ML19326D365

Intervenor Municipals & Cooperatives Motion to Lodge Us Court of Appeals,Seventh Circuit,770816 Decision W/Aslab Re FPC Jurisdiction

ML19326D365
Person / Time
Site:	Midland
Issue date:	09/09/1977
From:	Jablon R MICHIGAN MUNICIPAL COOPERATIVE POWER POOL, SPIEGEL & MCDIARMID
To:	NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP)
Shared Package
ML19326D362	List: ML19326D361 ML19326D365
References
NUDOCS 8006090783
Download: ML19326D365 (22)

Text

- (g%-"%?. - _

UNITED STATES OF AMERICA -

BEFORE THE NUCLEAR REGULATORY COMMISSION APPEAL 3GA.

In the Matter of

)

Consjmers Power Company ) Docket Nos. 50-329A (Midland Units 1 and 2) ) 50-330A INTERVENOR MUNICIPALS AND COOPERATIVES MOTION TO LODGE DECISION Pursuant to Section 2.730 of the Commission's Rules of Practice and Procedure, the Cities of Coldwater, Holland, Grand Haven, Traverse City and Seeland, Michigan, the Wolverine Electric Cooperative and the Northern Michigan Electric Cooperative, and the Michigan Municipal Electric Association respectfully move that the recent decision of the City of Mishawaka, Indiana , et al.

v. Indiana & Michican Electric Company, decided by the United States Court of Appeals for the Seventh Circuit (August 16, 1977) be lodged with the Appeal Board. They believe that the decision is relevant to applicants' claim of Federal P_ower Commission N

exclusive or primary jurisdiction of matters at issue and to the interpretation and authority of Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) and Parker v. Brown, 317 U.S. 341 (1943). The decision also gives guidance..as ..to the applicability of antitrust law and principle to the electric power industry.

Respectfully submitted, gooGO9b U wA Robert A. Jablon Attorney for the Cities of September 9, 1977 Coldwater, Holland, Grand Haven, Traverse City and Law Offices of: Zeeland, Michigan, the Wolverine Spiecel & McDiarmid Electric Cooperative and the 2600' Virginia Avenue, N.W. Northern Michigan Electric Washington, D.C. 20037 Cooperative, and the Michigan 202-333-4500 Municipal Electric Association

ggr

. - - - . . . = - - - - - - - - - - - - --- -

En @c .

EMtch 5tatesi Ecurt of Eppcals ,

for tfje E,thentf3 Cir:uit ,.

v .

N ..  ;

No. 76-2226 .,  !

CITY or MISHAWAKA, INDIANA, et al.,  !

I Plaintiffs-Appellees,

. v.

INDIANA & MICHIGAN ELECTRIC COMPANY, Defendant-Appellant. l 1

I i

Appeal from the United s:zter District Court for the Nenhern District of Indiana. South Bend Division.

No. S-74 70-Civ.-Robert A. Grant and Allen Sharp. Judges. -

ARGUED APRIL 23,1977-DECIDED AUGUST 16, 1977 Before CUMMIscs, TONE ar.d BAUER, Circuit Judges.

• CUMMIxos, Circuit Judge. One Michigan and nine In-  !

diana municipalities. members of the Indiana &  !

i Michigan Munic pal Distributors' Association, filed this antitrust action against defendant, a vertically in-  ! '

tegrated electric power company which generates, )

transmits and tielivers electric power both to its ,

i wholesale customers. including plaintiffs, as well as I j

directly to its own retail customers. Each plaintiff '

operates its own electric utility through which it purchases wholesale electric power from defendant then selling and distributing it at retail to industr%I, com . i I

mercial, and residential customers within its corporate limits and in nearby areas.

t l

6 I

~ -

.c . 4

=

~ '

No. 76-2226 .

2 .

According to the complaint, defendant is the only firm within itsower service area that transmits and wholesales and is the plaintiffs' only outside source electric of sup y for wholesale electric power. Eight of the plainti s depend on defendant for all the electric power they distribute and sell to their retail customers. The other two plaintiffs, which operate generating facilities, depend on defendant for more than 90% of their re-quirements for electri: power distribution and sale to their retail customers.

Plaintiffs alleged that detendant dominates and con-trols the dis:ribution and sale of retail electric rwer within its service area and has acquired four of the twenty municipal electrie utilities there since 1957 and unsuccessfully attempted to acquire a fifth. According to plaintiffs, "The defendant company now controls the distribu-tion and sale of retail electric power in more than 90% of the communities within its service area, while municipally owned and operated electric systems serve retail customers in fewer than 10%."

t

• (Complaint 5 6.)

Plaintiffs have charged defendant with intentionally monopolizing and attempting to monopolize interstate trade and co:smerce in the distribution ar i sale of retail electric power, in violation of Section 2 of the Sherman Act (25 U.S.C. f 2), by requiring them and other municipalities to pay since Januarv 13.1973, a new wholuale price wnich is substantially higher than the retail price it charges its own inaustrial customers.

Because of this " price squeeze." the municipalities can-

' not sell electric power to their own industrial customers at prices that compete with defendant's retail prices.

One consequence is that defendant may be able to lease Fort Wzyne. Indiar.a's electric utility system for 35 i'

years.. Fort Wayne is the largest city within the defen-dant's service area whien still operates its own electric utility. Other alleged censequences of the new wholesale price are:

1. Plaintiffs' ability to compete with defendant for retail and industrial customers has been im-paired. .

% ~ - . . . . ,

=

No. 76-2226 .

