Almeda Mall, Inc. v. Houston Lighting & Power Co.
| Decision Date | 11 April 1980 |
| Docket Number | No. 78-1586,78-1586 |
| Citation | 615 F.2d 343 |
| Parties | 1980-1 Trade Cases 63,278, 35 P.U.R.4th 557 ALMEDA MALL, INC. and Northwest Mall, Inc., Plaintiffs-Appellants, Cross- Appellees, v. HOUSTON LIGHTING & POWER CO., Defendant-Appellee, Cross-Appellant. WESTWOOD MALL, INC., a Maryland Corporation, Plaintiff-Appellant, Cross- Appellee, v. HOUSTON LIGHTING & POWER CO., a Texas Corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Lewis A. Noonberg, Paul V. Niemeyer, Baltimore, Md., Richard R. Goldberg, Richard G. McCauley, Columbia, Md., for plaintiffs-appellants, cross-appellees.
Baker & Botts, Walter E. Workman, David P. Cotellesse, C. Henry Kollenberg, Houston, Tex., for defendant-appellee, cross-appellant.
Appeals from the United States District Court for the Southern District of Texas.
Before COLEMAN, Chief Judge, REAVLEY and ANDERSON, Circuit Judges.
In this antitrust action the plaintiff Malls charge that Power Company refusal to sell them electricity through a single meter for individual resale to their business tenants is a violation of the federal antitrust laws and is discriminatory under Texas state law.
The lengthy record presents novel issues. The Malls do not generate or transmit or distribute electric power generally, and they have no intention of doing so. They simply wish to have the Power Company deliver electric power to them at a single meter, after which they would sell it to their respective tenants at the same retail rates now charged by the Utility.
The District Court granted a directed verdict in favor of the Power Company on all issues. We affirm.
The plaintiff-appellants are developers and owners of three regional shopping malls, Almeda Mall, Inc., Northwest Mall, Inc., and Westwood Mall, Inc., in Houston, Texas. The defendant-appellee, Houston Lighting & Power Company (HL & P), is a privately owned electric utility company, operating under a nonexclusive franchise granted by the City of Houston.
HL & P operates under a nonexclusive franchise granted initially by the City of Houston late in the nineteenth century and last renewed in 1957. The franchise is nonexclusive because Texas does not authorize a utility to have any type of exclusive monopoly. 1 The City of Houston is empowered to franchise additional electric utilities at any time. The HL & P franchise stipulates that under certain circumstances the City may purchase HL & P's facilities and operate the utility. Despite these options, HL & P is the only franchised electric utility in the City of Houston and the surrounding area. Consequently, HL & P is presently a natural monopoly for the distribution of electric power.
When this suit was filed, Texas had no regulatory commission to oversee public utility activity. Texas relied on local municipalities to regulate utilities as allowed under state law. 2 In 1975, Texas enacted a Public Utility Regulatory Act (PURA) and created a statewide Public Utilities Commission. Under PURA, however, municipalities retained their regulatory power under the same standards and rules applicable to the new commission. 3
Within this framework, state law and the nonexclusive franchise give the City of Houston the power to regulate practically all operations of HL & P regarding rates, operating procedures, and services to customers. The fact that the City can and does regulate HL & P actively is strongly supported by the record. 4
HL & P operates with 23 rate schedules, distinguished by the type and quantity of electric service rendered. Four of the schedules have been formally adopted by the City of Houston by rate ordinances, including (1) RS-1, residential service; (2) MGS-1, miscellaneous general service for loads not in excess of 50 kilovolt amperes; (3) H-7, small direct current usage for motors and other electrical equipment with a connected load of less than 100 horsepower; and (4) MSL, municipal street lighting. The remaining 19 schedules are not formalized by City ordinance but are submitted to the City as tariffs, automatically taking effect within a prescribed period of time. These rates are, however, at all times subject to the control and regulations of the City and can, in fact, be adopted by City ordinance.
The rate schedules applicable in this case are HL & P's general service rates: (1) MGS, for a demand up to 50 kilovolt amperes (the same as MGS-1 adopted by ordinance for city classification purposes); MGS-1L, for a demand above 50 kilovolt amperes; and LGS, for a demand above 700 kilovolt amperes with certain usage. These scheduled rates vary according to the level of demand and use. Because of the volume of electricity consumed, the LGS rate costs less than the MGS or MGS-1L rates.
