Ferguson v. Electric Power Board of Chattanooga, Tenn.

• Decision Date: 16 July 1974
• Docket Number: No. CIV-1-74-6.,CIV-1-74-6.
• Parties: Jerry D. FERGUSON v. ELECTRIC POWER BOARD OF CHATTANOOGA, TENNESSEE, and Tennessee Valley Authority.
• Court: U.S. District Court — Eastern District of Tennessee

378 F. Supp. 787

Jerry D. FERGUSON v. ELECTRIC POWER BOARD OF CHATTANOOGA, TENNESSEE, and Tennessee Valley Authority.

No. CIV-1-74-6.

United States District Court, E. D. Tennessee, S. D.

July 16, 1974.

Horace L. Smith, Jr., Joe M. Parker and Atchley, Atchley & Cox, Chattanooga, Tenn., for plaintiff.

Will Allen Wilkerson, Chattanooga, Tenn., for Electric Power Board.

Robert H. Marquis, Gen. Counsel, TVA, Beauchamp E. Brogan, Associate Gen. Counsel, Justin M. Schwamm, Asst. Gen. Counsel and James E. Fox, TVA, Knoxville, Tenn., for Tennessee Valley Authority.

MEMORANDUM OPINION

FRANK W. WILSON, Chief Judge.

This is a lawsuit brought by an electrical customer, acting upon his own behalf and on behalf of all other electrical customers similarly situated, seeking to have a portion of the charges for electricity declared to be in violation of the Tennessee usury laws (Tenn.Const. Art. XI, Sect. 7; TCA § 47-14-104) and in violation of the federal Truth In Lending Act (15 U.S.C. § 1601). The lawsuit was initially filed in the state court against the Electric Power Board of Chattanooga as the only defendant. Thereafter the plaintiff amended his complaint so as to join the Tennessee Valley Authority as a party defendant, whereupon the case was removed by that defendant to this court pursuant to 28 U.S.C. §§ 1337 and 1441. The case is presently before the Court upon a motion to dismiss and a motion for summary judgment filed on behalf of each defendant.

The plaintiff alleges in his complaint that he is a residential customer of the Electric Power Board (EPB) of Chattanooga, a municipally owned distributor of electricity in the Chattanooga, Tennessee area, which in turn purchases its electricity under contract from the Tennessee Valley Authority (TVA), a federal agency engaged in the production and wholesale distribution of electricity in the Tennessee Valley Area. He further alleges that it is the practice of the EPB to bill him and all residential customers upon a "net" and "gross" rate basis, the gross rate being 10% in excess of the net rate and the gross rate being payable if the customer does not pay the net bill within ten days of the billing date. The plaintiff alleges that the TVA, in its contract arrangement with the EPB, requires the EPB to invoice its residential customers upon this basis. Finally, the plaintiff alleges that he and others who were unable to pay their electric charges within ten days of billing have been required to pay the gross bill, or 10% in excess of the net bill, which additional charge the plaintiff contends is both a violation of the Tennessee usury laws and a violation of the federal Truth In Lending Law. Upon these allegations the plaintiff seeks to maintain a class action for both injunctive relief and monetary damages.

The defendants' motion to dismiss is based upon the contention that the foregoing allegations are insufficient to state a cause of action as to either party defendant. In addition, the defendants have moved for a summary judgment, filing in support of their motion a copy of the contract between the TVA and the EPB and an affidavit from the Manager of Power for the TVA. The matters set forth in these documents substantially accord with the allegations of the complaint and are uncontested by the plaintiff. It is accordingly undisputed that the contract between the TVA and the EPB, in addition to setting forth rate schedules at which EPB must sell electricity to its customers, includes the following provision:

"Above rates are net, the gross rates being 10% higher. In the event the current monthly bill is not paid within ten days from date of bill, the gross rates shall apply."

Upon the foregoing state of the record, the defendants contend (1) that the gross rate billing requirement is valid under the provisions of the Tennessee Valley Authority Act as amended; (2) that the gross billing charge does not constitute interest and the Tennessee usury laws accordingly have no application to the charge; and (3) that the federal Truth In Lending Act is inapplicable to the electrical charge here complained of as both the TVA and the EPB are exempt from that Act with respect to such charges.

Turning first to the issue of the validity of the gross rate billing requirement under the TVA Act as amended, it would appear clear that the inclusion of such a provision in a TVA power sale and distribution contract would be within the discretion accorded that agency by Congress. Section 10 of the TVA Act 16 U.S.C. § 831i expressly provides in relevant part:

". . . Provided further, That the Board is authorized to include in any contract for the sale of power such terms and conditions, including resale rate schedules, . . . as in its judgment may be necessary or desirable for carrying out the purposes of this chapter . . ." (Emphasis supplied)

Thus the setting of "resale rate schedules," limited only by the provision that they not violate the "purposes of this Act," is a clear and broad grant of discretion to the TVA Board to set power rates at the consumer level. In the absence of a clear violation of the "purposes of this Act" the matter of rate setting under the Tennessee Valley Authority Act is not subject to judicial review. Panama Canal Co. v. Grace Line, Inc., 356 U.S. 309, 78 S.Ct. 752, 2 L.Ed. 2d 788 (1958); Tennessee Electric Power Co. v. Tennessee Valley Authority, 21 F.Supp. 947 (E.D.Tenn.1938) (separate conclusion of law number 33) aff'd 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 (1939); Virgin Islands Hotel Assn. v. Virgin Islands W. & P. Authority, 465 F.2d 1272 (3rd Cir. 1972); Hahn v. Gottlieb, 430 F.2d...