Court Opinion

ID: 9636689
Source: CourtListenerOpinion
Date Created: 2023-08-22 14:39:27.297502+00
Date Added: 2024-06-11T12:12:45.363489
License: Public Domain

SOPER, Circuit Judge (dissenting).
When the federal emergency administrator of public works in the exercise of his authority under the statute decided to make the loan and grant to Greenwood county, S. C., to be used in the construction of a hydroelectric plant on the Saluda river, he intended not merely to effectuate the purpose of title 2 of the act to increase employment quickly, but also to reduce the cost of electric energy to the local community. The evidence shows quite clearly that he held the opinion that public utility companies have charged exorbitant prices, and that in particular the Duke Power Company and its subsidiary have exacted unreasonable rates, and that in order to bring down the rates for the benefit of the consumers it was desirable and proper that a part of the funds within his control should be used to establish municipal power projects in competition with privately owned public utilities.
When his authorized publications are considered, it is difficult to reach any other *1000conclusion. Thus in a press release óf the Federal Emergency Administration of Public Works (PWA) of September 24, 1934, he said:
“PWA has endeavored to make electric energy more broadly available at cheaper rates by acting on applications of municipalities for loans and grants to finance municipal systems where reasonable security is offered and the proj ect is socially desirable. They are deemed desirable where the loan can be amortized in a reasonable period while charging rates substantially lower than those of the existing utility.
“However, we make it a practice before approving the loan to give the company an opportunity to put in effect rates at least as low as those at which the municipal system will be self-liquidating. Several utility companies have accepted this opportunity. It is obvious that in such cases it is advantageous to the city and to PWA that the offer be accepted and the applications withdrawn. To make loans and grants to finance projects where the competitor offers rates which are lower than those possible by the city plant, would duplicate facilities without any social betterment and impose on the city a burden which it probably could not meet without resort to taxation.
“Furthermore, in the described situation Public Works will be free to use its funds to better advantage elsewhere. The action of the utility companies referred to supports the belief that domestic rates, in certain instances at least, are so high as to be disadvantageous to the company as well as unjust to the consumers. Experience shows that lower rates may produce larger profits particularly where promotional campaigns are conducted and the cost of electrical appliances is made reasonable.
- “PWA will cooperate with cities to prevent rates rising on an indication municipal plants may not be built. PWA will not rescind allotments or suggest the withdrawal of applications until .the lowered rates are legally in effect,.
“State laws authorize municipal competition,. hence it is PWA’s position that the state has determined that such competition may be socially desirable. We believe it is for the municipal applicant to determine whether or not it desires to- compete with privately owned utilities. It is our policy to consider such applications particularly where franchises are soon to expire, provided the project is self-liquidating at rates lower than those which the existing utility is willing to put into effect.”
In his testimony given in the pending case on December 21, 1935, the administrator did not repudiate this statement but said that it was not a true statement standing alone and must be understood as corrected by his testimony. A more detailed expression of his purposes as administrator and his views upon the practices of public utility companies in general and of the Duke Power Company in particular is found in his story of PWA told in his book “Back to Work,” May 16, 1935, chapter 6, Cheap Power, pp. 122 to 147, wherein reference to the Greenwood county project is made. He shows how the great federal power projects, such as Boulder Dam on the Colorado river, are the beginnings of a national plan designed to increase the supply of electric power and diminish its cost, and thus to put it within the reach of the under-privileged for many uses and raise the standard of living in their homes. With respect to municipal power projects .established under PWA he has this to say (p. 147):
“By January of 1935, twelve municipal power projects had been completed. Forty-eight others were under construction; thirty-four more had been approved by the power board, and about seventy-one were under consideration. The total amount allotted at that time for this purpose was $48,784,300.
“One of the most important accomplishments of PWA, although an indirect one, has been a saving to consumers of millions of dollars through the lowering of rates by the private utilities to meet the charges proposed by applicants for public power projects. The rejection or withdrawal of some of the 200 applications that PWA did not approve was the result of this reduction of rates by the private companies to a point where there seemed no necessity or justification for a municipal plant.
