Federal Power Commission v. Arizona Edison Co.

• Decision Date: 12 February 1952
• Docket Number: No. 12941.,12941.
• Citation: 194 F.2d 679
• Parties: FEDERAL POWER COMMISSION v. ARIZONA EDISON CO., Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

194 F.2d 679 (1952)

FEDERAL POWER COMMISSION v. ARIZONA EDISON CO., Inc.

No. 12941.

United States Court of Appeals Ninth Circuit.

February 12, 1952.

Bradford Ross, Gen. Counsel, Howard E. Wahrenbrock, Asst. Gen. Counsel, A. R. Spalter and Sherman S. Poland, Attorneys, Federal Power Commission, all of Washington, D. C., (Leonard Eesley, Washington, D. C., of counsel), for appellant.

Donald C. McCreery, Denver, Colo., Snell & Wilmer, James A. Walsh, Phoenix, Ariz., for appellee.

Before DENMAN, Chief Judge, and ORR and POPE, Circuit Judges.

ORR, Circuit Judge.

The Federal Power Commission, hereinafter referred to as the Commission, brought this action in the United States District Court for the District of Arizona pursuant to §§ 314(a, b) and 317 of the Federal Power Act, 16 U.S.C.A. §§ 825m (a, b) and 825p, to secure enforcement of an order finding the Arizona Edison Company subject to its jurisdiction and directing said Company to comply with outstanding regulations of the Commission. In particular, the order directed compliance with the Commission's uniform accounting requirements and further required certain specific accounting entries on the basis of findings made by the Commission. The Company's motion to dismiss the complaint was granted by the trial court on the ground that the complaint on its face disclosed that the Commission lacked jurisdiction to enter the order sought to be enforced.

The complaint recites that a proceeding was instituted by the Commission to determine whether the Company was within its jurisdiction as a "public utility" as defined in the Act and as such subject to various regulations and accounting orders; that said proceeding culminated in a Commission order finding the Company subject to the Commission's jurisdiction; that the Company is violating the terms of the order, and concludes with a request for injunctive relief. Incorporated as a part of the complaint, as the foundation for the enforcement proceeding, are the "Findings and Order Determining Status and Providing for Disposition of Plant Acquisition Adjustment" issued as a result of the original Commission proceeding. The Company makes the primary contention that the Commission's order is invalid on its face in that the findings of basic fact do not support the ultimate jurisdictional conclusion of "public utility" under a proper construction of the statute.

In effect, the basic facts are as follows: The Arizona Edison Company, Inc., hereinafter referred to as the Company, is an Arizona corporation owning and operating eight separate electric systems wholly within the state of Arizona. Three of these systems, known as Maricopa, Coolidge-Florence, and Yuma, were involved in the proceeding before the Commission. These three systems supply only ultimate consumers in their respective areas and all receive electric energy generated by the United States Bureau of Reclamation, hereinafter referred to as the Bureau, in California at Parker Dam and Siphon Drop Generating Station, and in Nevada at Hoover Dam. The out of state energy is transmitted across the Arizona border and brought within the state by the Bureau and United States Indian Service high voltage lines. Delivery is made to the Company almost entirely at substations owned by the government agencies except in one instance where delivery is made at a Company substation. The energy is received at relatively high voltages and the Company owns high voltage lines which serve to transmit the energy, without subdivision, from the point of delivery to Company owned substations which step down the voltage to place the energy in consumable condition. These lines include a 69,000 volt line 9.6 miles long, a 12,000 volt line 11.5 miles long, and a 34,500 volt line 12 miles long extending to a substation in one city, thence seven miles farther to a substation in an unincorporated small community. No customers are served from these lines; they are used exclusively to transmit the energy in bulk to the step-down substations. From the substations radiate lines of relatively low voltage (usually 4,000 volts) which are used to serve customers. The Commission asserts Company ownership and operation of the lines for the transmission of the energy in bulk to the substations as the jurisdictional basis for its order.

