Source: https://supreme.justia.com/cases/federal/us/343/414/
Timestamp: 2019-04-21 08:53:59+00:00

Document:
1. Petitioner power company owns a hydroelectric plant on a navigable stream and holds a license from the Federal Power Commission under Part I of the Federal Power Act. It also sells power at wholesale in interstate commerce. The Commission found on substantial evidence that the states involved were "unable to agree" on services to be rendered and rates to be charged within the meaning of § 20 of Part I of the Act.
(a) The fact that petitioner is a licensee and subject to regulation as such under Part I does not preclude its regulation under Part II as a public utility engaged in interstate commerce. Pp. 343 U. S. 418-419.
(b) The Commission having found on substantial evidence that the states were "unable to agree" on the services to be rendered and rates to be charged, within the meaning of § 20, petitioner is also subject to regulation under Part I. P. 343 U. S. 419.
2. Two power companies have hydroelectric plants on the Susquehanna River and a third operates steam-electric plants in Maryland. Under a contract between them, a complete integration and pooling of power producing and transmitting facilities has been achieved, and power flows from Maryland into Pennsylvania and vice versa, depending upon the flow of water in the Susquehanna River. The Federal Power Commission found that the combined operations of the system are completely interstate in character, notwithstanding the fact that, at some particular times, transactions may involve energy never crossing a state boundary.
Held: The Federal Power Commission has complete authority to regulate sales at wholesale of all of this commingled power. Pp. 343 U. S. 419-420.
the Federal Power Commission issued an order fixing petitioner's rates, which had the effect of requiring a continuation of the integration and pooling of the power producing and transmitting facilities of the three companies. Held: the order is valid. Pp. 343 U. S. 421-424.
(a) Petitioner's duty to continue its coordinated operations with the Maryland company springs from the Commission's statutory authority, not from the law of private contracts. Pp. 343 U. S. 421-422.
(b) The Act gives the Commission ample authority to order these companies to continue their long-existing operational "practice" of integrating their power output, and, in so doing, the Commission was furthering the expressly declared policy of the Act. Pp. 343 U. S. 422-424.
4. Petitioner has presented nothing to show that the end result of the rate reduction ordered by the Commission is unjust or unreasonable. P. 343 U. S. 424.
89 U.S.App.D.C. 235, 193 F.2d 230, affirmed.
The Federal Power Commission found the rates charged by petitioner for the sale of electric power at wholesale in interstate commerce unreasonable and ordered a reduction. The Court of Appeals affirmed. 89 U.S.App.D.C. 235, 193 F.2d 230. This Court granted certiorari. 342 U.S. 931. Affirmed, p. 343 U. S. 424.
ordered Penn Water to file a new schedule of rates and charges to bring about the reductions required.
In subsequent orders, the Commission denied Penn Water's applications for rehearing, rejected as insufficient new rate schedules filed by Penn Water, and itself prescribed the rate schedules which Penn Water here seeks to avoid. On review, the Court of Appeals gave full consideration to Penn Water's multitudinous challenges, and approved the Commission's action, one Judge dissenting. 89 U.S.App.D.C. 235, 193 F.2d 230.
"(1) Does the fact that Penn Water is a licensee under Part I of the Federal Power Act, [Footnote 4] and therefore subject to regulation under that Part, preclude its regulation under Part II of the Act as a public utility engaged in interstate commerce?"
"(2) Assuming that Penn Water can be subjected to regulation under both Parts of the Act, were the Commission and the Court of Appeals correct in holding that all of Penn Water's sales at wholesale were 'in interstate commerce' within the meaning of Part II of the Act?"
upon contractual agreements between Penn Water and Consolidated which Penn Water cannot carry out without violating the federal antitrust laws or the laws of Pennsylvania forbidding surrender by Pennsylvania corporations of their corporate independence?"
we should impliedly exempt Part I licensees from the more expansive Part II regulation. It may be possible that some future cases will develop minor inconsistencies in the administration of the two Parts. Today's case, however, is not such a one. We hold that Penn Water is subject to regulation under Part II of the Act. It is also subject to Part I regulation, since the Commission found on substantial evidence, as the court below held, that the States were "unable to agree" within the meaning of § 20 of Part I of the Act.
It is contended that some of Penn Water's sales at wholesale were not "in interstate commerce," and therefore were not subject to federal regulation under Part II. This contention refers to sales made by Penn Water in Pennsylvania to Pennsylvania customers. These are alleged to include about 83% of Pennsylvania generated power. Because of the following circumstances, we agree with the Commission and the Court of Appeals that these sales were "in interstate commerce."
"The central fact disclosed by the record about Penn Water's sales in Pennsylvania is that they are not sales of the output of Penn Water's own plant, but sales of output of the integrated and coordinated interstate electric system of which Penn Water's facilities are an integral part. . . ."
"In this manner, energy crossing the State boundary, with other system energy, is used to fulfill system requirements. There result times when system energy generated in Pennsylvania is used, mixed or unmixed, in meeting system requirements in Maryland. Similarly, there are occasions when system energy from Maryland is used, mixed or unmixed, in meeting system requirements in Pennsylvania. Energy flows in, across, and out of the system transmission network as the needs of the interconnected members develop from minute to minute and day to day."