“These ‘yardsticks’ provided by both municipal and federal enterprises are so valuable that they alone would warrant PWA’s expenditures for power undertakings. The municipal projects have caused private utilities to adjust their rates downward in wide areas and the federal projects have brought about rate adjustments over • still larger expanses of territory.”
How are these formal statements modified by his present testimony? To the extent that the government is interested in *1001the rates to be charged by the county only as a prospective bondholder and does not intend to exercise any control over them. He adds that the loan and grant would have been made regardless of the rates of the Duke Power Company, if it had been established that the county had legal authority to make the contract and that the loan would be liquidated; but as this statement enters the realm of conjecture it adds little to the discussion.
One is presumed to intend the natural and probable consequences of his acts; and the public utterances of the administrator show that he realized that his loans and grants to municipal power projects would reduce local utility rates, and that he made them for this purpose. The reduction of rates under the plan of PWA in this case is not merely probable, it is inevitable. The municipality not only makes no investment, but it assumes no liability for the loan of 70 per cent., for that is to be represented by revenue bonds payable only out of income of the plant. In addition, 30 per cent, of the cost of the project is a free gift. The power company, therefore, is not obliged to meet merely the influence of a competitor who risks his own money in the enterprise. Competition of that sort must be endured without complaint. The fact is that the county is freely furnished with sufficient funds to build the entire plant and thus may cut the rates with impunity; so that a reduction of rates in order to get the business and satisfy the demands of its citizens will certainly ensue.
We may lay to one side the protests of the power company that the state authorities have found the rates of its intrastate industry to be fair and reasonable, and the accusations of the administrator that the rates are exorbitant. The question is, Has the federal government the constitutional right to exert this regulatory power in a local field on the ground that it is only an incidental result of the laudable effort under the general welfare clause of the Constitution to put an end to unemployment? The conflict between state and federal power which arises is similar to that which the Supreme Court resolved on January 6, 1936 in U. S. v. Butler when it held that a statutory plan to regidate and control agricultural production effected by contracts between the farmers and the government was beyond its power and invaded the reserved rights of the states. The principle underlying that decision seems to control this case, and the factual differences between them do not appear to be material. The PWA contract does not in terms obligate the municipality to reduce the rates as directly as the farmers in their agreements were required to curtail production, but the rates are bound to be reduced as a result of that contract, as we have seen. Moreover the coercion imposed upon the power company with reference to its charges bears some analogy to the virtual compulsion under which the farmers’ contracts were signed. The party to the present contract with the government is a municipality or agency of the state which consents to the invasion of the state’s domain, and not a private citizen; but the state no more than the individual may be induced by gift to break down the barriers which confine the federal government within constitutional limits. In U. S. v. Butler the court said:
“But it is said that there is a wide difference in another respect, between compulsory regulation of the local affairs of a state’s citizens and the mere making of a contract relating to their conduct; that, if any state objects, it may declare the contract void and thus prevent those under the state’s jurisdiction from complying with its terms. The argument is plainly fallacious. The United States can make the contract only if the federal power to tax and to appropriate reaches the subject-matter of the contract. If this does reach the subject-matter, its exertion cannot be displaced by state action. To say otherwise is to deny the supremacy of the laws of the United States; to make them subordinate to those of a state. This would reverse the cardinal principle embodied in the Constitution and substitute one which declares that Congress may only effectively legislate as to matters within federal competence when the states do not dissent.”
The conclusion is that title 2 of the statute is invalid so far as it may be interpreted to authorize the making of such a contract as we have here; and that the effort of the administrator to regulate the local intrastate business of the power company is beyond the scope of the power which may be conferred by Congress upon an officer of the federal government.
The power company has such an interest in the business as to justify its suit. The practical effect upon its valuable property interests is manifest. It has an interest far more weighty than that of a federal taxpayer, which in Frothingham v. Mellon, 262 *1002U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078, was held to he too remote, uncertain, and insig-'. nificant to entitle him to injunctive relief against an invalid federal appropriation. The' plaintiffs here conform to the rule laid down in that case since they show not only that the act of the administrator was invalid, but that they are in danger of sustaining a direct and substantial injury therefrom.