PENNSYLVANIA W. & P. CO. v. CONSOLIDATED G., EL & P. CO.

• Decision Date: 30 September 1950
• Docket Number: No. 6102.,6102.
• Citation: 184 F.2d 552
• Parties: PENNSYLVANIA WATER & POWER CO. et al. v. CONSOLIDATED GAS, ELECTRIC LIGHT & POWER CO. of Baltimore (PUBLIC SERVICE COMMISSION OF MARYLAND, Intervener).
• Court: U.S. Court of Appeals — Fourth Circuit

184 F.2d 552 (1950)

PENNSYLVANIA WATER & POWER CO. et al. v. CONSOLIDATED GAS, ELECTRIC LIGHT & POWER CO. of Baltimore (PUBLIC SERVICE COMMISSION OF MARYLAND, Intervener).

No. 6102.

United States Court of Appeals Fourth Circuit.

Argued June 26, 1950.

Decided September 30, 1950.

Writ of Certiorari Denied December 11, 1950.

COPYRIGHT MATERIAL OMITTED

James Piper, Baltimore, Md., Wilkie Bushby, New York City, and Charles E. Thomas, Harrisburg, Pa., (R. Dorsey Watkins, Baltimore, Md., William J. Grove and Lloyd Benjamin, Harrisburg, Pa., on the brief), for appellants.

Harry N. Baetjer, Alfred P. Ramsey and Charles D. Harris, Baltimore, Md., (G. Kenneth Reiblich, Norwood B. Orrick and John Henry Lewin, Baltimore, Md., on the brief), for appellees.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

Writ of Certiorari Denied December 11, 1950. See 71 S.Ct. 282.

SOPER, Circuit Judge.

The subject matter of this suit is a wholesale electric power agreement between Consolidated Gas, Electric Light & Power Company of Baltimore, a Maryland utility corporation, and Pennsylvania Water & Power Company, a Pennsylvania utility corporation. Penn Water seeks a declaratory judgment that the agreement is not a valid contract principally on the grounds that it violates the federal anti-trust laws and is contrary to the public policy and the laws of Pennsylvania.

Differences between the parties led Consolidated on September 1, 1948 to invoke arbitration provisions contained in Article X of the contract. Shortly thereafter, Penn Water instituted this suit and asked the court to declare that Article X is unenforceable, and to enjoin Consolidated from proceeding with the arbitration. During the course of the proceeding, Penn Water notified Consolidated that it had terminated the agreement because of breaches on the part of Consolidated, and filed an amended complaint asking that the agreement be struck down in its entirety and also that the arbitration be enjoined.

Penn Water notified Consolidated that it would immediately cease to receive from Consolidated and pay for any electric energy generated in Maryland or the District of Columbia and transmitted to Pennsylvania, and that its operations would be changed to effect this purpose. It declared that it would receive energy via its transmission lines for the limited purpose of delivery to the Pennsylvania Railroad; and announced that these changes would have no effect on the amount of electrical services rendered by Penn Water to Consolidated. Thereupon Consolidated applied to the court for a restraining order and on February 9, 1949 the court restrained Penn Water, pending the final determination of the issues, from doing anything in respect to the generation, transmission and disposition of power covered by the agreement between the parties in any manner different from the procedure theretofore followed in the performance of the contract. Thereafter Consolidated answered the amended complaint denying that the agreement is invalid for any reason, or that it had broken the agreement in any way, and asserted that the alleged breaches were proper subjects of arbitration under the contract.

The attorney for the Public Service Commission of Maryland was granted leave to appear on behalf of the Commission as intervener, and filed an explanatory statement of its position in support of Consolidated. The Pennsylvania Public Utility Commission intervened and charged that the contract between the two utilities is invalid because it constitutes a surrender of the powers and franchises of Penn Water to Consolidated without the approval of the Commission.

The court held that the contract was valid and that the parties should proceed to arbitration and continue the restraining order in effect until the decision of this court on appeal.

Penn Water is a Pennsylvania utility corporation which was incorporated in 1910. It is the owner of hydro and steam electrical generating plants, capable of producing 104,000 kilowatts and 30,000 kilowatts respectively, at Holtwood, Pennsylvania, on the Susquehanna River. It also owns transmission lines, including those owned by its subsidiary, Susquehanna Transmission Company of Maryland, which connect with other utilities in Pennsylvania, Maryland and the District of Columbia. The area between the Potomac River on the southwest and the Hudson River on the northeast and south of the Pennsylvania-New York State line is interlaced with electric transmission lines connecting various utility systems. Penn Water's lines are interconnected with these systems which include the systems of Consolidated in Maryland and the Potomac Electric Power Company in the District of Columbia.

