wholesale 
sales of energy in interstate commerce and, independently, 
over the transmission of energy in interstate commerce. 
Even if one were to read Section 201(a)’s “ambiguous refer- 
ence to ‘matters . . . subject to regulation by the States’ ” 
(United States v. Pub. Utils. Comm’n (California PUC), 345 
U.S. 295, 308-309 (1953)) as covering all matters that 
traditionally have been regulated by the States (see N.Y. 
Pet. Br. 27-28), that would not help New York in this case. 
The States have not traditionally regulated unbundled 
interstate transmission associated with retail sales. 

In that regard, it is important to emphasize the fallacy of 
New York’s repeated assertions (N.Y. Pet. Br. 8-9, 27, 35) 
that the only difference between today’s unbundled trans- 
mission and the bundled retail service that Congress had in 
mind in 1935 “is a change in bill format.” Id. at 8; see also 
Enron Br. 18, 37. As used in Order No. 888, “unbundling” is 
one aspect of the Commission’s broader concept of “open 
access,” under which public utilities are required to provide 
nondiscriminatory access to their transmission systems so 

36 

that purchasers of power have a meaningful opportunity to 
obtain power across the grid from alternative suppliers. Pet. 
App. 133a-134a, 178a. The Commission has not asserted 
jurisdiction over unbundled retail transmission simply 
because a public utility bills its retail customers separately 
for generation and transmission. Rather, the Commission’s 
open-access tariff and its jurisdiction over rates, terms, and 
conditions of interstate transmission in connection with 
retail sales apply when the traditional, bundled transaction 
“is broken into two products that are sold separately (per- 
haps by two different suppliers: an electric energy supplier 
and a transmission supplier),” and the customer can choose 
an energy supplier. Id. at 306a; see id. at 476a-477a. The 
defining difference between bundled retail service and 
unbundled services is the customer’s opportunity to choose a 
different power supplier if the local public utility fails to 
offer a competitive price and quality of service. And as the 
Commission recognized, that opportunity to choose is not 
meaningful unless alternative suppliers have access to 
essential transmission facilities on nondiscriminatory terms 
and conditions. Id. at 558a. 

New York also suggests (N.Y. Pet. Br. 24 n.12, 36, 40) that 
Section 206(d) of the FPA, 16 U.S.C. 824e(d), shows that 
Congress did not intend to give the Commission jurisdiction 
to set rates for any services associated with retail sales of 
energy. See also Cal. Br. 17-18. Section 206(d) authorizes 
the Commission to “investigate and determine the cost of the 
production or transmission of electric energy by means of 
facilities under the jurisdiction of the Commission in cases 
where the Commission has no authority to establish a rate 
governing the sale of such energy.” 16 U.S.C. 824e(d). That 
authority would be useful, for example, when a single public 
utility generates electric power in one State and sells it to 
retail customers in another State, or when a single utility’s 
service area straddles a state line. See H.R. Rep. No. 1318, 

37 

74th Cong. 1st Sess. 29 (1935) (“This subsection reaches 
those situations where electric energy is transmitted in 
interstate commerce by the same company which distributes 
it locally, and will greatly aid State commissions in fixing 
reasonable rates in such cases.”). Order No. 888 respects the 
States’ “authority to establish a rate governing the sale of 

* * * energy” (16 U.S.C. 824e(d)) in such situations, even 
when transmission service is unbundled from the retail sale 
of energy. Although the Commission would regulate rates 
for transmission service, the State would regulate the sale of 
energy, and, in connection with that state regulation, the 
Commission could provide the State information regarding 
production or transmission costs that are outside the State’s 
jurisdiction. See Pet. App. 310a-311a, 365a-369a. Thus, 
there is no inconsistency between Section 206(d) and the 
Commission’s jurisdictional holding. 

New York further argues (N.Y. Pet. Br. 33-34, 36) that 
Section 212(h) of the FPA, 16 U.S.C. 824k(h), forecloses 
Commission jurisdiction over unbundled transmission ser- 
vices in interstate commerce in connection with retail sales. 
As the plain language of Section 212(h) states, and as the 
Commission explained in Order No. 888, that provision “pro- 
hibit[s the Commission] from ordering transmission directly 
to an ultimate consumer.” Pet. App. 479a; see n._, supra. 
The Commission respected that limitation by ordering public 
utilities to provide “functional unbundling” of transmission 
services only in the context of wholesale transactions. See 
id. at 178a, 306a. A public utility is not required to file a 
federal tariff for unbundled interstate transmission unless 
the utility offers that service voluntarily or state regulators 
—not federal regulators—allow retail competition by man- 
dating the provision of transmission service to competing 
suppliers of energy. See 61 Fed. Reg. at 21,708 (pro forma 
tariff § 1.11, limiting retail customers’ eligibility for tariffed 

38 

transmission service to customers served voluntarily or as 
part of a state retail access program). 

