Arkansas Power & Light Co. v. Federal Power Com'n

• Decision Date: 07 November 1966
• Docket Number: No. 18262.,18262.
• Citation: 368 F.2d 376
• Parties: ARKANSAS POWER & LIGHT COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

368 F.2d 376 (1966)

ARKANSAS POWER & LIGHT COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

No. 18262.

United States Court of Appeals Eighth Circuit.

November 7, 1966.

Richard M. Merriman, Reid & Priest, Washington, D. C., for petitioner. Harry A. Poth, Jr., and Peyton G. Bowman, III, of Reid & Priest, Washington, D. C., and New York City, were with him on the brief, and also Edward B. Dillon, Jr., of House, Holmes & Jewell, Little Rock, Ark.

Israel Convisser, Atty., F. P. C., Washington, D. C., for respondent. Richard A. Solomon, Gen. Counsel, Howard E. Wahrenbrock, Sol., and Drexel D. Journey and Wallace E. Brand, Attys., F. P. C., Washington, D. C., were with him on the brief.

Before VOGEL, Chief Judge, MATTHES, Circuit Judge and DUNCAN, District Judge.

MATTHES, Circuit Judge.

In this proceeding petitioner, Arkansas Power & Light Company, (hereinafter Arkansas) seeks to review orders of the Federal Power Commission determining that Arkansas' sales of electric energy for resale to its municipal and cooperative customers are sales in interstate commerce within the meaning of Sections 201, 205 and 206 of the Federal Power Act, 49 Stat. 847, 851, 852 (1935), 16 U.S.C. §§ 824, 824d, 824e (1960). The sales at issue in this jurisdictional proceeding represent sales to twenty-three purchasers at 108 separate delivery points.¹

I.

Arkansas is one of four utility operating companies which form part of the Middle South System (Middle South) of electric utilities, an integrated, interconnected group of utilities having a network of more than 5,000 miles of high voltage transmission lines throughout the states of Arkansas, Mississippi and Louisiana.² In addition to an extensive network of transmission facilities, these companies generate the bulk of their own electric energy from eighteen steam and hydroelectric power plants within this three state area. Transmission and generation functions are so coordinated and integrated as to permit an instantaneous transfer of electrical power to any part of Middle South's transmission network. The Middle South System in turn is interconnected with other major power systems in the eastern part of the United States and forms part of a network known as the "Interconnected Systems Group." This combine of the Interconnected Systems Group with other interconnected power systems, known as CANUSE and PJM,³ covers the entire eastern half of the United States and represents about 140 electric utilities, of which petitioner Arkansas is one.

Each of Middle South's subsidiaries operates its generators synchronously at a 60-cycle frequency, a function known as load frequency control. Frequency control is a critical requirement for the effective operation of interconnected utilities. The Middle South System, as well as other power systems in the "interconnected Systems Group," operates on a form of automatic control called "Tie Line Bias" which makes each system contribute its assistance in maintaining the standard 60-cycle frequency. If the generating frequency falls below 60-cycles per second, this would mean that the load or electrical consumption on a particular interconnected system has increased, or that generation has decreased. Conversely, if the frequency rises, electrical consumption has decreased in relation to generation. The Middle South System as part of its obligation must provide sufficient generating capacity to avoid imposing the burden of regulating frequency on other systems.

The combined service areas of the Middle South subsidiaries form what is known as a "control area."⁴ The control operator has a choice in the selection of generators in this control area to meet area power requirements. His selection is based upon the necessity of fulfilling combined system requirements at the least possible cost. Ordinarily the control operator employs the generating sources in the Middle South System to supply its own requirements. However, where there is a shortage of generation in the Middle South System, electric energy from outside the control area automatically moves in to supply the deficiency, a process referred to as "pool assist."

Moreover, various other factors such as fuel costs, transmission losses, and generator performance may make it economically feasible to draw desired energy from other systems rather than from Middle South's own generation facilities. When such is the case, the control operator arranges interchange transactions with another system. Even where no pool assist or interchange is necessary, electric energy may flow unscheduled over the boundary ties⁵ of the Middle South System.

The following finding of the Commission summarizes its findings in regard to the delivery of interstate energy to the wholesale customers.

