West Texas Utilities Co. v. Texas Elec. Service, CA3-76-633-F.

• Decision Date: 15 May 1979
• Docket Number: No. CA3-76-633-F.,CA3-76-633-F.
• Citation: 470 F. Supp. 798
• Parties: WEST TEXAS UTILITIES COMPANY and Central Power and Light Company v. TEXAS ELECTRIC SERVICE COMPANY and Houston Lighting and Power Company.
• Court: U.S. District Court — Northern District of Texas

470 F. Supp. 798

WEST TEXAS UTILITIES COMPANY and Central Power and Light Company v. TEXAS ELECTRIC SERVICE COMPANY and Houston Lighting and Power Company.

No. CA3-76-633-F.

United States District Court, N. D. Texas, Dallas Division.

January 30, 1979.

Order Filed May 15, 1979.

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Richard E. Powell, Richard G. Ferguson, Michael I. Miller, Thomas G. Ryan, David M. Stahl, Isham, Lincoln & Beale, Chicago, Ill., Stan McMurry, Rain Harrell Emery Young & Doke, Dallas, Tex., for plaintiffs.

M. D. Sampels, Robert Woolridge, F. K. Slicker, Worsham, Forsythe & Sampels, Dallas, Tex., J. A. Gooch, Cantey, Hanger, Gooch, Collins & Munn, Fort Worth, Tex., for defendant Texas Elec. Service Co.

H. Dudley Chambers, Jackson, Walker, Winstead, Cantwell & Miller, Dallas, Tex., E. W. Barnett, T. F. Weiss, Jr., J. G. Copeland, Baker & Botts, Houston, Tex., for defendant Houston Lighting and Power.

MEMORANDUM OPINION

ROBERT W. PORTER, District Judge.

This case involves the interconnected group of electric utilities companies serving the vast majority of the electric consumers in the State of Texas. Plaintiffs, two intrastate¹ Texas electric utility companies which are part of a holding company that also owns other interstate electric utility companies, have sued under ? 1 of the Sherman Antitrust Act, 15 U.S.C. ? 1, two other Texas intrastate electric utilities with whom plaintiffs are interconnected claiming that the defendants conspired to restrict their transmission of electric power to intrastate commerce. This conspiracy allegedly prevented plaintiffs from exchanging power with their interstate holding company counterparts through the use of defendants' transmission lines, at an estimated loss to the holding company of 2.2 billion dollars over the next twenty years. Plaintiffs seek an injunction permanently restraining this alleged conspiracy, restraining any enforcement of any written or oral contractual provision prohibiting the flow of electric energy in interstate commerce, and restraining defendants from disconnecting their systems from the plaintiffs' systems.

Defendants have asserted a number of defenses, including: (1) the intrastate method of operation is specifically permitted by Federal Power Act 16 U.S.C. ? 824(b); (2) defendants had no anticompetitive intent; (3) any actions by defendants had no anticompetitive effect upon the plaintiffs; (4) defendants' conduct was reasonable; and (5) defendants acted independently and not in conspiracy. Defendants also question plaintiffs' motive for filing this suit in an effort to undermine the credibility of the testimony presented by the plaintiffs. Defendants introduced evidence suggesting that plaintiffs filed this suit to ensure the interstate exchange of power between the members of plaintiffs' holding company. This exchange of power is required by federal law which permits utility holding companies only if they are integrated systems. The SEC, charged with enforcing this provision, had permitted the holding company to operate without continuous interstate flow of power until 1974, when various municipal power companies filed a suit with the SEC challenging the holding company status of plaintiffs' holding company. Defendants note that this proceeding is only one of a number of proceedings instituted by the plaintiffs or which involve similar issues. These proceedings include:

FPC Docket # E-9558?€”CSW's request to FPC to order maintenance of interstate operations with ERCOT;

PUC Docket # 14?€”Request by Defendants and others to PUC to have PUC order reestablishment of pre-May 4, 1976, mode of operation;

U.S. District Court, Western District Texas, Austin Division ?€” Suit filed by CPL/WTU objecting to PUC interim order under Docket # 14 reestablishing interconnections in Texas as they were before May 4, 1976;

SEC Docket # 3-4951?€”Oklahoma cities filed motion with SEC requesting SEC review CSW holding company status;

NRC Docket Nos. 50-498-A and 50-499-A?€”CPL's request to NRC to conduct antitrust hearing as part of construction permit proceedings before NRC involving South Texas Nuclear Project; and

FPC (FERC) Docket Nos. E-9593 and E-9578-CSW's request for joint hearings with PUC and proceeding to determine if TPL engages in interstate commerce.

The Court held a seven week non-jury trial commencing October 2, 1978. The Court renders the following memorandum decision, supplemented with additional findings contained in an appendix.