2. The Act’s legislative history, on which New York 
principally relies, is equally inconsistent with New York’s 
theory of the case. The Senate Report on the Act states that 
Congress assigned the Commission jurisdiction over inter- 
state transmission even “where there is no sale” of the 
energy being delivered, which confirms that the Commis- 
sion’s transmission jurisdiction is not limited to transmission 
accompanied by a wholesale sale of electric energy. S. Rep. 
No. 621, supra, Pt. 1 at 19; see also id. at 48 (“Jurisdiction is 
asserted also over all interstate transmission lines whether 
or not there is sale of the energy carried by those lines”). 

18 

Other legislative history is to the same effect. See Enron 
Pet. Br. 23-24. 

18 When Congress drafted the FPA, there already was a history of 
utilities providing transmission service for other utilities, without buying 
or selling the energy being transmitted. For example, in the Attleboro 
case to which Congress responded when drafting the FPA (see pp. - , 
supra), Seekonk Electric Company in Massachusetts received power 
generated in Rhode Island by Narragansett Electric Lighting Company, 
and carried that power over Seekonk’s transmission lines to Attleboro 
Steam & Electric Company (also in Massachusetts), which had purchased 
the power from Narragansett. See Attleboro Steam & Elec. Co. v. Public 
Utils. Comm’n, 129 A.2d 495, 496 (R.I. 1925), aff ’d, 273 U.S. 83 (1927). The 
FPA gave the Commission jurisdiction over such pure interstate trans- 
mission services. 

California suggests that when the Senate committee said that Section 
201 of the FPA gives the Commission jurisdiction over interstate trans- 
mission when there is no sale of energy, it actually meant that Section 
206(d) of the FPA allows the Commission to provide accounting informa- 
tion to support the States’ exercise of their jurisdiction in situations where 
there is a sale at retail but not at wholesale. Cal. Br. 17 & n.9. Even 
California seems not to take that strained reading of the Senate Report 
seriously, for it offers two alternative—but equally unconvincing— 
theories that the Senate Report’s discussion of federal transmission juris- 
diction under Section 201(b) actually addresses entirely different provi- 
sions of the Senate bill. Id. at 17-18 n.10. 

39 

More generally, Congress intended to ensure that federal 
regulators would be able to oversee those services and facili- 
ties that state regulators could not lawfully, or effectively, 
regulate. Congress’s overriding concern was that there 
never be a jurisdictional void. See Louisiana Power & 
Light, 406 U.S. at 640-641; Arkansas Elec. Coop., 461 U.S. at 
384 (“Congress’ purpose in 1935 was to fill a regulatory gap, 
not to perpetuate one.”); S. Rep. No. 621, supra, Pt. 1 at 48. 

New York’s narrow reading of Section 201 would defeat 
that paramount legislative intent. If the State in which the 
retail customer is located has jurisdiction to regulate all 
unbundled transmission associated with a retail sale, there 
would be a large regulatory gap in situations where the 
retail customer purchases power from a supplier in a distant 
State, and that supplier requires transmission service from 
intervening out-of-state utilities to deliver the power. See 
Pet. App. 366a-367a. The intervening transmission would be 
beyond the jurisdictional reach of the consumer’s State. 
Thus, under New York’s theory, those out-of-state trans- 
mission services would not be subject to regulation at all. 

The most important fact about New York’s reliance on 
legislative history, however, is that New York is unable to 
identify any statement indicating an actual congressional 
intent or understanding that if interstate transmission was 
separated from the associated retail sale of energy, the 
unbundled transmission would be subject to exclusive state 
regulation. There is no such evidence, because “the legisla- 
tive history of the FPA * * * grew out of a market 
structure in which electricity and transmission generally 
were bought and sold on a bundled basis.” Pet. App. 304a. 
Accordingly, when legislators stressed that federal regula- 
tors would not “fix the rate of delivery” of electric power 
(see N.Y. Pet. Br. 24), and when the FPC noted that it 
lacked “authority over local rates” (see N.Y. Pet. Br. 25-26), 
they were saying nothing more than what the Commission 

40 

said in Order 888: Under the FPA, the States “clearly 
retain[] jurisdiction over” retail sales of power. Pet. App. 
306a. 

