                                                                                                                           Opinions of the United
1995 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-9-1995

Freehold v Bd Regulatory Comm
Precedential or Non-Precedential:

Docket 94-5168




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995

Recommended Citation
"Freehold v Bd Regulatory Comm" (1995). 1995 Decisions. Paper 7.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/7


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                   UNITED STATES COURT OF APPEALS
                       FOR THE THIRD CIRCUIT

                            ____________

                            NO. 94-5168
                             ____________

               FREEHOLD COGENERATION ASSOCIATES, L.P.,
                                                 Appellant

                                 v.

 BOARD OF REGULATORY COMMISSIONERS OF THE STATE OF NEW JERSEY;
             JERSEY CENTRAL POWER AND LIGHT COMPANY
                          ____________

             Appeal from the United States District Court
                    for the District of New Jersey
                         D.C. No. 94-cv-00375
                             ____________

                      Argued October 28, 1994
   Before:    STAPLETON, HUTCHINSON, and ROSENN, Circuit Judges

                       Opinion Filed January 9, 1995
                             ____________

ROBERT F. SHAPIRO, ESQ. (Argued)
LYNN N. HARGIS, ESQ.
DAVID C. DICKEY, ESQ.
Chadbourne & Parke
1101 Vermont Avenue, N.W.
Washington, D.C. 20005

CHARLES J. WALSH, ESQ.
Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, NJ 07102-5400
  Attorneys for Appellant

STEVEN E. GREENBAUM, ESQ. (Argued)
JOHN P. BIEDERMANN, ESQ.
Berlack, Israels & Liberman
120 West 45th Street
New York, New York 10036
  Attorneys for Jersey Central Power & Light Co.

THEODORE C. GRANGER, PUBLIC ADVOCATE (Argued)
Department of the Public Advocate of New Jersey
31 Clinton Street
Newark, NJ 07109
DEBORAH T. PORITZ, ATTORNEY GENERAL
ANDREA M. SILKOWITZ, ASSISTANT ATTORNEY GENERAL
HELENE S. WALLENSTEIN, DEPUTY ATTORNEY GENERAL (Argued)
R.J. Hughes Justice Complex
Trenton, NJ 08625
  Attorneys for Board of Regulatory Commissioners


SAMUEL SOOPER, ESQ.
Federal Energy Regulatory Commission
Room 3000
825 North Capitol Street, N.E.
Washington, DC 20426
  Attorney for Federal Energy Regulatory Commission

                             ____________

                         OPINION OF THE COURT

ROSENN, Circuit Judge.


          This case has its genesis in Congress' creative effort

to promote the use of alternative energy sources by state and

federal utility authorities.    To make the nation more energy

independent, Congress sought to encourage small power production

facilities that use renewable fuels, such as solar, wind, biomass

and water, and cogeneration facilities that use traditional fuels

more efficiently by sequentially producing both electricity and

steam or other useful thermal energy.       Freehold Cogeneration

Associates, L.P. ("Freehold") is the type of facility that

Congress wished to promote.

          On January 19, 1994, Freehold sought a declaratory

judgment in the United States District Court for the District of

New Jersey that the Board of Regulatory Commissioners of the

State of New Jersey (the "BRC") was preempted by the Federal

Public Utilities Regulatory Policies Act ("PURPA") from modifying
the terms of a previously approved power purchase agreement

("PPA") between Freehold and Jersey Central Power and Light

Company ("JCP&L"), a New Jersey public utility.   Freehold also

sought an order enjoining the ongoing BRC proceedings.   Freehold

moved for summary judgment, and the BRC and JCP&L moved to

dismiss on various grounds.   The district court denied Freehold's

motion for summary judgment and granted the defendants' motion to

dismiss, holding that it lacked subject matter jurisdiction to

hear the matter.   Freehold filed a timely appeal to this court.1

           We reverse.

                                I.

           Under the Federal Power Act, 16 U.S.C. § 791a et seq.,

the Federal Energy Regulatory Commission (the "FERC") had the

exclusive authority to regulate "public utilities" that sell

electric power at wholesale in interstate commerce.   Id. at §

824(e).   In 1978, Congress modified the Federal Power Act with

the enactment of the Public Utility Regulatory Policies Act, 16

U.S.C. § 823a et seq., as part of a comprehensive legislative

effort to combat a nationwide energy crisis.   PURPA is intended

to control power generation costs and ensure long-term economic

growth by reducing the nation's reliance on oil and gas and

increasing the use of more abundant domestically produced fuels.

In enacting PURPA, Congress directed the FERC to promulgate rules


1
 . This court has jurisdiction pursuant to 28 U.S.C. § 1291 over
this appeal from the district court's final judgment. The
jurisdiction of the district court is discussed in section II,
infra.
and regulations requiring public utilities to buy electric energy

from, and to sell electric energy to, qualifying cogeneration

facilities ("QFs").    16 U.S.C. § 824a-3.2   Congress directed

state regulatory authorities, such as the BRC, to implement the

rules and regulations promulgated by the FERC.     Id.

            In early 1988, pursuant to the then-effective

cogeneration policies and procedures of the New Jersey Board of

Public Utilities (the "BPU"), the predecessor agency to the BRC,

Freehold commenced negotiations with JCP&L concerning a potential

power purchase agreement.    During the pendency of these

negotiations, the BPU adopted certain competitive bidding

guidelines which replaced negotiation as the method by which

utilities were to procure long-term power purchase agreements

with cogeneration facilities such as Freehold.

            After these competitive bidding guidelines took effect,

Freehold petitioned the BPU to "grandfather" or exempt it from

the newly adopted guidelines.    JCP&L opposed the petition.      By

Order dated July 31, 1989, the BPU agreed to grandfather

Freehold.    Freehold's negotiations with JCP&L were thereby

governed by the pre-existing policies and procedures, which

allowed Freehold and JCP&L to negotiate the terms of a power


2
 . A cogeneration facility is one which produces electrical
energy, and steam or forms of useful energy which are used for
industrial commercial, heating, or cooling purposes. 16 U.S.C. §
796(18)(A). In order to qualify as a QF, a facility must meet
the requirements set forth by the FERC, 18 C.F.R. § 292.101, et
seq., and the facility must be owned by an entity not primarily
engaged in the generation or sale of electrical power, 16 U.S.C.
§ 796(18)(B). Freehold is a QF.
purchase agreement.   On March 26, 1992, after three years of

extensive negotiations, Freehold and JCP&L entered into a power

purchase agreement (the "PPA"), to commence on the date of BRC

approval and to continue thereafter for a period of twenty years.

