ML19329E675

Brief on Proposed Findings of Mi Municipal & Cooperative Power Pool.Requests Proposed Licensing Conditions Be Ordered.Ra Jablon 741009 Ltr & Certificate of Svc & Exhibits Encl

ML19329E675
Person / Time
Site:	Midland
Issue date:	10/08/1974
From:	Jablon R MICHIGAN MUNICIPAL COOPERATIVE POWER POOL, SPIEGEL & MCDIARMID
To:
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ML19329E672	List: ML19329E671 ML19329E675
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NUDOCS 8006160451
Download: ML19329E675 (263)

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UNITED STI.TES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION 1

In the Matter of )

) Docket Nos . 50-02 9A Consumers Power Company ) 50-330A Midland Plant (Units 1 & 2) )

l l

BRIEF ON PROPOSED FINDINGS OF MICHIGAN CITIES AND COOPERATIVES ii j .

. i i

October 8, 1974 i Spiegel & McDiarmid 2600 Virginia Avenue, N.W. Robert A. Jablon Washington, D.C. 20037 8006160 I p

TABLE OF CONTENTS x

Page INTRODUCTION AND SU? DIARY O$ ARGUMENT . . . . . . . 1 ARGUMENT I. CONSUMERS POWER COMPANY' S DOMINATION OF THE BULK POWER FACILITIES IN THE LOWER MICHIGAN PENINSULA HAS RESULTED IN A SITUATION INCONSIST?NT WITH THE ANTITRUST LAWS . . . . . . . . . . . . . . . . 18 A. Consumers Power Company Dominates Bulk Power Generation and Trans-mission Facilities . . . . . . . . . . . . 18 '

B. Consumers Power Company's Coordi-nation Arrangements Provide a Market for Power Transactions from which Interveners are Excluded . . . . . . 29 C. Coordination with the Smaller Michigan Systems Sbauld Not Be on a Discriminatory Basis . . . . . . . . . . 38

. D. Consumers Power Company as Used Its Domination Over the Bulk Power

. Facilities to Its Advantage Compared with Smaller Systems . . . . . . . . . . . 43 II. CONSUMERS POWER COMPANY'S REFUSALS TO DEAL ON REASONADLE TERMS ARE VIOLA-TIONS OF ANTITRUST LAWS AND POLICY . . . . .. 54 A. The Bottleneck Monopoly Cases, In-cluding Otter Tail, Plainly Estab-lish the obligations of Consumers Power Company to Grant Intervenors Direct Access to Its Bulk Power Generation and Transmission Facilities. . 57 1

/

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B. By Refusing to sell Uholesale Power

(~ Services Separately, Including Trans-mission, Consumers Power Company Has

" Tied" Its Sales of Power, Created Barriers to Entry and Forced Exclusive Dealings Arrangerents . . . . . . . . . . . . . 68 III.

THE LAN REQUIRIS THE GRANTIUG OF BROlsD RELIEF

, . . . . . . . . . . . . . . . . . . . . ... 75 ,

A. The Atomic Energy Act Gives the Atomic Energy Commission Broad Authority to Regulate all Operations Flowing from the Activities of the Licensee that would Maintain or Create an Anticompe-titive Situation . . . . . . . . . . . . . . . . 75 B.

Antitrust Law and Ad-inistrative Law Refutes the Claims tnat the Atomic Energy Act Must be Given a Narrow Reading . . . ,.

. . . . . . . . . . . . . . . .. 86 IV.

RESPONSES TO DOARD QUESTIONS . . . . . . . . . . . .

92 Is there a conflict between the Atomic Energy Commission's ordering the license conditions that Intervenors request and Federal Power Commission jurisdiction? . . . . . . . 92 May Consumers Power Company refuse to deal with Intervenors because of its ownership interest in either the Midland or other large scale plants or trans-ission facilities?. . . . . . . 100 Do the Intervenors want the same things that are provided for in the Consumers Power Company interchange transactions with Detroit Edison Company and other major investor-owned utilities? . . . . . . . . . . . 101 Can the policies of the antitrust laws be reconciled with the denires for "coordina-tion," uhich implies agreement and coop-eration among entities?

. . . . .. . . . . . . . . . 102 ii

Considering that there is restric ti ve retail are likely to flow Intervenors the relief they seek?

frem an AEC order ch anting

, . . . . . .. . . . 104 Do the activities complainea of "per se" violations under the antit constitute V. rust laws? . . . 109; JUSTIFY DEMYING OR LIMIT DO MOT A. , . . . . ..

, The Profitability . .. 111 Defense.

. . . . . (" Tax-financin g ")

B.

........ .. . .. 111 Harm to Consumers Power Company . . .

C. .. . . . 119 State Law Defense .

D. .......... .. . . . 121 They Can Buy From Us Defense E.

They Are Too Small Defense

......... .. 123 i F. ........ .. .. 126 VI. The "You Never Asked eFor ense It". D. .f ..

126 i

EQUALIZED RESERVES . . . . . ..

ON . RESERVE VII. . . . . .

... . 127 CONSUMERS OPERATIONS .

POWER. POLITICAL COMPANY NQUIRY INTO CONCLUSION . ..

't

. . 134 139 a

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-,, n -.e -

4 CASES:

Page Admiral Merchants Motor Freicht .vUnited S ta tes ,

321 U.S.

404 F. Supp.

802, 353 (D. Colo., 1971), a f firmed rehearing denied 404 U.S._

987 .........

85 Alabama-Tennessee (CA 5, 1966), Peter Co. v. FPC, 359 F.2d 318 certiorari denied _ 385 U.S. 847 ........

119, 12 0

_American Tobacco Co.

328 U.S. v._ United States 781 (1946) ........................... ...... 71 Associated 326 U.S. Press v. Jinited States 1 (1945) .............................. ..... 57, 60, 69 Atlantic Refining Co._ v. PSC of New York 378 (1959)

............................,.360 U.S.

............. 85 Baltimore and Ohio Railroad Co. v.

JJnited S ta tgs,. 2 64 U.S. 258 (1924) ................... 61

_ Bell Teleobone Co. v. J020, F. 2d _

(CA 3 No. 74-1386, September 11, 1974)

.............. 95 -

Burrouva of Lansdale v. FPC, 494 F.2d 1104 (1974) ..... 35 California v._FPC, 369 U.S. 482 (1962-)

................ 138 California 444 U.S. Motor Transcort Co. v. Trucking Unlimite 508 (1972)

.............................d, .... 138 Ci H an 109 (CAof Lelincton 4, v..EEC, 295 R. 2d 1961) .............................. ...... 114 City of Pittsburah v. FPC (CADC, 1956) ...........,.237 F. 2d 741 City of Statesville v. AEC,

........................... 89 4 F. 2d 962 (CADC, 1969)

..........41

......................... 7, 64, 75

_ Colorado Continental Antidiscrimination Airlines Co., Commission v.

372 U.S. 714 (1963) ......, 88, 94

_ Continental 370 U.S. Oil Co. v. Union Carbide Corp .,

~ _

690 (1962)

................................ 80

(, .. -iv-

~

Cases (continued) Page Denver and Rio Grande Western Railroad Co. v.

United Stateg, 387 U.S. 485 (1967)........... 89 7-E,s tern nai_lror d Conf. v. Noerr Freich t, Inc., 365 U.S. 127 ('SJ7) .............................

l?r, 137-138 Eas tman KcSak Co. v. S_outhern Photo Co.,

273 U.S. 359 (1927) ................................. 57, 59 Iig; v._Svenska Amerika Linien, 390 U.S. 283, (1968) ....................................... 89 FPC v. Florida Power & Lich t Co. , 404 U.S. 453 (1972) .... 122, 138 FPC v. Hunt, 376 U.S. 515 (1964) ......................... 85 FPC v. Idaho Power Co., 344 U.S. 17 (1952) ............... 11, 88 FPC v. Sierra Pacific Power Co., 350 U.S. 348 (1956) ........................................ 93, 120 FPC v. Transcontinental Gas Pipeline Coro.c 365 U.S. 1, (1961) .............................. 89 FTC v. Cement Institute, 333 U.S.

683 (1948) ............. 61 FTC v. Motion Picture Advertising Service Co., 344 U.S.

393 (1953) ....................... 102 FTC v. Texaco, 393 U.S. 233 (1968)'....................... 101 Fortner Enterprises v. U.S. Steel Corp.,

394 U.S. 495 66, 71 (1969) ....................................

• jGainesville Utilities Dept, v. Florida Power Coro., 40 FPC 1226 (1968), 425 F. 2d.

1196 (CA 5, 1970), 402 U.S. 515 (1971) ...........,,,,,, 45, 66, 130<

134 Gamco, Inc. v. P_rovidence Fruit and Produce Buildino, Inc., 194 F. 2d 484 (CA 1, 1952)........................................... 61 G.arratt v. Dailey, 46 Wash. 2d 197, 279 F.

2d 1091 (1955) ....................................... 54

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Cace (continued) Page

• Gulf States Utilities Co. v. PEE, 12, 35, 's 411 U.S. 747 (1973) ...................................

?l, ?2, 1; 140 Hecht v. Pro-Football, Inc., 444 F. 2d 931 (CADC, 1970)

...................................... 107, 120, 139 Idaho Power Co. v. United States, 344 U.S. 17 (1952) 11, 83

> International Business Machines v. Uni ted S ta tes , 298 U.S . 131 (1936) ....................................... 74, 141 Interna tional Salt Co. v. United States, 332 U.S.

392 (1947) ............................................ 72, 122 La faye t te , La. v. AEC, 454 F.2d 941 (CADC , 1971) a f firmed sub. nom. Gulf Sta tes Utilities Co. v. FPC, 411 U.S.

747 (1973) ............................................ 66, 130

_Lorain Journal Co. v. Uni ted S ta tes , 342 U.S. 143 (1951). 59 Martin v. Hunters Lessee, 1 Wheat. 304, 1816 ............ 122 Municipal Electric Assoc. of Mass . v. SEC, 413 F.2d 1042, 419 F.2d 757 (CADC, 1969) ....................... 12, 61 Munn. v. Illinois, 94 U.S. 133 (1877)

................... 11 New Encland Power Co._ v. FPC, 349 F.2d 258 (CA 1, 1965). 136 NLRB v. Virginia Electric Co., 314 U.S . 469 (1941)

...... 120 Niagra Mohawk Power Co. v. FPC, 379 F. 2d 153 (D.C. Cir. 1967)................................. 87-88

• Northern Natural Gas Co. v. FPC, 399 F. 2d 953 (CADC,

' 1968)............................... 12, 89, l 105 Morthern Pacific Railroad Co. v.__ United 71,72, l

States 356 U.S. 1 (1958)............................. 122

• Otter Tail Power Co.

v. United States, passim I

410 U.S. 366  !

(1973)..................................

Packaged Prograic, Inc. v. Uentinchoune Broadcasting C o ._ , 255 F. 2d 700 (CA 3 1958).......... 61

(

Panhandle Eastern Pioelino Co. v. Public Service conminnion, 332 U.S. 507 (1947) ............. 12, 92 Parker v. Brown, 317 U.S. 241 ( 19 s M . . . . . . . . . . 'c- 'aa

Cases (continued) Page Pellers Co. v. Wendt, 260 F. Supp., 193 (WP Wash.,

/' S.D., 1966) .......................................... 122 Public Service Commission of New York v. FPC, F.2d , (CADC, 1974) ......................... 93 Richmond Power & Light v. FPC, 481 F.2d 490 (CADC, 1973), cert. denied sub. nom. Indiana and Michigan Electric Co. v. Anderson Power & Light, U.S. , 38 L.Ed. 2d. ........................... 1, 36, 93 111 Russell v. Farlev, 15 Otto 433, 26.L.Ed. 1060 (1882) .. 85 Sacramento Coca Cola Bottlina Co. v. Chauffeurs Local 150, 440 F.2d 1996 (CA 9, 1971) certiorari denied 404 U.S. 826 (1971) .................................. 138 Scenic Hudson Preservation Conference _v.

FPC, 354 F. 2d 608 (CA 2, 1965) .................-..- .

C9 Schine Chain Stores _v. United States, 334 5.9 U.S. 110 (1948) .....................................

Silver v. New York Stock Exchance, 373 U.S. 341 (1963) ........................--..--

-* 57 Six Twentv-1 Tine Proditctions , Inc. v. Roi. lins Telecastine, Inc., 365 F.2d 478 (CA 5, 1966) ........ 61 Southe rn S teamship Co. v,. NLRB, 3'16 U.S. 31 (1942) .... 88, 93 Standard Oil Co. v. United States, 337 U.S. 293 (1949).. 73 Swift & Co. v. United States, 196 U.S. 375 (1905) ...... 88 Texaco v. FPC, 290 F.2d 149 (CA 5, 1961) ................ 85 Udall v. FPC, 387 U.S. 428 (1967) ....................... 89 United Church of Christ v. FCC, 359 F.2d 994, (CADC 1966) 425 F.2d 543 (CADC, 1969) ....................... 89 United Gas Imorovement Co. v. Callery Pronerties, 382

. U.S. 223 ............................................... 85

\_

- United Gas Pipaline Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) ......................................... 93

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Cases (con tinued)

Page United 657 Mine Workers of AmericaPev (1965)

.........................nnington,.381 U.S.

/~

.................... 136, )

• F.2d Uni 416 ted (CA S ta2,tes v. Aluminum 1945) _ of Co.America , 148 138

.................................. passim

_ 376 United U.S. 658 States(1969)v. El Paso Natural Gas Co.

_ United States v. Griffith,.................................... 12 334 U.S. 100 (1948) ...........

JUnited States v. Loew's Inc., 371 U 59, 61i 38 (1962) 122, If

......................S. ......................

JUnited States v. Masonite Coro., 71, 72 , .

265 (1942) U.S.

....................316 88

_Ilnited Tra Co., States 173 F. v. Ne.w York Great Atlantic 2d 79 (CA 7,

_ United States v.' 1949) ..................... 101 Bank,. 374 U.S. Philadelnhia Nationa 3 21 (19 63 ). . . . . . . . . . j.

_ United States v. Peadino 3 Co., 95, 111, U.S. 26 (1920)

.............353

_ United States

...................... 61, 67, d v._ Terminal Railroad jhssoc. of St. Louis, 244 U.S. 380 (1912)

_ United States 57, 60, 6.

101 v._ United Shoe Machinery Corp., 110 F. Supp. 295 (D. Mass . ,

1953) affirmed oer cu 521 (1954) . . . . . . . . . . .riam,_ 347 U.S.

............................. 10, 43, 61

_ Utah Co., Pie Co. v. Continental Baking 386 U.S. 695 (1967)

_W. Montague'Co.

......................... 111, 120 v._ Lou 38 (19 04 ) . . . . . . . . . . .ry , 193 U.S.

_W hitten, Jr.. ..........$.................... 69 Builder, Inc.,Inc. 424 v. F.Paddock Pool 2d 25, (CA_

1970)

..........................1,

...'.............. 107, 120, 1)

(.

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Cases (continued)

Page

,.. W oods Exoloration and Producino Co. v.

Aluminum Co. of America 438 F. 2 1286 (CA 5, 1971) ...............d.................. 107, 12@

139

_Yick Wo.v. Hopkins, 118 U.S. 356 (1886) 53, 102 STATUTES:

42 U.S.C. S2135 (c) Atomic Energy Act

$1056, 2011 et _ sea.

Clayton Antitrust Act

.............................. 55, 54, ?

85, 101 15 U.S.C. 12-27

................................... 55 Federal Power Act 16 U.S.C. 824 (d) (e)

.............................. 61, 94 Sherman Act 15 U.S.C. 1,2

.................................... 55 Federal Trade Commission Act 15 U.S.C. 45

..................................... 55 ND LEw .................................. ............. 99 SD Laws

.............................................. 99 Cases. chiefly relied upon are denoted by an asterisk .

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UNITED STATES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION In the Matter of )

) Docket Nos. 50-239A, 50-330A Consumers Power Company )

Midland Plant (Units 1 & 2) .)

INTRODUCTION AND

SUMMARY

OF ARGUMENT

1. This brief on proposed findings is written on behalf of the Cities of Coldwater, Grand Haven, Holland, Traverse City and Zeeland, the Northern Michigan Electric Cooperative, (" Northern")

4 the Wolverine Electric Cooperative ( " Wolverine ") , and the Michigan Municipal Electric Association, ( "MMEA ") whose membership consists of nearly all of the municipal electric utilities in Michigan

( "In terveners ") .

2. While there may be variations in their operations, these i

systems are all dependent upon (and surrounded by) far larger neigh-boring. utilities for wholesale power supply and/or coordinatb n of their own generation. Thus, in one way or another, they depend upon

• /

domin. ant utilities who function as both suppliers and competitors. -

• / Compare Richmond Power & Lich t v. FPC, 481 F. 2d. of 490, 493 496-497. (CADC, 1973), cert. denied sub. nom. Indiana and Michiaan Electric Co. v. Anderson Power & Light, U.S.

~38 L. Ed. 2d.

a-r w- w

3. The intervenors' request tha t , if the Atomic Energy

(~ Commission licenses Midland Units I and II, they be granted (1) a right to direct ownership participation in the units; (2) the ability to purchase "back-up" power from Consumers Power Com-pany ( "Applican t ") for their ownership interest; (3) the ability to participate in coordination and interchange transactions with Applicant on an " equalized" reserves basis and (4) transmission services priced at nondiscriminatory rates, terms and conditions, which do not exceed the costs for the services involved. Such re-lief would provide them rights equivalent to those provided be-tween Consumers Power Company and the other dominant utilities in i the state. We attach a copy of Intervenors' proposed license con-ditions as Appendix A. We note that our proposed license conditions are. general, leaving much of the implementation to the Federal Power Commission or, if necessary, to enforcement hearings.

4.

Intervenersarefacedwi{hmanyproblems. Some are not at all unique to themselves, such as rising fuel costs and uncer-tain availability or needs to harmonize their actions with environ-ment. However, the Intervener systems also are faced with the ad-ditional problems stemming- from Consumers Power Company 's domina-d tion of its area of service.

5. Consumers Power Company has over 1,180,000 electric cus-tomers. It has annual electric revenues over close to five hundred l

million 'ollars d and operatingsrevenues of nearly eight hundred X'

-thirty-five million dollars. Its utility plang is valued at over c

three billion dollars of which electric is closo to two billion

-m-m dollars. 1973 Annual Report to S tockholders, p.

1,20. Further-

/ more it serves nearly the entire lower peninsula of Michigan, ex-cluding the Detroit area and the extrce.e southwest portion of the state.

6. Consumers Power Company is electrically coordinated with other utilities of equally large size. It closely integrates its operations with Detroit-Edison Company. Further, it has coordina-tion or interchange urrangements with the Hydroelectric Commission of Ontario (" Ontario-Hydro"), and the major utilities to the south, including Toledo-Edison, Indiana & Michigan and Northern Indiana Public Service Companics. "Prehearing Brief for Applicant,"

pp. 2-3. (November 20, 1973). Indeed, it has a coordination ar-rangement for Luddington power with Commonwealth Edison Co., as far away as Chicago. Ex. 11, 118. As the Consumers Power Company stated in one of its applications to the Federal Power Commissi3n, its interconnection and coordina tion with other utilities has an impact on power supply in Michigan, Indiana, Illinois, Ohio, Ontario and indirectly, into New York State. See generally, The Matter of the Anolications of the Detroit Edison Comoany and Consumers Power Com-pany, Docke t Nos . E-72 06, E-8308, especially, pp. 7-11 (June 12, 1974),

The Company has generating units as large as 800 mus. and in con-junction with other utilities is constructing 765 kv transmission to further coordinate its activities.

• / Generation capacity statistics of individual units are re-

" ported in the 1973 Annual Reoort_of Consumers Power Comoany to the Federal Power Commission, p. 432. They are also contained in Ex. 1001, pp. 3-9.

3--

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7. Especially in -the context of the control of Consumers Power Company of the dominant bulk power genera tion and transmission

~

, facilities, the relative size differences between Consumers Power and the Interveners create obvious - probleas for the latter. As Consumers Power Company readily agrees, economic power supply re-

, quires coordination.1/ Indeed, the almost universal coordination among'large investor-owned utilities including Consumers Power Com-pany establishes its value. Perhaps, most of all, an availability-of alternatives is a prerequisite to obtaining economic power supply.

(E.g., Gutmann, pp. 7-8, 14-18, 2 0-22 ; TR. 4664).

8. As we hope to develop more fully, there are two kinds of restrictions on access to alternative power supply faced by Inter-venors. The first is technical in nature. They do not own or control any bulk power generation and. transmission facilities of the size or magnitude of Consumers Power Company. To the extent they are denied access to Consumers, Power Company's high voltage transmiss' ion and large " base load" generation facilities, their ability to achieve economies of scale and access co bulk power supply alternatives is limited. Therefore, they must rely on T. ore

• / See Slemmer, pp. 6-7. See generally Ex. 1005, Deposition of

, Harry R. -Wall, which outlines the advantages of coordination und of. Consumers Power Company's coordination agreements and Ex. 1004, pp. 167-172 (Aymond) . We also refer generally to the testimony of intervenor witnesses Gutmann, Chayavahanangher, Rogers, De-

-partment of Justice Witnesses Mayben and Wein and AEC staff wit-ness Muller. We believe this point is not disputed and, indeed, the record takon in its entirety is a testament to coordination advantages.

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costly smaller units or purchased power from the Applicant. More-over, by being blocked from access to transmission, they cannot obtain access to sufficient external coordination to support large base' load gen'eration or transmission facilities'on their own system to achieve similar economies of scale to those Consumers Power Company ran achieve internally because of the large size of its system.

(E.g. , Gutmann, p. 12, 14, 29, 34-35; 44-64; Chayavad-hanangkur: 10-17: 50-90). */

9.

The second restriction faced by Intervenors is contract-ual. There are many ways wholesale power is bought and sold. These include " emergency" power, " maintenance" power, sales from particular units, sales or exchanges of " economy energy", transmission services and a host of other individualized types of transactions.

(E.g.,5518-5531. See generally Ex. 1005 ; Mayben, beginning 2538) .

However, analagous to a stock exchange or commodities exchange, these transactions are operated within the context of legal " inter-change " or " pooling" agreements . (5531-5532; 5549-5550; Gutmann, 5-8: 4464). Being barred from nondiscriminatory interchange agreements, they are barred from the markets where such power transactions are conducted.

• / Citations to the direct testimony, incorporated into the re-cord, are cited as above.

Other record references generally omit wi tness designations, u

l

10. By its control of bulk facilities for generation and trans-mission and the related contractual control of access arrangements, Consumers prevents the Interveners from developing the same economies of scale it has already achieved. The following are specific ex-amples of Consumers' anti-competitive conduct, which are supported by the record:

(1) Refusal to grant access to its nuclear facilities through the sale of a portion of the plant or " unit power" from it; (2) Refusal to transmit power from other bulk gener-ating facilities other than Consumers; (3) Denial of access to nondiscriminatory coordination.

in the manner which Consumers coordinates its own activities; (4) Tying the sale of power services available to interveners so that their choice of individual ser-

~

vices is limited unlawfully; (5) Requiring excessive reserve capacity, as a condition for coordination beyond that which Consumers maintains for its own system; (6) Maintenance of unlawful wholesale territorial agree-ments; s

. (7)- Systematic attempts to acquire smaller systems or limit their development.

gat

11. Psychoanalysis of legislative intent is an often hope-loss task. However, the 1970 amendments to the Atomic Energy Act are a clear Congressional response to Statesville. */ Statesville affirmed a grant of an atomic energy license unconditioned as to its ant! competitive impact on grounds that the units involved were

" experimental." Congress strengthened the Atomic Energy Commis-sion's antitrust review commanding the Agency to determine whether new plants will " create or maintain a situation inconsistent with the antitrust laws" and further confirmed the Agency's conditioning power, where it found such an anticompetitive " situation" to exist.

Atomic Energy Act, S1056, 42 U.S.C. S2135 (c). The statute focuses the Atomic Energy. Commission on a problem (the " situation incon-sistent") and grants it the power of correction.

12. The major situation that is inconsistent with the anti-trust laws in Michigan is Consumer Power Company's control of the bulk power facilities of generation and transmission and the re-lated contractual control of interch'ange arrangements to bar Inter-venors from noddiscriminatory access from large-scale generation, transmission and coordination. The building of large new nuclear units and attendant new 345 kv transmission will do nothing to di-minish this control.

l

• / The case makes plain that a contrary result would have fol- l lowed had the Court found the proposed nuclear plant to be

" commercial", as is llidland. Citv of Statcari310 v. AEC, 441 ,

r. 2d 9G2 (CADC, 1959).

u .

13 Indeed, its control of essential transmission services i ,

Consumers Power Company controls the access of Interveners to al-ternate sources of supply.

If Consumers refuses to transmit power from suppliers outside its service area, the Interveners are effec-tively denied access to alternative markets.

14.

i A bottleneck is also created if Consumers is allowed to develop nuclear power without giving access to smaller utilities Who lack the funds to develop nuclear energy on their own. In view of the projected shortage of fossil fuels, nuclear power may soon 1

become an essential source for an electric utility that seeks to maintain competitive rates. / Nuclear power has been developed with public funds, so their is no special ownership interest Consumers has in nuclear technology.

By-its refusal to acquiesce to invest-ment by Interveners in~ the Midland plants, Consumers is using publi property, namely nuclear technology, to develop an essential source J

of supply for itself, while refusing access to smaller systems with a greater *need for alternate sources of supply.

• /

The Federal' reveals tha t' inPower 1990, Commission 's Na tional Power Survev nuclear power will account for one-half the energy production Ex. 1001, JC-1, p. 5. of the nation 's major utilities .

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- 15 . The Applicant does argue a number of " defenses," ranging from ~ the: allegation .that 'its conduct has been innocent in a sense of legal scienter to that in the economic nature of things Con .

sumers Power Company's domination of power supply alternatives justified. It further argues that since the Intervenors can sur-vive without a'ccess, they are not entitled to it. However, Con-sumers Power Company ignores that is its the size of domination of-the Lower Michigan Peninsular which allows it to build large power plants, including Midland,to build and maintain high voltage trans-mission, to have access to coordination, and to exercise the power to exclude. It is because of its control of the bulk power genera-tion and transmission that Consumers Power Company and not Petoskey is applying for a nuclear license. */ Its arguments for denying 4

relief ba' sed on economics or ownership rights are arguments to continue the situation inconsistent.

16. As to the claim of innoce,nce, Consumers Power Company ignores that the antitrust laws have a practical purpose. These laws are a means of limiting unbridled economic and often associated political power.

A classic test has been market " domination."

Thus, in Alcoa Judge Hand long ago rejected the contention of the 1/ Compardbive generation data and in' formation concerning the relevant size ef'the' applicants and intervencr -systems on contained in 4 .Ex. 1001; 5131-5133. They are also found in the Company 's annual

" Form 1" report to the Federal Powar Commission (1973), especially pp. - 432-444. Compare Gutmann pp. 12, 19:4664. The coordina tion jw, agreements are extensively analyzed in the record, especially by witnesses Mayben and Gutmann and Ex.1005. See also, e.g., D.J.

3 1, 18-2 1,73-73a, 74-78, 227.

unconscious acquisition of monopcly power. A giant corporation

-does not just happen. United States v. Aluminum Co. of America, i 148 F2d 416 (CA 2, 1945). Accord, United States v. United Shoe ,

Machinerv Coro., 110 F. Supp.'295, 344-346 (D. Mass., 1953, Wyzanski) , affirmed per curiam, 347 U.S. 521 (1954).

17. The making of license applications, contracts, inter-change agreements and expansion plans inevitably lead to a result.

Indeed, direct proof of intent to control often is difficult be-Jcause the expansion process is contained in a myriad of small trans-actions and only sporadicilly is the overall design articulated.

It does not need to be. Besides, Consumers Power Company's eco-nomic justifications for its anticompetitive conduct in this case admit the knowledge and, indeed, the purposeful process of ob-taining and maintaining dominant control over the bulk power fa-cilities .

.n Michigan's lower peninsula.

18. *In the electric industry, the smaller systems can achieve

, similar economies through coordination as larger systems can achieve i

through sole ownership. In fact, coordination is a method of  !

1 operating independent utilities akin to a single operating l l

entity, without requiring sole ownership. Thus, coordination allows for the opportunity to obtain both operating efficiencies and inde-pondent decision making. It is this latter alternative Consumers Power Company seeks to avoid. Indeed, like Otter Tail, ultimately, Consumers Power Company's main defense is that through coordination l

__. _ -__10 -

l l

i the smaller systems can grow and prosper (to the alleged detriment of Consumers Power Company) and it is this that ought to be stopped.

19. However Consumers Power Company may interpret Otter Tail */ and the " bottle-neck" monopoly cases, **/ these cases es-

, tablish that, if a business concern chooses to control a facility that can " bottle-neck" competition, it must grant equal access to potential users of that facility. Indeed, even if this pro-

) position were not valid as applied to all companies, in the case of utilities having public service obligations, ***/ and broad franchise rights, ****/ equity would demand it be applied here.

The courts have so ordered.

20. The bottleneck monopoly rule is not new. In various forms, the requirement that one who possesses an essential facility has obligations to serve is rooted deep in Anglo-Saxon law. The innkeeper in King Richard's day could not refuse service to the tired traveler; nor can the railroad which controls the path under the river dis-criminate against other railroads. The principles apply to Con-sumers Power Company.

• / Otter Tail Power Co. v. United States, 410 U.S. 366 (1973).

• • / See cases cited Section II , infra.

• • • / See, e.a., Munn v. Illinois, 94 U.S. 133 (1877), FPC v.

Idaho Power Co., 344 U.S. 17, 23 (1952).

t

• • • • / Pace, P. 14-15, 19-20: 7239.

\

21. As in many other fields, various Federal and Sta te agencics have some jurisdication over Consumers Power Company. Relief can be readily fashioned to allow for an exercize of their judgments.

However, the law does not intend mutiple jurisdictions to create stumbling blocks for each o ther -- or a shell game for litigants to find the "righ t " agency. This too is a teaching of Otter Tail.-/

22. Consumers Power Company has no complaint if this Commission conditions a granting of a nuclear power license on its doing what

• / In Otter Tail, the defendant was arguing that there was a

" primary jurisdiction" in the Federal Power action so that the Court should stay its hand in ordering "whe e ling " . Brief for Appellant, Otter Tail Co., No.71-991, O.T., 1971, pp. 22, 25-45.

This position of Otter Tail was in marked contrast to a general industry position before the Federal Power Commission, tha t that Commission does not have jurisdiction, or has limited juris-diction, over the subject matter. For example, until recently Consumers Powcr Co. refused to concede the Commission had any jurisdiction over its wholesale power business. The !:upreme Court viewed the problem practically and affirmed the District Court mandate that Otter Tail had to " wheel". However, the Supreme Court also later affirmed a D.C. Circuit decision in Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973), s tating that the Fed-eral Power Commission had to consider anticompetitive impact in reviewing financing applications under Section 204 of the Federal Power Act. Finally, in United S tates v. ElPaso Natural Gas Co.,

-376 US 658 (1969), the Supreme Court ordered the Federal Power Commission not to interfere in the exercize of its certificate jurisdiction with what could be the result of a then pending District Court suit. The thread in each of these cases, and many o thers , is that an agency or court entrusted with a juris-diction should e::ercize its jurisdiction in recognition of the general body antitrus t law and tha t tha claim of potential jurisdiction vested in other .'.gencica or courts vill not allow a shield to protect againct enforcemcht. Eg. , Northern Na tural

(, Cas Co. v. FPC, 399 F. 2d 953 (CADC, 1968); Municipal Electric _

Association of Mass. v. SEC, 413 F. 2d 1052, 419 F. 2d. 757 (CADC, 1969), Panhandle Eastern Pineline Co. v. Public Service Commicmion 332 U.S. 507 (1947).

~~

another agency or court might also command. The question of potential

" con f i.ic t" is not whether another agency can order similar rt t..cdial relief, but whether such action is likely to conflict with an order the second agency must make in the exercise of a superior juris-diction. Certainly, if a propar order of the Atomic Energy Commission might lead to a greater competitive market structure, there is no ex-cuse for not doing so because the Federal Power Commission or some court might not go so far. 'Nor is there any demonstration of superior Federal Power Commission jurisdiction. Otter Tail Power Co. v.

United States, suora.

23. The Atomic Energy Commission's conditioning power is not lim!ted. Section 105c addresses itself to a practical problem of the pre-existing domination of the electric market by certain large investor-owned utilities and the likelihood that, if unchecked, the unconditioned licensing of nuclear power plants to such entities would only make the situation worse'. While in its pre-trial brief, Consumers Power Company has argued for a narrow construction of the Atomic Energy Commb sion Act, the conditioning power of the Commission is not' limited. Nor. is there any public interest reason tihy it should be. As the company itself agrees, the Midland units are part of and supported by an integrated system of generating plants tied together by transmission facilities, whose operations are made feas-ible by broad coordination agreements. (Slemmer, pp. 13-14:8837; A,c :ord, Chayavadhanangkur, pp. 16-17:5090; Rogers, 5522; 5525-5529).

24. Specifically, because of its size, Consumers Power Company can economically take advantage of nuclear power develop-ment, largely Government financed. IIowever, it has an attendant obligation to allow participation by smaller systems to prevent their being frozen from the opportunity of obtaining access to this major form of generation. Further, in recognition that the Midland units are to be part of an integrated network of coordinated units, Consumer Power Company has an obligation not to bar access by Intervenors to its transmission facilities and coordination agreements on equivalent terms and conditions to those made available to itself and its coordinating partners. The obligation stems from the use made of such physical facilities and legal ar-rangements by Consumers Pouer Company itself.

25. As we discuss infra, nuclear power will have a profound impact on Applicant's system. Its value will be enhanced by the Company's ability to operate it in conjunction with coordinated units on its system and other systems due to broad operating agree-ments between- Consumers Power Company and other utilities. In view of the value of such coordination to it, Consumers Power Company cannot lawfully continue to freeze Intervenors from equal advan-tages. Thus, while Consumers Power Company resists antitrust li-conse conditions, it ignores that the Midland units themselves are being constructed i1 the conte::t of the Company's transmission and n

and coordination availability. To foreclose Intervenors from equal access to transmission and coordination and ability to in-tegrate Midland power into their systems--or substitute for it--

will allow the licensing of Midland to result in undue economic advantage to Consumers Power Company, a situation Congress ex-plicitly sought to avoid.

26. Agencies without explicit antitrust jurisdiction have been reversed for viewing their function narrowly. See Section 3B ,

inf22 . Here the Commission has been given a iurisdiction to license fa cilities basic to the electric power industry, which facilities may affect the economic structure of the entire industry.-/ The Commission cannot fail to resolve the problem presented by con sumers Power Company 's domination and be true to the responsibilities given it.

27. To conclude this introductory statement, Intervenors would state that they recognise that wholesale power coordination has developed into the means whereby utilities can take advantage of economies of scale. From an operational standpoint, this re-quires cooperative effort.

In this context Intervenors regret

• /

For example, it is estima ted that by 1980 the indus try will be 28% nuclear and by 1990 it vill be 49% nuclear.

This figure under-s tates Consumers Power Company 's projected nuclear dependence.

Ex. 1001 JC-1, JC-3.

t

that settlement has not boon reached. However, they are constrained to point out to the Board that failure to reach settlement, the far preferable course, would appear to have been influenced, judging from its pleadings, by the failure of Applicant to accept the basic propositions that Otter Tail and other cases clearly mandate it to deal with Intervenors on similar terms as it deals with other utilities (i.e., not to deny access to its own advantage).

Indeed, its legal position is that it may take advantage of its superior bargaining position (or economic situation) to exact ex-tra benefits from Intervenors as a price for coordination.

28. As we explain later, as a matter of law we believe the Atomic ; Energy Commission' may have to reach the details of coordina-tion agreements and rates to assure non-discriminatory access to nuclear generation and attendant facilities (or the opportunity to substitute for such access). However, the Intervenors believe i '

that these details can likely.be worked out among the parties, providing the Board establishes a clear declaration of obligations, such as are contained in our proposed license conditions or the i

A.E.C. staff guidelines. It is the absence of a clear understanding of the existence of such obligations that frustrates negotiations regarding specific terms and conditions. In other uords, if the i

Board affirms rights of access to the Midland units, transmission a

i i l- __

and coordination on equal terms as Consumers Power Company now possesses, it well have equalized the bargaining position of the parties, which is now woefully unequal due to Intervenors' depen-dence upon Applicant -for meaningful coordination.

29. Finally, Intervenors would again comment on the alter-nate jurisdiction question, since it is so often raised. We be-lieve any government agency has an obligation to solve problems in a practical manner. Otherwise, the task of smaller entities attempting to assert rights against larger ones becomes almost I

impossible. Intervenors are aware of some judicial bodies having

- potential jurisdiction over some or all of the problems here presented. At least some of them are considering a District Court action, which could deal with questions of damages for past action and other litigation to secure full transmission and coordination rights. However, Intervenors submit that they ought not to have to embark,cx1 litigation before cour'ts and other agencies to estab-lish basic principles, most likely to be met with the argument that the Atomic Energy Commission has " primary" jurisdiction. Further-more, such actions are costly and may make more difficult settle-ment of any one action. Therefore, they urge on the Board that adrainistrative efficiency demands reaching issues raised in this proceeding.- We also suggest that in the long run a simple declara-

-tion of rights will establish a-framework for agreement among the  ;

partics.

I I. ~ COMSU"ERS poi'ER COMPANY'S DOMINATION OF THE BULK POWER FACILITIES IN THE LOWER MICHIGAN PENINSULA HAS RESULTED IN A SITUATION INCON-SISTENT WITH THE ANTITRUST LAWS A. Consumers Power Company Dominates Bulk Power Generation and Transmission Facilities.

30. Consumers Power Company dominates e'lectric service in the lower Michigan Penincula outside of the Detroit area. Each of the individual Interveners (including. the Michigan Municipal and Cooperatives Power Pool, "MMCPP") are surrounded by and dependant upon this dominant electric system for coordination and in the case of purchasers, for service. And, as we shall discuss, infra, in its operating arrangements, the Company is closely tied to Detroit Edison Company. The Company also operates natural gas distribdtion facilities throughout the lower Michigan Peninsula.

31. Consumers Power Company ',s 1973 load was 4,394 mw. Its 1972 nameplate ratings were 2846.0 ttu fossil steam, 886.7 nw nuclear, 68.0 nw hydro-electric and 496.9 mw other, or 4,297.6 mw total generation.

Its '1982 projections shortly after Midland should be on the line total 11,994.7 mw of which 4,568.0 nw will be nuclear. */ Ex. 1001, JC-3.

• / These figures may vary depending upon reapplication for the Quanticassee units and the timing of their being put into service. :.273 genera tion c t;t' -':ics Era c'ntained Et pp. 432-442 -A of i's 2nnut?. neport to the Fcdcral Powar Comnission, which '- e been supplied the Doard by Concuners Power Co.

1

~

32.

In 1973, Concumors Power company nad approximately 1,180,800 936,300 gas customers. Its total electric

' olectric customers and sales were 24,102,000 mwh or $495,723,000 of annual revenues.

To tal re tenues were $834,954,000. The Company has total assets of

$2,844,847,574 and an electric utility plant of $1,909,907,524.*/

By contrast, the total loads of Interveners are less than the power to be generated from the Midland units alone. Apart from Lansing, than 30 nnt and Lancing the Interveners own no generating units of more has no unit greater than 160 mw. Gutmana, p. 12:4664. The Midland units, are proposed at approximately 1,300 mw of base load power and associated energy, one of the units to provide 800 aw of power.

Application. Chayavadhanangkur, See p. 3:5090. Ex. 1001, JC-3, JC-In addition, Consumers Power Company 4 for interveners ' loads.

See 1973 now has a number of units of above 500 mw on the line.

Annual Report to Federal Power Commission p. 401 h.

the Board can 33' Through an examination of Exhibit 1001, readily examine the size differences between Interveners and Con-Thus, Consumers Power Company has existing sumers Power Company.

Annual Report to Federal Power Commission, generation of'4298 mw.

Coldwater, Hillsdale and supra. Holland has less than 100 mw.

• /.- These figures are from the 1973 Consumers Power Co. Annual Report, which has been supplied the Board by Applicant.

- Sco Ex. 21.

- 19 ~

/ ~

Marnhall each have less than 20 mv. The combined genera tion of the MMCPP, including Northern, Wolverine, Traverse City and Grand Haven, as well as Wolvorine's satellites, is less than 250 mv. Even Lansing, which is the_ largest municipal system in the state, has only 631 mw of existing generation as against a 1972 load of 321 mw. */

This is far less than could s.upport even one nuclear unit. Ex.

1001, JC-3 2694-26 95.

34. Because of the economies of scale in the electric in-dustry, there are clear advantages to having access to h rge scale generating units. E.g., 2556-2558, 2651-2652. Nuclear generation is becoming an increasingly important source of base load generation, so much so that it is projected by the Federal Power Commission's 1970 National Power Survey tha t in 1990, nuclear power will account for one-half of the energy production of the nation 's major utilities.

Ex. 1001, JC-1, p. 5. In applying for the Midland licenses, Con-sumers Power Co., " anticipates that the power produced from the -

units will produce as low, if not lower, cos ts in energy for base-load purposes as any other alternative." Chayavadhanangkur, P. 3, quoting Aymond, Ex. 1004, pp. 225-226. Moreover, the Company it-self recognizes the importance of the availability of alternatives,

• / The disparity of Lansing's generation and load also illustrates.

the difficulity of independent systems in the lower Michigan peninsula. Thus, due to the requirements forced upon it by Applicant, Lansing has been forced to operate with almost 100% ,

reserve capacity. And Lansing is not typical of the others. Compare DJ-1, DJ-20. Gutmann; pp. 19, 29-30: 4664, Ex. 1004, pp. 181-182. See 1003, 295-300.

-L

underscored by the uncertain availability of fossil fuels and the needs for environmental compatibility. Chayavadhanangkur, pp. 3-10.

I

35. Because of their size, Intervonors or other small systems cannot build nuclear units themselves. 2694-2695, 2808. Chayavad-hanangkur, pp. 10-12:5090. Therefore, unless they can directly buy portions of nuclear generation or power specifically assigned from them (unit power) , they will be barred from access to a major source of generation and perhaps from independent generation as well. Moreover, as witness Mayben and others testify, especially in view of increased fuel costs and decreased fuel availability, the installation of small units is becoming less and less economic.

(2806-2808). Congress did not intend that they be foreclosed i from such a major source of technology developed at government ex-pense. f/ (See 2797-2798, 2802, 2823-2826). See pp. 75-88, infra.

j 36 . Not only does Consumers Power Company own all la'rge base-load, generators in its service' area; but as has been testified

! to on this record--and is agreed to by Consumers Power Company--

it is this control of high voltage transmission facilities which

• / The issue is not whether nuclear ownership is preferable to other forms of ownership or purchased power as an objective matter (assuming this can be determined with any degree of certainty),

but whether the smaller systems shall have the occortunity to make that decision. The ultimate decision and responsibility for power supply should be that of the individual system and, in making this decision, small systems should not he foreclosed from nuclear ac-cess. It is noteworthy that, as evidenced by their actions, domi-nant utilitics, such as Consumers Power Company, believe this right is important.

allows for integrating its generation with its markets. This in turn allows for obtaining economies of scale. E.g., Pace, P. 38:

7239; Ex. 1005 P. 31-47,77; Ex. 1004, 166-167. For cost, environ-mental and market reasons, the smaller systems cannot duplicate Consumers Power's transmission network. E.g., 2811-2817. Through high-voltage transmission lines large amounts of power can be transmitted without substantial line' losses. Thus, for example, 345 kv lines integrate the Midland units into the Consumers Power -

Detroit-Edison systems. */ Moreover, for transmitting power over long distances (apart from coordination) high-voltage transmission is necessary. Ex. 1005, suora, Chayavadhanangkur pp., 16-19, 21-22:5090. Gutmann, pp. 13-22, 29-20:4664. **/

37. ' As is fully supported by the record, without access to such transmission the smaller systems are denied the opportunities to obtain alternate power sources and to coordinate with other systems, thereby depriving them of the type of economies of scale and of operational efficiencies possessed by Consumers Power Com-pany. Absent its large markets (or coordination with other systems having large markets) a utility cannot build large, efficient base load units. Without such markets, it cannot obtain financing for

• / We refer to the systems jointly, because they dispatch power

• • / jointly and for practical For,cxample, purposes a 230 kv line their systems1.6 costs approximately are a unit.

times a 115 kv line, but can carry 2.5 timas more power. Id.

Their " wheeling" serves environmental as well as engineering needs. E.g., Chayavadhanangkur. P. 26:5090. See Ex. 1004,

.k Pp. 181-182.

such units. Nor, can it sell enough power to pay for the carrying charges and expenses of units such as Midland. See references above. Ex. 1005, pp. 36-38, 77-78.

38. While to the extent that the general public consideres transmission facilities in any functional sense, it undoubtedly thinks of them as a vehicle for moving power analogous to a rail-way track bed or highway, transmission lines perform other distinct functions. Their greatest importance is to maintain sys tems re-liability.A! High-voltage transmission is necessary to transmit the power from large base load plants to market and to back-up such plants. For example, if a large 1,000 mw plant goes on or off the lino, an electric surge will result. There mus t be sufficient trans-mission capability available to absorb this surge. Similarly, the transmission lines connect varying generation sources. If one plant goes off die line, transmission facilities must be adequate to both absorb th*e loss of power from that plant and to instantaneously re-ceive the equivalent amcunt of power from other generating facilities.

39. A Part from loss of units, on a day-to-day basis transmission

• / For example, in a settlement approved by the Federal Power Com-mission last month, 60% of the costs ascribable to transmission were allocated to " reliability" purposes and only 40% to "trans-mission of power" purposes. Florida Power Corporation, FPC Docke,t No. E-7679 (5432). See Ex.'1004, P. 167, 169-170.

k

. 1

facilities allcw for the operation of the most efficient plants available to meet generation requirements. (2565-2566) It is the transmission network which allows computerized dispatching of power from the lowest cost unit available.

40. Transmission lines also "back-up" themselves. If a transmission line is placed out of service due to overloading or to damage from external sources (or simply due to construction or other planned service interruptions), other paths of power must be available. */ *

41. Even in the function of transmitting power, there are functional differences, higher voltages being necessary to trans-mit power great distances throughout entire regions and the lower transmission and subtransmission voltages being necessary to serve specific classes of loads or specific loads in local areas. The transmission facilities also make possible the receiving of power purchased by Applicant from other sources, including receiving and delivering interchange power. While functionally this may seem (and to a certain extent is) similar to the function of delivering power, it is the capacity in the large transmission lines, which allows

• / The various functions served by transmission to integrating systems and the relative efficient es i of higher voltage lines are found repeatedly in the record, including citations above. See gener-ally the following references : Ex. 1004, 168-169, 181-182, 1005, 44-47, 64-49, 1008, 214-215, Chayavadhanangkur, 16-19, 21-22:5090 m Gutmann, 13-22, 29-30:4664; 5430-5432. Mayben, 2556.

f

Consumers Power Company to interchange power with Detroit Edison Company, Ontario-Hydro or the M-I-I-O Companics to the South.

Transactions may include the transmission of firm powcr on a long-term, intermediate or short-term, or "when availabic" basis. It includes emergency power and economy exchange. The availability of transmission to facilitate such transactions allows both the

building of larger units and taking advantages of economies of scale (because of the making available of markets to sell excess power and the providing of "back-up" when the larger units are out 4

of service).

42. We break down the functions of transmission in detail to underscore the importance of Consumers Power Company's domination I on transmission to its ability to control power supply. */ The situation of a Coldwater, for example, which is denied access to coordination or interchange power even from other small systems underscores the importance of Consumers Power Company's control.

First, if in order to take advantage of economies of scale--or

• / The example is obvious in the case of a nuclear plant. A nu-

, clear plant may have an investment of anywhere from $500 - $1,000 kw. However, operating costs may be from less than 2 mills to 4 mills kwh. On the other hand, large fossil fuel units may have

, capital costs' as, low as $150 kw. However, especially in the light of higher fossil fuel costs, operating costs may be well over 2d kwh. At the prescat time oil has been soliing at $12/

bbl and con 1 as high as $51/ ton, which equates to energy costs of over 2d kwh. At the present time oil has been solling at $12/ bbl and coal as-high as $51/ ton, which equates to energy costs of over 2 d hwh . If a sys tem- can run a high capital cost nuclear plant con-tinually, the high capital costs can be ammortized and total power c6sts/kwh will be a less than ' conventional plants. However, if nuclear

'( ' plants must remain idic for substantial periods of time, . the plant becomes uneconomic and the system must use smaller less efficient unitu. Chayavadhanangkur, 2, 5-10:5090, Ex. 1005. i I

simply to expand its market--Coldwater desires to build a large plant even in relationship to its load, it cannot do so. It pre-i sently has a load of less than 20 mw (5426). Moreover, to sell i bulk power to other systems an'd thereby allow for building larger

units Coldwater must be able to purchase transmission services. If Consumers Power Company either refuses to sell transmission ser-vices or places unreasonable conditions upon such sales, Coldwater is restricted in the size of the units it may build. Similarly, if it wishes to take advantage of a large plant to be btdit by another system--say with the intention of its building an equally large plant sometime in the future--it cannot do so. Gutmann

17-18, 22:4664.

