Indiana and Michigan Power Co. v. State
| Decision Date | 05 February 1979 |
| Docket Number | Docket No. 59197,No. 18,18 |
| Citation | 405 Mich. 400,275 N.W.2d 450 |
| Parties | INDIANA AND MICHIGAN POWER COMPANY, Plaintiff-Appellee, v. The STATE of Michigan and Michigan Public Service Commission, Defendants- Appellants. Calendar |
| Court | Michigan Supreme Court |
Law Offices of Albert J. Thorburn, Albert J. Thorburn, James R. Anderson, Lansing, for plaintiff-appellee.
Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Walter V. Kron, Robert J. Taube, Asst. Attys. Gen., Lansing, for defendants-appellants.
We granted leave in this case, together with Michigan Gas Storage v. Public Service Commission, Mich., 275 N.W.2d 457 (1979), to determine whether the Michigan Public Service Commission may properly exercise jurisdiction over the securities of certain companies under M.C.L.A. § 460.301; M.S.A. § 22.101. In Michigan Gas Storage we held that jurisdiction did exist in the circumstances involved in that case and that it could properly be exercised. Although the federal regulatory framework applicable to Indiana and Michigan Power Company (Power Company) is different from the one involved in that case, we reach the same conclusion and, accordingly, reverse the decision of the Court of Appeals.
Power Company is a corporation organized and existing under the laws of the State of Michigan, having its principal office in the state at the Donald C. Cook Nuclear Plant, Bridgman, Michigan.
The Michigan Public Service Commission (the Commission or PSC) is an administrative agency of the State of Michigan.
Power Company filed certain applications with the Commission seeking approval or a disclaimer of jurisdiction of certain planned security issuances. The Commission approved the proposed transaction and ordered Power Company to pay to the State of Michigan the statutory fee prescribed by M.C.L.A. § 460.61; M.S.A. § 22.11. 1
Seeking a refund of the security issuance fee, Power Company filed the instant suit in the Court of Claims on September 21, 1972. Power Company and the Commission entered into a stipulation of facts in the Court of Claims. The stipulation established that Power Company was organized solely to acquire, to complete construction of, and to operate the Donald C. Cook Nuclear Electric Generating Plant. To acquire and finance construction of the plant, the company was required to issue securities in substantial amounts. The aforementioned applications to the Commission were filed and the issuances were approved.
All of the outstanding capital stock in Power Company is owned by Indiana and Michigan Electric Company (Electric Company). Under a "power agreement" entered into between Power Company and Electric Company, Power Company will, upon commencement of operation of the generating plant, sell to Electric Company all of the electric power generated there. Electric Company will be Power Company's only customer and will receive delivery of the electricity at the site of the plant at Bridgman.
Power Company's parent, Electric Company, is a corporation organized under the laws of the State of Indiana and having its principal office in that state. It is engaged in the generation, purchase, transmission, distribution and sale of electricity at retail in the states of Michigan and Indiana. Electric Company is a public utility under the laws of both states, each of which regulates the rates of the company's retail sales within its borders.
Electric Company also sells electricity at wholesale for resale to other electric companies in Indiana, Michigan, Illinois and Ohio. These sales at wholesale for resale by Electric Company were subject to the exclusive regulatory jurisdiction of the Federal Power Commission (FPC) under the Federal Power Act, as amended, 16 U.S.C. § 791a Et seq. At the time this case was initiated, the Federal Power Commission (FPC) was the regulatory authority under the Federal Power Act. Under 42 U.S.C. § 7101 Et seq., the Department of Energy Organization Act, the functions of the FPC were transferred to the Department of Energy and the Federal Energy Regulatory Commission. Under that act the FPC regulated Electric Company's wholesale rates and its services and facilities. In addition, the rates at which Electric Company purchases electricity from Power Company were also to be regulated by the FPC.
All of the outstanding stock of Electric Company is in turn owned by American Electric Power Company, Inc. (American), a New York corporation with its principal place of business in New York City. American is a public utility holding company owning all of the common stock of various electric utility companies operating in the states of Ohio, Indiana, Michigan, Virginia, West Virginia, Kentucky and Tennessee. These subsidiaries are physically interconnected and are operated and coordinated as a single, integrated electric utility system. As a registered public utility holding company under the Public Utility Holding Company Act of 1935 (PUHCA), 15 U.S.C. § 79 Et seq., American and its subsidiaries, including Power Company, are subject to the jurisdiction of the Securities and Exchange Commission. See the discussion, Infra.
