Pennsylvania Water Power Co v. Federal Power Commission Pennsylvania Public Utility Commission v. Federal Power Commission

• Decision Date: 26 May 1952
• Docket Number: 429,Nos. 428,s. 428
• Citation: 343 U.S. 414,96 L.Ed. 1042,72 S.Ct. 843
• Parties: PENNSYLVANIA WATER & POWER CO. et al. v. FEDERAL POWER COMMISSION et al. PENNSYLVANIA PUBLIC UTILITY COMMISSION v. FEDERAL POWER COMMISSION
• Court: U.S. Supreme Court

343 U.S. 414

72 S.Ct. 843

96 L.Ed. 1042

PENNSYLVANIA WATER & POWER CO. et al.

v FEDERAL POWER COMMISSION et al.

PENNSYLVANIA PUBLIC UTILITY COMMISSION

v. FEDERAL POWER COMMISSION.

Nos. 428, 429.

Argued April 3 and 4, 1952.

Decided May 26, 1952.

[Syllabus from pages 414-415 intentionally omitted]

[415]

Mr. Wilkie Bushby, New York City, for Pennsylvania Water & Power Co. et al.

Mr. William J. Grove, Harrisburg, Pa., for Pennsylvania Public Utility Commn.

Mr. Philip B. Perlman, Sol. Gen., Washington, D.C., for Federal Power Commn.

Mr. Alfred P. Ramsey, Baltimore, Md., for Consolidated Gas Electric Lt. & Power Co. of Baltimore.

Mr. Charles D. Harris, Baltimore, Md., for Public Service Commn. of Maryland.

Mr. Justice BLACK delivered the opinion of the Court.

In 1944 the Maryland Public Service Commission, the Mayor and Council of the City of Baltimore, the Baltimore County Commissioners, and several private purchasers of electric power decided to ask the Federal Power Commission for help. They requested the Commission to investigate allegedly 'excessive rates' the Pennsylvania Water & Power Company (Penn Water)¹ was charging Consolidated Gas Electric Light and Power Company of Baltimore (Consolidated). The Maryland interests wanted the Federal Power Commission to reduce these charges so that the state commission could lower Consolidated's rates to its Maryland customers. The federal Commission held many months of extensive hearings and found that Penn Water had charged its customers almost three times what it should have in 1946. In that year it had a net operating income of $3,477,408, as contrasted with $1,300,672 which the Commission found would have been a fair return (5 1/4%) on a fair rate base ($24,774,712), allowing Penn Water 'about 8.64% for common stock and surplus, which is adequate.'² The Commi- ssion ordered Penn Water to file a new schedule of rates and charges to bring about the reductions required.

In subsequent orders the Commission denied Penn Wate's applications for rehearing, rejected as insufficient new rate schedules filed by Penn Water, and itself prescribed the rate schedules which Penn Water here seeks to avoid. On review the Court of Appeals gave full consideration to Penn Water's multitudinous challenges and approved the Commission's action, one Judge dissenting. 89 U.S.App.D.C. 235, 193 F.2d 230.

Most of the numerous questions presented and decided by the Commission and the Court of Appeals are not presented here by the petitions for certiorari which we granted.³ We are not called on to review the adequacy of the evidence to support the Commission's findings as to a fair rate base, a fair rate of return, or any other findings except insofar as our decision of several rather general questions presented might indirectly undermine some of them. The questions we must decide are in general these:

(1) Does the fact that Penn Water is a licensee under Part I of the Federal Power Act,⁴ and therefore subject to regulation under that Part, preclude its regulation under Part II of the Act as a public utility engaged in interstate commerce?

'(2) Assuming that Penn Water can be subjected to regulation under both Parts of the Act, were the Commission and the Court of Appeals correct in holding that all of Penn Water's sales at wholesale were 'in interstate commerce' within the meaning of Part II of the Act?

(3) Does the Commission's rate reduction action compel the continuance of, or is it improperly based upon contractual agreements between Penn Water and Consolidated which Penn Water cannot carry out without violating the federal antitrust laws or the laws of Pennsylvania forbidding surrender by Pennsylvania corporations of their corporate independence?

I.