The BRC approved the PPA by order dated July 8, 1992.3

          Under the terms of the PPA, JCP&L is to pay Freehold

100% of JCP&L's 1989 avoided cost for the purchase of electrical

power.   Avoided cost is the cost which JCP&L avoids by purchasing

energy from Freehold rather than generating the energy itself or

purchasing it from some other source. 16 U.S.C. § 824a-3(d).

          On April 12, 1993, in response to decreases in the cost

of obtaining electrical power, the BRC directed public utilities

to notify it of any power supply contracts which were no longer

economically beneficial.   The BRC wished to encourage buy outs

and other remedial measures to reduce power costs.

          After reviewing its contract with Freehold, JCP&L

concluded that the PPA should be modified.   On April 16, 1993,

JCP&L contacted Freehold and proposed a buy out of the PPA.

Freehold rejected the proposal.   On May 12, 1993, JCP&L notified

the BRC that the PPA was no longer an economically beneficial

3
 . JCP&L challenges the BRC's 1988 order grandfathering Freehold
from the 1988 rate guidelines, and the 1992 BRC order approving
the rates. However, both of these orders are now final and
nonappealable.

Additionally, we will not address the Division of the Ratepayer
Advocate's ("DRA") argument that the BRC's approval of a 1989
avoided cost in 1992 was ultra vires because the DRA is making
this argument for the first time on appeal. See Patterson v.
Cuyler, 729 F.2d 925, 929 (3d Cir. 1984).
contract because the contractual avoided cost was significantly

higher than the current avoided cost due to the decrease in the

cost of obtaining electrical power.    On September 22, 1993, JCP&L

again proposed a buy out to Freehold, which Freehold again

rejected.    The BRC then unsuccessfully attempted to formulate a

joint agreement between the parties modifying the PPA.    By order

dated January 5, 1994, the BRC directed the parties to

renegotiate the purchase rate term of the PPA or, in the

alternative, to negotiate an appropriate buy out of the PPA.    The

order further provided that if the parties did not reach an

agreement within 30 days of the order, the BRC would commence an

evidentiary hearing to consider various courses of action.

            Freehold filed this action on January 14, 1994, seeking

a judgment declaring that the BRC's order is preempted by PURPA

and a court order enjoining the enforcement of that order.     The

district court granted the defendants' motion to dismiss, holding

that section 210(g) of PURPA, 18 U.S.C. § 824a-3(g), and the

Johnson Act, 28 U.S.C. § 1342, divested it of subject matter

jurisdiction.    The court further found that the PPA, which refers

disputes under the agreement to "the BRC or a court of competent

jurisdiction in the State of New Jersey," supported its finding

that there was no federal jurisdiction.    The district court did

not address the preemption argument in its opinion.

                                II.

            In enacting PURPA, Congress sought to overcome

traditional electric utilities' reluctance to purchase power from

nontraditional electric generation facilities and to reduce the
financial burden of state and federal regulation on

nontraditional facilities. FERC v. Mississippi, 456 U.S. 742,

750-51 (1982).    To overcome the first impediment to developing

nontraditional sources of power, section 210(a) of PURPA, 16

U.S.C. § 824a-3, requires the FERC to prescribe "such rules as it

determines necessary to encourage cogeneration and small power

production," including rules requiring traditional utilities to

purchase electricity from QFs.     FERC v. Mississippi, 456 U.S. at

751.    State regulatory authorities will then implement these

rules.    16 U.S.C. § 824a-3(f).

            To surmount the second obstacle, section 210(e) of

PURPA requires the FERC to implement regulations exempting QFs

from federal regulation to which traditional electric utilities

are subject, including most provisions of the Federal Power Act

and "[s]tate laws and regulations respecting the rates, or

respecting the financial or organizational regulation, of

electric utilities."   16 U.S.C. § 824a-3(a)(1).    In accordance

with these provisions of PURPA, the FERC promulgated regulations

governing transactions between utilities and QFs, including a

specific requirement that a utility must purchase electricity

made available by QFs at a rate up to the utility's full avoided

cost.    18 C.F.R. §§ 292.303-304 (1993).

            Acting pursuant to section 210(e)(1) of PURPA, the FERC

also promulgated regulations exempting QFs from various federal

and state regulatory requirements.     The regulations state in

pertinent part:
          (1) Any [QF] shall be exempted . . . from
          State law or regulation respecting:

               (i) The rates of electric
               utilities; and

               (ii) The financial and
               organizational regulation of
               electric utilities.


18 C.F.R. § 292.602(c).

                               A.

          Freehold asserts that the district court had federal

question jurisdiction over this case pursuant to 28 U.S.C. § 1331

because Freehold claimed that the BRC proceeding violated its

federally-established PURPA rights.   As support, Freehold relies

on Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), in which
the Court stated:
          It is beyond dispute that federal courts have
          jurisdiction over suits to enjoin state
          officials from interfering with federal
          rights. . . . A plaintiff who seeks
          injunctive relief from state regulation, on
          the ground that such regulation is pre-empted
          by a federal statute which, by virtue of the
          Supremacy Clause of the Constitution, must
          prevail, thus presents a federal question
          which the federal courts have jurisdiction
          under 28 U.S.C. § 1331 to resolve.


Id. at 96 n.14 (citations omitted).   Accord Airco Industrial

Gases, Inc. Div. of BOC Group, Inc. v. Teamsters Health & Welfare

Pension Fund, 850 F.2d 1028, 1032-34 (3d Cir. 1988) (district

court subject matter jurisdiction under section 1331 turns on

whether cause of action arises under laws of United States).

          The district court did not address section 1331

jurisdiction, but rather read section 210(g) of PURPA as carving
out an exception to federal jurisdiction over all PURPA claims

except those involving judicial review of a final decision by the

FERC.   The district court reasoned that:
           [B]y enacting [section 210(g)], Congress
           specifically provided that judicial review of
           orders by the State regulatory authorities
           was to be made only by the state courts or
           FERC. The only instance where Congress
           provided for federal court jurisdiction is
           where a party seeks judicial review of a
           decision by FERC. Here, FERC has made no
           determination which this Court might review,
           nor does Freehold allege this as a basis for
           jurisdiction. Thus, under PURPA, this Court
           does not have jurisdiction over Freehold's
           challenge to the BRC's order.


