411 U.S. 747 (1973), 71-1178, Gulf States Utilities Co. v. Federal Power Commission

Docket Nº:No. 71-1178
Citation:411 U.S. 747, 93 S.Ct. 1870, 36 L.Ed.2d 635
Party Name:Gulf States Utilities Co. v. Federal Power Commission
Case Date:May 14, 1973
Court:United States Supreme Court
 
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Page 747

411 U.S. 747 (1973)

93 S.Ct. 1870, 36 L.Ed.2d 635

Gulf States Utilities Co.

v.

Federal Power Commission

No. 71-1178

United States Supreme Court

May 14, 1973

Argued December 5, 1972

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

Following petitioner's application under § 204 of the Federal Power Act to respondent Federal Power Commission (FPC) for authorization of a bond issue, two intervening cities opposed the authorization on the ground that the proceeds of the bond issue would be used to finance or refinance certain anticompetitive activities in violation of the antitrust laws, the Federal Power Act, and the Public Utility Holding Company Act of 1935. Section 204(a) empowers the FPC to authorize a security issue only if the issue is found to be for some lawful purpose and compatible with the public interest. The FPC granted the cities' petition to intervene, denied their request for a hearing, and authorized the bond issue, holding that the cities' allegations were irrelevant to a requested authorization of securities under § 204. The Court of Appeals remanded the case for consideration of the cities' claim, holding that, in line with the reasoning in Denver R. G. W. R. Co. v. United States, 387 U.S. 485, the FPC should have considered the alleged competitive consequences of the bond issue in the § 204 proceeding.

Held:

1. The FPC, as a general rule, must consider the anticompetitive consequences of a security issue under § 204. Pp. 756-762.

(a) The Federal Power Act did not render antitrust policy irrelevant to the FPC's regulation of the electric power industry. Pp. 757-759.

(b) The fact that the FPC has broad authority under other provisions of the Act to determine whether a public utility's conduct is in the public interest does not mean that the same standard is not equally germane under § 204. P. 759.

(c) Consideration of antitrust policies in the context of § 204 provides a first line of defense against anticompetitive practices that might later become the subject of an antitrust proceeding. P. 760.

(d) The FPC, like the Interstate Commerce Commission, has broad regulatory authority, which includes responsibility for considering

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antitrust policy in discharging its statutory obligations. Cf. Denver & R. G. W. R. Co. v. United States, supra. Pp. 760-762.

2. Though the FPC is not necessarily required to hold a hearing or make a full investigation in all cases, its summary disposition of proffered objections to the security issue requires strict scrutiny by a reviewing court in light of the Commission's obligations to protect the public interest and enforce the antitrust laws. Pp. 762-763.

3. Unexplained summary administrative action is incompatible with the [93 S.Ct. 1873] requirements of § 204, and precludes appropriate judicial review. Pp. 763-764.

147 U.S. App. D.C. 98, 454 F.2d 941, affirmed.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J., and DOUGLAS, BRENNAN, WHITE, and MARSHALL, JJ., joined. POWELL, J., filed a dissenting opinion, in which STEWART and REHNQUIST, JJ., joined, post, p. 764.

Page 749

BLACKMUN, J., lead opinion

MR. JUSTICE BLACKMUN delivered the opinion of the Court.

This case presents the question whether, when a public utility applies to the Federal Power Commission for authority to issue a security, as the utility is required to do under § 204 of the Federal Power Act, 49 Stat. 850, 16 U.S.C. § 824c,1 the Commission, in passing upon the application, must consider the issue's anticompetitive effect in determining whether it is "compatible with the public interest," as that phrase is employed in § 204(a).

Page 750

I

In October, 1970, Gulf States Utilities Company applied to the Federal Power Commission for authority to issue for cash, on competitive bidding, $30,000,000 first mortgage 30-year bonds for the purpose of refunding part of Gulf's then-outstanding commercial paper and short-term notes.2

Gulf, a Texas corporation qualified to do business in Louisiana, is a public utility within the meaning of § 201(e) of the Federal Power Act, 16 U.S.C. § 824(e). It is engaged principally in the business of generating, distributing, and selling electric energy in southeastern [93 S.Ct. 1874] Texas and south central Louisiana in an area of approximately 28,000 square miles with a population of about 1,225,000. Gulf sells electric energy at retail in numerous communities in that market and, at the time of the application, was providing electric energy for resale to nine municipal systems, 11 rural electric cooperatives (one serving four municipal systems), and one other utility.

