Source: https://supreme.justia.com/cases/federal/us/426/271/
Timestamp: 2019-04-26 02:11:32+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 426 › FPC v. Conway Corp.
Federal Power Commission v. Conway Corp.
"an attempt to squeeze [respondents] . . . out of competition and make them more susceptible to the persistent efforts of the Company to take over the publicly owned systems in the State."
"in a market in which it is competing with its own customers are part of the factual context in which the proposed wholesale rate will function . . . ,"
and should be considered in determining whether or not the rate increase was just and reasonable.
Held: The FPC's jurisdiction to review a petition to set aside or reduce a public utility's wholesale electric rate increase permits consideration of the utility's alleged purpose to forestall its customers from competing with it at retail. Pp. 426 U. S. 276-282.
and anticompetitive. To the extent that the alleged discrimination is traceable to the jurisdictional rate § 205(b) would apply, and the FPC would have remedial power over the jurisdictional rate under § 206. Pp. 426 U. S. 276-277.
(b) Ratemaking is not an exact science, and there is no single cost-recovering rate: one rate as related to another may be discriminatory, although each rate, if considered independently, might fall within the zone of reasonableness. When the intrazonal relationship unduly favors one rate, the discrimination must be removed. Pp. 426 U. S. 277-279.
(c) While the FPC lacks authority to fix retail rates, it may take those rates into account when it fixes the rates for interstate wholesale sales that are subject to its jurisdiction. Cf. Panhandle Co. v. FPC, 324 U. S. 635, 324 U. S. 646. Pp. 426 U. S. 279-282.
167 U.S.App.D.C. 43, 510 F.2d 1264, affirmed.
that the proposed wholesale rates, which are within the Commission's jurisdiction, are discriminatory and noncompetitive when considered in relation to the company's retail rates, which are not within the jurisdiction of the Commission? We hold that it does.
electric systems and the two electric power cooperatives which are respondents here. [Footnote 2] Each of these respondents (Customers) operates in the State of Arkansas, and each borders on or is surrounded by the territory served by the Company.
"an attempt to squeeze [the Customers] or some of them out of competition, and to make them more susceptible to the persistent attempts of the company to take over the public[ly] owned systems in the State."
Company], since, in many cases, the revenues therefrom would not even cover the incremental power costs to [the Customers]."
"plainly discriminatory against the single class of customer which [the Company] has historically attempted to drive out of business, without justification on any ordinary cost of service basis. . . ."
"beyond the scope of this Commission's jurisdiction, contrary to the purposes of the Federal Power Act and inappropriate in this proceeding, the purpose of which is to review the justness and reasonableness of the [Company's] proposed wholesale rates."
that the Commission's jurisdiction over wholesale rates for electricity sold in interstate commerce furnished the necessary authority to consider the alleged discriminatory and anticompetitive effects of the requested increase. The Company's retail rates, the court held, "in a market in which it is competing with its own customers are part of the factual context in which the proposed wholesale rate will function . . . ," and should be considered in determining whether or not the rate increase was just and reasonable. 167 U.S.App.D.C. 43, 52, 510 F.2d 1264, 1273 (1975). The case was therefore remanded to the Commission for further proceedings.
We granted the Commission's petition for certiorari to consider the question whether the Court of Appeals had correctly construed the statutes controlling the Commission's jurisdiction. 423 U.S. 945 (1975). We now affirm the judgment of the Court of Appeals.
an alleged discriminatory or anticompetitive relationship between wholesale and retail rates by ordering the company to increase its retail rates.
As the Commission is at great pains to establish, this is the proper construction of the Act, the legislative history of § 205 indicating that the section was expressly limited to jurisdictional sales to foreclose the possibility that the Commission would seek to correct an alleged discriminatory relationship between wholesale and retail rates by raising or otherwise regulating the nonjurisdictional, retail price. [Footnote 5] Insofar as we are advised, no party to this case contends otherwise.
Building on this history, the Commission makes a skillful argument that it may neither consider nor remedy any alleged discrimination resting on a difference between jurisdictional and nonjurisdictional rates. But the argument, in the end, is untenable. Section 205(b) forbids the maintenance of any "unreasonable difference in rates" or service "with respect to any . . . sale subject to the jurisdiction of the Commission." A jurisdictional sale is necessarily implicated in any charge that the difference between wholesale and retail rates is unreasonable or anticompetitive. If the undue preference or discrimination is in any way traceable to the level of the jurisdictional rate, it is plain enough that the section would, to that extent, apply, and, to that extent, the Commission would have power to effect a remedy under § 206 by an appropriate order directed to the jurisdictional rate. This was the view of the Court of Appeals, and we agree with it.
"Statutory reasonableness is an abstract quality represented by an area, rather than a pinpoint. It allows a substantial spread between what is unreasonable because too low and what is unreasonable because too high."