In 1910 Penn Water built two transmission lines from Holtwood to Baltimore, and subsequently added various other lines. Today there are in addition a transmission line running northeasterly from Holtwood to Coatesville for the supply of power to the Chester Valley Electric Company, now merged with the Philadelphia Electric Company; a transmission line running northwesterly from Holtwood to York to supply power to the Edison Light & Power Company; a transmission line from the hydroelectric plant of the Safe Harbor Water Power Corporation¹ at Safe Harbor on the Susquehanna, ten miles above Holtwood, to the western part of Baltimore; and a transmission line from Safe Harbor to the eastern part of Baltimore; an extension of the westerly one of these lines from Ellicott City, Maryland, to a point near the District of Columbia, to supply Potomac Electric, which serves the District of Columbia; and a transmission line from Safe Harbor to Perryville, Maryland, along the eastern shore of the Susquehanna River which supplies power to the Pennsylvania Railroad at Perryville. That portion of these lines which is in Maryland is owned by the Susquehanna Transmission Company of Maryland.

Penn Water sells its electric energy and services in bulk to five customers. It has a contract with Metropolitan Edison Company, which operates in the central and eastern part of Pennsylvania; a contract under which it supplies electric services to the Philadelphia Electric Company at Coatesville, which serves an area around Chester, Pennsylvania; a contract with Pennsylvania Power & Light Company for the supply of power in the Lancaster territory extending from the Maryland line north to Harrisburg and eastward to Reading. These three public utility companies are the Pennsylvania customers of Penn Water. In addition Penn Water has a contract with Consolidated to supply power and energy over transmission lines to Baltimore, and also in connection with another contract to the Pennsylvania Railroad. Most of the energy supplied to the Railroad is delivered from Safe Harbor to Perryville, but there is another source of supply to the Railroad in Washington. It will be seen that the greater part of the energy produced by Penn Water is sold at wholesale to four customers, while the remaining portion is sold at retail to the Pennsylvania Railroad as a consumer.

Prior to entering into the agreement in suit, Penn Water sold electricity at retail to the street system of Baltimore, which is now a customer of Consolidated; and also to an electric furnace company in Baltimore. The lines of Penn Water connect directly with those of Potomac Electric and it could sell and deliver electric power directly to Potomac Electric if it were not for its contract with Consolidated which now buys electric power from Penn Water and resells it to Potomac Electric.

Penn Water, in order to supplement its own supply of energy, buys energy generated by Consolidated, Metropolitan Edison, Pennsylvania Power & Light, and Philadelphia Electric for resale, and also buys through Consolidated energy generated by Potomac Electric.

Consolidated has four large steam generating plants with a capacity of 538,000 kilowatts and distribution facilities in and around Baltimore, and also has extensive transmission lines which connect with Penn Water's network of transmission lines and with the Bethlehem Steel Company's electric generating plant in the Baltimore area.

It thus appears that both Penn Water and Consolidated are engaged in the generation, transmission and sale of electric power and energy. Both companies have charter rights for the sale of electric energy to the public at wholesale or retail. Penn Water's charter rights are derived from the State of Pennsylvania, insofar as its lines in that state are concerned, and through the Susquehanna Transmission Company in Maryland it has similar charter rights to operate in Maryland. Consolidated has similar charter rights for the purchase and sale of electric energy in Maryland.

If it were not for the agreement between the parties which is the subject of this suit, the parties would be potential competitors in the generation and sale of electric energy through their present facilities or other facilities that might be constructed; and would also be potential competitors in the purchase of power from others for resale. The power required by Potomac Electric to supply the wants of consumers in the District of Columbia could be purchased by Potomac Electric either from Consolidated or Penn Water and could be supplied by their present facilities or additional facilities that might be built, or by purchases from others. Similarly, Penn Water and Consolidated would be potential competitors for the supply of electric energy in and around Baltimore at wholesale or retail to customers with their present lines or an extension thereof to be approved by the public authorities.

The electric power which is now distributed in and near Coatesville, Pennsylvania, by Philadelphia Electric could be supplied from the facilities now owned or additional facilities to be built by Penn Water or could be supplied from the facilities of Consolidated.

Similarly, Penn Water and Consolidated would be potential...