Source: https://m.openjurist.org/410/us/366
Timestamp: 2020-07-09 05:11:53
Document Index: 593245588

Matched Legal Cases: ['§ 202', '§ 202', '§ 2', '§ 1', '§ 2', '§ 824', '§ 824', '§ 213', '§ 202', '§ 824', '§ 2', '§ 202', '§ 824', '§ 103', '§ 202', '§ 824', '§ 824', '§ 824', '§ 824', '§ 824']

410 US 366 Otter Tail Power Company v. United States | OpenJurist
410 U.S. 366 - Otter Tail Power Company v. United States
35 L.Ed.2d 359
OTTER TAIL POWER COMPANY, Appellant,
'The defendant shall not be compelled by the Judgment in this case to furnish wholesale electric service or wheeling service to a municipality except at rates which are compensatory and under terms and conditions which are filed with and subject to approval by the Federal Power Commission.'
So far as wheeling is concerned, there is no authority granted the Commission under Part II of the Federal Power Act to order it, for the bills originally introduced contained common carrier provisions which were deleted.6 The Act as passed contained only the interconnection provision set forth in § 202(b).7 The common carrier provision in the original bill and the power to direct wheeling were left to the 'voluntary coordination of electric facilities.'8 Insofar as the District Court ordered wheeling to correct anticompetitive and monopolistic practices of Otter Tail, there is no conflict with the authority of the Federal Power Commission.
As respects the ordering of interconnections, there is no conflict on the present record. Elbow Lake applied to the Federal Power Commission for an interconnection with Otter Tail and, as we have said, obtained it. Hankinson renewed Otter Tail's franchise. So the decree of the District Court, as far as the present record is concerned, presents no actual conflict between the federal judicial decree and an order of the Federal Power Commission. The argument concerning the pre-emption of the area by the Federal Power Commission concerns only instances which may arise in the future, if Otter Tail continues its hostile attitude and conduct against 'existing or proposed municipal electric power systems.' The decree of the District Court has an open end by which that court retains jurisdiction 'necessary or appropriate' to carry out the decree or 'for the modification of any of the provisions.' It also contemplates that future disputes over interconnections and the terms and conditions governing those interconnections will be subject to Federal Power Commission perusal. It will be time enough to consider whether the antitrust remedy may override the power of the Commission under § 202(b) as, if, and when the Commission denies the interconnection and the District Court nevertheless undertakes to direct it. At present, there is only a potential conflict, not a present concrete case or controversy concerning it.
The record makes abundantly clear that Otter Tail used its monopoly power in the towns in its service area to foreclose competition or gain a competitive advantage, or to destory a competitor, all in violation of the antitrust laws. See United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945—946, 92 L.Ed. 1236. The District Court determined that Otter Tail has 'a strategic dominance in the transmission of power in most of its service area' and that it used this dominance to foreclose potential entrants into the retail area from obtaining electric power from outside sources of supply. 331 F.Supp., at 60. Use of monopoly power 'to destroy threatened competition' is a violation of the 'attempt to monopolize' clause of § 2 of the Sherman Act. Lorain Journal v. United States, 342 U.S. 143, 154, 72 S.Ct. 181, 186—187, 96 L.Ed. 162; Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 375, 47 S.Ct. 400, 404, 71 L.Ed. 684. So are agreements not to compete, with the aim of preserving or extending a monopoly. Schine Chain Theatres v. United States, 334 U.S. 110, 119, 68 S.Ct. 947, 952—953, 92 L.Ed. 1245. In Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013, a cooperative news association had bylaws that permitted member newspapers to bar competitors from joining the association. We held that that practice violated the Sherman Act, even though the transgressor 'had not yet achieved a complete monopoly.' Id., at 13, 65 S.Ct., at 1421.
When a community serviced by Otter Tail decides not to renew Otter Tail's retail franchise when it expires, it may generate, transmit, and distribute its own electric power. We recently described the difficulties and problems of those isolated electric power systems. See Gainesville Utilities v. Florida Power Corp., 402 U.S. 515, 517—520, 91 S.Ct. 1592, 1594—1595, 29 L.Ed.2d 74. Interconnection with other utilities is frequently the only solution. Id., at 519 n. 3, 91 S.Ct., at 1594—1595. That is what Elbow Lake in the present case did. There were no engineering factors that prevented Otter Tail from selling power at wholesale to those towns that wanted municipal plants or wheeling the power. The District Court found—and its findings are supported—that Otter Tail's refusals to sell at wholesale or to wheel were solely to prevent municipal power systems from eroding its monopolistic position.