3 ,

2. In those municipalities that have absorbed the difference between defendant's higher wholesale arice and its lower retail industrial prices. pressure has been put on the municinalities to sell or lease their electric utilities to deIendant rather than to continue generating operating losses.

3. In those municipalities that increase their in-dustrial retail prices to the 1svel of the defendant's hf.gher wholesale price to them. the disparity between the municipalities' higher retail indus*. rial prices and defendant's lower retail industrial pricts threatent to cause the municipalities' industrial customers to exert pressure on the municipalities to sell or lease their electric utilities to defendant so  :

that those customers can purchase electric power at defendant's lower prices.

By a Sep*. ember 30, 1976, amendment to the com- i plaint, plaintiffs alleged that since July 27. 1976,  ;

defendant required them and other municipalities j to pay a new higher wholesale price for electric power, resulting in their financial inability to buy power at the defendant's new wholuale price and sell it i' to industrial customers at prices competitive with defendant's retail crices. In it.s answer to this amend-  !

ment, defendant acmitted that the Federal Power Com-  !

mission armitted its higher wholesale rates to become  !

effective on July 27, 1976, subject to refund.1 i i

Plaintiffs requested a declaratory judgment that j defendant had violated Section 2 of the Sherman Act and an iniunction under Section 16 of the Clayton Act .

(15 U.S.C.' 9 26) against violating it in the future. They i also sought an order ending defendant's present rate l' structure which requires plaim.iffs to pay a higher wholesale price to defendant for electric pcwer than the  !

retail prices at which it sells to its own industrial I customers. Under Section 4 of the Clayton Act (15 {

U.S.C. ! 15), praintiffs claimed dam;;es in excess of $1 million before trebling. The municipalities also sought attorneys' fees.

1 In June 1975, defendant filed an answer .:ntair.'.ng three

- counterclairr.s against plaintiffs. That pleaciing need not be j zummari::ed herein because it is irretevant to the issues in -

volved on the interlocutory appeal.

I

~

• e*E*= WD'# .88% 4.eue eheda e 4 % dhmem-, d'-4 e e M

~

4 No. 76-2226 Subsequently, on 31ay 1,1974, defendant filed a mo-tion to dismiss the complaint for lack cf subject matter jurisdiction or for failure to state a claim or, in the alternative, to sta#" the court proceedings until the Federal Power Commission should conclude its regulatory proceedings involving defendant's post-January 13. 1973. rates to wholesale customers. Defen-dant and the Indiana & 31ichigan Alunicipal Dis-tributors' Association (of which plaintiffs are members) were parties to these proceedings before the Commis-sien. On Slay 1,1975, Judge Grant denied that motion and at the same time filed an extensive opinion dispos-ing of defendant's arguments (App.11-29). In the opin-ion. Judge Grant noted that in 31 arch 1972. the Indiana Public Service Commission set defendant's new higher retail rates and that in Alarch 1973, the 31ichigan '

Public Service Commission approved an increase in defendant's retail rates. Both of these actions were in-stituted by defendant's July 30,1971, petitions for new rates filed with each of the state Commissions. In June

. .1972, defendant submitted proposed increases in the rates charged to its wholesale customers to the Federal

, Power Commission. The new rates were later made 3 effective on August 13, 1972.2 but the Commission' provided that if it determined that said rates were un-Just or unreasonable, it might order defendant to refund the excess to its customers. The Commission began its hearings on the lawfulness of these new wholesale rates on January 31, 1974.

Defendant contended that its retail rates, set by the state utility commissions, were immune from attack un-der the Sherman Act. The court held that under Parker

v. Brotet, 317 U.S. 341, it did not have authority to in-trude upon the Indiana and 31ichigan Public Service t

Commissions' approval of defendant's retail rates.

2 j ,

On August 13. 1972, the Commission suspended the use of these rates until January 13. 1973. the date involved in the original complaint herein. After an appeal to the District of Columbia Circuit by defendant on the grounds that the effec-tive date should be July 14, 1972. the Court proclaimed July 14.1972, to be the effecuve date but only allowed defendant to

' collect the difference between its old and new rates from -

December 14, 1972. onward. Indicne d .Vichio2n Ele::ric Co.

v. Federcl Power Commission. 502 F.2d 336 (D.C. Cir.1974),

certiorari denied, 420 U.S. 946.

1 s

-u.

". . e.

- 8

No. 76-2226 -

5 -

However, after distinguishing Ricci v. Chicago Mercan-tile Exchange. 409 U.S. 2S9. and Pennsylvania Power Company v. Fedcral Power Commission.193 F.2d 230 (D.C. Cir.1951), affirmed. 343 U.S. 414, the Court found that it had jurisdiction over the subject matter of the ac-tion, citing Georgia v. Pennsylvania R. Co. 324 U.S. 439; Keogh v. Chicago & N.W. Ry. 260 U.S.156: and Otter Tail Power Co. v. United States. 410 U.S. 366. In par-ticular, Judge Grant held that "Just as the Court in Otter Teil was hesitant to conclude that the authority of the Federal Power Commission to crder interconnections was intended to 'be a substitute for or to immunize Otter Tail from, anti-trust regulation for refusing to deal with municipal corporations.' this Court cannot conclude that the Federal Power Commission's authority to review rates was an intended substitute for the anti-trust laws in a situation involving the alleged monopoli::ing effect of a dual price structure."

(mem. op. at 16.)

