Duke Power Company v. Federal Power Commission, No. 20578.

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: BAZELON, , and LEVENTHAL and ROBINSON, Circuit
• Citation: 401 F.2d 930
• Docket Number: No. 20578.
• Decision Date: 28 June 1968
• Parties: DUKE POWER COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.

401 F.2d 930 (1968)

DUKE POWER COMPANY, Petitioner,
v.
FEDERAL POWER COMMISSION, Respondent.

No. 20578.

United States Court of Appeals District of Columbia Circuit.

Argued March 7, 1967.

Decided June 28, 1968.

Mr. Steve C. Griffith, Jr., Charlotte, N. C., with whom Mr. Charles W. Smith, Washington, D. C., was on the brief, for petitioner.

Mr. Howard E. Wahrenbrock, Sol., Federal Power Commission, at the time of argument, with whom Messrs. Richard A. Solomon, Gen. Counsel, Drexel D. Journey, Asst. Gen. Counsel, and Leonard D. Eesley, Sp. Asst. to Gen. Counsel, Federal Power Commission, were on the brief, for respondent.

Before BAZELON, Chief Judge, and LEVENTHAL and ROBINSON, Circuit Judges.

401 F.2d 931

ROBINSON, Circuit Judge:

This litigation presents the question whether the Federal Power Act¹ requires an interstate electric utility to obtain approval by the Federal Power Commission of its acquisition of facilities utilized in the local distribution of electric energy. Section 203(a)² of the Act bans, in the absence of the Commission's authorizing order, the disposition by such a utility of "the whole of its facilities subject to the jurisdiction of the Commission, or any part thereof of a value in excess of $50,000," and the merger or consolidation of "such facilities or any part thereof with those of any other person." In the proceeding under review, the Commission, applying this section to undisputed facts, answered the question in the affirmative.³

Duke Power Company, a utility subject to the Act,⁴ conducts some of its activities in South Carolina. With the approbation of that state,⁵ it bought from Clemson University, an agency exempted from the operation of the Act⁶ facilities⁷ which Clemson had previously employed in off-campus distribution of electricity to customers in two South Carolina counties.⁸ As the Commission found, Duke thereby "acquired only seven miles of distribution line and 418 service connections to be supplied from its system in the same way they had before the acquisition."⁹

The Commission learned of the transaction several months later when Duke submitted proposed journal entries to record it.¹⁰ Citing Section 203(a) and its own regulation,¹¹ the Commission

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then asked Duke to file an application for approval.¹² Duke's rejoinder was a request for an order disclaiming jurisdiction over the purchased facilities. The Commission thereupon initiated a declaratory proceeding¹³ which culminated in its determination that "by acquiring the facilities of Clemson * * * Duke merged or consolidated its facilities with those of another person without having secured an order of the Commission authorizing it to do so as required by Section 203 of the Federal Power Act and" the Commission's regulation.¹⁴ Duke's timely petition for rehearing was denied,¹⁵ and the case is here for our review of the Commission's ruling.¹⁶

We hold that Section 203(a), properly construed, is inapplicable to the transaction in suit. We accordingly reverse the Commission's order and remand the proceeding for a declaration consistent with this opinion.

I

Section 203(a) in pertinent part provides that

"No public utility shall sell, lease, or otherwise dispose of the whole of its facilities subject to the jurisdiction of the Commission, or any part thereof of a value in excess of $50,000, or by any means whatsoever, directly or indirectly, merge or consolidate such facilities or any part thereof with those of any other person, or purchase, acquire, or take any security of any other public utility, without first having secured an order of the Commission authorizing it to do so."

We note, at the outset, that the prohibitions forged by this section are imposed only upon a "public utility."¹⁷ Duke freely admits that it is a public utility within the purview of the Act, and in this proceeding the Commission, adherently

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with an earlier determination,¹⁸ found that it was.¹⁹

Not all of the activities of a public utility, however, are subjected to the regulatory authority of the Commission.²⁰ We mention now, and discuss later,²¹ the historical fact that the Act is not an exertion of the full national power over interstate electric utilities, but a delineation, consciously and carefully made, of the operations Congress decided to render amenable to federal control. Duke was obliged to honor the requirement the Commission invoked only if its acquisition from Clemson was a transaction to which that requirement applied.²²