Otter Tail relies on its wheeling contracts with the Bureau of Reclamation and with cooperatives which it says relieve it of any duty to wheel power to municipalities served at retail by Otter Tail at the time the contracts were made. The District Court held that these restrictive provisions were 'in reality, territorial allocation schemes,' 331 F.Supp., at 63, and were per se violations of the Sherman Act, citing Northern Pacific R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545. Like covenants were there held to 'deny defendant's competitors access to the fenced-off market on the same terms as the defendant.' Id., at 12, 78 S.Ct., at 521. We recently re-emphasized the vice under the Sherman Act of territorial restrictions among potential competitors. United States v. Topco Associates, 405 U.S. 596, 608, 92 S.Ct. 1126, 1133, 31 L.Ed.2d 515. The fact that some of the restrictive provisions were contained in a contract with the Bureau of Reclamation is not material to our problem for, as the Solicitor General says, 'government contracting officers do not have the power to grant immunity from the Sherman Act.' Such contracts stand on their own footing and are valid or not, depending on the statutory framework within which the federal agency operates. The Solicitor General tells us that these restrictive provisions operate as a 'hindrance' to the Bureau and were 'agreed to by the Bureau only at Otter Tail's insistence,' as the District Court found. The evidence supports that finding.
The District Court found that the litigation sponsored by Otter Tail had the purpose of delaying and preventing the establishment of municipal electric systems 'with the expectation that this would preserve its predominant position in the sale and transmission of electric power in the area.'9 331 F.Supp., at 62. The District Court in discussing Eastern Railroad Presidents Conference v. Noerr Motor Freight, 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464, explained that it was applicable 'only to efforts aimed at influencing the legislative and executive branches of the government.' Ibid. That was written before we decided California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 513, 92 S.Ct. 609, 613, 30 L.Ed.2d 642, where we held that the principle of Noerr may also apply to the use of administrative or judicial processes where the purpose to suppress competition is evidenced by repetitive lawsuits carrying the hallmark of insubstantial claims and thus is within the 'mere sham' exception announced in Noerr. 365 U.S., at 144, 81 S.Ct. 523, at 533. On that phase of the order, we vacate and remand for consideration in light of our intervening decision in California Motor Transport Co.
Otter Tail argues that, without the weapons which it used, more and more municipalities will turn to public power and Otter Tail will go downhill. The argument is a familiar one. It was made in United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249, a civil suit under § 1 of the Sherman Act dealing with a restrictive distribution program and practices of a bicycle manufacturer. We said: 'The promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct.' Id., at 375, 87 S.Ct. at 1863.
The same may properly be said of § 2 cases under the Sherman Act. That Act assumes that an enterprise will protect itself against loss by operating with superior service, lower costs, and improved efficiency. Otter Tail's theory collided with the Sherman Act as it sought to substitute for competition enticompetitive uses of its dominant economic power.10
The fact that three municipalities which Otter Tail opposed finally got their municipal systems does not excuse Otter Tail's conduct. That fact does not condone the antitrust tactics which Otter Tail sought to impose. Moreover, the District Court repeated what we said in FTC v. National Lead Co., 352 U.S. 419, 431, 77 S.Ct. 502, 510, 1 L.Ed.2d 438, 'those caught violating the Act must expect some fencing in.' The proclivity for predatory practices has always been a consideration for the District Court in fashioning its antitrust decree. See United States v. Crescent Amusement Co., 323 U.S. 173, 190, 65 S.Ct. 254, 262—263, 89 L.Ed. 160.
We do not suggest, however, that the District Court, concluding that Otter Tail violated the antitrust laws, should be impervious to Otter Tail's assertion that compulsory interconnection or wheeling will erode its integrated system and threaten its capacity to serve adequately the public. As the dissent properly notes, the Commission may not order interconnection if to do so 'would impair (the utility's) ability to render adequate service to its customers.' 16 U.S.C. § 824a(b). The District Court in this case found that the 'pessimistic view' advanced in Otter Tail's 'erosion study' 'is not supported by the record.' Furthermore, it concluded that 'it does not appear that Bureau of Reclamation power is a serious threat to the defendant nor that it will be in the foreseeable future.' Since the District Court has made future connections subject to Commission approval and in any event has retained jurisdiction to enable the parties to apply for 'necessary or appropriate' relief and presumably will give effect to the policies embodied in the Federal Power Act, we cannot say under these circumstances that it has abused its discretion.