Judge Grant stated that if the Federal Power Com- '

mission finally found the defendant's new wholesale rates to be just, the court might be forced to order defendant to initiate a new rate structure. eliminating the dual price system of higher wholesale prices relative

- to retail prices. On the other hand, if the Commission should find the new wholesale rate to be unjust, he '

might only enjoin defendant from any future dual i system. Consequently the court held that ?laintiff had not failed to state a claim upon which relief could be ,

granted. i i

i In conclusion. Judge Grant refused to stay the action '

until the Federal Power Commission should hand down  :

a final decision because "the lawfulnes,s of ,the defen- i dants wholesale rate is not c,eterminative or tne issue before" the court (mem. op.19). The district court ended its opinion as follows: I "Since it is the initiation of . monopolistic structure that the Court is asked to prohibit and not the rate I itself, final action by the agency will not by itself j prohibit the problem although it may alleviate it for '

m e -.s w tes ease.muh am.es mesmeme.,*W. '*e. *

+ge w v

6 No. 76-2226 l

- a time. Furthermore. if the Court found that l damages were recoverable in this case and that in determining the damages the final decision of the )

Commission was necessary and the Commission has .

not yet ruled on the lawfulness of the wholesale rate ,

the present action could at that time 1.e stayed by

' the Court for the purpose of awaiting the Cc:nmis- l sion result." (Id.)

Thereafter the case was reassigned to Judge Sharp.

On October 22, 1976, he denied ~ defendant's motion to reconsider Judge Grant's order of May 1,1975. There-upon, an interlocutory appeal was taken te this Court and allowed pursuant to 2S U.S.C. @ 1292(b). We affirm.

3 I. Exclusive Jurisdidion When the district court handed down its opinion refus-ing to dismiss the complaint and to grant a stav, the Federal Power Commission had ruled that this alleged I dual price system and its anti-competitive effects were beyond its jurisdiction (mem. op.14).8 However, in Federal Power Commission t. Conway Corp., 426 U.S.

271, the Supreme C,ourt subsequently held that such an anti-compet' 1ve price squeeze between jurisdictional 8 The InF.ma & Michigan Municipal Distributors' Associa-tion sought review of the FPC decision to eliminate from the case all testimony, exhibits and consideration of the price l squeeze issue. Appealing to the District of Columbia Circuit. l IMMDA requested the FPC to ecnfess error in light of l Federal Power Commission v. Conway Corp., 426 U.S. 271, 1 l

and obtain a remand to consider the price squeeze issue. On  ;

I August 13. 1976. the FPC filed such a request. In an initial

' decision of August 19. 1976. in the wholesale rate case com- l

' menced in June 1972, the administrative law judge recom- l l

monded that the price squeeze issue be resolveo m further  !

proceedings. This was in line with the parties

• agreement to dispose of-the 1972 wholesale rate case cy a financial settle-

! ment based on the initial decision without resolving the anti-competitive allegations (Pl. Br. 9 M). These facts veere brought to the district court's attentica before its October 22, 1976, denial of defendant's Motion to P.econsicer. Vacate. Set Aside' and Amend [the] Court's Order of May 1,1975 (D. Br.

5-6). The settlement was approved by the FPC in an order of June 1,1977.

i

'-- . . eram -

No. 76-2226 7 1

wholesale rates and non-jurisdictional retail rates should l be conridered by the Commission in fixing rates for in-terstate

- for a unanimous 1 Court, Mr.wholesale Justice %"sales. Speakindommission nite said the can take i retail rates into consideration in setting the wholesale j rate even though they are outside its jurisdiction. 426 U.S. at 279-2S2. The Court explicitly approved the Dis-trict of Columbia Circuit's conclusion that "When costs are fully allocated, both the retail rate and the proposed wholesale rate may fall within a zone of reasonablenass. yet create a price squeeze between themselves. There would, at the very least, be latitude in the FPC to put W,.olesale .

rates in the lower ange of the zone of reasonableness, without concern that overall results wou!d be impaired, in view of the utility's own deci-sion to depress certain retail revenues in order to curb the retail competition of its wholesale customers.167 U.S. App". D.C. at 53, 510 F.2d at 1274. (Footnote omitted.) 426 U.S. at 279. <

Such a remedy would only operate against the jurisdic-tional rate.' .

4 A new regulation,18 C.F.R. S 2.17. entitled " Price dis-crimination and anti-competitive e:fect (price squeeze issue),"

, was issued on March 21.1977, to implement the Commission's mandate under Contecy. In the order issuing the regulation, provision was made for the state commissions to be kept in-  ;

formed but, of course, no suggestion was made to force them to change the nm-jurisdictional retail rates:

i "Both the Federal Power Commission and the NARUC

[ National Association of Regulatory Utility Com-missioners commission] Board (of Consultants) recornize that state Commission, participation in rate proceedings before the particularly in cases involving retail and wholesale rate comparisons, would be desirable. and awareness of the state commission's views on price '

sgueeze issues would be valuable. We, therefore, adopt the NARUC Board's reecmmendation that in, all cases v aere  !*

price body s$neeze is at issue. for w ich is rmonsible theregulation state commission, of retail agency rates inor  !- I the state affectec shall be included in the service list '

! (Footnote continued on following page) i

' 4 l

. l 1

l

. - 1

.-- .. .. . ........l....__.__ .

