City of Huntingburg, Indiana v. FEDERAL POWER COM'N

• Decision Date: 06 May 1974
• Docket Number: No. 72-1890,72-1893.,72-1890
• Citation: 498 F.2d 778
• Parties: CITY OF HUNTINGBURG, INDIANA, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Public Service Company of Indiana et al., Intervenors. The PUBLIC SERVICE OF INDIANA NEGOTIATING COMMITTEE OF the INDIANA MUNICIPAL ELECTRIC ASSOCIATION CORPORATION et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Public Service Company of Indiana et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

498 F.2d 778 (1974)

CITY OF HUNTINGBURG, INDIANA, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Public Service Company of Indiana et al., Intervenors.

The PUBLIC SERVICE OF INDIANA NEGOTIATING COMMITTEE OF the INDIANA MUNICIPAL ELECTRIC ASSOCIATION CORPORATION et al., Petitioners, v. FEDERAL POWER COMMISSION, Respondent, Public Service Company of Indiana et al., Intervenors.

Nos. 72-1890, 72-1893.

United States Court of Appeals, District of Columbia Circuit.

Argued January 29, 1974.

Decided May 6, 1974.

Charles F. Wheatley, Jr., Washington, D. C., with whom Jerome C. Muys and Grace Powers Monaco, Washington, D. C., were on the brief, for petitioner in No. 72-1890.

George Spiegel, Washington, D. C., with whom Sandra J. Strebel and Robert C. McDiarmid, Washington, D. C., were on the brief, for petitioner in No. 72-1893.

Drexel D. Journey, Deputy Gen. Counsel, F. P. C., with whom Leo E. Forquer, Gen. Counsel, and George W. McHenry, Jr., Acting Solicitor, F. P. C., at the time the brief was filed, were on the brief, for respondent.

Charles W. Campbell, Plainfield, Ind., of the bar of the Supreme Court of Indiana, pro hac vice, by special leave of court with whom Howard E. Wahrenbrock and Christopher T. Boland, Washington, D. C., were on the brief for intervenors, Public Service Co. of Ind. and Southern Ind. Gas and Electric Co.

David S. Richey, Lebanon, Ind., and William C. Wise, Washington, D. C., were on the brief for intervenor, Indiana Statewide Rural Electric Cooperative, Inc.

Before LEVENTHAL, MacKINNON and WILKEY, Circuit Judges.

WILKEY, Circuit Judge.

Petitioners, the City of Huntingburg, Indiana, and the cities affiliated with the Public Service of Indiana Negotiating Committee (hereinafter collectively referred to as Cities), seek review of a Federal Power Commission order of 26 May 1972¹ accepting the rate schedule filings of Public Service Company of Indiana (PSCI) and Southern Indiana Gas and Electric Co. (SIGECO). PSCI and SIGECO are public utilities² subject to FPC regulation under subchapter II of the Federal Power Act.³ The rate schedule filings, as the Commission put it, "embody the terms and conditions of an Interconnection Agreement entered into on March 9, 1971, among the United States, acting through the Rural Electrification Administration, Indiana Statewide, Public Service and Southern Indiana."⁴ Indiana Statewide Rural Electric Cooperative, Inc. (Statewide) is a cooperatively owned utility whose facilities were financed in large part by loans from the Rural Electrification Administration.⁵

Cities raise no objections to the basic provisions of the Interconnection Agreement, which obligate PSCI, SIGECO, and Statewide to interconnect their bulk power supply systems, to coordinate operation of their facilities in certain respects, and to consult mutually on advance systems planning. However, the Cities argue that certain provisions of the Agreement would produce substantial anticompetitive effects in the market served by PSCI and SIGECO. They seek an order instructing the FPC to excise the disputed provisions from the Interconnection Agreement or, in the alternative, an order remanding the case to the Commission for an evidentiary hearing on whether the challenged provisions, if retained, would advance the public interest.

On the basis of the record supplied to us on review and the opinion accompanying the Commission's order, we are unable to discern the reasons for the Commission's decision to accept the allegedly restrictive provisions of the Interconnection Agreement as part of the PSCI-SIGECO rate filing. We therefore remand to the Commission for hearings in accordance with Part III of this opinion.