19 

3. New York admits (N.Y. Pet. Br. 12) that in 1935 Con- 
gress did not envision unbundling of retail transmission from 
retail sales of energy. But New York attempts to turn that 
fact to its advantage, by arguing (id. at 13-17) that, as a 
matter of “preemption” law, the court of appeals in these 
cases erred by upholding the Commission’s jurisdictional 
ruling absent “clear and manifest” Congressional intent 
regarding unbundled transmission. New York is mistaken 
on several counts. 

First, New York’s premise—that the Commission is 
seeking to seize jurisdiction over a service that the States 
traditionally have regulated (N.Y. Pet. Br. 14-15)—misstates 
the situation. Given that unbundled retail transmission is a 
new service, the Commission’s task was not to decide 
whether historical state jurisdiction should be “preempted,” 
but to determine whether the new service comes within the 
States’ unquestioned jurisdiction over bundled retail sales, 
or, rather, the Commission’s clearly established jurisdiction 
over transmission in interstate commerce. See Pet. App. 
476a; see generally West v. Gibson, 527 U.S. 212, 218 (1999) 

19 Likewise, New York is mistaken when it says (N.Y. Pet. Br. 17) that 
the Commission has changed its interpretation of Section 201. The state- 
ments cited by New York (id. at 21-22, 25-26, 31 & n.14, 41, 42 n.26) 
simply, and consistently, acknowledge the States’ jurisdiction over bun- 
dled retail sales. They do not address jurisdiction over unbundled retail 
transmission in interstate commerce. In his Senate testimony, for 
example, FPC Solicitor DeVane distinguished the interstate wholesale 
sales that would be regulated by the FPC from “energy that is transmit- 
ted in interstate commerce by a particular company and sold by that 
company to consumers,” which the States would continue to regulate. Mr. 
DeVane did not address any other potential retail arrangements. Public 
Util. Holding Co. Act of 1935: Hearings on S. 1725 Before the House 

Comm. on Interstate Commerce, 74th Cong., 1st Sess. 250 (1935). 

41 

(“Words in statutes can enlarge or contract their scope as 
other changes, in law or in the world, require their 
application to new instances”). 

Second, the court of appeals’ affirmance did not turn upon 
“the deferential standard of Chevron U.S.A. Inc. v. Natural 
Resources Defense Council, 467 U.S. 837 (1984).” N.Y. Pet. 
Br. 17 n.8.; see id. at 16. As the court of appeals stated, its 
primary holding was that the “clear[] and unambiguous[]” 
language of Section 201, as well as this Court’s decisions in 
Jersey Central and Florida Power, compel the conclusion 
“that the FPA gives [the Commission] the authority to regu- 
late transmissions at issue here, whether retail or whole- 
sale.” Pet. App. 32a, 34a. Chevron deference was an alterna- 
tive basis for upholding the Commission’s jurisdiction. See 
id. at 34a-35a. 

20 

Third, New York ignores stare decisis principles. Cases 
such as Jersey Central, Connecticut Light & Power, and 
Florida Power provide “cardinal and guiding” interpreta- 
tions of Section 201 (California v. FERC, 495 U.S. 490, 497- 
499 (1990)), upon which the Commission properly relied. See 
Maislin Indus., Inc. v. Primary Steel, Inc., 497 U.S. 116, 131 
(1990) (“Once we have determined a statute’s clear meaning, 
we adhere to that determination under the doctrine of stare 

20 Solid Waste Agency v. United States Army Corps of Eng’rs, 121 S. 
Ct. 675 (2001), has no relevance even with respect to the court of appeals’ 
alternative holding. See N.Y. Pet. Br. 16. In Solid Waste Agency, the 
Court declined to give Chevron deference to an agency interpretation that 
“push[ed] the limit of congressional authority” and therefore raised 
“significant constitutional questions.” 121 S. Ct. at 683. In this case, the 
Court has already decided as a matter of constitutional law that “genera- 
tion, transmission, distribution and consumption are so fused and inter- 
dependent that the whole enterprise is within the reach of the commerce 
power” if the utility connects to an interstate grid. Connecticut Light & 
Power, 324 U.S. at 529-530. The issue is whether, as a statutory matter, 
Congress chose to exercise its power to regulate unbundled retail trans- 
mission. 