No. 76-2226 8

-Nothing in the Supreme Court; einion in Conway suggests exclusive jurisdiction, as defendant concedes Indeed, Conway suggests that the FPC (D. Br. 32).5 remedy is limited to setting the jurisdictional rate somewhere above the lower boundary of the zone of reasonableness. A rate set so low that it would fail to recoup fully allocated wholesale costs seems to be beyond the Commission's power. 426 U.S. at 278. If the retail rates have been set so low by the state utility com-missions that a price squeeze could only be fully remedied by setting the wholesale rates below the lower boundary of the zone of reasonable recovery for fully allocated costs, the squeeze would go unremedied to the extent a wholesale rate set at the lower boundary of the zone of reasonableness did not cure the problem.

- Although Ccnway was brought to the district court's attention, it refused to vacate its order declining to dis-miss the complaint and to stay the action.

• cxtinued .

maintained by the Secretary under 18 CFR 1.17(c) as if that s,cate commission, agency or body h d intervened in the proceeding. In proceedings where the state commis-

' sion does not take an active part, the NA?.UC Board recommends that the Commisshn encourage FPC staff to confer with str.te commission staff for the purpose of ac-quiring information particularly within the knowledge of the state commissions in order to gain a more complete picture of the competitive relationship of respective wholesale to retail rates." (D. Rep. Br. App. AS-A9.)

5 Defendant points to one . sentence of dicta in Judge Lever. thal's opinion for the D.C. Cm:uit in Conecy arguably l to the contrary:

"The FPC's position would leave a regulatory gap-no m-stitution would have authority to consider an undue  ;

preference between wholesale and retail rates, even where  !

that preference was delibrately instituted for the purpose

- of cloggi5g comeetition. and to reduce interstate wnolesale rates. 510 F.2d at 1272.

Judge Leventhal's opinion does not consider antitrust aspects at all. When read in the context of the opinion as a whole, it is clear that the " institution" meant a regulatory administrative

. body.

b N -- Ned. -_ _

O

x p

t

. No. 76-2226 9

Subsequent to Conway, the Supreme Court decided Cantor v. Detroit Edison Co., 428 U.S. 579, refusing to '

f

. exempt Detroit Edison's light bulb exchange program '

from the federal antitrust .aws even though it was an i a7 proved element of the state rate tariff filed with the

! leichigan Public Service Commission. Given a complaint

'I that c.etails conduct which, if true, would constitute a substantive antitrust violation, Justice Stevens described two classes of situations involving the interaction of state  :

.and federal law where Sherman Act jurisdiction would, ,

I nevertheless, be defeated. First. Congress in passing the Sherman Act may not have intended for the Act to Brown, in the first instance, to state action. Parker v.

apply, 317 U.S. 341. Secondly, although originally mtended to be covered by the Sherman Act, certain conduct may have become exempted from the Act.-

In a section of his opinion commanding only a four-Judge plurality, Justice S'cVens. concluded that . in -

s Parker the "only Sherman Act issue decided was whether the '

sovereign State itself, which had been held te be a person within the meaning of s 7 of the statme, was also subject to its prohibitions." 428 U.S. at 591.

As in Cantor, the plaintiff municipalities have named no state officials or state agencies in the complaint, and there is no claim that any state action violated the an-titrust plurality laws. See 428 opinion, U.S. atv.591-592. Thus under the Parker Brown does not even arguably apply to the facts of our case. Nor do Chief Justice Burger or Justice Blackmun's concurrences in Ccntor.give defendant solace. The challenged activity 9

here is a dual rate tructure. The state utility com-missions have only put the imprimatur of their sanction on the retail rates charged by the defendant. The price

. squeeze has not been blessed by Indiana or Michigan. .

The fact that the district court has no authority to main- 3 .

i tain a direct attack on the defendant's retail rates does not alter the reality that the state commissions have in }

no way placed a badge of approval on the defendant's  :

dual rate structure. Consequently, defendant's conduct is not immunized under Parker v. Brown.

. S

-  ?

e O 10 No. 76-2226 -

- Having decided that the Sherman Act applies in the first instance to the conduct at issue here, we must decide whether an exemption nonetheless has been worked. Justice Stevens, in a portion of Cantor sub-scribed to by a majority of the Ccuit, suggested two geneses for such an exemption. First, it might be unjust to hold a private citizen iiable for conduct imposed by the direct command of the sovereign.5 Secondly, if the sovereign is already regulating an area, Congress may not have intended to superimpose the antitrust laws as an additional and perhaps conflicting regulatory scheme.2

, In City of Shakopee v. Northern States Potter Co., Civ.

No. 4-75-591 (D. Minn.1976), a post-Cantor case in-volving a virtually identical dual rate structure creating a price squeeze between the wholesale and retail sale of electric power, Judge Lord concluded that no exclusive jurisdiction existed in the Federal Power Commission because an exemption from the antitrust laws could not

be implied. Judge Lord interpreted the first genesis for exemption under Cantor to be based on the reasoning that 8 Although the facts of Cantor limited Justice Stevens' con-sideration to the state sovereign.

. finding that conduct arising -

from the command of the feceral sovere:gn is subject to anti-trust liability may be assumed to be similarly unjust.

. 7 If the sovereign is the federal government, the question reduces to the traditional problem of exclusive jurisdiction.

Here the conceptual framework is a federal statute post-dating the Sherman Act lodging the responsibility for regulating the conduct in issue in some federal agency and impliedly, repealing the application of the Sherman Act as to this specie of concuct.