4 3 .- Consumers Power Company itself covers such a wide service area that for itself the problem does not arise. DJ-19. If it 1

, builds a plant at any available site on its system, it can use its own transmission to bring the power to market, including to its whole-sale power customers who cannot do the same. .

44. Assume that a Coldwater does build a relatively large unit and desires to tie into plants of other systems. It can do so only through use of the existing transmission facilities, again owned by Consumers Power Company. Thus, except to the extent that

! Consumers Paver Company will permit it to do so, Coldwater well not have access to emergency or maintenance' power'to back-up its plant;

_.nor can it coordinate its operations among a nuniber of plants so

that it can generate from the most efficient units related to its load curve. Pace; p. 35-68:7239 The transmission facilities give control.

45. And Coldwater provides an apt illustration of the detri-ments from not having access to coordination. Although having small plants, at the same time that Coldwater had 16.5 mw of generation and a 16.7 mw maximmn load it was paying Consumers Power Company for an additional 71.2 mu months */ of capacity through wholesale purchases. Ex. 1001, 5426. Thus, it either oAned or was purchasing capacity equal to 35% of its load. Alternatively, an independent system, even the size of Lansing, which does not desire to pur-chase power from Consumers Power Company had 631 mw of generation to serve a 321 mw load; Holland had 77.3 mw of generation to serve a 49.3 mw load. **/ (Chayavadhanangkur, pp. 20-21:5090). Con-trast the situation of the gigantic Consumers Power Company which had 1972 main system peak demand of 4,080 mw and nameplate capacity of 4,298 mw or reserves of 5.3% of load. Ex. 1001, JC-3, 1972 An-nual Report " Form 1" to the Federal Power Commission, p. 431-B. See

• / A mu month represents the capacity charge in megawatts on a monthly basis.

This equates to an average annual purchase of 5.9 mw, although in some months it would be higher.

• • / It should be noted that Consumers Power Company is fond of using l

l reserves figures much higher than it maintains. Thus, it will talk l of reserves over 20%. Such figures are usually " planning" figures.

Indcod, even its installed reserves figure usually do not include allcwances for out-of-scrvice plantc, such as Palisades. See 5523-5524.

1 also pp. 54-66.

46. Because of its ownership of transmission facilities throughout the Lower Peninsula, Consumers Power Company can achieve the internal coordination that Intervenors have to ask for--or beg for--or litigate for. E . cr . , Ex. 1005, pp. 19-22. Chayavadhanangkur,

pp. 10-12

5090. Gutmann, p. 29:4664; see Pace, p. 38:723V, see also 5525-5530 (Rogers) testifying concerning Midland's impact on the Consumers Power system.

47. Not only are Intervenors faced with a ltrge utility, Con-sumers Power Company, surrounding them and isolating them, which can achieve internal self-coordination, but this utility finds it necessary and desirable to enter into complex coordination arrangements with I

utilities of equal size who equally dominate their service areas. f/

This coordination provides for electrical operations on multiple sys-tems similar to those that would occur on a system that was subject to sole ownership. Thus,through coordination and interchange, consumers i

Power Company achie~esv the economic advantages of having access to generation and power supply facilities throughout Michigan and the Midwest. See Statement and Summary of Argument, supra.

1 j/ It is impossible to bring together all record references to the advantagos of coordination. However, we call to the Board's atton-tion the coordination agreements themselves (e.,g., DJ-67, DJ-71-78) and the testimony of' the Department provided by Witness Mayben ex-plaining them. -Witness Rogers capsulizes these advantages at 5515A.

, Also Uitness Chayavadhanangkur at pp. 12-19:5090. The deposition of Harry R. Wall, Ex. 1005, discusses these extensively. Accord, Aymond, Ex, 1004, pp. 167-172.

B. Consumers Power Company's Coordination Arrangments Previde a Marhet for Power Transactions from which Interveners are Excluded.

48. . Pooling and interchango agreements provido a frame-work analogous to a market where varied pouer transactions can take place. Gutmann, pp. 5-7:4664; 5550-5554. Thus, for example, if an l independent system (assuming the existence of adequate interconnec-tion facilities) loses a unit, it would have to negotiate for power as a separate discrete transaction. Assuming the power was trans-mitted, the economic terms would be such that the system would be i

economically compelled to attempt to maintain large amounts of ex-cess capacity either through purchase or ownership to avoid such

~

transactions. This would lead to less efficient operations because of the necessity to have more idle capacity (i.e., reserves) com-pared with load and/or smaller, less efficient units. However, an '

existing interchange arrangement especially under terms of joint I

dispatch,,provides in advance for th'e most economic power trans-i actions. See previous footnote.

49. Power pools or~ interchange contracts are formal methods i

whereby individual systems enter into individual transactions to buy and sell various types of power as the need may arise. Access

to the stock exchange gives the oncortunity to buy or sell stocks at the best available terms. Access to the supermarket provides an ability to buy a variety of fruits, o'r vegetables, or meats, as i

1

_ 29 _

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e , _

..e---- _ r . - - m . .- ,, ._. , , -

_ . - - -..-_m , , , - _ - , , , , , - - - -

i i

l the need ariscs. Similarly, if a utility has access to the power I

/

pool, it can buy or sell emergency, maintenance, economy exchange, short-term or seasonal power, and a panoply of other specialized power services. If it is barred from this market, it must either l be self-sufficient (at great cost) , or buy and sell in a much more limited market and at less favorable terms. Thus, just as a holder of stock excluded from access to the New York Stock Exchange might be able to sell or buy but at less advantageous prices due to inade-quate access to fewer buyers and sellers, so a utility excluded from the pool can enter into particular power transactions with ac-cess to power from fewer units and smaller markets.

50. A utility will. purchase emergency power, for example, from the lowest cost available unit. If it has access to units on only one system, its incremental costs for power at any particular time may be twice the cost of the lowest cost unit in an area. For most of the smaller power systems in Michigan the market for buying and selling power is Consumers Power Company. Since they cannot ob-

tain transmission, that Company can set the terms of sale. Or as Henry Ford once said, you can buy any color car you want so long as it is painted black. */

• / The MMCPP is a coordinated group consisting of Grand Haven, Traverse City, Wolverine Electric Company. Since the largest unit on any of 'these systems is less than 30 nw (and total generati,on less than 250 mw), by interchanging with each other, they are still N barred from access to large low-cost bulk power units. Gutmann, p. 12:

4464, Ex. 1001, JC-3. Having total loads of less than 250 mw, for the MMCPP to bui3 d substantially larger units it would have to de-pend upon Consumers Power Company for transmiasion, coordination, etc.. (See 7885)

51. As Consumers Power Company witnesses attest, its coordinatie arrangements are of great advantage to it. Through establish-ing an access to a broader power market, they give the Com,eny the ability to tailor its power supply to its demand. If it needs only emergency power for short periods of time when its units are down, it can obtain that type of power at a price specifically geared for th,e service. It can obtain such power from Detroit-Edison or Ontario-Sydro or Toledo Edison or Indiana and Michigan or even Intervenors, depending upon the most favorable price. On the other hand, if Coldwater wants emergency power, it must purchase partial require-ments power at a rate based upon the cost of supplying total power needs, including an annual demand charge. Thus, if Coldwater uses such power for only one hour, it vill have to pay charges for an en-tire year. See previous references to advantages of coordination,

p. 28, n.1, suora. In addition, see discussion of a ratchet clause as'to partial requirements customers. TR. 5113-5119.

52. Thus, Coldwater's charges for power are based upon its maximum monthly demand. For each succeeding month it must pay a demand charge based upon a fraction of its highest monthly usage during an integrated 30 minute period for the 11 preceeding months or the full amount of the demand charge based upon its highest use during the month, whichever is higher. Id., Appendix C. This is analogous to the situation that vould exist if one had access to automobile rentals as well as taxi cabs, busses and subway service, but another had access only to annual car rentals. If the first person has to rush to a hospital, he can take a cab; the latter would have to pay car rentals for a year. jy'

53. There is a relationship between sizes of generating units, economies of scale, necessary reserves and reliability of service..

2553-2555. As has been stated before,' there are substantial economies of scale to the building of'large generating units. 2558. See

p. 20 , supra. Total base load power costs produced from them are cheaper than smaller units. However, because of the necessity for a continuous electric power supply, a system must have adequate al-ternative capacity available when its units are out of service.

Moreover, in attempting to advance technology and to build larger units, there is greater probability of these larger units going cut of service than smaller ones. In his deposition, Harry R. Wall tes-tified to this greater unreliability of larger units and the company's

• / Not only is the requirement for Coldwater to pay annual demand charges based on the maximum power purchases (including emergency power) anticompetitive, but it distorts power use, creating addi-tional " barriers to entry." Once a system creates a demand, it is economic for it to purchase energy throughout the year. Analogously ,

in the car rental situation, one might choose not to save the milage chargos by- driving'a rented car when he is already committed to pay the weekly or annual bacc charge. While Coldwater can avoid paying Consumers Power Company energy charges by not purchasing from it, it will choose not to if it is already required to pay the annual domand charge for the entire year based upon the highest y single use.

1

m . _ . _ _ _ ._. _

experience with Palisades is an obvious example of this. Thus, there is a trade-off between the economies of operation that can be achieved from larger units.and the greater amounts of reserve capacity which may result from their use. Ex. 1005, pp. 72-73, 74-

77. */

54. Internal or external coordination makes available both contractual and operational reserve capacity which results from a great number of units necessary to serve a large area. **/ E.g.,

2563-2567-2580. Consumers Power Company can construct and operate large units such as Midland, thereby achieving the advantages of scale, because it has available access to the reserve capacity in

• / The Michigan Power Pool has large units, which would be con-siderably less reliable than smaller ones. For example, Palisades has been out of service for months. (5446). Ex. 1004, pp. 76-76.

Company Witness Pace states that in view of the higher costs asso-ciated with "relatively small generating units," " base load self-generation by small systems generally is an alternative only if those systems have the benefit of substantial government subsidies."

Of course, whi'le large amounts of reserve capacity are desirable from a reliability standpoint, reserves represent idle capacity (and financial investment) and therefore increased costs of opera-tion. Ex. 1004, p. 167.

• • / While, as a matter of law, Intervenors do not believe the rights to relief are affected whether Consumers Power Company's advantages come from its own internal operations and the-internal coordination thus achieved or the parallel advantages achieved through coordi-nation with other systems. Consumers Power Company is coordinating with other systems. The Midland units are being built in context of such coordination. In this situation, Consumers Power Company cannot legally deny the same coordination to Inter-venors that it has with other independent systems.

the units not only on its own system, but owned by Detroit-Edison, Ontario-Hyrdo and the MIIO systems. Ex. DJ 66-78. Because of the ability to plan maintenance schedules jointly and the reduced proba-bility of concurrent multiple outages, the necessary roscrves supporting such large units are reduced as a result of the company's coordina-1 tion. This broad coordina tion gives Consumers Power Company the advantages of the ability to build large units and to reduce its reserves requirements, hopefully leading to the most efficient gen-eneration mix. E.g., See generally Ex. 1005, especially pp. 1-65 Chayavadhanangkur, pp. 12-17:5090.

55. Moreover, coordination (internal or external) results in reduced risk to building larger units. A system having a large number of units on its own system or available through interchange can more readily risk building a larger unit than a smaller system that has less baskets in which to place its eggs. Ex. 1005; p. 21, 2561. Since there are substantial economics of scale in electric generation, the opportunity to build or acquire access to larger units results in substantial savings for a smaller system. E.g.,

2553-2555. .

s_

l i

. a

56. Internal and external coordination gives Consumers Power ,

Company more flexibility. Varied evidence has been placed in the record of predictions concerning the probable costs tothe company or to Interveners under certain hypotheses.*/ There can be no question that a large system, especially one having broad co-ordination opportunities, has more alterna tives available to it and, i

therefore, more choices in case one type of unit should become technologically or otherwise outmoded. Ex. 1005, p. 21-23. For example, at the present time Consumers Power Company has a balance of nuclear power, coal fired generation, gas and oil units, pumped storage hydro-electric power as well as other hydro-electric power and a different mix of large base load units, intermediate size units and smaller peaking units. Additionally, these units are of various vintages. Ex. 1001, JC-3. Obviously, a smaller system does not have access to this type of flexibility and must rely on the smallest, units.

57. The recent oil shortages and change in fossil fuel prices l I

and environmental concerns give dramatic proof to the dangers of  !

systems which does not nave access to alternative sources of power.

• / Interveners view such evidence -- on all cides -- as being irrevelant to the issues in this case, although to the extent such issues are held to be relevant we rely on DJ-200-203.

However, what type of generation a system should obtain and the l mix of generation are managerial decisions. Indeed, such choices {

may provide the essence of allowing ror competitive alternatives.

\ )

Ex. 1005, p. 19-21, 105-108; Chayavadhanangkur, pp. 3-5:5090; 5455-5488. Gutmann, p. 36 :4664. The President of Consumers Power Co.

testified "that nuclear power is quito important" because of limited fossil fuel availability. Ex. 1004, p . 13 8,16 G . Regulatory changes in application rate-making principles provide another example of cost uncertaintics. 5110-5103, 5119-5121. /

58. Greator number of units allow for greater reliability of service. As is stated above, coordinated operation allows for operation at any one time of the most efficient units consistent with the total demand for power on the coordinated systems E.g.,

Chayavadhanangkur, pp. 11-12:5090.

59. There are additional advantages to coordination. Coordina-tion makes capital investment for better transmission facilities more feasible. It allows utilities with hydro-electric plants to take advantage of stream flow diversity between drainage basins. It also

• / The Board is aware of recent changes in methods of determining "just and reasonabic" rates by the Federal Power Commission and of criticisms of that agency, which have been marked, among other things, by a sense of notable Court reversals. E.g.,

• Gulf Sta tes Utilities Co. v. FPC, 411 U.S. 747 (1973); Richmond Power & Licht v. FPC, suora, 481 F. 2d. 490; Burrough of Lansdale v.

PP'C , 494 F. 2d 1104.(1974); See "U.S. Acting to A.d Electric Utilities ", Washington Star News , pp. 11 (July 3, 1974), See also ,

" Quick Stato Action on Utility Rate Rises Urged by Simon and other U.S. Officials ", Wa ll S treet Journal, p. 12, Col. 2, (September 12, 1974) . Cf. , Comptroller General, Need for Improving the Resala-t; ion of the Natural Gas Industry and Management of Internal Operations '

(September 13, 1974).

The point raised is not whether rate regulation is effective, but that in intervencrs can well t detormine that they desire the control of owning their own gon-eration in wholc or part to avoid the _ uncertainties of regula- l tion or because they do not desire regulation effectivo. The Board should regulation to not deny access because it disagrees and believes be effective.

gerial choico. This is clearly a matter of mana-Consumars Power C6mpany's purpose in dovoloping nuclear includes recognition of both the short and long dis-abilities of nuclear fuel.

• / E.g. , DJ-67 with DJ-91-92 ;99-103. Sec DJ-47-49, DJ-170-172, concerning keeping out "undesirabic third parties ".

- 3C -

1

allows utilitics to coordinate maintenance programs. Hein;3974-75 3/

It allows for management contact and exchange of information. It allows for coordinated development in units to place optimal size units on the line (through purchases or sales of power during interim periods before, or after, a system's own load is capable of absorb-ing the capacity of the unit size in question). Absent coordination, because of its demands for power, a system might have to build smaller than optimal size units or have idle capacity in a larger unit. After it builds a unit it might still have excess capacity which because of lack of coordinated operations it may not be able to soll.

60. Coordination also allows for financing advantages by giving flexibility in terms of the timing of new units. Consumers Power Company's decision to postpone building Guanticasse due to a tight money situation would doubtless have been less possible absent its coordination agreements.

61. In summation, coordination allows for access to forms of alternative power supply arrangements and for maximumized use of available power supply. The difference between a dependent and non-dependent electric system in obtaining low cost power supply can be surr:r.arized as the availability of alternatives. Indeed, this is 1

true of any business. ,

,/ Additional benefits from l'idland are that it can be integrated with the Company's Luddington pumpc0. stcrage plant. Inexpensive  ;

energy from 1:idland can be used to purep water to the Luddington re- 1 servoirs used to genercto electricity during peak periods. Unlike I Detroit F2ison or Ccmcrimalth Edicen PJ-72, D.T-227 Intcrvencrs voro not of-- ,

forcd participatien in Luddingten. Indeed, in dis osing of hydrc21ectric sites the Ccrpany rcab:icted such sitsa froin electric gcncration use so tlut they could 4

nob be used by Intaxercro. 9a DJ-146

-w

allows utilitics to coordinate maintenance programs. Wein:3974-75. */

It allows for management contact and exchange of information. It allous for coordinated development in units to place optimal size units on the line (through purchases or sales of power during interim periods before, or after, a system's own load is capable of absorb-ing the capacity of the unit size in question). Absent coordination, because of its demands for power, a system might have to build smaller than optimal size units or have idle capacity in a larger unit. After it builds a unit it might still have excess capacity which because of lack of coordinated operauions it may not be able to sell.

62. Coordination also allows for fin-;ncing advantages by giving flexibility in terms of the timing of new units. Consumers Power Company's decision to postpone building Quanticasse due to a tight money situation would doubtless have been less possible absent its coordination agreements.

63. In summation, coordination allows for access to forms of alternative power supply arrangements and for maximunized use of available power supply. The difference between a dependent and non-dependent electric system in obtaining low cost power supply can be sunmarized as the availability of alternatives. Indeed, this is true of any business.

• / Additional benefits from ?!idland r.re that it can be integrated uith the Company's Luddington pumped storage plant. Inexpensivo energy frca I*idland can be used to per9 water to the Luddington re-C servoirs used to generate electricity during peak periods. Unlike Datroit Edicen or Cct:ronwealth l'dison PJ-72, RT-227 Ir.tcreanors v;2re rot of-fered participaticn in Luddington. Indcod, in disposing of hydrcelectric sites the Co.rpany restrict:cd such sites frcm elschric generation una so t!ut they could not b2 used by Intervonors. Em ET-146 w.

Should C.

Coordination with the Smaller Michigan Syster Not be on a Discriminatory Basis.

gaining, F.2ile stating that coordination is a matter of 1

64.

• Company 1/ Consumers Po.

as the discovery and common sense attests, it has has much to say about the types of interchange arrangemer y provido These arrangements almost uniforrc-with other companics.

h ir reservo: "ormulas mutual access to transmission capacity and t e 1s and t in 1-result in equal reserves requirements proportiona e 71-78.

tion. DJ ' .

a shared savings from the-interconnected opera to allow Thus, for example, high voltage transmission is necessa)

, i ce long for interchange power transfers among major utilit es ;rt Con-The basic MIIO agreements (and for the mo: t distances. ) provi, for no sumers Pdwer Company's interchange arrangements -nsmission nnected 1 charge by any party for the use of the interco  : the con-1005, 64-66. Similarl?, whate facilities.

DJ-76. Ex. as respon-in practice each utility eithe:

tractural formulation, own judg-based upon -

sibility to maintain _ adequate reserves as . out to a t it vs ment or, where there is a reserves requiremon ,

proportional porcentage of londs. See agrecmonts, suntel. Thus, use of transmission' capacity is encouraged to facilitato power i such as emergency power,

!' transfers; specialized power transactions, will be bought and sold at incremental costs without requiring dis-prbportionate reservations of capacity by one system or another and without providing' for special additional charges for one system or

+ another. If one system can operate a unit not in service more cheaply i

than a unit on another system, 'the lower cost utility will operate i the amount of money its generation .and the two systems will split I ' saved. Such arrangements obviously benefit all parties to them.

i 1

,' Agreements, suora.

7

65. By contrast an examination of the interchange contracts between Consumers Power Company and the smaller systems within First, there is rgt pro-its service territory show the following.

vision for joint use of transmissica capacity or even for the pur-chase or sale of such capacity.-/ See agreements, generally, e.g.,

DJ-104-105 '.

1 1

• /

One exception, not a matter of record, is a recent transaction l betwoon Detroit Edison Company and the MMCPP, providing for This trans-

~ transmission over Consumers Power Company 's lines.However, it is action may wall be a result of this proceeding.

noteworthy .that in order to obtain such transmission, the MMCPP is paying 15;? of energy charges for the power transmitted.as well as a demand charge.

Si lD

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

r .. . . - ~ -

66. The second item of note is that such arrangements have uniformly provided for larger reserve dedication by the smaller isolated systons. The formulas have invariably based on some kind of " larges t ' unit" formula, which results in far greater reserves requirements by the smaller systems es a proportion of their load, even though there is no showing that such systems ' units have lesser reliability. They also inhibit the ability of the small unit system to install the largest and more efficient units. DJ-99-105. Chayavadhanangkur. p. 10-22:5090.

67. Such agreements have been entered into only with Lansing, Holland and the MMCPP. Lansing and Holland have had large cimounts of excess capacity, which could only be sold to Consumers Power Com-Pany.1$/ Consumers Power- Company has insisted that large reserves be maintained by those systems and, at the same time, through re-stricting transmission availability, Consumers Power Co. has been

• • / Such excess capacity results from their isolation and the onerous reserves required of them to obtain any coordina tion.

l  !

i

'l i

e ,

And, indeed, the " prime rea-the only market outlet for such power.

"that son" for entering into the Holland interchange agreement was if Consumers Power Ccmpany did not maintain this interconnection un-doubtedly the City and Wolverine Electric Cooperative will enter into such an agreement". DJ-150. Holland could not interchange with both, because Consumers Power Company precluded such dual ar-rangements. DJ-99,100. The MMCPP, which once represented iso-

lated systems, joined together only af ter they could nct reach sat-However, there isfactory arrangements with Consumers Power Company.

is no such coordination provided for the other more isolated systems.

68. The impact of the disproportionate reserves requirements by Consumers Power Company based upon the largest unit concept have i

meant that the smaller systems could not economically build large L

units (apart from their market limitations), because they would have to dedicate an excessive amounts of unused capacity. Indeed, as Lansing and no. land now do have large amounts of excess capacity, raising the costs of power on their internal system, although ex-Consumors Power Company. */

cess energy can be sold to guess who?

69. Yet, these systems had to entor into these arrangements r

with Consumers Power Company or be' cut off from coordination.

,i I

• / If smaller reyctems such as Coldwaterthey wish to generate, but can purchase power l

. ~

not to mai ntain excessive - onreservn, an nr ual basis, subject to a i

from Censumers Power demand ratchot.

41 - ._, - _ ._. _ -.

70. The required reserves -- and willingness of Consumers Power Coupany to coordinate -- has been related to the ability of Intervaners to do without. This explains why the MMCPP, af ter join-ing together, could get some i'nterchange advantages. It explains why Holland (who was situated so that it could have joined the MMCPP),

could also get interchange from Consumers Power Company. It ex-plains why Lansing with its comparatively greater size and greater amounts of reserves (and less need of an interchange arrangement) could obtain one. It explains why Coldwater or Hillsdcle or Mar-shall cannot. DJ-150, 2635-2652.

Indeed, Consumers Power Company 's legal theory appears to be that because they do not now have Con-sumers Power "ompany's vas t markets, large base load generation and high voltage transmission facilities, to start with, they would be disproportionately advantaged from changes in their interchange agree-monts and therefore they should contribute greater reserves than Consumers. Power Company. Prehearing Brief for Applicant, pp. 135-136.

71. As we have stated before, the Midland units are to be major investments as part of a' generation and transmission network of integrated generation and transmission facilities. They can be expected, to have a

" tremendous impact" on Consumers Power 's sys tem.

5525-5529,5525.

Interveners cannot themselves build such facilities.

Nor could Consumers Power Co. do so economically without the ad-

~

. vantages of internal and external powar coordination. Indeed, absent t

such access.to transmission and coordination, it would be uneconomic for interveners to even consider access to Midland. 2827-2845; 5524-5525. The integrated operations of power systems demands that, if the Midland Units are licensed, the interveners not be deprived of the ability to utilize power'as part of integrated operations in the same manner as Consumers Power Co. To hold otherwise would give Consumers Power Co. disproportionate advantage from the licensing of these facilities to the substantial detriment of interveners.

5538-5546.

i

D. Consumers Power Company has Used its Domination

! Over the Bulk Power Facilities to its Advantage 1 Compa red with Smaller Systems.

72. Under the bottleneck monopoly doctrine, there is no need for Interveners to show " unreasonableness" on the Coupany 's part.

However, the record does indicate a purposeful intent on the part of Consumers Power Company to achieve domination over the lower Michigan peninsula in violation of antitrust laws and policy.

73. As we stated initially, the Alcoa and United Shoe Machinery I

cases are declarative of the fact that a corporation cannot grow into a giant enterprise without an intent to do so. Unit ed States v.

l Aluminum Co. of America, 148 F. 2d 416, 430-432 (CA 2, 1945); United States v. United Shoe Machinery Coro., 110 F. Supp. 2 95, 34G (D.

Mass., 1945), affirmed per curiam 347 U.S. 521 (1954). Consumers Power Company's control of bulk power generation and transmission facilition certainly is no accident.

• / We discuss this issue separately.at nr. 65-60 and also specifically ' roplied to the Board 's request of Counsel at l pp. 109-130 .

a_

74. Consumers Power Company has territorial agreements or

" understandings" with dominant surrounding systems who might have had an ability to build duplicato transmission facilities or otherwise to complete directly with Consumers Pouer Co. , for wholo-sale -- or for tha t matter retail -- markets . DJ-110, 112, 2160-2163. DJ-157. See DJ-ll2-ll3; Gutmann, pp. 35-36:4664. Beyond th at , there is ample use of the control over bulk power supply both to limit competition for viholesale power (i.e., that is power sold to other utilities for integration into their operations and re-sale to ultimate consumers). The most obvious exampics are il-lustrated the exis ting interchange arrangenents. For example, Lansing wanted a more favorable reserves contract among other things. 2,098-2116, 2121.

However, as has been stated. even a system of Lansing's size, could not obtain coordination on the same basis the Consumers Power Company freely grants to a non-competing sys tem, Detroit Edi-son Company, DJ-91-92A.

75. The Holland-Consumers Power Company agreement is a prime example of discrimination. DJ-99-101. Under this formula, Holland l

was required to maintain reserves equal to 1/2 (Larges t unit + l 1/2 2d largest unit - 0.15 annual peak load) + 0.15 annual peak load. The practical impact uns that under the formula Holland's 1973 reserves under the formula computed to 47.2% of its peak load.

Moreover, if Holland were to install a larger, more efficient, unit, its reserves requirement, would go up. Chayavadhanangkur pp. 20-21:

_., ,-.-,.--e ..---,w * - ' " " " * " " ' " ~ ' ' ' '

._. . . _ - . = . _ __. _ _ _ _ . _ _ __

5090. Thus, the formula not only penalizes efficiency, bst it

~

discourages smaller systems from installing generation competitivo

• /

with Consumers Power Company. ~ Morcover, both the Holland and Lansing Agreements contained express provisions, required as a condition of interconnection, that they could not buy power from

• • /

4 or sell power to other systems. --

Sec pp. 5 7-31, supra .

76.

The pattern of consistent refusals to deal constitutos an intent and use of Consumers Power Ccmpany's domination over bulk power facilities to avoid competition. The most obvious way to avoid competition is to purchase such system. United States v.

_ Crescent Amusement Co., 323 U.S.

173 (1944). Consumers Power Company has attained its large***/ size partially through a proccus of consoli-dation and purchase.

77.

Consumers Power Company has continually attempted to take over smaller competing utilities adjacent to it or within its cervice area and has been at least partially suc-i cessful.

There is additional evidence of concerted activities by the Company to limit generation of competing smaller systems Such .

activities have included attempts to block REA financing and to break-up the generation and distribution cooperatives, DJ-42-44, 46 2086. Ex.

• / Gainesville Utilities Dept. v.

1238 (1968),, set aside, 425 F.2dFlorida 1196 Power Corp _. , 4 0 FPC 1226, (CA 5, 1970), reversed, 402 U.S. 515 (1971, affirming FPC opinion).

1*/ Consumers Powar Company apparently seeks to defend such ar-rangements as attempts to avoid federal jurisdiction and not to limit those municipal systems. See En. 100, 10936. Assuming that the motivation to avoid federal jurisdiction had a legiti-mate business purpose, this does not jus tify actions Which would be unlawful on other grounds.

• • • / 1974 Moody'c Public Utility ?anual, p. 1957.

__ _ - A g - _ _ --

1017-1053, 1073-74, 1076, 1095-1097, 1099-2000, 2003-2007, 2016-2020, 2024, 2029-2030, 2032-2040, 2044, 2051, 2062-2063, 2086, 2092, 2103-2123, 2126-2127, 2129-2133, 2154-2157, 2172, 2174. Tr. 1023-1031 Ex. 1004, pp. 25-27. As, Mr. Robert H. Paul, a witness in this proceeding and presently General Supervisor of Commercial Electric and Governmental Services, stated-

"The first goal of our Marketing activity or program concerning other utility systems in our service area is, of course, to acquire the systems. Since 1950, Consumers Power has pur-chased 6 municipal electric systems. An offer to purchase the Charlevoix System was turned down, but we are now supplying most of Charle-voix 's requirements. In 1965, when it became apparent that Traverse City was about to ex-pand its generating plant, we at tempted to head this off with a lease proposal . . . also in 1965, we offered to purchac 3 the S t . Louis Electric System for $825,000 . . . We are are in the process of submitting purchase proposals to the Cities of Allegan for its system and to Grand Ranids and the City of Wyomina for their street lighting systems . . .

. Ex. 2025 (1966).*/

78. Even assuming for the moment that sdch acquisitions and attempted acquisitions were not illegal, the

• / This statement was apparently part of a speech to Division Engineers of Consunors Power Company, which therefore could be expected to influence policy of the company and have c' :ider-able impact. '7hile the present Chief Executive of the. Co :pany disclaims that this is a matter of Company policy, he does not

" recall" acquainting Mr. Paul with this policy. (Tr. 6420)

Perhaps Concuters Pcwer will argue th'at this, too, is covered by Monrr-Ponning'.on.

porsistent attempts. of Consumers Power Company to limit competition i

through attempted take-overs or limiting self-generation negates any claim that Consumers Power Company's growth and resulting con-trol over bulk powar facilities was without knowledge or motivation.

It so chose to expand 'and achieve dominant control. The fact that it did creates obligations to deal.- /

79. Significant evidence of Consumers Power Company's know-ledge and use of its domination and control to limit competition is found in the testimony of its chief executive. On deposition, witness A. II. Aymond, the Chicf r,xecuti'cc, President and Chairnan of the Board of Directors of Consumers Power Company, testified as follows (Ex. 1004, pp. 182-185, 202-203, emphasis supplied): -

Q. Just to be clear about it, . if, say, a municipal entity in the State of Ohio desired' to buy viholesale power from consumers Power, would you sell it?

A. ,

I don ' t think so.

Q. You do sell power to Ontario Hydro, do you not?

A. Well, we exchange power with Ontario Hydro.

-*/ The alternative to purchase or acquisition under single ownership is coordination and there is nothing to prevent coordinated development by Consumarc Power Company rather than individual company control. Even if one ascumed arguendo that the extent of Consumers Power Ccmpany's monopoly control is cconomically necessary and/or desirable, in a situation of monopoly control there is every reason to encourage the competition for whole-sale power supply that may be abic to continue to exist.

L f

_ . ..~. _ _ _ _ . _. _ _ _ _ . . _.

l l

Q. Assume that Ohio Power or 1:uckeyo Power or Ontario i Hydro or some other entity were willing to sell power to a municipality within your service territory, would you sell trancmission, services to get the power there?

A. The matter has never come up and I think I would want ,

to know more of the details of the transaction.

Q. What kind of things would you want to know?

j

A.- I would want to know, for one thing, whether or not

) our lawyers felt we were obligated to do so. For another, 4 ,

i I would want ' to know for what purpose the power was being t

sold and at what rate --

O. Sold by whom?

A. By a selling firm. At what rate, what the receiving utility intended to do with it, what impact it would have in the long run on the ability of Consumers Power

, Company to maintain its present markets.

Q. 'Is it fair to say that vour iuderment would be based at least in part on your iudoment of th e extent to which the purchase of this powar bv the municinality or coonorative within your service territory enabled it i

to reduce its ratos in comoetition with Consumers Power?

A. I think tha t would be - c factor.

i Q.- A 3arcro factor?

, A. I thi_nk s o .,

f

- 48.- - _ - - . . - - . - _ _ - . . - . - . . - . . - -

Q. Apart from the question of your legal obligation, are therc any other major factors?

A. Hell, I think the size of the transaction would be a factor. -

Q. Why is that ?

A. Well, it might be a matter that all things considered wasn't too significant. I think v/hether the receivina utility actually was going to use it to invade our present market area would be a factor.

Q. What do you mean by "invado our present market aren"?

A. Well, start taking away our customers which we have in-vested a great deal of money in order to serve them.

Q. I believe this morning one of the reasona you mentioned for, as limiting the villingnosc of Consumers Power to sell, transmission to publicly

' owned utilities was the inpact Saat such sale might have  ;

- l on competition bctween the buying entity and Consumers l l

Power. My question is, first, whether that was a fair caracterization and, secondly, assuming it was, were you mainly referring to large commercial and industrial cus-tomers or residential customers or both?

1 A.

I was referring principally to large customers but I

'think the problem also exists with respect to residential l

L N M

custcmcrs even though the:araounts involved in a particul

-( area might he relatively small insofar as the transfor oh customers from one supplier to another because of , as I mentionod in respons'e to onc of Mr. Brand 's questions yesterday, we do concern ourselves with the relative rate at which we are able to supply service to our-customers as compared with those of other entities. Frankly, we don't like to put ourselves in a position where we a re increasing the extent to which our performance looks bad in relationship to that of other entities .

Q.

Does that complete your answer?

A.

Just one final thought on that and that is to the ext'ent that we do we increase our exposure to losing our markets.

See also Ex. 1004, pp. 46~48, 12b.

80 The Company's Chief Executive states clearly th a ta large factor in the Company's determination of whether it will sell trans-mission service is how the' sale of such services may aff ect com-petition for customers. More simply put, the Company's Chief Executive says he will not sell transmission services wh ere such use can' create retail competition.

Gutmann, pp. 30-34:4664 This is clearly illegal and precisely die kind market of domination of one through control of facilities in another ma k r et tha t the anti-trust ' laws, and the bottleneck monopoly thcory, prevent. are designed to

-k customers even though the aruounts involved in a particula

'( area might be relatively small insofar as the t ransfer of customers from one supplier to another because,ofas I mentionod in response to one of Mr. Brand 's ques ons ti yesterday, we.do concern ourselves with the relati ve rates at which we are able to supply service to our cust omers as compared with those of other entities.

Frankly, we don't like to put ourselves in a position wh ere we are increasing the extent to which our performa nce looks bad in relationship to that of other entities .

Q.

Does that complete your answer?

A.

Just one final thcught on that and that is to the ext'ent that we do we increase our exposure to losi ng our markets.

See also Ex. 1004, pp. 46-48, 12b, 80.

The Company's Chief Executive states clearl y that a large factor in the Company's determination of mission service is how the' sale og such services whether it will sell trans-petition for customers. may affect com-More simply put, Executive says he will not sell transmis i the Company's Chief use can create retail competi'3 1on. s on services where such Gutmann, pp. 30-34:4664 This is clearly illegal and precisely di marke t e kind of domination of one through control of facilities in anoth trust laws, er market that the anti-and the bottleneck monopoly theory, prevent. are designed to L.

81 Consumers Power Company and neighb owned utilities have no difficulty in all oring, large, investor of their respective transmission faciliti owing cach other fre Consumers Power Company allows us es so that, for example, energy between Detroit Edisonn Company a de of its f Ex. 1005, pp. 64-66.

Toledo Edison Company, DJ-72-77 Power Company. Neither is a competitor to Consumet However, the Company has an intere s ti a sale between such companies and muni i n preventing Michigan and will not sell transmi c pals or cooperatives within 82 ssion for that purpose.

What the Company claims is a ri h g t to restrict use of its facilities because of itsownership status.

factual question. There is no intervenors in the same way it tIf the Company gree to treat could all go home. reats Detroit Edison Company , we 83 ApParently finding the Company's i i tenable, during his testimony M n tial position un-Yes, he said, it is r. Aymond presented a minor bombsh .

venors. now the Company's intention to deal Al though he never realized the with inter-other neighboring investor-owned utilitiy wanted to be trea has broad coordination arrangementses with ~ which the Company to sell participation in Midland , Mr. Aymond says he is willing j

like, transmission services, and the \

a committment to which the Compa 6071; 8106-8109). ny should be bound (6046-

-the While we appreciate this co road to Dethesda, but see Paul nversion on

, Ex. 2025, the Cor.pany  !

demonstrates a consistent u e allattit'hedmore.

)

Pouer Company sell transmissio Will Consumers i

n services?

ing that this "will not result Answer yes, provid-in a significant loss to Consumers V

Power, directly or indirectly, of existing load or service areas . . .

(6049-6051)

And how can the sale of trans-ission services harm

-Consumers Power Company? Answer. It might lose sales, thus " idling" facilities. Id.

e4. This record contains clear, direct, unambiguous evidence by a Company that its intent is to grant or deny use of necessary facilities which it dominates on the basis whether, in its judg-ment, such use will adversely affect the Company. To control is to_ control.

85. Consumers Power Company 's intent is further demonstrated ,

by its continued legislative support for maintaining the so-called 25% rule, which inhibited retail competition by neighboring municipal entities. Eg., Ex. 2181-2186. Agreement has been reached on a compromise bill, limiting the service areas of the Cities (and also the competitive harm that might result to Consumers Power Com-pany from, municipal competition), but allowing additional sales within a prescribed area.

However,,the Company's attempts to limit competition are further illustrated by its legislative support of the 25% rule over a course of years. See generally, Testimony of Arthur Land,

-5872ff. Ex. 1004, pp. 172-173; Ex. 2181-216G. It is notauorth f, hm:cver, that at the same time the Company had territorial agreements or " gentleman's understanding" with neighboring investor-owned utilities, Detroit Edison Company and Indiana & Michigan, and was supporting the 25'; rule to restrict competition uith the municipalities, the Company was attempting to maintain greater A

retail competition with the Rural Electric Cooperative Systems.

Tr. 995. Ex. 2160-2163. The reason for this is not hard to find.

Coir.umers Power Company has maintained generally uniform retail rates.

86. Finally, there is also clear evidence of the Compan?y 's intent to keep smaller sys tems from the Michigan Power Pool, which provices the mechanism for the major buying and selling transactions of Consumers Power Company with Detroit Edison Company. According to Company documents, the agreements were tailored to keep out "un -

desirables", alth.ough the Company has difficulty in figuring out who such undesirables could be. DJ-170.

• / Examining the pool agreement themselves, they provide for a result whereby Detroit Edison and Consumers Power Company effectively have qualized reserves. Each can use the others transmission. However, to be ad,mitted into the pool a system must have transmission facilities at 345 kv or higher (which none Of the interveners have) and agree to an excessive reserves formula, as applied to them. Ex. 67, DJ-73, 11, 115. The formula is reminiscent of state statutes providing for general requirements for Cities having populations' of more than 1 million but less than 2 million. . . . See Yick Wo. v. Hopkins, 118 U.S. 356 (1886).

4

./ 87. We state the above to civ6 the Ronrd specific evidence of the obvious

To the extent that motive to control or affect competition is relevant under the

" bottleneck" monopoly theory or more generally under the Sherman Act, 4

, such' evidence exists. However, the results prove the intent.

Young Brian Dailey could not successfully defend against pulling a chair from under his Aunt on the ground that he did not " intend"

his Aunt to fall; Consumers Power Company cannot defend on 'the

{ grounds that it only intended to build the necessary facilities and make the necessary contracts to create a bottleneck monopoly:

It just happened. Garratt v. Dailay, 46 Wash. 2d 197, 279 P.2d

'1091 (1955).

II. CONSUMERS POWER COMPANY'S REPUSALS TO DEAL ON REASONABl.E TEPJ4S ARE VIOLATIONS OF ANTITRUST LAWS AND POLICY

88. In light of its domination of large scale generation (including nuclear generation) and bulk power transmission facilities on the lower M.ichigan Peninsula, absent government interference, Consumers Power Company can control the terms at which smaller entities in its areas of service will compete in the wholesale power markets. It has unlawfully denied smaller systems access to its bulk power generation and~ transmission of facilitics, or permit-tted access only on discriminatory terms; at the same time, Con-sumers Power Company freely grants acccca to larger neighboring

(

utilities such as Detroit Edison. This use of its control over

- , , - - - , - . - -_- 7 , , , , - + . -- ,,.y-,,.g, n, ,--..-p-

a large scale generation, transmission and the attendant coordina-x tion arrangements to bar or limit access of the smaller systems to equivalent alternatives to those possessed by Consumers Power Company constitutes a clear " situation inconsistent". (2805-2911, 2821-2822).

89. The Sherman Antitrust Act, and other natitrus t Acts,1/

condemn such attempts of dominant companies in a particular markets to "res train" competition in that or other markets . E.g. , Consumers Power Company has the power to deny access to large generating units, transmission facilities and to the coordinating and inter-change arrangements through which wholesale power transactions take place. In refusing access to the smaller systems to these facilities and arrangements, Consumers Power Company -- in the words of the statute -- is " maintaining a situation inconsistent with the antitrust laws".

90. Not only is Consumers Power Company restricting competition in the wholbsale power market (i.e., the buying,and selling of '

power for resale to ultimate consumers), but it is also doing so with a purpose and result to affect competition generally, including retail sales. _See pp. 47-49, supra.

• / 15 U.S.C. 1, 2. See also rederal Trrde Comris.mion Act, 3R S ta t .

717, as an. ended, 15 U.S.C. 45 Clayton Antitrust Act, 15 U.C.C.

12-27. The Sherman Acb direcbly prohibits actions "in res train t of trade." llowever , the Ccmpany 's discritainato2:y policies in granting or denying access to bulk power coordination and trans-taission also clearly constitutes " unfair methods of competition" and discrimination as proscribed by those latter Acts.

91. Additionally, Consumers Power Company is attempting to

" tie" together the various wholesale power services thereby limiting intarveners ' markets for the purchase and sale of wholesale power.

The resul t- is u3 reasonable exclusive dealing requirements and barriers to entry in potentially competitive nervices.

92. As has been explained earlier, and as the record clearly demonstrates, through interchange agreements companies can buy and sell separately a host of individual services at prices designed both to facilitate such transactions. Thus, utilities can purchase power either on a continual or individual basis at rates per kt:h which reflect the type of power purchased. They can buy the i

right to output from a particular unit, '

(" unit power) or the right to the combined output from all' units (" firm power purchases"), as well as emergency power, maintenance power, economy exchange, short-term power and various other forms of power transactions. To the extent that Consumers Power Compa,ny refuses to sell these t j

individualized types of powe'r transactions separately to interveners or in other words to "unbundle" the transactions, the Company is thus engaging in a classic form of " tie-in" sale and, additionally, is restricting entry into the wholesale power markets. Unless power services can be purchased separately to complement other power sources, an intervener vill find it more difficult and less economic to purchase or operate a particular type of generating unit or wholesale power service separately. Therefore, it will be forced to accept Consumers Power Company as its sole power supplier.

-M-

93. . Further, its arrangements to restrict its sales of

< ps . . r to limit self-generation and its wholesale territorial agree-ments are thensclves anticompetitive. They aid exclusivo dealing arr.ingements and inhibit ' interveners'- development of or access to

,- alternative supply sources.

94. Finally, the Atomic Energy Act itself prevents limiting the availability of nuclear power, as Consumers Power Company is attempting to do. -

i

95. If anything is clear from this case, it is tha t the Con-sumers Powcr~ Company is trying to restrict interveners' abilities to participate in wholesale power markets through limitbag or re-fusing access to its bulk power facilities and power arrangements.

> The only question is whether its " defenses " tha t it should be allowed to do so will be successful.

T

• A. The Bottleneck Monocoly Cases, Including Otter Tail, Plainly Establish The Obliga-tions of Consumers' Power Company to Grant Intervencrs Direct Access to Its Bulk Power Generation and transmission Facilities.

96. Consumers Power Company's refusal to provide access (1) to nuclear generation, (2) to transmission service and, (3) to l

1 coordination constitutes the type of refusal to deal long condemned  !

by the antitrust laws. A bottleneck monopoly cannot lawfully re-fuse.to deal in. bottleneck or attended services. United States v.

Terminal' Railroad Association,'224 U.S. 383 (1912); Associated Press  ;

v. United 'S ta t es , 32G U.S. 1 (1945) ; Silver v. New York Stock Ex-chance, 373 U.S. 341 (1953). Nor may a monopalist use the doEense.

i of refusing to. deal in order to avoid competition. 2astman Kodak 7

comoany v. Southern Photo Co. , 273 U.S. 359, 375 (1927) ; Lorain Journal Co. v. United States,_ 342 U.S. 143 (1951).

97. The recent claim of' companies like Consumers Power Company was that because of the necessity for at leas t partial monopoliza-tion of some of the involved facilities, antitrust principles should not be applicable -- or at least should be limited in their applica-tion -- to the electric power industry. However, in both Otter Tail and Gulf States, the Supreme Court recently reaffirmed the contrary principles.

98. Otter Tail is a bottleneck monopoly case. Otter Tail Power Company v. United S tates , 410 U.S . 366 (1973). In various pleadings, Consumers Power Company has attempted to narrow or avoid the thrust of Otter Tail, relying on strained or narrowly technical distinctions, as if logic chopping could avoid the clear thrust of the case. The immediate question in Otter Tail'was whether that power company could refuse to sell the sale of wholesale transmission services or otherwise restrict power. 410 U.S. at p. 368. The Supreme Court brushed off its economic arguments of claimed demise or competitive disadvantage 410 U.S.

and held that the Otter Tail could not refuse to deal.

at p. 378, 381-382. Thus, the Supreme Court affirmed the District "from refusing to ' wheel' Court 's decree enjoining the Company olectric power over the lines from the electric power cupplies to

1

-existing or proposed municipal systems in the atea and - from entering Jinto or enforcing any kind of contract which probibits use of Otter Tail's . lines to ' wheel' electric power to municipal electric power systems or from cntering into or enforcing any contract which limits y to whom in areas in which Otter Tail or any other Electric power com-l 4

l pany may sell electric power". 410 U.S . a t 368-369 (quoting the

.i Supreme Court) .

99. It .should be stressed that in Otter Tail the claimed bottle-neck ~ facilities were relatively low voltage subtransmission lines.

r It should also be stressed that'both the District Court and the Supreme j Court showed a concern as to th.e contractual arrangements, which would have restricted available alternate power sources. 410 U.S.

at 370, N. 2; 331 F. Supp. 54, 59-61 (D. Minn, 6 th Div. , 1971);

1 331 F. Supp. at 59, 6 3-6 5, 410 U.S . 378-379..

1 100. Finally, from a legal s tandpoint, both the District Court and the Supreme Court were applying the " bottleneck" monopoly theory that a company that obtains a monopoly in a vital process must l l

use that monopoly in such a way that it does na t advantage itself l in obtaining markets (or' res tricting markets) by dint of control of i

the bottleneck. Thus, in Otter Tail, the Supreme Court cited United i

Sta tes v. Griffith, 334 U.S. 100, 107 (1948); Lorain Journal v. United States, 342 U.S. 143, 154 (1951) ; Eas tman Kodak Comoany v. Sou thern i Photo Ma_terinls Co., 273 U.S. 359, 375 (192 7) ; Schine Chain S toren v.

sv t

'l

- 59 .

-- I

_ . _ . - - - ~ . , . _ . _ _ - _ . _ - . ._ .

Upi ted S ta tes , 334 U.S . 110, 119 (1948) AscocinFcd Press v. Unitzlc States, 321 U.S . 1 (1945). Accord, United States v. Terminal Railroad Association, 224 U.S. 383 (1912), cited at 331 F. Supp. at 61.

101. The bottleneck monopoly theory is not new. It is based upon ordinary principles of fairness. If one operates the only bridge at a river crossing or an inn on a highway necessary to human comfort, or a stock market exchange through which the bulk of s tock trading is done or motion picture thea ter chain with Ehe only theater in a town, the law demands that one not take~ advantage of the situation. A company may be entitled to profit from that facility (although there are aluays requirements of fair dealing -- for example rate regulation statutes and common law doctrines restricting utilities to "just and reasonable" rates) .-*/

But that dominant position cannot be used to bar access to vital facilities and certainly not to enhance one's own monopoly power. * */'

• / See Mu~nn. v. Illinois, 94 U.S. 183 ~(1877) .