The Federal Power Act¹ defines "public utility" as "any person who owns or operates facilities subject to the jurisdiction of the Commission under this Part." § 201(e) It grants the Commission jurisdiction over "all facilities" for the transmission of electric energy in interstate commerce and for the "sale of electric energy at wholesale in interstate commerce." § 201(b) The statute further provides that "electric energy shall be held to be transmitted in interstate commerce if transmitted from a state and consumed at any point outside thereof". § 201(c) But the Commission "shall not have jurisdiction, except as specifically provided in this part and the part next following, over facilities used * * * in local distribution or only for the transmission of electric energy in intrastate commerce". § 201(b) Our problem is to determine whether the lines owned by the Company and used to transmit energy in bulk were properly classified by the Commission as used in the "transmission of energy in interstate commerce" and not engaged solely in "local distribution or only for the transmission of electric energy in intrastate commerce".

The Company points out that all its facilities are located within Arizona; that all its customers are in Arizona; that it makes no sales for resale from the facilities in question and, hence, it follows that functionally the Company commences the process of serving its customers the moment the energy enters its lines. In addition, all its revenues are derived from sales of energy to customers rather than from the function of transmission as such. The Company also relies on the policy declaration in § 201(a) of the Act that the federal regulation is "to extend only to those matters which are not subject to regulation by the states" and declares that as an intrastate enterprise it is fully subject to Arizona regulation. To support its contention that its activities are "local distribution" and, hence, outside the jurisdiction of the Commission, the Company cites the case of Connecticut Light & Power Co. v. Federal Power Commission, 1945, 324 U.S. 515, 65 S.Ct. 749, 89 L.Ed. 1150. The Commission argues that "local distribution" does not begin until the transmission in bulk at high voltages has ended and subdivision of the energy for delivery to customers at the lower consumable voltages begins. It points out that the Company's lines receive the out of state energy and transmit it without break or diminution to the substations where the subdivision process commences. Until the energy reaches the substation the Company is simply completing the process of interstate transmission.² The Commission relies on Federal Power Commission v. East Ohio Gas Co., 1950, 338 U.S. 464, 70 S.Ct. 266, 94 L.Ed. 268, to justify its conclusion.

The East Ohio case involved facilities located wholly within Ohio for the transportation of natural gas. The East Ohio Company receives out of state natural gas at high pressure and transports the gas through its own high pressure lines for over 100 miles to its local distribution systems where the eventual reduction in pressure takes place. The East Ohio Company makes no sales for resale but simply conveys the gas to the ultimate consumer. The Natural Gas Act, § 1(b), applies to the "transportation of natural gas in interstate commerce" but not to the "local distribution of natural gas or to the facilities used for such distribution". 15 U.S.C.A. § 717(b). The Supreme Court held that "* * * what Congress must have meant by `facilities' for `local distribution' was equipment for distributing gas among consumers within a particular local community, not the high-pressure pipe lines transporting the gas to the local mains", and, further, that "* * * the word `transportation' like the phrase `interstate commerce' aptly describes the movements of gas in East Ohio's high-pressure pipe lines." 338 U.S. 464, 469-470, 70 S.Ct. 269. To us the East Ohio case seems strikingly similar, both factually and in statutory framework, to the instant case. The actual facilities involved are analogous, and the key statutory language is almost identical; compare "transportation of natural gas in interstate commerce" with "transmission of electric energy in interstate commerce" and "local distribution of natural gas or to the facilities used for such distribution", with "facilities used in local distribution". We read the East Ohio case as requiring approval of the Commission's finding of coverage here. What we deem superficial differences between the two situations may be pointed out. Here we are dealing with electric energy and not with natural gas. The policy declaration section of the Gas Act does not contain the admonition of the Power Act that "* * * such Federal regulation, however, is to extend only to those matters which are not subject to regulation by the states." § 201(a) But the legislative history of the Gas Act indicates a desire by Congress to regulate only those activities which were not subject to regulation by the states, and not to impinge upon areas open to the exercise of state powers.³ Similarly, the legislative history of the Power Act shows that the congressional purpose in its passage was to regulate areas not open to state control.⁴ The breadth of the gap in state powers of regulation under prior Supreme Court decisions and, hence, a delineation of the congressional purpose, may have been subject to reasonable dispute prior to the East Ohio case. However, in the East Ohio case the Court undertook to analyze its own prior decisions and, thus, to define the extent of the void in state power which must have been within the...