42 

decisis, and we judge an agency’s later interpretation of the 
statute against our prior determination of the statute’s 
meaning.”). 

Fourth, New York disregards the presumption in favor of 
federal jurisdiction under Section 201, where such jurisdic- 
tion is necessary to fill a possible jurisdictional void. “Con- 
gress desired regulation by federal authority rather than 
non-regulation.” See Louisiana Power & Light, 406 U.S. at 
641 (citation & internal quotation marks omitted); see p. _, 
supra. Therefore, as this Court has held, the enumerated 
exceptions to federal jurisdiction stated in Section 201 “are 
to be strictly construed.” United States v. California Pub. 
Utils. Comm’n, 345 U.S. 295, 310 (1953). New York’s pro- 
posed approach of forbidding federal regulation unless there 
is affirmative evidence of congressional intent that the statu- 
tory exceptions will not apply, risks creating the very juris- 
dictional vacuum that Congress wanted to avoid. 

In other cases that presented questions of federal juris- 
diction under Part II of the FPA—such as Jersey Central, 
Connecticut Light & Power, and Florida Power—this Court 
has straightforwardly “construe[d] § 201(b) as it is written, 
and as its legislative history indicates it was intended,” 
without applying the anti-federal gloss suggested by New 
York. New England Power, 455 U.S. at 343; see Arkansas 
Elec. Coop., 461 U.S. at 379 (Part II of FPA “shifted this 
Court’s main focus—in determining the permissible scope of 
state regulation of utilities—from the constitutional issues 

* * * to analyses of legislative intent.”). The Court has 
taken the same approach when applying analogous jurisdic- 
tional provisions. See Louisiana Pub. Serv. Comm’n v. 
FCC, 476 U.S. 355, 359, 376-377 n.5 (1986) (treating resolu- 
tion of conflict between federal and state telecommunications 
regulation as an ordinary matter of statutory interpreta- 
tion). Contrary to New York’s thesis, nothing in this Court’s 
decisions suggests that the Commission or the court of 

43 

appeals should have applied a presumption against federal 
jurisdiction. 

D. Policy Considerations Also Do Not Support New 

York’s Interpretation 

Finally, New York argues (N.Y. Pet. Br. 46-48) that Order 
No. 888 will undermine the States’ ability to ensure that 
consumers receive reliable retail electric service at just and 
reasonable rates. Along the same lines, California maintains 
(Br. 27-30) that the Commission lacks statutory authority to 
regulate unbundled retail transmission adequately, and that 
the Commission has made the wrong policy choices in the 
past. 

Those policy arguments are “properly addressed to Con- 
gress, not to the Courts.” Chemehuevi Tribe of Indians v. 
FPC, 420 U.S. 395, 423 (1975). 

21 Furthermore, New York 
offers nothing to support its assertion that the Commission’s 
regulation of unbundled retail transmission will hamper 
regulation of facilities and services within the States’ 
jurisdiction. The Commission specifically clarified that, even 
if a State chooses to order retail unbundling, it retains 
authority under Order No. 888 over local matters such as 
power production, customer service, and local service 
reliability. Pet. App. 307a-311a. The Commission also com- 
mitted, when exercising its jurisdiction over unbundled 
interstate transmission used for retail sales, to cooperate 
with state regulators on various matters that implicate their 
expertise and concerns and to defer to the States when 
applying its seven-factor test for identifying local distribu- 

21 New York’s invocation of Chemehuevi Tribe (N.Y. Pet. Br. 15) is 
wholly misplaced. In that case, the Court rejected an argument that 
statutory language should be disregarded when the policy choice underly- 
ing that language is outmoded. 420 U.S. at 422-424. Here, by contrast, the 
Commission applied the plain language of Section 201 to new circum- 
stances. 

44 

tion facilities. Id. at 309a-315a. Finally, while transmission 
assets may be shifted from state to federal jurisdiction as a 
result of retail unbundling, the resulting accounting issues 
would be “commonplace.” FPC v. Conway Corp., 426 U.S. 
271, 280 & nn. 6, 7 (1976). 

