City of Paris, Kentucky v. Federal Power Commission, 21375.

• Decision Date: 03 July 1968
• Docket Number: No. 21375.,21375.
• Citation: 399 F.2d 983
• Parties: CITY OF PARIS, KENTUCKY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Kentucky Utilities Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

399 F.2d 983 (1968)

CITY OF PARIS, KENTUCKY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent Kentucky Utilities Company, Intervenor.

No. 21375.

United States Court of Appeals District of Columbia Circuit.

Argued May 24, 1968.

Decided July 3, 1968.

Mr. Philip P. Ardery, Lousville, Ky., for petitioner.

Mr. Israel Convisser, Attorney, Federal Power Commission, with whom Messrs. Richard A. Solomon, General Counsel, and Peter H. Schiff, Solicitor, Federal Power Commission, were on the brief, for respondent.

Mr. Malcolm Y. Marshall, Louisville, Ky., with whom Mr. Squire R. Ogden, Louisville, Ky., was on the brief, for intervenor. Mr. Thomas M. Debevoise, Washington, D. C., also entered an appearance for intervenor.

Before FAHY, Senior Circuit Judge, and WRIGHT and ROBINSON, Circuit Judges.

J. SKELLY WRIGHT, Circuit Judge:

On October 7, 1965, the City of Paris, Kentucky, filed a complaint with the Federal Power Commission against the Kentucky Utilities Company, an investor-owned public utility, asking that the Commission order Kentucky Utilities to interconnect its electric transmission facilities with those of Paris and to transmit over its lines an exchange of energy between Paris and the East Kentucky Rural Electric Cooperative Corporation. Annexed to the complaint was a contract between Paris and East Kentucky for the sale and exchange of energy between them.

The City of Paris owns and operates an electric generation and distribution system which now serves approximately 75 per cent of its residents. The firm capacity of Paris' system having become inadequate to meet increased demand, Paris entered negotiations with Kentucky Utilities seeking an additional source of supply of electric energy. Kentucky Utilities now serves that part of Paris and its environs not served by the municipal system and operates two transmission lines, 69 kv and 33 kv, through the city. Its 69 kv line is only about 1500 feet from Paris' generating system. Paris' negotiations with Kentucky Utilities proved unsuccessful. Paris then turned to East Kentucky as an alternative source of additional energy and negotiated the contract with East Kentucky for the sale and exchange of electric energy which is the subject of these proceedings.

East Kentucky is a Rural Electrification Administration financed generating and transmitting cooperative which operates two steam generating plants to supply its member cooperatives throughout Kentucky. Its transmission lines interconnect with those of Kentucky Utilities at some 19 different points where the two systems exchange energy with one another. But the nearest facilities of East Kentucky are 8.7 miles from Paris, and it was to obviate the need to construct a 69 kv transmission line for this distance that Paris requested in its complaint that the Commission order Kentucky Utilities to interconnect its electric transmission facilities with those of Paris to facilitate its interchange with East Kentucky.

In its answer to the complaint Kentucky Utilities opposed Paris' request and offered instead to sell energy to, and exchange energy with, Paris at a cost to Paris that would be less than the cost of securing energy from East Kentucky. This proposal necessarily contemplated the requested connection between Kentucky Utilities and Paris. In rejecting the Paris complaint, the Commission ordered Kentucky Utilities to provide the connection, but only for the purpose of supplying its own energy to Paris.

In denying the relief requested by Paris, the Commission, citing its earlier ruling in Dairyland Power Cooperative, 37 F.P.C. 12 (1967), held that it had no jurisdiction over the activities of either municipalities (Paris) or REA-financed cooperatives (East Kentucky). Therefore, the Commission felt, it did "not have to decide whether it can order under section 202(b) a public utility to transmit the power of another utility for the benefit of third parties since it is clear that the Commission cannot compel a private utility to transmit the power of government instrumentalities under Part II of the FPA." Since, in its judgment, both Paris and East Kentucky were Section 201(f) (16 U.S.C. § 824(f) (1964 ed.)) government instrumentalities, the Commission held that it could not grant the relief requested by Paris.

Section 202(b) of the Power Act, 16 U.S.C. § 824a(b) (1964 ed.), provides that "whenever the Commission, upon application of any * * * person engaged in the transmission or sale of electric energy, and after notice to * * the public utility affected * * *, finds such action necessary or appropriate in the public interest it may by order direct a public utility (if the Commission finds that no undue burden will be placed upon such public utility thereby) to establish physical connection of its transmission facilities with the facilities of one or more other persons engaged in the transmission or sale of electric energy, to sell energy to or exchange energy with such persons * * *." (Emphasis added.) It is clear that under this section the Commission can order a public utility to sell its energy to, or exchange its energy with, any person engaged in transmission or sale of electric energy.¹ But the issue of whether a privately owned public utility can, under this section, be ordered to transmit the power of another for the benefit of third parties — that is, to "wheel" for another utility — has never been resolved by the Commission and was avoided by it in the proceedings below. For even though Section 202(b) itself does not distinguish between publicly owned and privately owned utilities, the legislative history of the Power Act convinced the Commission that, even if it can sometimes order a privately owned utility to wheel, it can never order such a utility to transmit the power of a Section 201(f) government instrumentality.²

The Commission's decision in Dairyland, on which it relied here for its holding that East Kentucky, as an REA-financed cooperative, was a Section 201 (f) government instrumentality, rested on two alternative grounds. In Dairyland the Commission held first that Congress simply never intended these cooperatives to be within its general jurisdiction because they are not encompassed in the term "public utilities" as used in Parts II and III of the Power Act. To buttress its holding, and of particular importance here, the Commission also based its denial of jurisdiction on the Section 201(f) exemption for government instrumentalities which it held included cooperatives.

The Commission's Dairyland decision was never directly subjected to judicial scrutiny. However, in Salt River Project Agricultural Improvement & Power District v. F.P.C., 129 U.S.App.D.C. 117, 391 F.2d 470 (1968), this court had occasion to review a Commission decision raising precisely the same issues. In Salt River the Commission, relying on Dairyland which it had just decided, held that REA-financed Colorado-Ute Electric Association (a cooperative) was not subject to its jurisdiction. We affirmed that decision on the ground that Colorado-Ute was not a public utility within the meaning of Parts II and III of the Federal Power Act. We carefully avoided reaching the question whether REA-financed cooperatives were also exempt as government instrumentalities under Section 201(f).

Now that question must be faced. For the Commission's decision here rested at least in part on its determination that East Kentucky is a government instrumentality. It was because it considered East Kentucky to be a Section 201(f) instrumentality that the Commission never reached the question whether the proposed interchange between Paris and East Kentucky was in the public interest, and it avoided the major issue of whether it can ever order an objecting privately owned utility to transmit the power of another utility for...