• • / The district court opinion stated:

" Pertinent to an examination of the law is a reference to cases expressive of the ' bottleneck theory' of antitrust law. This theory reflects

-in essence that it is an illegal restraint of trade for a party to foreclose others from the use of a scarce facility. Here the theory finds application in Otter Tail's use of its subtrans-mission lines. One. authority belicves:

'The Sherman Act requires that where facilitiec cannot practically be duplicated by would-be competitors, those in possession of them nunt allow them to be shared on

, fair terms.'

• • /(continued )

m_. -@- -

102. In Consumers Power Company 's case, we may assume that Midland should be licensed. We may also assume that there are economic or legal reasons why it presently owns the only buDc pm.er generation facilities over 160. mw and the only transmission lines above 138'kv. We may also assume that the Company is allowed to charge a rate for the use of those transmission lines, so long as that ra.te is both "just and reasonabic'.' and nondiscriminatory.-*/

However, it may not use -- or refuse to use -- those facilities to give itself an advantage in the buying or selling of wholesale power transactions. Thus, as Otter Tail clearly confirms, it may.

not restrict the ability of municipal (or cooperative) systems to obtain alternate sources of purchased power., for either all .

or partoof their needs, by refusals to sell transmission services as separate transactions or by otherwise restricting access to its dominant facilities. It may not restrict its coordination arrange-ments to creabe disadvantage to those seeking control over their

• • / (Continued)

This statement epitorizes the holdings in federal cases which have established the prin-ciple: United States v. Terminal Railroad Assoc., 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed.

810 (1912); Gamco, Inc. v. Providence Fruit &

Produce Building Inc., 194 F.2d 484 (1st Cir.

1952); Packaged Programs, Inc. v. Mestinghouse Broadcasting Co., 255 F.2d 708 (3rd Cir. 1958);

Six Twenty-Nine Productions, Inc. v. Rollins Telecasting, Inc., 365 P.2d 478 (5th Cir. 1966).

.331 F. Supp. at 61.

1 +/ recoral Power Act, Sf.205, 2CG, 16 U.S.C. 824d, c.

l l

)

- C L --

own power supply for distribution 'either to themselves or to those who would themccives enter into wholesale power markets. While we can understand Consumers Power Company's desire to maintain the municipalities as customers, these entities have a right to seek alter-nate power sources,. including the development of the'ir own power supply.

Certainly, Consumers Power Company 's now stated willing-ness to sell transmission services on the condition that it does not adversely affect use of its economic position is a classic example of an attempt to use its dominant bottleneck facility to

" create or maintain" self advantage.*/ Precisely what the Atomic Energy Act Ai endments and Otter Tail decides is that antitrust principles are indeed applicable to wholesale pcwer supply.

These principles include the rules set forth in the " bottleneck" monopoly cases.

See Baltimore & Ohio Railroad Co. v. United States, 264 U.S. 258 (1924),

(" Chicago Junction Case"); United States v.

Griffith, 334 U.S.

100 (1948); United States v. Aluminum Company of America

~~j 148 F.2d 416 (CA 2, 1945).

• /

~

In classic understatement, the District Court stated, ". . .

even the threat of losing business does not justify or excuse violating the law".

supra, 331 F. Supp. atUnited 65.

States v. Otter Tail Power Co.,

• • /

To the extent tha t' the Company is arguing it will transmit, but only if it determines harm to Company economic interests will not result, it argues for a form of price discrimination to offset competitive or other advantages. This is nothing more than a form of basing point pricing, condemned by the law. United States v. Pending Co. 353 U.S. 26 (1920) ; antitrust Corn Pro-ductc Ref. Co. v. FTC, 324 U.S. 726 (1945) ; FTC v. Cement Inn titute 333 U.S. 683 (1948). Indcod, if its object is to offset inter-veners advantages to protect its retail merkets, this is a classic "pr.i ce squeone " United Stn tes v . Alumi num Co. of America, 148 P. 2d 416, 437-430 (CA 2, 1945).

103 The Supreme Court in cu) f S ta tes, citing _ Otter Tail among other cases, i

reaffirmed its concern that regulatory agencies not be remiss in .their consideration and application of antitrust prin-ciples to the power industry.

104 The concern for access by the smaller sy tems to nuclear power development and attendant coordination is not limited to Otter Tail _and Gulf States, although these cases, along with Gain esville,

_ constitute recent Supreme Court holdings declaring a necessary broad application of antitrust principles to the who le-sale power industry.

Counsel for Consumers was indeed correct Uhen he stated that _ Otter Tai), and presursbly Gul f States could t ave a h

definite bearing on the state of the law which would control, a t least in part, the issucs being raised by the Interveners and th e Depa rtment of Jus tice ".

(Tr. 103-104, see 131-132) 105.

In _ Municipal Electric Association of Mass . v. SEC, 413 F.

2d 1052, 1055 (CADC, 1969),

the basic issue was phrased whether approval

[o? an aquisition under the Public Utility Holdingompany C Act, Section 10, 15 U.S.C. Section 79 j, ] should be given "in a manner which would give municipals an opportunity on reasonabl e terms to ob.tain access to this new lower - cost [ nuclear] power. "

The Court presented the issue in terms of blockin g access to nuclear base load' power and "for low cos t bulk power supplies and trans-mission services ". 413 F. 2d at p. 1058.

It was held that the SEC could not grant the requestod exemption withou t considera tio n ,

of the anticompetitive claims raised the Cition.

- (?. -

106 Furthermore, the Atomic Energy Act requires the granting of

, such law. access unless it would not be inconsistent ntitrust with t The'1970 Amendments were a resul' of congressional di ssat-isfaction with Statesville, Which had determined that a " noncom-mercial" license could be granted without antitrust conditions . But, as the various decisions in _Statesvilla Pake clear, the results would be contrary for a commercial license here. , which is being applied for

_ Cities of S ta tesville v. AEC, banc). 441 F. 2d 962 (CADC, 1969,3g1 Ato'm ic Enerov Act, Sec. 1056, 42 U.S.C. 2135 (68 Stat. 938, as amended by P.L.91-560 (December 19, 1970).

The reasonc for policing the control of facilities and terms of acces s to coordination were well expressed by Chairman Joseph C. Swilder.~*/

Swilder stated: ' Chairman "To the large privately owned electric utility a retail customer even a large industry, is simply a customer. How-also a competitor, actual or potential.ever a W The customer at Wholesale be a competitor in the fringe areamay not only Where the two systems are contiguous

'but may also be a direct or potential competitor for the commercial and in-dustrial businesses that are able to take costs and conditions of electric service into account in deciding where to locate and which power supplier to patronize.

1/

The formar Chairman of the Federal Pow recently of'tha-Mew York State Public forviccr aCommission and more Commission, 1 i

k i

"The electric seeking to putpower wholesaler may in fact be

^ This is not merely the theoretical.

retailer out of business.

Every year many municipals systems surcome to purchase orders by invester-owned wholesaler suppliers

• /

107.

He additionally pointed out that the wholesale po'.:or industry involved " multi-s ta te poc13" and a variety of wholesale and specialized services, including, emergency ser-vice, supplementary and efficiency energy, spinning reserve, re-serve capacity, stand-by reserve, wheeling reserve, seasonal inter -

change and economy energy, all of which are " foreign to retail sales". Senate Bill No. 218, Exemption of Certain Public Utilities from Federal Power Jurisdiction" _ Hearings before the Gommittee of i

Commerce, United States Senate on S. 218, _89th Conaress, 1st Sess.

[ Serial No. 89-38) , pgs . 92-93 (1965).

108.

At great length Consumers Power Company argues that its conduct has been "rcasonable," ss ictioned by lav, econcaically justi-fied or otherwise beyond the reach. of this Board.

Without s tating so explicitly,' it seeks to apply a standard of reasonableness. How-

ever, ,

the harms of limiting competition flow directly from its re -

I fusals to deal in the context of its control of the major bottle -

1 neck facilities.  !

t/ See p._45-4G for the many ref$rences to Consumers Power Company their generaattempting tion. to take-over competing systems ormtli i

• \

109. The' Board has ack us to comment co.icerning an analogy

(

to the "per se" standards relevant to application of the anti-trust laws as opposed to the " rule of reason" tes ts. See pp. 109-110, infra. However, it should be stressed that the "per se " s tandard is merely a shorthand expression of d2terminir.g that certain types of activity have a built-in tendency to restrain competition. The are

" unreasonable in and of themselves ". Fortner Enterorises v. U.S.

S teel Corp. , 394 U.S. 495, 499 (1969).

110. The Atomic Energy Act Amendments are not an isolated a~ tion by Congress and indeed make reference to other statutory law, including broad reference to the antitrust laws. And as we state in the next recent case the law confirms the application of antitrust principles to the wholesale electric utility. In the words of the District of Columbia Circuit, Giinesville Utilities v.

Florida Power Coro., 402 U.S. 515, 517-520 (1971), expresses clearly the proposition that municipals should nqt be interconnected "on terms more onerous than those required of other invester-owned utilities ".

La fave t te , L a.

v. AEC, 454 F. 2 d 941, .952 (CADC, 1971), affirmed sub.

nom. Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973). More-over, Otter Tail itself cites Gainesville, 402 U.S. 515, 517-520, stating, "We recently described the difficulties and problems of thosa isolated c1cetric power systems. . .

Interconnection with other utilities is frequcntly the only solution". 410 U. S . at 33 8.

.i 66 -

r 111. And it ' connot be argued that Consumers Power Company docs not " intend" to continue to control the bottleneck facilities or to break down its sales of power to allow for equal access to the interveners (i.e. separately sell them the different forms of interchange power). Therefore, under a "per se " s tandard or not, the evidence is clear. Indeed,.the pursuit of this litigation is a specific attempt to avoid an order requiring a direct granting of access by Consumers Power Company to its nuclear generation and transmission facilities or an equal access to its coordination 1/

agreements.

t

, 112. The bottleneck monopoly theory itself recognizes the in-herent control which goes ' hand in hand with the domination of fac-ilities necessary for use in a particular industry. Thus, for ex-ample, where railroads also owned coal mines, it took no great im-i agination to realize that if the railroads could price transporta-tion to equalize the market prices for coal, they would be adversely affecting competition at the retail level. So much more so, if the

] railroads could have blocked others fro:a independent owhership 1

~

of coal altogether. United States v. Reading Co.; 253 U.S. 26

(1920). Similarly, an Otter Tail or Consumers Power Company can-not refuse access to a direct form of ownership of nuclear power or j to its bulk power transmission lines, especially to affect com-

(~ l

• / .Despite attempted qualifications, at least insofar as trans-mission across is concerned, Dr. Stolzer appears. to agree.

Pp. '19-2 0 :G 72 3.

O

-t

,. . petition on the retail level or to preserve its existing wholesale markets.

113.

The control of vital facilities and agreements by Con-sumers Power Company (especially in conjunction with having obtained government privileges, such as franchises and AEC licenses) carries with it an obligation to allovf access at reasonable and on non-discriminatory terms. This the law requires.

B.-

By Refusing to Sell Wholesale Power Services Separately, Including Transmission, Consumers Power Company has " Tied" its Sales of Power, Created Barriers to Entry and Forced Exclusive Dealings Arrangements ,

i 114.

Apart from the obligation for fair dealing which results from its control of bottleneck facilities and the more general ob-ligation not to attempt to res train competition in the wholesare power markets, Consumers Power Company has created " barriers to entry", among other things, through its use of " tie in" sales. This is illustrated in one of its defenses.

115.

Consumers Power Company apparently contends that its only l

obligation is to sell wholesale power, which as we have discussed above, is a sale of power to meet generalized requhr ements of the purchaser or what is referred to in the indus try as " full require-ments " or " partial requirements " service.

Consumers Power Company i

contends.that.an intervener should not be able to acquire a portion

(

.of the Midland Plant through direct ownership, buy transmission

services separately, or -buy specialized forms of power necessary to accomodate his own generation or power purchased from other sources. If interveners obtain generation to moet part of their needs, the Company would further deny the ability to purchase "ba ck-up" power services a t reasonable terms "from Consumers Power Company (or others). */

116. The result is to create " barriers to compe'ition",

t again violative of antitrust law and policy. It becomes more expensive for a municipal or cooperative to self-generate than it would be for Consumers Power Company because of the availability of comparably price back-up and attendant power services. United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 344-345 (D. Mass., 1953), affirmed per curiam, 347 U.S. 521 (1954). See W. Montague Co. v. Lowry, 193 U.S. 38 (1904); Associated Press v.

United States, 342 U.S. 143'(1951).

.117.- Moreover, in forcing partial requirements purchasers to either meet-Applicant's imposed tests for adequate coordination (i.e.,

"self sufficiency", including reserves reservations as determined

• / That' the sale of such specialized power services is common in the industry is illustrated by Consumers Power Company's own practice of buying and selling such' services as part of its interchange transactions.- E.g, Ex. DJ-G7-76, 11-106-11,122. s

(

. sg _

justified by it) or to purchase wholesale power from it under its .

partial requirements' rates, Consumers Power Company adopts a clear

( diviac and conquer strategy. If a utility system is self-sufficient enough so that it can do without is coordination, albeit disadvan-tageously, Consumers Power Company will then coordinate, but at less favorable terms than its dealings with other utilities. Houever, the necessity to obtain full self-sufficiency in order to get any back-up at all makes it difficult for a system without generation to acquire generation in the first place and makes such back-up exceedingly expensive. This is especially so since denial of transmission services will discourage joint ventures in construct-ing generation or obtaining back-up elsewhere. Thus, for many necessary services, systems are constrained to purchase from Consumers Power Company.

118. Consumers Power Company is attempting to maintain 4 a system of " tie-in" sales. The Company maintains that many 1

interveners who do not meet its ' tests for coordination must buy a whole " bundle" of power services. Even as to systems that do, the Company will not sell transmission so that an intervenor has

( */

to buy power and transmission together.- Consumers Power Company

• / As a result of its " Statement of Policy," Consumers Power Company may now be willing to do so providing it does not result in a "significant loss" to the Company, whatever that means. (8106-8107) .However, in any event, such restrictions are unwarranted.

4 We further point out that nothing is preventing service agree-monts or contracts, if not unranconable, to protect the Company against abrupt changes in suppliers by interveners. However, considering that the Company claims to have difficulty financing necessary facilities, even on its own anticompetitive terms, the

~

" economic detriment" test does not justify tito Company's re-refusals to deal. See, e.g., Ex. It04, pp. 22-24.

f -

could clearly separate the package so that interveners could buy

.(

transmission from Consumers Power Company and power from a separato source. It could clearly sell an ownership interest in Midland or 4

unit power from it, based upon the Midland unit costs. It could clearly break down its partial requirements rate to provide for a 1

separate price for " base load" or " peaking" power. It can sell emergency or maintenance power separately. Indeed, its rates for wholesale power include the carrying charges and expenses for all of these services. Thus, the " rate base" used to cost wholesale power includes the costs of its transmission lines, base load units and peaking units. Its prices combine generation costs for all services. .(5092-5121).

119.

Consumers Power chooses not to sell such services separately except through its interchange transactions, which are either not available to interveners or not available on reasonable terms. Such tie-in sales are per-se violations of the antitrust laws.

i Fortner Enternrises v. U.S. Steel Corp., 394 U.S. 495 (1969). Northe rn P .R. Co. v. United S ta tes , 356 U.S .l', 5 (1958).1/ I$[

• / Under Fortner, to establish a car se violation a plaintiff would have to- show tha t the defendant has " economic power over the tying product", 394 U.S . a t 502-503, and that the volume of com-merce in the tied product "is substantial enough not merely to be the minimis," 394'U.S. 501, although a violation could be proved even if these tests are not met. 394 U.S. 500-501. Here, where Consumers Power dominates the exis ting :carhet for wholesale power, and controls high voltage transnisnion and whcro the availability of wholesale and back-up power is essential to interveners, the tests would be clearly met. Accord, United States v. Locu's, Inc., 371 U.S. 38, 45 (1962). ~~

• • / Dy using its power over various segments of the wholesale market (e.g., transmicsion, bulk generation, coordination),

i the Company further engages in unfair practices to control pr. ice at dif ferent stages of co=aarec. United States v. Heading Co., 253 U.S. 26 (1920); americe.n Tcb,cco Co. v. Uni N d SEil'5c ,

' ~ ~

'J25 U .~ S . 731 (1946).

~~

i ~

120. As the Supreme Court said in Fortner, (394 U.S. at 503),

commenting on cases such as International Salt Co. v. United States,

/

332 U.S. 392 (1947); Northern Pacific Railroad Co. v. United States, 365 U.S. 1 (1958) and United States v. Loew 's Inc . , 371 U.S. 38 (1962):

"These decisions rejecting the need for proof of truly dominant power over the tying product have all been based on a recognition that because tying arrange-monts generally serve no legitimate bus-iness purpose that cannot be achieved in some less restrictive way, the presence of any appreciable restraint on competi-tion provides a sufficient reason for in-validating the " tie " .

121. Mr. Justice White stated in dissent, supra, 394 U.S.

510, 512-514 (footnotes omitted):

"There is general agreement in the cases and among commentators that the fundamental restraint against which the tying proscrip-tion is meant to guard is the use of power over one product to attain power over another, or otherwise to distort freedom of trade and competition in the second product. "This

, distortion injures the buyers of the second product, who because of their preference for the sell'er's brand of the first are artifically forced to make a less than optimal choice in the second. And even if the cus- .

tomer is indifferent among brands of the second product and therefore loses nothing by agreeing to use the seller's brand of the second in order to get his brand of the first, such tying agreements may work significant restraints on competition in the tied product.

The typing seller may be working toward a monopoly position in the tied product and, even if he is not, the practice of tying fore-closes other sellers of the tied product and makes it more difficult for neu firas to

, enter that narket. They must be prepared not only to match c::isting sellers of the tied product in price and quality, but to offset the attracticn of the tying product itself. Even if this is possible through l

simultaneous entry into production of the tying product, entry-into both markets is significantly more expensive than simple entry into the tied market, and shifting buying habits in the tied product is con-siderably more cumbersome and less respon-sive to variations in competitive offers.

In addition to these anticompetitive effects in the tied product, tying arrangements may be used to evade price control in the tying product through clandestine transfer of the profit to the tied product; they may be used as a counting device to effect price discrimination; and they may be used to force a full line of products on the cus-tomer so as.to extract more easily from him

a. monopoly return on one unique product in the line.

2 122 More succinctly, as the Court stated in United States v.

Loew 's , Inc., 371 U.S. 38, 44 (1962) , quoting S tandard Oil Co. v.

United States, 337 U.S. 293, 305, 306 (1949). " Tying arrangements serve hardly any purpose besides the suppression of competition".

j i In that case. the Court condemned block booking, i.e.,.the requirement 4

that television stations has to buy a pac' cage of mation pictures to ob-5 tain rights to individual films. As here, there were involved

, statutory created monopo.ly rights-(copyrights), .but the Supreme Court heldthat this could not justifying extending monopoly power

-further than necessary.

123 In United Stat'n e v. Griffith, 334 U.S. 100 (1948),

the Supreme Cour,t condemned an arrangement whereby in order to

.show motion pictures-in towns where a theater operator owned the sole outlet, a distributor was required to lease the film to

~

the same operator's theater elsewhere.

-k

- . - - -. . .- ,.o . . , . , , . - - . .-- , -

124. In International Business Machines v. United S ta tes , 298 U.S. 131 (1936), Supreme Court held illegal a requirement tha t in order to obtain IBM's computers, a customer also had to buy the "s o f t -ware " (i.e., programning and compu'er cards). The IB:4 case, where a cascomer had to buy a " bundle" of services together but could not purchase individual computer services, directly duplicates the situation here. -

125. Finally, while not decided expressly.on this ground, Otter Tail requires a separate sale of transmission services distinct from the cale of retail energy.

9 o

. ~ . . . - . . . . .

III. THE' LAW REQUIRES THE GRANTIMG OF BROAD RELIEF A. The Atomic Energy Act Gives the Atomic Energy Commission Broad Authority to Regulate all

~

(' Operations Flowing from the Activities of the Licensee that would Maintain or Create competitive Situation.

126. At various times, consumers Power Company has argued tha t the Commissic1 's authority under the Atomic Energy Act is to be read narrowly, if it is exists at all. Indeed, from reading i

the Company'_s past expressions on the matter, one would get the impression that the purpose of the 1970 amendments was to narrow the Commission 's jurisdiction. The plain words of the s tatute give the Commission a jurisdiction over a "si tua tion " , clearly not a narrow expression, " inconsistent" with the antitrus t laws. We note tha t the statute uses the word " inconsistent" and not "in violation of". Upon that finding, ther.e is no limitation stated in the Act on the conditioning power of the Commission. Clearly, the

. jurisdiction is granted to resolve the problems created by the situation.,

127. Moreover, it must again be stressed that the 1970 amend-ments were a reaction to Statesville, in which Congress was con-cerned that the Commission was not paying sufficic.nt heed to its function of antitrust review. Considering Ehat the Company admits that large scale nuclear plants will and must be clectrically inte-grated into its entire operation tnd tha t what is involved is a licensing of major faciliti~cs, which will inevitably shape the pro-I

. duction of electric' power, we do not see how the jurisdiction could

be read narrow 1". */ E.g., PP. 35-36, sy g.s.

12d. There is no question that Cent;rcan has intended

,- t. hat

-the Atomic Encrgy Commission ' ("AEC") be given broad authority in c:-:ccuting the Atomic Energy Act, to assure that licenscos granted the benefit of billions of dollars of public research and development do not utilize that grant in ways that are in violation'of the letter or spirit of the antitrust laws.

Section 1(b), uhich states the Congressional. declaration of policy in the Act, is notably expansive:

"S1.' Congressional declaration of policy.

Atomic energy is capable of application for peaceful as well as military purposes. It is therefore declared to be the policy of the

-

• United States that --- .

(b) the development, use, and control of atomic onergy shall be directed so as to promote world

' peace, innmvo the general welfare, increase the standard _ng, and strengthen free cc:ancti,,, .

tion in sate enterprice."' (cuphasis add 5d) _7 129.- Although the conr.ercial development of nuclear powcr for the-generation of-electricity was still a concept to be developed in 1954, when the Atomic Energy Act.of 1946 was revised, the 1954 Act made clear that -hen commercial develop-mont arrived', there would be ample regulations governing its use

,/

' It is of noto, that it is prcjected that within a 10-year period over half Consumerc Power Company 's total generation vill be from nuclear energy. E:: . 1001

• • [ S1 offthe' Atomic Energy Act of 1954, 42 U .S . C . - S 2 011.

in accordance with the above-stated Congressiona1 policies. ,

Thus, the 1954 Act specifically provided, among other matters,.

(1) that any facilitics for the production and utilization of atomic

• / \

oncrgy would be subject to AEC licensing, ,

(2) that licenses for commercial development (i.e., found to be of practical valuc) would be " subject to such conditions as the Commission may by rule or regulation establish to effectuate the purposes and tk/

provisions of this. chapter"I-' (3) that the license would be subject to revocation or "such other action as it (i.e., the _

AEC) may deem necessary" if the licenseo violated any of the

• • • /

antitrust laws "in the conduct of the licensed activity," and (4) that prior to the issuance of any commercial license, the AEC should notify the Attorney General of the proposed license and the proposed terms.and conditions thereof for his advice on whether the "propocod license would tend to create or maintain a situation inconsistent with the antitrust laws, and such

• • • • / '

advice shall be published in'.the Federd j:egister."~ In addi-tic,, the Act provided for notice "to such regulatory agency as may have jurisdiction over the rater, and services of the proposed activity, to mt3nicipalitics, privato utilitics, public bodics, and cooperatives within transmission distance authorized to engage esssaj in the distribution of electric energy" and preferred

• / Id., S101, 42 U.S.C. S2131 (1954).

• • / Id., S103, 42 U.S.C. 52133 (a) (19 5 /. ) .

• • • / Id. 5105 (a) , 42 U.S.C. S213S (a) (1954). .e

• • • • / Id', S105(b), /.2 U.S.C. S2135(b) (1954).

( -

• • • '4/ Id. , 5102 (c) , 42 U S.C. S2232 (c) (1954).

. to nip in the bud any incipient antitrust situation but also to further such competitive postures, out-side of the ambit of the provisions and establinhed policies of the antitrust laws, as the ccnctission

(.- might consider beneficial to the frec enterprisc system.

The Joint Committee does not not satisfy, either extrcmc view. favor, and the bill does The Committee is recommending the enactment of prolicensing review provisions which . . . do not stop at the p6 int of the Attorney Concral's advice, but

_ go on to respect to potential describe antitrust the role of the Commission with added) situations. (caphasis It is intended that the finding be based on reason-able probability of contravention of the antitrust laws It or the policies is intended that, clearly underlying these laws.

in effect, the Commission will conclude uhether, in its judgment, it is reasonably probable tnat the activities under tne license would, when the license is issued or thereafter, ce incon-sistent underlying clearly with any orthese the antitrusc laws. laws or the policies (empnauis a'HHed).

It is important to note that the antitrust laws within all the the lawsambit of subsectinn specified in subsection 105c105a.of the bill are The committee-is well aware of the phrases 'may be'

,,and ' tend to' in the Clayton Act, they have been given by v'irtue of decisions of theand of the mean

~

Supreme able Court and the will of Congress--namely, reason-probability.

'also chosen the touchstone of reasonable probability for the standard to be considered by the Commission under the revised subsection 105c of the bill." .

The above passage makes clear what Congress intended the AEC to do in conducting its licen' sing procedures, nancl'y, to conclude for itself whether the activities under the licence would, apply-ing all the antitrust laws and the policios they represent, be inconsistent with such laws and policies. Morcover, the test e

9

in its deliberations was "the focus of reasonabl.c probability--

• /

not certainty or possibility." After such consideration,

(~ and aided in its deliberation by not only the Attorney General but such intervenors and such other. regulatory agencies and per-sonnel as may wish to or be requested to participate, the Com-mission may issue, deny, amend'or condition a licenso with "such

• • /

~~

conditions as it deems appropriate."

'132. The same concern for maintaining competition expressed by the Joint Committee was repeated in the floor discussions of the bill. For example, Scnator Hart, Chairman of the Senate Antitrust and Monopoly Subcommittee, stated the purpose of the 1970 Amendment as follows; "It seems to me that the clear intent of this language in subsection 105 (c) (G) is to enable the Atomic Energy Commission to expedite the licensing of nuclear power facilities while, at the same time, taking those steps necessary to ,

cure adverse antitrust findings under the pro '

. visions of the act."***/

~

133. The legislative history is replete with the concerns of Congress that the proposed bill be adequate to deal with anti-competitive situations, and the remarks of Senator Aiken, the ranking member of the Joint Committee on Atomic Energy, on this issue are enlightening: .

Sen. Aiken. "

. . . I was concerned that the language of the bill clearly would result in the application of the antitrust laws in this country to the producers of electrical energy

• / Id., at 31. ,

l l

• • / S10$(c) (G) of the Atomic Energy Act of 1954, as amended,

( T2 U.S.C. S2135 (1970).- ,

i

• • • / 116 Cong. Rec., 39622 (1970). ,

from nuclear plar.ts. Therefore, I consulted with the Department of Justico quite freely

'^

bill.roccived and . . . "1/their assurance that this is a good Sen. Aiken then inserted in the record a letter dated Novembe ,

1970 from Richard W. McLaren, Assistant Attorncy General, Anti-trust Division, to Sen._ Aiken'concerning the b'ill to amend the Act, the last tuo paragraphs of which road as follows:

. "The Committee's intent scens clear:

if AEC finds that'a situation ' inconsistent with the antitrust laws 'would result from activ'. ties under a license,' it may either (1) deny the license or (2) condition grant of the license on action by the applicant (s) .

to eliminate the inconsistency. . . .

example, applicants for a license for aFor joint venture nuclear power plant could be granted a license by AEC to construct a vitally needed facility; houever, grant'of the licenso would be condicioned upon aopli-cants' affording access to lou cost nower from the nuclear racility on reasonable terns to a utility theretofore exclue.ied from participation, if exclusion of tne lanter would sub]ect it to unreasonable competitive disadvantage. (Emphasis added)

"On the basis'of our understanding of the

. . purpose and meaning of S.4141, as set forth

', above, the Department of Justice supports enactment of this legislation."

"MR. AIKEN. Mr. President, with that assurance from the Department of Justice, and the coopera-tion of the entire Joint Committee on Atomic '

Energy, that I feelthe we bill wasenact should reported unanimously, so,,/

this legislation.__

, 134.a

' It .is evident that Congress felt the AEC's conditioning authority was not only sufficient to cure any anticompo~titive effects in existence or flowing from the issuance of a license but also trequired to deal adequately wit'h situations in which

- o

• / 116 Cong. Rec. 39620 (1970). -

• 1/ Ibi<3,.

, n, . -

anticompetitivo conditions woro or 11 holy to be prescnt. Thus, in discussing the bill, Congressman !!olifield of the Joint of Committec explained in the !!ouse:

"The Ccamittec believes that, except in an extraordinary situation, Commission imposed conditions should be able to eliminate the concerns entailed in any affirmative finding under paragraph (5) while, at the same time,

- accomodating the other public interest concerns found pursuant to paragraph (6) . . . In connection with the range of Commission discrc-tion, the Comnittec notes that pursuant to sub-section 105a che Commission may also tako such licensing action as it deems necessary in the event a licensee violated is found any of the actually antitrust tg, latis."--pave

~

'Furthermore, in floor debate in the Senate, Senator Hart of the Antitrust and Monopoly Subcommittee stated:

"If an adverse antitrust finding is -

made by the Commission, it may issue or '

continuo a license when there is a 'need for power in an area,' but this issuance or continuance 1must be accomoanied by appro- ~

priate conditions in the license which rcquire

• the applicant to cure the adverse antitrust findings. If the applicant or holder of the license does not cure the antitrust findings,

• , then the AEC may suspend or revoke the license regardless of the 'need for power in the affected area.' (Emphasis added) -

~

• Under no circumstances would the Commission be"rolieved of its responsibility to require applicants for licenses to conform to the 1 antitrust provisions of.the act and the Enti- l

. trust laws generally." ***/  :

• / 116 Cong. Rec. 34312 '(1970).

• • / To' same offcet, see the following statement by Congressman' Prico at 116 Cong. Rec,. 34318 (1970):

,' The Committee . . . expects the Commission l

, normally to take care of both the need for energy ,

as well as to remedy the situation uhcre there has been an affirmative finding undor paragraph I i' (5) ." .

, ***/ 116 Cong. Rec. 39622 (1970). ,

1 '

O

, Rcinforcing tho Congressional intent to grant broad scopo

(

to the AEC's conditioning authority was the interprote. tion

', of the bill's antitrust provisions by thc Justice Depart-ment's Antitrust Division. In a letter to Sonator Metcalf, in response to his inquiry about the bill's antitrust provisions, 4 */

the Antitrust Division s.tated:

"t.'e would not think the AE.C could ' avoid the conditioning of licenses to cure adverse antitruct findings' simply upon a finding that there was a need for power in the affected area. Rather, we expect, and we believe that

, the Commission expects, that the Commission's conditioning authority could bc used to cure competitive problems while allouing construc-tion and utilization of facilitics." ,

. Stated simply, the legislative history of the Act and the relevant provisions plainly indicate a comprehensive authority ,

granted by Congress to the AEC to license nuclear pod'or plants, subject to donial or conditions curing or preventing anticompetitive offects . created or maintained by the issuance of such license, ,

135. ,

As we have noted, Congress,' in'the passage of the 1970 amendments to the Atomic Encrgy Act, intended that this Commission have broad authority to insure that the nuclear plants to be licensed by the Commission not be used in n manner which would create or maintain,a situation inconsistent with the antitrust laws. In effect, this delegatini cf authority

• / Letter of Acting Assistant Attorney Concral, Antitruct Division, L Nalker B. Cor.cgyo to Sonator Lee Metcalf, dated Septe:uber 2, 1970, rc S.4141 quoted

• wit.h approval in 116 Cong. Hec. 39621 (1970).

i

to the Commission, as the Sup:: cmc Court stated in Gulf States Utilities Co. v. FPC, 411 U.S. 747, 36 L.Ed. 2d 635, 644 (1973),

( ,

in an analogous case, " serves the important function of catablishing a first line of defonso against those competitive practicos that might later be the subject of antitrust proceedings." For this jurisdiction to be effectivo, however, it is necessary that this Commission enter its order in such a fashion as to ensure the parties and itsclf that the conduct of the parties pursuant to that order will in fact be such as to climinate the anticompetitive situation found to exist under Section 105 of the Act.

136. ' The Commission's authority to set conditions to a license under Sections 103 and 105 of the Act is plonary. See, e.g., United Gas Improvement Co. v. Callery Properties, 382 U.S.

223 (1965); FPC V, Sunray DX Oil Co. , (391 U.S. 9 (1968); Atlantic Refining Co._ v. PSC of New York, 360 U.S. 378 (1959); Russell v.

Paric_r, 15 Otto 433, 26 L.Ed. 1060, 1063 (1882); FPC v, Hunt, 376 U.S. 515 (1964); Texaco v. FPC, 290 F.2d 149 (CA 5, 1961); Admiral-Merchants Motor Freight v. United States, 321 F. Supp. 353 (D. Colo.

1971), affirmed 401 U.S. 802, rchcarina denied 404 U.S. 987.

f

- 85 ,

l

B. Antitrust Law and Administrative Law Refutes the Claims that the Atomic Energy Act must be Given a Narrow Reading.

137 As has been established previously, Consumars Power Com-pany is operating an integrated system. pp. 18-37, supra. To the extent that a monopoly s!1:acion has been cream d or maintained by such practices, the construction and operation of the Midland units,

, makes that situation more feasible. Thus, in determining the

" nexus" that need be shown to grant relief, the jurisdictional reference must be the extent to which the construction and opera-tion of nuclear power plants have an impact on Consumers Power Com-pany's operations. Especially considering the broad language of the Act encompassing a " situation" (from interveners' standpoint a problem) inconsistent with the antitrust laws,not limiting itself to the operations of the plant, the , relief granted must be consis-tent with* resolution of the " situation inconsistent."

138 Moreover, since the statutory reference of the Atomic Energy Act is to the general antitrust laws, so must the scope of relief be referenced to those laws. The situation in this case is that, contrary to agreements for settlement that have been reached t

by numorous other major utilities, Consumers Power Company refuses to deal in major areas of Wholesale power transactions with smaller utility systems within its area of service or will do so only on discriminatory terms.

139 In light of cases condemning refusals to deal, barriers to entry, tie-in sales, exclusive dealing requirements, basing point pricing -- in short the attempt to monopolize -- such as those being practiced by Consumers Power Company, the Trial Board has a mandate to take a broad view as to the appropriate relief.

There can be no public interest in narrowing the scope of relief.

As the D.C. Circuit stated in reference to the Federal Power Act, it is precisely in remedial situations that an administrative agency's power to grant relief is at its broadest.

The statutory authority to issue certificates or permits on conditions implies broad authority to take effective action to achieve regulation in the public interest. We are mindful of the liberal interpretation the Supreme court has given similar provisions in other statutes as

. reflecting broad authority, and in appropriate cases a correlative duty to effectuate the public interest . e a Finally, we observe that the breadth of agency discretion is, if anything, at Zenith when the action relates primarily not to the issue of ascertaining whether conduct violates the statute, or regulations, but rather to the fashioning of policies, remedies, and sanctions, including enforcement of voluntary compliance programs ilt order to achieve maximum effectuation of Concressional obiectives. The source of discretion is available .. .

Where the agency 's order, though having aspects of determination of individual fault, is a denial to i a wrong-doer of participation in a government program generally ex2 ended to businessman, for the purpose of maintaining the fairness, equity, and efficiency

of the program. Here the case is stronger, for Petitioner seeks a license or orivilece. While

('

that license may not be unreasonably or unlawfully withheld, it certainly need not be extended to an applicant not ready to redress his default by discharging the duty he should by rights have assumed without nudging!'. Niacara Mohawk Power Co. v. FPC 379 F. 2d 153, 159 (CADC, 1967, emphasis supplied) 140. Nuclear power development was largely created through the aegis of Federal development and the fruits of that development are part of the"public domain". In this situation, the public in-terest obligations which result from the acceptance of a license must be at their broadest. Compare FPC v. Idaho Power Co.,

344 U.S. 17 (1952).

141. In determining the extent of its power, the Board should consider that there is no public purpose in permitting a continua-tion of Consumers Power Company's refusals to deal and to coordinate on an equalized basis. Compare Colorado Antidiscrimination Com-mission v. Continental Airlines Co.,'372 U.S. 714 (1963); Southern Steamshio Co. v. NLRB, 316 U.S. 31, 46-49 (1942). Expecially re-levant are antitrust cases holding that in the case of violations, courts or agencies should look to the transactions and violations as a whole and not limit themselves to the isolated acts immediately complained of. E.g., Swift & Co. v. United States, 196 U.S. 375 (1905); continental Oil Co. v. Union Carbide Corp., 370 U.S. 690,699-699 (1962). See United States v. Masonite Coro. , 316 U.S. 265, 274-276 l

l (1942) i r f

, 142. Moreover, in determining the extent of its authority,

/

4 the Board should also look to cases interpreting the general obliga-tion of regulatory agencies in considering antitrust matters and cases establishing the scope of the conditioning authority Which attaches to licensing and certificating authority. In licensing and certification, the scope of conditioning power to protect the public interest has been held to be very broad. Indeed, even Where a Commission cannot command the alternative or Where it may have no direct -- or limited -- regulatory authority over a subj ect matter, it has been held that consideration must be given to national policies beyond the immediate statu-tory jurisdiction. E.g., FPC v. Transcontinental Gas Piceline Coro.,

365 U.S. 1 (1961); Denver and Rio Grande Western Railroad Co. v.

United States, 387 U.S. 485 (1967); FMC v. Svenska Amerika Iinien, 390 U.S. 283 (1968) ; City of Pittsburgh v. FPC, 237 F. 2d 741 (CADC, 1956) ; Northern Natural Gas C'o. v. FPC, 399 F. 2d 953 (CADC, 1968). See Udall v. FPC, 387 U.S. 428 (1967); Scenic Hudson Pre-j i

servation Conference v. FPC, 354 F. 2d 608 (CA 2, 1965), cert. denied i sub. nom. Consolidated Edison Co. of New York v. Scenic Hudson Pre-servation Conference, 384 U.S. 941 (1966) ; United Church of Christ v s

FCC, 359 F. 2d 994, 425 F. 2d 543 (CADC, 1966, 1969). Especially, considering the strong national policy underlining the antitrust l

,m -

i laws,b! and the explicit antitrust authority granted this agency,11/

this Board can do no less.

143 Finally, we call to the Board 's attention that the Supreme Court specifically considered and rejected in Otter Tail claims that the scope of relief should be limited, noting that a company in Otter Tail's situation could expect to be somewhat " hemmed in " . 410 U.S. at p. 391 144. If one is caught stealing a RCA television set, an in-junction or consent decree need not limit itself to say that one may no longer steal RCA television sets. Relief, as the word implies, should provide a remedy to the basic problem. Mr. Justice Jack-son stated in Interna tional Salt Co. v. United S ta tes , 332 U.S. 392, 400 (1947):

"The District Court is not obliged to assume, contrary to common experience, that a violator of the antitrust laws will relinquish the fruits of his violation more completely than the Court requires him to do so. And advantages already in hand may be held by methods more subtle and informed, and more difficult to prove than those which, in ,

the first place, win a market. On the purpose of restrain trade appears from a clear violation of l

law, it is not necessary that all of the untravelled roads to that end be left open and that only the ,

l warn one be closed. The usual ways to the prohibited ,'

goal may Le blocked against the proven transgressor  ;

and the burden put upon him to bring any proper claims for relief to the Court 's attention. "

• / E.g., Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973).

• • /- In view of the breadth of the conditioning power granted admin-istrative agencies, it is difficult to preceive that in the situ-ation here presented, action of the Atomic Energy Commission to

' limit the scope of its jurisdiction would be considered lawful, especially here where there has been given direct statutory authority to apply antitrust law. This ic especially true since the Act does not limit itself to violations of the Antitrust laws, but rather to "cituations inconsistent".

-- And, as was further stated, id. at 401:

". . . the end to be served is not punishment of past transgression, nor is it merely to end specific illegal practices. A public interest served by such civil suits is tha t they effectivly pry open to competition a market that has been closed by defendants ' illegal restraints. If this decree accomplishes less than that, the government has won a law suit and los t a cause. "

In short, the Commission 's jurisdiction is not to be part of a legal game whereby ~if Consumers Power Company can find the pre-cise intellectutlized argument to narrow relief, interveners here should be forced to go elsewhere, continually searching for the right formula to find the exact number of proceedings, and forums which have the precise jurisdiction to give relief. If anything is clear from the legislative history of the 1970 Amendments, it is that Congress did . .t intend the AEC to do a half-way job, result-ing in interveners going from agency to agency for possible years of hearings at great expense before obtaining effective relief. We do not believe that Congress intended administrative agencies to become the tools whereby interveners arc submitted to a "shell game" to find where they can get possible agency or judicial correction. Compare Gulf States Utilities v. FPC, 411 U.S. 747 (1973).

s

IV. RESPONSES TO BOARD QUESTIONS .

( 145. Throughout this proceeding the Board has raised specific questions with regard to intervenors' entitlement to relief or other issues in the case. _

To the extent tha t we have not done so

! previonsiv, we attempt to answer these here.

Q. Is there a conflict between the Atomic Energy  !

i Commission's ordering the license conditions that interveners re- I quest and Fe'deral Power Commission jurisdiction?

A . No . We have discussed these issues at great length in Section III.B, supra. However, we would add that in interpreting Federal Power Commission jurisdiction, the Supreme Court has indicated clearly that a practical approach should be taken avoiding a "no i

man's land" or " regulatory gap" where a regulated utility can avoid jurisdiction by arguing the potential of conflict. Panhandle Eastern Pipeline Co. v. FPC,332 U.S. 507 (1947). Otter Tail, says ,

I much the same thing in affirming a court determination of violation of the antitrust laws despite claims of " primary jurisdiction". I 410 U.S . a t 3 76. l i

146. The Federal Power Commission's rate jurisdiction over I utilities has repeatedly been held to give the Commission Board authority to regulate rates and terms and conditions of service subiect to contract limita tions and other limitations in the law. ,

I'-

Thus, for example, in determining what rates are acceptable for

{~ filing or what are " jus t and reasonable " rates, */ the Commission clearly must pay attention to the antitrust laws. Gulf States Utilities Co. v. FPC, 411 U.S. 747 (1973); Richmond Power & Licht V. FPC, 481 F. 2d 490 (CADC , 1963), cert. denied sub. nom., Indiana and Michican Electric Co. v. Anderson Power & Licht of the city of Anderson, Indiana, 414 U.S. 1068; seeSouthb.rnSteamship Co. v. NLRB, 316 U.S. 31, 46-49 (1942).

147. Similarly, a private utility may make a contract for a lower rate than might otherwise be found just and reasonable and the Commission has an obligation to enforce that contract. United Gas Piceline Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956);

FPC v. Sierra Pacific Power Comoany, 350 U.S. 348 (1956) ; Richmond Power & Ligh t v. FPC, suora; Public Service Commission of New York

v. FPC, F. 2d (CADC, No. 24176 et al, March 25, 1974, pp.

62-76 of slip opinion,1974 "Rayne Field") . Both Sierra and Mobile, as well as subsequent cases, hold that the Federal Power Commission gives utilitiesauthorizationstofileforrateincreasesandsetsprocedurek whereby those rates can be reviewed and changed.

• / We do not request that as a result of these hearings, the AEC reach the question of rates, but we do not waive our rights to argue in an enforcement hearing or a hearing, if held, on the scope of appropriate remedy, that the AEC should do so. However, on the record, as it now stands, the Board need not .here reach the:

issue of appropriate rates. We do point out that unreason-able or discriminatory rates can create a barrier as effective as an absolute refusal to deal and therefore " create or main-tain a situation inconsistent with the antitrust laws". There-g fore, under such circumstances the Commission would have to con-

sider and order such relief. This would be especially true in a case where direct access to nuclear facilities were not being ordered so that the Commission would have to consider the equi-valent benefits to nuclear access.

The Act, howaver, does not giva power companies or others regulated r by the Commission unlimited permission to file for rate changes, nor does it prohibit contractual or other limitations on rights which regulated companies would otherwise have. Thus, in a practical way, there is no reason to anticipate that a lawful order of this Commission would conflict with Ehe jurisdiction of the Federal Power Commission, even assuming that the Commission micht reach a parti-cular substantive result different from the FPC. Compare Colorado A'ntidiscrimination Commission v. Continental Airlines, 372 U.S. 714 (1963). In any event, this Commission has jurisdiction over the sub-ject matter of these proceedings and can remedy demonstrated harms.

Compare California v. FPC, 369 U.S. 482 (1969).

148. However, for the purposes of this case interveners do not request tha t this Commission set rates, but are willing to accept' an order that defers to the Federal Power Commission. What inter-veners request is that they be afforded access to nuclear plant, transmission and coordination on a basis similar to that enjoyed by Consumers Power Company.

That is they desire access and nondiscrim-ination. Within the context of relationships that have been estab-lished by Consumers Power Company, the FPC would set the specific rates.1!

• /

The E.g.,standard of nondiscrimination is common to regulatory statutes Federal Power Act, 5205, 206, 16 U.S .C . 824d, e. .

149. The problem discussed is similar to that involved with h the interconnection of specialized common carriers to the AT&T network. Just last month the third circuit affirmed Federal Com-munications Commission decision holding that -

. . . where a carrier has monopoly control over essential facilities we will not condone any policy or practice whereby such carrier would discrimin-ate in favor of an affiliated carrier or show favor-itism among competitors. " Bell Telephone Co. v. FCC, F. 2d (Ca 3, No. 74-1386, September 11,1974).

150. As in the AT&T situation, Consumers Power Company can-not here interconnect and sell services (or charge rates) to its coordination partner, Detroit Edison, and others, and then com-plain if such terms are made generally available.

151. The Board should clearly establish the entitlement to access and coordination on terms equivalent to those enjoyed by Consumers Power Company. Plainly a rate for a service may be es-tablished on an incremental basis (or no rate may be established at all) to facilitate coordination. If by doing so, the larger systems receive advantages denied the smaller systems, the results would be anticompetitive. Thus, for example, if -- as is the case --

1 Detroit Edison and Consumers Power Co. for their advantage choose to establish their interrelationships so that there is no trans-mission charge (Which they are not forced to do) and the result is to give them greater access to coordinated power transactions, it would be illegal to charge the smaller systems for transmission, therehy imposing a barrier to the. smaller systems conducting the trans- '

i actions participated in by the larger ones. Of course, the two t

companies could impose a transmission rate for each other and, of course, the smaller systems would have to maintain (or pay for) j; reserves equal to those maintained by consumers Power Company ,

assumina such' requirements were iustified by engineering criteria. */ ,

I

• /

The problem may be seen in terms of a " price-squeeze". United S tates v.

1945). Aluminium Co. o f Ame rica , 148 F. 2d 415, 436-438 (CA 2, 321, 350-352,United See 368-370 States(1963). v. Philadelohia Na tional Bank, 374 U.S.

but may charge prices to competitors high enough to give him-A mono self advantage or to offset an advantage held by others. Indeed, if the price refusal charged is high enough, it will be tantamount to a to deal.

! Thus, if Consumers Power Co. can exact a trans-mission surcharge on transactions involving interveners higher than that it' charges itself or k s larger coordinsting partners, it creates'a bar to such coordination. Especially, since the 4 FPC claims, has said it has no jurisdiction. to consider " price squeeze "

incorrectly we believe, there can be no primary juris-diction the principle issueof and it is incumbant for non-discrimination, this Commission although as stated intothe establish i

e L

, , ,y - ,_ _m n ..- e--,_rm ,-. . - - - - , --.m.,.. ..w..-.w.rw

152. A company violating the law -- or even public intsroot rights--ought not to be able to defeat relief by raising possible other jurisdictions to deal with the subject matter. In a practical

. (~

sense, governmental bodies should resolve problems and not permit litigants to avoid relief merely because it might successfully con-vince another forum of the correctness of its position.

153 Arguments addressed to Federal and Sta te jurisdictional conflicts were decisibly rejected in Otter Tail, suora. Petitioner there as well as the Federal Power Commission *1/ explicitly raised -- ,

and repeatedly stressed -- the issues of alternative jurisdiction.

They further argued that lack of Federal Power Commission juris-diction was a clear Congressional intent to permit refusals to deal (i.e.,

if the FPC has jurisdiction, it should grant relief; if it doesn 't no relief should be granted) . (Brief for Appellant Otter Tail Power Co., O-T, 1970, NO.71-991, pp. 22-23, 24, 70-71, and generally throughout its brief) . We quote at length Otter Tail's argument.

Af ter the Supreme Court rejection of it, this Commission cannot accept a similar position of Consumers Power Company.

1/ Continued -

text we would leave to the FPC or enforcement or judici a lpro-going principals.ceedings E.g.,

the establishment of rates whichre- accord wi Order California Edison Co., Docket of E-8176.