If the sovereign is the state government, an implied i repealer ;f a federal law such as the Sherman Act is of course foreclosed by the Supremacy Clause. Presumably, the exemp-tion is created here en the conceptual framework that Con-I gress did not-intend ths. Sherman Act to apply to areas of the economy pervasively regulated by the states. Unlike the Parker exclusion, this exemption would not derive f om the character of a state's involvement with certain conduct but -

rather with the gtnlity and scope of the rezulatory mechanis~m imposed rv :he state over such conduct. The state i commissions oI Indiana and Michigan are not alleged to have

any power to regulate the price squeeze in any sense. Since

.' this conduct is r.ct being regulated by the state commissions.

. Sherman Act jurisdiction of course is not ousted in favor of

, state regulation. The defendant does not contend otherwist i

'~~~' , . . . -

--e,- - s e w ey y s

m - -

0 No. 7G-2226 11 "if an anticompetitive practice is the product, at least in part, of the company being regulated and could be avoided if the company chose to do so, then 4

the anticompetitive condition is in reality the work j of that company and is not 'necessary' to the func-I tioning of the regulatory scheme and will not be im-1 munized from antitrust liability." (mem. op. 6.)

Accordingly, the court noted that, as here, defendant Northern States Power Co. could have avoided the alleged monopolistic position by " tailoring its applica-tions to allow for competitive ' wholesale' and ' retail' power rates"(mem. op. 7) and that, given such company autonomy, this position was not "necessary" to the func-tioning of the regulatory scheme.

With respect to implying a repealer of the antitrust acts, Judge Lord began with the now settled axiom that after Otter Tail Power Co. v. United States, 410 U.S.

366, "there can be no doubt about the proposition that

• the federal antitrust laws are acclicable to el?ctric

~

l utilities." Ccntor, suprc. at 596 n. 35' Since the antitrust laws are not generically superseded by the regulation of electric utilities.5 the only queston ocen to debate is whether "the particular application of the [ antitrust laws? is irreconcilably recupant to the operation of the regu,atory scheme." Id. Jucge Lord decided that there

- was "little or no apparer.t conflict between applying the antitrust laws to the troe of conduct complained of here and the smooth and efficient functiomng of the FPC's regulatcry system" (mem. op. 5 price squeeze alleged in our case). As in Shchopee, the "is not between rates set by one regulatory agency, as was the case in Georgic [u. Pennsylvanic R. Co.,

324 U.S. 439), but rather is between the ' wholesale' s

In order to imply a general exemption for an economic see-

• se of an industry, mere conflicting standards are not enough.

This aspect of a regulatory agency's jurisdiction must be "regulatory imperative in the scheme continued over effective the industry of the functioning" as a whole. Cantor l supra, at 596-597 n. 36 and n. 37. Since Qntor distinguished i and rcfused to apply Gordon v. New Yorr: Stock E. change, 422 l U.S. 659, perhaps defendant's principal case on this ground, no purpose would be served in discussing it further here. See 42S U.S. at 596 597 n. 36. .

l

. i W'

f

, s.

. . -- --- =-- -- -

12 .

No. 76-2226 rate set by the FPC and the ' retail' rate over which the FPC has no jurisdiction. Put simply, under these circumstances, antitrust immunity is not

'necessary' to the functioning of the regulatory process because the discrimination is ' external' to that process. The FPC does not control both ends of the discriminatory conduct." (mem. op. 7 n. 6.)

If plaintiff proves it is entitled to relief on the Sherman Act claim asserted in its complaint. the Federal Power Commission's regulatory process would not be disturbed by the court's awarding camages for past anti-competitive conduct or by enjoining future anti-competitive conduct by defendant in making and

. promoting its rate applications. Thus relief could be granted without the cistrict court's actually becoming involved in the process of setting rates.

Indeed the Federal Power Commission has conceded that it does not have exclusive jurisdiction over conduct such as that alleged here. Following Judge Lord's denial of Northern States Power's motien to dismiss, Shakopee is proceeding, we are advised, before the district court and the Federal Power Commission in tar,dem. On May 23, 1977, the Fede.c.21 Power Commission released an order in Northern 3:ates Power Company, FPC Docket No. ER 76-S18, stating that the Commission's examina-tior, of the alleged price squeeze would not affect the dis-trict court action In Shahopee because "That action seeks damages for allegedly an-ticompetitive activity that occurred in the past. As the District Court noted in its October 18. 1976, order denying Northern Sta*es' motion te dismiss, should Shakopee prove itself entitled to relief tha regulatory process would not be disrupted by sn award of damages for past conduct nor by an en-joining of certain future conduct. These remedies I are beyond our jurisdiction as we cannot look to past rate schedules and, if a price squeeze were found, we could not take any remedial action. Ac-cordingly there is no alternative to this issue being litigated in both forums, one concerning itself with present rates and the other with pa:;t rates and

, possible future conduct."  ;

I 1  !

MM*****

e v

. i ^

. I No. 76-2226 13 -

This ruling equally applies here. Therefore. it is clear that defendant is wrong in asserting that the Federal Power Commission has exclusive jurisdiction over this .

f matter.

II. Primary Jurisdiction

~~

The more difficult question is whether the Federal Power Commission has primary jurisdiction over the price squeeze. Primary jurisdiction is concerned with the proper allocation of responsibilities between the ad-mimstrative agencies and the courts. "Even when [an '

titrust actions) and remedies survive and the agency in question lacks the power to confer immunity from an-titrust] liability, it may be appropriate to refer spec [ific issues to an agency for initial determination where that procedure would secure '[u]niformity and consistency in the regulation of business entrusted to a particular agency' or where

"'the limited functions of review by the judiciary

[would be] more rationally exercised, by I preliminary resort for ascertaining and inter-  !

preting the circumstances underlying legal issues to '

agencies that are better equipped than courts by specialization, by insight gained through ex- i perience, and by more flexible precedure.' Far East Conference v. United States, 342 U.S. at 574-575."

