In the 1985 case Nantahala Power & Light Co. et al. v. Thornburg, Attorney General of North Carolina, et al., the U.S Supreme Court ruled in favor of Nantahala Power & Light Company and Tapoco Inc., both subsidiaries of Alcoa Incorporated. The companies were contesting a decision by the North Carolina Utilities Commission (NCUC) that disallowed them from passing on to their customers certain costs related to power allocation under an agreement approved by Federal Energy Regulatory Commission (FERC). NCUC had argued that FERC's approval was unjust and unreasonable due to alleged discrimination against these companies in terms of power allocation compared with other Alcoa subsidiaries not regulated by FERC. The court held that since FERC has exclusive jurisdiction over interstate wholesale rates, its determination regarding cost allocations preempts state law or regulation; thus, states cannot second-guess or modify such determinations when setting retail rates for utilities within their jurisdictions. Therefore, NCUC could not bar Nantahala and Tapoco from recovering those costs through retail electricity rates.

In the dissenting opinion for Nantahala Power & Light Co. v. Thornburg, Justice Brennan argued that the majority's decision failed to properly apply federal law and precedent regarding wholesale energy rates set by Federal Energy Regulatory Commission (FERC). He contended that FERC’s allocation of power among companies was not a rate-setting action but an operational order, which states are free to disregard in setting retail rates. The majority's view would effectively allow FERC to dictate state retail prices indirectly, undermining states' authority over their own utilities and intruding upon traditional areas of state regulation. Furthermore, he disagreed with the majority's interpretation of Duke Power Co.'s contract rights under its agreement with Nantahala and Tapoco; he believed these were not absolute but contingent on regulatory approval at both federal and state levels.