No. September 21, 1973, in SouLhern vies of that No.

order are now Petitioners for rdR"~~

FPC, CADC, 73-2173 et al.pending as Cities of Anaheim et al . v.

Arkansas Power & Licht Co._, Docket No. E-8250 Orders of October 29, 197 Conway Corp. v. ,

appeal pending FPC, CADC No. 73-2207 in Union Electric Co._ Docket No. E-8215 Order of January 3, 1974 1974 in Commonwealth Edison Co.,

Opinion of January 7, February 28, 1974, in_Public ServiceDocket Co. No. E-7578. Order of E-8242. Order of March 14, 1974, of Oklahoma, Docket No.

Docket No. E-7777. Order April in Pacific Gas & Electric Co.,

19, 1974 in 11isconsin Electric Co., Docket No. E-8619

• • /

Brief of Federal Power Commission as Amicus Curie Support of Applicant, O.T. 1971 No.71-991.

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"The fundamental error of the decision below lies in g its repeated and consistent disregard of Congress ' intent

\

concerning both the wholesale sale and transmission of electric energy and the proper application of anti-trust.

"With respect t_o the interstate transmission and whole- -

sale sale of electricity, Congress enacted Part II of the Federal Power Act, a regulatory statute dedicated to the, objective "of assuring an abundant supply of electric energy throughout the United States with the greatest possible economy and with regard to the proper utilization and conservation of natural resources . . ."

The duty of achieving this aim is expressly entrusted to the Federal Power Commission. As to involuntary Whole-sale sales in particular, Section 202 (b) of the Act pro-vides that such transactions may be ordered by the FPC, upon notice and hearing, if the Commission finds that such action would be in the public interest and that certain specified criteria (e.g., that the sale would not impose an " undue burden" on the utility) are met.

Totally ignoring these statutory procedures and stand-ards, the lower court held that the antitrus t laws im-pose an absolute duty upon a utility to sell at Whole-sale in all cases, regardless of the circumstances. J:y t so ruling, the district court has deprived the FPC of a crucial element of its jurisdiction and has effec-tively nullified the regulatory scheme which ' ,ngress provided to govern the specific subject matter of com-pulsory wholesale sales.

"The lower court 's holding that the Sherman Act re-quires a privat e utility to transmit ("or Wheel") gover-ment power to municipalities is, if anything, even more repugnant to Congress ' intent, since here Congress speci-fically determined that no such duty should be imposed at all. Indeed, when it enacted Part II of the Federal power Act in1935, Congress deliberately eliminated two proposed sections that would have imposed the same legal duty Which the lower court has created of its own accord in the case at bar.

1

\ l l

l

" Finally, the district court misconceived funda-mental antitrust principles and compounded its m

error by applying mistaken notions of per se illegality without regard to the special circum-stances and regulatory framework of the electric utility industry.

The court thus held that Otter Tail is a monopolist on the basis of circumstances which are integral in the electric power business, and without regard to the state and federal regula-tory schemes which deprive a utility of the very indicia of monopoly proscribed by the Sherman Act, i.e.,

the power to fix prices or exclude competition.

"In fact, Otter Tail does not possess the power to "fix prices". In Hankinson, Finley and Velva - the only towns considered below which Otter Tail is still serving at retail -- its rates are thoroughly regu-lated by the North Dakota Public Service Commission.,j i In South Dakota **/ and Minnesota ***/ its retail rates are regulated at the municipal level. Throughout its service area, otter Tail may sell at wholesale only at rates and upon terms and conditions approved by the Federal Power Commission. 16 U.S.C. SS 824, 824d-824g. It is thus a contradiction in terms to speak of the power to fix pricee in a regulated industry context where the regulatory bodies are the ones that determine how much a company may charge. In this setting, regulation provides a surrogare control over price in lieu of the competition which antitrust is designed to foster."

• /

N.D. Century Code, SS49-02-01 to 03, 15 to 20 (1960),

(1971 Supp.). as amended

• • / S.D. Compiled Laws S9-35-1 (1967)

• • • /

Minn. Statutes SS300.03-04, 454.041-043 (1967).

i s 154. Wa append the entire brief of Otter Tail Power Co., and the Federal Power Commission to the Supreme Court in Otter. Tail.

While we assume that Consumers Power Co., will manage much artistry in attempting to distinguish Otter Tail (such as the fact that Otter Tail operates in Minnesota and North and South Dakota), the case

! is determinative. We invite a comparison of the issues raised by Otter Tail and those raised by Consumers Power Co. in all relevant respects they are nearly identical. '

Q ,. May Consumers Power Company refuse to deal with inter-

' venors because of its ownership interest in either the Midland or i

t other large scale plants or transmission facilities? Answer. This j question has been answered previously, but because it is so central to the ' case, we focus upon the ques tion. Consumers Power Company's arguments ultimately center on rights it sees inherent in its ownership of facilities. However, especially considering that l

its " bottleneck" control could come about only because of its taking 4

various actions to obtain franchises,and other governmental rights, the rights claimed to be inherent in ownership are limited where they can' have an adverse impact opon competition or upon other public ,

. interests. As s tated, Consumers Power Company has a right to charge l

) for the sale of services from its " owned" facilities, but only where such charges are not unreasonable or discriminatory compared with I charges allowed others and, further, where the charges do not them !

selves establish cobpetitive barriers.

4 s 155. Consumers Power Company obtains obvious advantage from its franchises and ability to maintain and operate large scale

, 10 0 - i 4 (

l

6 gcnsrction and transmission facilities (i.e., the " bot tleneck ") .

Public policy may militate against direct elimination of the mono-( poly situation. However, the possession of the bottleneck carries with it an obligation to forego the economic advantage which might otherwise accrue where access or pricing might result in an advan-tage compared with potential or actual competitiors. United States

v. Terminal Railroad Association of St. Louis, 244 U.S. 380 (1912);

United States v. New York Great Atlantic Tea Co. , 173 F. 2d 79 (CA 7, 1949).  !

156. We note that, in arguing for recognition of its proprietary ;

rights, otter Tail argued that the " bottleneck monopoly" theory had not "ever been recognized by the Courts " and "[f]urthermore, none of the ' refusal to deal' cases which is in the business of selling at retail must sell at wholesale to its competitors or former retail cus tome rs " . Brief for Appellant, suora, at pp. 75,78. See, 410 U.S. 366 (1973).

Q. Do the Interveners want the same things that are provided for in the. Consumers Power Company interchange transactions with Detroit Edison Company and other major invester-owned utilities?

• / Note that the Atomic Energy Commission jurisdiction includes Section 5 of the Federal Trade Commission Act, 15 U.S.C. 13 (e ) ,

which would prohibit: " unfair methods of competition in commerce, and unfair and deceptive acts in commerce . . ." In interpreting this statute, the Supreme Court has held that it was intended to " combat in their incipience trade practices that exhibit a strong potential for stifling competition". FTC v. Texaco, 393 U.S. 233, 225-226 (1968). Thus, if the Board finds that an ex-ercise of ownership by Consumers Power Company, while lawful under the Sherman Act, would tend to "s tifle " compe tition, h at exercise is within the direct reach of the conditioning t'

power of the Atomic Energy Commission through reference of Section 5 of the Trade Commission Act. Atomic Energy Act, 105c, 105a. Senate Report No. 91-1246, 91s t Cong. , 2nd Sess .

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Yes. We would point out that the Michigan Power Pool

\

$.greements cannot be applied to directly to them because some of its terms (such as the requirements of ownership of 345 kv transmission for admission) or the res_erve formula which as applied to inter-veners would create an undue discrimination between their reserves as a percentage of load and those maintiined by Consumers Power Com-pany and Detroit Edison Co. DJ-71, Art. I, 6 (a) , (b) ; Definitions ;

Art. III (b) (2). See Yick Wo v. Rockins, 118 U.S. 356 (1886).

These requirements cannot be deemed accidental. See, e.g., DJ-170.

Q. Can the policies of the antitrust laws be reconciled with the desires for " coordination", which implies agreement and coop-eration among entities.

A. As we stated earlier coordination is the market mechanism whereby competition with regard to individual buying and selling services takes place. (E.G., 5564-5566,5555). If Consumers Power Company needs emergency power and there is more than one available source, it will obtain emergency power from the cheapest incremental source. Thus, within coordination agreements there is competition for individualized power transactions \ and the sale will be made by the cheapest source of available power supply for any transaction.

On a broader basis, the utilitythat can genera te or otherwise obtain  !

• / Continued -

(1970) p. 14. Note that the Supreme Court has specifically held that the unfair methods of competition condemned by SectLon 5a of the Trade Commission Act "are not confined to those that were illegal at common law or that were condemned by the Sherman Act".

FTC v. Motion Picture Advertising Service Co., 344 U.S. 393 (1953).

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p5wer cupply most chcaply, will bo mos t cuccessful in attracting industry to its service area and in competing for markets subject to competition.

( It will also enable it to best serve its particular

\

rarket by enhancing its earnings and makh g it a more attractive investment opportunirv. (E.g., Gutmann, pp. 10-11 :4664 ) .

157.

It should be noted that in the context of coordination the firm with power to sell (e.g., emergency, maintenance, economy exchange) is selling to a purchaser. While the sale may reduce the purchaser's cost compared with his alternative, it provides added j revenues to the seller to its advantage. Forexample,inaneconomyf exchange situation a seller with an incremental generation cost of 10 mills will sell energy to a buyer with an in-cremental cost of 20 mills for 15 mills. Over a course of time, the seller gains a decided advantage.

158. Moreover, as is discussed at Sec. I,, suora, within the context of coordination, providing competitive access to wholesale power markets, can work towards achieving greater economies. Es-pecially given the public and regulatory concern over power rates, the impact of reduced rates by one utility tends to create pres-sure towards reduced rates elsewhere. Consumers power Company has tes tified that it takes such price comparisons very seriously. E.g.,

Ex. 1004, pp. 2 02-2 03. E.g, 2043, 2082, 2087 Coordination aids the tendency toward reduced rates from competing entities by allow-ing transactions which share the benefits of efficiencies in opera-tion among utilities thus creating added consumer benefits. See, generally Rogers, suora, especially at the pages cited above. In this way competition and coordination can have complementary con-sumer benefits.

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}

Q. Considering that there is restrictive retail competition

{ are there consumer gains which are likely to flow from an AEC order granting interveners the relief they seek?

A. Yes. The opening of alternaiive sources and outlets for

~

wholesale power to. interveners will clearly benefit interveners in allowing them to obtain lower costs of power supply, which will benefit their taxpayers and ratepayers. Assuming that this were the only impact of an Atomic Energy Commission order, and assuming further that such impact were detrimental to Consumers Power Company or its ratepayers, relief would still be justified because the retail customers of interveners have the right to expect their supplier will be able to obtain the lowest available power supply -- or at least not be restricted for anticompetitive reasons in attempting to do so. Ib:ever, the benefits frcm ordering the relief requested by Inter-verors are likely to reach beyond the borders of Intervenors' service areas. / Studies have repeatedly shown the validity of the " yards tick "

concept. See p. 49-51,suora.

Where competitive power sources exist, there are incentives to efficiency of all utilities. Thus, for example, one can draw concentric circles around major public power systems, such as TVA, and demonstrate reduced power costs for power sold by all systems not explicable solely by reference to power

• / To the extent that it is argued that the type of nondiscriminatory access and coordination sought by interveners will raise costs

, to Consumers Power Co., this taerely argues that the existing i

situation of interveners is woefully discriminatory, f **/ Hellman, Governme_nt Competition in the Electric Industry (Praeger, 1972).

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ccvinga thnt rc2 ult from icsa cxpen31va public pow;r production costs due to Government financing. The importance of comparitive

[ rates is demonstrated by the fact that Consumers Power Ccmpaly closely monitors interveners ' retail rates and maintains detailed rate comparisons. See preeious references. Indeed, given the lim-itation of regulaI.ory agencies ef ficiently policing excessive cost incurrences, competition may be the only effective way of ultimately protecting the public against excessivo rates. Courts have commented on theis phenomenon many times and for this reason have admonished regulatory agencies to provide for competition to the greatest ex-tent practicable, even within the context of regulated entities.

E.G., Northern Natural Gas Ccmpany v. FPC, 399 F. 2d 953 (CADC, -

1968), Municioal Electric Association of Massashusetts v. FPC, 414 F. 2 d. 12 06 (CADC, 1969).

159. We would also point out that increased coordination be-tween Consumers Power Company and intervencrs should provide bene-fits in the same way that any coordinat'ici does and for the same reasons. Obviously, Consumers Power Company may face a detriment to the extent that it must eliminate unreasonable activities as a result cf greater competition. However, on a longer range basis, municipal and cooperative systems do provide a potential source of capital for financing of new gonoration and transmission facilities, which can be coordinated to the benefit of all systems.1/

• / Consumers Power Company argues a static pio theory that to the extent granting intervoners any relief that they may seek reduces their costs, it must incrcasc Consumers Power's cus-tomers ' cos ts . Apart from the fact that it depends upon the 6

level and design of the regulated retti, rate and upon derand and production cost curves, the argument mixes the "whcles ale "

and " retail" power supply markets. Intervonors are entitled to obtain low-cost wholesale power supply regcrdless of whether this aids or limits Censuraars Power Company in competition for retail customers. E.g., United Staros v. Aluminum Co. of

_haerica. 148 F. 2d 416 (CA 2, 1945). Of course, to the ex-tent that there is actual competition for customers (and the record shows that there are areas of competition), the op-portunity for alternate suppliers does exist and there is a direct benefit to retail customers. -105-

. _ ~ - .. . _ _ --

(

\.

, 16 0. In terms of the public, the benefits are not all mone-tary. The coordination rights requetted would allow generation from the most efficient unita. Nuclear access would allow intervenors '

access to nuclear energy. Granting access to transmission on the part of interveners can substitute for reliances on duplicative or low voltage transmission lines. The result would tend to aid con-servation and environmental values.

161. Avoiding duplicative transmission lines has obvious aesthetic and land preservation gains. Encouraging efficient gen-eration also has land use gains. It aids goals of fuel conservation and avoidance of unnecessary air pollution. To the exter t nuclear power is -believed to have environmental values over fossil fuels, interveners should not be deprived of such access. E.g., Chayavadhanangkur, pp,. 17-18, 26:5090.

162. The Board requests our views concerning the legality and desirability of conditioning relief to increased competition at the retail level. While the matter is subject to possible doubt, inter-l i

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veners believe that the Board does have such authority. */ As wa have i

stated previously its mandate is to resolve problems resulting from situations inconsistent with the antitrust laws which would be

" created or maintained" by the licensing of nuclear generating facilities. If the Board determined that such situation involved competitive barriers on the retail level, the jurisdiction of the Commission would probably reach this far. However, insofar as interveners are aware, all parties to this proceeding have assumed such relief to be unnecessary and none have claimed that a factual situation exists on the retail level warranting correction. Since it is unnecessary to reach retail patterns of competition to correct the "situacion inconsistent" to exi,s t by the parties and, since no record adequate to such correction has been developed, we believe that the Board would not be justified in taking such steps on its own motion, however, the matter might be considered as a subject for review in subsequant licensing cases.-

• / For purposes of interpreting the Federal Power Act, a "brigh t line" has been developed between Federal and State jurisdictional authority. While matters of the Federal side of this line are clearly within thejurisdictL on of the Board, Parker v. Brown, could be interpreted to allow for State jurisdiction the regula-tion of retail service territorities and competition at least in some circumstances. Parker v. Brown, 317 U.S. 341 (1943). Com-pare Whitten Jr., Inc. v. Paddock Pool Builders, Inc. 424 F2d 25, ,

31-34 (CA 1, 1970); cert. denied 400 U.S. 850 (1970); Woods Ex-ploration and oroducina Co. v. Aluminum Co. of America, 438 F2d 1286 (CA 5, 1971), cert. denied, 404 UsS. 1047 (1972) ; Hecht v.

Pro-Football Inc., 444 F 2d. 931 (CADC, 1970); cert. denied, 404 U.S. 1047 (1972). These cases are discussed infra, Sec. VC, VII.

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163. We call to the Board 's attention that policies with re-( gard to retail competition are being developed on the State level, including recent legislation, and therefore we believe that, while the Commission might have the legal authority to enter into this area, in the context of this case it would be preferable to give deference to state actions.

164.

Absent a record, interveners cannot comment on the desir-ability of various possible ordered requirements or restrictions concerning retail competition. We do note, however, that as a gen-eaal matter, rural electric cooperatives were originally encouraged by Federal legislation as a result of a concern that rural electri-fication would otherwise be delayed or would be uneconomic. There is apparent general agreement that Michigan Rural Electric Coopera-tives have higher costs (and rates) than both Consumers Power Com-pany and must municipally-owned utilities (However, allocations of Consumers Power company costs of ope' rations solely for such areas may not be higher than the Rural Electric Cooperatives ' costs) . Any ultinate resolution of limitations or encouragements to competition at the retail level would presumably have to consider these factors as wel.1 as the factors of the existing investment -- often at higher embedded costs -- of the Rural Electric Cooperatives. !

• /

Granting the relief in requested in Appendix A should help re-duce high rural electric cooperative costs.

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5 Q.

Do the activities complained of constituto "per se" violations under the antitrust laws? Yes.

We have discussed the 7 of the antitrust laws, as they apply to Applicant, in the body of i

our brief. However, since the Board asked us to specifically ad-dress this question, we shall repeat the answer.

165.

The two principal allegations that we raise with regard to Consumers Power Company's " activities inconsistent" are its use of the dominant control of major base load generation and trans-mission (as well as its intended control of coordination agreements) to bar Intervenors from access equal to that enjoyed by major in-vestor owned utilities and the " bundling together" of wholesale power trhnsactions, so as to refuse to deal on equal terms or re-fusing to deal at all in individualized power transactions. The former activity is covered by the " bottleneck" monopoly ther; .y under the Sherman Anti-trust Act; the latter is a " tie-in" sale.

Moreover, there is substantial evidence that Consumers Power Com-pany has engaged in wholesale (as well as retail) territorial agree-ments.

All three. activities are commonly classified as "per se" violations. See pp. 66-68, 70-74, suora.

166.

We do not wish to add to our legal discussion at this point in the brief.

However, we stress that a main defense of Otter Tail before the Supreme Court was its objection to the Distric Court 's adoption of a "per se" s tandard.

In this way, Otter Tail complained that the Court failed to consider (or allow the Federal Power Com-

-mission to consider) the various legal and economic limitations

-109-

which it claimed should affect its obligations to dealo Continually and consistently throughout its Brief, Otter Tail argues tha t de-r~ cisions with regard to " forced" transmission and coordination demand scrutiny and application of judgment as to their consequences by .

I the Federal Power Commission Amicus Federal Power Commission argued '

the same thing. Thus, Otter Tail concluded its summary as follows:

(Brief, p. 24).-

" Finally, the District Court misconceived fundamental anti-trust principles and compounded its error by ap-plying mistaken notions of per se illegality without regard to the special circumstances and regulatory frame-work of the electric utility industry. The Court thus held that Otter Tail as a monopolist on the basis of circumstances which are integral to the electric power business, and without regard to the state and federal regulatory schemes which deprive a utility of the very.

indicia of monopoly proscribed by the Sherman Act.. .

The Court further held . . . it is illegal oer se for a company to insist, when its property is used by another, that that property not be utilized to destroy its own business. ... [T]he application of such ner se concepts to an industry regulated in accordance with specific public interest objectives of its own is especially inappropriate....." Accord, pp. 78-

83. See especially Otter Tail!s arguments of the ,

nece,ssity for the " favored... scalpel of regulatory discretion rather than the bludgeon of an absolute duty." p. 59-64, 59.

167. It took Otter Tai.184 pages to attempt to explain why it should not be obligated to deal. The Supreme Court readily determined that " otter Tail's theory collides with the Sherman Act as it sought to substitute for competition anticompetitive uses of its dominant economic power."

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(

V. CONSUMERS POWER COMPANY'S DEFEMSES DO NO'2 JUSTIFY DENYING OR LIMITING RELIEF 168. Consumers Power Company has a number of defenses. They are erroneous. We note that they tend to follow in more muted tona s the various defenses raised by Otter Tail and rejected by the Supreme Court. Ultima tely, these defenses generally ignore the distinc-tion between the wholesale and the retail power markets and the en-titlement under the law of interveners to a competitive power supply.

169. While we cannot cover all such defenses, we comment briefly on some of them:

A. The profitability (" Tax-financing") defense: Con-sumers Power Company argues that the municipal and cooperative systems can compete with it under present circumstances and that it is therefore unnecessary to grant them direct access to nuclear gener-ation or other relief. Specifically, it argues that, because the

~

municipals and cooperatives have certain financing and/or tax ad- i l

vantages, the company should be relieved of obligations that it might otherwise have under the Atomic Energy Act. However, denial of a disproportionate advantage is no defense to a refusal to deal on a reasonable basis. The coordination is an essential facility for a j utility desiring to maintain the most efficient operations. Al-though the benefit to Consumers might be less Proportionate to the benefit to the Interveners, Consumers would achieve added re-

-111-

liability for its own sys tem, and reduced costs should it be necessary

(*

for Consumers to call on the IntervSners to provide some power. To the extent that Consumers decides to give up these advantages be-casue the Interveners have more to gain, it is operating a classic price squeeze. It is deliberately following a policy of increasing the costs of competitors without any significant advantage for it-self other than the anticompetitive impact of this course of conduct.

See e.g., Wein 23-24, 25-27, 60-66:3979.

170. Ignoring its own position as a holder of monopoly rights, Consumers Power Company argues that it has no obligations to grant access, if the interveners can survive without. However, contrary to its position, the leading cases in the utility field including Otter Tail affirm the rights of access by smaller systems ,to parti-cipation, transmission and coordination. Furthermore, the general antitrust law refutes the contentica that a party can argue the profitabilty of the complainant as a, defense to monopolization, denial of access, or other anticompetitive conduct. E.g., Utah Pie Co. v. Continental Baking Co., 386 U.S. 695, esp. p. 702 (1967). l A rich man, as well as a poor man, is entitled not to have his com-1 petitor violate the antitrust laws to his detriment. Indeed, the pur-l pose of the antitrust laws is to encourage competition, not necess- I arily successful competition. l t

171. The antitrust review provisions in the Atomic Energy Act

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were passed by Congress precisely for the purpose of protecting the smaller utility system against use of monopoly power by the

' (~ larger invester-owned utilitier, such as Consumers Power Company.

Certainly, Congress was well aware that most of the smaller utilitied (although not all) were governmentally or cooperatively owned. Had it chosen to do so, Congress could have viewed the advantages of the smaller systems as offsetting the advantages of the larger ones. It did not. '

172. Moreover, even on its own terms, Consumers Power Com-pany's arguments do not stand scrutiny. The defense against granting access to nuclear power on the part of the smaller systems is ul-timately based upon an attempt to show that systems can otherwise compete on a retail basis. However, under the law, Consumers Power Company is not entitled to limit access to its nuclear generation and high voltage transmission to protect its retail position: /Otter Tail, suora; United States v. Aluminum Co., of America, 148 F. 2d 416 (CA 2, 1945). See, United States v. Philadelchia National Bank, 374 U.S. 321 368-370 (1963); Richmond Power & Licht v. FPC, suora, 481 F. 2d 490, 493, 496-497 (1973).

• / We do not here challenge the right to Consumers Power Company's '

exclusive ownership of the " bottleneck" facilities. However, certainly this control does not protect it against having to deal.

See, e.g.,

Gulf States, supra, establishing that insofar as prac-ticable antitrust principles should be applied to the wholesale power industry.

l 1

-113-j

173. The so-called " tax" and financing issues are artificial

-f in any event.

Consumers Power Company dominates the Western portion of the lower Michigan penisula. Fur thermore , the number of munici-pally and cooperatively owned electric plants has been declining.

steadily. E.g.,

Testimony of Joseph C. Swidler on S. Bill No. 218, Hearings Before the Committee on Commerce, United States Senate, 89th Cong., 1st Sess., pgs. 69-70. The alleged threat of the municipals and cooperatives taking over Consumers Power Company, a 3 billion dollar enterprise controlling the major generation and transmission facilities in its area is -- to say the least -- strained.

174.

There are various forms of ownership of electric ut-ilities (or other businesses) . Each have different advantages. Thus, for example, as its mentioned in its testimony, Consumers Power Company enjoys the benefits of perpetual franchises in portions of its service area and other. long-term franchises elsewhere. It further enjoys limitations on retail competition and, indeed, recently leg-islation has been passed limiting the geographic area cf municipal retail competition.

Compare Cities of Lexington v. FPC, 295 F. 2d 109, 116 (CA 4, 1961).

175. It has further advantages stemming from its sheer size and the numbers of customers that-it serves, its large service area, and its cumulative assets and revenues. These have allowed it to construct and operate the bottleneck facilities (e . g. , large generating units, high voltage transmission lines)-in the first place, to negotiate extensive pooling and interchange agreements 1 -114-

and presumptively, to hire and train experienced personnel in

(~ diverse fields, such as management, marketing, engineering, fin-ancing and space technology. If such advantages are not present, perhaps there would be no excuse for maintaining its monopoly con-trol altogether as opposed to conditioning that control upon itc

~

not refusing to deal.

176. Consumers Pouer Company has the additional advantages of being a combination Company with large natural gas markets. It has been able to contract for long-term oil supplie s.

177 The above illustrates the advantages in business manage-ment to the corporate form and the additional built-in advantages which flow naturally from large size. Experience shows, once a company has obtained large size, it is difficult to dislodge .* /

We raise these points not to argue the benefits of large investor- .

owned companies but to point out that advantages are not all a one-way street. Ultimately the balance pf advantages between various forms of ownership in the utility business is irrelevant, although encouragement of competition among the various entities can creaba Consumers advantage.

178. The tax and financing defense is ultimately the complicated de fense . While we note that because of various tax advantages (including liberalized appreciation and the investment tax credit),

Consumers Power Company and other major utilities pay vastly reduced i -

• j/ For one thing, large corporations can finance extensive litiga-tion to resist governmental limitations upon their activities.

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tax;sy/ the question of financing and tax benefits as it relates to profitability depends upon long-term projections

(- , and economic prediction. Such predictions of continued profita-bility can provide no basis to bar interveners from participation in the wholesale power markets except on terms acceptable to Con-sumers Power Company. ~

179 Moreover, the Company 's argaments of intervener advantage {

are overstated in the extreme. Accordingtoits1973AnnualReoort,k i

p. 24, last year the Company paid only $2,717,766 Federal Income Taxes charged to utility operations and a similar amount in state income taxes ($2,785,570). Thus, its total Federal / State Income Tax expenses charged to utility operations were 3.9% of its Net Operating Income (plus deferred taxes and tax credits excluding income taxes).Ib Federal Income Taxes alone were 1.7% of that amount. Its economies of scale ; obably more than offset any additional advantages municipally or cooperatively - owned utilities enjoy. It is ironic for the notoreously low tax paying electric utility industry to base a defense a fair dealing on the fact that it pays taxes.

180. Apart from any other factor, use of such studies requires l a prediction of competitiveness far into the future. A change in i i

the availability of using a particular fuel or type of generator,

• / The building of major facilities, such as Midland, create the type of construction which would reduce or eliminate federal income taxation for the Company.

jjy' The fiuares are $2,717,766 divided by $124,715,102 (p .18) plus

$39,129,398c representing deferred taxes and investment tax credits, less SS,503,336 federal income taxes paid (p. 18). The

.( high booked tax expense of $44,632,734 does not constitute a payment, but is a " normalized" a deferred figure. The company takes advantage of liberalized depreciation, investment tax ,

credits, etc., to reduce tax payments. Ex. 1004, pp. 172-174. i

• • • / $2,717,766 divided by $158,341,102. -116-

)

l

labor pay scales, electricity demands, governmental constraints, or

(

\ combinations of such factors, can change the outcome of such studies.

We hesitate to think that courts -- or even expert agencies --

should find a defense to antitrust violations based upon them.

181. In any event [ if either advantages possessed by Consumers Power Company or the municipalities or cooperatives are unwise, as matters of public policy, they should be attempted to be changed politically. ! Indeed, financing costs for rural electric cooper-atives have been marketedly increased by the virtual elimination of "2%" money for generation purposes, thus making it more difficult for rural electric cooperatives to compete with Consumers Power Com-pany.

182.

It is no justification to bar access to forms of electric utility operations, such as direct ownership of Midland, that based upon studies made for the purpose of trial, the Board might con-clude that such utilities might be able to survive without such ad-vantages.' Nor is Consumers Power Company justified in using a "self-help" to effect advantages it thinks unfair.

• /

We do not mean to imply tha t strong arguments may not be made on their merits for retention of such benefits. Principal among them is that municipal or cooperativa utilities are actually owned by the public subject and that returns on public moneys should not be to taxation.

( -117-

183. W'e have discussed the profitability arguments because

{ they have been raised in this case. However, as a matter of law,  ;

i and apart from any other argument, Otter Tail foreclosed the issue.  ;

Consumers Power Company is merely attempting to raisc in a respect-able form the issue of public v. private power. As the Board must be well aware, for years investor-owned utilities have inveighed against wha t they have considered to be unfair tax benefits en-joyed by public power entities . This issue was sought to be raised by Otter Tail, but in the case of that name the trial judge re-fused even to enter into such matters r/ E.g., s Appendix to Otter Tail Power Co. v. United States, suora, 0-T, 171, No.71-991, p.

337.

184. Otter Tail compla.i aed to the Supreme Court (Brief, suora,

p. 46):

"The lower court held that the Sherman Act requires an electric utility to use its own transmission system to transmit (or ' wheel') subsidized government power for municipalities seeking to take over its retail business . .

. The decision clearly contravenes . . .

manifest congressional policy . . ."

j/

One of his reasons was to prevent the trial from becoming a

" life-time mission", a justification that appears to have con-siderable merit. id.

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185. The Supreme Court responded to the arguments made as

(~' follows (410 U.S . a t p. 380) :

" Otter Tail argues that, without the weapons which it used, more and more municipalities will turn to public powerand Otter Tail will go down-hill. The argcment is a familiar one. It was made in United S tates v. Arnold Schwinn & Co. , 388 U.S.

365 . . . The promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct. " id at 375.

186. Should. Consumers Power fears come true, it can apply for rate or other justified relief at that time, but claims of potential competition or of competitor advantage do not allow the co ntinued self-help remedy of refusing to deal on non-discriminatory terms.

Otter Tail Power Co. v. United States, 410 U.S. 366, 381-382. (19730; New Enalanf Power Co. v. United States, 410 U.S. 366, 381-382.(1973);

Uni ted Sta tes v. Alumin"m co_ mf Ama H 3, 148 F. 2d 416 (CA 2, 1945). See Alabama - Tennessee Pows- En- " "PC, 35 9 F. 2 d 318, 338-339 (CA 5, 1966), cerF. denia4, 385 U.S . 847 - (196 7) .

B. Harm to Consumers Power Company 187. Consumers Power Company apparently attempts to make some sort of "failing company" argument in further justifying its l refusals to deal. This argument has been sdasumed above. While 1 l

permission to raise such arguments at this juncture might aid the l profitability of law firms and consulting firms, the s tudies per- 1

~

form no other valid function. "

-119-1

188. The potential profitability of a competitor provides no g

s license to violate the antitrust laws. Utah Pie Co. v. Continental Bakino Co., 386 U.S. 685 (1967) and, reports of Consumers Power Com-pany 's potential demise, we suspect are exaggerated.

Again, this argument justifying denial of access was made by Otter Tail, which merely possessed a monopoly on subtransmission lines and not on all transmissiaa lines in its area of service above 138 kv. Com-pare Otter Tail. suprn, 331 F. Supp. at P. 59. As the Supreme Court held in otter Tail, supra, 410 U.S . a t 380-382, the complete answer to any " defense" of Consumers Power Company that coordination with public power systems would put it out of business is that, if such conjuctures should occur, regulatory agencies (including those with the power to raise rates) retain jurisdiction over the industry and can take corrective measures as necessary. New Encland Power Co. v.

FPC, suo ra , 349 F. 2d. at 264. Alabama-Tennesse a v. FPC, 359 F. 2d.

318, 339 (CA 5, 1959) , cert. denied, ' 385 U.S . 847 (1966). See United States v. Philadelphia National Bank, 374 U.S. 321, 371-372 (1963).

See also Sierra Pacific Power Co. v. FPC, 350 U.S. 348 (1958),

establishing the basis under which the Federal Power Commission can raise rates otherwise subject to contract to protect other rate-payers.

189. We again are constrained to note that Consumers Power Com-pany's arguments of its own demise ignore the reality of municipal

(

-12 0-

6 188.

The potential profitability of a competitor provides no If license to violate the antitrust laws. Utah Pie Co. v. Continental

_ Baking Co.,

386 U.S. 685 (1967) and, reports of Consumers Power Com-pany 's potential demise, vie suspect are exaggerated. Again, this argument justifying denial of access was made by Otter Tail,- which merely possessed'a monopoly on subtransmission lines and not on all transmissicn lines in its area of service above 138 kv. Com-pare Otter Tail. supra, 331 F. Supp, at P. 59. As the Supreme Court held in Otter Tail, supra, 410 U.S. at 380-382, the complete answer to any " defense" of Consumers Power Company that coordination with public power systems would put it out of business is that, if such conjuctures should occur, regulatory agencies (including those with the power to raise rates) re tain jurisdiction over the industry and can take corrective measures as necesc 2ry. New England Power Co. v.

FPC, suora, 349 F. 2d. at 264. Alabama-Tennessee v. FPC, 359 F. 2d.

318, 339 (CA 5, 1959) , cert. denied, 385 U.S. 847 (1966).

. See United S ta tes v. Philadelohia National Bank, 374 U.S. .

321, 371-372 (1963).

See also Sierra Pacific Power Co. v. FPC, 350 U.S. 348 (1958),

establishing the basis under which the Federal Power Commission can raise rates otherwise subject to contract to protect other rate-payers.

t 189.

We again are constrained to note that Consumers Power Com-pany's arguments of its own demise ignore the reality of municipal

-12 0- i i

l l

L I

and cooperative forms of business. Should the State of Michigan

(- choose to condemn Consumers Power Compay and operate a publically owned power system we assume that it could lawfully do so, but the experience of the United States indicates that public officials and citizens will not support the type of financial commitments necessary for small municipalities to run state-wide businesses.

C. State Law Defense.

190. Consumers Power Company argues for absolution on grounds that it obtained its franchise and operating authorities pursuant to state law. Parker v. Brown, 317 U.S. 341 (1973). We find the argument stange. It might as well argue against FPC wholesale rate jurisdiction on the grounds that its contracts to sell power to municipalities are legal and enforceable under state law. Al-though the proposition might be argued, nobody is here suggesting that Consumers Power Company 's franchises should be . voided.

• / Although Consumers Power Canpany perpetual franchise rights may create doubts.

• • / Parker v. Brown itself involved a case of complimentary state and Federal action. The state action was deemed to be insulated from the antitrust laws, as, for example, a private action or all-considered state action would not be. E.g., Geor R. Whitten, Jr.,

Inc. v. Paddock Pool Builders, Inc., 424 F. 2d 25 (ca 1, 1971). Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F. 2d '1286 (CA 5, 1971), cert denied 404 U.S. 1047 (1972) . Hecht v. Pro-Foo tba ll , Inc., 444 F. 2d 931 (CADC, 1971),

cert. denied, 404 U.S. 1047 (1972). There can be no Parker v.

Brown question of insulation by state action here where, as is here l

t l

t

-12 1- '

l l

6 191. Consumers Power Company is applying for a nuclear license.

It does so under the Atomic Energy Act, an Act passed by Congresc.

That Act provides for explicit antitrust review, obviously intending that antitrust principles 4ae made applicable to the granting of the license. The supremancy clause of the United States Constitution and Martin v. Hunters Lessee. , 1 Wheat 304 (1816), we would have thought had finally resolved any issue involved in a "s tate law" defense. We further point out that, at least for purposes of i

Federal Power Commission, the Courts have established a bright line.f I

• / Continued -

'the case, Congress determined a specific antitrust review.

Nor can such question exist af ter Otter Tail and Gulf States, which makes clear that antitrust principle apply to the whole-sale power industry. Moreover, the courts have hold repeatedly that legally acquired monopoly rights or privileges (e.g.,

through state franchise) are not to be extended through implied exemption of the antitrust laws. International Salt Co. v. United States, 332 U.S. 392 395-396 (1947); United States v. Griffith, 334 U.S. 1001 107(1948); Northern P.R. Co. v. Uni ted States , 356 U.S. 1,(1958); United States v. Loew's, Inc. 371 U.S. 38, 45-47 (1962) ; United States v. Aluminum Co. of America , 148 F. 2d 416 (CA2, 1945); Peelers Co. v. Wendt, 260 F. Suop. 193, 197 (W.D.

Wah. S.D., 1966). Indeed, such special rights carry correlative j obligations to the public to avoid expansion of monopoly privilege. While we do not believe there is any valid Parker

v. Brown ques tion, in denying inquiry into Consumers Power Company's political activities -- and the extent it may have been responsible for state action -- the Board has preciuded this issue.

-122 -

(

__. , _ _ _ . . - ~

By analogy the Atomic Energy Act jurisdiction must also go at least this far. E.g., Federal Power Commission v. Florida Power & Light Co., 404 U.S. 453 (1972).

192. Finally, vis-a-vis Federal jurisdiction we are again con-strained to point out that Consumers Power Co. is in no different situation than Other Tail Power Co., who also argued, unsuccess-fully, that its monopoly situation arose from' state authorizations and that its rates were subject to local approvals so that it could not be charged with having created a monopoly. E.g.,,Brief for Appellant Otter Tail Power Co., suora, pp. 13, 19, 24-25, 81-83.

D. They Can Buy From Us Defense 193 Consumers Power Company makes one defense, which we consider truly arrogant. This is that, since the interveners always have the option of purchasing wholesale power (which includes power generated from the Midland Units), that they need not obtain direct access to nuclear or transmission facilities or coordination. This de-fense illnstrates Consumers Power Company's true position. It is that they ought to be able to use their bottleneck control to bar interveners from competiting in the wholesale markets or from obtaining individ-ualized power transactions separately, because they can buy from the company.

194. As did Otter Tail, / the Company does make a technical argument that it is unfair for municipals tor cooperatives to buy k */ Brief for Appellant, suora, pp. 24-25, 81-83.'

-123 -

at a lower rate than they would be entitled to receive through purchas-ing coordination servic.es, since other customers would ha ve to pay more c The premise of the argument of course is that interveners are and should be considered like retail customers (i.e., that they should be dis-abled from competiting in wholesale power markets) . The answer is that the antitrust laws gives them the specific right to compete at wholesale on fair terms. 71-195. Even if the suggestion that interveners should prefer to buy from Consumers Power Co. were somehow legally and economically justifiable, a r.anager ought to have the choice of whether to be dependent upon a major supplier or whe ther to enter wholesale power markets directly. Certainly the decision should not be made by Consumers Power Company. Given the uncertainties, changing decisions, and delays of regulation, a utility manager at least ought to have the choice to attempt to control h,is own power supply. Mor'eover, we note that at the same time Consumers Power Company resists selling direct access to nuclear facilities and specialized power services, noting Ehat the smaller utilities can buy from it, the Company also resists allowing a sale of transmission services (except perhaps on its terms --

=

-124-k '

i.e., where it will not hurt Consumers Power Company) . Thus,

(

it would also cut off the availability of competitive alternatives of purchasing from other utilities at the same time that it is in-sisting that a direct purchase of wholesale power is an alternative to ability to obtain direct access to Midland genera tion. */ E.g.,

Stolzer, pp. 17-19, 25-26:6723.

196. Consumers Power Company makes the additional argument that it is uneconomic to grant " subsidized" entities coordina-tion. To the extent that the argument is that corporate forms are a pre ferable form of organization, it can demonstrate this at the market place. On the other hand, to the extent that the Company is arguing that the public would be better off without granting coor-dination to the smaller systems because they have financing or tax advantages, the argument is logically fallacious. Given any base level of costs of operations for any generating entity, coordination will tend to, allow use of larger plants and lesser amounts of re-

• / The assumption of applicant seems to be that there is. a rate for wholesale power. However, the level of the wholesale rate that a Company will file before the F.P.C. agree to is of ten dependant upon the purchaser 's alternatives. For example, Mr. Aymond stated tha t, in setting retail rates, he considers competitive factors, and presumptively the same would be true for wholesale rates. Ex. 1004, 232 -234. Thus, the price for wholesale power would itself be affected by compe-titive. alternatives, (Tr . 2819-2 82 0 ) , and the denial to intervenors of alternatives will reduce their bargaining power

( over the level of the wholesale rate. -

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s e rves , thereby reducing those costs (i.e., once it is conceded

( that interveners -- or Consumers Power Company have certain advan-tages, which will not be eliminated, it reduces costs of operations to coordinate, at whatever level those costs may be).

197. Indeed, if interveners have reduced costs because of financing or tax advantages or for any other reason, economically this would provide reasons to prevent Consumers Power Company from using its bottleneck monopoly to negate them, thus preventing the savings from being passed to public. The company cannot seriously contend that a monopolist can limit competition because ,

his competitor can operate more cheaply.

E. They Are too Small Defense 198. The "they are too small defense" ties into the "they can buy from us " defense. It is merely an excuse to avoid coordination or dealing with smaller entities. There is no technological or economic reason why coordination is impossible for any particular unit owned a

by a small system rather than a large one.

F. The "You Never Asked for It" Defense 199. Consumers Power Company expresses shock and disbelief that the smaller entities which it surrounds ever wanted the same cypa of operating arrangements as its neighboring invester-owned l 1

utilities. The Company claims that it never dreamed that these i

systems might want to be treated equally.

(

-12 6 -

l

200. There is direct evidence in this proceeding that Con-

{~

sumers Company arranged its relationships precisely to keep out "undesirables " . There is further evidence that whenever an approach was made by a smaller system to Consumers Power Company, it was rebuffed. What Consumers Power Company is criticizing is the systems knew the conditions of the market in which they were operating a..d did not have the foresight to make a '" paper" record detailing the refusals to deal. Moreover, regardless ope should not need a Rosa Parks on a Birmingham bus to ask for rights, which all

• /

know are being denied.

VL RESERVE SHARING SHOULD BE BASED UPON EQUALIZED RESERVES.

201. Interveners' proposed licensed conditions are Appendix A.

They are self-explanatory and provide for condi'; ions similar to the interchange arrangement that Applicant presently has. They are sup-ported by the record. .

202. There is one particular item provided for that has been specifically objected to by Applicant, that of the requirement tha t reserve sharing be on an " equalized reserve" basis.

203. Intervencrs proposed license conditions provide that the amount of reserves shall be mutually established as part of " reserve

• / Knowing the economic climate, if one system managar ter,ted the water and was turned down, even at a lower level, this

('

would not be lost on other system managers. '

-12 7 -

sharing" arrangenent. They shall be those required to " maintain adequate reliability of power supply . . ." That is, we do not request the Board to here establish any specified reserve level. The amount of reserves shall be based-upo'n engineering criteria. / However, common sense protection for the interveners requires that the re-serves levels interveners are required to maintain must be limited by some objective criterion. 1*/ Etren if some reserves formula other than equalized reserves were acceptable (and none is in the record) ,

fairness requires absent agreement that interveners not be required to maintain greater reserves than the pool members themselves .

204. Interchange transactions allow for a reduction in the total reserves requirements of combined systems compared to the re-serves those systems would have to carry, if they were isolated.

The principle can be readily understood from an example of a system having one unit. To maintain a continuous electrical supply, the system would have to have reservos equal to its load in the event that that unit should fail or be out of service. for repair. How-ever by combining with another similar system, each system could share in purchasing a spare unit, diereby reducing their reserves in half.

• / They may of course be varied for units or types of units of demonstrated , lesser or greater reliability, but are "nc t to be directly related to the si=c of generating units ". Appendin A.

• • / Comparo Otter Tail Power Co. v. United S ta tes, 410 U.S' at 381. Cases cited at pp. 82-91 , suora.

-128-

- 205. Consumers Power Company, of course, achieves the advan-tages of " reserves shar ing" on its own system. Having many units of varying sizes, it has an ability to plan for the optimal size units, taking advantages of econ'omy of scale, in conjunction with the minimum reserves responsibility to support such units. A system large enough to support 10 or 20 units (especially of large size) needs less re-serves than a smaller isolated system. However, even a system the size of Consumers Power Company has reserves sharing agreements with neighboring entities.

206. Absent its internal coordination achieved through its large size and its coordination with other systems, it could not economically build Midland Units without significantly increasing its reserves and, therefore, its costs. E.g., Ex. 1005, pp. 36-42.

207. Consumers Power Company argues that the smaller systems should have greater than " equal" reserves. Consumers Power Company is arguing for an admission fee to get into the club. Caisumers Power and Detroit Edison, as well as other major util'ities, can dino for merely paying the costs of the food, but the other systems must pay an admission fee, this fee consisting of the maintenance of larger reserves. It is the clearest form of barrier to entry that can be imagined. Furthermore, it makes less valuable the benefits of coordi, nation, increasing intervener costs to the advantage of Consumers Power Company.

k- '

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"6 208. Mere change of ownership a hypothetical 100 mw unit should

(

not create the requirement of greater reserves for that unit. How-ever, this is the direct result of an unequalized reserves formula.

What an unequalized reserve formula does is reward the size of a total system by. relating reserves requirement to the relative size of the interconnecting systems. However, the "situat ion incon-sistent" is the use by Consumers Power Company of its control of large unit generation and high voltage transmission block inter-veners access to power transactions equivalent to those enjoyed by the Michigan Power Pool. Providing interchange service on an un-equalized reserves basis is nothing more than charging a special price.

209. The Federal Power Commission has approved an equalized standard, which was confirmed by the Supreme Court. Gainesville

, Utilities v. Florida Power Corp. , 402 U.S. 515 (1971), a case that Judge Levanthal later characterized in Gulf States as standing for the proposition that municipals should not be interconnected "on terms more onerous than those required of other invester-owned utilities ". id, _La faye tte Louisiana v. AEC, 454 F. 2d 941, 952 (CADC, 1971) , a f fi rmed s ub . nom. Gulf S tates Utilities Co. v. FPC supra.

4

( -130- ,

(' 210. Moreover, what Gainestrille was all about was the claim by Florida Power that the costs of interconnectioned services should be shared on the basis of benefits received, as consumers Power Company argues here, rather than upon " burdens " (i.e., costs) imposed. Gainesville Utilities Department and City of Gainesville, Florida v. Florida Power Coro., 40 FPC 1227, 1237 (1968) ; set aside sub, nom. Florida Power Coro. v. FPC, 425 F.2d 1196 (CA 5, 1970),

reversed sub. nom. Gainesville Utilities v. Florida Power Corp., 402 US 515, (1971). / As the Supreme Court put in:

"An airpla ne seat may bring more profit to a passenger flying to California to close a million-dollar business deal than one flying west for a vacation; as a consequence, the former may be willing to pay more for his seat than the latter.

But focus on the willingness or ability of the purchases to pay. for a service is the concern of the monopolist, not of a governmental agency 211. Proposing the splitting of benefits test merely is an attempt by Consumers Powers Company to get this Board to recognize its monopoly power in setting interchange terms.

• / The Federal Power Commission noted at 40 F.P.C. a t 1238, that a special harge based on Gainesville 's largest unit would reduce "the economic incentive for Gainesville l to install larger and more efficient generating units", j precisely the anticompetitive effect that results from Consumers Power Company 's various refusals to dea' on non-discriminatory terms and conditions.

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l I

2 12 . Consumers Power Company apparently makes the argument f that interchange arrangements result from a balancing of interests and thab therefore, it should be excused from an equalized reserves standard because bargained for agreements may have resulted in some different tests. In other words negotiations might result in discriminatory agreements. Even assuming this to be the case, nothing will prevent utilities from voluntarily agreeing to different s tandards on the basis of mutual agreements. However, the AEC can-not justify license conditions based upon standards which permits discriminatory access, not agreed to.

213. Consumers Power Company also appears to argue that, since Gainesville paid for the interconnection facilities in the lead case, this is a substitute for not having " equalized reserves" (i.e., reserves based on proportionate loads). However, Consumers Power Company makes no showing that Gainesville did not want to build the interconnection facilities. In Gainesville, Florida power argued that it should have the right to purchase the transmission facilities so that it cxauld serve markets off the it.terconnection facilities. In any event, it is beside the point. 40 FPC, at 1227. All Gainesville */ held was that, since Gainesville agreed to build the facilities, Florida Power could not claim a detriment from the interconnection. Consumers Power Company would turn this around to argue in effect that, if a smaller system does 0/ Gainesville v. Florida Power Corp., 402 U.S. 515 (1972).

( ,

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not build the interconnection facilities, the larger sys tem can t'

• /

discriminate forever after.

214. Equalized reserves represents a short-hand expression that parties to coordination agreements will contribute proportionate reserves to the total loads supplied as in other words, pay an equal price for what they receive. Tr. 2633. It is the type of arrangement that would be expected to result from parties having equal bargaining strength. Id. However, a system having great relative size (and therefore greater bargaining strength) could exact more. 2630-2632. Thi.s Board should not count'erance relief in a form that allows Consumers Power Company to exact extra pay-ment from each transaction by requiring the smaller systems to baintain disproportionate reserves to obtain essential coordination.