Analysis of Section 203(a) reveals three activities that are forbidden unless authorized by the Commission, of which two quite obviously are not involved in this case. The first is a sale, lease or other disposition by a public utility "of the whole of its facilities subject to the jurisdiction of the Commission, or any part thereof of a value in excess of $50,000." No such disposition by Duke engages our attention and, as the Commission held,²³ Clemson was not a "public utility."²⁴ The second inapplicable prohibition is the purchase, acquisition or taking by one public utility of a security of another public utility. Nothing of that character occurred here. Our question relates to the remaining injunction — "No public utility shall * * * by any means whatsoever, directly or indirectly, merge or consolidate such facilities or any part thereof with those of any other person, * * * without first having secured an order of the Commission authorizing it to do so."²⁵ The Commission felt that, by taking over Clemson's distribution system, Duke "merged or consolidated" its preexisting facilities with "those of another person."²⁶

We accept the Commission's conclusion that the "merge or consolidate" clause encompasses acquisitions²⁷ of facilities,²⁸ and we share the parties' view that the words "such facilities," adverting to the facilities of the public utility with which the acquired facilities are incorporated, must be "facilities subject to the jurisdiction of the Commission." The controversy here centers upon the reference properly supplied by the phrase "those of any other person," which points to the facilities procured for the incorporation. Duke argues that the antecedent of

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"those" is the phrase, "such facilities," language in turn referring to "facilities subject to the jurisdiction of the Commission," and points out that Clemson's distribution system fell outside the latter category. The Commission, on the other hand, would have us ascribe to the phrase "those facilities of any other person" sufficient breadth to include both jurisdictional and nonjurisdictional facilities

By our estimate, we face a constructional problem of which the bare statutory words admit confidently of no single solution. They do not inexorably preclude Commission supervision of proposed combinations of interstate and intrastate facilities, but neither do they unambiguously endow the Commission with authority to do so. We feel that, without crystallization extrinsically, they can be read either way, with the result that we cannot safely confine the scope of our inquiry to their grammatical potentialities. Here, as in any similar context, we are impelled to resort instead "to all the aids available in the process of construction, to history and analogy and practice as well as to the dictionary."²⁹

II

Until 1927, state commissions exercised ratemaking jurisdiction over sales by public utilities of electric energy, including energy transmitted over interstate lines.³⁰ In that year came the celebrated Attleboro decision³¹ to the effect that the states are constitutionally incapable of fixing the rates at which sales at wholesale in interstate commerce are to be made.³² In the laissez-faire milieu thus created utility holding companies flourished, and behind the Attleboro shield abuses became flagrant.³³ It was to correct these abuses that, with the strong support of President Roosevelt,³⁴ Congress enacted the Public Utility Holding Company Act of 1935³⁵ to bring the holding companies under federal governance.³⁶ And it was primarily to fill the "Attleboro gap"³⁷ that Congress concomitantly passed the Federal Power Act³⁸ as its first exertion of national authority over the operating electric utilities.³⁹

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Congress did not, however, in formulating the proscriptive provisions of the Power Act, undertake to exhaust its constitutional prerogatives.⁴⁰ While by no means confined in its coverage to areas legally immune from state control,⁴¹ the Act's major emphasis is upon federal regulation of those aspects of the industry which — for reasons either legal or practical — are beyond the pale of effective state supervision.⁴² A federal-state balance of authority, by which this general objective was to be achieved, was not only a characteristic solemnly declared when the legislation was proffered for enactment,⁴³ but is also a feature evident from many sections of the Act,⁴⁴ of which perhaps two contain the most vivid expression.

Section 201(a) declares the necessity in the public interest for federal regulation in the electric utility field, partially of "matters relating to generation" and wholly "of the transmission of electric energy in interstate commerce and the sale of such energy at wholesale in interstate commerce."⁴⁵ But with a congressional purpose to impose "Federal regulation only over those matters which cannot effectively be controlled by the States,"⁴⁶ that section further provides that "such Federal regulation, however, is to extend only to those matters which are not

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subject to regulation by the States."⁴⁷ Thus emerging, said one of the Act's draftsmen,⁴⁸ was the underlying legislative policy "that matters largely of a local nature, even though interstate in character, should be handled locally and should receive the consideration of local men familiar with the local conditions in the communities involved."⁴⁹

Having found the need for federal...