           Section 210(g)'s language, however, shows that it is

more limited in scope than the district court believed.    Section

210(g) provides:
               (1) Judicial review may be obtained
          respecting any proceeding conducted by a
          State regulatory authority or nonregulated
          electric utility for purposes of implementing
          any requirement of a rule under subsection
          (a) . . . [under the same requirements as
          judicial review may be obtained under 16
          U.S.C. § 2633] (emphasis added).


Thus, section 210(g)(1) applies only to review of proceedings by

state regulators or nonregulated utilities designed to implement
any requirement of rules promulgated by the FERC pursuant to

section 210(a), 16 U.S.C. § 824a-3(a).   Section 210(a) requires

utilities to purchase energy from and sell energy to qualifying

facilities at certain prices.4

4
 . Section 210(g)(2) is not applicable to this action.     That
section provides:
          The parties disagree as to whether Freehold is

challenging the BRC's implementation of the FERC's rules under

section 210(a) or whether it is challenging the BRC's actions

under section 210(e) and supporting regulations.    Freehold

argues, and the FERC, as amicus, agrees, that Freehold is not

challenging the validity of state action implementing the rules

adopted by the FERC pursuant to section 210(a).     Rather, it

alleges that the BRC proceeding is inconsistent with and

preempted by section 210(e) and the FERC regulations promulgated

thereunder, which exempt QFs from state utility regulation.      See

16 U.S.C. § 824a-3(e)(1); 18 C.F.R. § 292.602(c).

          The defendants argue that Freehold's complaint was

brought under section 210(a) of PURPA because the complaint

refers to the FERC's rules implemented under subsection (a).

Before the district court, Freehold clearly relied upon FERC's

rules implemented under section 210(a) in arguing that the BRC's

actions were preempted.   As noted by Freehold, however, such

(..continued)
          Any person (including the Secretary) may
          bring an action against any electric utility,
          qualifying small power producer, or
          qualifying cogenerator to enforce any
          requirement established by a State regulatory
          authority or nonregulated electric utility
          pursuant to subsection (f). [Such action
          shall be brought under the same requirements
          as judicial review may be obtained under 16
          U.S.C. § 2633].

This case does not involve a state regulation promulgated
pursuant to section 210(f), which governs the sale and purchase
of electricity between utilities and QFs, nor was it brought by a
person against a QF to enforce such a regulation.
references were necessary to explain what the FERC's PURPA rules

provided in order to establish that the BRC's actions were

outside those rules.   The pleadings reasonably can be read to

assert a claim that the BRC proceeding is inconsistent with and

preempted by section 210(e) of PURPA and the FERC regulations

promulgated thereunder, which exempt QFs from state utility

regulation.   See Bristol Energy Corp. v. New Hampshire Pub.

Utils. Comm'n, 13 F.3d 471, 474 (1st Cir. 1994) (even though

defendant sent out data requests pursuant to a certain statute

which precluded federal jurisdiction, the court agreed with

plaintiffs that the case did not "arise under" that statute, but

rather implicated principles of preemption relating to the QF

exemption and the Supremacy Clause, which triggered federal

question jurisdiction).

          The BRC actually concedes that Freehold's complaint was

not brought to obtain review of a Board proceeding to implement

the FERC rules as required by the jurisdictional limitation in

section 210(g) of PURPA.   Relying on Greensboro Lumber Co. v.

Georgia Power Co., 643 F. Supp. 1345 (N.D. Ga. 1986), aff'd, 844

F.2d 1538 (11th Cir. 1988), however, the BRC argues that

Freehold's complaint contends that the BRC has failed to adhere

to its own implementation plan under the FERC regulations by

attempting to revoke or modify its prior approval of the PPA.

Thus, the BRC submits that "Freehold's complaint [involves] a

claim with regard to the Board's Order implementing the FERC

rules."
          The district court also relied on Greensboro.    In that

case, the District Court for the Northern District of Georgia

held that section 210(g) divested it of jurisdiction over a QF's

claim that a nonregulated utility failed to adhere to its own

implementation plan in its dealings with the QF.   Greensboro, 643

F. Supp. at 1374.    The court held that PURPA requires that such

an "as applied" claim "must be bought (sic) in state court, which

has exclusive jurisdiction 'to enforce any requirement' of a

nonregulated utility's implementation plan."   Id. (citing 16

U.S.C. § 824a-3(g)(2)).    Thus, PURPA divested the court of

jurisdiction because the case involved a claim arising under

section 210(f)(1).

          In contrast, this case does not involve a claim arising

under section 210(f), see supra note 4, but rather a claim

arising under section 210(e).    Freehold does not allege that an

unregulated authority has failed to provide service to it in

violation of the authority's implementation plan, or otherwise

challenge the BRC's implementation of FERC rules "as applied."

Rather, Freehold complains that the BRC has interfered with its

federally-granted right to be exempt from certain utility-type

state regulation.    See Independent Energy Producers Ass'n v.
California Pub. Utils. Comm'n, No. C-91-2644 MHP, 1992 WL 533058

(N.D. Cal. June 3, 1992), rev'd on other grounds, 36 F.3d 848

(9th Cir. 1994).

          Because Freehold is essentially claiming that the BRC

is subjecting it to regulations precluded by section 210(e), the

jurisdictional limitations of sections 210(g)(1) regarding state
proceedings implementing any requirement of a rule enacted under

subsection (a) are not relevant to the district court's

jurisdiction.    Thus, it was error to dismiss Freehold's complaint

on the basis of PURPA's jurisdictional limitations.     The district

court possessed jurisdiction to hear Freehold's preemption claim

pursuant to 28 U.S.C. § 1331.

                                  B.

            The district court also found that it must dismiss

Freehold's complaint because the Johnson Act, 28 U.S.C. § 1342,

eliminated jurisdiction.    In enacting the Johnson Act, Congress

intended to seriously curtail federal jurisdiction over the

subject of state utility rates.    See Zucker v. Bell Telephone

Co., 373 F. Supp. 748, 750 (E.D.Pa. 1974), aff'd, 510 F.2d 971

(3d Cir.), cert. denied, 422 U.S. 1027 (1975).      The Johnson Act

provides:
            The district courts shall not enjoin, suspend
            or restrain the operation of, or compliance
            with, any order affecting rates chargeable by
            a public utility and made by a State
            administrative agency or a rate-making body
            of a State political subdivision where:

            (1) Jurisdiction is based solely on
            diversity of citizenship or repugnance of the
            order to the Federal Constitution; and,

            (2) The order does not interfere with
            interstate commerce; and,

            (3) The order has been made after reasonable
            notice and hearing; and,

            (4) A plain, speedy and efficient remedy may
            be had in the courts of such State.
All four of the Act's criteria must be met for it to apply.    See

Zucker, 373 F. Supp. at 751.

