Central Louisiana Elec. Co. v. Rural Electrification Admin.
| Decision Date | 18 November 1964 |
| Docket Number | Civ. A. No. 10552. |
| Citation | 236 F. Supp. 271 |
| Parties | CENTRAL LOUISIANA ELECTRIC COMPANY, Inc., v. 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. Gulf States Utilities Company, Louisiana Power & Light Company, Intervenors. |
| Court | U.S. District Court — Western District of Louisiana |
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Jacob S. Landry, Jack J. Cousin, and William O. Bonin, Landry, Watkins, Cousin & Bonin, New Iberia, La., for plaintiff.
Edward L. Shaheen, U. S. Atty. for the Western District of Louisiana, Edward V. Boagni, Asst. U. S. Atty., Shreveport, La., John C. Bagwell, General Counsel, Ralph F. Keobel, Asst. General Counsel, Louis Gorrin and Henry E. Freedman, Attys., United States Department of Agriculture, Washington, D. C., for defendants.
Tom F. Phillips, Taylor, Porter, Brooks, Fuller & Phillips, Baton Rouge, La., for intervenor Gulf States Utilities Co.
Eugene G. Taggart, Monroe & Lemann, New Orleans, La., Thomas W. Leigh, Theus, Grisham, Davis, Leigh & Brown, Monroe, La., for Louisiana Power & Light Company.
By this action Central Louisiana Electric Company (CLECO) seeks to enjoin consummation of a loan by the Rural Electrification Administration (REA) to Louisiana Electric Cooperative, Inc., in the amount of $56,521,000 to be used for construction of steam generation and transmission facilities. A hearing was held October 26, 1964, on a motion to show cause why a preliminary injunction should not be issued.
Plaintiff is a privately owned electric utility corporation organized under Louisiana laws and operating in this State. Made defendants are the REA; its Administrator, Norman M. Clapp; and the U. S. Department of Agriculture and its Secretary, Orville L. Freeman. Louisiana Electric Cooperative, Inc., (Super Cooperative) was organized by twelve of the thirteen electric cooperatives which operate under Louisiana law.
Plaintiff is engaged in the business of generation, transmission, distribution and sale of electric service in some twenty-four, out of 64, parishes in this State. Among other customers, it furnishes wholesale electric power to six of the electric cooperatives which helped organize the Super Cooperative. Plaintiff complains that defendant Clapp approved the loan in violation of the Rural Electrification Act, 7 U.S.C.A. § 901 et seq., REA Bulletin 111-3, and the Fifth Amendment.
It is claimed that the result of consummation of the loan will be illegal competition with plaintiff, a denial of equal protection of the laws, a deprivation of property without due process of law, operation of an unregulated monopoly through Super Cooperative, and a violation of Louisiana laws governing public utilities. Plaintiff claims that the Administrator conspired with the Super Cooperative and its members to create an unregulated monopoly and to deprive plaintiff of its property and income. Plaintiff also alleges that in the negotiations preceding the loan approval the Administrator attempted to coerce plaintiff and other private electric companies to agree to so-called "territorial integrity" agreements which are alleged to be in violation of Louisiana laws.
The Rural Electrification Act, 7 U.S. C.A. § 901 et seq., authorizes the Administrator to make loans to finance construction of generating and transmission facilities for the furnishing of electric energy to persons in rural areas who are not receiving central station service. One of the limitations imposed by § 904 is that the loan shall not be made unless the consent of the State authority having jurisdiction in the premises has been obtained.
The Administrator set forth in REA Bulletin 111-3, 29 Fed.Reg. 2765 (1964), the requirements for consideration of a loan application under § 904. This bulletin states that no loan shall be granted except upon certification by the Administrator to the Secretary of Agriculture of the completion of a power supply survey showing that the loan is "* * * (c) needed because existing and proposed contracts to provide the facilities or service to be financed were found to be unreasonable, each supplier involved was so advised, REA attempted to have such contracts made reasonable, and the existing or other proposed suppliers had failed or refused to do so within the time set by the Administrator." Plaintiff contends that the requirements set forth in this bulletin have not been fulfilled.