Nor is there merit to California’s argument (Br. 28-29) 
that the Commission lacks the authority it needs to ensure 
adequate and nondiscriminatory transmission service. Order 
No. 888 requires public utilities to provide their unbundled 
transmission services to all eligible customers under the 
same terms and conditions that apply to the utility’s own 
operations. See 18 C.F.R. 35.28(c) (requiring public utilities 
to file open-access transmission tariffs and to obtain trans- 
mission service under those generally available tariffs) 
(published in 61 Fed. Reg. at 21,694). The Commission’s pro 
forma tariff also obligates the public utility to take appropri- 
ate steps to provide sufficient transmission capacity to serve 
all tariff customers on a nondiscriminatory basis. 61 Fed. 
Reg. at 21,718 (Order No. 888 App. D, § 28.2). 

New York argues (N.Y. Pet. Br. 48) that Order No. 888 
will deter States from requiring unbundling of transmission 
from retail sales, because unbundling would trigger federal 
jurisdiction and “diminish[]” the States’ own jurisdiction 
over transmission. That contention assumes that States 
regulate to maximize their own jurisdiction, rather than to 
promote the public interest—a proposition New York itself 
rejects as respondent in No. 00-809. See N.Y. Resp. Br. 18- 

23. Indeed, numerous States have adopted so-called “retail 
choice” programs since the Commission issued Order No. 
888.22 

22 Before Order No. 888, 12 States had acted to give retail customers a 
choice of power suppliers. Pet. App. 169a & n.101. As of May 2001, 25 
States had adopted such programs by legislation or administrative order. 
See Energy Information Administration, U.S. Dep’t of Energy, Status of 

45 

California suggests (Br. 1) that the jurisdictional lines 
identified in Order No. 888 have contributed to that State’s 
current energy crisis. Enron disagrees. Enron Resp. Br. 16 

n.6. The Commission has found that the principal causes of 
California’s electricity shortage were state regulations that 
required all utilities to purchase their wholesale require- 
ments through a spot market exchange, froze retail rates at 
levels lower than wholesale rates, and inhibited construction 
of new electric generating capacity. San Diego Gas & Elec. 
Co. v. Sellers of Energy and Ancillary Servs. into Markets 
Operated by the Cal. Sys. Operator and the Cal. Power 
Exch., 93 FERC ¶ 61,121, 61,351, 61,353, 61,360 (2001), 
mandamus denied, In re California Power Exch. Corp., 245 
F.3d 1110 (9th Cir. 2001). Those causal factors have nothing 
to do with regulation of unbundled transmission. Order No. 
888 likewise does not implicate the disagreement regarding 
state control over the governing board of the California 
Independent System Operator, to which California refers 
(Br. 27-28). That disagreement, moreover, has been 
resolved. See generally Western Power Trading Forum v. 
FERC, 245 F.3d 798, 799-800 (D.C. Cir. 2001). 

II. THE COMMISSION REASONABLY CONCLUDED 
THAT CONGRESS HAS NOT AUTHORIZED FED- 
ERAL REGULATION OF THE TRANSMISSION 
COMPONENT OF BUNDLED RETAIL SALES OF 
ELECTRIC ENERGY 

In No. 00-809, petitioner Enron supports the Com- 
mission’s determination that the FPA establishes federal 
jurisdiction over unbundled transmission for retail sales, but 
argues that the court of appeals erred by deferring to the 
Commission’s further conclusion (Pet. App. 306a) that it 
lacks jurisdiction to regulate the transmission provided by 

State Electric Industry Restructuring Activity as of May 2001 
(<http://www.eia.doe.gov/cneaf/electricity/chg_str/regmap.html> 

46 

public utilities in their bundled retail sales. See Pet. App. 
35a. Enron contends (Enron Pet. Br. 21) that “Section 201(b) 

* * * explicitly gives [the Commission] jurisdiction, without 
any stated limitation or qualification, over all interstate 
transmissions * * * for both wholesale and retail sales,” 
and that the Commission disregarded that “plain meaning” 
by “read[ing] into section 201(b) an exception for trans- 
missions that are bundled at retail.” 
Enron’s understanding of the Commission’s transmission 
jurisdiction is correct—as far as it goes. As the court of 
appeals held (Pet. App. 32a-34a), and as we have demon- 
strated in Part I, above, Section 201(b) assigns the Commis- 
sion jurisdiction over interstate transmission whether it is 
used in conjunction with a wholesale sale of energy or a 
retail sale of energy. But Section 201(b) also assigns the 
States jurisdiction over “any * * * sale of electric energy” 
that is not “at wholesale in interstate commerce.” 16 U.S.C. 
824(b)(1). The issue faced by the Commission, therefore, was 
whether a public utility’s sale at retail of delivered energy in 
a single transaction—in a State that does not permit con- 
sumers to choose their power supplier—constitutes (1) a 
retail sale of energy within the States’ jurisdiction, or (2) a 
State-regulated retail sale of energy as well as a federally 
regulated transmission service. See Pet. App. 306a. 

