New Orleans Public Service, Inc. v. Council of New Orleans

New Orleans Public Service, Inc. (NOPSI) (plaintiff), a public utility providing electricity, was one of multiple utilities that agreed to finance the construction of a nuclear reactor in exchange for a share of the reactor’s electricity. The Federal Energy Regulatory Commission (FERC) allocated the construction costs between the utilities in proportion to their energy usage, allocating 17 percent to NOPSI. The Council of New Orleans (council) (defendant) was the state regulatory body with authority to set the electricity rates paid by New Orleans residents. Believing that NOPSI failed to prudently manage its expenses, the council refused to increase rates to a level that would allow NOPSI to fully recapture its contribution to the construction costs. NOPSI then filed two legal actions against the council. The first action, filed in state court, alleged that the council’s rate decision violated state law and the Constitution’s Takings Clause. The second action, filed in federal district court, argued that FERC’s cost allocation had preemptive effect, requiring the council to set rates allowing NOPSI to fully recapture its costs. The council asked the federal court to abstain from deciding the preemption claim, arguing that it should instead be decided in the state-court proceeding. The district court agreed, abstaining from exercising jurisdiction. The court of appeals affirmed, and the United States Supreme Court granted review.