Except for the provision of the order discussed in part IV of this opinion, the judgment is affirmed.
I join Part IV of the Court's opinion, which sets aside the judgment and remands the case to the District Court for consideration of the appellant's litigation activities in light of our decision in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642. As to the rest of the Court's opinion, however, I respectfully dissent.
It is undisputed that Otter Tail refused either to wheel power or to sell it at wholesale to the towns of Elbow Lake, Minnesota, and Hankinson, North Dakota, both of which had formerly been its customers and had elected to establish municipally owned electric utility systems. The District Court concluded that Otter Tail had substantial monopoly power at retail and 'strategic dominance' in the subtransmission of power in most of its market area.1 331 F.Supp. 54, 58—60. The District Court then mechanically applied the familiar Sherman Act formula: since Otter Tail possessed monopoly power and had acted to preserve that power, it was guilty of an antitrust violation. Nowhere did the District Court come to grips with the significance of the Federal Power Act, either in terms of the specific regulatory apparatus it established or the policy considerations that moved the Congress to enact it. Yet it seems to me that these concerns are central to the disposition of this case.
In considering the bill that became the Federal Power Act of 1935, the Congress had before it the report of the National Power Policy Committee on Public-Utility Holding Companies. That report chiefly concerned patterns of ownership in the power industry and the evils of concentrated ownership by holding companies. The problem that Congress addressed in fashioning a regulatory system reflected a purpose to prevent unnecessary financial concentration while recognizing the 'natural monopoly' aspects, and concomitant efficiencies, of power generation and transmission. The report stated that
'(w)hile the distribution of gas or electricity in any given community is tolerated as a 'natural monopoly' to avoid local duplication of plants, there is no justification for an extension of that idea of local monopoly to embrace the common control, by a few powerful interests, of utility plants scattered over many States and totally unconnected in operation.' S.Rep.No.621, 74th Cong., 1st Sess., 55 (emphasis added).
The resulting statutory system left room for the development of economies of large scale, single company operations. One of the stated mandates to the Federal Power Commission was for it to assure '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,' 16 U.S.C. § 824a. In the face of natural monopolies at retail and similar economies of scale in the subtransmission of power, Congress was forced to address the very problem raised by this case—use of the lines of one company by another. One obvious solution would have been to impose the obligations of a common carrier upon power companies owning lines capable of the wholesale transmission of electricity. Such a provision was originally included in the bill. One proposed section provided that:
'It shall be the duty of every public utility to furnish energy to, exchange energy with, and transmit energy for any person upon reasonable request therefor . . ..' S. 1725, 74th Cong., 1st Sess., § 213.
'Whenever the Commission, after notice and opportunity for hearing, finds such action necessary or desirable in the public interest, it may by order direct a public utility to make additions, extensions, repairs, or improvements to or changes in its facilities, to establish physical connection with the facilities of one or more other persons, to permit the use of its facilities by one or more persons, or to utilize the facilities of, sell energy to, purchase energy from, transmit energy for, or exchange energy with, one or more other persons.'2 Ibid.
Had these provisions been enacted, the Commission would clearly have had the power to order interconnections and wheeling for the purpose of making available to local power companies wholesale power obtained from or through companies with subtransmission systems. The latter companies would equally clearly have had an obligation to provide such services upon request. Yet, after substantial debate,3 the Congress declined to follow this path. As the Senate report indicates in discussing § 202 as enacted:
'The committee is confident that enlightened self-interest will lead the utilities to cooperate with the commission and with each other in bringing about the economies which can alone be secured through the planned coordination which has long been advocated by the most able and progressive thinkers on this subject.
'When interconnection cannot be secured by voluntary action, subsection (b) gives the Commission limited authority to compel inter-state utilities to connect their lines and sell or exchange energy. The power may only be invoked upon complaint by a State commission or a utility subject to the act.' S.Rep.No.621, 74th Cong., 1st Sess., 49.