The Commission filed notice of Gulf's application. 35 Fed.Reg. 16649 (1970). Thereupon, the cities of Lafayette and Plaquemine, Louisiana (Cities) filed a protest and petition to intervene in the proceedings before the Commission and requested a formal hearing on Gulf's application.

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The Cities alleged that Gulf, in concert with two other investor-owned utilities, Louisiana Power and Light Company (LP&L) and Central Louisiana Electric Company (CLECO), had engaged in activities "apparently violative of the anti-trust laws," as well as of § 10(h) of the Federal Power Act, 16 U.S.C. § 803(h),3 and of the Public Utility Holding Company Act of 1935, 49 Stat. 838, 15 U.S.C. § 79 et seq.; that these activities, in effect, would be "financed or refinanced by the bonds here proposed"; and that the utilities' activities were incompatible with the public interest. The Cities opposed the requested authorization "unless and until Gulf States purges itself of these past violations, or unless the Commission conditions its authorization."

The Cities' claim centered on and stressed a 1968 interconnection and pooling agreement between the Cities, Dow Chemical Company, and Louisiana Electric Cooperative, Inc. (LEC). Dow has a plant near the Cities; the plant has generating capacity that could be used by the other members of the pool as emergency stabilizing capacity. LEC is a generation and transmission electric cooperative financed by the Rural Electrification Administration (REA); it is a super-cooperative composed of 12 electric distribution cooperatives, all located in the area served by the three utilities.

In 1964, the REA was considering loans to LEC for the construction of a generation station and transmission lines through which LEC would be able to serve eight of its 12 member organizations. These members were then purchasing their power from the three utilities. The Cities claimed that the three utilities had attempted to

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destroy LEC, and pointed to a history of "extraordinary litigation" instituted by the utilities between 1964 and 1970 to prevent the construction of the station and the lines, and, in fact, delaying that construction for five years. The arrangement proposed by the 1968 agreement would assure a market for the parties' surplus capacity, and would coordinate, at substantial savings, the construction of new generators by the parties. The three utilities, correspondingly, would lose substantial business if the 1968 arrangement were carried out. Accordingly, Cities alleged, the three utilities engaged in frivolous and repetitive litigation and launched a public relations and lobbying drive against LEC in order to block the loan and prevent fulfillment of the agreement. Cf. California Transport v. Trucking Unlimited, 404 U.S. 508 (1972).

The REA loan was effected, however, in 1969. But by that time, the loan was sufficient only for the generating facilities exclusive of the lines. Cities, Dow, and LEC, then were forced to negotiate with the three utilities for the use of the utilities' lines to transmit their power. Cities contended that the three utilities continued, through the course of the negotiations, to block or limit the pool by agreeing only to provide transmission services to some of the pool members; by refusing to supply transmission [93 S.Ct. 1875] facilities between pool members unless the 1968 pooling agreement were canceled; and by demanding that LEC limit its power capacity to the wattage already planned, thus giving the three utilities the exclusive right to supply all further power needs of LEC's 12 cooperatives and precluding further expansion by LEC.

Cities, by their proposed intervention, would bring these allegations before the Federal Power Commission in the § 204 proceeding. They claimed that such anticompetitive conduct was properly the subject of a § 204 proceeding and that, under § 204(b), 16 U.S.C. § 824c(b), the Commission may condition its approval of the

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bond issue accordingly and place restrictions on Gulf's use of the proceeds.

By its answer, Gulf denied any violation of the antitrust laws, of the Federal Power Act, or of the Public Utility Holding Company Act of 1935. It alleged that the purpose of § 204 of the Federal Power Act was "to prevent unsound financing which might impair the financial integrity of public utilities," and that, even if the allegations of the Cities were accepted as true by the Commission, those matters were "irrelevant to this application."

By order issued December 3, 1970, 44 F.P.C. 1524, the Commission granted the Cities permission to intervene. It denied their request for a hearing, however, and it authorized the issuance and sale of the bonds. The order recited:

The requested approval of the issuance of the Bonds allow [sic] the Company only to change the form of a portion of its outstanding indebtedness, it does not call for the initiation of any construction or other program by the Company which might effect [sic] the interest of the Petitioners. The...

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