The court of appeals correctly concluded (Pet. App. 34a) 
that “Congress has not directly addressed th[at] precise 
question” with unambiguous language. Chevron, 467 U.S. at 
843. Nothing in Section 201(b) establishes the proper char- 
acterization of a bundled transaction under today’s market 
conditions. Whereas Section 201(b) clearly gives the Com- 
mission jurisdiction over transmission, and clearly gives the 
States jurisdiction over non-wholesale sales of energy, “[t]he 
statute is much less clear about exactly where the lines 
between those activities are to be drawn.” Pet. App. 35a. 

47 

Section 201(a) does not resolve the ambiguity. While 
federal jurisdiction “extend[s] only to those matters which 
are not subject to regulation by the States,” 16 U.S.C. 824(a), 
that declaration of policy is, as this Court has held, itself 
ambiguous. California PUC, 345 U.S. at 308-309. 

The legislative history of the FPA is inconclusive as well. 
Enron cites legislative history indicating that some legisla- 
tors believed the FPA would give the Commission juris- 
diction over interstate transmission “[w]hether it be whole- 
sale or retail.” Enron Pet. Br. 23 (quoting House hearings) 
(emphasis omitted); see id. at 23-24 (discussing legislative 
history). Based on that reading of the FPA and its history, 
Enron suggests (id. at 27-33) that, even though the States 
historically have regulated bundled retail sales of energy, 
the Commission was required to assert federal jurisdiction 
when energy markets evolved to the point that competitive 
sales of electric energy to retail customers became possible, 
and access to public utilities’ transmission facilities became 
necessary to support that competition. Other legislative his- 
tory, however, demonstrates an intent to “tak[e] no author- 
ity from State commissions” and to maintain “valid state 
authority” that was then being exercised. New England 
Power, 455 U.S. at 341 & n.7 (emphasis omitted). Unlike the 
Commission’s assertion of jurisdiction over the new service 
of unbundled retail transmission, asserting federal jurisdic- 
tion over the transmission component of traditional bundled 
retail service would affect historical state regulation. 

This Court’s decision in Louisiana Power & Light also is 
not “controlling” (Enron Pet. Br. 22) on the question of 
jurisdiction over bundled retail transmission of electric 
energy. Louisiana Power & Light held, in pertinent part, 
that the Commission had authority to direct interstate 
natural gas pipelines to curtail deliveries to all customers in 
time of shortage, and that such curtailment regulations did 
not interfere with the States’ exclusive authority over retail 

48 

sales of gas. 406 U.S. at 623-647. The critical considerations 
under the Natural Gas Act were that curtailment rules did 
not implicate local rate-setting, id. at 637-638, and that 
leaving allocation of scarce gas to the States would “create 
contradictory regulations that cannot possibly be equitably 
resolved by the courts,” id. at 634. Because the federal cur- 
tailment requirements addressed transportation rather than 
retail sales, id. at 638-640, and because state rationing of 
interstate gas was not feasible, id. at 641, the curtailment 
requirements were permissible. 

Neither of those considerations was present on the record 
in the Order No. 888 proceeding. Enron acknowledges 
(Enron Pet. Br. 26) that federal regulation of the transmis- 
sion component of a bundled sale implicates retail rate- 
setting. Furthermore, the record before the Commission did 
not establish that state regulation of bundled sales, including 
the transmission component provided by the selling utility, 
was unworkable. Cf. Pet. App. 235a (finding that federal 
unbundling of retail transactions is not necessary to prevent 
discrimination). Enron, moreover, has never provided clear 
record support—in a rehearing petition before the Com- 
mission, in the court of appeals, or in this Courtfor its 
argument (which the court of appeals did not address, see id. 
at 35a) that the States are unable to address discrimination 
with respect to transmission that is part of a bundled retail 
sale. See id. at 35a. 

