426 U.S. 271 (1976), 75-342, Federal Power Commission v. Conway Corp.

Docket Nº:No. 75-342
Citation:426 U.S. 271, 96 S.Ct. 1999, 48 L.Ed.2d 626
Party Name:Federal Power Commission v. Conway Corp.
Case Date:June 07, 1976
Court:United States Supreme Court
 
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Page 271

426 U.S. 271 (1976)

96 S.Ct. 1999, 48 L.Ed.2d 626

Federal Power Commission

v.

Conway Corp.

No. 75-342

United States Supreme Court

June 7, 1976

Argued April 21, 1976

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Syllabus

An Arkansas public utility company (hereinafter Company) that makes wholesale interstate electricity sales, as well as retail industrial sales in competition with some of its wholesale customers (including respondents, seven municipally owned electric systems and two cooperatives, operating within Arkansas) filed a wholesale rate increase with the Federal Power Commission (FPC). Respondents sought to intervene before the FPC, urging that the increase be rejected on the ground that it was

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.

The FPC allowed only limited intervention, excluding the alleged anticompetitive activities as outside the FPC's jurisdiction, which does not reach [96 S.Ct. 2001] retail sales. The Court of Appeals, on review, took a contrary position, holding that the Company's retail rates

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. 276-282.

(a) Though the Federal Power Act confers jurisdiction on the FPC with respect to the sale of electric energy at wholesale in interstate commerce, and the FPC has no authority to correct an alleged discriminatory relationship between wholesale and retail rates by regulating the nonjurisdictional, retail price, § 205(b) of the Act forbids the maintenance of any "unreasonable difference in rates" or service "with respect to any . . . sale" subject to the FPC's jurisdiction, and a jurisdictional sale is necessarily implicated in respondents' charge that the difference between the Company's wholesale and retail rates is unreasonable

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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. 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. 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, 646. Pp. 279-282.

167 U.S.App.D.C. 43, 510 F.2d 1264, affirmed.

WHITE, J., delivered the opinion for a unanimous Court.

WHITE, J., lead opinion

MR. JUSTICE WHITE delivered the opinion of the Court.

The question in this case is this: when a power company that sells electricity at both wholesale and retail seeks to raise its wholesale rates, does the Federal Power Commission (Commission) have jurisdiction to consider the allegations of the company's wholesale customers

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that the proposed wholesale rates, which are within the Commission's jurisdiction, are discriminatory and noncompetitive when considered in relation [96 S.Ct. 2000] to the company's retail rates, which are not within the jurisdiction of the Commission? We hold that it does.

I

Arkansas Power & Light Co. (Company) is a public utility engaged in the sale of electric energy at wholesale in interstate commerce under the meaning of § 201 of the Federal Power Act (Act), as added, 49 Stat. 847, 16 U.S.C. § 824. Its wholesale rates are thus within reach of the Commission's powers under § 206(a) of the Act to establish rates which are just, reasonable, and nondiscriminatory. 16 U.S.C. § 824e(a).1 The Company also sells at retail, [96 S.Ct. 2002] and seeks industrial sales in competition with some of its wholesale customers. These wholesale customers include the seven municipally owned

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electric systems and the two electric power cooperatives which are respondents here.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.

In June, 1973, the Company filed with the Commission a wholesale rate increase pursuant to § 205(d).3 The Customers sought to intervene before the Commission, urging that the rate increase be rejected. Among other grounds, it was asserted that the Customers and the Company were in competition for industrial retail accounts, and that the rate increase was

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.

App. 6. It was alleged that the proposed wholesale rates would make it

impossible for the [Customers] to sell power to an industrial load of any size at a competitive price with [the

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Company], since, in many cases, the revenues therefrom would not even cover the incremental power costs to [the Customers].

Id. at 7. It was also asserted that the rate filing was

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. . . .

Id. at 19.

The Company opposed the petition. The Commission permitted the Customers to intervene, but ruled that it would "limit Customers' participation in this proceeding to matters other than the alleged anti-competitive activities" because the Customers had failed to demonstrate that the relief sought was "within this Commission's authority to direct." Id. at 35. The Commission also denied the Customers' amended petition to intervene, again refusing to consider the tendered anticompetitive and discrimination issues. Inasmuch as the Commission's authority is limited to wholesale rates and does not reach sales at retail, the Commission's opinion was that "the relief sought by [the Customers] is beyond the authority granted to us under the Federal Power Act." Id. at 53. In later denying the Customers' petition for rehearing, the Commission stated that, in considering the Company's cost base for its proposed wholesale rates, it would, of course, put aside those costs properly allocable to the Company's retail business; but it again ruled that the [96 S.Ct. 2003] anticompetitive issue presented by the Customers was

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.

Id. at 55.

The Customers sought review of the Commission's action in the Court of Appeals for the District of Columbia Circuit. The Court of Appeals, disagreeing with the Commission's view as to the reach of its powers, held

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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.

II

Section 201(b) of the Act, 16 U.S.C. § 824(b), confers jurisdiction on the Commission with respect to the sale of electric energy at wholesale in interstate commerce.4 The prohibition against discriminatory or preferential rates or services imposed by § 205(b) and the Commission's power to set just and reasonable rates under § 206(a) are accordingly limited to sales "subject to the jurisdiction of the Commission," that is,, to sales of electric energy at wholesale. The Commission has no power to prescribe the rates for retail sales of power companies. Nor, accordingly, would it have power to remedy

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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.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...

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