This legislative history, especially when viewed in the light of repeated subsequent congressional refusals to impose common carrier obligations in this area,4 indicates a clear congressional purpose to allow electric utilities to decide for themselves whether to wheel or sell at wholesale as they see fit. This freedom is qualified by a grant of authority to the Commission to order interconnection (but not wheeling) in certain circumstances. But the exercise of even that power is limited by a consideration of the ability of the regulated utility to function. The Commission may not order interconnection where this would entail an 'undue burden' on the regulated utility. In addition, the Commmission has
'no authority to compel the enlargement of generating facilities for such purposes, nor to compel such public utility to sell or exchange energy when to do so would impair its ability to render adequate service to its customers.' 16 U.S.C. § 824a(b).
As the District Court found, Otter Tail is a vertically integrated power company. But the bulk of its business—some 90% of its income—derives from sales of power at retail. Left to its own judgment in dealing with its customers, it seems entirely predictable that Otter Tail would decline wholesale dealing with towns in which it had previously done business at retail. If the purpose of the congressional scheme is to leave such decisions to the power companies in the absence of a contrary requirement imposed by the Commission, it would appear that Otter Tail's course of conduct in refusing to deal with the municipal system at Elbow Lake and in refusing to promise to deal with the proposed system at Hankinson, was foreseeably within the zone of freedom specifically created by the statutory scheme.5 As a retailer of power, Otter Tail asserted a legitimate business interest in keeping its lines free for its own power sales and in refusing to lend a hand in its own demise by wheeling cheaper power from the Bureau of Reclamation to municipal consumers which might otherwise purchase power at retail from Otter Tail itself.
The opinion of the Court emphasizes that Otter Tail's actions were not simple refusals to deal—they resulted in Otter Tail's maintenance of monopoly control by hindering the emergence of municipal power companies. The Court cites Lorain Journal Co. v. United States, 342 U.S. 143, 72 S.Ct. 181, 96 L.Ed. 162, for the proposition that '(u)se of monopoly power 'to destroy threatened competition' is a violation of the 'attempt to monopolize' clause of § 2 of the Sherman Act.' This proposition seems to me defective. Lorain Journal dealt neither with a natural monopoly at retail nor with a congressionally approved system predicated on the existence of such monopolies. In Lorain Journal, a newspaper in Lorain, Ohio, used its monopoly position to discourage advertisers from supporting a nearby radio station seen by the newspaper to be a competitor. The theory of the case was that competition in the communications business was being foreclosed by the newspaper's exercise of monopoly power. Here, by contrast, a monopoly is sure to result either way. If the consumers of Elbow Lake receive their electric power from a municipally owned company or from Otter Tail, there will be a monopoly at the retail level, for there will in any event be only one supplier. The very reason for the regulation of private utility rates—by state bodies and by the Commission—is the inevitability of a monopoly that requires price control to take the place of price competition. Antitrust principles applicable to other industries cannot be blindly applied to a unilateral refusal to deal on the part of a power company, operating in a regime of rate regulation and licensed monopolies.
The Court's opinion scoffs at Otter Tail's defense of business justification. United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249, is cited for the proposition that '(t)he promotion of self-inerest alone does not invoke the rule of reason to immunize otherwise illegal conduct.' This facet of the Court's reasoning also escapes me in the case before us, where the health of power companies and the abundance of our energy supply were considerations central to the congressional purpose in devising the regulatory scheme. As noted above, the Commission is specifically prohibited from imposing interconnection requirements that are unduly burdensome or that interfere with a public utility's ability to serve its customers efficiently. The District Court noted that Otter Tail had offered a 'so-called 'erosion study" documenting the way in which its business would suffer if it were forced to wholesale and wheel power to municipally owned companies. The District Court gave little credence to the report's predictions. 'But regardless,' the court went on, 'even the threat of losing business does not justify or excuse violating the law.' 331 F.Supp., at 64—65. This question-begging disregard of the economic health of Otter Tail is wholly at odds with the congressional purpose in specifying the conditions under which interconnections can be required.