"It occurs to us that one rate in its relation to another rate may be discriminatory, although each rate, per se, if considered independently, might fall within the zone of reasonableness. There is considerable latitude within the zone of reasonableness insofar as the level of a particular rate is concerned. The relationship of rates within such a zone, however, may result in an undue advantage in favor of one rate and be discriminatory insofar as another rate is concerned. When such a situation exists, the discrimination found to exist must be removed."
"clearly carries with it the responsibility to consider, in appropriate circumstances, the anticompetitive effects of regulated aspects of interstate utility operations pursuant to . . . directives contained in §§ 205, 206. . . ."
Gulf States Util. Co. v. FPC, 411 U. S. 747, 411 U. S. 758-759 (1973). The Commission must arrive at a rate level deemed by it to be just and reasonable, but, in doing so, it must consider the tendered allegations that the proposed rates are discriminatory and anticompetitive in effect.
"When costs are fully allocated, both the retail rate and the proposed wholesale rate may fall within a zone of reasonableness, yet create a price squeeze between themselves. There would, at the very least, be latitude in the FPC to put wholesale rates in the lower range of the zone of reasonableness, without concern that overall results would be impaired, in view of the utility's own decision to depress certain retail revenues in order to curb the retail competition of its wholesale customers."
167 U.S.App.D.C. at 53, 510 F.2d at 1274. (Footnote omitted.) Because the Commission had raised a jurisdictional barrier and refused to consider or hear evidence concerning the Customers' allegations, the Court of Appeals could not determine whether a wholesale rate, if set low enough partially or wholly to abolish any discriminatory effects found to exist, would fail to recover wholesale costs. The case was therefore remanded to the Commission for further proceedings.
"any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order."
wholesale sales which are subject to its jurisdiction."
The Court of Appeals' construction of the Act is sound, and its judgment is affirmed.
"Whenever the Commission, after a hearing had upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order."
49 Stat. 852, 16 U.S.C. § 824e(a).
49 Stat. 851, 16 U.S.C. § 824d(b).
The respondent customers are Conway Corp. (Conway, Ark.); Benton Municipal Light & Water Works; Hope Water & Light Commission; city of North Little Rock; city of Osceola; city of Prescott; city of West Memphis; Farmers Electric Cooperative Corp.; and Mississippi County Electric Cooperative, Inc.
"Unless the Commission otherwise orders, no change shall be made by any public utility in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, except after thirty days' notice to the Commission and to the public. Such notice shall be given by filing with the Commission and keeping open for public inspection new schedules stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect. The Commission, for good cause shown, may allow changes to take effect without requiring the thirty days' notice herein provided for by an order specifying the changes so to be made and the time when they shall take effect and the manner in which they shall be filed and published."
49 Stat. 851, 16 U.S.C. § 824d(d).
"The provisions of this Part shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but shall not apply to any other sale of electric energy or deprive a State or State commission of its lawful authority now exercised over the exportation of hydroelectric energy which is transmitted across a State line."
Under the Act to Regulate Commerce of 1887, it was held that the Interstate Commerce Commission was empowered to order that a nonjurisdictional, intrastate freight rate be raised to eliminate a discrimination. Houston & Texas R. Co. v. United States, 234 U. S. 342, 234 U. S. 356-359 (1914).
"The function which an allocation of costs (including return) is designed to perform in a rate case of this character is clear. The amount of gross revenue from each class of business is known. Some of those revenues are derived from sales at rates which the Commission has no power to fix. The other part of the gross revenues comes from the interstate wholesale rates which are under the Commission's jurisdiction. The problem is to allocate to each class of the business its fair share of the costs. It is, of course, immaterial that the revenues from the intrastate sales to the direct industrial sales may exceed their costs, since the authority to regulate those phases of the business is lacking. To the extent, however, that the revenues from the interstate wholesale business exceed the costs allocable to that phase of the business, the interstate wholesale rates are excessive."
324 U.S. at 324 U. S. 588.
"We agree that the Commission must make a separation of the regulated and unregulated business when it fixes the interstate wholesale rates of a company whose activities embrace both. Otherwise the profits or losses, as the case may be, of the unregulated business would be assigned to the regulated business and the Commission would transgress the jurisdictional lines which Congress wrote into the Act. The Commission recognizes this necessity. As it stated in Re Cities Service Gas Co., 50 P.U.R.(N.S.) 65, 89:"
"The question is whether a formal allocation was necessary under the exceptional circumstances of this case."
"It is true that the Natural Gas Act forbids discrimination only as between regulated rates, and does not forbid discriminations between the regulated and unregulated ones."
But the Justice went on to make clear that a nonjurisdictional price could be used in determining what is the "just and reasonable" jurisdictional rate.
"By use of the unregulated price as a basis for comparison, I think a reduction in the wholesale rates for resale to the public is in order. If this makes low price industrial business less desirable, it will be in the long-range public interest for reasons more fully stated by me in [FPC v. Hope Gas Co., 320 U. S. 591 (1944)]."

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