Pennsylvania Water & Power Co. v. Federal Power Com'n

• Decision Date: 03 July 1951
• Docket Number: 10239,No. 10531.,No. 10236,10236,10531.
• Citation: 193 F.2d 230
• Parties: PENNSYLVANIA WATER & POWER CO. et al. v. FEDERAL POWER COMMISSION (two cases). PENNSYLVANIA PUBLIC UTILITY COMMISSION v. FEDERAL POWER COMMISSION.
• Court: U.S. Court of Appeals — District of Columbia Circuit

193 F.2d 230 (1951)

PENNSYLVANIA WATER & POWER CO. et al. v. FEDERAL POWER COMMISSION (two cases). PENNSYLVANIA PUBLIC UTILITY COMMISSION v. FEDERAL POWER COMMISSION.

Nos. 10236, 10239, No. 10531.

United States Court of Appeals District of Columbia Circuit.

Argued January 23-25, 1951.

Decided July 3, 1951.

Dissenting Opinion October 4, 1951.

Writ of Certiorari Granted February 4, 1952.

COPYRIGHT MATERIAL OMITTED

Randall J. LeBoeuf, Jr., New York City, with whom Craigh Leonard, Wilkie Bushby, New York City, Raymond Sparks, F. G. Awalt, Preston C. King, Jr., and Daryal A. Myse, Washington, D. C., were on the brief, for petitioners Pennsylvania Water & Power Co. and Susquehanna Transmission Co. of Maryland.

Charles E. Thomas, Counsel, Pennsylvania Public Utility Commission, Harrisburg, Pa., pro hac vice, by special leave of Court, with whom Thomas M. Kerrigan, Asst. Counsel, Pennsylvania Public Utility Commission, Harrisburg, Pa., was on the brief, for petitioner Pennsylvania Public Utility Commission.

Howard E. Wahrenbrock, Asst. Gen. Counsel, Federal Power Commission, and Reuben Goldberg, Atty., Federal Power Commission, with whom Bradford Ross, Gen. Counsel, Federal Power Commission, Washington, D. C., was on the brief, for respondent.

Charles D. Harris, Gen. Counsel, Public Service Commission of Maryland, Baltimore, Md., for intervenor Public Service Commission of Maryland.

G. Kenneth Reiblich and Alfred P. Ramsey, Baltimore, Md., for intervenor Consolidated Gas Electric Light & Power Co. of Baltimore.

Before WILBUR K. MILLER, BAZELON and FAHY, Circuit Judges.

Writ of Certiorari Granted February 4, 1952. See 342 U.S. 931, 72 S.Ct. 375.

BAZELON, Circuit Judge.

In 1944, the Federal Power Commission received two petitions — one from the Mayor and City. Council of Baltimore and others, the other from the Public Service Commission of Maryland — requesting that it institute an investigation of the justness and reasonableness of the rates and charges of Pennsylvania Water and Power Company and Susquehanna Transmission Company of Maryland¹ with regard to such of their sales or transmission of electric energy as are subject to the Federal Power Act, 16 U.S.C.A. § 791a et seq. By orders issued in September and October of 1944, the Commission assumed jurisdiction and began its investigation of petitioners' rates and charges. Intervention was requested by the Pennsylvania Public Utility Commission, the Maryland Commission, and Consolidated Gas Electric Light and Power Company of Baltimore,² all of whom were permitted to and did participate in the hearings before the Commission. Those hearings, which began on April 15, 1946, and continued until July 16, 1947, were extensive in nature and produced a voluminous record. In January 1949, the Commission issued its order requiring Penn Water to reduce its rates and charges in accordance with the Commission's findings. The revised schedules submitted in an attempt to comply with the Commission's order were considered unsatisfactory and, on October 27, 1949, the Commission prescribed its own schedules for Penn Water's services. Petitioners seek review of both the January and the October orders, as does the Pennsylvania Public Utility Commission which intervened before the Commission. In addition, the same parties have moved to set aside the orders or to obtain appropriate alternative relief.

The various proceedings before the Commission present a picture of petitioners' operations which is essential to an understanding of the issues now before us. Penn Water owns and operates both a hydroelectric and a steam generating plant at Holtwood, Pennsylvania, which is on the Susquehanna River, some nine miles north of the Pennsylvania-Maryland border. In addition, Penn Water and the Transmission Company together constitute an interconnected interstate transmission system — with Penn Water owning and operating that part of the system which is located in Pennsylvania and Transmission Company, its wholly-owned affiliate, operating the Maryland facilities. A third company, Safe Harbor Water Power Corporation,³ owns and operates a hydroelectric development at Safe Harbor, Pennsylvania, the transmission facilities of which also interconnect with Penn Water and Transmission Company.