215. If Consumers Power Company can impose a special burden on l

l

• /,

The problem does not generally come up in Michigan that existed in.the Florida Power-Gainesville situation. Interconnection facilities themselves are largely already in existence. Interveners proposed licensed conditions provide that interconnections will be made at the highes t transmission voltag 3 available "if the costs to applicant will not exceed applicant 's benefits". The provision states further that, where the requesting entity pays the full costs of the interconnection (i.e. facilities), the benefits to the applicant will always be deemed to exceed the costs.

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4 interchange terms, it will be able to effectively exclude inter-r veners at least partially r' rom participation in markets for inter-change. While we anticipate that the Company will advance many objections, it must be remembered that the major utilities

-- not the interveners - have established the standards for inter-changing power; It is Consumers Power Company that has es-tablished the standards. cainesville Utilities v. Florida Power envp- 402 U.S . 515, 528-529 (1971).

VII. THE BOARD SHOULD HAVE PERMITTED INQUIRY INTO CONSUMERS POWER COMPANY 'S GAS AND POLITICAL OPERATIONS 216. On June 29, 1973, Intervenors filed a " Motion for Reconsideration of the Trial Board's November 28, 1972, Order i

and Motion to Compel" in which they again argued for consideration of Consumer's Power Company's use of its gas monopoly to aid it in competition for electric customers and for considera-tion of Consumer's Power Company's political activities.

, That mo-tion was denied. Rather than reargue the merits of our position, Intervenors respectfully incorporate that Motion by reference. They recognize that the Board's ruling has been adverse, . but do so in order to preserve their rights.

I 217. Briefly, Intervenors' position is that any demonstration of use of Consumer's Power Company's gas monopoly to aid it in elec-tric competition or vice-versa would aid Applicant _ competitively, i '

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As the Supreme Court stated in United States v. Griffith, 334 U.S.

7 100, 108, "If monopoly power can be used to get monopoly, the (Sher-man) Act becomes a feeble instrument indeed."

218. Intervenors' position is furtier that, while applicant may have the right to petition the state legislature or other governing body, such activities are not protected from scrutiny. What ap-plicant fails to understand is that it has been granted certain monopoly or franchise rights, including rights of incorporation.

As a result, it takes on certain obligations. Indeed, regulation could be totally inhibited, if applicant could hide behind claimed First Amendment rights to refuse to reveal its activities even to lovernmental bodies. The ques tion is not the right of communica-tion, but the claimed right of maintaining its activities secret.

219. Intervenors' further position is that, even where Consumers' Power Company's political activities may not be illegal per se, such activities may violate independent laws. What the famed dictum about shouting fire in a crowded theatre was all about is that through speech one can commit independently illegal acts. */ l Otherwise Consumers' Power Company could have an absolute de-i fense that its contracts could not be claimed to violate the anti-trust laws since they are printed matter. Moreover, even

• / "The most s tringent protection of free speech would not pro- l tect a man in falsely shouting fire in a theatre, and causing a panic." It does not even protect a man from an injunction against uttering words that may have all the effect of force." Schenck  :

v. United States, 249 U.S. 47 (1919, Holmes, J.)

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fully protected speech may evidence a course of canduct giving

( NLRB v. Virginia Electric

color to other non-protected actions.

• /

Co., 314 U.S. 469 (1941).

220. While we do not expect the Board to reverse its position on these issues at this time, it would have an obligation to look towards the evidence most favorably to Interveners, since one cannot tell what evidence of further anti-competitive activity may have been uncovered.

Indeed, entreaties to local government to prevent installation of generation or limit municipal or cooperative activities may well ha ve fallen under the " political" rubric.

221. The Board has asked us to discuss the Noorr-Penninaton Doctrine as it may further affect this case. We anticipate that Applicant well make some sort of combined Parker v. Brown Panning 6nn-Noerr argument **/ to the effect that since retail monopolization is at least partially sanctioned by state lawih*/, the Board can-

• / It is noteworthy that on remand the District Court held against Otter Tail in its claimed Noerr-Pennington de-fense to the use of litigation to delay and prevent the estab-lishment of municipal electric systems. Eastern Railroad Con-ference v. Noerr Motor Freicht, Inc., 365 U.S. 127 (1961);

United Mine Workers of America v. Pennington, 381 U.S. 657 (1965)'

but see California Motor Transoort Co. v. Trucking Unlimited, 444 U.S. 508 (1972).

• • / Parker v. Brown, 317 U.S. 341 (1943).

• • • / E.g., franchise rights.

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=, not consider or take action from any results stemming from that

( First, we are constrained to point out that retail monopoly.

this argument was decisively rejected in Otter Tail.

suora. Arguing at pages 69 - 83 of its brief that the retail power industry is by definition monopolized, Otter Tail contended forcefully that its activities should be insulated because of its franchises and local or federal regulation. The Supreme Court determined othe rwise.

222. Independent of Otter Tail, on its own merits Noerr-Pennington merely allows a petitioning to the government or the public in certain circumstances and does not protect against viola tions of the anti-trust laws. While Parker v. Brown, supra, does pro-J tect state policy from contravening the anti-trust laws, the Doctrine would be irrelevant as against a specific statute, such as the Atomic Energy Act, which made express a Congressional concern that the policies of the anti-trust laws be applied. Parker v. Brown merely expresses that the anti-trust laws may not have intended to reach certain state activities, but certainly Congress could manifest a different intent.

223. As we have stated earlier, Intervenors are asking for con-ditions which would reach wholesale power sales. Since, as is i

evidenced by the Federal Power Act, such transactions are federal i'

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l

in nature, the rationale of local policy acting as a protection

( has no impact in any event. Federal Power Commission v. Florida Power and Light, 404 U.S. 453 (1972).

And given recent cases by the Supreme Court stating that the anti-trust laws should be applied to wholesale power transactions, there is no warrant for an implied exemption on the grounds of local actions. E.o., Otter Tail, n#pyn; Gulf Sta tes , suora; i

l California v. FPC, 369 U.S. 482 (1962).

223. Moreover, even on its own terms, Par'ker v. Brown is limited.

The lead case involved the validity of a California statute,

• /

which it created no apparent conflict with federal policy and- wa s apparently either modeled after federal legislation or written with the aid of federal officials. It should not be a surprise that a local statute not in conflict with federal policy would be upheld.

However, as recent cases make clear, neither Noerr-Pennincton or Parker v. Brown can protect corporate as opposed to state activity.

Nor can these cases protect activities which " flow" from state poli-cies. Sacramento Coca Cola Bottlina Co. v. Chauffeurs Local 150, 440 F.2d 1996,1998-1999 (CA 9, 1971), certiorari denied, 404 U.S. 826 l (1971); Georce R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc. 424

• / Compare Panhandle Eas tern Piceline Comoany v. FPC, 324 U.S. 635 (1945).

-138-I

F2d 25, 31-34 (CA 1, 1970), certiorari denied, 400 U.S. 850; Woods Exoloration and Producing Co. v. Aluminum Co. of America,

(

438 F2d 1286 (CA 5, 1971), certiorari denied, 404 U.S. 1047 (1972);

Hecht v. Pro-Football Inc., 444 F2d 931 (CADC, 1971), certiorari denied, 404 U.S. 1047 (1972). Whether or not Consumers Power Company's local -franchises are legal, the fact of them does not pro-tect Consumers Power Company against refusing to sell participation s in the Midland units, refusing to sell transmission services, re-fusing to coordinate at equal terms with Intervenors or its other anti-competitive activites.

• j/ _

CONCLUSION 224. For the reasons stated herein interveners urge the , ,_

Board to adopt its proposed license conditions. Their -citizens and ratepayers will greatly benefit from such order in that they will be allowed access to alternate wholesale power supplys Moreover, we know of no better aid to stimulating cost reductions for al.1 consumers, including custom 9rs of Consumers Power Company, than encouraging additional competition for wholesale power supply, Additionally, there should be substantial environmental and conservation benefits from the increased coordination required.

• / There is no showing that the state of Michigan has attempted to regulate wholesale " interchange" transactions. Nor did any-

s. body force Consumers Power Company to exclude Intervenors from equal access to cuch transactions,

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225. While this case may have seemed overly complex, from the beginning interveners have been requesting an entitlement to partici-pation in bulk power generation, the access to the purchase of trans-mission services and to coordination on an equalized reserves basis.

These concepts are all common in the utility industry and supported by law. Unless there is to be continued, drawn out, litigation

~

the clear standards established by the courts should be reaffirmed.

Indeed, the reward for Consumers Power Company's holding out should not be license conditions less oneroua Ehan others have ,

1 1

agreed to voluntarily. (5515-5517). Once such principles are l reaffirmed, it will then be in all parties interes"ts to settle 1

on the particulars of implementing agreements.

226. We must again note that IBM establishes that a seller of severable commodities with control over one element of the package (e.g., here transmission) cannot " bundle" them together. Otter Tail ,

l establishes the validity of the bottleneck monopoly concepts as applied to'the utility indus try. And Gulf States reaffirms the duty of administrative agencies to apply the concepts of anti-trust law to the wholesale power industy. There is little argued by Consumers Power that was not argued by Otter Tail; nor is it reasonable to assume that the Court that decided otter Tail would di stinguish that the situation here. While Consumers Power Company will argue for narrow relief, accepting its arguments will not

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resolvo the " situation inconsistent". Nor will it serve any public purpose.

227. For the foregoing reasons, interveners request that their proposed license conditions be ordered.

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Respectfully submitted, rA A fWf:d N, Robert A. fablon Attorney for Municipals of Coldwater, Holland, Grand Haven, Traverse City and Zeeland, and the Michigan Municipal Electric Association, and the Wolverine and Northern Michigan Electric Cooperatives.

October 8, 1974 Law offices of:

Spiegel & McDiarmid 2600 Virginia Avenue, N.W.

Washington, D.C. 20037 6

4

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7 -_ y , _ _ _ . _ . --,_.___ _ f.- , ,_ ..

UNITED STATES OF AMERICA BEFORE THE ATOMIC ENERGY COMMISSION

(, In the Matter of )

)

Consumars Power Company ) Docket Nos. 50-32 9A Midland Plant (Units 1 6 2) ) 50-330A CERTIFICATE OF SERVICE I HEREBY CERTIFY that I have this day served a copy of the foregoing document upon the following per sons by depositing a copy thereof in the United Stat es mail, with first class or air mail postage affixed ,

this 8th day of October, 1974:

Honorable Hugh K. Clark Atomic Energy Commission William W. Ross, Esquire Post Office Box 127A Keith S. Wa tson, Esquire Kennedyville, Maryland 21645 Wald, Harkrader & Ross 1320 Nineteenth S t. , N.W.

Honorable J. Venn Leeds, Jr. Wa'shington, D.C. 20036 Atomic Energy Commission Post Office Box 941 Harold P. Graves, Esquire Houston, Texas 77001 Vice President and General Counsel Atomic Safety and Licensing '

Consumers Power Company Board Panel - 212 West Michigan Avenue U.S. Atomic Energy Commission Jackson, Michigan 49201 Washington, D.C. 20545 Joseph Rutberg, Esq.

Chairman, Atomic Safety and Benjamin H. Vogler, Esq.

Licensing Appeals Board Antitrust Counsel U.S. Atomic Energy Commission Regulatory Stafffor AEC Washington, D.C. 20545 U.S. Atomic Energy Commission Washington, D.C. 20S45 Mr. .Tbraham Braitman, Chief Office of Antitrust and Indemnity Honorable Frank Kelly U.S. Atomic Energy Commission Attorney General Washington, D.C. 20545 Sta te of Michigan Lansing, Michigan 48913 Mr. Fragk W. Karas, Chief Public Proceedings Branch Office of the Secretary of the Commission U.S. Atomic Energy Commission Washington, D.C. 20545

w ^^

i k-Wallaca E. Brand Department of Justice 7(

Antitrust Division Washington, D.C. 20530 Joseph J. Saunders, Esq.

Department of Jus tice Antitrust Division Washington, D.C. 20530 -

James B. Palahee General... Jrney Consumers Power Company f 212 West Midaigan Avenue Jackson, Michigan 49201 i

A 4 3 A' J J 4 .-

Robert A. Jablon Attorney for Municipals of Coldwater,. Holland, Grand Haven, Traverse City and '

Zeeland, and the Michigan Municipal Electric Association and the Wolverine and Northern Michigan Electric Cooperatives October 8, 1974 Law offices of: .

Spiegel & McDiarmid

- 2600 Virginia Avenue, N.W.

Washington, D.C. 20037 1

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,* APPENDIX A

t. .

{ INTERVENORS' PROPOSED LICENSE CONDITIONS MIDIAND UNITS 1 AND 2 *

1. As used herein; (a) " Applicant" means Consumers .

Powcr Company; (b) " utility" means a public utility under fcdcral or Michigan law; an REA Cooperative; a governmental (federal, state or municipal) unit or agency having an elec-tric. generation or distribution system; .(c) "cntity" means-(1) a "uk-ility"; or (2) any person or organization which is

. legally authorized to represent one or more utilities. .

. 2. ' Consumers Power will interconnect with and co-ordinate reserves by means of the sale and exchange of emergency and maintenance power with any entity or entities y . . - .

, in its service arca engaging in or proposing to engage in electric bulk power supply on terms that will provido for Applicant's costs (including a reasonable return) in con- ,,

nection therewith and allow the other participant (s) full access to the benefits of reserve coordination and reserve sharing. .

• j The use of the term "scrvice area" in no way indicates an assignuent or allocation of wholesale market areas.

It is intended only as a general indication of an arca within th3 State of Michigan wherc Applicant provides r.omo class of clectric service. -

9

(

The participant (s) to the reserve sharing arrangc-

~

ment shall, jointly with e)pplicant, establish from time to timo the minimum reserves to be installed and/or purchased ,

as necossary, to maintain adequato .roliability of power supply on the interconnected system of Applicant and participant (s) .

The reserve responsibility thus determined shall be calculated as a percentage of peak loads and is not to be directly re-lated to the size of generating units. Under no circumstances will minimum spinning 'or operating reserve requirements ex-cocd the installed reserve requirement. .

At the requcot of a participant or the Applicant, sell and each shall, to the extent it has surplus availabic, furnish spinning and/or operating reserve services to 'the-that other at terms which are compensatory, subject, however, l

those terms be no higher than those charged to any other ,

ut'.lity with which Applicant or the participant (s) is inter-connected. ,

3. Interconnections will be made at the transmission volcago requested by the entity if 'such voltage is available oa Applicant's installed or planned facilities in the arca 9

where interconnection is desired, if the costs to Applicant

(

will not execed Applicant's benefits. Where the entity pays

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e

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- i the full costs of the interconnection, the benefits to the Applicant will always be deemed to excccd the costs.

4. Mutual cmcr ency and maintenance service provided under such agreements will be furnished by each party to the -

~

other to the fullest extent availabic as desired where such supply does not impair service to the supplier's customers.

Reimbursement for those services shal-1 be on a non-discrimi- .

natory basis and rates shall be no higher than those estab-lished with any other utility with which'the supplier is interconnected. - .

The Applicant and cach participant shall provide to the other emergency and mainteriance power if and when avail-able from its own generation, or through its transmission

. from the generation of others to the extent it can do so r .

i without disrupting service to its own customers. .

5. Applicant will purchase from, or sell "btilk power" to any other entity or entitics in the aforesaid area

~

engaging in, or proposing to engage in, the generation or ownership of electric power in bulk, at its cost, including a reasonable return, when such transactions would serve to reduce the overall cost of now bulk power supply for Appli-5 cant or the other participant (s) to the transaction. This

c, .

4

(

refer specifically to the opportunity to coordinato in the planning of new generation, transmission, and associated facilitics, including the joint ownership of new generation ,

and transmission facilities or a portion of the capacity in such facilitics. .

In circumstances where coordinated planning results in any new generating unit (s) which Applicant owns, constrdets, organizes, or is a joint participant with others, Applicant will, upon timely request, sell to any other c.itities who-sock to participate in such planning, either an appropriate undivided interest in the plant is fee, or a portion of the .

plant capacity (i.e. , unit power) upon the basis of a rate that 'will recover to tl}c Applicant the average fixed costs (including a reasonable return) of the plant. In either -

event the utility receiving power will pay the associated -

energy and operating costs incurred for the power it receives, at rates and terms no grcator than those charged to any other utility to whom such power is sold. 'The above shall include the right to participate on an equitable basis in' the owner-ship of the Midland Units Nos. 1 and 2, or a portion of the capacity and associated energy thereof. 1 O

e 4-

6 6

, . /

. /

/

/

6. Applicant will provide 'ransmission service over its system between or amolig two or more entities with which it is interconnected on the same terms as exist between Ap-plicant and any other utility with which it is interconnected to the extent that subject arrangements reasonably can be ac-commodated from a functional and technical staridpoint. This condition applios to entities 'with which Applicant may be ,

interconnected in the future as well as those with which it is now interconnected. ,

Applicant is obligated under tilis condition to trans-mit bulk power for other entities on the terms stated above, and to include in its p'lanning and cionstruction programs suf-ficient transmission capacity as required therefor, provided that such other entitics give Applicant suff.'cient advance notice as may be required to accommodate the arrangement from a functional and technical standpoint and that the other enti-tics will be obligated to compensate applicant for the use of its system at rates and terms no higher than any other utility with which Applicant is interconnected. -

[

7. Applicant will not directly or' indirectly,, enter into, bdhere to, continue, maintain, renow, ' onforce or claim i

any rights under any contract, agreement, understanding, joint l .

pinn or joint. pro:Iram u.i th entitics to limit, allocato, rostrict,

- O divido or assign', or to' impose, or attempt to imposo, any

/ **

' limitations or rostrictions respecting the markets or terri-tories in which either the Applicant or any other entity may horcaf ter soll or transmit electric bulk power supply.

8. Upon requent the Applicant will sponsor the "

membership of any entity in its aforesaid arca and will take all necessary and available steps to facilitate membership for said entity in utility planning organizations or power pools including the Michigan Power Pool and the Michigan Illinois Indiana Ohio ("MIIO") group with which the Applicant is or may becomo affiliated. Membership shall be sponsore.d on the basis of terms and conditions established' herein.

9. To the extent that compliance with the foregoing conditions requires filings to be made under the provisions

, of the Federal Power Act or by the statutes of the Shte of Michigan or by any regulatory agency, the Company shall sub-mit all necessary filings to the Federal Power Commission or to the MPSC or any other appropriate regulatory agency in ac- 1 l

cordance with the provisions of the respective laws, the ro.gu-lationt; thereunder, and the provisions set forth therein. '

1' 0 . Un3ess otherwisc specified, should a dispute arise between the Applicant and an entity over obligations undcr e a e

e e

• e those licenso conditions, this Commission shall have con-tinuing jurisdiction to resolve such dispute.

11. Should a dispute arise between the Applicant and

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an. entity ever the compensation to be received by the Appli-cant for services , it is obligated to provide hereunder, the Applicant will nonetheless provide the services and refund to the entity, or receive from the entity such amounts ret- .

roactivdly to the date of initiation of the service as de-termined.by a final order of the Federal Power Commission to be.either less then, or in excess of, a just and reasonab'le rate therefor. ,

e e

p 6 e e

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63 Ft. Worth Area, Texas Jaime Padills, Pres.

772 P.O. Box 842 Ft. Worth, Tex. 76101

64. Brcward County Area, Fla. William E. Sullivan, Pres.

761 P.O. Box 8307 Ft. Lauderdale, Fla. 33310 LOCALS -

500 to 750 members

65. Tanpa, Florida , Ranson (Ranny) Erskine, Gen. Pres.

Area Incal P.O. Eox 22173~

754 Tampa, Fla.

66. Southwest Coastal Area, Calif. . John S. Gaffney, Gen. Pres.

745 811 N. Broadway, Suite 304-306 Santa Ana, Calif. 92701 67 San Juan, Puerto Rico Aurelio Rivera, Cen. Pres.

770 Box 6047 - G San Juan, P.R. 00936

68. New Haven, Conn. Reno Gabianelli, Pres.

813 P.O. Box 21 New Haven, Corin. 06501 69 Keystone Area, Pa. Eugene Deaven, Pres.

717 P.O. Box 3421 Harrisburg, Pa. 17105

70. Jacksonville, Fla. James E. Phelan, Pres.

695 P.O. Box 2881 Jacksonville, Fla. 32203

71. Central Area, Fla. Laurel R. Rice,' Pres.

685 P.O. Box 20133 Orlando, Fla.

72. Nashville, Tenn. Edward Bryan, Gen. Pres.

678 P.O. Box 103 Nashville, Tenn. 37202 73 Salt Iake City, Utah B. Clyde Buckley, Pres.

666 P.O. Box 2458 Salt Lake City, Utah

74. Toledo, Chio Harold Ingle, Pres.

615 P.O. Box 695 Toledo, Ohio 43694 75 hlsa, Oklahara Tom Wright, Pres.

Area Local P.O. Box 651 599 Tulsa, Okla. 74101 4

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: DIX B 1x ran f tt}!rr!!!P 6 1:ltrl D f IIIP l blilPEI S IE105 ,

OCTotil:l TE!DI,1971 No. 71991 O'rrr.r. T4n. Powtn Courist, Appc!! ant, Y.

Userra SrArts or ArratcA, Appellee.

.. .\. - e. I'..ot Tun 1.'stito SrArts Disir.rcr Cotrar ron Tuc Durr.:cr or MzxstsorA

=. -

11RIEF FOR APPELLANT .

OTTER TAIL POWER COMPANY tis 3.\.]ng3 D s.. . l . Li stt t s 1.- 1.". N.:ier.sl Bank Building ,

l I esa 1 Zh. .stmeesota 56537

.. ' .\litrox IIANDLtR  !

• hisci Att D. BLtC1DIAN 425 Park Ascaue New York. N.Y.10022 <

Attorneys for Otter Tail ,

Power Company simo Ca.123 Vmet Srnst. N. Y. 10014. 235 2500 C-49

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J TABLE OF CONTENTS non Opi nion Belo w . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Jurisdiction . .... ............................. 1 Statutes Involved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4

Questions Presented . . . . . . . . . . . . . . . . . . . . . . . . . . .

I i Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . 5 L Otter Tail's Business and Service Area ..... 5 I

8

. 2. Refusal to Sell at Wholesale and to Wheci ...

3. Political Activitics and Litigation . .. ... ... 13

4. Othe r Towns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5. Voluntary Interconnection and Coordination Arragemen ts ' . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

6. Proceedings Below . . . . . . . . . . . . . . . . . . . . . . . 20 Summary of Argumen t . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Ar.cunext

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Potxt I. The. Decision And Judgment Below Would Nullify The llegulatory Scheme Provided Ily Con.

. . gress In Part 11 Of The Federal Power Act Spc.

eifically To Govern Involuntary Wholesale Sales of Elect ric Energy . . . . . . . . . . . . . . . . . . . . . . . . . . 25 A. The Federal Power Act Was Clearly In.

tended To Provide The Exclusive 3! cans By Which a llegulateil Utility 31ay Be Required To Sell A t Wholesale . . . . . . . . . . . . . . . . . . . . 26

'T 1

N

t 11 iii nos ' nos 1 Tha Decision And Jud: ment Below Are Re-Aconoen:

• pegnant To The Regulati.ry Scheme Which .

A. Ieg.islatin story of Part 11 of the Federal CIngress Provided liv The Enaeunent Of

' l'uwe r A c t . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Part 11 Of The Federal Power Act. . . . . . . . . 32

1. Proposed Wheeling Sections Eliminated 4 C ngress IIas Standated That Dec. .i> ions Re.

from Part 11 of the Feileral Power Act garding Comtud-ory Wholesale Sales Of Elec. During ('onsiderution of the Act by Con.

tneity lie Based L,pon An Appiwal Of The ,, ; g 3 g ' " ' " " " ' * " * " * " " * "

"Public Interest" Within The IIenning Of 2. Opposition to Propo<cd Wheeling Sections The Federal Power Act. . . . . . . . . . . . . . . . . . . . . 38 at flouse and Senate Hearings .... ... . 2 h The Question At liar In Not Whether There 3. Testimony of the Draftsmen of Part II of Is Any Express Exemption Or Implied Im. { the Federal Power Act . . . . . . . . . . . . . . . . 11 acnity From Antitrust. But Itather Whether ,

4. Proposed Amendment Limiting FPC's Congress Intended The Provisions Of 4 202(b)

Powers With Respect To Wheeline (Pro.

To Be Nullithy.lly An Antitru<t Suit Predi.

d U tion The d'.une Subject 31atter . .... 41 - - posed during consideration of the Act in ca*7 I93 ) " " " ' " ' '""'"""' 5 r II. The Decision And Judgment Helow Are 5. Declarations llade in 74th Congress in ntrary To Congress' bpecilie Determination 1935 An To Purpose Of Eliminating Pro. .

[ hat A Duty To Wheel Not Be Inysosed On 46 Posed Wheeling Sections .. .. ..'...... 27 gIcetric Utilitien ............. ..............

B. Wheeling Bills Introduced ami IIcarings IIeld b In Enacting The Publie l'tility Act of 1933 in SSth Through 02nd Congresses . . . . . . . . . . 28 Crngress Determined That Private Utilities Sh:uld Not lie Itequired To Wheel Govern- - '

men t Pow e r . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 B. Since 19% Congress 11as Itepentedly Re.

allirmed its Intent That Forced. Wheeling Sh:uld Not Ile Imposed On Private l'tilities . 53

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C. The Deci* ion And Jmigment Helow Are Con.

trary To The Lnifest Intent Of Congress .. 57 axt III. The Decision And .1udement Below Are lirectly In Conflict With The Hulings Of This hurt In Noerr A nd Prunington . . . . . . . . . . . . . . . Gi BiNr IV. The Decision Below 311< construes The r

Aititruxt Laws and Their Appliention To The Fa ct s A t Ba r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 i

$N CLL*S lo N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 b

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Cases Cited Carnation Co. v. Pacine Westbound Conference,3S3

,wy, U.S. 213 (IDGG) . .. . . ... .. . 42,42n iderm v. City of IIankinson.157 N.W. 2d 833 Carneal v. Kendig.10G Va. COS, SS S.E. 2d 235 (1955) Sin (N. D. 19GS) . . . . . ..... ... . ... . ..... 1G Central Tra..<fer Co. v. Tenninal Railroad Ass'n.,

icx II:siery Co. v. Leader,310 U.S. 4GD (1940) SO 268 U.S. *CD (193J) . ... . ....... 45 row Transp. Co. v. Scuthern Ry., 372 U.S. GSS City of'1'nris, Kentucky v. PPC,300 F.2d 053 (D.C.

(19G3) . ... .. ....... . . .. .... 31n Cir. 1DGS) . .. .... . . . .... 51 sociited Press v. United States,30G U. S.1 (1945) 76,77 City of Paris, Kentucky v. Kentucky Utilities Co.,41 FPC 45 (19G9) .. . .. .. . 51,51n,G2n illimore & 0. R.It. v. United States er ref. Pitcairn Coal Co.,215 U.S. 481 (1910) . .. .. . ... 30n Colby v. McLaughlin, 50 W::h. 2d 152, 310 P. 2d 527 (1957) . .. . .... ... .... .. .. 81n irt;w v. Florida Power Corp., Civil No. 701*D.T (M.D. Fla., filed Apr. G,1970) .. . ...... ... 37 Dick v. Scara-Roebuck & Co.,115 Conn.122,160 A.

432 (ID32) . . .. . ......... ..... Sin anan v. Bergenfield Plaz.i. Inc.. IG N.J. Super.

520, S5 A. 2d 222 (snper. Ct.1951) ... . ... S0n _ Director Cencral of Railroads v. The Viscose Co.,

251 U.S. 4DS (1921) . . . . . . .. ..... 30n inrd cf R.R. Comm*rs. v. Great N. Ry., 2S1 U.S.

412 (1930) .. . .. . .. .. ... 30n,31n Eas' tern R.R. Prc<idents' Conference v. Nocer Motor Freight,Inc.,3G5 U.S.127 (10G1) ..... 23,G4,65,CG,6S igart v. cal 1well, GG So. Od 600 (La. Ct. App.1953) Sin Eastman Kodak Co. v. Southern Photo 5taterials iroagh ci Pitcairn v. Duquesne Light Co., Civil Co.,273 U.S. 350 (1927) ... . . .75n,78 Nr. GS-858 (W.D. Pa., filed July 23, 1963) 37 Export Liquor Sales, Inc. v. Ammex Warehouse Co.,

mahton v. Socony Mobil Oil Co. 231 Cal. App. 2d .ggg p,'.hl 551 (Gth Cir.1970), cert. Jenied,400 U.S.

ISS,41 Cal. Eptr. 714 (Dist. Ct. App. IDG4) . 81n 1000 (1971) . . .... . ... . .. . .. 80n ilif;rnia v. Federal l'ower Commission, 369 U.S- For East Conference v. United States, 342 U.S.

482 (1902) . . . . ... .. 43

.28,29,29n,32 570 (1952) . . .

diftruia Bldg. Co. v. Italle,80 Cal. App.2d 229,131 .

~ FCC v. RCA tommunications, Inc., 346 U.S. 86 F. 2d 404 (Dist. Ct. A lip.1947) . .. ... SO

, (1953) . . .. . . .. .. . . 0S,30,41,43,81 ilif:rnia Motor Transport Co. v. Trucking Un- Federal Power Conunission v. Florida Power &

limited, 404 U.S. 503 (1972) . ... ...G5, Gi G7 Light Co., 404 U.S. 453 (1972) . .11n,44,62 nhunet Council llide. Corp. v. Standard Oil Co., Federal Power Commission v.1daho Power Co.,344 107 F. 2d 530 (7th Cir.194S) 81n U.S.17 (1952), rev'g ISD F. 2d 605 (D.C. Cir.

1951) . . .. .. .. .. . .... 51n,GO

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t vi vii PAGE PAGE Federrt Power Commission v. I.onisiana Power & Kobe v. Dempsey Pump Co., IDS F. 2d 416 (10th Cir.

Light Co., 32 List.2d 369, 40 U.S.LW. 4G3G 1952)........................................ 67n (U.S. June 7, 1972) . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 44 Lampson Lumber Co. v. Caporale,140 Conn. G70, Flood v. Nuhn,32 L Ed. 2d 738, 40 U.S.LW. 4747 102 A.2d 87*> (1954) ...... ..... ..... .... .. Sin (U.S. J une ID, 197 2) . . . . . . . . . . . . . . . . . . . . . . . . . 58 Lien v. Northwestern Engineering Co., 73 S.D. S4, Fl:rida Power Corp. v. FPC, 425 F.2d 11DG (5th . 30 N.W. 2d 4d3 (194 9) . . . . . . . . . . . . . . . . . . . . . . . . 80n Cir.1970), rcr'dii.part on othr groun4 sub noen. Loomis v. Lehigh Valley R.R.,240 U.S. 43 (191G) .. 30n Gainesvdle Utilities Department v. Flonda Power Ca rp., 402 l'.S. 515 (1971) . . . . . . . . . . . . . . . . . . . . 51 Lornin Journal Co. v. United States, 342 U.S.143 Gr.inesville Utilities Department v. F1-rida Power (1951) " " " " " "* " " " * ' * " " * ' ' " "75n' 78 Carp., Civil No. G8-305 Civ. J. (M.D. Pht., filed .

McLean Trucking Co. v. United States, 321 U.S.

. Au g. 13, 1908 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 67 (1944) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38, 3D, 41, 41n Gainesville Utilities Depa:tment v. Florida Power ,Meyer v. Estes, IG4 Mass. 457,41 N.E. GS3 (1635) '.. Sin Ccrp., 40 FPC 1227 (1DGS) . . . . . . . .. . . . . . . . . <. 41n Midland Vadley R.R. v. Barkely, 27G U.S. 482

Grinesville I'tilities Department v. Florida Power - -

(1923) ........... .......................... 30n C4rp.,402 U.S. 515 (1971) . 25,2G,33,34,3Gn,37,41n,61 Mitchell Coal & Coke Co. v. Pennsylvania R.R.,230 GImeo, Inc. v. Providence Fruit & Produce Build. U.S. 247 (1913) ... .. .. ..............:..... 30n ing,Inc.,194 F. 2d 4S4 (1st Cir.1952) .. ....... 77n Montana. Dakota Utilitics Co.v. Northwestern Public Gauu v. Delmae,140 Miss. 320,105 So. 335 (1925) . Sin Service Co.,311 U.S. 2tG (1951) . . .. . 31,36,37,G3 Georgia v. Pennsylvania 1!.R.,321 U.S. 439 (1945) 43,45 Montana Dakota Utilities Co. v. Williams Electric Cooperative,203 F. 2d 431 (Sth Cir.195D) ...... 70 Otidberg v. Tri. States Theatre Corp.,12G F. 2d 26 .

Morrisdale Coal Co. v. Pennsylvania R.R.,230 U.S.

(8 th Ci r. 1912) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80n Handfinger v. Stevelaw Realty Corp.,102 N.Y.S. 2d 304 (1913) " " ' ' " " " * " " * ' * ' " " " " "

• 30s GSS ( S u p. Ct . 1950) . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Nagy v. Ginsberg,2S2 App. Div. 842,124 N.Y.S. 2d 3 400 .(2d Dep't 1953) . . . . . . . . . . . . . . . . . . . . . . . S0n Hercules l'owder Co. v. Cont. mental Can Co., IDG Va. ., ~ .

935, SG S.E. 2d 123 (1955) . . . . . . . . . . . . . . . . . . . . . Sin New York Times Co. v. United States,403 U.S. 713 (1971) " " ' " " ' " " " " ' " " " " ' ' * ' 58, G 4 Hodge v. Sloan,107 N.Y. 241,17 N.E. 335 (ISST) . Sin Northern Pae. Ry. v. Solum,247 U.S. 477 (191S) . . . 30n Inttrnat.onal V. isi .ble Systems C.arp. v. Renu.ngton.

Rand, Inc., G5 F. 2d 540 (6th Cir.1933) . . . . . . . . . 67n O'Brien v. Brown, 41 U.S.LW. 4001 (U.S. July 7, Keogh v. Chicago & Northwestern Ry.,200 t'.S.15G 197 2 ) " " * " * * " " " " " " " " ' ' " * " " " GG

( 10/.!) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 2D u, 32, 43 Oregon Steam Ship Navigation Co. v. Winsor, S7 U.S. G4 ( 1 S73) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79, 80 v

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viii ix PAoS PAon Otter Tail Power Co. v. City of Coleman,121 N.W. Straus v. Victor Talking Machino Co., 297 F. 791 2d 4S3 ( S.D. 1903 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (2d Ci r. 192 4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 67, G7n Otter Tail Power Co. v. FPC,429 F.2d 232 (Sth Cir. Terminal Warehouse Co. v. Pennsylvania R.R.,297 1970), cert, desdcd, 401 U.S. 917 (1971) . . . . . . . . . 51 IT.S. 500 (1936) . . . . . . . . . . . . . . . . . . . . . . . . . . 28,29n, 31 Otter Tail Power Co. v. MacKiehan,270 Minn. 2G2, Texas & Pae. Ry. v. Abilene Cotton Oil Co., 204 133 N.W. 0d 511 ( 1965 ) . . . . . . . . . . . . . . . . . . . . . . . 17 - U.S. 42G (1907) . . . . . . . . . . . . . . . . . . . . . . . 2G, 27,32, 41 Packaged Programs, Inc. v. Westinghouse Broad. Texas & Pue. Ry. v. Ainerican Tie & Timber Co.,234 casting Co.,255 F. 2d TOS (3d Cir.195S) ...... . 75n U.S. 138 ( 1914 ) . . . . . . . . . . . . . . . . . . . . . . . . . . 30n P;n American World .\irways, Inc. v. United States, Tri Continental Finance Corp. v. Tropical Marino 371 U.S. 29G (10G3) . . .. 29,29n,31,38,39,40,41,45

• Enterprises, Inc.,2G5 F. 2d G19 (5th Cir.1959) . 80 P4nnsylvania R.R. v. Clark Bros. Coal Mining Co., Union Leader Corporation v. Newspapers of New 233 U.S. 456 (1915) . . . . . . . . . . . . . . . . . . . . . . . . . 30n England, Inc.,2S4 F. 2d 582 (1st Cir.1900), cert.

desded,365 U.S. 833 (19G1) . ............ . 73,74 Pennsylvan.ia Water & Power Co. v. FPC,193 F.2d

-. 230 (D.C Cir.1951), af'd 343 U.S. 414 (1952) ... . 82 .,

United Mine Workers of America v. Pennington, 381 U.S. 657 ( 19G5) . . . . . . . . . . . . . . . . . . . . . 23,G4,G5 P4nnsylvam.a h. ter & 1,ower Co. v. FPC,343 U.S.

414 (1952) ........ ... .......,........ 25,31,45,S2 United States v. Addyston Pipe.& Sreel Co., S5 F. 271

r. , ,175 M m W ) m- M,80 PI:stie Contact Lens Co. v. Butterfiehl,3GG F.2d 338

- (9th Cir.1966), cert. deded,395 U.S.1000 (1907) . G7n United States v. Ahtminmn Co. of America,14S F. 2d 41G (2d Cir.194 5) . . . . . . . . . . . . . . . . . . . . . . . . . . 71 P4rt of Boston Mar.ne Ternn.ual asa,n v. Rede.

riiktiebolaget Transatlantie,400 U.S.62 (1970) .. 31n United States v. 'American Tobacco Co., 221 U.S.

Public Utilities Coimuission v. Attleboro Steam and

( }"""""""""'*"'"*"'"". 0 Electric Co.,273 U.S. S3 (1927) . .... ...... 44,G2 United States v. Borden Company, 303 U.S. ISS (1939) " ' " ' " " ' ' " " * ' ' " ' ' " ' ' 4 *

Riney v. Tompkins,197 Md. 981,78 A.2d 183 (1951) Sin United States v. Grinnell Corporation,3S4 U.S. 563 s

4 R:binson (1912)v..............................

Baltimore & O. R.R., 222........ U.S. 50G 30n

) ........... .......................... G ,

United States v. Klcarflax Linen Looms, Inc., G3 Six Twenty Nine Prodnet. tons, Inc. v. Ro!! ins Tele. .

F. Supp. 32 (D. Minn.1945) .......... . .. .75n,78

c. sting, Inc., 3G5 F. 2d 473 (5th Cir.19GG) . . . . . . 75n United States v. Newbury Mfg. Co.,3G F.Supp. G02 Staebler.Kempf oil Co. v. Mac's Auto Mart,Inc.,329

@. Mass.), moHon to racate judgment denied, Mich. 351, 45 N.W. 2d 316 (1951) . . . . . . . . . . . . . . Sin 123 F.2d 453 (1st Cir.1941) .. ............. Sin Stite es rel. Strenge v. Westling,130 N.W. 2d 109 United States v. Philadelphia National Bank, 3*'

( s.n. 19G4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 U.S. 321 (nG3) . . . . . . . . . . . . . . . . . . . . . . . . 41, 42, 43, 4 4 B

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I XI PAoE United States v. Public Utilities Commission of Cali-f rnia,345 U.S. 295 (1953) ........ . ......... 51 Statutes Cited United States v. RCA,358 U.S. 334 (1959) ........ 43 e ,4cm United States v. Terminal Railroad Association,224 Federal Power Act, IG U.S.C.%S24 et seq.:

U.S. 3S3 (1912) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75, 7G Section 201, IG U.S.C. % S2 4 . . . . . . . . . . . . . . . . .

. 44 United States v. Topeo Associates, Inc.,405 U.S. 59G Section 202, IG U.S.C. % S24a . 2, 3, 4, 20. 22, 25, 2G, (1972)........................................ 79 2Go, 31, 32, 33, 34, 34n, United States v. Western Pae. R.R., 352 U.S. 59 35, 3G, 3Gn, 37, 40, 41, (195G)........................................ 42n, 42, 43, 44, 45, 51, 31n United States Nav. Co. v. Cunard Steamship Co., ' "' '

284 U.S. 474 (1932) .. ............ 27,23,29n,31,45 Section 203, IG U.S.C. % S24b . . . . . . . . . . . . . 44,47,51 Uptown Food Stores, Inc. v. Ginsberg,255 Iowa 4G2, Section 204, IG U.S.C. 4 S24c . . . . . . . . . . . . . . . . . 45 123 N.W(d 59 (1963) . . . . . . . . . . . . . . . . . . . . . . . . . S0n ,,,

Section 205, IG U.S.C. % S24d . . . . . . . . . . . . . 45,71n Utica Square, Inc. v. Renberg's, Inc.,390 P. 2d S7G Section 20G, IG U.S.C. 4 S24e . . . . . . . . . . . . . . . 45,71u

( Okla. 19G 4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Son .

. Section 207,16 U.S.C. 4 824(f) . . . . . . . . . . . . . . 72n

• Vcughan v. General Outdoor Advertising Co., 352 S.W. 2d 502 (Ky.1961) ...................... E0n IIinnesota Sintutes % 300.03 4 . ...... .... .. 7n,70n Village of Elbow Lake v. Otter Tail Power Co.,40 IIinnesota Statutes $4 454.041 thru 454.043 . .. .. . 7n,70n FPC 12G2 (19GS), 79 PUR 3d 259, af'd, 429 F. N. D. Century Code, Tit. 49, Public Utilitics, as 2d 232 (Sth Cir.1970), cert. Jenied,401 U.S. 947 . amended (1971 Supp.) .. . ......... 7n,70n,71n,72n (1971).. ...... .. .......................... 9n Sherman Act, Section.2,15 U.S.C. % 2 . . . . . 3,4,21,29,31 Village of Elbow Lake v. Otter Tail Power Co.,2S1 37, 45, 57, 67n, CD, 70, 72 Minn. 43,100 N.W. 2d 571 (19G3) ............ 17 S. D. Compiled Laws, % 0 351 . . . . . . . . . . . . . . . 7n,70n

> Virtue v. Creamery Package Manufacturing Co.,227 S. DXompiled Laws {$ 49-419.7 thru 49-419.S . . . 71n U.S 8 ( 1913) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gin i Watiker Proces Equipment, Inc. v. Foo.1 Machinery .

& Chemical Corp.,382 U.S.172 (1965) . . .... . 67n Waring v. WIL\S llroadenoting Station, Inc., 327 Pa. 433,194 A. 631 (1937) . . . . . . . . . . . . . . . . . . Sin Western & Atlantic R.R. v. Ocorgin Pub. Serv.

Comm'n, 2G7 U.S. 493 (1925) . . . . . . . . . . . . . . . . . . 30n Whitney National Bank v. Bank of New Orleans, 379 U.S. 411 (1965) .... .................. 30,31,43

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Other Authorities Cited Ix rue

• hiipff810 I1111Tl Df TIjP 1hlil021 diatr$

Annit.,143 A.L.R. 5S3 (10 4 4 ) . . . . . . . . . . . . . . . . . . . . 80 OCTO11ER TERM,1971 An n:t., 97 A.L.R.2d 4 (IDG4) . . . . . . . . . . . . . . . . . . . . . 80n 113 Coxo. R re. ( I DGT) . . . . . . . . . . . . . . . . . . . . . . . . . . 55 .

N*'o. 71001 FPC,1070 Xariosas. Powra Scaver (1972) ..... .. 61 FPC, SrAristics or Paivaniet Owsro Ex.rctnic Ursurars is rum U.S. ron Ysan Exoco Drccussa En Orrna TAIL Powzn Couraxy, 31, 1970 . . . . . . . . . . . . . . . . . . ................

Appellant' Ilearings on !!.R. 3277 and Other Bills Before the Y-Communications and Pmccr .%lacom. ef the !!ouse Camm. on laterstate anJ Foreign commercc,92nd g y,7 ,3 37 ,,, ,, g y ,,,c ,,

C:ng.,1st_Scu. (1971) . . . . . . . . . . . . . . . . . . . . . 57 j pp,zy,,,

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H1arings on !!Jt. 5423 Referc the House Comm. on' hierstate and l'oreign Commerce. 74th Coug.,1st 48 Ox ArrzAL Fnox Tnr. Uxirro Srrres Disrazer Count ron Sess. ( 1905 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. Hearings on !!.R. 71Sc and Related Bills Before the Crmmunisnth,n< e,.4 Pun rr Sn.laam. o! the !!nva Csmm. on interstate awl Foreign Commerce,91st Cong.,1st & 2d Sess. (1971) . . . . . . . . . . . . . . . . . . . . 56 BRIEF FOR APPEi LANT OTTER TAIL POWER COMPANY Heerksgs on S. m2, S. 3:3s and S. 31to Before the Sc mic Com m. on interstate Com merce,SDth Cong.,

2d Sess. (19CG) . . . . . . . . . . ............ .... . 54 Pi nion Below Hearings on S.1725 Refore the Senate Comm. on lxterstnte Cumnicrce,74th Cong.,1st Scu. (193~4 4G ,, The. op* Won d flic district court is reported oCicially at 331 F. Supp. 54 and unonicially at 1071 TnAnn CAs. V 73,GD2.

Hearings ou S.19tf and ReinicJ ltills Rc/or,e the

• Senate com m. an luterstate Commerce.Doth Cong.,

1s t Ses s. (IDG7 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Jurisdiction Neale, Tus Aar:Turst LAWS or inE USA (IDGO) . .

The Jurisdiction of this Court is conferred by the Ex.

75,75n,76n,77n pediting Act % 2,15 U.S.C. % 20,32 Stat. S23 (1903). The R estArtu rxr or Cox rnacts % 51G (1932) . . . . . . . . . . 80 district court entered its original Judgruent on October 6A Concix nx CoxTr. ACTS % 13S9 (IDG2) . . . . . . . . . . . . . . SO 14 Wtu.istox ox CoxTr. Acts % 1G42 (Od ed.1072) .. . . 80

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connected and coonlinated electric facilities. It shat!

22, 1971. Appellant moved, infer ufin, to amend such be the duty of the t'ounni>> ion to promote and encour.

Judgment (A.1:14 208),8 and an amended, final Judg. age such interconnection and coordination within each ment was accordingly entered on Nm ember 10, 1071. such district and between sneh di>tricts. Before es.

(A. 207 210). A tituely Notice of Appeal was filed in the Mahli>hing any sneh district and fixing or modifying District of Minne usa. Sixth Divi < ion, on December 7.1971. the boundaries thereof the Commission shall give no.

(A. 211212). The di>trict court's Amended Judgment tice to the State conuninion of caeh State situated hu been su< pended sharing the in udency of this appeal.

• wholly or in part within such district, and shall afTord (See Dec. 7,1971 order in the record). Otter Tail ided its each such State connni*sion reasonable opportunity to Jurisdictional Statement with this Court on February 4, present its views and recommendation <, and shall rc.

1972. On May 1,1972, the government served a mem- ceive and consider such views and recommendations.

cramhtm conceding that the issues involved in this case cre " novel" nm1 "obviously important in the administrn. (b) Whenever the Commission, upon rpplicat. ion of nunissi n r of any person engaged m the tion of the Sherman Act and its relation to the Federal ""I b'".e Pner Act." Probable jurisdiction was noted on May 22, ransnunion or sak gf ylectric enngp and afte notiec 1972. 32 L Ed. 2d ;O0, 40 U.SLW. 3EG. to each State commissmn and pubhc utility affected and after opportunity for hearing, finds such action

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~. ' - neecssary or appropriate in the public interest it may Statutes involved by order direct a publie utility (if the Counninion finds that no undne burden will be placed upon such Su,csect..ons (a) and (b) of Sect. ion 202 of the Federal public utility thereby) to establish physical connec*;on Power Act, IG U.S.C. 6 S24a, provide:

of its transminion facilities with the facilities of one

"(a) For the purpose of assuring an abundant supply or more other persons engaged in the transmission or Cf electiic cuorgy throughout the l'nited States with salo of clectric energy, to sell cuergy to or exchange the greatest 1ossibte economy and with regard to the energy with such persons: Prorhied. that the Commis.

proper utilization und conservation of natural re. sion shall have no authority to compel the enlargement sourecs, the (Federal Power] Commission is empow- ,

of generating facilities for such purpo<es, nor to com.

cred nud directed to divide the country into regional pel such public utility to sell or exchange energy when districts for the voluutary intercoimeetion and coordi. to do so would impair its ability to render adegnate ration of facilities for the generation, transmission, Lervice to its customers. The Commi>sion may pre.

cnd sale of electric energy, and it may at any time -- scribe the terms and conditions of the arrane:cment thereafter, upon its own motion or upon appUc'ition, to be made between the persons affected by any such make such modifications thereof as in its jud: ment order including the apportionment of cost between will promote the public interest. Each such district them and the compensation or reimbursement reason.

shall embrace an area which,in the judgment of the ably due to any of.them."

Commission, can economically be served by such inter-Section 2 of the Sherman Act,13 U.S.C. % 2, 2G Stat.

• References to the Appendix are cited throughout as "(A. )."