For many years, it has been HL & P's policy, and practice, not to allow the resale of electricity. All rate schedules used by HL & P, whether effected by ordinance or not, specifically state that resale is prohibited. Under the MGS City ordinance, however, a special contract may be allowed permitting resale of power along with other commonly prohibited services. 5
Trial testimony revealed several reasons for restricting resale of electricity by HL & P. One is that direct service by the utility to the customer eliminates intrusion by an unregulated middleman and prevents possible conflicts over duties to maintain and repair the electrical system. 6 Another reason, offered by Dr. Paul Garfield, a public utility economist, states that insulation of different market prices to different classes of customers is necessary to maintain the entire public utility rate structure and to spread costs of service equitably to each class of customers. 7 Restrictions on resale, therefore, provide stability in the operation and upkeep of utility service.
As a public utility, HL & P is required to serve all similar customers in a like manner. Certain groups of customers, however, have had the rate structure and the right to resell power applied differently in an historical context. Regarding this variation, HL & P admits that, for redistribution to individual tenants, office buildings are served by one meter. However, retail establishments in office buildings, with the exception of businesses located in older buildings in downtown Houston, are individually metered. With the establishment of resale restrictions aimed at individual businesses, old businesses were permitted to continue operating without suffering an expensive conversion to an individual meter.
Apartment complexes in Houston are also permitted to resell power to individual tenants. Under a city ordinance, landlords may opt to have a single meter for an entire apartment complex or may have each individual tenant have a single meter. HL & P has always permitted the customer to take the service providing the most favorable rate application.
All shopping centers in Houston have been served by individual meters for each retail store. This has been in keeping with HL & P's modern policy to meter every retail store separately and not to allow resale from a master meter to individual stores. All applications from shopping centers for resale service in the past have been uniformly declined by HL & P.
Planning and development began in 1967 and 1968 for Almeda Mall and Northwest Mall. During 1967, the Malls inquired of HL & P about the possibility of purchasing electricity through a limited number of meters so that they could redistribute and resell the electricity to the individual tenants of the Malls. Under this proposed plan the Malls would receive electricity at the cheaper LGS rate, since the kilovolt demand at each meter would far exceed the required 700 kva minimum. They would then resell to the tenants through individual meters at the higher MGS rate, thus realizing a profit. The Malls planned to include the cost of the electricity in the rent charged each tenant on a per square foot basis. HL & P informed the Malls that its policy did not permit the resale of electric power by retail purchasers.
In 1972, Almeda and Northwest Malls formally requested to convert the individually metered stores in their malls to a single meter system convenient for resale. This was refused by HL & P regarding resale to tenants. HL & P did indicate, however, that a single meter could be set up for consumption in office space, storage areas, and common areas within the Malls.
Planning and development for Westwood Mall began in 1973. Westwood requested a limited meter system to enable it to resell electricity to its tenants. HL & P also denied this request.
Following these denials, Almeda and Northwest Malls and Westwood Mall brought separate suits against HL & P, alleging that HL & P's denial of resale violated federal antitrust laws, specifically Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2, seeking damages under Section 4 of the Clayton Act, 15 U.S.C. § 15, and injunctive relief under Section 16 of the Clayton Act, 15 U.S.C. § 26. The separate actions were consolidated for trial, with jurisdiction based on Sections 4, 12, and 16 of the Clayton Act, 15 U.S.C. §§ 15, 22, 26.
The Malls contend that the utility has denied them the right to compete with it in the retail sale of electricity to their tenants. They also allege that this denial has injured competition between them and other regional shopping centers in the Houston area.
The prohibition against sale for resale, appellants argue, has a detrimental effect on competition in several respects. One argument is that the purchase of electricity by appellants at the LGS rate for resale to tenants would produce not only a profit for the Malls but also a savings to the individual consumers. By purchasing through one, two, or four meters, instead of numerous individual meters, the electrical expenses for an entire mall would be reduced by eliminating the...
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