THE PARTIES

All of the parties to this proceeding are electric utilities engaged in the generation, transmission, distribution and sale of electric energy. None of the parties' facilities used in the generation, transmission, distribution or sale of electric energy are located outside the State of Texas.

PLAINTIFFS

West Texas Utilities Company (WTU) and Central Power & Light (CPL) are wholly owned subsidiaries of Central and South West Corporation (CSW), a registered public utility holding company under the provisions of the Public Utility Holding Company Act of 1935. 15 U.S.C. ? 79 et seq. CSW also owns all of the capital stock of Public Service Company of Oklahoma (PSO) and Southwestern Electric Power Co. (SWEPCO), electric utilities operating in the States of Oklahoma, Arkansas, Louisiana and portions of East Texas.

WTU provides electric service to customers of central West Texas, an area including 167 communities, farms, ranches, and 18 electric cooperatives located in 53 counties. The cities of Abilene and San Angelo are the largest metropolitan centers served by WTU, and the company serves a total population of approximately 520,000. In 1977 WTU owned and operated 10 electric generating plants having a total net generating capability of 1,054 megawatts. That year the WTU system experienced a peak load of 758 megawatts for a reserve of 296 megawatts (see appendix C for a map of the WTU service area).

CPL provides electric service to customers in the Rio Grande Valley and the Gulf Coast regions of Texas in an area that includes 212 communities and adjacent and rural areas, seven rural electric cooperatives and two municipal electric systems in 45 counties. The cities of Corpus Christi, Laredo and Victoria are the largest metropolitan centers served by CPL and the company serves a total population of 1,200,000. In 1977 CPL owned and operated nine electric generating plants having a total net generating capability of 3,044 megawatts. That year the CPL system experienced a peak load of 2,323 megawatts for a reserve of 721 megawatts (see appendix B for map of the CPL service area).

WTU has historically operated its system as two divisions, with the "Northern Division" being interconnected with PSO, operating in the State of Oklahoma and the "Southern Division" interconnected with TESCO and other members of the Texas Interconnected Systems (TIS) and the Electric Reliability Council of Texas (ERCOT).

The TIS is a voluntary membership organization consisting of the major bulk electric power suppliers in Texas, including DPL, TESCO, TPL, HLP, CPL, Austin, CPSB, LCRA, TMPA and WTU.² The primary purpose of TIS is to ensure maximum reliable electric service through coordination of planning of operations.

ERCOT was created in July, 1970 and is one of nine regional electric reliability councils forming the National Electric Reliability Council (NERC) (see appendix D).

The northern division of WTU, through its interconnection with PSO, operated in electric synchronism with PSO and other members of the Southwest Power Pool (SWPP). The two divisions were designed so as to permit occasional interchange of power, in part to permit CSW to satisfy the provisions of the 1935 Holding Company Act.

DEFENDANTS

Texas Electric Service Co. (TESCO) is a wholly owned subsidiary of Texas Utilities (TU), a holding company which also owns all of the capital stock of Texas Power & Light (TPL) and 99.6% of the capital stock of Dallas Power & Light (DPL). TESCO provides electric service in North Central and West Texas, including the Cities of Fort Worth, Wichita Falls, Midland, Odessa, Arlington, Grand Prairie and 68 other incorporated municipalities, with a total population of approximately 4,000,000.

TPL, not a party to this suit, provides electric service in portions of 51 counties in North Central and East Texas, including the Cities of Irving, Waco, Tyler, Mesquite, Richardson, Killeen, Temple, Sherman, Denison, Paris, Lufkin, Brownwood and 249 other incorporated municipalities. DPL provides electric service primarily in Dallas County. TESCO, TPL and DPL are separate corporate entities with their own officers and boards of directors (see appendix B for a map of the TESCO, TPL and DPL service territories, and Appendix C for a more accurate depiction).

Houston Lighting and Power (HLP) is a wholly owned subsidiary of Houston Industries, Inc., and serves an area of approximately 5,000 square miles in the Texas Gulf Coast region in which are located Houston, Galveston and 152 smaller cities and towns. In 1977, the peak load for the HLP system was 8,645 megawatts, with a total net generating capacity of 10,170 megawatts for a reserve of 1,525 megawatts (see appendix B for a map of the HLP service territory).

ELECTRICITY

Electricity is consumed the instant it is produced, and electric generators are designed to respond instantaneously to changes on demand. For example, each time an electric appliance is turned on, demand for electricity increases; and, conversely, every time an electric appliance is turned off, demand decreases. Each minute increase or decrease in demand requires the generators producing the electricity to produce more or less electricity as required.

Once electricity is produced the producer loses all effective control over it, since electricity moves by the forces of physics over wires connected...