           The district court concluded that all four elements

were present in this case.     It held that the first requirement

had been met because Freehold sought declaratory and injunctive

relief on the basis that the BRC's Order was preempted by PURPA.

The court concluded, "[i]t is apparent that Freehold alleges

jurisdiction on the basis that the Order is repugnant to the

Federal Constitution since Freehold claims that the Supremacy

Clause mandates that   the Order give way to PURPA."

           The Johnson Act, however, requires that jurisdiction be

based solely on the federal constitution.    Freehold's claim that

the BRC's order is preempted does not rely solely on

constitutional grounds, but also relies on PURPA, a federal

statute.   In a similar case, the Eighth Circuit Court of Appeals

held that the Johnson Act did not preclude federal jurisdiction

over a claim that a public service commission's refusal of relief

was in conflict with and preempted by the Federal Power Act.     The

court reasoned:
          It is true, of course, that a federal statute
          overrides conflicting state law only because
          of the Supremacy Clause of the Federal
          Constitution. In a sense, therefore, a
          preemption claim always asserts repugnance of
          state law to the Federal Constitution. But
          such a claim does not usually require that
          the Constitution itself be interpreted.
          Rather, the meaning of federal statutes and
          of state law must be explored, and the extent
          of any conflict ascertained. A state law
          struck down on the basis of preemption is
          perhaps more aptly labeled "unstatutory" than
          "unconstitutional." In any case, whatever
          the theoretical arguments might be, all of
          the appellate authority in point of which we
          are aware upholds federal jurisdiction in
          utility rate cases where a substantial claim
          of federal statutory preemption is pleaded.


Arkansas Power & Light Co. v. Missouri Pub. Serv. Comm'n, 829

F.2d 1444, 1449 (8th Cir. 1987) (citations omitted).5

          Thus, a statutorily-based preemption claim does not

provide a basis for invoking the Johnson Act to deprive a federal

court of jurisdiction.   Because this case does not meet the first

prong of the Johnson Act analysis, it is not necessary for this

court to reach the remaining prongs.

                                C.

          The district court further concluded that it lacked

subject matter jurisdiction because the PPA contains a choice of

forum provision providing that all disputes arising under the PPA

5
 . See also Hawaiian Tel. Co. v. Public Utils. Comm'n, 827 F.2d
1264, 1273 (9th Cir. 1987), cert. denied, 487 U.S. 1218 (1988);
New Orleans Pub. Serv., Inc. v. New Orleans, 782 F.2d 1236, 1242-
42 (5th Cir. 1986), withdrawn in part on other grounds, 798 F.2d
858 (5th Cir. 1986), cert. denied, 481 U.S. 1023 (1987); Aluminum
Co. of America v. Utilities Comm'n of North Carolina, 713 F.2d
1024, 1028 (4th Cir. 1983), cert. denied, 465 U.S. 1052 (1984);
International Bhd. of Elec. Workers, Local Union No. 1245 v.
Public Serv. Comm'n, 614 F.2d 206, 210 (9th Cir. 1980); Kentucky
West Virginia Gas Co. v. Pennsylvania Pub. Util. Comm'n, 620 F.
Supp. 1458, 1460-61 (M.D. Pa. 1985), rev'd on other grounds, 791
F.2d 1111 (3d Cir. 1986).

In Kentucky West Virginia, the defendant did not appeal the
district court's decision that the Johnson Act did not deprive it
of jurisdiction, so this court did not discuss the issue. The
cases cited by JCP&L are not to the contrary because none of them
involve preemption claims. Rather, they involve claims under 42
U.S.C. § 1983, the gravamen of which is a violation of federal
constitutional rights. The BRC has not raised the Johnson Act
issue on appeal.
would be resolved either by the BRC or by a New Jersey state

court.   The court reasoned:
           The parties provided that the PPA "shall be
           governed by and construed in accordance with
           the laws of the State of New Jersey
           applicable to contracts made and to be
           performed in that State, irrespective of the
           application of any conflicts of laws
           provisions." Further, the parties "agree[d]
           that all disputes arising under [the PPA] not
           resolved between the parties shall be decided
           by a petition to the BRC or a court of
           competent jurisdiction in the State of New
           Jersey and [Freehold] hereby submits itself
           to the jurisdiction of the BRC or such court
           for such purposes.


           PURPA and its regulations do not prevent Freehold from

waiving its statutory rights, see 18 C.F.R. § 292.301(b)(1), and

thus Freehold may legally consent to have PPA disputes heard in

state court.   The choice of law and choice of forum provisions

quoted by the district court, however, merely demonstrate that

Freehold agreed to submit disputes arising under the PPA to

either the BRC or a court of competent jurisdiction of the State

of New Jersey, not that it gave up its right to be exempt from
state laws and regulation.   Freehold's complaint demonstrates

that this is not an action to resolve a dispute under the PPA,

but rather, a preemption claim against the BRC.    Thus, the

district court erred in holding that the PPA supports a finding

that it lacks jurisdiction to hear this matter.6

6
 . On appeal, JCP&L also contends that a federal court should
abstain from resolving the merits of this case even if it
possesses subject matter jurisdiction. We disagree.

Abstention under Younger v. Harris, 401 U.S. 37 (1971), Burford
v. Sun Oil Co., 319 U.S. 315 (1943) and Railroad Com. of Texas v.
                              III.

          The defendants argue that if the federal courts have

jurisdiction and abstention is inapplicable, this court should

not address the merits of the preemption question, but should

remand for consideration to the district court.   JCP&L also

argues that dismissal is mandated because Freehold's claim is

moot and otherwise not ripe for adjudication.   JCP&L and the BRC

additionally assert that there are disputes over material facts

that preclude any grant of summary judgment for Freehold and

there are no "exceptional circumstances" justifying a resolution

by this court of Freehold's motion for summary judgment.

          On the other hand, Freehold asserts that its claim is

ripe for adjudication as a matter of law because the BRC has been

subjecting it to extensive state administrative, utility-type

rate hearings and disclosure requirements since March 1994.

