Kentucky Utilities Company v. Tennessee Valley Authority

• Decision Date: 27 March 1967
• Docket Number: No. 16491.,16491.
• Parties: KENTUCKY UTILITIES COMPANY, Plaintiff-Appellant, v. TENNESSEE VALLEY AUTHORITY, Powell Valley Electric Co-operative, Edward J. Hardin, individually, and as Mayor of Tazewell, Tennessee, and James B. DeBusk, individually, and as Mayor of New Tazewell, Tennessee, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

375 F.2d 403 (1966)

KENTUCKY UTILITIES COMPANY, Plaintiff-Appellant, v. TENNESSEE VALLEY AUTHORITY, Powell Valley Electric Co-operative, Edward J. Hardin, individually, and as Mayor of Tazewell, Tennessee, and James B. DeBusk, individually, and as Mayor of New Tazewell, Tennessee, Defendants-Appellees.

No. 16491.

United States Court of Appeals Sixth Circuit.

November 15, 1966.

Certiorari Granted March 27, 1967.

COPYRIGHT MATERIAL OMITTED

Malcolm Y. Marshall and James S. Welch, Louisville, Ky. (Ogden, Robertson & Marshall, Louisville, Ky., John A. Rowntree, Fowler, Rowntree & Fowler, Knoxville, Tenn., James D. Estep, Jr., Tazewell, Tenn., on the brief), for appellant.

Paul A. Sweeney for United States Dept. of Justice, Washington, D. C.

Philip P. Ardery, Louisville, Ky., for Tazewell and New Tazewell, Tenn.

Charles J. McCarthy, Knoxville, Tenn., (Clyde Y. Cridlin, Jonesville, Va., on the brief for Powell Valley Electric Cooperative; Robert H. Marquis, Thomas A. Pedersen, Lewis E. Wallace, Knoxville, Tenn., of counsel), for Tennessee Valley Authority and Powell Valley Electric Cooperative.

William R. Stanifer, Tazewell, Tenn., Philip P. Ardery, Brown, Ardery, Todd & Dudley, Louisville, Ky., for defendants-appellees, Tazewell and New Tazewell.

S. Eason Balch, Jesse S. Vogtle, Martin, Blach, Bingham & Hawthorne, Birmingham, Ala., for Alabama Power Company, Amicus Curiae.

Herbert B. Cohn, American Electric Power Service Corporation, New York City, for Appalachian Power, Amicus Curiae.

W. Reid Thompson, Charles F. Rouse, Raleigh, N. C., for Carolina Power & Light Co., Amicus Curiae.

Carl Horn, Jr., William I. Ward, Jr., Charlotte, N. C., for Duke Power Co., Amicus Curiae.

William H. Schroder, Harold C. McKenzie, Jr., Troutman, Sams, Schroder & Lockerman, Atlanta, Ga., for Georgia Power Co., Amicus Curiae.

Herbert B. Cohn, New York City, for Kingsport Power Co., Amicus Curiae.

James S. Eaton, Eaton A. Lang, Jr., Eaton, Cottrell, Galloway & Lang, Gulfport, Miss., for Mississippi Power Co., Amicus Curiae.

Sherwood W. Wise, Richard B. Wilson, Jr., Wise, Smith & Carter, Jackson, Miss., for Mississippi Power & Light Co., Amicus Curiae.

John W. Douglas, Asst. Atty. Gen., Paul A. Sweeney, Sp. Asst. Atty. Gen., Dept. of Justice, Washington, D. C., Ernest W. Rivers, U. S. Atty., Louisville, Ky. (Curtis H. Bell, Field Solicitor, Department of the Interior, Washington, D. C., of counsel) for the United States, Amicus Curiae.

Before O'SULLIVAN and EDWARDS, Circuit Judges, and CECIL, Senior Circuit Judge.

Certiorari Granted March 27, 1967. See 87 S.Ct. 1284.

O'SULLIVAN, Circuit Judge.

This is an appeal from a judgment of the United States District Court for the Eastern District of Tennessee, Northern Division, dismissing a complaint for injunctive relief. Plaintiff-appellant, Kentucky Utilities Company, a Kentucky Corporation (hereafter KU) had sought to have Tennessee Valley Authority (hereafter TVA), Powell Valley Electric Cooperative, a TVA distributor (hereafter PVA), and the respective mayors of the cities of Tazewell and New Tazewell, Tennessee, restrained from taking over KU's electric customers in the area of Tazewell and New Tazewell, and generally to restrain TVA and PVA from taking over the supply of electric power to those Tennessee cities.