This is not to say that Otter Tail's financial health is paramount in all instances,6 or that the electric power industry as regulated by the Commission is per se exempt from the antitrust laws. In the absence of a specific statutory immunity, cf. Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577, such exemptions are not lightly to be implied, United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915. Furthermore, no sweeping antitrust exemption is warranted, as it has been in cases involving certain pervasively regulated industries, under the doctrine of 'primary jurisdiction.'7 Cf. United States v. Radio Corp. of America, 358 U.S. 334, 346—352, 79 S.Ct. 457, 464—468, 3 L.Ed.2d 354. See Far East Conference v. United States, 342 U.S. 570, 72 S.Ct. 492, 96 L.Ed. 576; Terminal Warehouse Co. v. Pennsylvania R. Co., 297 U.S. 500, 56 S.Ct. 546, 80 L.Ed. 827; United States Navigation Co. v. Cunard S.S. Co., 284 U.S. 474, 52 S.Ct. 247, 76 L.Ed. 408; Keogh v. Chicago & N.W.R. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183; Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553; cf. Carnation Co. v. Pacific Westbound Conference, 383 U.S. 213, 86 S.Ct. 781, 15 L.Ed.2d 709. Our duty in attempting to reconcile the Federal Power Act with the Sherman Act on the facts of the case before us requires a judgment regarding the 'character and objectives' of the regulatory scheme and the extent to which they 'are incompatible with the maintenance of an antitrust action.' Silver v. New York Stock Exchange, 373 U.S. 341, 358, 83 S.Ct. 1246, 1257, 10 L.Ed.2d 389. 'Repeal (of the antitrust laws) is to be regarded as implied only if necessary to make the . . . (Act) work, and even then only to the minimum extent necessary.' Id., at 357, 83 S.Ct., at 1257.
With respect to decisions by regulated electric utilities as to whether or not to provide nonretail services, I think that in the absence of horizontal conspiracy, the teaching of the 'primary jurisdiction' cases argues for leaving governmental regulation to the Commission instead of the invariably less sensitive and less specifically expert process of antitrust litigation. I believe this is what Congress intended by declining to impose common carrier obligations on companies like Otter Tail, and by entrusting the Commission with the burden of 'assuring an abundant supply of electric energy throughout the United States' and with the power to order interconnections when necessary in the public interest. This is an area where 'sporadic action by federal courts' can 'work mischief.' Cf. United States v. Radio Corp. of America, 358 U.S., at 350, 79 S.Ct., at 466—467.8
Even assuming that Otter Tail's refusals to wholesale or wheel power to Elbow Lake and Hankinson were colorably within the reach of the antitrust laws, I cannot square the opinion of the Court with our recent decision in Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d 525. Otter Tail's refusal to wholesale or wheel power to Elbow Lake was the subject of two concurrent proceedings—one in the District Court, and another in the Federal Power Commission. It seems to me that the principles of Ricci, related to but not identical with the traditional doctrine of 'primary jurisdiction,' should require a District Court in a case like this one to defer to the Commission proceeding then in progress. Surely the regulatory authority of the Commission with respect to interconnection is at least as substantial as the responsibility of the Commodity Exchange Commission, in Ricci, for the implementation of reasonable membership practices by its regulated contract markets. Id., at 310—311, 93 S.Ct., at 584 (Marshall, J., dissenting). The responsibility of the Commission for 'assuring an abundant supply of electric energy throughout the United States' and its authority to order compulsory wholesaling satisfy the three criteria enunciated in Ricci for a deferral of antitrust jurisdiction to an administrative agency: (1) that the court must first decide whether the conduct complained of, in light of the regulatory statute, is immune from the antitrust laws; (2) that 'some facets of the dispute' are 'within the statutory jurisdiction' of the agency; and (3) 'that adjudication of that dispute . . . promises to be of material aid in resolving the immunity question.' Id., at 302, 93 S.Ct., at 580.
'(W)e cannot disagree with the Examiner's view that Elbow Lake has engaged in 'an ill-advised excursion into the power business.' Given the facts of record before us, it is plain that Elbow Lake's effort has not brought it the rewards it expected; indeed, its first year of operations, during which it perpetuated the rates formerly charged by Otter Tail, resulted in a financial loss. Unlike Otter Tail's earlier service to Elbow Lake, Elbow Lake's own system is of doubtful reliability, as evidenced by its presence before us now. .. . While it is our responsibility to take all possible steps to insure to Elbow Lake's customers a high standard of service reliability, our terms and conditions must not invite improvident ventures elsewhere.
'We also share the Examiner's view that Otter Tail is legitimately concerned about the possible erosion of its system. If other communities were to follow Elbow Lake's route, and if, having miscalculated the results, they could expect to be rescued by overly-generous interconnection terms, then Otter Tail's fears that it will lose its customers, seriatim, seem to us to be supported. We do not mean by this that we accept a captive market concept, however. . . . The exercise of that (statutory) authority may well require, as it does here, that we order a public utility to interconnect with an isolated municipal system.' Elbow Lake v. Otter Tail Power Co., 46 F.P.C. 675, 677—678.