23 

23 Citing Northern States Power Co. v. FERC, 176 F.3d 1090 (8th Cir. 
1999), cert. denied, 528 U.S. 1182 (2000), Enron suggests (Enron Pet. Br. 
25-26 n.17, 42 & n.27) that, absent Commission regulation of bundled 
transmission, public utilities will favor customers of their own bundled 
retail service when curtailment situations arise. The Commission, how- 
ever, noted when opposing certiorari in Northern States Power that even 
under that incorrect decision, the Commission can prohibit such dis- 
crimination notwithstanding its lack of jurisdiction over bundled retail 
transmission. See Brief for the Federal Energy Regulatory Commission 
in Opposition (No. 99-916) at 8-9. 

49 

Accordingly, neither the text of the Act, nor its history, 
nor this Court’s decisions, resolve the definitional question 
that the Commission faced in Order No. 888. The court of 
appeals properly deferred to the Commission’s reasonable 
decision to abide by six decades of practice under the FPA, 
and not to override the States’ historical regulation of trans- 
mission that is bundled with a retail sale of energy. See 
generally Chevron, 467 U.S. at 842-845. 

24 

The Commission’s jurisdictional determination resolves 
Enron’s final argument (Enron Pet. Br. 33-44) that Section 
206 of the FPA, 16 U.S.C. 824e, requires the Commission to 
assert jurisdiction over the transmission involved in public 
utilities’ retail operations, even if the relevant State favors 
traditional bundled sales. Section 206 authorizes the Com- 
mission to remedy undue discrimination with respect to 
matters subject to its jurisdiction. See 16 U.S.C. 824e(a). 
The Commission’s reasonable finding that it lacks jurisdic- 
tion over the transmission component of bundled retail sales 
under Section 201 therefore precludes the Commission from 
regulating that transmission component under Section 206. 

25 

24 Enron relies on the supposedly “plain language of the statute” 
(Enron Pet. Br. 20; see id. at 43), and does not dispute that, if the statute 
and its legislative history are ambiguous, the Commission has provided a 
“reasonable interpretation” (Chevron, 467 U.S. at 844) of the FPA. Like- 
wise, Enron does not challenge the court of appeals’ holding (Pet. App. 
34a-35a) that an agency’s interpretation of a statutory provision that 
defines the scope of the agency’s jurisdiction is entitled to Chevron defer- 
ence. This Court has applied the same rule. See CFTC v. Schor, 478 U.S. 
833, 844-845 (1986); NLRB v. City Disposal Sys., Inc., 465 U.S. 82, 830 n.7 
(1984); see also Mississippi Power & Light Co. v. Mississippi, 487 U.S. 
354, 380-382 (1988) (Scalia, J., concurring in the judgment); Dole v. United 

Steelworkers, 494 U.S. 26, 54-55 (1990) (White, J., dissenting). 

25 The Commission, however, has concluded a rulemaking regarding 
Regional Transmission Organizations (RTOs) that addresses some of 
Enron’s concerns. Order No. 2000, Regional Transmission Orgs., FERC 
Stats. & Regs. ¶ 31,089, on reh’g, Order No. 2000-A, FERC Stats. & Regs. 
¶ 31,092 (2000), appeal pending sub nom. Public Utils. Dist. No. 1 v. 

50 

CONCLUSION 

The judgment of the court of appeals should be affirmed. 

Respectfully submitted. 

KEVIN P. MADDEN 

General Counsel 
CYNTHIA A. MARLETTE 

Deputy General Counsel 
SUSAN J. COURT 

Associate Solicitor 
TIMM L. ABENDROTH 
DAVID H.COFFMAN 

Attorneys 
Federal Energy Regulatory 

Commission 
BARBARA D. UNDERWOOD 

Acting Solicitor General 
EDWIN S. KNEEDLER 

Deputy Solicitor General 
AUSTIN C. SCHLICK 

Assistant to the Solicitor 

General 

MAY 2001 

FERC, No. 00-1174 (D.C. Cir. to be argued Oct. 17, 2001). An RTO serves 
as the sole transmission provider within its region, providing all trans- 
mission for wholesale power transactions as well as bundled and unbun- 
dled retail power transactions. The Commission has provisionally 
approved three RTOs, and additional applications are pending. Also, 
Enron could in the future petition the Commission to revisit its resolution 
of the jurisdictional ambiguity in the FPA. See Chevron, 467 U.S. at 863- 
864.