With respect to the security issues involved in this case, Power Company filed, in addition to the applications filed with the Public Service Commission, declarations (see the discussion, Infra ) with the SEC pursuant to § 6 of the PUHCA, 15 U.S.C. § 79f. The SEC issued orders permitting the declarations to become effective.
Following the decision and orders of the Michigan Public Service Commission, Power Company paid the statutory issuance fees under protest and filed the instant suit.
On August 4, 1975, the Court of Claims entered a judgment granting a refund of $431,500 to Power Company. Appellants, State of Michigan and the Commission, appealed to the Court of Appeals which affirmed the decision of the Court of Claims. Indiana & Michigan Power Co. v. Public Service Commission, 72 Mich.App. 398, 249 N.W.2d 429 (1976).
We granted leave to appeal. 400 Mich. 805 (1977).
As we stated in Michigan Gas Storage, supra, the Court of Appeals held in these two cases, as we read their opinions, "that the Michigan Legislature intended securities regulation in M.C.L.A. § 460.301; M.S.A. § 22.101 to be ancillary to the Commission's regulatory jurisdiction over rates, services and facilities pursuant to M.C.L.A. § 460.6; M.S.A. § 22.13(6)." 72 Mich.App. 398, 409, 249 N.W.2d 429, 435.
In Michigan Gas Storage we stated that we did not so read the legislative intent. We reaffirm that opinion here.
Power Company readily admits that regulation of the securities issuances was motivated by the evils and injurious effects on the public of overcapitalization. It argues, however, as did Michigan Gas Storage Company in the related case, that the capital structure of the company is an essential element in its rate structure, that rate and securities regulation are inextricably tied together, and that the Legislature would not have intended to exercise jurisdiction over securities where it was not asserting similar authority over rates.
Briefly, we are convinced that securities regulation was intended to, and does, protect interests which rate regulation alone could not effectively control. It serves the interests of both the investors in, and creditors of, a company organized and operating and issuing securities under the laws of this state and those of ratepayers in efficient and uninterrupted service at reasonable rates. People v. County Transportation Company, 303 N.Y. 391, 103 N.E.2d 421 (1952), App. dis. 343 U.S. 961, 72 S.Ct. 1062, 96 L.Ed. 1359. There is no reason to believe that the Legislature intended to reserve use of this valuable tool for serving the public interest to cases where rates are also being regulated while leaving some companies free to issue securities without public participation. The statutory language gives no indication of any such intent and we will not read limiting language into it.
We also hold that Power Company, like Michigan Gas Storage Company, is a public utility indirectly selling electricity to the public.
The next matter that must be considered is whether the Congress, in enacting a federal regulatory scheme applicable to Power Company, preempted state regulation of Power Company's securities issuances. We believe that it did not.
As mentioned, Power Company, upon commencement of operations, will sell electricity only to Electric Company at wholesale for resale. In this setting, Power Company was subject to the jurisdiction of the FPC under the Federal Power Act. Under that act, the FPC was to exercise authority over Power Company's rates, service and facilities.
The Federal Power Act, unlike the Natural Gas Act, did contain explicit authority under which the FPC was authorized to regulate the securities of subject utilities where regulation by specified states does not exist. 2 Those provisions are not dispositive of the question before us, however, because the Federal Power Act also provides that the securities regulation provisions do not apply when the PUHCA applies, 3 as it does in this case.
Provisions of the PUHCA authorize, Inter alia, the Securities and Exchange Commission to regulate the issuance and sale of securities by registered public utility holding companies and their subsidiaries. The Court of Appeals found, and we agree, that the PUHCA created concurrent regulatory jurisdiction in the SEC and the states over companies like Power Company. The Court then went on to express doubt whether Congress intended to allow the states to regulate securities where they do not regulate rates, a matter we will discuss, Infra.
Briefly, the scheme of the PUHCA, with respect to securities issuances, is one which requires the approval of the SEC before a holding company or subsidiary company to which the securities provisions apply issues or sells its own securities...
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