But the basic conflict between the Commission's authority and the decree entered in the District Court cannot be so easily wished away. The decree enjoins Otter Tail from '(r)efusing to sell electric power at wholesale to existing or proposed municipal electric power systems in cities and towns located in any area serviced by Defendant.'9 This injunction is qualified by a provision that such wholesaling be done at 'compensatory' rates and under 'terms and conditions which are filed with and subject to approval by the Federal Power Commission.' The setting of rates, terms and conditions, however, is but part of the Commission's authority under § 202(b), 16 U.S.C. § 824a(b). The Court's decree plainly ignores the Commission's authority to decide whether involuntary interconnection is warranted under the enunciated statutory criteria. Unless the decree is modified, its future implementation will starkly conflict with the explicit statutory mandate of the Federal Power Commission.
Both because I believe Otter Tail's refusal to wheel or wholesale power was donduct exempt from the antitrust laws and because I believe the District Court's decree improperly pre-empted the jurisdiction of the Federal Power Commission, I would reverse the judgment before us.
Elbow Lake v. Otter Tail Power Co., 40 F.P.C. 1262, aff'd, Otter Tail Power Co. v. FPC, 429 F.2d 232 (CA8), cert. denied, 401 U.S. 947, 91 S.Ct. 923, 28 L.Ed.2d 230.
See S.Rep.No.621, 74th Cong., 1st Sess.; H.R.Rep.No.1318, 74th Cong., 1st Sess.; Elbow Lake v. Otter Tail Power Co., 46 F.P.C., at 679.
Section 202(b) provides: 'Whenever the Commission, upon application of any State commission or of any person engaged in the transmission or sale of electric energy, and after notice to each State commission and public utility affected and after opportunity for hearing, finds such action necessary or appropriate in the public interest it may by order direct a public utility (if the Commission finds that no undue burden will be placed upon such public utility thereby) to establish physical connection of its transmission facilities with the facilities of one or more other persons engaged in the transmission or sale of electric energy, to sell energy to or exchange energy with such persons: Provided, That the Commission shall have no authority to compel the enlargement of generating facilities for such purposes, nor to compel such public utility to sell or exchange energy when to do so would impair its ability to render adequate service to its customers. The Commission may 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.'
S.Rep.No.621, supra, n. 6, at 19.
After noting that the 'pendency of litigation has the effect of preventing the marketing of the necessary bonds thus preventing the establishment of a municipal system,' 331 F.Supp., at 62, the District Court went on to find:
'Most of the litigation sponsored by the defendant was carried to the highest available appellate court and although all of it was unsuccessful on the merits, the institution and maintenance of it had the effect of halting, or appreciably slowing, efforts for municipal ownership. The delay thus occasioned and the large financial burden imposed on the towns' limited treasury dampened local enthusiasm for public ownership. In some instances, Otter Tail made offers to the towns to absorb the towns' costs and expenses, and enhance the quality of its service in exchange for a new franchise. Hankinson, after several years of abortive effort, accepted this type of offer and renewed defendant's franchise.' Ibid.
The Federal Power Commission said in Elbow Lake v. Otter Tail Power Co., 46 F.P.C., at 678:
'The public interest is far broader than the economic interest of a particular power supplier. It is our legal responsibility, as the Supreme Court made clear in Pennsylvania Water & Power Co. v. FPC, 343 U.S. 414 (72 S.Ct. 843, 96 L.Ed. 1042) (1952), to use our statutory authority to assure 'an abundant supply of electric energy throughout the United States,' and particularly to use our statutory power under Section 202(b) to compel interconnection and coordination when the public interest requires it. The exercise of that authority may well require, as it does here, that we order a public utility to interconnect with an isolated municipal system. The private company's lack of enthusiasm for the arrangement cannot deter us, so long as the public interest requires it.'
'Any certificate issued under the provisions of this subsection authorizing the operation of transmission facilities shall be subject to the condition that any capacity of such facilities not required for the transmission of electric energy in the ordinary cope of such applicant's business shall be made available on a common carrier basis for the transmission of other electric energy.'
The proposed Electric Power Reliability Act was reintroduced in 92d Congress, 1st Session, as S. 294 and H.R. 605. H.R. 12585 from the 91st Congress was also reintroduced, as H.R. 6972, 92d Cong., 1st Sess. Still another bill would have prevented proposed regional bulk-power supply corporations from contracting with an electric utility unless that utility 'permit(s) . . . the use of its excess transmission capacity for the purpose of wheeling power from facilities of such corporation . . . to load centers of other electric utilities contracting to purchase electric power from such corporation.' S. 2324, H.R. 9970, 92d Cong., 1st Sess., § 103(c)(1)(B). None of these bills was enacted.