Although Penn Water is the type of 'public utility' subject to regulation under Part II of the Act, it argues that since it is subject to regulation under Part I as a licensee, it cannot be regulated under Part II as a public utility. We cannot agree. With some express exceptions not here relevant, the language of Part II of the Act makes all 'public utilities' subject to the regulation it prescribes. No reason has been advanced which could possibly justify a judicial exception to this statutory command. A major purpose of the whole Act is to protect power consumers against excessive prices.⁵ Part I leaves regulation to the states under some circumstances. But, under § 20 of Part I the Federal Government is to protect the consumer if a state regulatory body does not exist or the 'States are unable to agree * * * on the services to be rendered, or on the rates or charges of payment therefor * * *.' Part II proceeds on the assumption that regulation of public utilities transmitting and selling power at wholesale in interstate commerce is a matter which must be accomplished by the Federal Government. Part II therefore provides for a more expansive federal regulation than that authorized under Part I. It would hinder, not help, the Power Act's program if we should impliedly exempt Part I licensees from the more expansive Part II regulation. It may be possible that some future cases will develop minor inconsistencies in the administration of the two Parts. Today's case, however, is not such a one. We hold that Penn Water is subject to regulation under Part II of the Act. It is also subject to Part I regulation since the Commission found on substantial evidence, as the court below held, that the States were 'unable to agree' within the meaning of § 20 of Part I of the Act.

II.

It is contended that some of Penn Water's sales at wholesale were not 'in interstate commerce' and therefore were not subject to federal regulation under Part II. This contention refers to sales made by Penn Water in Pennsylvania to Pennsylvania customers. These are alleged to include about 83% of Pennsylvania generated power. Because of the following circumstances we agree with the Commission and the Court of Appeals that these sales were 'in interstate commerce.'

Penn Water and Safe Harbor Water Power Corporation (Safe Harbor) have hydrogenerating plants on the Susquehanna River in Pennsylvania. Consolidated operates large steam-generating plants in Baltimore. The flow of the Susquehanna varies greatly even from day to day. During periods of low flow, Penn Water receives steam-generated energy from Baltimore in order to meet its power supply commitments. Conversely, during periods of high flow, Consolidated is able to receive the cheaper hydroelectric power from Penn Water and Safe Harbor. For many years Penn Water, Consolidated, and Safe Harbor have been operating under contracts for the coordinated sale and distribution of electric power in Maryland and Pennsylvania. A complete integration and pooling of the power producing and transmitting facilities of the three companies was thus achieved. With reference to this coordinated system of production and distribution, the Commission said:

'The central fact disclosed by the record about Penn Water's sales in Pennsylvania is that they are not sales of the output of Penn Water's own plant, but sales of output of the integrated and coordinated interstate electric system of which Penn Water's facilities are an integral part. * * *

'In this manner energy crossing the State boundary, with other system energy, is used to fulfill system requirements. There result times when system energy generated in Pennsylvania is used, mixed or unmixed, in meeting system requirements in Maryland. Similarly, there are occasions when system energy from Maryland is used, mixed or unmixed, in meeting system requirements in Pennsylvania. Energy flows in, across, and out of the system transmission network as the needs of the interconnected members develop from minute to minute and day to day.

'It is accordingly evident that the operations of the unified system enterprise are completely interstate in character, notwithstanding the fact that system energy transactions at some particular times may involve energy never crossing the State boundary.' 8 F.P.C. 1, 12, 15.

We hold that the Federal Power Commission has complete authority to regulate all of this commingled power flow.⁶ The Commission's power does not vary with the rise and fall of the Susquehanna River.

III.

Penn Water contends that the Commission's orders improperly require it to continue performing an illegal contract and that continued performance of this contract is the basis for some of the Commission's findings. This contract allegedly requires Penn water to subject the management of its business affairs to the domination of Consolidated and for this reason violates the federal antitrust laws and the corporation laws of Pennsylvania under which Penn Water is incorporated. In private litigation, the Court of Appeals for the Fourth Circuit has agreed with Penn Water that certain provisions of the contract are illegal for the reasons stated. Viewing these provisions as inseparable, that court held the entire contract unenforceable.⁷

We need not now decide the question much argued here concerning what, if any, power the Commission has to rely on or to compel parties to carry out private contracts which would otherwise be illegal; the Commission has not attempted to exercise such power in this case. It is true that Penn Water must continue to do some of the things it used to do in compliance with the Penn Water-Consolidated contract. For under the present schedules prescribed by the Commission's order Penn Water must continue to buy, sell, and transmit power in the same coordinated manner in which it and Consolidated have been functioning for more than twenty years. But the Commission's order, as construed by the Commission, by the Court of Appeals and by us, neither expressly nor impliedly requires Penn Water to yield to any contractual terms subjecting it to the control of Consolidated. In the highly unlikely event that Penn Water's man- agerial freedom is ever...