Evidence adduced at the hearing held on the motion to show cause, virtually none of which was contradicted by defendants, reveals that the Super Cooperative applied for the loan in question August 3, 1962. After extended negotiations between the Administrator, the private electric companies and the electric cooperatives, the Administrator advised plaintiff February 13, 1964, that future power arrangements must meet three requirements: (1) the cooperatives must obtain power at the lowest possible cost under relatively short-term contracts; (2) the cooperatives must be assured contractually of an adequate power source and of its availability to meet future needs; and (3) means must be found, legislatively or otherwise, to assure the territorial integrity of the cooperatives.
During negotiations which followed, the evidence shows that plaintiff submitted proposals which attempted to offer reasonable solutions to the first two requirements set forth by the Administrator. It was shown that CLECO offered to supply the complete electric requirements of the cooperatives it served under contracts with a term of ten years and at a rate of 6.25 mills per kilowatt-hour.1 Although the Administrator indicated in the affidavit he submitted that "the rates offered by the existing power sources would result in higher costs of power for the consumers involved than the costs from the facilities to be financed by the aforesaid loan," evidence was offered by CLECO to show that the rates it offered were lower than the rates the Super Cooperative would have to charge after construction of its proposed facilities for generation and transmission of electric power.
One exhibit introduced by plaintiff showed the rates of the twelve largest REA financed generation and transmission cooperatives during the twelve month period ending June 30, 1963. The average rate charged by these cooperatives was 10.04 mills per kilowatt-hour, ranging from a low of 6.84 mills to a high of 15.72 mills per kilowatt-hour. The opinion of Douglas G. Wright, Administrator of the Southwest Power Administration, in his testimony before the Senate Subcommittee on Appropriations, 88th Congress, was that the best rates that could be offered by the Super Cooperative would be 7.5 to 8 mills per kilowatt-hour. The Administrator himself indicated in the statement of information attached to his certification to Congress that the cost of power to the cooperatives under the generation and transmission plan would be 6.8 mills per kilowatt-hour.
Plaintiff offered contracts with a term of ten years, and in a letter of February 29, 1964, to five of the cooperatives indicated that it would not object to an agreement providing for a redetermination of rates at the end of five years. CLECO's president testified that it is probable, and in fact required as security for the proposed loan, that the contract term between the cooperatives and the Super Cooperative will be thirty-five years, a term equal to the term of the loan in question.
There also was evidence showing that the reliability of the service now received from plaintiff would be greater than that achieved under the proposed facilities. This is due to the fact that plaintiff and the other privately owned suppliers have numerous interconnections, so that a breakdown of one or more of their lines likely would not affect service to the cooperatives. However, it was shown that under the best information available to plaintiff the facilities proposed by the Super Cooperative would contain only a single interconnection with the Southwestern Power Administration in Arkansas.2
As to the Administrator's third requirement, plaintiff advised him that, since plaintiff was subject to the jurisdiction of the Louisiana Public Service Commission which regulated plaintiff's activities, its attorneys had advised that any contractual agreement concerning the protection of the territory of the cooperatives would be illegal.3 Plaintiff suggested that legislation would be the proper solution to that particular problem.4 However, after further negotiations and an unsuccessful attempt to pass such legislation in Louisiana, no agreement ever was reached between the parties concerning the "territorial integrity" issue.
Plaintiff contends that the Super Cooperative is subject to regulation by the Louisiana Public Service Commission; and that before the generation and transmission facilities can be constructed with the loan funds, the Super Cooperative must obtain a certificate of convenience and necessity from that Commission. LSA-R.S. 45:121, 45:123 (1950).5 Plaintiff also alleges that defendants failed to require the Super Cooperative to obtain the certificate of convenience and necessity before the loan was granted, and that this failure constituted a violation of 7 U.S.C.A. § 904.6
Defendant contends, on the other hand, that the Super Cooperative is exempted purportedly from the jurisdiction of the Louisiana Public Service Commission by the provisions of LSA-R.S. 12:326 (1950).7 Plaintiff counters that this section does not apply to the Super Cooperative because of the provisions of LSA-Const. (1921) Art. 6, § 4,8 and contends that any attempted application of that section in contravention of the cited constitutional provision would result in invalidity of the section.
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