Freehold vigorously argues that there are no factual issues to be

(..continued)
Pullman Co., 312 U.S. 496 (1941) is "an extraordinary and narrow
exception to the district court's duty to adjudicate a
controversy properly before it, justified only in the exceptional
circumstances where resort to state proceedings clearly serves an
important countervailing interest." United Services Auto. Asso.
v. Muir, 792 F.2d 356, 360-61 (3d Cir. 1986), cert. denied, 479
U.S. 1031 (1987). The doctrine of discretionary abstention is
predicated upon a federal policy of comity: federal courts of
equity should exercise their discretionary power with proper
consideration for the independence of state government in
carrying out its governmental functions. In this case, however,
our concern is with carrying out a federal statutory scheme
promoting the development of alternative energy sources. The
alleged intrusive action is not by the federal government, but,
on the contrary, by a state regulatory agency. We conclude that
abstention is not appropriate in this case and does not warrant
any extended discussion.
considered in addressing the legal question of preemption, and

that the appellees have had ample opportunity to make every

argument that they could in defense against Freehold's claim that

PURPA preempts the BRC's order.    Freehold notes that the only

alleged factual dispute that the BRC and JCP&L have been able to

claim before this court is whether the so-called "regulatory out"

clause permits the BRC to modify Freehold's contractual rates.

Freehold, however, counters that the "regulatory-out" clause

dispute requires no additional factfinding because it involves

only a simple contract construction issue capable of resolution

on the face of the PPA.   We agree; the clause is unambiguous and

requires no extrinsic evidence for its construction.

          Freehold also contends that there are exceptional

circumstances here that mandate disposition by this court of the

preemption issue without remand to the district court.    It claims

that the cogeneration project has already been delayed by the

time-consuming and costly proceedings before the BRC and that

every day adds immeasurably to the project's cost.    Freehold

argues that interest rates are rising, equipment and construction

costs are increasing, and the legal costs of this action and the

action before the BRC are escalating, while the revenues from the

project, if constructed, are fixed for the life of the contract

with JCP&L.

                                  A.

          In light of the ongoing proceedings before the BRC, we

see no merit whatsoever to the argument that the issue is moot.

As to the question of ripeness, the Supreme Court stated in
Abbott Labs. v. Gardner, 387 U.S. 136 (1967), its leading

discussion on the subject, and again reiterated in Pacific Gas &

Elec. Co. v. State Energy Resources Conservation & Dev. Comm'n,

461 U.S. 190, 201 (1983), that the question of ripeness turns on

"the fitness of the issue for judicial decision" and "the

hardship to the parties of withholding court consideration."

Abbott Labs., 387 U.S. at 149.

          In Presbytery of New Jersey of Orthodox Presbyterian

Church v. Florio, No. 93-5559, 1994 WL 638864 (3d Cir. 1994),

this court adopted the three part test from Step-Saver Data

Systems, Inc. v. Wyse Technology, 912 F.2d 643, 647 (3d Cir.

1990), to determine whether we would engage in pre-enforcement

review in the context of a declaratory judgment action:    (1) the

adversity of the parties' interests, (2) the conclusiveness of

the judicial judgment, and (3) the utility of that judgment.

Slip. op. at 14.

          There can be no question here about the adversity of

the parties' interests.    JCP&L seeks to alter or modify the PPA

it entered into with Freehold on March 26, 1992.    The BRC, which

had approved that contract consistent with PURPA's implementation

requirements, subsequently directed Freehold and JCP&L to

renegotiate the purchase price terms of the PPA or, in the

alternative, to negotiate a buy out of the PPA.    Freehold

rejected a renegotiation of the purchase price terms of the PPA

and a buyout by JCP&L.    Since then, the BRC has commenced an

extensive evidentiary proceeding to consider various courses of

action, including the modification or revocation of its approval
of the PPA.    In this litigation and on appeal, Freehold's

position is diametrically opposed to that of the defendants.

Thus, there is an actual concrete controversy "of sufficient

immediacy and reality to warrant the issuance of a declaratory

judgment."    Salvation Army v. Department of Community Affairs,

919 F.2d 183, 192 (3d Cir. 1990) (quoting Steffel v. Thompson,

415 U.S. 452, 460 (1974)).

          Furthermore, a judgment of this court will be

conclusive.    It will determine whether the BRC proceedings

conflict with or are expressly preempted as a matter of law by

section 210(e) of PURPA and FERC's implementing rules.    Moreover,

we are not persuaded that factual developments at the BRC

proceedings would add anything to the legal construction of

PURPA.

          Finally, there remains for consideration the last of

the Step-Saver three part test, the utility of such a judgment.

Freehold convincingly contends that the BRC's proceeding is

impeding Freehold's ability to obtain financing for its facility

and jeopardizes not only the PPA, but also the project's

financial viability.

             Freehold also argues that additional delay may make it

impossible to meet the construction and other deadlines contained

in project contracts and permits.    This argument is very

persuasive.    It takes but little experience in financial markets

to realize that lending institutions will not lend a borrower

large sums of money when the life of the underlying project is
threatened by extensive litigation.7   While the BRC litigation

has been in process and this appeal pending, the Federal Reserve

Bank has increased interest rates six times.8   Additional costs

because of the delay -- not only in interest, but also in

material and labor costs -- are irrecoverable under the terms of

the PPA.   Moveover, Freehold cannot recover damages from the BRC

if it prevails on the merits.

           In Pacific Gas & Elec. Co., 461 U.S. 190, a question of

preemption arose under circumstances where California's

traditional role of regulating the generation and sale of

electrical production challenged a complex federal scheme to

promote the development of civilian nuclear energy.   The

plaintiff utilities filed an action in the federal district court

seeking a declaration that certain California regulations were

invalid under the Supremacy Clause because they were preempted by

the Atomic Energy Act of 1994.   Ripeness became an issue in the

federal courts because the state administrative agency had not

yet resolved the proceedings before it.   In disposing of the

7
 . In the submission to the BRC of the proposed joint
modification agreement dated November 3, 1993, between Freehold
and the Staff of the Board of Regulatory Commissioners, Freehold
represented, and this representation was undisputed, that
expeditious approval of the joint agreement "is necessary so that
Freehold can go forward with the Project Financing. The lending
company will not make commitments until the issue of rate
reduction is resolved."
8
 . See 80 Fed. Reserve Bulletin 610 and 913. See also John E.
Woodruff, Fed jolts interest rates up, The Baltimore Sun, Nov.
16, 1994, at 1A (discussing the Federal Reserve's increases in
interest rates during 1994 and their effect on consumers and
businesses).
ripeness issue, the Court examined the Abbott Labs. test of the

"fitness of the issue for judicial decision" and "the hardship to

the parties of withholding court consideration" and concluded

that both factors favored a finding that the issue was ripe for

adjudication. It stated:
          The question of pre-emption is predominantly
          legal, and although it would be useful to
          have the benefit of California's
          interpretation of what constitutes a
          demonstrated technology or means for the
          disposal of high-level nuclear waste,
          resolution of the pre-emption issue need not
          await that development. Moreover,
          postponement of decision would likely work
          substantial hardship on the utilities.