(Nader v. Allegheny Airlines, 426 U.S. 290, 303-304.) i The defendant argues that since "some facets of the

dispute * *

• are within the statutory jurisdiction of the l [ Federal Power] Commission." Rirci v. Chicago Mercan-j-

tile Exchange, 409 U.S. 289, 302-here the Contcay-dictated duty to set the jurisdictional rate with an eye to any price squeeze between it and the non-jurisdictional rate-the Feceral Power Commission must be deemed to preempt antitrust jurisdiction. However, that position was also foreclosed by Otter Tail Poncer Co., supra.

There only the dissenting Justices would have required ^ ,

the antitrust court to defer to the Commission .

proceeding. 410 U.S. at 392 395. The other Jatices af-firmed a decree under Section 2 of the Sherman Act (ex- .

I I

!- l 1,

I  !

.- - t s,

-w- tg q 'eQ-

14 No. 76-2226 .

cept in one respect immaterial here) without requiring a stay where there was only a potential conflict between the federal judicial decree and a future order of the Federal Power Commission. ~410 U.S. at 376-377. Any suspicions that the 4 3 vote in Otter Teil impairs its authority seem wholly unwarranted in light of the Can-tor majority's repeated citations of it with approval. See also Gulf States Utilities Co. v. Federal Port Commis-sion, 411 U.S. 747, 758.

Even if it cannot be maintained as a matter of course that as between the dual jurisdictan in the district court and in the Federal Power Commiss!on the jurisdiction in the Commission is primary, it may be that deferral to the Commission maxes sense as a matter of judicial ad- -

ministration. If a significant inconsistency between the antitrust action and the ren:latory scheme which was certain to arise could be specifically shown to be avoidable by letting the Commission proceed first, daferring to the Commission would be advisable. In ad-dition, if the " adjudication of th[e] dispute by the Com-mission promises to be of material aid in resolving the

[ antitrust] immunit'/ question." Ricci, suprc, at 302, or will advance the Court's fact-finding capacity, it may be desirable to hold the antitrust action in abevance pend-n' ing the resolution of the proceeding before the Commis-sion. Nevertheless, we hold that the Federal Power Com-  !

mi,ssion does not have primary jurisdiction over the l price squeeze.

A. Uniformity .

i Where uniformity and consistency of the regulatory (

, scheme are at stake, primary antitrust coverage does not '

necessarily follow even when there is a statutory grant j of express immunity as to certain other conduct ap.

+

• proved by a federal agency. Mt. Hood Stages, Inc. v.

Greyhound Corp., ..... F.2d ...... ..... (9th Cir.1977) (slip

} op. at 1200). Where there is no statutory grant of an-titrust immunity, so that ihe argument that Congress in.

tended " conduct not within the exemption [to remain]

subject to the antitrust laws" is foreclosed (id.), the uni- ,

formity intc ests in primary administrative jurisdiction l are correspondingly strengthened. But as Chief Judge Browning added:

r i n ..... . - - - - - - - - -

j l

i 1

l No. 76-2226 15 --

" Conduct is not immunized merely because it falls within the jurisdiction of the regulatory agency, as it did in this case. Immunity is not implied merely.

because the applicable regulatory standard requires the agency to give weight to antitrust policy, as it did in this instance." (Id.)

Indeed as noted in Gulf States Utilities Co. v. Federal Power Commission. 411 U.S. 747, 758-759, the Federal Power Act does not preclude the operation of the an-titrust laws even thcugh the Federal Power Comminion is required to give weight to antitrust policy. There Justice Blackmun, speaking for six members of the Court, declared that the rederal Power Commission should consider antitrust and anti-competitive issues before author:2ing the issuance of securities under See-tion 204 of the Act (16 U.S.C. s 524c) in order to es-tablish "a first line of defense arainst those comnetitive practices that might later be the subject of antitrust proceedings" (411 U.S. at 760). This of course does not mean, as defendant urges (Reply Br. 5-6n. *), that a dis-trict court which, as here, nas assumed jurisdiction over a price squeeze two ;. ears before the Nmmission agreed to consider it must withhold relief Inat (as the district court has already indicated) will not interfere with the Commission's rate-making function. In fact. primary ad-ministrative jurisdiction based on uniformity grounds is not even an issue in such a factual setting.

455, As in Georgia r. Pennsylvania R. Co., 324 U.S. 439, 457, plaintiffs are seeking to enjoin conduct violative of the Sherman Act ano to recover damages therefor. That relief, if appro violation of the antitrust laws,priate to remedy a proven would cause defendant to

' end its purported current price squeeze practice but need not interfere with rates already approved by the l

state and federal commissions. The antitrust and regulatory re'gimes accommodate and supolemcnt each

} cther in order to prove full protection from anti-competitive prictices. Here too the remedies afforded under the two statuM: can be meshed. As in Mt. Hood Stages, supra, ..... F.2d at ..... (slip op.1201), no plain '

repugna :y exists between this federal regulatory statute and'the Sherman Act as applied to defendant's t I (

l

=-

16 No. 76-2226 .

conduct, nor is it necessary to exempt that conduct from antitrust restraints to make the regulatory statute work.