200 (IS00), provides:

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, b "Every person who shall monopolire, or attempt to

, monopolize, or combine or conspire with any other per-son or persons, to mmmpolize any part of the trade or 5. Did th. di>trict court err in hohlin;r that Otter Tail commereo among the several States, or with foreign a "monopoli>t" polely on the basis of circumstances nations, shall be skemed guihy of n misdemeanor, and, which are integral tu the electrie power businew a on conviction thereof, > hall be puni.hed by fmo not execeding fifty thousand dallars, or by impri>otonent Echemes which det. rive Otter T of monopoly power' that the Sherman Act prescrib in the discretion of the court."not eseceding one year, or by both said punishments, *

6. Did the district court err in blindly aptsfin mis.

1 taken per se concepts without regard to the spec Quest,ons i Presented circumstaneds of the electric utility industry, the nn ture, purpose and policy of the pertinent regnlator

1. Did the district court err in imposing on Otter Tail an scheme, and the adverno efTects of its heldings tbsolute duty to sell at whole, ale to all municipalitin, produens and consmners of einW enemyf without regstd to the specific procedures and criteria 7. Did the district court err ht hohling as a matter of which Congress provided in Section 702(b) of'the Ped. .

ar.litrust law (i) that a company must tanke its indi.

eral PoIrci Att to govern determinations as to whether involuntary wholesaling should be orderedt vidually owned capital ansets available for use by competitors; (ii) that n company which is in the busi.

2. Did the district court err in requiring private utilities ness of selling at retail nmst also sell at wholesale to to whccl goverurnent power even though Congress has competitors; and (iii) that it is illegal per se for n specifically and repeatedly d.: tern;ined that no such company to insist, when its property is used by others, duty to wheel should be imposedt that the property not be utilized to destroy its busi-nesst

3. Did the district court crr in spi d .ving the Sherman Act to Otter Tail's efforts to in0ueneo the electoral deci. , Statement of the Case signsissuc power of municipal t voters with respect to the public

1. Otter Tail's casinen and Sereiec Area The Otter Tail Power Company (" Otter Tail") is in the

• 4. Did the district count err in enjoining Otter Tailfrom business of supplying c!cetricity at retail to consumers the exercise of its constitutional right to petitimi the' ' located in the small town ** and countryside of western courts even though no suit commenced or sutiported by Minne' iota, eastern North Dakota, and northeastern S bad faith and even though no such litigation 8 440 has of ottereverOtter Tsiri E3 towns love Tail wasunelerfound pnpubrions 1.500.

to b prevented Only 23 have a populatum af 1.500 or greater. amt only abr power systemthe1 establistunent of a singlo municipal Datata) luving a geputation of abouta poputrian in Set 4, A. 933 938). 13.000. (A. (41; DX 95, e

i e

4

.--.w .,-,-.-y ,- ~ -- r, - - - - - - - ,---..,,.-----m,c , , , , 4. --.-4v-.m--s

.m r

6 7 c kota. ( A. 654 064 DX.95, Schedules 1, 4, 5 and Chart Public Service Commission of North Dakota ' and by A. 903 034: DX.28. A. GIO,61!)..While the district court municipal bodies in 3finne.ota ' and South Dakota.' .

mml that Otter Ta!! serves 4t;~a of the GIS towns in this yum consu1cred hv the court, niul thua "pos$ cates mono.

• Under applicable i. tate law. Otter Tail generally op-gg,, g,ursuant to anunicip:d francidsen which expire sly power, ( A. ., .,8 ; Funh,ng 1S,e, A. S., SS), the every 10 or :'O years. ( A. 697,608; A. 93G; Dep. GX OSI, spulations of these towns vary from a high of 29,0578 to inr of 20 peruns, pp, gg,33,3, .'80 28G: A. 00). Since the 1940** there have been ndmicil ial power factions in various town < which llued en actual retail rales-rather than counting have advocatnl that Otter Taira franchisc he terminated irir.usly sized towns as though they were fungible units- and that the town in qnc* tion serve itself by cotabli,hing tier Tairs market share is ordy 23.00 of the total in the its own, independent power sy tem. (A. 28: A. 700, 707, M> graphic market area as a whole.' The remaining 71.1r; 712 715; S07 812). The issue of municil ial versua private r,ccounted for by the retail sales of rural cicetric co. , power has been deci,k.d at the polls in cach instance. A yratives, nmnici vd l sy tems, federal ngencies, and other total of 22 elcetions have been held in 12 towns with vari.

ivestor owned utilitics. (DX.04, A.1201120s; A. 873 87G, .

ous municipal electorates often reversine their previous (2-DIG). vote either for or against public power. (GX.2, Answer to Despite the modMsize of its business,' by painstakiu- - - Intm. .No. 2, .L 241. ,MG; MniHug W. A. Ri). Mac of hrt over a period of more than GO vcars, Otter Tail has these 12 mum,c,palitics i have thus far elected to remain etted for the consumen whom it 'does nerve, an inte. with Otter Tail. (A. S0G). Of the three which ultanately ited electrie power system capable of fctnishing eco. v ted for mumc,ipal poiver, all are presently operati,ng

"** E' imie and reliable service to this thinly polmlated part of ' **" d'*I " "I * ' '

ital America. (A. rM, 639). 58-00, A.1101, "1113,1110, 250257, 2SS-2SG; Findings 40, 130,137,101, A. 53,77, S3).

Ottir Tail is a regidated utility under '.* art II of the ederal Power Act. It is also regulnted by the State Although the gommnent mefuny inmt.ed i Ottu Tail's ac.tivit,es with respect to all of the hundreas of 8 3runchead. itinne nea (une serted by Oner Tail). DX.94, towns ivhich it has ser iced over the past several decades,"

4. A. 873.1204. (popnt.aion from 1970 Census), the trial court dealt with only six municipalitics in any

' Sihtey, Noeth Dakota (served by Oncr Tail). GL2, p. 4. A. detail-Elhow lake., Stinnesota; Cohnan and Aurora, 3, 233 .'86: IAv. GL287. p.12.7, A. 250, 2A6. 061; DX-95 South Dakota; and llankinson, Finley, and Velva, North

h. 4, A. 933 938. (popul. timi from 1970 Cenms). .* - Dakota. ( A. 50,S5).

' tlc reicvant geographic market is Federal power Commi.sion ipply Area 26, uhhh ci.rre.pomi, generally with the outer limits ' N.D. Century Code, Chs. 49 01 to 09,.20 (19CO), as the area scrsed by Otter Tairs system. (DX 94, p. 4, A S72 S74, smended (1971 Supp.).

D4: Finding I86. A. 87).

• 11 inn. Statutes H 300 0348,454 011-043 (1969).

' For example, Otice Tair. installed generating capseity is only s S.D. Compiled 1.aws19-331 (1%7).

.],163 KW. In ermparison, the instaticti generating espacity of i stonne E!cctne poucr Compriy, the utility wliich serves Wash. 3, A good deal of the evidence which the gosernment thus prof.

ton D C., is 3 108.030 KU-mnre than 15 times as much. FPC, fered was rejected tiy the district court as immaterial. (A. 494-487).

i cruties or painni.v Owxrs Es.rctase Urrutir.s ax vnc U.S.

= Yst.m Exoto Dsecuta.a 31,1970 at 703, 71S.

3 I

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2. Rdusal to Sell ot Wholesale and to Wheel In March, IDW (some three ntonths before its system The district court stated that the "has.ie inue" .in tla.s became operational). Ethow 1.ake 6ted an application with

& Pedetal l'ower Counninion to compel Otter Tail to ise i.s ch..ther otter Tail'e rein. al "to nell clectrie lmwer furnish the services which it had previon le reque.ted.

sholesalo, and . . to wheel (or tran3mit) electric power i annntespalitic811 formerly served at retail, con *titute a (GX-SI, Stip.13, .L 110 8,1105. 2592M, $52.N: Finding g 3, .413M '21b W Nm mM R 19% h. Fl't' em onop:hz.etwn of conuneree nt vplaFen of the (Shermau} Med mi MM p rsuant to .% tion '.'02(h) of the Federal et." ( A. 27). In fact, th,s i mue relates to only two

,wns-Elhaw Lake, .ilinnevnta and llankinson, h,ortit l'ower Act, r(quiring Otter Tail to pimide .t chott term

.kota. None of the cther inunicipahties con idered

, interconnection and to dell electricity at wholeente as an Ine hail any need for such services einen alternative emergency measuie, in order to prevent overloading of Elbow Lake's generatars."

'urces of w holesale power and transmission facilitics were Edily available in cadt insinnec." i (l#0'88'# f0"lia"<d /'um l'ardhT fcF)

While simdar sotaces of poutr amt transminion were asailable Elbow Lof.c, .Vm.unota (pop.1,550) c!ceted not to to Fin!cy anil Vcha. North Dakota, both of these towns neverthercs con,tinued to serve neverthc Elbow Lake -

809-811. M.% 905 '07: DL93. .L M4 : C! art submined by the

'itil that inunicipality's own genernting and d!>lribution United States. A.1219. W m. added to record by order dated atem began oI$crations in . lune.19GG. (UX-84, Stip.10, July 5.19f2L The weue.5 caned, h the gosemuent in caam.h Otter Tad s purg..rted ,%.m, n unce over tramnh i..n admined that

, A.110 8, 251-25*, aS5-28G). While the rnum .cipal power he had not nudc a study of anv od.er tom (.L 607. M8. 613. 614),

rrjcet was in its preparatory stages, Elbow Lake re. and the record comaias ese esidence that Guir Tait pwe%cd such icated that Otter Tali support its efTorts by inrnishing adom:nancc with aspici to any nm"h irando e,ther than En.ow cetricity nt wholesale or, in the alternative, that Otter Lake and llantiawn. In fact. as shown hilow in the text. Ouct Tail all allow its transmiulon lines to be used to whcci sub. did "o' 've" he e Smi"aurc" a5 to the'e twa t*v"5 *inec (i) both

.lized' a-overnmentally produced power to its former re. had recour. c to the ITC to require i hter Tail to wil at whoicule.

d custotucte. ( A. O.a, a.1, a..s i GX 02, GX-00, A. OSa.. and (ii) both b.vl other (c.mble ahreatives available to them. (.L 559, 560. M2. 5o5. Sco. SM, 5M. 597m01614. SS7-800).

G). Otter Tait refused both rerpte.sts on the ground, In addition. Ow ru erd Arm.umh shon one occr Tail owns n:ng othets, that sneh support for niunicipal ]cwcr ven- only 8% of the tot.d mitrge of the electric lines in the eco.:raphic

res wouhl lead to the crusion and eventual destruction market area. ( DS91. A. I P'61198, A. 853-858. 877). 1:lectric

' its *cwn integrated system. (1. 703 717, 32). m - lines of other >uppher, prohteraic the gm.:raphic nurket aret and furni.h competithe somics of inn e r. (.L W-S72. 903 : DL92

" Cohnan and Aurora. South Dakota, cach secured a sourec of . A. I PJ912to. 864 : DL93. .L MI: see alsa A. UWM. 611.615,

,wer from the thirc:m of Reclannten. In cach ca c. the c!cctricity 696, 697, M9. 712J lf ).

wtwded to il e municipahty oser the lines of the Siout Valley n y;ii3,.c of Dhme I.ake v. Oncr Tail Power Co,40 FPC 1262 npire lhtiic Cosperathc. t GL84. Snps. F.-38,4 4. 52. 53. 59: A. (1068). 79 pt'n 34 259 (printed in Turivlictional St. dement at 11.1113. Ill1 til6. 251257,283 2S6: Finding. 137.163. A. 77, ' ,

, 83 : A. 363J69. v &, to7. 8 69. 850. SG. 8U): DLIT. DL18 A 120135). af'd, 42a F. 2J 232 (6h Cir.1970), ccrt. denicd. 401  !

g,S, 947 ( pj73 ), l L19, A.1181 110, 3/J. sos; Clart suhtnined t y the 1" nite !

ates, A.1219. 670. 671, added to record by order dated July 5

'72).

(footnote continucJ on fo!!adng fajc) l l l

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' 11 10 Elbow Lake thus exacted from Otter Tail in its proceed. ,

In a second opinion dated Segiteinher la,1971 ( A.187 ing before the FPC was a back.up emtree of encrey to in. - l 203), the P!'O ruled that a hing term interconnection also - ercase the reliability of a municipal plant which ha,I al.

wruld be in the public interest in Ell.ow 1.ake's case. (A. ready replaced Otter Tail as the sole eupplier of electricity 100 104, 108)." The Comminion made it clear, however, to the town's resid..nte. While the use of Otter Tail's that it did not si>h to cucourage " improvident ventures" facilities may have prosided the optinnmt means of achiev.

by other municipalities. (A 191). It pointed out that ing this re> ult, the record shows th.it Elbow Lake couhl Elbow lake, while ;dpetimting Otter Tail's rates, had have acedmplished the same end by providing its own in.

neverthete>s incurred a financial loss, and that the new terconnection (i) by an independent transmis= ion line built municipal system was of "donhtful reliability." ( A.101), either by the Village, or by the 31issouri Basin 3funicipal The FPC also found "that Otter Tail is !cgitimately con. Agency and operated in conjunction with local generation cerned about the possible cro ion of its system." It thus . ( A. 559, SCO, 502, 50, 500, 553, M I, 614, 8S8, 539, 32G.329),

at:ted: '

e or (ii) via lines of the Ibt River E!cetrie Cooperative, marked and re.

"If other communities were to follow Elbow Lake's $5,11178, 292 ; I)X.99, A.12111213, rsute, and if, having miscalculated the results, they cetved Ir. ev,dence i by order dated November S,1971; A. S89,

~~

could enVct to be rescued by overly generou4 in,ter. - SDO, 907, 008, 562).

c:nnection terms, then Otter TaiPs fears that it will Hanlinson, Nonh Dakota (pop.1,125) voted to utablish Inc its cu<tomers, seriatim, seem to us to be sup. a municipal electric system in October, IDGJ. (GX 81, ported." (A.101). Stip.22, A.1100,254 257,2S5 2SG; Finding G7, A. G3). Liho Elbow Lake,11ankinaon asked Utter Tail to ' supply cht.

The FPC therefore formulated an order deeigned to tricity at wholesale and to wheel governn:ent power. ( A.

provido assistance in the immediate case, but upon terms 37,3S, G3, G1,0X.117, A.1130,1131,29*,-256). Otter Tail did which would he " fair to Otter Tail and its custnmers" not comply with thoc demande, and llankinson accord.

(A.193), and would not encourage other municipalitics to ingly appiled first _ to the North ])akota Public Servico M w suit "Commi=sion" and then, in ING, to the FPC for an order The fact of the matter is that Elbow Lake did not ac. compelling Otter Tail to render such services. (GX.132, tually n(ed whoicsale power from Otter Tail or anyone A. 2S5 2SG).

elst in order to establish it, municipal power system. As Initially approved by the electorate and ultimately inwic. .-

In lilGS the compositien of the Ifanhinson City Council l

mented, that system is deugned to itself generate all of changed wWi une ekeu.on of a new mayor and councHmen the power needed by Elbow Lake comumers." What "& Nath Mom Conunissim fanut slut it lod no power to-(Findin; 93. A. (M ; GX-131, GX 140 "The FPC also ruled that it had no power to compel wheeling. E'*"' d '*U'I '.l""uxl.

( A.193198). Sec p. 5, infra. While Otter Tail los not chal. b- II.". the WC that ha emu..n jun@tN mer leuged the Commission's detenninstirm that it furnish wholesale mientate tran3num an whole.ak W M &ctncae mM

.A* 20 service, an appcat is presemly pending in the F.ighth Circuit with Part 11 ( the Federal Power Act. Sec. s.p., Federal Power respect to one of the ternts of the interconneuim. b"" " * * E N N On the other hand, the North Dakota Camanmuu liu c'ompreh

" GX.34, Stips. 411, A.1101,1148, 255 237,2SS.2S6; A. 888.'

power to regulate the w!e of c!cctricity at retsil. (A. 699,700).

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12 13 epgmed to municipal power. (A. 720,051). As a result, from municipal to private power through the electoral the Council elected to terminate the FPC procculing and l>rocess. Otter Tail is tims prewntly serving llankin on ta stier a new franchi e to Otter Tail. (GX.84, Stips. 28, consumer

• enld.rt to the full and compreln nsive regulation 29, A.11 tis 1110, d'at.257,2s5 $6; Findinus 1u2101, A. 70; of the North Dahnta Public .%rvier Commission. In the A. G15; UX.Oll, pp. 'G 42, A. 344). The city thus chose cases of 1,oth 1%nr t.ake amt ihmkinson, the mhnini<tra.

voluntarily not to pursue its Fuleral l'ower Act remedies tive procedures asailable to the inuns tuuler the Pnt"rul em Elbow 1.ake had done. Power Act girosidrd a perfectly nde.pmte means of chtain.

Again, it shouhl be noted that even without Otter Tail's ing the scry same relief w eich the instant antitru<t action facilities, 11ankinson had three alternative sonrecs of was intended to alton 1.

power asailable to it, the nearest being only 18 miles away.

(A. 887,5!G-C00). The total cu3t of such power to llankin.

3' "". ^'"""'." " " ' '.#'#" .

son (including the e xpense of a connecting l,ne) wonhl Siceo the is.<nn of public versus private poner has been hive been 15 milla per kilowatt honr-a smn which the invariably decided at the polls, the struggle between the government's own expcit admitted wonhl have been " fen- opposing factions in the various immicipalities was gen-sibic" for IIankinnn to par. (A. 599 600). erally conducted in the same manner as any other political

.' - campaign. The trial court admittrd in evidence, over Otter In sununary, ihe district tourt's tind.mg of monopoh. za- Tail's oldeetion, a inass of campaign material ou 1.oth > ides tirn rests upory,0tter Tail's refusal to sell at wholesal of the municipal power que tion," and the opinion below cr wheel c!tetric2ty tu two towns. 13oth mum.apalitics had reiterates the government charge that Otter Tail monopo-alternat vc frauble means of obtaining power from other lized by " participating in local municipal Imw'e r political sources, albeit at a somewhat higher cost. One town c.unnaim." @ 31-02h (Elbmv 1.ako) established its onm municipat power system ~

in IDGG without u.,ing Otter TaiPs facilitien. It then ob. In addition to such campaigning, the district court con-sidered a number of lawsuits, often directly related to the tained tuo orders from the FPC raguiring Otter Tail to sell to it at uholesale, first on a temporary and then a " GX.112 A thru GX 112 31: GX.113 A thru GX-113 3t; permanent bas,is. These orders were entered in 106S and cx.142 A thru CX.152 5tiGX.143 A thru GX-14.1 D; GX-tm A 1971, respectively, afler the town had supplanted Otter thru GX-178 C: GN-179 A thru GX 1M i: GX 201 A thm GX.2dl C: GX.202 A thru GX.202 D: GN.22 A thru GX-242 0; GN-293 Tail as the "monopolb t" in the nmnicipal " market" in A thru GX-293 J; GX-420, GX.421; GX.1@,,0; GX 171, A. I13<,

quest.wn." The second town (IIank.inson) conunenced.the , _ , 3:33, ,

.  ::me type of FPC proceeding as had been successfully The ofrers, statements of coun ci, objections and rulings in this invoked by Elbow Lake, but then switched its preference arca arpear in the record at the fonowing rtaces: A. 225, 225, 256, 2GO-263. 271. 272. 280-256. U1. 483. 4 ~ . 488.

This is the terminc.togy u<cd by the district court with respect After the court overru1cil defenda iti objections to the cami'3i:"

in Otter Tail in the same ciremnatances. As ind;cated Iclow at pp6 rnatcrial, to make the record ew.uplete an.1 without wahine the ntr 72-74, int,er, it is Otter Tail's pa=ition that the u<c of such terms jections, the lutance of the items of c.nupaign material (all rdating to describe the f act that a small inwn is generally served by a single to Vetva. North li Lota) which the gmcrnment did not afict were

~

identi6cd. o(Tered amt received i n esidence. DX.25 thru DX-37, supplicr mbconceives fundamental principics of antitrust.

A. 4SS-4S9, 432, 433.

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II 15 electoral procces, which Otter Tail brought or supported. would thus, in effect, be transformed into general obliga.

Since neither Cohnan nor Aurora hail any need for Otter tions) without *nbmitting such action to the eh etorate. (.%

Tail's wholernte power or tran-mi-sion facilitica. the lower Findiu; 153,161;13W,363). As that court etated, the court's fimlin; of monopolization with respect to these bond issue was invalk) sinec "a necessary election was towns is predicated entirely upon such litigation (as well never held." (DX.SO, p. 4).

as related political activitics) rather than nny refusal to ,

scl! at wholerate or wheel. The trial court al,o c.,m.idered b. Lawsuits involving Colman, South Dakota c2rtain suits involving 12how Lake and !!ankin on. Ex- gfyf, y 7,g, 3.f , y, yg.cstling,130 N.W.2d 109 (S.D.

cept for the three actionx referred to below where 1DGI), involved nuother mandamus petition, this time' to Otte Tail is mdicated as a nannd plaintiiT. there cases compel certain oflicials of the Town of Colman to hold an were brought by local citixcus oppmed to mnnicipall aiwer. .

clection as to wheiher a previottsly authorized bouil i sne Otter Tail a participation consisted of offer,nig legal ndvice should be rescinded. The court held for defendants on the and/or financial nssistance to snect the expensen of litiga. .

ground that the 1961 statute which prov.ded i f.or such tion. (DX 42 thru DX-ST,1 F50; GX-105-10G A, GX.110, an elet, ton did not aliply retroactsvely to a bond issue up.

GX.131140, UX.1*.01fri, GX.bG 1DS 12SS-2SG, Dept. CX. , wen Hmu$ Om Imdat,n pcWon um tLd

'2S7, pp.15N00, ISO ISS, Dep. GX 2S9, pp. 34-06, Dep. p ,ut i ut In 1400; see also DX.Gt thru DX 07, A. 850).

GX-291, pp. 5-S,14-1G, A "SO.2SG).

la Oiler Teil Poorer Co. v. City of Colmnn,121 X.W.

c. Lawsuits Involving Aurora, South DeLota 2d 4SO (S.D.' 1903), Otter Tail challenged certain ir.

State er rel, Jensen v. Rasmussen was a mandamus ae. regularitics in the manner in which a resolution favoring nmnicipal power had been passed by the City Council and tion brought by a umab:r of Aurora votera to cnfere: ecm.

submitted to the c!cttorate. Tim court held for the defend.

pliance with an initiative petition calling for a vote on a resolution to abandon the town's plan for establishing a ants, this time on the ground that a subsequent statute -

did apply retroactively so as to cure the defects in question.

municipal electric system." Although they had ori::iually It may be noted that the legislation nlied upon in this cane refused to do so, the connnencement of this snit prompted was found insufficient to cure the defects successfully t:mt omeials to hold the ro1 nested election, thus runking further litination unnecessary. (DX-53-SG, A 850; Find- elmHeuged in Otter Tait v. Aurora, supra. (A. 40G-40S; see also DX C0 thru DX 63,1 S.*>0).

ings 150,101,1 S2, S3; A. OG't, OGl). *

~

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• In addition to these actions against Cohnan and its om.

Similarly,in Offer Tail v. Toten of Aurora (DX-S$1 cials, the town itself brought suit against Otter Tail to 850), the Sout!t Dakota Circuit Court held, inter ulia, that enjoin the installation of a small number of larger nized th313wn could not purchase its own revcuuo bonds (which .

8' Aurora ha.1 first voted ,r+rlut municipal power (GX-2. p. I, '" d".\Yhile it remiered judgment in favor of the other plaintif s grand. the enun kund.that Oter rait had no standing to A. 283..% rinding i4t. A. 78: GX-318 pp. 25. 25. A. J30-y1)* **'"*'*I^"**

but hul resermt this decision in a suh.c'tuent clection. (GX.2, p. I, '"'

W 'I"",'p".U"N SO 2. A. *84'"PY' ** * " *

• l A. 293 %: Findin 144. A. 79: GX-3 s. gy. 36,37, A. 339-MI).

petitioners thu< bored that a thir.1 tote wouhl restore t!.c origirut i detIrinin.ition.

)

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d

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J 16 17 Poles which Otter Tail contended were neecuary to im. with the municipality's electrie hond i>>ue. Otter T.JI j prsvc its di>trilnatinn system. (DX.09, DX.70, A. K0; Porrer Co. v. .llen KiiI, ass. 270 3 tion. 000.103 N.W. Od 511 Dep. UX 0SS, pt'. 23, 24, 3. 260 080; GX.150, GX.157, A. (19G5) (DX.42 A,11 and t's DX.40, DX 44, DX-45. A. 90).

2SG). At consumer insistenec, Cohnan ultimately stipn- The town then wunt Otter Tait-equally unsucec4 fullv-fur

< lated tl.at Otter Tail conhl in< tall one larger po!.. .Epecially alleged damages claimed to have resnited front the tir$t liti.

necthsl to maintain >crvice. (DX.71. DX.72. A. San: Dep. gation. (DX-47, p.15. A. NO). This time Otter Tail pre-GX 2S$ p. 24, A. 280 05G: GX.159, UX.159, a. 2ss.2SG). Al. .vailnl at both the trial court and appellate levels. l'illage 4 tlyough tlje di trat court htu.he.1.

a>i.le this care, and a of Elf, ore Anic v. Offer T,dl 1%,rrr f'o., Ost 3! inn. 4:t, Ico snmlar dupute mvolving llankin<on, as "minutiac" which N.W. ad 571 (1903). (DX-17, pp. 01 105, A. S50 ; DX.48, DX.

j shouhl not be considernt (A. 3:Gd118), it subsequently 49, A, s50).nc cdoptml as a "fmding" the ::overnment's incomplete and .

In addih. on to .ts i darnage act.mn ni du' state courts and 4

cnc. sided version of the facts. (Finding 124, A. 74). .

its proceed,mg< before the FPC, b,lhow Lake conunenced un l

c. Laiusuits lavolving HanL*nson, North Dakota antitrust suit against Otter Tail in federal diatrict court.

This private action was continued pending the ontcomo of In <f urterson v. City of lin, kn.eson,157 N.W. 2d S03 Fibow Lake's FPC proceeding. (DX-59; see DX-S7, p. 3'

---(N.D. IDGS),.a. group of Itankmson taxpayera sued..the - par. E., A. 850).

etty, charging, among other th,mga, that expenditure of funds to conq cl Otter Tail to make its trmpminion facili. In summary, Otter Tail brought or supported six netions against four towns (Aurora, .Cohnan, Ilankinson and tics available for whccling was unlawful 1.veanse state law Elbow Lake), no actions having been brought against either prohibited a inunicipality from len.*ing sneh transmission facilities without first ol.taining the permission of the Mul y r ha. We the district court foumi that thezo litigations had been broueht to prevent the c$tal,lishment c!cciorate. (GX.100, A. 0#C). This <,uit was einece.afn!

of mumcipal Iw wcr systems,in fact no suit brought or sup-at the trial court !cvel, althonch the decision was ultimately ported liy OHer M had nny such clTect." As noted above, reversed on appeal. (GX.10G A thru GX.139, A. 2S5.Osc). allof the towns wheh ult,nuately votni for mmocipal power por .ts i part, .m addih.ou to the proceedings the city (Elbow Lake, Cohnan .nd Aurora) presently have their started before the h, orth Dakota Pahlic Service Conunis.

sisn and the FPC, Hankin<an conunenced a private anti. ** The Findings n!>c refer to amther Ethnw f ake ca c which trust suit against Otter Tail which it later abandoned after had been brought in 19.h After the municipality tu.t prevailed in ,

'hi'""'i'.>n. it an oths tc<$ eketeit tg, grant ( ht(r Tail a nSw frandii-e  ;

subsoptent elections had chanced the emn1i!cxion of-the - .

m 1932.

• It was upon the expirathni of Lliat fraticin<e ni P943 th.it ,

. gUrn government. (GX.S-1, Sh.p. 29, A.1110,054 257, OSS- the nnre cuurut municird wnter  ! dispute in Elhuw lake twgan.

28G; A. 724 700) (Finding,14.19. A.10 321.

- 88 White the unndamus acti.m agsin-t Aurora surrented in

d. Laicsidts involving El6ow Lake, Afinnesota bringing at.iut tia de ired vtation, the electorate cho e to adhere to  !

its dccis.n in favor of numiripal power. (Findings 150.l(l. A. S2 l Otter Tail and an Elbow Lake resident brought an unsue. 83b Afin ouu Tait s ,uh gain t Aumra c<tahn-hui that the j eessful action neainst the town challencinT certain misrcp-

• " ' " " "" P" # * '" """ " #

in nurketme it, oNigitions lawfutty tn an outsid'e buyer. (Fnalings I

i reseng,,. sons amt other alleged irregular.lica in cunucction 150153,155. A. tMI).

k .

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18 19 ewn electric systems. ( A. 014. 015 : Chart submitted by the Finally, although the oph; ion below deala only with United State *, A.1219, G70, (;71, udih.d to record by order litigation instigatal by private power advocates, as the dated . Inly 5,1972). preceding outline of the suits shows, municipal power ad-Significantly, the trial court did not find that any of the vocates were at lea t njiially free in invoking the a'd of suits were groundless or brought in had faith, in fact, judicial and adnunutrat,ve i tribunals m connection with three of the *ix action < were at lea-t partially sueecoful:2; these local controversies.

eml, of the three which were lo-t, the two cases involvin,,

Cohnan were cleaily decided on tethuical, legal grounds of d' " "*~

narrow compas<. In the laat caec, involving Elbow I.ake, The only other town < which the district court examined the town's subseipient claim.< to hacing been damaged by in any detail in its Findings were Finley and Velva, North the litigation were flatly rejected by the state trial and

• Dakota (pop. 509 and 1,241, re*pectively). ( A. 83 85). In sppellate courts. these cares, Otter Tait neither instituted litigation nor re-The trial court eimilarly did not And that Otter Tait had fused to interconnect or wheel electricity. The electorates any policy of litigatim;in every in>tance recardless of the in both towns simply reversed their carher resolution < m merits. As previously indiented, no suit's at all were favor of municipal power. All that Otter Tail was found

. brought with_respett to Finley or Velva, although these to have done was to take action to improve service in both iswns also had imtially ciceted to terminate Ott r fall's municipalitics. (Findings 172,1:4,170; A. S4,85).

franchise. Furthermore, the uncontradicted tenthnony of In summary, of the six towns which the di.4trict court Otter Tail's president established (i) that he per.conally considered in any detail, three opted for. and now have made the decision as to whether to litigate in each instance, municipal power (rlbow 1.ake, Column and Aurora). Of (ii) that the decision was ba=cd upon a careful nucument the three which c!ceted to remain with Otter Tail (llank-si the meilts of the case la iguatios., an.d (iii) that Otter inson, Finlev ami Yeha), two (Phd.9 and Vehn) ara Tail had no general policy as to litigation with municipali- towns in which Otter Tail is accused of nothing more than ties. (A. 722 70G; Dep. CX-SS7, pp. 2S34SI, A. 2SO4SG). having improved its service, and in the third (llankinson)

The dec;sion below fails to indicate the clearly politic d the electorate voted the municipal pmeer faction out of atture of most of this litigation. As the foregoing sum. control. Finally, it nmy he noted that all of the m,orosay1 mary indientes, four of the six cases involved the failure of municipMies wMeh mter TaH b,now- Mn @nbn.

cne or another town to hold an allegedly required clection, son, Finh.y and Velva) are hieated m .%, orth Dakota where Otter Tail's retail husmess ,s i timrongbly regulated by a

two cf these suits being mand.nnu< actions to compel com. ,

the State Public Serv, ice Coimmssion.

. pliance with initiative petitions. Such actions were plainly ancilhary to the more central, electoral battles at Avhich the 5. Voluntary Interconnection and Coordination municipal power issue was in fact decided. 3 ,,,,,, ,,,,,

• • In adihtion tn the two successful suits neainst Aurnra, the In 1955, Otter Tail ' entered into a contract with the '

taxpayers' action a . dust Hankinson was successful at the tri:J court United States llureau of Heelamation whereby, upon spec-level. ahhou;:h reverned on creal. ified terms and conditions, each party agreed to sell and exchange power and to provide wheeling services for the e

e t

p.

(,

21 20 ather, (GX.GT, A.105810W,2%1,285 28G; A. G7G.G79,31). that such conihiet violated Section 2 of the Sherman Act.

Anning other thinge, Otter Tail agrevil to transmit lower ( A. 29,17 21).

ther than The case was tried on June 1 through June 11. 1971.

La lhireau polit,c*

i wideh customers Otter i;l' ail t>

was elf a,thow sersing at located retail. in munici. 3g3,;v of the operatisc facts were established hv stipula.

(GX.G,., par. 27(c), pp. 27,24, A.1078,1079, G79.Gqt). The tion.' a 2'4 Th diariet contt reintered its n' pinion on 1turcan has also cutered into euch agreements with vari. Septemler 9,1971, and entered its original jiulement on ens other utilitie- ( A. ro3. G94). Otter Tail has likewuo October 22, 1971. Without considering the application of conchuhd substantiallv samlar emytracts with varions the l'ederal l'ower Ael,it hehl that Otter Tail's rern,al to rural c!cetric cooperatives. ( A. Gw69.i; CX.22. A. 079- - scH M dhk and win ci constituted monopolization ( A.

1005, 28G; GX.09, A. 20051017, 295 286; CX.39, A. lots. 27 40: 131-130); Otter Tail was accordingly enjoim,1 from 1010, 2SG; CX.Ca, A. 10101053, 245 2dG; A. 42). In each ,

refusig smh services to existing or proposed numicipal case, the duty of Oiler Tail and of the contracting coopera. power systuna in the future. ( A.132). The conrt also 1:ve to transnnt power for the other n suh 3cet to the same '

found that litigation initiated or sponsored hv Otter Tail kmd of restrict, ion. (A. C94, G95; Finding 224, A.120)' .

,had violated Etion 2 (A. 40 42), and it en'oined j Otter Although the di trict court made no liading'on the Tail from thereafter enracing in any litigation "for the

,, point, evidenEnddoecd at the trial ebowed that the afore. - purimse of delaying, preventing or interfering with estah.

said contracts would not have been entered into without lishment [ sic] of a municipal electric power system."

the provisions assuring the parties that their facilitics ( A. 102). Finally, the district court found that Otter ceuhl not he used to deprive them of existing customers. Tail's contracts with the 11ureau of Heclamation and var.

(A. G7G GS3, GSS.G45). Such vnhmtary interconnection and lous rural electrie cooperatives were illegal per se be.

coordination arrangements, which plainly =crve to anure cause the parties did not undertake to wheel pm er to "an ahimdant supply of clectrie energy . . . with the great. their own retail customers. ( A. 4145). The. Judgment est 1mnible economy an I _with regard to the proper util. necordingly prohibited Otter Tail from cutcring into or ization and conscrsation of natural resources . . .", are enforcing any such ugreements. ( A.132).

espressly cucouraged by Section 202(a) of the Federal On October 27,1971, Otter Tail moved for n new trial or, Pown Act. in the alternative, for amenih d and/or additional findings Of I"'t ^"d C0"CI"'I""8 E I3 *t nml to nonml the Judg.

6. Proceedings Belou, ment. ( A.134 204). Among other thing <, Otter Tail The government's Complaint, fded July 14,19G% al- .- brought to the court's attention the Federal Power Com.

. leged that Otter Tail had monop dizeit and attempted to mission's decision of Septendier 13, 1971 which had anonopolize by (1) refusing and threatening to* refuse to granted F.thow Lake a long term interconnection. (A.

sell power at wholesale, (2) refusing awl threatening to

• 137142,1S7 203). The district court amended its Judg.

refuse to wheel and (3) " engaging in other activitics de. ment on November 10,.1971 by adding the proviso that signed to obstruct and defeat the attempt hy municipali. Otter Tail wonhl not bi compelkwl "to furnish wholesale des to establish alternative local electric power system electric service execpt at rates which are compensatorv

[ ic]." (A. 2S,13,14). In ita Armeer, Otter Tail ad. and under terms and conditions which are filed with and n Itted its refusal to sell at wholesale and wheel, but denied subject to approval by the Federal Power Commission."

'. _ .  ?

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22 23 (A. 005 00G, Ot/J). The Amemled Judi; ment did not, how.

The lower court's hohling that the Sherman Act re.

ever, allow the FPU an"y discretion as to the threshoki quires a private utility tu tran;mit ("nr wheel ) govern.

question of whether the public intercat required that ment power to mumcipalities is, if anything, even more wholesale or whccling service be compelled at all in a P""."""I '" (, n grew m

, tent, s,mee here Congress spo.

caliently determmeu that no much duty shouhl he impo<cd given case.

at all. Indeed, when it enacted Part II of the Federal

, Power Act in INS, Congre>a deliherately eliminated two

SUMMARY

OF ARGUMENT pmposed sections that wouhl have imposed the same

, legal dnty which the lower court has created of its own The fundamental error of the decision below lies in secord in the caso at har. Since 1935, the joue which the its repeated and consistent disregard of Congress' intent . court below purported to remIce has been the subject of esnecrning both the wholesale sale and transmission of intensive legislative dehale. However, while numerous electric energy and the pmper application of antitrust. -

proposed wheelir lla have been introdneed in the SSth With respect to the interstate transmission and wholo- .

thmugh Mnd t .ogmm, Con- ms has consistently elected to stand by. i,ts cath,er determ,mation that forced sale sale of electr.a .ty, t. engress enacte1 Part II of 11i wheeling wouhl be inimical to the national intciest. The

' Federal Power Act. a regulatory statuto dedicated to the .

ebjective "of7ssuring an abumlant supply of electric

- dec..is on below thus represents an improper attempt to

Y'' C "#'""8 J"'hcmily and to usurp its role tu decid.

energy throut;hout the United States with the grcatest pos-sible economy and with regard to the proper utilization ing unp rtant matters of natinual pohey.

cnd conservation of natural resource *. . . ." The duty of The district court again contravened Congress' in-achieving this aim is expressly entrusted to the Federal tent, as well as this Court's decisions in Nocrr and Pcny Power Cunmdssion. As to involuntary wholesah sales in ington, by i.pplyng the Shennaa Ad av as tu inIcrfere paiticular, Section 200(h) of the Act provides that such with local t.olitical controversies and to deprive Otter 4 transactions may be ordered by the Fpc, upon notice and Tail of its constitutional ri:ht to petition. The decisions hearing, if the Commission fmds that sneh action wonhl . w.hich Otter Tail is accused of having sought to indnence be in the public intere>t mul that certnin specified criteria in this case are all basically political in nature, with tho (e.g., that the sale would not impn=c an "undne burden" citizens of each town indicating their choice ns between en the utility) are met. Totally igunring these statutory public and private power by soting on this issue in munici.

> - procedures and standards, the lower court hehl that the pal electiana. The lower ourt thus considered a mass of antitrust laws impose an absolute duty upon a utilitrio e ' political. campaign material and reiterated in ils opinion

' sell at wholesale in all casca. regardleu of the circum. the government charge that Otter Tail had " monopolized" stances. In so ruling, the district court has deprived tho . by participating in such petitical activitics. Furthermore, FPC of a crucial element of its jurisdiction and has effec. proceeding upon the erroneous a%umption that the right lively nullified the. regnbtory scheme which Congrees of judicial re tress is not constitutionally protected, the provided to govern the specific subject matter of com. lower court found that Otter Tail had "mnnopolized" pulssry wholesale sales, by bringing or supporting some six lawsuita involving four towns. None of these actions was found to be base.

b 1

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24 2li le-- or brmnht in 1.a.1 faith tir:ler.1 three were at lea-t would tiroilnee both in.ia-tico an.1 thaus le an in.In-n e '

partially ncee- ful), an.1 none in fact prevented the whose 1.reper functioning is essential to tiie national e-tabli-Incent of a i.irsh nou.ielpal te:n. .% erthrle- , welfa s e.

cn thi4 hasi*, the c..nrt re-t raine,1 s uter Tail from hence- ~

forth brin::ing or npportin any litigation, how ever tuer;t..rion- it wh ht i . in delay. prevent. nr inteifeie ARGUMENT with a noniicipel ta'e~over of it- r. tail bn-inew. This ch>ohlte in,innstion on the excrei of a constitutional right PO!NTI 34 phonly contrary to ( ongre*4 intent.

Finally, the district court ini-conceived fundamental The Decision And Judgruent IMow Would Nillify antiu nst principles an.1 eempomaled it- crror by applying The P.ecul. tory Schente Provided Ey Co.y r es. la Part mistalien untion< of p. r se ilie ality without regard to th., II Of The Federal Power Act SpeciGeally To Govern special circuan.<tmier, anj regulatory framework of tha Involuntary Wholesale S.:les Of E!rctric Energy.

cletteic utility imb.-t y. The court thn- hehl that Oltre In light of the government's rahni% ion that the iune<

Tull i4 a monopolist on the basis of ciremn. tancu which at har "are cheinn-ly imp-s tant in th.. a.buini<tration of

. are integral A.,, th.. ciert rie pow er hn ine* , nnd without the .Mn nuan .\ct "v / its r. laflua to fl e T. .!, ,at P,.u . c rep rd to the it'ab and fe.letel reenl.. tory vehenn 4 w hich deprive a utility ot the v. ry ir.dici.. of monopofy pro-ci!N d

.lct" Dh mnramhna For The United Stat. 4 p. 1; em.

pha is :nhied), the fact that the trial enurt*- opinion doc.

by the Shennan .\rt. i.e., the power to als prices or enhale not even mention the hitier >taliite plainly ,In.u- the errar comp. tition. Tle court fneti.er hebl-withont any prece. of it* aidy-i . In enactin: Part H of the Fed..ral 1 ou er dential ha-i. w hat <oeter-that a< a n atter of antitrn-t ime At, Concre,< clearly iidicated it< inter.! that r. fn-al-(i) a enmpany une t ma:,e Ih indicI4nal: .o.s ned e..p.:a!

to sell itectsity at vlo,:e-nh, L. deah with ' y th:. F h rni n<sel- available in i.n.nicipalitie- which sert: to replace it n< n applier of elect ricity: (ii) a emepiny in tho hu ine-< Power Contai-hm al.14hc the crih iia abd i.tilb h.c ti..

proccilure* explicitly >cl (mth in the reuniatory stat ute of > riling pow er at retail ico t nevertirle-* ell nt s hol... 1 ot (a In re) by a com t applying the i nite ditTerent i

sale ir re. pie teel tu d.. n: aml (iii) it i illeeal per . c for a stainlard- of the antitrn-t law s, company to insist, w hrn it.< proper ty i- ucc4 by anoth. r, that that propeity not be utilized to detroy it< own hu-i- Section "J0(h) of th. Pnh rtd Power Act pren i.h.:,

nco. M,hile the*e not mns would 1.0 crrnuenna in any that the l'PC may or.l. r the interennm eti,.n of trnos-

, -- - 3ni, i.ny racilitic, mal or the sah or scho n... of ch.etii.

, ciretunstances, the app),ication of >nch f rr se e merptr to nn mdu try rglated ,m accordance wdh =p. cine public city n! whole.-ale "under critain circum <ta .ces." P, m.

interest obj,eettvc4 of it< nun is c-ty. :.ll>l inappro;niate stricania ll*cle r .f P,oc, r (n. v. PPU, aja y,,q ay, 4. 3

'I he con-e.1nenec* oi ihr b.w er es.nrt 3 habime< wouhl be to (ltr,2). The partientar eliteila which Conves, specirc.)

hupair 50rvice, la rain- co<b. for ennunner< of electricity for determinin; whethar a whole.ah sale may be com-and to di=courare the very k, uni of voinntary interennnee- pc!!ed were paraphrancil hv this Cun't in I7ain e'e rill.-

tion and coordination of facilities which Contre <s expies ly U/itific3 /s, fun Iun ut v. TI,[,i.In 1%o r Corp' 4tr~a t ~5:'

stated should be pronmted. In nm, the deci.-inn hqow k -.

i e

2G 27 511 (1971). As state.1 therein, the FPC may enter a able railroad rates. Although the Interstate Conuncree

$202(b) order: Act, by it< term, expres,1y preserved esisting common

. law and . statutory remedies (see 204 U.S. at 41ti), the Court

u. . . .f the Conuw.uon ' finds such action necessary or i

licid that- *

ppropriate in the public interest,' and 'if the Com.

minion finds that un mnine burden will be placed ". . . the recognition of such a [ common law] rh:ht upon smh publie utility thereby.' The proviso to the ,

is wholly incon.istent with the admini-trative power scetion makes explicit that the Conunis. Ion has no conferred upon the Commi>sion. . . . Indeed no rea<nn authority in ordering an intercoim(etion 'to compel can be perceived for the enactment of the provi= ion the enlargement of genernting facilitics . . . [or) to -

endowing the administrative tribunal . . with power compel such public utility to sell nr exchange energy . . . not only to award reparation to a partienlar when to do so would impair its ability to render shipper, but to conmtand the cartier to de=ist from cdequ.ite service to its cu=tomers." 402 U.S. at 521 ,

violation of the net in the inture . . . if the power w as 522 (brackets in original).28 . left in courts to grant relief . . . without icference to

. previ un action by the Con: mission in the premiscs."

As demonstrated below, Congress plainly intended 204 U.S. at 410 441.

that { 202(b) whonhl govern detenninations as'to whether ,

3 praticular iifility may be properly required to se!F at In Kcoph v. Chicapo t Northarestern Ry.,200 r.S.15G wholesale in a given cace. The decision below nullifies thts (1922), this same principle was held to har an antitrust regulatory scheme m disre:ard of Congress' i,nicut, and suit for treble damages predicated upon the exaction of shouhl therefore be reversed. -

rates which, although approved by the ICC, ivere alleged to have been fhed conspiratorially by the defendant. rail-A.*IT.c Fed:r er Act Was Cl::.rly Intended To Pro. ,

vide The' Exclusive Means 13y Which A itegulated Utility roads. Writmg for the Court, Ju3tice Tirandeis pomted M:y Celt =quifed To Se!! At Whatenate, out that if the alleged con < piracy resulted in rates which rj

' were unreconably high or di>criminatory the plaintiff As early as Tcras iC Tec. Ry. v. .lbilene Cotton Oil Co., .codd daim d.onages in an administrative proceeding he.

201 U.S. 42G (1907),11ns Court establi>hed the principle fore the ICO. In such circumstance =, the .lu-tiec found it that where Congrew has created a specific regubtory incicdiMc "that Congress intended to provide the shipper scheme to deal with a given subject matter, the spechhzed from whom illegal rates have been erncied with an a.ldi-cdmimst rative proccelures provided therchy e,nnot h tional remedy under the Anti-trust Act[.1" 200 U.S. nt 1G2.

circumvented by j,uibcial intervention based upon purlmed - .

' common law or antilrn<t principles. The plaintiff in Similarly, in Uni /cJ Sinics Xar. Co. v. Cunard Steam-Abilcuc, a shipper, as=crted a conunon law claim for dam. . ship Co.,31 U.S. 474 (1932), the Court hebt that a private ages predicated upon the exaction of allegedly unreason. antitrust plaintiff may not bring an action based.on con.

duct covered by the provisinus of the Shipping Act.

t2 Under the second sentence of Section 202(b), the It pC may Specifically, the Court said:

prescribe the " terms and enn.titions" of a whntesale safe once it has nude the threshold determination that the transaction should be "A comparison of the enumeration of wronet competted. charged in the bill with the provi= ions of the sections I

1 l

0 1

( ..

23 20 cf the Shipping Act above outlined conclusively shows, created by Congress for regulating the auhjeet matter without going into detail, that the all ;ations either should not be passed over." 342 U.S. at *274."

con <titute direct and liasie chargen of violation, of Isr Pau .lmcrican ll'os tJ .linrays, Inc. v. Unitc<l States, these provisions or are so interrelated with such charges a< to be in etTeet a component part of them; 371 U.S. 2N (1903), the government attacked, as violations and the remedy i< that alYorded by the Shipping Act, of the Sneriuan Act, (i) an agreement dividing eettain which to that extent supersedes the antitrust laws." South American air routes between Pan American and 2S4 U.S. at 48 i. .

Panagra (a corporation jointly owned by Pan Ainerican and Grace), und (ii) Pan American's alleged interference These principles were reiterated and applied by Mr. with Panagra's etTort.s to obtain the approval of the Civil Justice Cardozo, writing for the Court in Termiuni 11 are. . Aeronanties noar.1 for certain additional, competing routes house Co. v. l'o,nsyfrnnia it ft.,297 t*.S, ,00 (193li). Hohl.

from Central America to the (*nited Statu. The Call had ing that a warehouw owner conhl not bring an antitru*t '

itself re.gue ted that the Attoincy General 1. ring suit.

tet!6n attacking an exchisive arrangement between the h*cverthelm, the Court found that the ad.uinstrative rzilroad nud anoth'r warehouse, the Court said:

remedies provided in the Civil Aeronanties Act harred an ased upon the same subject matter. While

""9'"N

~

"Certain then it is that the Anti. Trust laws hre

• "I'.

