Gainesville Utilities Dept. v. Florida Power & Light Co.

• Citation: 573 F.2d 292
• Decision Date: 22 May 1978
• Docket Number: No. 76-1542,76-1542
• Parties: 1978-1 Trade Cases 62,042 GAINESVILLE UTILITIES DEPARTMENT and City of Gainesville, Florida, Plaintiffs- Appellants, v. FLORIDA POWER AND LIGHT COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 292

573 F.2d 292

1978-1 Trade Cases 62,042

GAINESVILLE UTILITIES DEPARTMENT and City of Gainesville, Florida, Plaintiffs- Appellants, v. FLORIDA POWER AND LIGHT COMPANY, Defendant-Appellee.

No. 76-1542.

United States Court of Appeals, Fifth Circuit.

May 22, 1978.

As Modified on Denial of Rehearing and Rehearing En Banc

July 28, 1978.

John P. McKenna, John C. Scott, Washington, D. C., Osee R. Fagan, Gainesville, Fla., for plaintiffs-appellants.

John E. Mathews, Jr., H. P. Osborne, Jr., Jack W. Shaw, Jr., Jacksonville, Fla., J. T. Blount, Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before BROWN, Chief Judge, GODBOLD, Circuit Judge, and MEHRTENS ^*, District Judge.

JOHN R. BROWN, Chief Judge:

After ten years of litigation and one trip to the Supreme Court in a related case ¹, we finally reach the merits in this private antitrust suit. The City of Gainesville ² contends that by resisting an interconnection with its municipal power system Florida Power & Light (P&L) violated both Sherman Act § 1 and § 2. 15 U.S.C.A. §§ 1-2. A jury found for the defendant on special verdicts, and the District Court denied a judgment n. o. v. After an extensive review of the record, we reverse on one question

only ³. We hold that the evidence compels a finding that P&L was part of a conspiracy ⁴ with Florida Power Corporation (Florida Power) to divide the wholesale power market in Florida.

Connecting On An Interconnection

The municipal utility system of Gainesville serves customers within the City and in the surrounding area in Alachua County, located in the north central part of Florida. Privately owned P&L, the largest electric utility in the state, operates generally in the eastern and southern parts of Florida from Jacksonville in the north to the Miami area in the south. P&L serves two cities on the eastern edge of Alachau County. The closest P&L line to the Gainesville system is within approximately 18 miles. Florida Power, also privately owned, serves the area on the western side of Gainesville. As the second largest electric utility in the state, its predominant service area is the western and central portions of Florida from the Panhandle in the north to the St. Petersburg area in the south. Florida Power's lines are within the City of Gainesville. The company serves, for example, the University of Florida, located inside the city limits.

This case grew out of Gainesville's long struggle to obtain an interconnection for its electric system with either of these two power companies. The Supreme Court has described the merits of an interconnection, as follows:

The major importance of an interconnection is that it reduces the need for the "isolated" utility to build and maintain "reserve" generating capacity. An interconnection is simply a transmission line connecting two utilities. Electric power may move freely through the line up to the line's capacity. Ordinarily, however, the energy generated by each system is sufficient to supply the requirements of the system's customers and no substantial amount of power flows through the interconnection. It is only at the times when one of the connected utilities is unable for some reason to produce sufficient power to meet its customers' needs that the deficiency may be supplied by power that automatically flows through the interconnection from the other utility. To the extent that the utility may rely upon the interconnection to supply this deficiency, the utility is freed of the necessity of constructing and maintaining its own equipment for the purpose.

Gainesville Utilities Dept. v. Florida Power Corp., 1971, 402 U.S. 515, 518-20, 91 S.Ct. 1592, 1595, 29 L.Ed.2d 74, 78-79 (footnote omitted). Thus, to avoid making a large investment in generating equipment, Gainesville needed an interconnection.

During World War II, the Federal Power Commission (FPC) issued an emergency order requiring a low capacity interconnection between Florida Power and the City. When the emergency ended and the order was terminated, Florida Power tried to persuade the City to purchase power at wholesale from the company instead of installing additional generating capacity. The City As Gainesville's utility system grew, however, so did interest in an interconnection. In 1964, James Richardson, an outspoken advocate of interconnection, was elected to the City Commission. He and other members of the Commission explored the possibility of interconnection, primarily with Florida Power. The City and Florida Power were at that time competing for customers southwest of Gainesville, and Florida Power insisted, as a prerequisite to interconnection, upon a territorial division for retail customers that would restrict the municipal system to the city limits. ⁵

refused, and Florida Power dismantled the interconnection when new generation for the City's system was installed in 1955.