In truth, as recognized as lon Electric Light & Power Co. g a-o as Consolidated Gas.v. Tennsylvania W Power Co.,194 F.2d 89, 97-99 (4th Cir.1952). certiorari denied, 343 'J.S. 963, Part II of the Federal Power Act, which contai.'s Section 205 involved in this case, is not repugnant to tie antitrust laws and therefore does not supersede them.

In the court below, defendant in effect recognized that the C,mmission cannot afford the requested relief to plaintiffs because defent. ant stated it was

" aware of the Con. mission's inability to remedy a cla:m of anti comptitive behavior, premised on the difference in rates charged by [ defendant] I & M to its wholesale and retail customers, by raising the retail rates to the level of the wholesale rates" (mem. op. 9).

Nor does Conway guarantee that the price squeeze may be fully remediec ]y severely de to eliminate the price squeeze.This pressing wholesale is because, as werates have demonstrated abyte, the Federal Power Commis-i sion cannot set wholesale rates below the lower boun-dary of the zone of reasonableness even if the price squeeze could not be eliminated without setting the wholesale price below the zone of reasonableness limit.

Primary jurisdiction is not a doctrine that requires an exercise in futility. See Local 189. Amalgamated Meat Cutters v. Jercl Tea Co., 3S1 U.S. 6 6, 686. Thus an-titrust relief is needed for fuil protection from the anti-competitive conduct alleged in the complaint.

If plaintiffs prove their case, instead of interfering with any rates approved bv the Federal Power Commis-sion, in addition to possible damages, the d strict court

-: wodid aresumably order defendant to file a new wholesale rate anplication that would remove the dis-parity betwee: the rates charged plaintiffs and defen-dant's industrial customers. The court would thus not be affording a remedy that would "rta-kly conflict with the explicit statutory mandate of the Federal Power Com-mission * * * [or] improperly preemp[t] the jurisdiction D

0

~4 _ . ... ._ . . _ _ . _ _ -. - -

o a ,w

. l i

-.s

~

__ ,.u _ . . _ _ _._.m.._-,.

No. 76-2226 17 of the Federal Power Commission * * *." Otter Tail

. Power Co., supra. 410 U.S. at 395 (concurring and dis-senting opinion of Justice Stewart). As shown from the opinion below and from the opinion in Shakopce. supra, the district court intends to apply the antitrust laws "to the public utility industrf only to the extent that the an-titrust claims asserted are not within the reach of the regulatory agency's supervision " the very standard recommended by defencant (Br. 21t Under Otter Tail Power Co., supra, and Gulf States i.itilities Co., sunra, in fashioning any relief that may be warranted under the Sherman Art the judiciary must be careful to avoid or resolve any inconsistency with Section 205 of the Federal Power Act. We are confident that the district court will observe this stricture.

Indeed the opinions of the district courts in this case and in Shakopee show that they do not intend to in-terfere with the Federal Power Commission's jurisdie-tion, because if the Conimission should find the respec-tive defendant's higher wholesale rates to be just, the courts would, on proof of violations of Section 2 of the Sherman Act, order the defendants to initiate new rate structures eliminating the dual price system of higher wholesale prices. If the Commission should find the pres-ent wholesale rates to be unjust, then the courts would only enje:n the defendants from future dual systems violative of the Sherman Act. Both district courts noted too that it would not disrupt the regulatory process to award damages for any proved at trial. Therefore,pasta stay anti-competitive is unnecessary canduct to avoid a clash between the antitrust laws and the Federal Power Act.

B. Agency Expertise Nor is a stay warranted on the pounds that the i.

Federal Power Commission's expertise will materially advance the district court's fact-finding capacity or aid the district court's determmation of the extent of any possible antitrust immunity.

I a

~. .

,,.g. g

18  : No. 76-2226 As amici curiae " Illinois Municipals. have stated, Ricci v. Chicago Mercantile Exchange, 409 U.S. 2S9, has no bearing here because the district court does not need to know the Commission's expert views on what con-stitutes a just and reasonable rate "as a prerequisite to a determination of whether defendants' activities violate the antitrust laws" (Br. 24). Also, the Ricci Court thought the Commodity Exchange Act probably limited the applicability of the antitrust laws there (409 U.S. at 302-304) whereas no such limitation exists here. Cantor, supra, Otter Tail Pmcer Co., supra. Under the iacts oi the instant case, where the district court has first asserted jurisdiction over the antitrust p_roceedings, it may continue its probe. California v. rederal Pmcer Ccmmission, 369 U.S. 482: Pennsylvania 1 Vater & Power Co. v. Consolidated Gas Ehetric Light & Power Co.,184 F.2d 552, 562-566 (4th Cir.1950), certic ari denied,340 U.S. 906.

111. Discretionary Stay Assuming that a discretionary stay could be ap-propriate even whEn primary jurisdiction is not in the Federal Power Commission, the district court certainly i did not abuse its discretMn here. Indeed, the equities weigh hevily in favor et the plaintiff municipalities.

The Illinois Municipals point out that the district court should be permitted to proceed in order to avoid the

- typical lengthy delays that occur in processing wholesale rate increases un&- Section 205 of the Federal Power

' Act (16 U.S.C. ; n'4d). Under that provision, a public utility files its rate increase application no less than 30 days before the effective de tnereof, and the Commis-sion typically suspends the proposed rate f.om one day to five months. with refunds required if the rate is found

to be above the statutory "just and reasonable" standard.