1. " ' "' #' " '# " F ## ""*""" '# * "" "

ir. applicable in all their apparent breadth to carriers

" ""E " , #

by rail or wr.fer. A consignor or con <ignee aggrieved by such a wrong must re ort to the appropriate admin. "The acts charged in this civil suit a.= antitrust istrative agency, at lea <t for many purpees. If he is violations are precise incredients of the Board's nn-remitted to the Conan:re: Act or the Shippin; Act thority in :: ranting, qualifying, or denying certificates to cancel the illegal preference, may he pa,s over those to air carrier.*, in modifying, suspending, or revoking acts and revert to the Clayton or the Sherman Act them, and in allowing or disallowing artillations between for the purpose of recovering dane.ges! The Com- connnon carriers and air carriers." 071 U.S. at 00 2.

merec Act like the Shipping Act embodies a remedial The (.,ourt therefore hehl:

system that .is complcle and self.conta.med. . . 1,or the wrongs that it denounces it prescribes a fitting ". . . that the [ Civil Acronautical Act leaves to the remedy which, we think, was meant to be exclusive." Board under $ 411 all questions of injunctive relief 297 U.S. at 514. . -- - against the division of territories or the allocation

• of routes or against combinations between common In For East Conference v. L.ui.tcJ Statet, 312 U.S. carriers and air carriers." 370 U.S. at 310.

570 (1922), which mvolved facts substantially s,imdar to -

those in Cunard, the Court characteri:cd as " firmly u p,r I;,,, cour,rcure at-o authoritatively established that the estah ished" the principle: avaitahitity of admiinstrative pn.cedures and remedics wilt bar an antitrust suit brought by the norvrnment as well as foreciosing

". . . that .in cases ratsm; issues of fact not w.th.m the i

private trchte damage ac' tion 4 'This issue had presiously been Icit conventional experience of Judges or cases requmns open in Kcoph. CunarJ and Tmninal l archon.. Scc also c y the exerciso of administrative discretion, agencies Pan American World Airwap, Inc. v. Umied States. infra.

9 9

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30 .

31 Again, in ll'hitney 3. ..,nul Rank v. Rank of New tion that the remedies and procedures of the Federal Power Orleans, ::T9 U.S. 411 0 - ), this court rejected the Act-like tho e of the inter-tate Connneree Act, the Ship- ,

plaintiiT liank's suit to enjoi. the opening of a competing ping Act and the Civil Aeronautics Act-are exclu>ive as bank hohling company subsidiary. The Court held: ' to the matters which tiiey cover. Nec llontana 17akuta Utilitics Co. V. Northerestern Pul,lic service Co.,341 U.S.

,,(Congress] .mieudeil that challenges to [ Federal g g.4 Sre A Pe nMenuia H*nts r 4 Pau er (*o. v.

Reserre] Doard approval of the organir.ation and oper- FPC,3 3 C.S 411 (1%2), where this Comt behl that a atton of a new bank by a bank hohling company he ,

' utility may not avoid pre >cribed Federal l'ower Act pro-pursued solely a< provated ut the statute. Th,is view dmo d neikim* "to utilize a violation of the sherman as conbrmed liy our cases hohhng th:t where Congress Act bo as to null fy a rate. reduction order." Id. at 423-has provided statutory review precedures designed

• g*

to permit agency expertise to be brought to bear on particular problema, those procedures are to 1.c ex. ,

As to $ 202(b) in particular, the FPC's authority under clusive. . . . Congress has set out in the Bank Itohl. .

that section clearly covers the " precise ingredients" of ing Company Act of 1%G a carefully I danned and . the government's antitru t claim, i.e., Otter Tail's refusal comprehensive method for challenging Board determi-

• to sell at wholesale. Sce Pan .imerienn H*orld Air # rays,

' nations. fi'h tt action by Congress was designett to _

lue, v. United States, supen; United States Nar. Co. v.

permit an agruey, expert in banking matters, to explore Cunard Steamship Co., supra. That section provides the and pass on the ramifications of a proposed hank hohl. procedure and criteria by which such involuntary wholesale ing company arrangement. To permit a district court sales may be ordered-in short, "a temedial system that to nuiko the initial determination of a plan'a prognicty is complete and self. contained" as to the subject dealt couhl subatantially decrease the ciTectivences of the with. See Ters, dual II*archause Co. v. Pennsytrania R.lt.,

statutory design." OID U.S. at 120.

supra. It was plainly inti nded as a " carefully idanned and comprehensive method" wherchy the expert agency to The principles articulated in the foregoing decisions which Congress has ent rusted such matters might "ex!dore Oro controlling in the case at bar. There can be no ques- und pass on the ramifications of a proposed [ transaction]."

See 11*hitney National Bank v.11ank of Ne'w Orleans,

'$ S<c aise, c.g.. Ihhimare & O. R.R. v. t*nited States c.r rct. #" N Pitesirn Coal Cn. 215 U.S. 431 (1910): Robinson v. Ibitimore

& O. R.R., 222 U.S. 506 (1912): If Akti Coal & Coke Co. v. By the enactment of $ 202(b), Congress has explicitly Penn>>hania R.R. 230 l'.S. 247 (1913): ltorrhdale Coal Ca, v. ., . directed.that compulmry wholesale sales should he or-00'00 0"I YO's the La is of cert in specilie factual determina.

. n ri ic i r .' 4 U.. 1 ) , nk tsons and discretionary judpnents which he outside the R.R. v. Chrk Itros. Coal blinine Cn. 234 (*.S. 4.% (1915): Lnnnds scopc of common jud,'cial experience.

i In such circum.

v. l.chigh Vattey R.R., 210 l'.S. 43 (1010): Lrthern Pae. Ry. v. -

Solum Directne General of Raitnwis v. Great N. Ry. 281 U.S. 412 (1930): United Sutes v. Western Pac.

The \,., 287Co..

ucose U.S.

54477 t!.S.(1913):

498 (1921): Wecern & Athutic R.R. v. R.R., 352 U.S. 59 (1956): Arrow Tran p. Co. v. Soutlictn Ry.,

• a Cenrgia Puh. Serv. Cumm,n,267 U.S. 493 (1923): 11idland Valley 372 U.S. GFS (1963): Port of I!oston Sfarine Terminal Ass n v.

R.R. v. Ibskely,276 l'.S. 432 (192S): Itoant of R.R. Conun*rs v. Rederisktiebobget Transathntic,400 U.S. 62 (1970).

• f 4 ,

e I f

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1 32 33 stances, the FPC, as the expert agency created by Congress the lower conrt's view, a utility which in presented with a 13 deal with such matters, ".houhl not be passed over." denmmt for whole ale service umst always comply im.

Far East Con /crcure v. United SIntcs, supra. It is in. mediatelv and d its own accord. If it aceka to have the conceivable that Congress intended any party-inclnding matter resolved by the rederal Power Conuni>sion in the 1*nited States-to anert an additional, antitru<t rem. accor' dance with ( 202th), it inay da no only at the ri*k nf edy whereby mandatory wholesale males cunhl be ordered invoking the full p;moply of antitrust sanctions. Obvionsly, on imes entirely ditierent from thnee specified in 4 202(b). .

'any interpretation of the antitrnst laws which maken it a Cf. Kcople v. ClJrep., f .%Ilarr,tre n fly., supra. ,1pdeed, misdemeanor to relv upon Federal Power Act procedures it is difiienit to imagine a ca*c in which the assertion of is plainly repugnant to the latter statute.

such a right wouhl be more " wholly inconsistent with the .

cdministrative power enuferred upon the Commission. . . ."

• 2. The Judgment below vcquires Otter Tail to furnish Tcras 4 Pae. Ily. v. ill.ilcue Cottuu Oil Co., supra. '

wholesale Imwer to any municipality which makes a de.

In smn, a regulated utility such u. Otter Tail may be i mand, regardle ale snic< dircelly under the district court's contravenes Con'gce s* manifest intent and is thereforo Judgment, without the nerd for making any appheation to plainly erroncons.

• the FPC. While Paragraph V of the Annnded Judgment purport < to restore the fumminion's anthority under the B. The Decision And Jud: ment Delow Are Repuirnant To second scutence of Section 202(b) to pass on the terms The Regulatory Scheme Which Conerm provided BY and conditions of such sale *, the in.im.etion still deprives

'ne Enactment Of part it Of The Federal power Act. the FPC of nll power under the first sentence nf that

. scetion to decide whether a mandatory rede should be

1. The lower court found that Otter Tail"monoPoh. ze d" ordered at all*

by refuaing to sell at whu!ctale to two towns, Elbow Lake .

and llankinson. Iloth municipalities availed the,selves . In coinesritte Utilities l>epartment v. Florida Potrer cf their prescribed Federal Power Act remedies. h iite Corp.,402 U.K 313 (1971), this Court reversed a court of

]Iankinson elected to rentw Otter Tail's franchise, and appeals mmlitication of the terms of an FPC % a02(b) thus withdrew its npplication with the FPC, Elbow Lake order and rein <tated the Commi>= ion's decision. The Court proceeded before the Commis< ion and obtained first n , . held tha,t:

tempoinry and then a 1.ermanent $ 200(h) order regniring u,,,'the Court of Appeals overstepped the role of the Otter Tail to sell at wholesale. Otter Tail has duly obeyed judiciarv. Congress ordained that that determination

. both of these administrative dircctives. *

[as to tiie terms of a { 202(b) nrderl should be made, The putative an'ilrust violation involved in this case. In the first instance, by the Conunission, and un the thus con-ists of Otter Tairs refn=al to compiv with the record made inels case, the Court of Appeals erred i municipalitics' demand < 1,cfore being ordered t'o do so in in not deferring in the Connniuion's expert judg.

tee:rdance with statutor>' procedures. In other words, in ment." 402 U.S. at 527.

I i

l 1

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34 35 If it is improper for a court of appeals to substitute its ing an abundant >upply of electric cuergy throughnut the judgment for that of the FPt' with re<}ect to a sing!c United State

• with the greatest porible economy and with ttrm of a 6 202(b) order, surely it is indefensible for a regard to the pr q.er utilization ami con,crvation of natural district enurt to usurp entirely the FPC's tuore important resourecs. . . Pe.lcral Power Act } 202(a). The di>trict rtle in determining whether a tuandatory whole* ale sale court's utter di regard of this primary concreasio ial ob-should be ordered m the air,t Idate.

jective is evident both from the .Indement it> elf nml from

- the numernu di-paritie< letween the court's deci ion and

3. In enacting ( 202(h), Congress carefully provided those of the FPC in Milane Lake % { 202(h) goceedinv.

that no utility may be compellnl to sell at wholesale if .

For example, in it< September 1:t, IM1 ordi ., the FPC such action would (i) impose an unduc burden, (ii) reiluire stressed the import:mee of not encouraging o.her intmiei-the enlargement of generating facilitiee, or (iii) impair . palitics to follow I:! bow Lake with improvident power

' ventures of their own. (A.191). The district court, on the service to existing customers. Sec Guinecsrille v. Florid.2 Poacer Corp.,402 U.S. at ti21422. Ignoring these provisos,

• other hand, ha- given all such ventures the stron: cat Im.

ths district court has oruered Otter Tail to furnish whole- sihte encouragement by pro cribing utility oppo4 tion and, sile power in all casyn, even where compliance n-ill imposo indeed, requirina utility nupport, by wholesale sales smd

.an undue buntyn, require enlarged generation facilities or whccling, regard!c s of the circumstance.<. ( A. 1201:12). In innpair service? In lieu of the congressionally ord: lined its earlier interennnection order, the FPC declared Otter sche;ne, whereby determination < as to mandatory wholesale . Tail's viability as n producer of electricity to be an clement sales are to be made on a case by-case baris,in light of the of the public interest Jurisdictional Statement at A l'il.

particular facts involved in caeh instance, the district

• For the di trict enurt, however, Otter Talli survival-an I court has enh: red a blanket injunction, requiring Otter the consequences of its failure for consumers-are utterly Lil to furni.4 whoksak ,ov.c I to a.'l existiu ; and prospec- , immateri:d to a. dete:4 tincio:t as in whrther n dater ~e tive municip.d dectric sy>tetus, regardless of the circum. ,

interconnection rhuahl be reepiired. ( A.4's)." In short, thc st:nces. It is difficult to conecive of a more direct contra. - district court reached it.< decision solely on the ha in of its vention of Congress' intent. .

. novel interpretatiren of the antitrust law.< which it Idindly applied to an electrie utility withnut even considering the 4.' Section a02(b) also provides that a wholesale sale "public interest" under the Federal Power Act, or the may be compelled only upon a linding that su-h action is need for a specialized, expert agency to apply this stand-This a rd.

, . sitndard "necessary or appropriate in the public intere<t."

must be read in light of the puryose of Partfl of .- - -

the Federal Power Aet, w hich is stated to be ihat "of assur. The court an1 the Cornmissian atu, disagreed on nwh teasie evidentiary matter as whether an overly broad duty in srlt it wh te-8' -,nificantly, the FpC may not initiate a i 202(b) proceeding sale might in fact Ir.ut in the erosion and eventual dotrnetion of on its own motion. but rather can only prnceed upm an application 0:ter Tairs inte;: rated system. Whde the emirt bru-hed aside Otter Tail's contenthm< in this re ard (A. 45,16), the FPC found

+

duly made in a particular case. Ity sinicturing i 202(b) in this marmer, Congrr<s nude it impoeihte for any utility to In: subjected that the utility ma< *1ccitinunty concerned ** (A.191),

l lawfully to a blanket order to sell at whnteule in all situations. 8'It may he ob creed tint if the Judgment at har lad been en-Such an irconstnons result could be achieved only by an onter, such tered fire years a:, f eather tion la-t year), the FPC wout.1 neser as the judgn ent 1,einw. ut.ich is entirely outside of the procedures have had the opportunity to pass on 1.:!mw Lake's applications for 4

created by Congress.

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3 11

" Petitioner cannot separate what Congress has

3. Section Ot>J(b) re.piires that each > tate commia.< ion joined together, it cannot litieate in a judicial fonmt which will be n Teeted by the FP("> oider must be given itse general ri::ht to a rea*onable rate, ignorine the untice and an opportunity la he heard. Under the di,trict  ;

court's Judgment. the North Datu:a Public Service Com. ' qualification that it , hall Ie made specilie only by exercise of the Commirion's judgment,in which there mission ha* been deprived of all auch rights with respect is some con ideralde element of digretion." l tu wholesale tales to North Dakota municipalitie-some '

cf which may 1e cue mraged therehy to embark upon what

• In the in tant ca,c, a determination u< to whether a par.

the FPU haa called " improvident" municipal power ven. &ular wladmde e i, h dm imhtic interest" n9uires '

tu res. Thus, ,m3tead of the procedures that Congren has .

M lea. t as nmeh experti,e and infonned discretionary jn.lg.

provuled for premohng the coonhnat, ion of federal and inent as a decision concerning the term of a transaction state regulatory c!(ntt . the ilistnet emtrt has substituted , dich b Mrcady been compelb d. P.v exci ing the m.tjor '

a oncaided regime of federal control prediented solely on pordon of the FPt". juri-diction, uml requiring it hence.

entitrust consideratwns.

kui W edorm die Judwm rada r dian the Federal Power Act, the district court has nu!!ified Congrea.' intent that Comnn.ssion expert.ise and statutory standard 4 1-C. By the addit. ion of Paragraph Y of the An.cuded brought to hear ut the ont-et .md w.th i re*pect to iile inoot

- Judgment, tlu.:,disinet court apparentiv reco:nized that only the F1,C n competent to pre crilc the rates and other crucial .usnes m a b.et h.on 3r2(b) procce.h.n g.

tenus and conditions for a compul ory wholesale sale. But, ,

the power (a) to order a compub,ory wholesalo sale ni.d (h) 7. 'The district court % deci, ion invites concurrent pro.

' ta determme the terms of the transaction, are mtegral parts ecedings before the court, and the Connaission with rc$pect of a ungle re:;ulatory functtun. , As t!ns Court stated m to virtually all of the matters encompan cd by the Federal Jilentumn.Dalntes Utilitw, s Co. v. .\ ortiacalsru PuMic Se re. Poni na As rwied 4.,oove, v.lhow a 1.a .e and u~.mk.mm s

tec.Co.,341 U.S. 21ti,231 (1031) t hoth commenced trchle d.nnage actions a4 well as procecu.-

ings before the FPC. See pages 16,17, supra. Similarly, temtvirary and twrma icnt interconaceu..u. ender i .'0Jt t ). The FpC decision which tl.i< C.,urt reinstated anit auirmed in Gai.ic ville . the mattern dealt with l>v this Court in Gaincnille Utilitics Utilitics Ikpartnent v. Florida puner abrp.. suf ra. would likewi e . p,g,f,gg y, pyg.;,7, 'Pu cr Corp., supra, are presently never have been entcied since the utility m that ca c would pre- g 3g g Ig g g

. .g, g , gg,,y.;g sumafety al o have beca m ter an abe. lute antitru>t duty to inter. UlilIIIc8 UfFa'l*'"i Y- II',sida Putter Corp., C.ivi.l h. o.

com cct. Thus no unency wmdd fuse cur co.widered t'Iw "put.f;c CS.303 Civ. J. O!.D. Fla., fded Aug. 13, 1968). Sec nIdo interest' a twis of these trannetion<. This remit is partiotady ' ~ '

1. artdm v. Florida Pmrer Corp., Civil No. 701/9.T (.l.D. \

, incongruous siih se g rct in 1%w La!.c amt Gainessille, dhich Fl% filed Apr. 6,1970) Borupp1, of Pitcairn V. Durfurshc scre both seekin.: back.up power alle;:cdly ncedcd to imprme re*

liability. Thus,in additivn to other ] .'02(b) factors, the FpC had. Light Co., Civil No. 04S.~N (%~.D. Pa., filed July "3,1!G). i to ransider what the nunu,upshtics needs actually were-a judgment In other wonle, in a proliferat,ng i number of casca the acquiring a 1:reat deal of expertime as to the relishitity of cbetric courts nnd the Comm,inton must now rule concurrently on i sptems under varium citesmutances. Pre umably a municip.dity the same subject matter npplying the difiering standants  !

in the position of Ett.ow lake or Gaine*ville may. under the decision below, obtain such back up puwer autonutica!!y, without any demon. of the Shennan Law and the Federal Power Act. In such c reumstances, inconsistent determinations-such as those ,

suadun of need. 1 e t '

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39 38 which in turn incorporates the goals of the national trans.

which characterire the district court and FPC decisions portation policy." The Court concluded: ,

here-are virtually inevitabic. Further incon*istencies will Endoubtedly also arise among the ditierim th terminations .

"In short, the Conunission um>t c timate the >copo af the variou4 district courts. Plainly, Con :rews never in' and appraise the etTects of the curtaihnent of competi.

tended that the orderly scheme of enforcement pmided by tion which will re-ult from the proposed consolidation the Federal Power Act >L ,uld be replaced by a chaotic ami consider them along with the advantages of im.

regime of duplicative proceedings. ,

proved serviec, safer operation, lower costs, etc., to determine whether the consolidation will asvist in ef.

In sum, the decision and judgment below are repugnant ' fcctuating the over-all tran.<portahon pohey. Resolvmg to tha letter, spirit and purpec of the Federal Power Act. these considerations is a complex task which requires Such blatant di recard of Congre s' intent is manifestly

• cxtensive facilities, expert judgment and con <tderable erroneous nud whonld be reversed. .

knowledge of the transportation industry. . . . *The wis-dom and experience of that commis<icu,' not of the C. Cengress Itas F.tandated That Dreinions Regarding Com. .

puhcry Whotesale Sales Of Cici.tricitr lie fiased Upon ,

courts, must determine whether the proposed consolida.

An Appiaist.1 Of The "Public in te rest ** Within Th* tion is ' consistent with the public interest.' " 321 U.S.

-- Mstmng O&.Tae Federal Power Act. ,, ,,

at 67-88.

The ihcinion and judgment below mako the policies and

• In ItCA Connnunic itions, the FCC had approved certain requirements of the antitrust laws of primary importance to a determination na in whether a utility should be com- duplicative radiotelegraph circuits on the ground that com-pelled to sell at wholesale. Thi.* re< ult,in the enntext of a petition was "reasonnbly feasible" in the circumstances.

The Court (per Fraukfurter, J.) reversed the Commission, segulatory theme dedicated to its own, particular "public interest" objectivc<, is plainly contrary to this Cuntt's holding that the FCC u.a t determina that ec:'ip-tition h holdings in McLean TrucUng Co. v. finitcJ Stctes,321 U.S.

not merely "fessibl'" but desirablein liglat of the purposes 67 (1981), FCC v. Ilr.1 Comarenicatiows, Inc.,31G U.S. S6 of the Federal Communications Act. A decision based

. simply on antitrust goals would deprive the public of the (1D*>3) and Pan .!merican ll" ort,I .firacnys, luc. v. l/nited benefits of the FCC's expertise and would be contrary to States,371 U.S. 39G (1963).

Congress' intent that such decisions be based upon all In McLeau Trucliur factors relevant to the "public intere-l." 34G U.S. at in.

4 the ICC approving the'i theofCourt eou-olidation certain reviewed regulated an order of In Pan American, this Court similarly pointed out timt mstor carriers. The Justiec Department attacked the ICC's the words " unfair practiecs" and " unfair methods of com.

• decivion for its alleged failure "to consider and give due weight to the anti trust and other laws of the Unted States." * That is, the fo tering of "'a system of cuordinated transporta.

321 U.S. at 77. In upholding the Conani.<sion, the Court ti n I r the Ltion which will suppfy the most c&iem rneans of found that "the policies of the antitrust laws determino transp n and furnish service as clwaply as is consistent uth fair

'the public interest' in railroad regulation only in a <Iunli. treatmeat o[ lahur nud wuh earnings which wi.I support adequate i credit anr1 the ability to expand as need develops and to take ad.

kd }vny.,, Id. at 83. Spec.fically, the ICC must base 115 vantage of a!! improvements in the art."' M. at 82.

doc,tstans upon an assessment of the "public interest,"

T i

4 l l

l m

40 41 petition," when " transferred to the Civil Aeronautics Act, result is plainly contrary to the law an articulated in gather meaning froni the contest of that particular regu. JIcI,cnu,1lC.t Communications and Pan .tmerican, latory traasure ainl the type of competitive regime which ,fhin is not to 8ay that competitive consequences may it visuahzes." .o1 U.S. at 308. The Court continuedt not be con >idered in determining whether a particular com.

"That regime has it< special standard of the 'publio . puhory sale is in the Imblic intere>t. liut the teaching of interest' as defined b3 - Congre-4 . . It wouhl bo Jlcl,cau,1/C.! Commetuications and Pau .tmerican is that strange, indeed, if a division of territories or an alto.

• competition in but one such factor in the "public interest" cation of rontc4 which meet the requirements of the equatie, und that a determination as to its proper weight

'public intere L' as defined in 12 were hehl to be anti. and role inay properly be made only by the expert regu.

trust violation <. . . . Whether or not ttansactioux of ,

latory ngency, n ot the courts." The di trict court is that charseler meet the standarda of competition and . therefore doubly in error: lir>t, liccauce it hand its de-monopoly provided by the Act i< peculiarly a question . cision Solely on antitrust rather than Fedeial Power Act for the lloarl. . . . If the courts were to intrude inde. goals; sceom1, because the court it elf ordered otter Tail pendently with their construction of the antitrust laws,

- 'to sell at wholesale rnther than 1 caving auch determination

~'

two reghmes might collide." Id. at 30S310. . _.

to the Commission. In both respects, the decieion below is contrary to the expres.<cd will of Congreu and therefore In the instant case, Congress has created a scheme of ,

erroneous.

regulation dedicated to "assnring an ahnndant supply of electric energy thranghout the United States with the urcat. .

D. The Question At Bar Is Not Whether There Is Any Express l'xe nption Or Implied immenity From Ant i-est ceonomy and with tenrd ta pw prop r utilitniion and I"**"

c:nservation of naf ural resources. . . ." Vederal Power Act I

Provna.ons Of $ 202(b)*"lo .,

"U lwe Nulhaed By An Ant.'

i-trust Suit Predicated Upon The Same SulJect Matter.

% 202(n). It has arr.meady d.arceted that all deterna.nat.mn*

c.s to mandatory wholesale palca he based upon this Theap um of antitrmt,to part.icular conduct in a "public interest" standard. Far from seeking to achieve '

ngulated m,tdicat.dustry dependa,in cach ca>c, up e antitrust goala, one of the drnftimen of the hdi which Ir. e it is true mat "icpeals by implication Congum came Pait 11 of the Pederal Power Act explicitly >tated that

"" ""I I"""'"d'" ###' # 't.. Tc.sas a Puc. II. Co. v. A hilene

"(1]he' hi!! is not drawn upm the theory that competition Cotton Oil Co., 201 U.S. at 4:17, natitret has repeatedly shall be established in the ladu<try.""

+

• ^ heen Ireld not to apph "in ennen of plain repugnane'v The deci* ion Indow stamia this congre, ionally in. 1-etween the antitrust n' n d regulatory provisions." Unitr<I tended scheme of segulation on its head. Otter Tail han*

been ordered tc sell at wholesale to all municipalitic< lused H Signi6cantly, the FpC etid co wkter the role ;,i enmpetitino in the Caiscrd//c case, whste the defenttant utility cited inercased Tpon antitrust consideration alone, with no regard to the 'd ^

"public interest" goals of the Federal Power Act. Tho '"'"Pi'I"" "* * **"* I^'"7 en ns"E I

• ""..? 'h" i.""^""dand statutory objectiver, and the exP rti8e of the FPC' are f O W order. m (.uinnn '."".'! a Aca au ranstate affirme<t hv this Court (402 U. S. 315 (1971)). did not disagree permitted to play a tole only secondarily in determining that. in th'c circumstanec4 of the case. increasal cong.etition would tha terms of a previously ordered intercom cetion. This he contrary to the puhtic interest: rather, it funnd as a matter of fact that such competition was unlikely to occur. G. inesviUe Utilities

" Remarks of Solicitor DeWne. Addendum, p.19 (hereinafter v. Morida power Corp.,40 FPC 1227,12391212 (pics).

cited as **( Add.)"). Scc also Add.1713. .:0.

m - ,

c. ..J

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43 43 ditztra v. Philadriphin .Yufional Bank, 3741*.S. 321, 351 so as to directly deprive the FPC pro <pectively of decision-(1963). A. demon >trated in Section A, sneh repuenancy inaking authority in es cntial areas of its juri.< diction. The has been found wherever Cungreen has provided >tatutory problem I, thus not une of construing an expre > ese:np-procedures and standard < to govern specilic subjects. tion,.but rather of permitting the regulatory scherne to In Scetion* 11 and C, we have pointed to the particular function as Congren intemled.

areas of repugnancy in the instant cute bettecen the lower The incre fact that an indu try in regulated does tiot, c3urt's constructmn of the Shertuatt Act ath! the regulatory .

of courac, tucan that it is prr sr innnune front antitrunt.

scheme protuted by Congrc>s to deal with myoluntary The question in each case is whether Congiens intemled whole. ale sales of c!cetrie power. . the regulatory >chetne applicable to a particular enfefret The iwuc at bar in thu< totally unlike that in United snatter to he controlling. Congien' intent may thus be States v. For.len Co,nenny. ;U l'.S.18 (19':0),tthere construed differently with re>[seet to varion* subi-ets in this Court held that the express exemption from untitrust the contest of a single indu-try. Con,parc e.g., as to bank contained in the Agricultural 31arketing Agreement Act regulatory agencies: f *nited States v. Philadelphin Xa-cf 1937 for marketing agreenients approved by the Secre. .

Ilonnt Bank, surro (hank merycts), erith II'hitney .Yulinunt tary of Agricultere di t not apply te agreements which Bank v. Rank of Xc,e 0,1cuns. supra (e tabli hment of were not so approved. In that ca*c, the applicatiors of - bank hohling company unh-idiary): as to the ICU: I?rorgia entitrust couhl not pouibly interfere with the Sceretary

v. Pe nnsytranio R. R.,324 l'.S. 4M (194~)) (attack on un-ef Agriculture's regulatory functions since in all cases regulated conspiracy) trith Krogh v. Chicago # Xosthteest.

where he acted to approve an agreement, the exemption

• ern Ry., supra (direct attack on. regulated rates); as to the would automatically take effect. There was thus no disrup- FPC: Cofifornia v. Federni forcer Comtdissihn 309 U.S.

lisn of the regulatory wehe:ne and no repugnancy between 4S2 (19d2) (meretr of natural ga< companies) trith Federal the Sherman Law and the Agricultural 31arketing Agree- Putrcr Comninion v. l. oui.dnua Pescer i 1.ight Co. 32 tocut Act. L. Ed. a.1369,40 l'.S.L.W. 4Gm ((*.S. June 7,1972) (intcr.

state "tran*portation" of natural gan); as to the FCC:

In the instant case, on the other hand, the subject (I '.M (exchange of m tter involved-involnutary wholesale sden of cicctrielty

@"I#'d N#dI" ** UO*b D television station <) Icith Federal Commuutentigna Comun,a-

-in specifically regniated by the FPC utuler 1202(b). Iis

- c ntrast in Bordcu, m.d to this Court's similar decision 888" V* E I I""""""'"' N"" . #"F".' O'"'.ining o f rad o telegraph citenits). The only usue m the instant case i+

in Carnation Co. v. Pacific !!*csthauud Conferrucc,3F3 U.S. th"* "I' ether Congress intemled antitrust to control the 213 (IDGG)," here the district court's Judgment opeutes ^ *

• specific subject matter provided for m $ 202(h).

88 Carnations involved a treble damage clains predicated upon a . Cotogreiss' indeitt may be derived from the language rite.nxing a,;rcement which h:ut not twen approud by the Federal. Por blan,tuue C.gunuwon. The Court hekt that comt< mav: and legislative historT of a particular cunctment.. nn example, in United SInfes v. RC.1,3'd U.S. W (ITit;, i.

". . . subjcct activitics which are clearly unfan f ut umler the Ship. Court found that the legislative bl. story of the Federal ping Act to antitrmt sanciinm so long as the courts ref rain from ttLing action which might imerfere with the Commi-sion's Communications Act compelled the conclusion that the exercise of its lawful imers. . . . The award of treble damages antitrust lairs were intended to apply and to be enforced for past and ccmpleted tomtuct which clearly violated the Shjp. by the courts with respect to the exchange of television pmg Act woukt certainly net m, terfere wnh any future action

• af the Commission." 333 U.S. at 221222.

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44 utilitir*. Section 003 regulates the issuance of securitice stalitus. In centrast, the statute and legi lative history and a<sumption of liabilitico by much companie<

Scotion Sir, pro. und inn.

in the instant ca c compel piccieely the oppu-ite conclusion, The statute to.re >pecifien!!y provides that whoh -ale tales po4cm certain regenting re,tnirement ,hihit, h

Scotton con provides the PI'c are to be onlered ou the 1,a,i. of the criteria expre,-ly met forth, including the FPC*. judgment as to the "public powers to t gniate rates.with powera to pervaorderive the interc*t," rather than any antitru-t cou-iderations. The . Plainly, the Federal Power Act 'piovhics intended to be en.

legi,lative Idolory likewise ein,w, that the regulatory scheme of regulation which Congre-4 scheme was intended as a sub titute, rather than a pred. forced by a single, expert agency.

icate, for competition. Nec page 40, supret; Aild.17 20. ll.11., supra, this is Vulike Grungia v, Prunsylcunia In United States v, Pldlaricipida Xalianal Isauk, 374 -

not a case where ihrre it a contract, ecmhination or ron.

UK 021 (IN3), this Court hehl that the Bank Erger spiracy which can be condenmed under the antitru-t Act does not preclude the application of the Clayton Act ' separate and niwt from the resul:ing, segulated con to bank aucrger,. The Court reached this ronclu ion on the Thus, n> in Prun !!'ater, thi< Pourt smed not decide "wh Lavis of the pertinent le;i'lative history and the ah-ence

• if any, power the [PPC) has to rely on or to compel p.n

'in she bani.irn-lista of c ennpreheuwive "publie utility regn. -

to carry out private contract < ubich wouhl otherwi<e he lation." lJ. at 3.s2. It wa< poinh d out, for example l that illegah . . ." 343 UA at 421. IIere, the allegation of "f r] ate rexulation in the banking industry is tirailed and illegality is predicate.1 upon Sectimr 2 of the Sherman A under no duty not and consists preci-ely of the conduct v-hich the FPC ha largely indirect," that " hanks are to discriminate in their servicca" and that "hanta may been mandated to regulate. See Pau Jmerienu tror1J .

(J. In contract, da buriness . . where they plea *c." scays, luc. v. l'udfrd Niales supris; United Stater Xnv "puldiu utllity regulation"I* pwi<cly what Yart li of thE v. Cunard Aten m>!J,, Co.. Ell., supra: #!. Cen'ral Traas Federal Powei Aet does provide. Section 201(a) declare = Co. v. TerminoI 16dIrocJ .lss'n,288 UA 400,47G (UGO) .

that federal regulation of "transmiwion of electric energy "

P"#" "

In interstate commerce and the sale of such ener; y at whole. *

. ~ " * "" "'

palo" is nece<sary in the pullie interent. As this Court Act. The antitrust laws should thus not has repeated!v behl, Congre>s *pecilleally i; tended to fdl the "" . ""be #applied

""? so as

" "" U '"' "'

n w uld be obv."""ly contrary to Con.

ugap,, in > tate regulat. ion created by the dec. .umnin mus mh cons rud Public litilifics Commissivos v. Attleboro Strano &.-L'lec. E* " "

fric Co., 273 US S3 (1907), io that state and Thieral regulation together wouhl cover all aspects of the fwhh

' Sce, e.g., Federal Poster Cumndssion v. Florida Pmver &

light Co., 408 UK 453, 4.*>R (1972). Cf. Federal Poncer Commission

v. Louisinun Pusccr & Light Co., supra.

Section 202 thus provides for both voluntary and com-pulxory interconnections, salen and exchanges. Section 203 allows the PPC to control di>po<itions of property, einsolidations and purchancs of securities by regulated

, l

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at 22:1 ( Add. Ibl2)." As originally drafted, this hill POINT II contained a section (et>2(a)) which wouhl have inade it

"... the duty of every publie utility to . . . transmit ener-ey The Dec. .tston And Judgment Below Are Contrary for any per.on upod n a,.mahic n qm ,t . . ." ( Aild.11.

To Congren Specific Determination That A Duty To In adition to thi ,o-called "connnon carrier" provi, ion.

Wheel Not lic hnposed On Electric Utilitics. section cir:(h) of the bill souhl have emenwcred the l'Pt*

to order wheeline, uten due notier and an opportunity The lower court held that the Sherman Act n,inires .

for hearin** if it found vueh netion to lic "neccuary or an electric utiliiv to nec sta own tran nnmon ay, tem to do.naW .m Ge puW. intu d ,. @ pg. U.

tran,mit (or "w' heel") suh idim! government power for municipalities sect.ing to take rner its retail hu inen. As The proposed wheeling scetions were vigorously op.

demonstrated I.elow. Congreu .pecifically detennined in posed at the IIouse and Senate Conunittee llcaring ..( Ad l.

Ill3"i that private utilities whonhl uut he requited to wheel 210, 21-27). It wa3.particularly feared that if prtra:e involuntarily: and it has since repeatedly reaflinued its utilities couhl be forced to transmit sob *idiud govern.  ;

determination by re,lecting propo ed legislation that wouhl mental power over their own lince, the rceult ". . . would ,

impose this duty. The decision below directly contravenc s be [the] complete domination of the power supply lield this manifcat ecugre -ional policy, and is therefore c!carly by the Government with private operators no longer alle to tuaintain any po3ition in their field." (Add. 7). As one i

erroneous.__' * -

coinpany pointed out:

I A. In Enacting The Public Utility Act of 1935 Congress "[ Private util,it.ics) wdl he heav.ly i taxed and cont.

Determined That Private Utilitics Should Not be pelled to mmijtam , fixed scheihden .of rates und Reetuired to Wheel Govermr. cut Power. forbidden to d>>crmunate, while tun. [ government 11 i

' The propo<ed Pehlic Utility \ct of 10M, which ulti- producer) is tax free and may char; c ,whatever rg ,4 mately becaine Pait 11 of the lideral Power Act," was et picanes at any moment, and ehsennnnates at wm. ,

1 principally drafted by lepC Conunis,ioner Seavey and ( Add 2).

- Comminion Solicitor De\*ane, later a 1*nited States Dia- Other witnesses testified that the comequent crosion of trict Judge, both of whom were key witncues ut the Investor. owned electrie mystems "may impair the integri::

congrenional henrine on the hill. //rurings on 11. It. of [the utilitical underlying obligation " (Add.10) aul , '

m.1 Itefore IIsc flunse (',nnw. on Interstate ern,I INrciF8 wonhl increase costs for those consumers who remaims!.

Cononcree, 74th (*ung., lot .%. (193) (hereina rter, ( Add. 2">).

"llouse llearinp") at 400, M2; llenring on S. m.s 11c. ' " ' " * ' ' , * " ". ". ~ "

J fare Ilue Scunte Comm. on interstate Commercey 74th .~ -

D".(*"0'"'.0'#"0K*

Y Scavey disputeI the fact that great hann woubt re> ult if-Ccug.,1st Sew. (10%) (hereinafter, " Senate Itcarings")

• private utilities were required to shect govermncut power.

" Part I of the Federal Power Act hvl been enacted he Con- se As indicated b, low in the test, the pertinent scetions of the gress in 19:'O. That statute created the l'edcist Power Cumil dnion Proposed hill and relevant inrtions of the lionse and &nate llen-a-d gave it certain licensing gewers with re,pect to hptrocicetric ings are set forth in the Addendum.

projects.

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On the contrary,l.oth dr..ftonien took the position that the 3f n. Drf.m. M r. Wolverton, iny an wer i ..

that is thine That if there is any donht about it an.1 propoced bill wouhl not hnlu. e any such duty;" lat both this co sgreed that the hill rhuuhl lie $niende.1 if there were words in,ininit,tw thu hill, letcan riannw us put Wat(.\dd.13).

thern in. ihul,q h aMm,o decined to be any ninn:gmty on th.u 1.oint. 1.or example, ,

Judge 1)cVane and Congre,sman Wolverton engaged in In unswer to nuother, niinitar hylmthetical, .in. lee the following totheijuy: DeVune inade it clear that the "connnon carrier" tiro.

vision < were not intended, under any citemn-tances, tn aid "3f n. Woi.mrinx. I'nder the provi< ion < of this bill, wonhl it lie pn -il.le for tin Goverinu'ent in any competitors in ou< ting a utility froin its retail market:

of its electric operation ,in utilize tio, tranunia.< ion " I mM W to M.

h .P mn - @ m, . .a naarp, yet u<

lines of pmate compames!

N".

• 'I.not ie s*ag (in 31u. IhYur No. irt and I want to make that ing) in iny hoine cityt here is,n generntmp plant, very detinite t und if there is. any donht about it and we will say that flyat ennre inarket, is fr.ui .:

so far a4 I mn euncerned. Such m'Imen.iment might s upphei,1 17 tin

• pe be made n* to naake it clear." (.bhl. !?). of furm*hing sufaa,nerating ent pow er. plant, and it is ca Congreeman Weleciton then po ed a hypothetical ques. ' lleic is an.4her generatine Id ant owwd by a tion which tracks the precise fact, invuteed in the caso competitor nf thi one (indicating atal illn tratin ).

" and doc < not base nccen to this maiket. IL ha- no et bar: . _

transmi% ion lines. Now, do you agree that by order

" 3!n. Wou r.ntox. I,et me smn:est a po< ible of 3 our Connni-< inn you may reeinire thii company (indicating) to carry that generatine phant'4 (in.h-sit uat ion. Ynnr nn-wcr will clarift mv mind con.

cating) energy In Ilmt sharket in competitiuu w"h siderably a< to the etreet or thi3 bdi in tiie partien!ar the ori.:inal company?

instance. h*nine that a unaticip:ility hvilt a plant for the reneration an.1 distributinn of electric Mu. Ib.Ym. N o. sir t if I under.<tand your energyi n% mne that a di-tant connunnity is serviced question, the anwer to that in 'no.'

by a company that como ninter the regnhitinu of this Mm Pmrsmi.i Well, what sort of situation oute, nlehill of in ti;rthat State.it procure

( onhl the* cityit< eb;ctric energy w h,ith ha< con. froni would the lan;;uage of 202(a) apply! [ sic]

structed a plant, but has i.a tianssinomn lmes, * *

• utilite the *) tem of tran.-Ini 3 ion lines constructed Mn. IkYm. We will take a company that I by the pricaf: company.' between one prodmine energy and another ne n 5f it. Ibh r. No. ir, energy, and we will as mne that the mhld!e comt".ny 3tn. Woi.trn rns. Then, yon do not tidnt- that - *.camust furni-h the needed energy to it < neighlyr

~~

the power given in this hill in the 14ieral Puwer but has facilities that are nvailable for tran-mittnie Conuni > ion would enable it to direct that tho<c the encigy froni the producine company to the one transmission liuc.< Iv 50 use I? .

in need. The ('onunirion conhl reunire ihn um of "The draft

• men helised that any such inscrpertation of the tho-e facil; lie in order to meet that situation.

Idtt wnut.1 != prutiml .1 by the eschidori of inunicip:ihiic. from the 31 n. Prim e.u.i., lhit not la take the company defmition of "jmm' wto might require st.celing wrsiccs. (Sea that owns the line; not to take its market nware Add. 12, 24 ). [ sic] from it!

3!n. DsVnr. No, not to take the market aww from it; no, sir." ( Add.1G.1S; sce also khl.131 -

al24).

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In order to c!arify the intent of the draft, men, Jud e Sections 202(a) and 2icth) of the original hill, the legi,la.

tors intended in reiv colciv upon "e uluutary coor,linnlin

• 1)eVane lirnp<ssed an ainvndinent w hich would have 3.tated and in ti h gate w h5elit.E to the re.dm of "roluutury oc.

cxplicitly that the FPC had no power ni compel the tran4 minion of electricity produce.1 by inunicipn!, etate nr fed. tion." (3,hl. ges),

crally-ow ned plant <. ( Add. 2.~,). This prnposed amend. 'fhe foregoing legi-haive history-and the policy ment, howes er, failed to sati-fe opponents of the hill who ugain*t foiced wheeline that it embodier-have in en r.;e.

feared that a utility ini: ht >iill be compelled to wheci ognind by this Co:o t, l'nitnl hintre v. I' niels,e flititow competine Inwer lat a rourt in an action (*uch us the one C"""I"i*" "! C"h!"'"E' 3 'I' M T# W " 23 @C ' ,

at har) brunht by aomeone other than the FPC. As one by the Federal Power Conunininn it-tif, City of Posu critness testinc.1: Ncuturty v. Kentuu t to I:lihtirs Co., 41 1*PC 4:n (19tet) :

"l'Ib ,rnpo=ed m,non.bnent] does not cover it at yfffaye yf f,ff,,nr 1.nic v. Otter Tail Pon er Co. ( A.167

' Ot and by uve,al cin nit courts of appeal, Florula Punn C$,mie hl no .t n i i nv coi nt ,] C*'p. v. ITC,42.~e P.2d 11N (lsth Cir.197n), rer'<l in pas t mit 16cch evrgy. All this dori in to sak that the on oil,rr pronn.ls sul, enm. (7aines,ille (*tilitics //cpas t.

power conuniwion's powers

• hall not he invohed to meut v. Flori,la Pou r r rury, supra; Otten Tail Punr Co.

compel it. Y,ut the power c f the Inter > tate Com.

merce Conenis-lon, for inst.mee, is nnt invoked to v.1'/'C,429 P.2d 232, 3*, (sih Cir.19), ce,t <le nied. 401 comjif n railroad to rece pt a shipment of :: cods. U.S. Oli (197D. &e'. An t'ity of Pneis 1s'culmly v. FPC.

Any 1 cdcral court can do that because that a th.e. 3'J.) F.2d Ml (D.C. Cir.1Ns). That teg.islative b..story con.

law. Amt this is the law under nection 202(a). chi *ively demon tratu Congre%'stwine intent that a util.

( Add. 27). by burh as Ota Tam not k Igah wquiwd to wM h Consequently, in oriler to ensure that no utility could p wer of g vermnent neeney (such as the IGreau of !!ce.

possibly be pliced in the po ition in which Otter Tail now, lainatmn) in a tunningalo y (mh as Gmw Lak or linds itself, Congreu elitninnted from Part 11 of the U ""E ,"" " ) -

Federal Pow er Act any provi< ion w hich,in Congrm' view, u g.,. ,,,, gr deral e power Cnnuuission v. hhhn Power Co . .W might have ullnweil the PPC nr a ronrt to impo<e a duty U.S.17 (105.?). where the FpC snocht to camhtien t! e ionarce h wheel on a private power enmpany. There can be of a licen>c for a hydnwhrtric prejtti muter part I ni t!.c Fritent no question ns in Congren' intent m exci ing the8e see.

• Power Act upon the mihty 4 a;rcenient to whcci in ceria;c ciremn-tions. 1)uring the licor debate Senator Wheeler, Fponsor shnees. The il C. Circuit had stricken the uMiiion, tuing it.

and manager of the legi*lation in the Senate, plainly decision brgely upon the lui4aive history of part 11 of the Ft to.d Md *. , ,

Power Act. Im F..'.I t/,5 t to3 t h Th6 Court res cr*c.f. cot be.

cau e it disacrted with the 11 C. Clicu6 reading of Congred

• "1.ihewi<e there wa* a provizion in the hill mak. intent, but krau c it fuimd that tbc inten int reinictius hxl no  ;

ing tian ini" inn lines comun.n caniers That was 81pbcation in the constinoring of a sicuwe under part I of the Act.

strictr n oat. I inay way, at my >n."etinn. becan%c This Court's deci ion in Idalm I'me.r bn thu< been ron.<truct bv I did not think that at pre-ent transmi- ion lines the Fedesal power Conuni -ion as a, a:T.rnunce of ConarcW intent l shouhl be held to In connuun tartiere." ( Aibl. US), put to re<juire iniced wNeelinpas diainguished from Congicd i

S.imi

.larly, the & nate lleport accompa nying the Pubh.c acceptance of votnntary whaling undcriaken by guerrnent. - *MChy o paris. Kentucky v. Kenincky t tditics Co. iu/ra.

Utility Act of 10 explicitly stated that, in climinating I l

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It was plainly not Congrews' intent to withhold the The plain fact is that Congrew refused to cuact com.

power to compel wh cling from the FIT while allowing pulsory uheeling in 19:'.. becau<e it determined that the the very same obligation to be impo.-ed by the courts in imposition of -uch a 'nty w enhl le inimical to the national enfoicing anti ru t or other law *. lealced, it was jire- welfare. A> dem m-trated above, it was the con en n* at eisely in order to picelude the po. ihility of any much judi- the llou-e and Senate llearin:4 that involuntary wheelin:

cial action t!ut the prol . ed amendment to limit the FPC's would mlver.ely alrect tin utill:y imlu-try and the publie powers wa< icjected a4 inade.inate; and Congre 4 in<tead , generally, the harmful enn-equence. in question beine climinated all 1.rovi-ian, w hich inight nilow the u<e of the same regardle3< of whether the obligation to wheel tra'ismivion facihtic, to be compelled, either by the Com- emanates from the FPC enforcing the Federal Power Act mis 8 ion, or by the enurts, or (as here) from a court applying the untitrust laws. . Con-In taking >uch action, Con.nw proceeded upon the sequently, as the Sena.c t lieport plainly states, Conere-<

Enderstanding that no ni-ling law, > nth as the Sherman determined that whccling shonhl bo a matter ot' rohndary Act, required utditio to w heel in any event, regard!c*s of action on the part of the utilities rather than something hiw the Fcdcral Power .\ct mi ht he an.cnded. Certainly which could he compe!!ed 1.y the operation of any law.

no wituc 3 at the Ilouse or Senato llearine.4 suggested this The decis. ion below is dircelly contrary to this congres.

possibility. Oc the contrary, Judge DeVanc specincally sional determination and therefore clearly erroneous.

testified th*uo legal oldi:ation to whtel then existed and _

that the indu>try practice in the fiehl was based on volun. B. Since 1935 Congress Itas Repeatedly Reaffirmed Ils I""L tiry egreement. (.bh!. 21) Conunininner Scavey similarly On Pr.That forced Wheeling Should Hot 1;o imposed ivate Utilities.

tutified that private tumer companies conhl be required to transmit government power only if Congress cuaeled an Nmuerous hilla were introduced in the SFth througli additional, particular provision to that etsect. ( Ada 2S2t). 02nd Congreres which in one form or another, woubt Jf the diatrict court's holding on the avheeling inue is have imposed a duty to wheel un private utilitir4 Thn<

correct, the pn.eceWna in the 74th Conert<= were nothing far, Congress has declined to cucet any of this proteed moic than an excreise in futdity. Under the court's view, legislation into law.

the provisions as to compul-ory wheeline in the orig- Jn 19G:1, two identical hilt < were intrndneed in the 8sth inal draft of Part II of the Fedesai i%..o .h t were un- Congress (S. 3~,0 and II. It. 2101)" which would have neceNary-an absolute duty to wheel kning existed since conditioned the ivouance of certific1tc< of convenience and the enacitucht of the Sherman I.aw in ISPO--and the clun- necessity for extra high. voltage inter > late t ran-minion inntion of those provi-inns was thu< totally without.cficet. ,

lines ,upon un applicant', willingness to make its exce3a

, in other wmds, the thon-ands of page< of lionse and Sen- capacity "available on a connnon carrier ha<ia for the tran4-ato ll aiings at which senrc< of witne--es te-tified amt mi<sion of other electric cuergy." (. bbl. 2M9). Though Irgislainr4 carefull 3- deliberated on the merits of the pru'- both hilla died in conunittee, they were reintroduced in posed bill wouhl amount to nothing more than a gicat deal of sound aml fury, signifying nothing beyund a 8' The retesant sections of the whectin;t hius in:n>ince.1 in the manunotb waste of tiene aml etTort. Smely, any such inter- 88'h th" h T"d C"" "5 "5 "'ll 8 5 PCi"'"' '*'P'5 I'"*

pretation of the Sherman Act, which w onhl malic a mockerv the hearings w a re* pen thereto, m set Ionh at Add. M.