I. BACKGROUND

A. History of the Interconnection Agreement

Most of the historical background of this controversy centers on the formation and development of Statewide and its predecessor, Hoosier Cooperative Energy, Inc. (Hoosier). Hoosier was organized by sixteen rural electric membership cooperatives in 1961.⁶ On 15 June 1961 it received a loan commitment of $60 million from the Rural Electrification Administration (REA) for construction of a generation and transmission system.⁷ When Hoosier could not readily obtain a certificate of convenience and necessity from the Indiana Public Service Commission (Indiana PSC), it transferred its loan commitment to Statewide, which had been incorporated in 1935 with PSC approval. Statewide then entered into long-term contracts with the Hoosier member distribution cooperatives. However, SIGECO and PSCI successfully challenged Statewide's authority to operate the Hoosier system in Southern Indiana Gas & Electric Co. v. Indiana Statewide Rural Elec. Coop.⁸ The Indiana Supreme Court directed the circuit court to enjoin Statewide from generating or transmitting electricity "until it obtains a current `certificate of convenience and necessity' from the Public Service Commission of Indiana."⁹

Subsequently the REA took title to Statewide's facilities under the authority of section 7 of the Rural Electrification Act.¹⁰ Title was to revert to Statewide within four and one half years if it could obtain authority to operate the system from the Indiana PSC.¹¹ In 1969 Statewide filed with the PSC a petition for certification in which it sought only the authority to serve its own members. PSCI and SIGECO intervened in opposition to Statewide's petition. In a letter dated 16 February 1970 the Indiana PSC set forth a proposed settlement among the parties.¹² The proposal contained essentially the same terms as the Interconnection Agreement ultimately signed by the parties, including a clause providing:

Hoosier Energy\'s certificate shall be so conditioned that it can sell and resell within the terms of the wheeling agreement only to its 17 REMC Rural Electric Membership Cooperative members, with its 17 members being named in the certificate.¹³

The Interconnection Agreement was signed by Statewide, the REA, PSCI, and SIGECO on 9 March 1971 for a 25-year term beginning on that date. On 25 June 1971 the Indiana PSC granted Statewide a certificate of convenience and necessity allowing Statewide to "engage in the production, transmission, delivery, distribution, supplying, furnishing or sale of electric energy to the Member REMCs and to PSCI and SIGECO . . . ."¹⁴

B. The Challenged Contractual Provisions

The main focus of the controversy is on section 5.05 of the Interconnection Agreement, which provides:

. . . Statewide will serve only NSA National Southwire Aluminum Co. during the remaining term of said contract and Hoosier Members while the systems of the parties are interconnected, and power and energy furnished and delivered by Public Service and SIGECO under this Agreement shall be resold or delivered by Statewide to NSA during the term of said contract and to Hoosier Members only; provided, however, that Statewide may continue to perform its obligations under (i) its power supply agreement with Southeastern Power Administration, and (ii) all power and purchase pooling agreements it now has with other entities until the agreements referred to in (i) and (ii), can be legally or mutually terminated by Statewide and the other parties thereto.¹⁵

Cities assert that this provision represents a horizontal division of markets, a per se violation of section 1 of the Sherman Antitrust Act¹⁶ under United States v. Topco Associates, Inc.¹⁷ They further argue that section 1.03 of the Agreement, which requires that Statewide contractually prohibit its members from reselling electric power sold to them at wholesale by Statewide, constitutes an unlawful restraint on alienation under United States v. Arnold, Schwinn & Co.¹⁸ The potential for anticompetitive impact is also raised with respect to sections 1.01 (limiting the scope of Statewide's application for a state certificate of convenience and necessity), 1.03.1 (requiring Statewide to assign its contract with the City of Jasper, Indiana, to SIGECO), 3.02.1 (prohibiting Statewide from constructing a contemplated 161 kilovolt interconnection with East Kentucky Rural Electric Cooperative), 3.03 (assigning to PSCI and SIGECO all unused capacity in Statewide's tie line with the Big Rivers Rural Electric Cooperative Corporation), and Schedule H (giving PSCI and SIGECO exclusive right to all unused capacity in the Statewide transmission system).

The Cities describe the harm that these provisions would allegedly occasion as follows:

The net effect of the restrictive provisions in the Interconnection Agreement is to prevent Hoosier Statewide from acting as a viable competitive force in the wholesale power supply market in Indiana and Kentucky, thereby preventing not only Hoosier itself from competing with PSI PSCI and SIGECO in the supply of power in bulk to the Cities, but effectively preventing Cities from entering the bulk power supply market as their own bulk power suppliers with generating sources other than PSI or SIGECO. Thus, Cities are for at least the next quarter century "assigned" to PSI as captive wholesale customers.¹⁹

C. The Commission's Action

PSCI and SIGECO submitted the Interconnection Agreement to the FPC on 14 June 1971 as an interstate rate schedule filing. On 26 May 1972 the Commission accepted the tendered filing with the following observation:

In granting the relief herein afforded, we have examined the controlling legal requirements, considered relevant and material factual data and applied the policy considerations which are committed to the discretion of the Commission under the Federal Power Act. We are persuaded that the public interest will be served by authorizing the filing of the rate schedules and the transfer of the utility facilities. . . . We find it unnecessary and inappropriate to order formal hearings as requested by Cities in light of our investigation and analysis, as reflected herein. Accordingly, we deny their requests in that regard.²⁰

Chairman Nassikas and...