Id. at 201.    The Court noted that one does not have to await the

ultimate impact of the threatened injury to obtain preventive

relief.    The imminence of the injury is sufficient.

            In Middle South Energy, Inc. v. Arkansas Pub. Serv.

Comm'n, 772 F.2d 404 (8th Cir. 1985), cert. denied, 474 U.S. 1102

(1986), the complaint also raised a preemption challenge to state

proceedings.    As in this case, the plaintiff did not challenge

the state's ultimate substantive decision, but rather its

authority to conduct proceedings to determine whether it should

declare void ab initio certain contracts entered into by a

utility pertaining to the purchase of power from, or payment for

construction of, a nuclear power plant in Mississippi.   The court

concluded that it "can hardly be doubted that a controversy

sufficiently concrete for judicial review exists when the

proceeding sought to be enjoined is already in progress."     Id. at

410-411.
          We also conclude that the issue here is ripe for

adjudication.   The proceedings before the BRC have been ongoing

for nearly one year.   The interest that Freehold seeks to

vindicate in this proceeding is the right to be free from "state

laws . . . respecting the rates . . . of electric utilities" and

from the expense, delay, and uncertainty inherent in the

administration of such laws.   If, as Freehold insists, the

ongoing BRC proceedings constitute state regulation of utility

rates and the burdens on Freehold occasioned by those proceedings

are the kinds of burdens which Congress intended QFs to be

spared, Congress' mandate would be frustrated if Freehold's right

to judicial review were postponed.    There is a concrete dispute

that has already worked a severe hardship upon Freehold, and a

determination of the legal issue of preemption need not await any

further developments before the BRC.

                                 B.

          The BRC and JCP&L rely on Equibank, N.A. v. Wheeling-

Pittsburgh Steel Corp., 884 F.2d 80, 86 (3d Cir. 1989), for the

proposition that this court generally has declined to address

issues that were not decided by the trial court absent

exceptional circumstances.   In Equibank, however, we declined to
address the merits because they had not been fully briefed by the

parties and additional factfinding might have been required by

the district court.    In contrast, the original complaint in this

case sought summary judgment on the sole legal question of

whether PURPA preempted the BRC's order which directed a hearing

on Freehold's previously approved rate.    The parties have fully
and repeatedly briefed this issue in the district court where

they also engaged in substantial oral argument on the merits.

Moreover, as previously alluded to, the increasing financial

pressure and rising costs imposed on Freehold because of the

protracted delay, the escalating interest rates in the financial

market, and the probability that the entire project will no

longer be viable if we remand, constitute exceptional

circumstances warranting our resolution of the preemption issue.9

                               IV.

          Our task is not to examine the merits underlying the

controversy between JCP&L and Freehold over whether the PPA

negotiated and executed in 1993 may be now revised and altered.

No claim of fraud or mutual mistake of fact is alleged in the

negotiation and execution of the PPA.   We must determine only

whether PURPA preempted the BRC order, dated January 5, 1994,

directing the parties to renegotiate the purchase rate terms of

the PPA or, in the alternative, to negotiate an appropriate




9
 . Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277 (3d
Cir.), cert. den. sub nom. Altran Corp. v. Ford Motor Co., 112
S.Ct. 374 (1991), and Virgin Islands Conservation Soc. v. Virgin
Islands Bd. of Land Use Appeals, 881 F.2d 28 (3d Cir. 1989),
cited by JCP&L for the proposition that there are no "exceptional
circumstances" justifying the resolution by this court of
Freehold's motion for summary judgment are inapposite. In both
of these cases, this court only decided that it would not
consider an issue raised for the first time on appeal without
compelling circumstances. In neither of these cases was the
matter of compelling circumstances analyzed or briefed as they
are here.
buyout of the PPA, failing which the BRC would and did commence

proceedings now pending before it.   We conclude that it does.10

          A state law may not only be preempted expressly by

Congress, but whenever it conflicts with federal law.    Fidelity

Federal Sav. and Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153

(1982).   Under the Supremacy Clause of the United States

Constitution, a federal agency acting within the scope of its

congressionally delegated authority has the power to preempt

state regulation and render unenforceable state or local laws

which are otherwise not inconsistent with federal law.     Louisiana

Public Service Com. v. FCC, 476 U.S. 355, 368-69 (1986).       Of

course, the application of the preemption doctrine requires a

determination of congressional intent in enacting a federal law.

That intent is not necessarily dependent on express congressional

authorization to nullify or render partially or wholly

unenforceable an inconsistent state law or regulation.      It also

occurs "where Congress has legislated comprehensively, thus

occupying the entire field of regulation and leaving no room for

the States to supplement federal law, or where the state law

stands as an obstacle to the accomplishment and execution of the

full objectives of Congress."   Id. at 368-69 (citation omitted).

10
 . The district court held that the dispute before the BRC
arises under the PPA and presumed that it was not subject to
preemption. Freehold, however, has no dispute under the PPA; it
filed a complaint in the district court to protect the terms and
integrity of the PPA from unwarranted intrusion by the BRC. The
BRC is attempting to alter the terms of the PPA after having
fully approved it in a final and non-appealable order. We do not
believe that Freehold's claim can correctly be characterized as a
dispute under the PPA.
          As we have previously stated in this opinion, Congress

modified the Federal Power Act, which gave the FERC exclusive

authority to regulate public utilities engaged in the sale of

electric power at wholesale in interstate commerce, by enacting

PURPA as part of a comprehensive legislative effort to solve a

nationwide energy crisis and thus reduce the nation's dependence

on fossil fuels.    In PURPA, Congress directed the FERC to

promulgate regulations requiring public utilities to buy electric

energy from and to sell electric energy to qualifying

cogeneration facilities.    After extensive hearings, Congress

concluded that the energy problem was nationwide in scope and

therefore required "federal standards regarding retail sale of

electricity, as well as federal attempts to encourage

conservation and make efficient use of scarce energy resources."

FERC v. Mississippi, 456 U.S. at 757.