The interest of Baltimore Company in these proceedings stems from certain system foundation contracts which have, for the past twenty years, tied its operations to those of petitioners and of Safe Harbor. Under these contracts, Penn Water is required to provide Baltimore Company at all times with the capacity and energy available at its hydro and steam plants, beyond that part of it which is needed to fulfill its own commitments to customers. Those customers must, however, have been previously approved by Baltimore Company. Baltimore Company is also entitled, by contract, to receive two thirds of Safe Harbor's output and such part of the remaining one third which is left after Penn Water's needs are satisfied. In turn, Penn Water is entitled to receive from Baltimore Company steam energy to the extent that it is available after Baltimore Company's requirements have been met. Nor do the contractual entitlements of Baltimore Company necessarily represent power used by it. Its hydro entitlement is at the disposal of the entire system in order to permit the lowest incremental cost energy to be used as needed at the various parts thereof. In return for the rights granted it under its contract with Penn Water, Baltimore Company assures Penn Water of revenues sufficient to cover all of its operating expenses and a specified return on its investment. Similarly, both Penn Water and Baltimore Company assure Safe Harbor of a combined annual payment which yields a specified return above operating expenses. The function of these contracts and of the interconnection of facilities which they accomplish is, in the words of the Commission, to achieve operations which are "closely integrated and coordinated as a matter of economy, efficiency, flexibility, and maximum utilization of hydro capabilities * * *"⁴ of a river which has a very variable flow.⁵

I

Before considering the various challenges to the Commission's rate order, we will address ourselves to petitioners' motions to set aside and annul that order. These were filed with us on December 29, 1950, shortly after the United States Court of Appeals for the Fourth Circuit had issued a judgment declaring certain phases of the contractual arrangements between Penn Water and Baltimore Company illegal under the federal antitrust laws and the laws of Pennsylvania.⁶ The illegality of these system foundation contracts was first raised by petitioners in their petition for rehearing of the January 1949 order, about nineteen months before the Fourth Circuit decision was handed down. The Commission denied the request for rehearing, ruling, inter alia, that the validity of the Commission's order is not dependent upon the legality of the contracts under the antitrust laws. Petitioners' position here is that the Fourth Circuit's decision requires us to invalidate the Commission's rate order.

The problem raised by the motions is one of the interrelation of two statutory schemes — each of which reflects different historical pressures and different conceptions of the public interest. The Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note, and related laws represent an attempt to keep the channels of competition free so that prices and services are determined by the workings of a free market. They derive from the conviction that the greatest good to the greatest number will be attained by preventing monopoly, monopolizing and combinations in restraint of trade. In marked contrast is a statute such as Part II of the Federal Power Act.⁷ It evidences congressional recognition that competition can assure protection of the public interest only in an industrial setting which is conducive to a free market and can have no place in industries which are monopolies because of public grant, the exigencies of nature, or legislative preference for a particular way of doing business. In place of competition as a generalized and indirect regulator of prices and services in the field of interstate transmission of electric energy at wholesale, Congress has substituted a regulatory agency authorized to supervise almost every phase of the regulated company's business.⁸ Rates charged by such utilities, as well as the services and contractual provisions affecting them, must be "just and reasonable." And what is "just and reasonable" is not determined by the pressures of competition but by the adequacy of the service to the public, the fairness of the return allowed upon the investment in the company, and the degree to which the congressional objective of efficient use of the nation's power resources is served. Nor was Congress unmindful of the problems of undue concentration of power in this field, characterized as it is by local monopolies. In the Public Utility Holding Company Act, 15 U.S.C.A. § 79 et seq., it provided antitrust-like remedies to assure that integration of power companies be limited in scope and confined to an efficient power area.⁹

These contrasting objectives indicate that the antitrust laws can have only limited application to industries regulated by specific statutes. Those laws, though quite properly viewed as having been intended "to make of ours * * * a competitive business economy",¹⁰ are not constitutional mandates which freeze all aspects of our economic system for all time into the pattern of "laissez-faire." We think it obvious that they may not be extended beyond that part of the economy which Congress intended to leave to the operation of the free market. "Certainly what Congress has forbidden by the Sherman Act it can modify. * * * It is not impotent to deal with what it may consider to be dire consequences of laissez-faire."¹¹

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