Finally, in January 1965, John Kelly, the director of Gainesville's utility system, wrote the chairman of the FPC requesting assistance in obtaining an interconnection from either Florida Power or P&L. The FPC sent copies of the letter to both companies and asked for comments.

The day after P&L received the Commission's letter, Robert Fite, president of the company, also received a letter from Ed Dunn, vice-president and general counsel of Florida Power, attaching copies of Kelly's letter and that of the FPC. Dunn asked Fite to "furnish me on or before Friday, February 12, 1965, your comments in this matter so that we might prepare our response to the Federal Power Commission." Px 5. Fite routed Dunn's letter to Ben Fuqua, vice-president of P&L, with an "F.Y.I." notation, and a copy also was sent to McGregor Smith, P&L's chief executive officer.

A week later, Florida Power's president, William Clapp, wrote the FPC indicating a willingness to discuss interconnection with the City on the same terms previously demanded by the company. He further stated with specific reference to Kelly's request about obtaining an interconnection with P&L:

Florida Power Corporation and Florida Power & Light Company several years ago entered into territorial agreements to preserve territorial integrity, thus avoiding duplication and economic waste. These agreements are on file with the Florida Public Utilities Commission, pursuant to that Commission's jurisdiction of these two companies. Accordingly, we would have to resist any effort to violate the letter or spirit of these territorial agreements.

Px 294 (emphasis added). Clapp then sent Fite a copy of the letter "to keep you informed on this matter, in case you have any questions put to you." Px 6.

On February 17, 1965, the final day for submitting comments, Fuqua wrote on behalf of P&L:

The facilities of the Florida Power Corporation are, of course, much closer to those of the City of Gainesville than are any facilities of our Company. Obviously, we feel it would be an economic waste for us to undertake to build lines when Florida Power Corporation is already in immediate proximity.

We have received a copy of the letter addressed to the Commission by Mr. W. J. Clapp, President of the Florida Power Corporation, and we have observed that Mr. Clapp expresses a willingness to sit down and try to work out this situation with the City of Gainesville officials. We are quite hopeful that this can be done.

Px 7.

Representatives of the City and Florida Power subsequently met several times to discuss the interconnection, but the discussions ended in failure. In November 1965, the City filed a formal application with the FPC for an order directing Florida Power to interconnect. No application was filed During the FPC proceeding which eventually culminated in an interconnection order, Clapp contradicted statements in his letter to the FPC and asserted that Florida Power had no "agreement" with P&L prohibiting the latter from interconnecting with Gainesville. Kelly, after consulting with Commissioner Richardson who was then Mayor, wrote P&L on July 7, 1966, and inquired whether, in view of Clapp's testimony, P&L would open negotiations on an interconnection with Gainesville. Fite responded that the City should deal with Florida Power because such a tie, in his opinion, would be cheaper and more economical. "It is for this reason that we believe any tie with Gainesville would necessarily be one with Florida Power." Px 12.

against P&L because at the time it was not subject to Commission jurisdiction. ⁶

Kelly wrote again on August 2. He questioned Fite's estimate of the cost of an intertie with P&L and asked "for a meeting between the engineers of Florida Power & Light and Gainesville to determine the engineering necessary for the interconnection and its cost." Px 13.

Fite responded by making it clear to Kelly that the City should resign itself to dealing with Florida Power since even P&L wanted the City to agree with Florida Power on a retail territorial arrangement:

In discussing a possible interconnection with Gainesville among ourselves, the question of responsibility for service areas always arises. In this case, three parties are involved the City of Gainesville, Florida Power Corporation, and Florida Power & Light Company. It would seem that in order to avoid duplication of distribution facilities, any plan should include an agreement that would define the service areas of all three suppliers and would clearly indicate the responsibility of each one. Have you given any thought to this subject and what are your comments as to how this matter could be resolved?

Px 14 (emphasis added). Kelly answered on August 30 that the City was prepared to discuss the possibility of a territorial agreement between the City and P&L even though "there is no necessary connection between interchange and territorial arrangements." He explained, however, that "(t)he question of a service area agreement between Gainesville and Florida...