City of Chanute v. Kansas Gas and Elec. Co., 83-1818

• Decision Date: 05 February 1985
• Docket Number: No. 83-1818,83-1818
• Citation: 754 F.2d 310
• Parties: 1985-1 Trade Cases 66,399 CITY OF CHANUTE, City of Iola, and City of Fredonia, Plaintiffs-Appellees, v. KANSAS GAS AND ELECTRIC COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 310

754 F.2d 310

1985-1 Trade Cases 66,399

CITY OF CHANUTE, City of Iola, and City of Fredonia Plaintiffs-Appellees, v. KANSAS GAS AND ELECTRIC COMPANY, Defendant-Appellant.

No. 83-1818.

United States Court of Appeals Tenth Circuit.

Feb. 5, 1985.

J. Michael Peters, Wichita, Kan. (Ralph Foster, Wichita, Kan., with him on the briefs), for defendant-appellant.

Charles F. Wheatley, Jr. of Wheatley & Wollesen, Washington, D.C. (Peter A. Goldsmith of Wheatley & Wollesen, Washington, D.C., and Charles H. Apt III of Glaves, Weil & Evans, Wichita, Kan., with him on the brief), for plaintiffs-appellees.

Brian J. Moline, Gen. Counsel for Kansas Corp. Com'n, Topeka, Kan., on the brief for amicus curiae State Corp. Com'n of the State of Kansas.

Before HOLLOWAY, Chief Judge, and SETH and McKAY, Circuit Judges.

McKAY, Circuit Judge.

The issue raised in this appeal is whether the trial court properly issued a preliminary injunction ordering the defendant to "wheel" (transmit) electric power for the plaintiffs.

Plaintiffs are three municipalities that own and operate their own electric power operation and distribution systems. In addition to the power they themselves generate, plaintiffs also purchase wholesale electric power from defendant, a public utility, under a contract limiting rate changes in a manner favorable to the cities. Several years ago, each plaintiff city contracted with additional suppliers of electricity as well. The cities of Chanute and Iola were to begin receiving five-year allocations of hydro-electric power from the Southwestern Power Administration (SWPA) on January 1, 1984, and January 1, 1985 respectively. Under the terms of the contracts, if the cities did not begin using their allotments of power on these dates, the allotments would be lost. The city of Fredonia was to begin receiving power from the Nearman Creek generating plant on June 1, 1983, and was obligated to pay demand charges whether or not it actually used the power.

None of the cities has the capacity to transmit the power from the generation facilities of these new suppliers to their respective distribution systems. Because each of the cities was already connected to defendant's transmission lines, they approached defendant to arrange for the wheeling ¹ of the power. Defendant was willing to enter into an agreement with the cities to wheel power, however, only on the condition that the existing contracts for the purchase of wholesale power be terminated. Because the cities were unwilling to do so, defendants refused to wheel power for them.

Consequently, plaintiffs filed this action alleging, inter alia, violations of sections 1 and 2 of the Sherman Act and of section 3 of the Clayton Act. Plaintiffs' complaint sought treble damages and a permanent injunction requiring defendant to provide them wheeling services. Plaintiffs also sought a preliminary injunction requiring defendant to wheel their power pending the outcome of this suit. The trial court granted plaintiffs' motion for the preliminary injunction four days before Fredonia was to begin receiving power from the Nearman Creek Project.

"It is well settled that the grant or denial of a preliminary injunction is within the sound discretion of the trial court, and may be set aside only if it is based on an error of law or constitutes an abuse of discretion." Kenai Oil and Gas, Inc. v. Department of Interior, 671 F.2d 383, 385 (10th Cir.1982) (citing Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir.1980)).

To obtain a preliminary injunction, a movant must establish that the injunction would not be adverse to the public interest; that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; that the movant will suffer irreparable injury unless the injunction issues; and that there is a substantial likelihood that the movant will eventually prevail on the merits. Lundgrin, 619 F.2d at 63.

All three plaintiffs established that the preliminary injunction would not be adverse to the public interest. Indeed, defendant misconstrues the test as being whether the injunction would benefit the public interest, and fails to elucidate any adverse effect except that suffered by the defendant.

Each plaintiff established that the injury it would sustain if the injunction is not issued outweighs whatever damage might be caused defendant by the issuance of the injunction. Indeed, defendant does not argue that the trial court erred in its balancing of the hardships.

Defendant makes several arguments in support of its position that plaintiffs did not make an adequate showing that they will suffer irreparable injury unless the injunction issues. Defendant first asserts that plaintiffs have an adequate remedy at law under the Public Utility Regulatory Policies Act of 1978. 92 Stat. 3117 et seq. (1978). In particular, they argue that 16 U.S.C. 824j and 824k authorize the Federal Energy Regulatory Commission to order wheeling in certain circumstances. The trial court rejected this argument, noting that the drafters of the Act "intend[ed] to preserve the jurisdiction of the Federal and State courts in actions under antitrust laws, whether or not the parties to such actions could have sought remedies under this legislation." 564 F.Supp. 1416 at 1423 (quoting H.R.Conf.Rep. No. 95-1750, 95th Cong., 2d Sess., 68 reprinted in 1978 U.S.Code Cong. & Admin.News 7659, 7802). The legislative history quoted by the trial court does not specifically address whether the act does in fact provide a remedy at law for the alleged anticompetitive behavior in this case. The Federal Energy Regulatory Commission has held, however, that its authority to order wheeling was not intended to be a tool to control anticompetitive conduct. See Southeastern Power Administration v. Kentucky Utility Co., Federal Energy Regulatory Commission Opinion No. 198, slip op. at 17 (Issued Nov. 8, 1983), rehearing denied, Opinion No. 198-A (Issued Feb. 3, 1984). Moreover, the Commission specifically concluded that wheeling would generally not be ordered when the wheeling utility would lose sales to its wholesale customers, as would be the case here. Id. slip op. at 13-16. Thus, we cannot say that the trial court erred in holding that PURPA does not provide plaintiffs with an adequate remedy at law.

Second, defendant contends that Chanute and Iola cannot claim irreparable injury until they have arranged for wheeling with the Empire District Electric Co. to interconnect with the wheeling that would be provided by defendant, because defendant is not directly...