          Section 210 of PURPA sets forth the benefit to which

QFs are entitled.    It creates a market for their energy by

requiring that the FERC establish regulations that obligate

public utilities to sell electric energy to and purchase electric

energy from QFs.    16 U.S.C. § 824a-3(a).    Section 210(b) requires

the FERC to promulgate regulations to ensure that the rates for

these purchases "shall be just and reasonable to the electric

consumers of the electric utility in the public interest."      These

rates may not exceed the incremental cost to the utility of

purchasing alternative electric energy.      16 U.S.C. § 824a-3(b).11

11
 . Where, as here, the PPA has a long-term, fixed price,
tension may arise between this consumer protective provision of
           Pursuant to PURPA's requirements, the FERC issued

regulations which define the minimum operating and efficiency

standards that cogeneration facilities must meet and the benefits

to which they are entitled.    18 C.F.R. §§ 292.101-.211.   The

regulations also authorize the FERC to revoke QF status for non-

compliance with its application and empower the FERC to waive

operating and efficiency standards upon a showing that the QF

produces significant energy savings.    18 C.F.R. § 292.205(c).

Additionally, the regulations address the purchase of energy by

utilities, and the cost to be paid to the QF supplying the energy

and guidelines for calculating such costs.    18 C.F.R. § 292.301-

.308.   Thus, PURPA and the implementing regulations establish an

extensive federal system to encourage and regulate the sale of

electrical energy by QFs.

           JCP&L claims that it and Freehold voluntarily agreed to

the BRC's continuing jurisdiction over the PPA and the rates

charged by Freehold thereunder.    This argument is based upon the

BRC's unsuccessful effort in late 1993 to formulate a joint

agreement between the parties modifying the PPA.    JCP&L also

asserts that in the course of the ongoing proceeding initiated by

the BRC to review the PPA, the BRC is reviewing documentary

evidence and testimony concerning the meaning of the PPA's

"regulatory-out" clause.    JCP&L maintains that the regulatory-out

(..continued)
PURPA and the FERC regulation permitting the parties to hold
incremental avoidable cost at the level it has on the date the
PPA is effective. Whatever problem this may create is, however,
a matter for FERC, not the BRC. See also infra p. 30.
clause grants the BRC continuing jurisdiction over rates.

Finally, JCP&L argues that PURPA contains no express preemption

claims and that implied preemption is not to be lightly presumed.

In fact, it argues that there is a presumption against finding

preemption of state law in areas traditionally regulated by the

states.

           Although the states are required under the federal

statutory scheme to implement the federal rules, section 210(e)

of PURPA requires that the FERC prescribe rules exempting QFs

"from state laws and regulations respecting the rates, or

respecting the financial or organizational regulation of electric

utilities, or from any construction of the foregoing, if the

Commission determines such exemption is necessary to encourage

cogeneration and small power production."   16 U.S.C. § 824a-

3(a)(1).   As discussed earlier, the FERC promulgated regulations,

pursuant to section 210(e)(1) of PURPA, exempting QFs from

various federal and state regulatory requirements.

           The BRC concedes that in adopting the regulation

exempting cogenerators from state utility regulation, the FERC

described the exemption as broad.   It takes heart, however, in

FERC language stating that the exemption is "not intended to

divest a State regulatory agency of its authority to review

contracts for purchases as part of its regulation of electric

utilities."   45 Fed. Reg. 12,233 (Feb. 25, 1980).   This

misunderstands the interplay between sections 210(a) and 210(e).

There is no dispute here that section 210(f) gives state

regulatory authorities power to implement the requirements of
section 210(a) and the relevant regulations.     In fact, both

section 210(e)(3) and the applicable regulation, 18 C.F.R.

§ 292.602(c)(2), expressly limit the exemptions from state law

that QFs enjoy under § 210(e):   QFs simply are not exempt from

state laws and regulations enacted pursuant to § 210(f) and, with

it, § 210(a).

           Thus, if a case concerns implementation procedures

contemplated by § 210(f), then the action is properly covered by

§ 210(g), and, therefore, federal jurisdiction would be improper.

Here, on the other hand, the BRC's implementation of FERC's §

210(a)-type regulations ended with BRC's July 8, 1992 approval of

the PPA.   The present attempt to either modify the PPA or revoke

BRC approval is "utility-type" regulation -- exactly the type of

regulation from which Freehold is immune under § 210(e).     As the

explanatory note states, the regulations do not disturb the

authority of state regulatory agencies "to review contracts for

purchases" so long as those regulations are "consistent with the

terms, policies and practices of sections 210 and 201 of PURPA

and [FERC's] implementing regulations.   If the authority or its

exercise is in conflict, . . . the State must yield to the

Federal requirements."

           Absent legislative restriction, the BRC also asserts,

reconsideration of its prior approval of the PPA is inherent in

the authority of all administrative agencies and not necessarily

a characteristic unique to rate-making bodies.    However, in this

instance, there is specific federal statutory legislation, PURPA,

that bars reconsideration of the prior approval of the PPA at
least absent some basis in the law of contracts for setting aside

the PPA.   No such basis is referred to here. Based on the overall

scheme of PURPA and its stated goal, and especially section

210(e) and the implementing rules promulgated by the FERC, we

hold that Congress intended to exempt qualified cogenerators from

state and federal utility rate regulations.

           Two recent cases support our conclusion.   In

Independent Energy Producers, 36 F.3d 848, the Energy Producers

sought an injunction in the federal district court to prevent the

California Public Utilities Commission ("CPUC") from implementing

an order which delegated to the defendant-utilities the authority

to enforce federal operating and efficiency requirements set out

in PURPA and in the regulations promulgated by the FERC.     As in

this case, the plaintiff QF and the utilities entered into

contracts for the sale and purchase of electric energy.    The

contracts contained standardized terms and the rates to be paid

the QFs.   In 1991, the utilities and the CPUC created a program

which authorized the utilities to monitor the compliance with

federal operating and efficiency standards by the QFs with which

they had contracts.   If a utility determined that a QF did not

meet federal operating and efficiency standards, it was

authorized to suspend payment of the rates specified in the

contract and substitute a lower alternative rate.     Independent

Energy Producers challenged this program, contending that the

FERC's authority is exclusive and the state program is preempted

by federal law.   The district court disagreed and held there was

no preemption.
          The court of appeals reversed.    It concluded that the

FERC regulations carry out the statutory scheme reposed in its

exclusive authority to make QF determinations for the revocation

of QF status or waive compliance with QF standards, they nowhere

"contemplate a role for the state in setting QF standards or

determining QF status."    Id. at 854.   For reasons of policy, it

held that a "uniform federal decision maker is necessary" in the

public interest and that the CPUC program was preempted by

federal law.   Id.