"It is accordingly evident that the operations of the unified system enterprise are completely interstate in character, notwithstanding the fact that system energy transactions at some particular times may involve energy never crossing the State boundary."
8 F.P.C. 1, 12, 15.
We hold that the Federal Power Commission has complete authority to regulate all of this commingled power flow. [Footnote 6] The Commission's power does not vary with the rise and fall of the Susquehanna River.
freedom is ever threatened by such an order, it will be time enough to consider its validity. To the extent that Penn Water is being controlled, it is by the Commission, acting under statutory authority, not by Consolidated, acting under the authority of private contract terms "legalized" by the Commission. The duty of Penn Water to continue its coordinated operations with Consolidated springs from the Commission's authority, not from the law of private contracts.
"If there are questions as to legality of the foundation contracts which are in litigation, as respondents' application for rehearing indicates, the validity of our order is not dependent upon the decision of those questions."
8 F.P.C. 170, 175. We agree with the Court of Appeals that neither the order nor the findings were premised on the continuation of the Penn Water-Consolidated contract.
"Whenever the Commission, after a hearing . . . shall find that any rate . . . is unjust, unreasonable . . . the Commission shall determine the just and reasonable rate, . . . practice, or contract to be thereafter observed and in force, and shall fix the same by order."
"For the purpose of assuring an abundant supply of electric energy throughout the United States with the greatest possible economy and with regard to the proper utilization and conservation of natural resources, the Commission is empowered and directed to divide the country into regional districts for the voluntary interconnection and coordination of facilities for the generation, transmission, and sale of electric energy. . . ."
"prescribe the terms and conditions of the arrangement to be made between the persons affected by any such order, including the apportionment of cost between them and the compensation or reimbursement reasonably due to any of them."
. . . or contract relating thereto, except after thirty days' notice to the Commission and to the public."
Here, instead of following the procedure for changing existing services and practices -- a procedure which the Congress has authorized and which the Commission has supplemented by rules of its own -- the company has rather tried to utilize a violation of the Sherman Act so as to nullify a rate reduction order.
Nothing whatever has been presented by Penn Water to show that the end result of this rate reduction is unjust or unreasonable. Cf. Federal Power Comm'n v. Hope Gas Co., 320 U. S. 591, 320 U. S. 603.
* Together with No. 429, Pennsylvania Public Utility Commission v. Federal Power Commission, also on certiorari to the same court.
There was evidence before the Commission that, from 1936 through 1945, Penn Water's dividends on its common stock had never been less than 25% of the cash paid in on the stock.
41 Stat. 1063, 49 Stat. 838, 16 U.S.C. § 791a et seq.
Section 20 of Part I provides that "the rates charged and the service rendered . . . shall be reasonable, nondiscriminatory, and just to the customer. . . ." Section 205(a) of Part II provides that "All rates and charges . . . shall be just and reasonable. . . ."
See also Safe Harbor Water Power Corp. v. Federal Power Commission, 179 F.2d 179, aff'g 5 F.P.C. 221.
Pennsylvania W. & P. Co. v. Consolidated G., E.L. & P. Co., 184 F.2d 552. See also Consolidated Gas E.L. & P. Co. v. Pennsylvania W. & P. Co., 194 F.2d 89.
There is more to these cases than meets the eye. On the surface, they seem to be only an illustration of the exploitation of the public by a utility through the charging of excessive rates. But far greater issues lurk in the record. There is lawless conduct that overshadows the evils of extortionate rates. It is lawless conduct that violates the Sherman Act. It implicates not only the utilities, but the regulatory agency as well. The desire to reduce excessive rates should not blind us to the greater evil. It is far better that one public utility win one more legal skirmish in its struggle against regulation than that we abandon legal standards and let the regulatory agency run riot.
has been condemned by the Court of Appeals for the Fourth Circuit. See 184 F.2d 552; 194 F.2d 89. The alliance was illegal because it violated the Sherman Act. It was an arrangement that permitted Penn Water to be operated as though it were a department of Consolidated. All competition between the two companies was destroyed, as evidenced by the fact that, in 1948, Consolidated vetoed a steam electric generating plant to be built by Penn Water at Holtwood, Pennsylvania. What Penn Water may do, the revenues it receives, the costs it will incur, are largely determined by Consolidated under these illegal contracts.
"If there are questions as to the legality of the foundation contracts which are in litigation, as respondents' application for rehearing indicates, the validity of our order is not dependent upon the decision of those questions. In our opinion and order, we took care to leave the continuation of the operation of the integrated and interconnected system in full effect, merely changing the rates. . . ."
contract that leaves Penn Water no initiative of private management.
Of course, the Commission has authority under § 202 of the Federal Power Act to promote, and at times compel, interconnection and coordination of the facilities of public utility companies. But I know of no power in the Commission that authorizes it to place one company on the back of another company, to merge and consolidate companies as it chooses, or to give the management of one company a veto power over the management of a competitor. Those are practices which the Sherman Act condemns, and which nothing in the Federal Power Act sanctions.
* The Commission entered its final order in the cases prior to the decision of the Court of Appeals in the Sherman Act litigation. The Commission opinion on rehearing hearing was dated February 26, 1949, while the first decision of the Court of Appeals was on September 30, 1950.

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