KU's asserted ground for relief was its claim that it was and had been, before and after July 1, 1957, the primary source of electric power to the consumers in the Tazewells; that in 1963 and prior thereto the municipal authorities of the Tazewells made plans and "conspired" with TVA and PVA to introduce additional TVA power into the area and had commenced to take over KU's customers; and that all of such plans and conduct were and would be violative of an amendment added in 1959 to the Tennessee Valley Authority Act as Section 15d thereof, (Public Law 86-137; 73 Stat. 280), which in subsection (a) provides that,

"Unless otherwise specifically authorized by Act of Congress the Corporation TVA shall make no contracts for the sale or delivery of power which would have the effect of making the Corporation or its distributors, directly or indirectly, a source of power supply outside the area for which the Corporation or its distributors were the primary source of power supply on July 1, 1957 * * *." (Emphasis supplied.) Title 16 U.S.C.A. § 831n-4 (a).¹

On the critical date, July 1, 1957, KU and PVA were both supplying power in the involved municipalities, but KU supplied 561 customers out of a total of 589, or 95.3% thereof, PVA serving the remaining 28 customers. In the month of June, 1957, KU supplied 228,087 KWH of electricity out of a total 242,853, or 93.9% thereof, PVA supplying the balance of 14,766 KWH. As found by the District Judge, "On August 6, 1959, the day the Act in question became effective, KU in Tazewell supplied 371 customers to Powell Valley's 19 and in New Tazewell, KU supplied 256 customers to Powell Valley's 12. In the two towns combined, KU supplied a total of 627 customers to Powell Valley's 31." It was the contention of KU that the foregoing and other evidence established that the cities of Tazewell and New Tazewell were "outside the area for which the TVA or its distributors were the primary source of power supply on July 1, 1957", and that TVA and PVA were forbidden additional entry into the area. In defense, TVA and PVA asserted that the basic "area" should not be limited to that part of Tennessee in which KU was the primary source of power, but should encompass that larger portion of Tennessee, including all of Claiborne County, in which TVA and its distributors were in total the primary source of power. In Claiborne County, in which the Tazewells were located, two TVA distributors, PVA and the City of LaFollette Electric System, were suppliers. KU also supplied power outside of the Tazewells along a corridor extending into Tennessee from an area of Kentucky wherein KU was also the primary, if not the exclusive, source of power. While PVA and LaFollette Electric System together may have exceeded KU in customers and power delivered, KU was the largest single source of power supply in the whole of Claiborne County. The District Judge found that in Claiborne County:

"As of July 1, 1957, Powell Valley and the City of LaFollette Electric System (the other TVA supplier for Claiborne County) supplied power to a total of 3,564 consumers in Claiborne County and KU supplied power to 1,839 consumers. In June, 1957 Powell Valley and LaFollette had combined kilowatt-hour sales of 1,025,793 as against 626,043 kilowatt-hours for KU. In the same month, the combined kilowatt demand for Powell Valley and LaFollette was 3,125 kilowatts as against 2,338 for KU. The depreciated plant investment in distribution facilities of Powell Valley and LaFollette (as of January 10, 1957 for Powell Valley and as of June 30, 1957 for LaFollette) was $902,999.17 as against KU investment on June 30, 1957 of $457,947.93." 237 F.Supp. at 513.

There was evidence that KU was also the primary source of power in the area of its corridor outside of the Tazewells and that its corridor had a total area of about 60 square miles.

The meritorious issue before the District Judge was whether, as contended by KU, and within the meaning of the 1959 Act, the cities of Tazewell and New Tazewell were outside the area wherein TVA or its distributors were the primary source of power on July 1, 1957.² In addition to their defense on the merits, defendants-appellees pleaded that plaintiff lacked standing to maintain the action. The District Judge concluded that plaintiff had standing to sue but held for defendants on the merits. Kentucky Utilities Company v. Tennessee Valley Authority, 237 F.Supp. 502 (E.D.Tenn.N.D. 1964).

Defendants-appellees reassert here their defense that plaintiff was without standing to sue, and ask that the judgment of dismissal be affirmed on such ground, regardless of the merits. We defer threshold discussion of this question, believing that the reasons which prompt our disposition of it will be more clearly exposed by our consideration of the merits.

We sustain the District Judge's denial of the standing to sue defense, but reverse the judgment which dismissed the cause on the merits.

There is little controversy over the essential and dispositive facts, although the litigant adversaries differ as to their significance. Plaintiff Kentucky Utilities Company is an investor-owned electric public utility, serving customers in about two-thirds of the State of Kentucky, in Claiborne County, Tennessee, and through a subsidiary, in four counties in southwest Virginia. Its transmission lines serving this entire area constitute an integrated and continuous system, and all parts of the area served are substantially contiguous. Its Claiborne County, Tennessee, area begins at an area served by it in the State of Kentucky, adjacent to that state's southerly line and then extends along and within a peninsula or corridor into Claiborne County, Tennessee, 15 or so miles to include the cities of Tazewell and New Tazewell. The record before us leaves us uncertain as to the exact width of this corridor and indeed at one point its width and contiguity with the adjoining area may be limited to the dimension of a transmission line at a point where a transmission line of PVA crosses it. This KU corridor is bounded on the east, south and west by TVA distributors and on the north by the main area served by KU itself.

KU's activity in the above area began as early as 1919 and from 1920 it has been serving customers in Tazewell and New Tazewell, which localities became incorporated as cities of Claiborne County in 1954. KU has a non-exclusive franchise to provide electricity to customers in all of Claiborne County. The fixed corporate limits of Tazewell and New Tazewell define the area in which KU on July 1, 1957, was the primary source of the electric power consumed therein....