          One of the issues raised in Smith Cogeneration, Inc. v.

Corporation Comm'n, 863 P.2d 1227 (Okla. 1993), is even more

analogous to this case.    A rule of the Oklahoma Corporation

Commission required QFs and electrical utilities to include in

their non-negotiated cogeneration purchase contracts a notice

provision allowing reconsideration and modification by the

Corporation Commission of avoided costs after the contract had

been agreed upon.    The cogenerator argued that the Corporation

Commission rule directly conflicted with PURPA and the FERC

regulations, discouraged cogeneration, and was preempted by

federal law.   Although the cogenerator acknowledged that states

have broad authority to implement PURPA, it insisted that any

utility-type regulation over cogeneration contracts directly

conflicted with PURPA.

          As Freehold does here, the cogenerator in Smith argued
that any attempt to revisit a cogeneration contract, as a result

of changed circumstances, deprives QFs of the benefits of the

bargain and that the state rule, unless waived, stands as a
direct obstruction to obtain the necessary financing for the

project.    The Corporation Commission and the utilities argued to

the contrary.

            The Oklahoma court, after examining the preamble to the

FERC regulations and PURPA, concluded that reconsideration of

long term contracts with established estimated costs imposes

utility-type regulations over QFs.     "PURPA and FERC regulations

seek to prevent reconsideration of such contracts.     The

legislative history behind PURPA confirms that Congress did not

intend to impose traditional utility type rate-making concepts on

sales by qualifying facilities to utilities."    Id. at 1240-1241.

Accordingly, the court held that PURPA and FERC regulations

preempted the State Commission rule.

            JCP&L attempts to distinguish this case from Smith on

the ground that the challenged rule in Smith would impact on

financing, but that in this case, the BRC's "pre-financing review

of the PPA will have no such impact."    Such a distinction is

illusory.   The Oklahoma court did not rest its preemption holding

merely on the impact of the Commission rule on financing, but

primarily on the obligation and rights of the parties under a

negotiated and executed contract.    Here, the facts favor Freehold

more strongly than they did the cogenerator in Smith.    In Smith,

the cogenerator did not yet have a signed contract; Freehold does

and the preemption issue is precisely the same.    Besides, we

cannot disregard the impact on cogeneration financing if a

purchase power agreement is at any time in the future subject to

the arbitrary reconsideration by a state utility regulatory body.
          Finally, the defendants maintain that preemption is

inappropriate because JCP&L and Freehold voluntarily agreed to

exempt the PPA from PURPA.   They note correctly that FERC

regulations specifically contemplate voluntary agreements outside

of PURPA's umbrella.   See 18 C.F.R. § 292.301(b); see also

American Paper Institute, Inc., 461 U.S. at 416 (stating that "a

qualifying facility and a utility may negotiate a contract" that

constitutes "a waiver" of PURPA).   They claim that Freehold, in a

"regulatory-out" clause,12 agreed to waive its section 210(e) and

12
 .   The "regulatory-out" clause provides in pertinent part:

          20.2(a) The parties recognize and
          acknowledge that this agreement and the rates
          to be paid to the Seller [Freehold] for
          energy and capacity for the Facility are
          premised upon and subject to the Company's
          [JCP&L] continuing ability to timely and
          fully recover from its customers all such
          costs and charges paid to the Seller
          hereunder for energy and capacity throughout
          the term hereof. Consequently, in the event
          that the BRC, the FERC or any legislative,
          judicial, administrative or other
          governmental agency having jurisdiction over
          the parties, . . . should disallow in whole
          or in part or otherwise impair the full and
          timely recovery by the Company from its
          customers of any energy and capacity payments
          made or to be made to the Seller hereunder,
          then, at the option of the Seller, (i) the
          parties hereto shall promptly thereafter
          commence negotiations to approximately amend
          this Agreement to reduce the rates to be paid
          by the Company hereunder for energy and
          capacity to such rates as the BRC or such
          other governmental agency exercising
          jurisdiction shall have authorized the
          Company to recover through operation of its
          Levelized Energy Adjustment Clause ("LEAC") .
          . . on a full and timely basis or (ii) upon
          thirty (30) days prior written notice to the
18 C.F.R. § 292.602(c)(1) rights to be free from state rate

regulation or law.

          As we have noted, insofar as the issues in this case

are concerned, we find the "regulatory-out" clause unambiguous.

It merely describes what would happen in the event that during

the 20-year contract term JCP&L should for any reason lose its

right to pass costs on to its ratepayers.   When this clause was

agreed upon, the parties clearly did not expect that this right

could be lost as a result of BRC action absent some change in the

governing law.13   But the important aspect for present purposes

is that this clause does not purport to confer on the BRC any

jurisdiction it would not otherwise have.   In particular, it

reflects no intent on the part of Freehold to surrender any of

the protection from state rate regulation conferred upon it by §

210(a).

                                 V.

          In summary, we conclude that the district court had

subject matter jurisdiction to consider Freehold's claims and

(..continued)
          Company, the Seller may terminate this
          Agreement and neither party shall have any
          further liability or obligation hereunder
          except for amounts due prior to the date of
          termination . . . .
13
 . In the BRC's 1992 order approving the PPA, the BRC committed
itself and its successors to "allow JCP&L to flow-through and/or
fully and timely recover the rates specified in [the PPA] and the
costs resulting therefrom . . . ."

A July 1, 1988, Stipulation and Settlement relied upon by the BRC
in approving the present PPA states that the BRC will not
readjust contract rates or preclude flow through.
that the jurisdictional limits of section 210(g) of PURPA did not

bar jurisdiction of this action.   We also hold that the district

court erred in concluding that the Johnson Act precludes federal

jurisdiction and that Freehold's claim involves solely a

contractual dispute subject to the jurisdiction of the state

utility regulatory agency under the choice of law and forum

provisions of the PPA.   We reject the argument that any of the

abstention doctrines apply in any manner to these proceedings.

Finally, we hold that once the BRC approved the power purchase

agreement between Freehold and JCP&L on the ground that the rates

were consistent with avoided cost, just, reasonably, and

prudentially incurred, any action or order by the BRC to

reconsider its approval or to deny the passage of those rates to

JCP&L's consumers under purported state authority was preempted

by federal law.

          The order of the district court will be reversed and

the case remanded with direction to enter summary judgment in

favor of the appellant and for such further proceedings as are

consistent with this opinion.   Costs taxed against the appellees.