The District Court was persuaded that the restrictions on wheeling contained in Otter Tail's contracts with the Bureau of Reclamation were 'in reality, territorial allocation schemes.' 331 F.Supp., at 63. I think this finding was clearly erroneous. Territorial allocation arrangements that have run afoul of the antitrust laws have traditionally been horizontal, and have involved the elimination of competition between two enterprises that were similarly situated in the market. United States v. Topco Associates, 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515; Timken Roller Bearing Co. v. United States, 341 U.S. 593, 71 S.Ct. 971, 95 L.Ed. 1199; cf. White Motor Co. v. United States, 372 U.S. 253, 261—264, 83 S.Ct. 696, 700—703, 9 L.Ed.2d 738. Otter Tail and the Bureau of Reclamation stand in a vertical, not a horizontal, relationship. Furthermore, though Otter Tail refused to wheel power to towns whose consumers it formerly served at retail, it did not exact from the Bureau a promise that the latter would not provide power to such towns by alternative means. Hence, I cannot see how these contracts operate as territorial-allocation schemes. If Otter Tail had demanded that the Bureau not sell to former Otter Tail customers, or if Otter Tail had combined with other retailers of electricity and undertaken mutual non-competition agreements, this would be a different case.
In ordering permanent interconnection between Otter Tail and the town of Elbow Lake municipal system, for example, the Commission correctly noted that, 'The public interest is far broader than the economic interest of a particular power supplier. . . . The private company's lack of enthusiasm for . . . (the interconnection order) cannot deter us, so long as the public interest requires it.' Elbow Lake v. Otter Tail Power Co., 46 F.P.C. 675, 678.
The Federal Power Commission, as noted above, only orders interconnection under the provisions of § 202(b), 16 U.S.C. § 824a(b), though it has broader powers in times of war or other emergency. 16 U.S.C. § 824a(c). The Commission does not normally set rates, though utilities subject to its jurisdiction must file proposed rate schedules with it, and it has the opportunity of assessing the lawfulness of those rates. 16 U.S.C. § 824d. In the event the Commission concludes that any rate or practice is 'unjust, unreasonable, unduly discriminatory or preferential,' it determines the 'just and reasonable rate . . ..' 16 U.S.C. § 824e(a). Under these same provisions, the Commission regulates the terms and conditions of interconnections and wheeling arrangements voluntarily entered into.
The resulting system of regulation is thus more comprehensive than the regulatory apparatus applicable to bank mergers which was held to be insufficient to oust antitrust jurisdiction in United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915, and the regulatory scheme with respect to broadcasters, which similarly failed to displace the antitrust laws in United States v. Radio Corp. of America, 358 U.S. 334, 79 S.Ct. 457, 3 L.Ed.2d 354. Nevertheless, the considerable freedom allowed to electric utilities with respect to coordination of service persuades me that the antitrust laws apply to the extent they are not repugnant to specific features of the regulatory scheme. For this reason, litigation and political activities that come within the so-called 'sham' exception in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642, might constitute an antitrust violation. Similarly, a genuine territorial allocation agreement might be prohibited under the Sherman Act, see n. 5, supra. Were it not for the legislative history noted above, a consistent refusal to deal with municipally owned power companies might also be impermissible under the Sherman Act. For me, however, the legislative history with respect to wheeling and interconnection is dispositive.
Unlike the situation presented in R.C.A., supra, where the regulatory agency filed a brief in this Court disavowing any conflict between its regulatory functions and the operation of the antitrust laws, id., at 350 n. 18, 79 S.Ct., at 466—467, in this case the Federal Power Commission has taken the unusual step of filing a brief as amicus curiae in support of Otter Tail. The Commission points out that it was considering an application for interconnection filed by the town of Elbow Lake at the same time this lawsuit was progressing in the District Court. An order requiring long-term interconnection by Otter Tail with the Elbow Lake municipal system was entered by the Commission on September 13, 1971—just four days after the District Court entered judgment. The Commission reads its authority to order interconnection, 16 U.S.C. § 824a, as a grant of exclusive jurisdiction in matters involving interconnection.