Alabama Power Co. v. Alabama Electric Cooperative, Inc.

• Decision Date: 13 July 1965
• Docket Number: Civ. A. No. 2193-N.
• Citation: 249 F. Supp. 855
• Parties: ALABAMA POWER COMPANY, a corporation, Plaintiff, v. ALABAMA ELECTRIC COOPERATIVE, INC., a corporation, Rural Electrification Administration, Norman M. Clapp, Administrator of the Rural Electrification Administration, the United States Department of Agriculture, and Orville L. Freeman, Secretary of the United States Department of Agriculture, Defendants.
• Court: U.S. District Court — Middle District of Alabama

249 F. Supp. 855

ALABAMA POWER COMPANY, a corporation, Plaintiff, v. ALABAMA ELECTRIC COOPERATIVE, INC., a corporation, Rural Electrification Administration, Norman M. Clapp, Administrator of the Rural Electrification Administration, the United States Department of Agriculture, and Orville L. Freeman, Secretary of the United States Department of Agriculture, Defendants.

Civ. A. No. 2193-N.

United States District Court M. D. Alabama, N. D.

July 13, 1965.

Martin, Balch, Bingham, Hawthorne & Williams, Birmingham, Ala., for plaintiff.

Rushton, Stakely & Johnston, Montgomery, Ala., L. A. Beers, Jr., Andalusia, Ala., and Volpe & Boskey, Washington, D. C., for defendant Alabama Electric Cooperative, Inc.

Ben Hardeman, U. S. Atty., and Rodney R. Steele, Asst. U. S. Atty., Montgomery, Ala., for remaining defendants.

JOHNSON, District Judge.

This is an action by the Alabama Power Company against Alabama Electric Cooperative, Inc., the Rural Electrification Administration, Norman M. Clapp, Administrator of the Rural Electrification Administration, the United States Department of Agriculture, and Orville L. Freeman, the Secretary of the United States Department of Agriculture, asking this Court to enjoin the defendants from consummating a proposed loan of $20,350,000 to the Alabama Electric Cooperative, Inc., which loan was approved by the Administrator of the Rural Electrification Administration on October 31, 1961.¹ Each of the defendants has filed motions asking this Court to dismiss the complaint and in the alternative for summary judgment. The Alabama Power Company has moved for a preliminary injunction prohibiting the defendants from consummating the loan. Each of these several motions is now submitted upon the pleadings, the affidavits and the several exhibits thereto, which were timely and properly filed with the Clerk of this Court, and the briefs and arguments of the parties.

The Alabama Power Company is a public utility corporation organized under the laws of the State of Alabama and is authorized by its charter to generate, transmit and sell electric energy throughout the State of Alabama. It possesses certificates of convenience and necessity from the Alabama Public Service Commission for the construction of its several steam and hydroelectric generating plants, together with connecting transmission facilities located throughout the State of Alabama, exclusive of a section in north Alabama where electric service is supplied by the Tennessee Valley Authority. In addition, the Alabama Power Company holds nonexclusive franchises from 56 counties and 257 municipalities in the State of Alabama. It is in these counties and municipalities that the Alabama Power Company conducts its electrical operations.

The AEC was organized and exists under the Alabama Electric Cooperative Act (Title 18, § 31 et seq., Code of Alabama, Recompiled). The cooperative is composed of twenty members, the membership consisting of two industrial consumers served at retail by the cooperative, six Alabama municipalities owning distribution systems served at wholesale by the cooperative, and twelve electric cooperatives, which furnish electric energy through distribution systems financed by the REA pursuant to Section 4 of the Act (7 U.S.C.A. § 904). At present, two of the member cooperatives receive all their electric power requirements at wholesale from the AEC; four obtain part of their power requirements at wholesale from the AEC, and the remainder from the plaintiff, Alabama Power Company, or Gulf Power Company; the other six member cooperatives at the present time obtain all their power requirements from either the Alabama Power Company or the Gulf Power Company. The AEC was organized by electric distribution cooperatives for the purpose of providing themselves with electric power and energy needed by them to satisfy the electrical requirements of their member-consumers. The power presently being supplied by the Alabama Power Company to the distributing cooperatives is provided pursuant to 5-year contracts, each of which has been approved by the Alabama Public Service Commission. The revenues received by the Alabama Power Company from the sale of the electric power to these cooperatives is substantial; for example, the revenue received by the Alabama Power Company from these cooperatives increased from over $1½ million in 1960 to approximately $2 1/3 million in 1964. There is no question that the Alabama Power Company has made a substantial investment in its electric system, including its transmission lines and substations. This investment has been for the purpose of providing electric power requirements to its customers, including the cooperatives. The Alabama Power Company has offered and continues to offer the sale of electric power to these cooperatives at the same rates at which it has sold power to such cooperatives since the last rate established and approved by the Alabama Public Service Commission. In addition to the transmission and sale of electric power to the distributing cooperatives, the Alabama Power Company since 1944 has supplied a substantial portion of the electric power required by the defendant AEC and as with the cooperative that distributes the power, the Alabama Power Company has offered and continues to offer to supply the AEC its deficit power requirements in order to fulfill the needs of its customers.

In October, 1959, the AEC initiated an application to the REA for the purpose of obtaining a loan in an amount in excess of $20 million for the purpose of constructing a generating plant in southwest Alabama, together with several hundred miles of transmission lines and related substations to be used to provide electric energy to the several member distributing cooperatives, which energy was at that time, and is presently, being provided by the Alabama Power Company and by Gulf Power Company. This loan application was revised in April, 1961. The revision is inconsequential insofar as the issues now presented to this Court are concerned. In connection with the processing of this revised loan application, the REA instructed the AEC to obtain from each of the electric distribution co-operatives wholesale power supply agreements requiring each of such cooperatives for a period of thirty-five years to purchase all their wholesale power requirements from the defendant AEC and to require such distributing cooperatives to discontinue the purchase of power from any supplier other than AEC. Accordingly, the AEC undertook to and did obtain the contracts from the distributing cooperatives. Subsequently, the defendant Norman M. Clapp, Administrator of REA, entered into a contract on behalf of the United States of America with the defendant AEC, this contract being dated July 31, 1961, whereby an agreement was made to lend $20,350,000 to AEC for the purposes aforestated. The loan commitment was made subject to the conditions that AEC secure written approval from the Director of Finance for the State of Alabama and that AEC complete the 35-year wholesale power supply contracts with the distributing cooperatives. Subsequently, AEC filed its petition with the Director of Finance for the State of Alabama, seeking an order from the director to the effect that the proposed project serves a public need and is in the public interest and that the issuance of obligations on the part of AEC in the amount of $20,350,000 and the use of the proceeds of such loan for such purpose would further the corporate purposes of AEC.

The Alabama Power Company intervened in the proceedings before the Alabama Director of Finance, this intervention occurring some three years ago; the basis for the intervention by the Alabama Power Company in that proceeding was that the proposed loan would not serve a public need, nor be in the public interest; that the Alabama Power Company had adequate facilities to supply and would supply the power needs of consumers to be served by facilities to be financed with the loan; that the proposed generating and transmission system is unnecessary and will constitute duplication of the Alabama Power Company's electric...