"As a consequence of this method of operation, Respondent Arkansas receives and delivers energy across state boundaries pursuant to rate schedules on file with the Commission. In 1963 Respondent received 1,062,818,000 kwh of electric energy from Louisiana Power and Mississippi Power within the control area and from Oklahoma Gas & Electric Company and Empire District Electric Company outside the control area. In the same year total deliveries to those systems were 766,462,000 kwh.

"The sales to the 23 customers involved in these proceedings are made from short lines extending from substations where the voltage is stepped down in most instances from 115 kv to 13.8 kv for delivery to each customer. Total deliveries to these customers amounted to 718,768,360 kwh in 1963. The sales to the 23 customers are made from energy available in Middle South\'s control area which extends over three states and from energy received from other systems outside the control area. As in Indiana & Michigan, supra, we are not dealing merely with a single flow of energy or multiple flows of energy but are dealing instead with an interstate pool of energy to which the generators of the control area and other interconnected systems contribute power and from which all loads, and sometimes the loads of other systems, are supplied. * * *" 34 F.P.C. at ___.

The basic question for our determination is whether the Commission's finding that all of the twenty-three wholesale purchasers received interstate energy is supported by substantial evidence. Arkansas readily concedes that "some of the 108 sales involve from time to time interstate energy." Indeed, the tracing studies conducted by Arkansas and introduced at the hearing before the Commission show that at least sixteen out of twenty-three resale customers received energy from outside Arkansas during one of the study periods. Thus, in brief, Arkansas' position is that absent evidence of a study by the Commission based on the manual or computer tracing technique (concededly not made), there is no factual basis to support the Commission's finding. The Commission with candor acknowledges "that in past cases tracing studies * * * were put in evidence to show that out-of-state energy was delivered to specified customers." The Commission asserts, however, that the teachings of the Supreme Court clearly establish that where, as here, there is an integrated, interstate pool operation, jurisdiction may be proved without resort to tracing studies. We agree with the Commission and affirm.

We are not prepared to say that detailed tracing studies are a sine qua non to the conferral of federal jurisdiction where there exists an integrated, interstate "pool assist" operation as in the present case.

While the Supreme Court has reiterated that "federal jurisdiction was to follow the flow of electric energy, an engineering and scientific, rather than a legalistic or governmental test", we do not construe this language as requiring the employment of tracing studies in every instance. While this standard was applied in Federal Power Commission v. Southern California Edison Co., (The Colton case) 376 U.S. 205, 84 S.Ct. 644, 11 L.Ed.2d 638 (1964), it seems clear that the Supreme Court there was not confronted with the highly integrated, interconnected pool operation that characterizes the Middle South System. In the Colton case, the issue centered on whether out-of-state energy was delivered by Southern California Edison Co. to a single customer, the City of Colton. Since no integrated operation was present in that case, the Commission by necessity had to resort to scientific studies to show that out-of-state energy reached the sales to the City of Colton. Similarly in Connecticut Light & Power Co. v. Federal Power Commission, 324 U.S. 515, 65 S.Ct. 749, 89 L.Ed. 1150 (1945), the Connecticut Light & Power Co. attempted to disavow all affiliation with the Connecticut Valley Power Exchange, and interstate power pool and rearrange "its operations with intent to cut every connection and discontinue every facility whose continued operation would render it subject to the Federal Power Commission's control." The Commission then attempted to invoke its jurisdiction upon a single remaining facility of the company. In such an instance only scientific and engineering data could substantiate the Commission's determination of jurisdiction over one facility, which otherwise retained the appearance of a local and intrastate service.

Moreover, we feel that the limited tracing studies offered by Arkansas convincingly demonstrates the existence of extensive amounts of interstate energy in each of the sales to its twenty-three customers, proof of which Arkansas contends does not exist. It stands undisputed in the record that Petitioner's tracing studies, while encompassing only four hours out of an annual total of 8,760 hours, showed that out-of-state energy reached at least sixteen (or perhaps nineteen based upon the government interpretation) customers of Arkansas. We agree with the Commission that it seems highly probable that during the remaining unchecked period of 8,756 hours, some interstate energy did in fact reach each of ...