.i The wholesale rate increase in the present case stems

!I from a June 13, 1972, application by defendant, and tne case was not terminated in the Commission until it ap-proved a settlement on June 1,1977, a span of five years. Except for the settlement, the case would still e pend before the Commission.

!i- hha Ct

,of B .avia, Geneva, Naperville, Rock Falls and St.

. . . - - . . - - . . . ~ . . .

,~ ~, *

..,_.e._ .. . _ .-_. __

No. 76-2226 19 -

, Thus far, the Commission has never rejected a rate fil-Ing on price squeeze or other antitrust grounds, and there is no limit on the number of filed increases that may be in effect at the same time under Section 205.

Simply by filing an anti-ecmpetitive increase and waiting for time to pass, a public utility like defendant can place a price squeeze on wholesale customers. As the Commission has stated " electric utilities are permitted to file virtually any level of costs and rates and after a period of suspension charge those rates subject to re-fund, pending Commission decision." FPC Order No.

487, 50 FPC at 127 (1973). j.

Under this procedure the price squeeze can continue between the time the Commission allows the rates to go into effect and its final order, fer the new Conway remedy as to price squeezes does not become effective until then. Thus if a stay were gr nted to defendant, plaintiffs and customers in sin...ar positions would be anable to secure any relief from price squeezes like this until the Commission finally approved the filed rates. As -

the Illinois Municipals have picturesquely put it:  !

" Delay combined with the multiple rate in-creases, could mean that the customer h:_s been put out of business by his supplier-competitor. You can-not give refunds to a corpse." (Br. 27-28.)

l Furthermore, the Commission would be unable to affnrd complete relief because the Federal Power Act does not provide for damages or for an injunction against a utili-ty violating the antitrust laws. Thus a stay in this case would excuse defendant's alleged non-compliance with the antitrust laws for a completely unnecessary length of time.

IV. Disposition At oral argument, we wcre advised that on January 14, 1977, defendant requested the Federal Power Commission t5 approve a negotiated settlement between -

it, these plaintiffs and others for the reriod from January 13, 1973, to July 27, 1976 when defendant's new wholesale rate schedule became effective. This settlement' was approved on June 1,1977. See note 3 suptc. Upon remand, the district court will have.to d

"N emme.e _ _e p

+ e.m een - w ese eu...e*e e.. es -.

O

~

20 No. 76-2206 .

determine whether this settlement agreement has mooted any of the antitrust claims in this case. Of course, the claims stemming from the July 27, 1976, higher wholesale prices are still active.

While we are holding that the district court need not stay further proceedings herein, we agree with Judge Grant that if the district court should ever find it necessary to ascertain particular Commission action in order to decide the enet scope of antitrust damages, or ,

for other purpcses, t:w court may then stay its hand for the purpose of awaiting the Commission result (mem.

op. 19).

The orders of May 1.1975, and October 22,1976, are affirmed.

A true Copy:

Teste:

• \ Clerk of the United States Court o*f Appeals for tJie Seventh Circuit t

i r

[

• USCA 421G--Midwest Law Printing Co Inc Chicago-S.16-77-27s J - _. . . _

=- - -

. , m CERTIFICATE OF SERVICE .

I hereby certify that I have this day caused to be served the foregoing INTERVENOR MUNICIPALS AND COOPERATIVES MOTION TO LODGE DECISION, by deposit in the United States mail, upon the following persons:

i Alan S. Rosenthal, Esquire James 3. Falahee, Esquire Chairman, Atomic Safety and General Counsel Licensing Appeal Board Consumers Power Company Nuclear Regulatory Comm'n. 212 West Michigan Avenue Washington, D.C. 20555 Jackson, Michigan 49201 Michael C. Farrar, Esquire William Warfield Ross, Osquire  ;

-Atomic Safety and Licensing Wald, Harkrader & Ross ,

Appeal Board 1320 - 19th Street, N.W. i Nuclear Regulatory Comm'n. Washington, D.C. 20036 '

Washington, D.C. 20555 Keith Watson, Esquire '

e Richard S. Salzman, Esquire Wald, Harkrader & Ross 1320 - 19th Street, N.W.

Atomic Safety and Licensing Appeal Board Washington, D.C. 20036 Nuclear Regulatory Comm'n.

Washington, D.C. 20555 Seth R. Burwell, Esquire Burwell & Shrank Hugh K. Clark, Esquire ,

1020 Washington Square Building

Chairman, Atomic Safety Lansing, Michigan 48933 and Licensing Board Nuclear Regulatory Cc=m' n.- Honorable Frank Kelly Washington, D.C. 20555 Attorney General State of Michigan Robert Verdisco, Esquire , Lansing, Michigan 48913 Antitrust Counsel for Nucleah Regulatory Comm'n. Staff Dr. J.V. Leeds, Jr.

Nuclear Regulatory Comm'n. P.O. Box 941 Wahsington, D.C. 20545 Houston, Texas 77001 i

Frank W. Karas, Chief

~~~ ~-

Public Proceedings Branch -

Office or the-Secretary. %

Nuclear Regulatory Comm'n. _

Washington, D.C. 20545 _

Mark Levin, Esquire Forrest Bannon, Esquire Antitrust Division

-Department of Justice P.O. Box 7513 Washington, D.C. 20044 Dated at Washington, D.C., this 9th day of September, 1977.

I W i Robert A.Jablon

._. ~ , _ . _ ___.- _---_._ __ __ __