If the legislative proces<, runst be rejected.

4

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g Co"""I*" Ion couhl act more efficiently to protect the the toth Congress as S.1472 amt II.11. 2072. At this pubbe m. tercat if it were free to chon*e amone came eenion, two nhervat.ive 1. illa were also introduced tuethods of guaranterie" participation in the prd.

' jects it woubt tvrtiticate to all who-e participation (S. 2110 and 11. li. 7791) which likewi*e souhl have ron. , wonhl be in the puhtic intercer. In come ra*es, for ditioned the ionance of certificates for extra high.vnttage examp!c, joint con,truction amt owner

• hip of a ljne

' tran mi eion, but which did not provide esprenly for ' might he a better wolution than *conunon carner' wheeling. (Athl. 29.*to). status unpoecd by statute." ( Add. ;*>).

~

Slany mitnicipal power mlvocaten testine d at the hear. The Justice Department responded to the I'l'C in the form

ings nr. the Senate hi!!*. See //rarings on S. i172, S. fus of a letter frotn then Deputy A1turney (tencrul llamsey end S. 2110 lic[ooe the Scuate Curnon. ou luterstufe Cooa. Clark to Senator Slagnuson, chairman of the Senate Com.

i merec, FUth Cone. 2d .%. (10eiG). ( Add. 30 40). Among cthers, the legislative Director of the American T'uhlic merce Committee. 31r. I' lark wrotet Power Association etiticimi S. 2140 for its failure to ". . . we favor an amendment to the bill to require linpone a 53meine duty to wheet ( Add. 3*09). To support a certificate hohler to transmit power tu anyone

' his argument, this witnes. de-cribed tha name eventa in, who reigue*ta it amt whcci power for anyone who tenders it. Ilowever, the Federal Pnwer Commis.

vahing the Town of IIankinson which the district court sion . . . has indicated that this type of condition

. relied upon.itt airhing at its ihcision in the case at bar. is not approliriata in every case. *

• As an (Add. 30). Presented with the-e facte, Congress declined alternative we would, therefore, recommend that to enact the leill which the public power proponents advo. the bill be amended to provide that if any certifiente

, holder refuses to transmit or wheci power the Com-cated (S.1472). mission shall hnid hearing, to desertnine if sneh On the other side, tho<o opposcil to sl.celing prc4ented refusal was justified-taking into consideration the niany of the argum futs which hnd becu vmrcufully urged burden upan the certi6eate I,u.bler to trmi;mit the

$ before Congrown in IfL15," as weil a4 painting out the *I 8 I " "

planning prnblem4 und reduced reliahility which wouhl , , , l('(j",*idll i !."- i result if the component parts of nn ,mtegrated py tem 1]""]i e to reilu r the whccling nr . tran< minion of p could be used by thitd parties. ( Add. 00 ' 0).*' In addi. - prorated if necc=surv. where the refusal is fonnd to le unjustified." (ddd. 40).

tion, FPC Chairman White te*tified afininst an invariable duty to wheel, statiin:t In other worde, the [n tice Department took a far more moderate po4ition lefore Congreu than it Iris taken in

". . . this type of condition in not approprinfe in the car at har, advocating at that tune only a conilit,m nal 4 every case. There is no doubt in my mind that ' the ^ duty its whcci subject ta FPC discretion. Nevertheless, the

,

• Department falkst in convince Congreas to enact the legis-j 86 Ep. that wheeling woukt put prhate industry at a competi.

.t,ve dundsantage and lead to the croson et its retail ms i lat. ion which it proposed.

( A*kt J.L3.5). In 10G7, S.1472 and 11. II. 5072 (providing for an ex.

• • Significantly. Senator h!cteatf. senmoi of S.102. <tercu.ted his bill in this regud by pointint out, that (unlike the Jiut; ment in press whccling condition) were reinttoiluced in the 90th the m tant ca>c) it.c prop >,cd kentsu in would only apply t Con 3ress nA S.1834 nnd II. IL 2011; and S. 2140 (provid.

escan transmission cap. w ity. (Add. 36) ing for a general FPC power to condit. ion certificates) was i

f a-ry. - .- . _ . , _- _..__g __ - . , . , -_ ,, _ . _ y, y, - _ __ y , m , , , , . , , , ,.

"4 4

~~ - . . .- _ _ .

31 GG reintroduced av S.195. In addition. Congressman Moes, and two (S. 2324 aml 11.11. 0170) to enact the National Power 8.f rid Act, which, inter clie woul.1 create regional Gmong other>, intenduced the E!cetric Power !!cliability Act of 1967 (11. II.12:122), which would have cmpowered bulk power anpply corporation < nint reituire tho-c entitive to invert sheeling eomlitim,4 in their contracts with private the FPC to order wheeline. after no'iec and hearine, if it utilitica. ( A shl.19.*in). !! earing < have ahe:nly been Iwlit.

fmmd that emh action wa nece%ary or appropriate to carry out the ub.iectivra of the Act, and that no undne . sc.> licorinus on 11. II. a??7 nad Ofl'i r Dilix #eforeII.rr.

hurden wonhl he phteed on the utilhy as a result. ( Add. Comusuuitations nud l'un er Subcumm. of the lluuse lulu state and l'oreign Counatice Cemur. 92nd Cong let Se-4 40 41).'" At the heariugs on thew various hill +, public (1971), with the advnentes for and again t forced wheeline power advocaten again testified in favor of wheeling; and once again laying their arguments and evidence before Con.

industry repre4cntative4 and other* (including > tate regn.

latory c...cial*) tv-titied-succenfully-on the other side. gress. (Aihl. 50 51). Since the 92nd Congress is still in Sec llenrings un 5. l.911 und iblated Bills th fure the acusion, the fate of the varloan wheeling proposals (nll Scuate Conna. On luter>Inte Cma,ncirc, !Mth Cong.,1st still in connnittee) icmains uncertain.

Sess.10,2G (IN7) ( Ashl. 4143). Ne c ulso 113 Con.1(cc. In num, Congress has repeatedly reafirmed it< deler.

2251.'l 2251'l (19G7) (remark

• of t'ongreuman Wo).

mination that forced wbroling whoubt not he impeed.

In IDCU,-the ruh,tance of the "l:lectiie Power 1:cliabil. Surely, that deci* ion-and the demoeintic proecues by wideh it was arrived at-may not he circumvented by a ity Act" was reintrodneed in a nundier of hills In the ~

Dht Congres* (S.1071. II. II. 70m, II. It. 7052,11.1:. 71SG district court in the context of an antitruit suit.

and 11.11.D~s57). In addition, the Electric Power Coordina. C. The Decision And Ju:lement Below Are Contrary To tion Act was intreiluent as IL !!.12585, proposing an ex. The Manifest intent Of Congress.

pres, coof.resei+411 ;clicy in fav9r cf wheeling and the 1. The district court % Judgment rcepdres Otter Tail imposition of conenon carrier vtatn* on transmis* ion lince.

( Add. 44 45). Again, hearings were held, see IIcnrings on to wheel electricity for any numicipality which nwkes a demand. (A.132). This Judgment is predicated upon the

11. II. rua and l!<fnted itills liefore the Commundeations ' court % hohling that Otter Tnil violated Action 2 of the and Posrer Suhromm. nf the lionse Interstate and l'oreign Commerce Conna., Dt>t Cone.,1st & 2d Sess. (1971) ( Add. Sherman act by refn-ine to transmit 1:nreau of Thetama.

45-49); and again a!! of the propo>cd hills died in com. tion In:wer to the towns of P.thow 1.ake and llankinson.

(A. 06.:IS). Otter Tail was funnd in have ha.1 "d;minance**

mittee.

over transmission with rerpcet to the<e municipalities un At least neven proposed whccline hills are nnw p.unting "

• before the 92nd Conercu r four (S. 294,11. II. 005.'ll.11. the hitsis of evidence ohnwiue that the u e of Otter Taif %

3S'tS and II. It. 5911) to enact the Ticetric Ppwer licali. line, provided the cheape>t of the several feasihte alterna.

ability Act givin: the FPC powcr .to order wheelingt tives by which the town 4 could have secured a supply of wholesale power. Nec pages 11,12, supra. On this haris, one (ll.11. (1972) to cuart the Ibetric Power f% ordination a private utility wontd f ave i to wheel govertmterital!y pris.

Act imposing connnon carrier status on tran< mission lines duerd jurver in virtually any ca<e where there would he

1. Another sersion of the Electric puwer Reliability Act which an incentive for a municipality to respie*t such service. In

<!id not provide for wheeling was intruthired in the Sen.ac as short, the lower court has imposed enunnon carrier status

. S.19.M

. f I

l e

s_

e 59 53 con >umers ( A. ftIM, Cri7, m5.720. 737 749. Nt3 N4: T)X.41, by judicial Gat on the transmi -ion lines of Otter Tail in A.1191,1195, 7:tS. 7:t9.1%'Hi, .\. 952: Dep. b. 2SI, pp.

pariieular, and on those of electrie utilities in general. 285-287, A. 2Hb2M), testinniny to precisely the 3atac e Tect As noted above, the 74th Congrc3* deliberately rejected ( Aiht 210, :C.:t*>. 42 4't) has thu, far permidrd Congre-s the impo-ition of jn-t 3.nch a co:muou carrier oblication. that wbecling should he lef t in the realm of voluntary action.

Even standing alnne, Congreo* refusal to enaet a statutory Plainly, if the law is in he chan ed aint fosted whccline i<

wheeling requirement would constitute deci ive evidence of .to be impo<cd, Congre.* shouhl he the one to make the its intent. &c, c.n., .Veir l'oe k Ti.m ('o. v. L*ni/(d N/.,/n, deci. ion.

400 U.S. 71:1, 721 (1971) (Dougla , J.); id. at 7:C.734 (White, J.) ; id. at 715 747 (.\Iariball, J). As .lu-tice Mar. 3. Even proponents of foried wheeling have generally shalt stated,"!wlhen Congreu -pecifically declines to make favored the realpel of recubtory discretion rather than j conduct unlawful it is nut for this Court to redecide those the bludgeon of aa absolute duty. (. bbl. 13.'17, 40, 50 51).

issues-to overrnie Con;:ress." /d. at 745 746. llcre, In this connection, the inappropriateness of judicial lau-Congress' intent in rejecting the wheeling scetions of the making here is highlichied by the di.-trict court's total di3 1935 bill need not he inferred;it is ext. licitly spelled ont in regard of the practical conse.p:ences of its .lud ment in a wealth of !cri4ative history demon 3trating Congren' terms of the continued operation of the nation's electric corsidered.iudg nent that under no circumstanen .<hould system s.

electric utilities be required to wheel invohmtarily.- -

Numerous witneues at the 19:15 and sub-equent hear.

2. As in Flood v. Krd,n, 32 L. Ed. 2d 739, 744, 40 ings testiGed that forced wheeling is technologically in.-

U.S.L.W. 4747, 47.M (U.S. J une 19, 1972), here " remedial p ractical. ( Add. 4,10). A utility's transmis-ion lines con-stitute a component part of its integrated .=ystem, the phy>i.

legislation"-to impo>e wheeline "has been introdneed cal na t o* e of eb etticity beine such that generation, repeatedly in Cony m but none has ever hecu enacted." In transminion and use all occur *imuhancon.ly. ( Add. 2 4).

the circumstance.. nt bar, this pLinly constitutes Some-Planning in terms of hath opera' inn nnd future incestmant thing other than mere cogres>ional-ilence and panisity." ,must thus he done on a system-wide basis. ( Add. 31 M,42).

14. The fact of the inatter i* that this case ha been tried time and again-nmi indeed is still being tried-in Con- asserted it , hu. .4 capacity, but has neurthdr. A. N3-and even the facts at har (sce paucs 4&p),53, nipra), have 2 M.275.27:4. Furthernac. a inui.l.cr of prnjecu air prt<endy in heen presented to that body. Wnile the district court re. the p%nning gm whh wm'd 4 inenme die nipt# of govnn-jected evidence that forced whecling would result 4n the ~ "'P 1.s l A. '"'"'A.121

' " '2 3bl^'.2 *m' "'3*#" """ l'"24.

M "A. *& A crosion of Otter Tail's system," impair it. credit and harm "l'".' -

.11."DX

$79431. 617 624. 7mo2. su. 833 : ocp. GX m. pp %3 : th p.

u Ahhou;:b apparently accrptine Coneress. accament that forced g3j,g g, g g ggyg 33 3 g f,3g yg3y,;

gg gg y gggpg g.g, .

wheeling wouM atioid goscnuncnt.d pn*turtrs an m-upera!4e advan-tage, the disniet,ceurt fouwt that f etter Tait s fears of ern,io" htwo m mbk b>Mh ndivM 6(WdeAQm's m h.th orarc ik j were unjustiGed m new of the Inmted avaitih.1;ty of itnreau of Rectanution powcr. ( A. 46). The eviilence at trial, however. it would be meaningt.m. i/ where there is no go crnment power showed that, as a matter of history, the IJureau has rcpeatedly g g gg g e  !

l

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{

61

' GO panded ps er needs of the nation during the remainder If the capacity of a , ingle tran mi>> ion line is exceeded, of this century. &c, c.p., FPC,1970 .brront. Powen the cystem a4 a whole-and perhap- interconnected systems Suavor at 1.;i 4 (1972).

es sell-may shut down. (Add. :;u41t).

Indu.try > poke > men have repeatedly te>tified that the 4." Nothing would lie more contrary to Congress' intent neersvary system planning emmot 1e eticetuated if somo than to construe the deletion of the wheeling provi< ions component parta~ir., trun mi>> ion line,-are acallable for from Part 11 of the l'ederal Powcr Act a< creating a use by others. ( A.ht. ::tal). In rebuttal, the proponents regulatory " gap" to be tilled by the simplistic application cf ulweling hills have pointed unt that buly esevo trans. of antitrust. Any much interpretation wonhl imply the mit > iou capacity would he atfected. ( Ad.l. fG). Compare exintence of antitrust.derned obligations to cover precisely Fritcrat Potrer Cumminium ' v. lilalso Pmrcr Co., supra, those nrea< in shich Congress espressly determined that no Opponents have replied that reliability requires re*crve duty shouht be imposed at all. By a parity of reasoning,if transmission cap wity nnd that, for this reason among ,

congressional limitatinn of the PPC's powers so as to cthers, the term ' excess" '

is intrinsically unrealistic, (Add. preclude forced wheeling is deemed to create a " gap,"

30, 02 33). then the proviso < of Seedon 20J(b), which eimilarly limit In the enee at bar, the district court's Judgment the FPC's dircietion so as to precinde certain compn!sory

-' requires Otu, Tail to wiwel for any nnmicipality which i.e., tho-e which wouhl irapo<e an unduc

- interconnections makes a demand, regardleas of whether Otter Tait has burden, require increased generating facilitic<, impair

. cxcess capacity or not. ( A. 208). The court avoida the service, or otherwise not be in the public interest-must g roblem which trouteled I;ungre>. by simpli tically >tating also be viewed as creating " gap <" in the regn!atory echeme, In that Otter Tail nm-t have >aflicient enpacity since it served and therefore defining the proper scope of ahtitrust.

the municipalities in mention at retail. ( A.107,12G). liut, other words, if compelling a particular whoic ale sale Es the guver........ . 'hi. poini conceeh.d. capacity would not require a utility to h*dhi new gem: rating facilities, shish la presently. runicient may beenme inadequate in it may he ordered by th. FPC in a Section 202(b) pro.

ene, two or three yearn time. ( A. Ut0, ful). Since the linen ceeding; hat if increased generating capacity would ba serving Otter TaiP4 former municipal customers are ' required, the very fact that the FPC "has no authority" integral parts of a sing!c transmiwion + tem, the adc<ptacy to order the sale, Gainnrille f*(ilitics #cp.tr/mcut v. FPC,

' . of Otter TaiPs tran.-mid-lun capacity nmst he gmiged in 402 U.S. fd5,521 (1971), wonhl empower a court to do so.

terms of the incica ing needs of all it< customers, not, Under this view, an antitrust phdutitT might be able to mercly the com.umer< residing in a parth nlar nmnicipality. --

obtain;.. court order requiring a utility to 3 ell at whole. un

.The lower contt's apertion of n dogmatic, antitrurFdnty sale, if-hut only if--the plaintiff conhlf prove, an to wheel on deman.1 for all existine and proposed municipal essential element of it< case, that the re ief heim: rcepicabst systems thus provides no safeguard to enmre the ndequato wonia impose an undne burden on the defendant, harm functioning of Otter Tair, aystem. If upheld as a rnic other con <nmers or otherwi e he contrary to the public of law, it would iuale it virinally impoulble for private Interest. Obviously, any such hizarre reading of the law utilitica to asente the continuance of reliatile =crvice, par. wouhl completely destroy the regulatory <cheme which

' ticularly in view of the pioh! cms u hich the industry already Congresa sought to create.

fnees in terms of meeting the predictable and va tly ex.

l e

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. l l

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G3 62 In sunt, the FI'C's inahility to order whecling docy The fact is that Congre>s enneted Part 11 of the not constitute a regulatory " gap,',' and to tm7 eon true it Federal l'ower .\ct with the specilie intention of occupv. as sneh wouM frustrate congrewn,nal @, emn yy en.

ing the entire tietti of interatate tran.-tninion und w hofe>aie "* , F C0"GEI "K ""*"d ""!" *that congrew detenmm4 wouM sale of electric power and therehr tilling the " gap" in

'0*Indsion as to wheehug state regulation creattd by the dveision in .itlichuro he inindeal to the national velfare.

See, e.g., FPC v. Florirlo Puerer st; 1.iglat ro., 40 s U.S. -

M3, G (197q). In p! acing certain limitations on the 5. The provision in the Amended Jutment allowing

)) C s d,reretion, ( ongreu certmniv did not intend t

• b pass on the ratcy, terms and conditions for ercate new " gaps.,' Hather, the-e hnntat, ions repre-ent ling Wdih W fndnnental error in ibe a congreniomd elToit to predeternune wrtain iones whirh deci,in helnw. As this Court wtated in Nonfano. Dakota would otherw,re have been left ogen for the 1- IT to dec,ul Utilitics Co. v. Nortfare3 tern Puhtic Screi,c Co., suprn:

hv applymg the "pubbe miere-t" statulard. biwh deter-niinations are plainly no lew a part of the regulator'e "The fact that the Pondress withhebt from the

{ Federal l'owar] Conuniumn power to grant rep-scheme because they Yere made by Congren in 191's rather arations does not re pure courts to entertant p ro-than 1.y IQt,omun.nu,n act.mg today. h.ur ds has thus far ch*d

. leave the apptiennt br,c inyrek the same $.rder frmn a* district court; rather, the FPC retams jurediction to imptement an ,arranerment M hd kik origiml deh nnination. In the<c circum-widch wonkl te m the puhhc mtcrest. Sund, artv. m Cnr of pans. stances, the lower court,8 dec. .omu amy ,)uiyguieng reprepe Kentucky v.14cmnet v t'iititic* Co. 41 FPC 4'4 (IM). after the nothing leas than an. attempt to reverse t,ongre*s Jmb,-

FPC determined thati 't bd na powcr to comtel whechn:. the CWr snission added that it neurtheteu did havr inriuliedno tn provide cially and to pre-empt its tole in decidim; important mat-ters of Pational policy, Sneh a re*ntt is " utterly ,suenn-prnper relief in the premi e<. and it prneceded to order a mandatory interconnection under 1202fht Sec sho Vilh::e of Ethnw Lake v. sistent with the concept of separation of powers," and Otter Tail power Co. ( A. 187-203).

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G4 G5

- shouhl be reversed. Xnc rorf. Tinees co. v United States, are equally controihng when a particular municipality '

403 U.S. 713,742 (1971). elects to

• witch from private to public owner > hip in a eiven

- indu try. Under Xocrr and P.unington the Sherman Act plain'!v ha4'un pl. ice in much pdlitical controversie- at anv' POINTIII icyc ;f government.

As noted above, the district court admitted in evidence, The Dec. .ision And Judgment I!cinw Are Directly over Otter Tair.s objection, a maa, of political enmpaign

-In Conflict With The 1 ulings Of This Court In.Nocrr tunteriaf. Nec page 13, supra. Par from di> claiming any And Penm,ngton. reliance on this evidence, the opinion below reiterates the government charge that Otter Tail monopolimd by 1r 11axicrn 1!.11. I'rceidruts ronferrue v. Nocer .1/otor Prcig1,/ Inc.,3r.5 U.S.127 (1961), thi4 Court hehl that the "Imrticipating in local inanicipal power peditical cam.

Sherman Act wa- intended to reguh.te business, not politi. Imign8." ( A. 31,32). Thi<. by itself. constitutes municient cal activity. Poneerted action to in!!ainee govermuent is ground

• for reversal under l' ult J .1/iue ll*mkers of .imer.

ica v. Pennington. 0SI U.S. 657, (W-670 (1905).

therefore lawfut, even if the teolo.l.tues u*cd are unethient With re>pect to the lawsuit 4 brought or supported by and the pufno-t to be achieved is clearly unti-competitive. - Otter Tail, the district cc.nri again erred by assuming-In Unih J .1/iue Worters of <!mrriru v. Penningtdu. Ost

• incorrectly-that the principles articulated in Xocrr and U.S.C57(1'1064 the (*uart nQirineil that "[sluch conduct Pcnningten apply ". . only to esTorts aimed at inthiencing is not illegal, either standin;r alone or as part of a broader

• ~ the legi lative and cuentive branche< of the nnvermuent."

scheme itself violative of the Sherman Act." 381 U.S. ( A. 41). This Court recently >tated precisely'the opposite at G70.

lu the instant caic, the detenniaation, which Ottei T il in Culifornia .llefor T..rnsp..it Co. v. Trucking (~alindled.

401 U.S. 50s, 510 (1972):

ellegedly >oucht to inthience were all ha iertly politiial in natij re, in other wurd<, the revidenta of each nnmicipclity "'yk >ame philosophy [as was expressed in decided for or agan.<t mumcipal power at the tells. in thar Nocir] governs the approach of citizens or groups of them to admini trative ngemies . . and to court <.

capacity as electur>, rather than in the marketplace, in the third branch of Guernment. Certalidy the right their capacity as purch:i<cre. The ques tion in each instance to petition extcud* to all departments of the Gov-was not which unpplier sunhl prevail in the competitive enunent. The right of neve ss in the cimits st ruggle, but rather whether or not incel government deed liut one n> lect M U.e u;ght to petitmn. ,

should > imply take over the retail cles tric bu<incoinr its - .,

citizens and therchy exrlude private enterprise entirely. The ciremnstances at har make the appliention of Nocrr If thi< dispute had taken Idace at the national !cgt, and l'cumington especially compelling in the instant case.

the inapplicability of antitru<t would be obvious. If Con.

Fress, for exampic, were actively con-idering the nutright 1. Four of the six suits con =idered below invntred the  !

nationalization of all electric utilit_ics, no one wonh1 ques. failure of a h cal govermuent to hold an allegedly required tion the right of the private companies to oppu>c this mnvc election. Twn of these were mandamus actions to enm.

by political vampaiw. litigation or the refu<al to volun- pel compliance with initiative petitions. See pages 1418, teer'the use of their facilities. Ilut the same principle

• supra. Such litigations nic clearly as much a part of the 1

4 9

L 4

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CG c7 were delntable." Strates v. I*ictor Tolldug .1/acl<ine Co.,

l'olitical prueco a4 >uit* to itupunnd contested hallots or challenges to the ,catine of convention delegates. Cf.. 297 P. 7DI,7DS (2d Cir.1921). Nre pane < 14.lG, lS. .<npra.

O'llrien % liron n. 41 l'.S.I..M*, 4001 (U. S. J uly 7,1972). M*hile the sisth suit wa> un-ucee-*fut on the incrit. , the The decision and .ludgment below thus intrude upon pro- towt(s sub-reguent aticinpt to recover damagra on acentmt treted political attivities a- well as directly depriving titter of this litigation was rejected by Imth the trial and appel.

Tail of it< cou titutional richt to petition. This re.<uf t i* 1 ate courts. Nrr pazes Iti-17, enista.

not only contrary to the deci iun, of this Coutt,it also has .

Th*'" ." 'h"# '"' C' "I"""" . this case wlu. th enuld the unfortunate effect of renmving a >ignificant c!wek which c neci Jy le ul t tbc condus.on'"that "juda ,al procems s presently en3nres the inte.;rity of the democratic process. [ hadj been ahneed." 401 l'.S. at 51'i on the etmtrary, the trenrd plainly shows that . Otter Tail did imt sue in

2. There is nothing in the in* tant record which could every instance, that it had no general policy with re-pect ponibly bring thi- ca e within the "> ham" exception to to such litiption, and that each deci ion to bring suit wa<

Noctr. In contrast to Coli/uruia .llo6,r 7'ranspurf, there is Ina<h' at the hide t levsb and hasid upon a careful nues<-

no allegation here (and a foitioni no proof) that Otter Tail Inent of the incrit< of the particular 8ase in <1uestion.

"rou::ht to bar [it*] competitors fium meanin:;ful access "

. to ndjudief. cry tribunal 4 and so to u<urp that decision. M Pos" b '"l'"'

sunking proces." 404 U.S. at 512. No law uit brou'ght by - o in ti,.ht of the ahme f aci,. in is cicar tha: the autf.orities Otter Tail ham had that etIect. On the contrary, the tunnici- relit I squu by the di trict court' tot.dty fail to dupiwrt its hd.iting.

palitier in spie-tien have repeatedly availed themselvet of IXteA.43425 In IM Conant 1.tn- Co v. lWl'uht t I o F.2d W wth Cir tw .erif d.ri-J. .N3 L .S. Ifb9 : IW h- the conn their own righi< of free acce-4 to the courts and adminis.

N that ti.c et. .""H'"'"'

' P "

• T '" ' "**

trative agencica. Fa c pm:es 15-17, lo, supra. The district mehrato, nn, tor unim.tsroyah.U m the sait,"." were car coun t, .ludgmrut has t.i.u, creattd the caart conver.<e of m.. -

mails in et hiM ** 3 4 FJ.! a W in Elia r Pr cc

• i the situation in Pulifo#uia .llotor 7'ran? port. The inunici- inent. lnd v. Fned liachinerv & Chemic..I Corp., F2 U.S. th palitic may frevly seek athninistrative or judicial redress; (tw), thi, Cmut runna that the e,ierconent ni a varm pocard by fran*l n i the Pmut Onke nny be sintatise of ( 2 of the S rnun but th( courtroom door remains harted to Otter Tail. Such -Act provikt the other cMnent cesr>sary to a i 2 ca-c are pr cut /

oac-W..

• notet s to the judicial sy3 tem plainly violate < the ""**" M D' U""

• I"d'd Inost ha>ic gunranlees of equal prutection, as wt11 u< the P # "'mg an func-t un.calv wc.nt."*be a c...

1 " complete IJ.' a t t e i ..,.cien const; tut.ional r.ight to petit. ion a'i In anthes of govermnent. In Lbc v. Demp-y 1%mp Co.. t"9 l'21 4 th ilmh Cie. P62 +.

in runtra't to Otter Tail's carsin11y con idord chci4ons to litig.ac.

3. Again in contra t to California .llotor Trurspurt, -- - Kohe tu t,ruuda its astion uiti.out anv ronen te information th.it the court behnv did not find-aml the record doe,. not the Dempsry pmop in f act infrinant its pate us, and (ii) pnueded to amend it< cuirplaint to adl a totally ::nmndic.4 it.dm b.e.ed on Show-nny " pattern of ha-ele ><, repetitive claims." 401 unfair ro,nprtiiian Id. at a In adshikn m Mn- aktingnMe U.S. at 513 Par f rom being "baseles.<," tlnee of tlie " i' * '' "" '"" i""' * " '"" "I \ * "" "

six suits enn.<islered below were at least partially o ne. - Creanwry Pxkagt Slacu s.act unne '"'#' Co . 25 U.S.8 ( 1913 ), which ce ful; and two of the three wh.ich Otter Tail lust were MI that even an i,frintement action brnunhi nnhei m ty and with-decuted upon t.uch technical ground.< that charly "the most out proud.h can e noubt not violate the wnnan Art, ser ete '

which can be said . . . is that the questions litigated . . International Visibic System, Corp. v. Remin tan-Rand. Inc., G F. 2d S to (6th Cir.194): 8traus v. Virtnt Tathing htachine Co.,

297 F. Mt. N7 (2d Cir.1924).

9

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(30

4. No suit brought or supported by Otter Tail has PO1NT 1V had the etices of preventing the e tabli hment of a single suunicipal elect rie sy* tem. .% r pages 7, II,19, sursa. Never. The Decision Below Misconstrues The Antitrust Laws '

i thele *, under the J uihanent below, otter Tail is henectorth And Their Application To The Facts At Bar.

totally barred from eching judicial redre s to protart its *

." E" * "

i busine-4 from a municipal lahcover, rett.trdien of how #"" *# " .'" ." * " " ' ""I * #

+ fiaerantly unlawful a icirticular municipalits *s action < may the regulatorv *cheme of Sect."^ '" "' (ii) in reverse mn *.'02(b),

.. "' . W """#I * " ."

be. ( A. 2tb-). .The di tr.nt court ha thu4- ab<olutely en.

joined the excroine of a con titutional right without even the tulor of n compelling need in ferins of the objectives *"

Y I"U."""I ".N'.<. In tlas l'omt we > hall Show that cf the antitrust laws. itse doc.utun helnw is also erruncous as a matter of anti.

In summary, the district court has mi< applied the tru.-t law, first, because the di<trict court misconstrued antitrust laws vu a* to dictate the outcome of cuentially . fundamental antitru t principles and, t.ecund, because it, political di putes and to deprive Otter Tail of its right applied the.-c mistaken enneepts to an electric utihty as cf free acecu to the courts. Obviously, Otter Tail's con. thou;th it were dealing with a talmco company or shoc stitutional rights are no leu sacro 8anct where its partici. manufacturer, without recognizing how inap1esito are tra.

. pation in local, potilical c:nnpaigns and litigation elTorts ditional untitrust concepts when mechanically applied to a pervasively regulated industry.

are aimed ni preventime its own ouster from a particular municipality. As this Court stated in Norrr: The district court enmmences its antitrust analysis by

" A construction of the Sherman Act that wonld quoting the defmition of monopoly set out in finitol States di=qualif.v people frem tahing a public poiition mi v. (;dumil ('orporatione, Os t U.S. SG.1,370.fC1 ( ft!GG), to the matters m whi.;h the:. me financially interested effect that a Ses tion 2 otien.e consi-t.. of (1) the powes-sculd thn< depnve the g.wcrn:uent of valaahh: * ""'II""n poly power m the relevant market an .t (2) ine

~ source of information und, at the same time, deprive - willful acqui d!Ln er maintenance of that power. ( A. 400).

the people of their ri;:ht to petition in the very

, instances in which that right may be of the most The existence of monoply power, n.enrding to the (*.mrt, importance to them." UQ U.S. at 1.W. depend < upnn the ability to fix priers or c clude co npeti.

Indeed,if Otter Tail is barred from going to court to con, tion. (A.30). llecognizing the patent absurdity of applyin;

. text cren clearly ilh gal unndelpal action tlu.t will destroy the Sherman Act to condemn a monopoly conferred by its bu=iness, Utter Tail is al<o effectively being deprived st,te or local grani, the cuart predicate

• its findim: of a cf its property without due proce-< of law mul is thush ing ,, . Section.,2 violation on the willful maintenance of a lawful-

• stripped of yet another cun-titutional guarantee. Plainly, monopoly. ( A. 31). llow one lawfully pooca.ing mnnopoly Congrew never intended the Sherman Act to super >cde power enn fnnetian withunt willfully maintaining it in the such basic freedom < " protected by the 1:ill of 1 i; hts,'i normal operations nf is< huaine-s, the court does not pause id. at 108, and the lower court's dreinion to the contrary is to explain.1:ather, it finds that Oiler Tail had maintained clearly erroneous. - its monopoly power in three ways. l'irst, Ulter Tail's re.

fu=nl to sell at whole< ale and whccl i< said to be unlawful under certain " refusal to deal" cases cited by the court.

1 i

I t

i

,e

- , n. , n , , ,. n, , e-,--. , , a.,,.n.,--ev , ,m--v.--

. . 0 t

71 TO in terms to > peak of the power to th pricca in a regulated ,

Alternatively, a utility's refu-al to wheel cicetricity is held indu>try context where the regulatory I.inlica are the on .4 to be unlawfut under u hat the court calleil the " 'lEuleneck that detennute Jmw nm4 a eiunpany inay cham in 0n*

theory' of antitru t law.". t.\. 0). Finally, Utter Tail I, settim. ' regn!ation provnfe4 a surrogate control over pnee found to have **monopohzed.' he br.niem; or suptmrtmg in lieu of the competition which untitru>t is ijesque3 to certain law uit* relating to the [mmicipal power irue. In foder.

addition, the di-trict court found that certain contracts - Otter ' rail's power to exctmle competition is likawi<c which Otter Tail h:al entered into with the !!uivan of lle- limited as a matter e,f law by state and federal regula-clamation and with varions rural ricorrie cooperatives wero illegal per se because they provided that one or both pas tie

• tion;" and its impotew in this reptrd is itenmndrated

. would wheel guer for the other to certain municipalities as a practical matter by the fact that every mmiicipality but not to tho e which the wheeling party was then servin; con <idered below which voted for publie power now has its own electrie system. So' pages 7.17, IP, supra. In fact, the at retail.

poucr to exclude competition in this ca>e rests solely with ,

As demonstratetl below, thi- invocation of per se con- the uinnicipalities, since ,t is they who may ternnnale i

ecpts is ridden with a ruuhiplicitt of errors.

Otter Tail's franchi>ea and take over its retail business if they choo<e to do so.

1. In holding that Otter Tail has " monopoly power,"

the district conrt distorted the meaning of Svetion 2 by in short, the re;pdatory framework within which Otter di<regarding the nuh,tantive evil, at which the statute is Tail operates is of detenninative signifiennec, it is oh-aimed. Ahhou.h it currectly oberved that nn essential vioudy sacaning!ce* to characterire a' regulated utility as element of a monopoly condemned by the Sherman Act in a "monopoli t" withcut negard to the >tnin and federal theimregulatul rector is the ability to fix price

• nr exclnde inwn which eleprive it of the very indicia of monopoly competition (.\. :12), the court never pansed to con ider power that the Sherman Act proscribes.

whether Otter Tuil~a seguhited utility-actually has such power, in fact. Otter Tait does not possa the power 2. The folly of'a mimplistie application of Grirmrff is to "fix prices." In IIankin>on, Finley and Veh u-the 'that it wonhl nmke it an anti' rust vintation for a utility only towns cun-idered 1clow which Otter Tail is still to take any vetion to procrve or expamt its system to serving at retai!-its rates are thorourMy regulated bY meet the nceds of the pnblic. For example, under U,dini

~'

S/n/csi ,thaminum Co. of f merica,14S P. 3141(i, 4".0. i t the North Dakota l'oblic Service Connnission." Idouth Dakota" and Slinnesota" its retail rates are reguhted (2d Cir.1915), the per-i< tent ami continued increa-c of

• L at the municipal level. Thronchout its service area, Otter capacity to meet expanded demand was deemed the ciptiva.

Tail nmy > ell at who!c> ale only nt rntes niul urnn terms lent of c.xchi ionary manenvers. Yet sneh expansion of and conditions approved by the Federal Power Commis. capacity is prcel ely what every chetrical utility in the sion.16 UAC. () N28, M4d S2ig, it is thus n contradiction United States is trying to accompli >h today ami, indeeil,

" N. D. Centmy Cale, {! 49 02 01 to .03. 13 to .20 (1960),

as enicad.J ( PG t supp.). "See, c.s.. N. D. Century Code 4402 02 thrn 4402 0s.

                 ** S. D. Ccmpiled t.aws ( 9-331 (1%7).                                   49 02 33, .t94t 01 thru 4' pot 02. 494107: 5.11. Comt hi 1.aws gJ 49 419.1 thru 49-419.3 (1972 supp.): 16 U.S.C. II 824d. S24c..
                 " Minn. Statmes !! 3000341. 354 0tI.043 (1967).

i l

                                                     !                                                                                                      l

~~- - . _. . . 73 U to lac avoided. The right application tu clectrie utilities Furthermore, to the extent that public versus private ef ndes e tabli,hed in other. piite different, industrial con. power di-pute- inay le regarilnl a* " competition"," the texts will thu4 inevital.ly serve to nintermine policies of entity w ho-e en-totn i. heing competed for i3 the town as a crucial importance to tln national welfare, whole, rather than each re4 lent acting indivi.Inally. In other worde, the citizen < of a partienlar municipality mn-t

3. The alternative market analy>c which the court make a enth.etive eleci-ion a- to whether their town will la relini upon in lieu of a incaningful examination of Otter .>crved by Otter Tail, or will c>tablish % own elect ric Tail's true economic po-ition are hath aleu errnneous in system. The municipality > bn-ine , can only be won or them clves. The tourt *> tinding that each municipality Im.t as on Itulivi-ihle nuit, on an all or nothing hvis, in constitutes a separate " relevant market" is plainly a this context, the lower enuit's con >truction of the bherman reductio ed ul.senJw. If Otter Tail in a monopoli-t a* to Act-which w ouhl prohibit any attempt to g:.in or preserve the municipalities it still > enc 4, then each municipal power the patronage of a partient ir municipality- in cITect makes system i.< likewi i a monopolist in it particular town. competition a per ac offenu Surely, Con;re-s never in-Certainly nothing in the Sherman Act suenc>ts a prefer- tended that the antitrust laws he given mh a bizarre ence for unregulated." pablic monupulies as oppo-ed to reading.

private, m;ula'ed nuce it in an unavohlable fact that . The enor of the di tr et court.a hohh.n: that Otter the precticaTit..- to of electr.ical di-tribut.um generalle re-- Tail may not defend its bus.ne-s m partienhor mumupah.- qmre that a > mall ton n be sened hv a .<.mgle system. Itut

                                                  -

• t.ies is further demon 3trated by the deu. .sou of. t.ne l'..irst to reg ud th.a orenm-tance n* a sufu. -nent predicate for .m-C.iremt .mI..suu n Leader L.arpration v. h.ea spapers of X ne A,ngla d . Juc. OSt 1,. 2d N (1st Ceir. IMO), cort, vok.mg Se t.c mn 2 of the Sherman Act vconhl makei .t equalle
• unlawl'ul hoth for a mun..ri p .dity to >cch to rephteu Otter

                                                                                                                                                .. ies A nied* 3G U.S. ED (1961). 1)eal.mg w ith the :-tivit.       .,

Trdt .m<l fa- Ott. r .I.:n.! to darrud it<ctr mo.mt weh a of competing new3 paper

• in a > mali tow n w . .mtn conm sug-total outer. (Jn.!o the th. strict court.w analys.ts,any such p rt only one raper, the cuart ht!d:

efYoit by either dide unnhl have to be emnlcmned as a willful atteinpl to acquire or maintain monopoly power. " We do not think the ruet that enutpetition is in a nattital mor. .p,dy elimatn can limit a del'end-( A. 32 'ti). nn t '.s right to defemi 11 > li. We base already pointnl ont that l'nion 1.cmler wa, not restiicted

            " M unkipuies :ne generativ exempt from state anil fe.lcrat                      by thi< ciremn>t.mae. What i sauce for the coo <c regulatnn. Sa, c#. N. D. Cenfurv G lc. { t'A02 01.1 ; 16 t's.C.                        is sauce for the gander, atal, while there may he

[ L'i( f ). Enisipal regelation ordi .u tv la no app % atioa where .~ tu different davor8, the stork a the same, la the the niunicipality italf tatt, ovtr the b'u,inc% of furni>hiS elec- one situation we ha,vc recognie.ed that entry into a tricity at retail. monopolv matLet withnnt nmre does not tmut other-

                                                             ? .
             " In this connection, it i imemgrou> thq the yhstrict enure. s                   uise b.bl cannluet t now we are saying that the judgment woul.1 en)..m (lt ts-r "l ait from ho,r.atmg wah. or rtin-i"7                  dA.nce of onch a maikel camtot circums ribe c<m.

tu nll at wholesale or whnt to, e tabh hnt mnoisipal electric >ys- duct which might otherwise he justified as defensive. tems-such as Elbow 1.ake'Wwhkh hase alrrady a* nmed a McMi lly' we refu-e to permit the inevitahlo "nuno;= ti> tic" gwi6nn. (See A.1.10). It i nerly a strange anti-tru>t deerte which wrves tu support entrenched "munogvdi-ts in si A, yhnwn in paint III. sutnt. the nutenme of such contrnver-tlns manner, sies are determinut by the citiern uf the town acting as clettors in the political puro s rather than as purtt.a ers in the nodet milieu to which the word " competition" nornully, applies in amitrust. I i 9

                                                                                                                                                             -n 75
                                         ~4
                                                                                             ".> The cmtri further erred in it. Imblin n+ to the par.

4 < monopoly to give either enmpetitor a fortuitous tic.:lar incan, by which litter Tait purporteilly "mounpo. univamtage." 284 F. 2d at M-lired". As .-Imwn in 1%ini 11. mern, the court *, imimiiion The Fir.t Circuit *.- rea.-oning 13 a fortiori applicable to the of n duty to wheel ilirectly centravenes Congre>>* vicar instant case where each unmicipality is not only a natural policy determination on the very same >ubject. The court's monopoly but al-o the very unit whose collective "purchm. hohling as to w herline is al o errimeous, however, as a mat. ing deci> inn" toinpetitur. nuy >eek to influence. ter of antitrn-t law. I!cre, the court relicil upon the so. called " bottleneck theory" devimi by a liritish civil *erv.

4. .\pparcutly reengnizing the coureptual dimenitie< of tmt, Ali. Xcale (see Lah , Tun .\rurunr Lm or tue segarding cuch nmnicipality a- a -ci.arate snarket, the dis- U.S.A.131 1:17 (1960)) ( A. 2). In fact, nu such thenry trict court behl in the alternative that the relevant ; co- Las ever been reent:ni7eil by the court +. :utd none of th..

graphical m.uket con-i*t< of all im.u- in Otter Tail %. >erv. cases cited by either Str. Lab: or the distiirt court np-ico nrea. ( A. 33, 311 Findine IM, IM, A. 87, dS). Here, however,it was alde to attribute mi.nopoly power to Otter port the rotn 'u ion that antitru-t requires a enmpany to inake it= indwidually.nwned c.. pita! facilities available to Tail only by the patently illogical desice of counting all com pe ti t<,r<. To the extent tl.ey involve the uve of capital towns as equal unita ret:ardle-s of their . ize,. Nec page facilities at all," lhe ille::ality found in these deel.-inn 4 i-

 --    G, servra. Ap,ilhd to other imlnstiic<, this analyri.* woubl                      invariably predicated upon un unlawful combination or condenm as a "tuonnpoli-t" a vendor ut* machins ry which-     t group boycott.

sells twenty unit- to twenty small enmpanics whil.: its . a competitor scil

• two hun.Ited utste to the three or four In Um.ir.! Sintes v.1crummi RmTuomi .Issen. tu.nn. 224 largest firm <. Ua ed upon the more rational atamlard of U.S. -o .,S., (1912)," f r esample, a group f ra.d t uada ,j.ouu-d tha kiinn att hour vnhune of its total retail sales. Otter Toil commandcd e.n!y 23.99 ef the m.uket in ipn > tion u The hfu.M to dent ra<es cite.1 hv lir. ble and the court all invuhc a rrin-al to 1.ev e <.it po Inc'ts or seniev-nnt a reia at (D.L"l, A. IW1 1210, A. SEI)-harilly a monopoli-t's to allow competite,n tht'n . ni the dcku lant'. ..w n c. p i ni awa.

sharc." Sec. c#, Irrain journal Cn. v. I'nhot smic 3:2 UX tu (1o3:1:

                                                                                     - bsun.m Ibl L Ci.. v. SoetN cu Photo liatetiata Cn . 273 !!.S. 3Ps 6' Ahhou;h the aficinative reinant nurkt m>>cd by the pvern.                 (l'J27) : Unhnt States v. Kkard.n 1.inc u !.nemis. toe. 63 tr. Supp muit was aid to 1.t "the towns in the t hter Tail service arca"                  32 (D Mina. 1413t: PacLa-ut 1%:r.un.. Inc. v. Watingh..u e

( A. 33). the di,trict enmis cumpnian.m is vor m iact based upon att firn.uka ti g Co. 2M F.2d 70A (.101 Cir. 1"3F): Six Twe ty-such temns, but rather np. n a hi:bly hn hed stketion. Tkromt Nine Preshictions. I nc. v. I otlin< Tckrastin::. Iw . 3G F.2d .tN thus climicated a!! munidp.ditic, vened by othe r ime-tor.ownrit ' Oth. Cir. 1%4 Thus, white the court h lt in 1. ora 'a /m. .: d systenn on the ;:".nml that these utihiirs do not comfte for the ~ that a newspaper nuy not .<rk to maintain ii4 mon..p..ty posinon busine*+ of nau.hipahtic< wrved by 0 to Tai.. * ( A. 'o; Ius ue by refu%; t.. ,cti a.hcitiWu : to ev-tonwr- who ahu :ohusi-e w:t!- A. W7. fM 912. ul3). The court imthre su;a3.ted stat the 105 a compriin ra.bo >tation. the ca.e nawbere sunec that I naia towns scesed by rmal clettric cooperathu bicui e unt le cJanted Journal h.td a .tuty ta adnaatiuty help its ompeiii.tr take away cince lil'.A*. puriertully aho do not inmpete as to Otter Taws partitutar accoimt, by (icr c> amp!c) furni>hieg it with conti.lenti'l l municipalities. ( A. 31).1;y a parity of tr a-unin;:. towns huia; their customer li>ts. , own mumcipal apirm, =hnidd hLewi-c t e uniunt ince thry do not u Sec A. 39; Neale, supra at 131 132. f Thus. 1 typically vek to ev.innd acryice to other p.htical subdividon ' as with it. finding that cach nmnicipdits consitmc. a eparate mar-ket. the court's analyds ronhes imli to the a6ntdity that cycry electrical supplict is a monopulist as to its uwn customers. l l 1 r e 4

r T 2 .. . . . . _ .. 77 76 . erulasc/ul combination." 30G l'.S. at 15 (eniphasis irgether in the defendant a *ociation to acignire for their Rdded F 4tra ettlu*ive n.*e all of the bridge < uherrhy competitors ' Inight gain nece3* fn the Cit'y of St. l.ouis. The Court In stun, the decision below propounds a radically new

         ~ found that auch rueursted activity cc.nducted for a plainly                                                ad MaHy unprecedented principh* of antitrn<t law which, anticuantwtitive purin, e h resuhe'd in a rus,sLism/ivu which                                             if affirmed, would dra ficaHy alter the ground rules by i

is in re f raint of trade within the n. caning und purpo<e of wluch hn4no-s is ennducted in this country. The di trict the Anti-Tru*t Act." #ce J24 U.S. at ::N (esnpha>is . , court % hnbling in this re; card i4 predicated upon it- thalitre added), Ilnit Otter Tail had "domin:nire" over tran.mi-inn whh 4

                  &. nn .larly, in Js.vocials d Pr ess v. U, sited .'ifofre,it/G 1*.S.                                 respect io Iwo towns ( M! bow 1.ake and llankin>en)':t 3 (IDl's)," the govermnent niineked as a contract in re.                                                        % men, Inc. v. ProvMence Fruit & Produce I:niMing Inc straint of trade that portion of Al% by. law.* which made                                                 IM l'AI JNi (I t Ur. PAU) bv. A. JJ:Neale, n/r. at 1.U p. acdu .

it virtually impo . ilJe for a new> paper to join the neo. inetved a Hush runuore,I fuHnywhi+ tinie a bninne ned n a ' ciation if a con:peting m-w3 paper in the same cunununity opmud. in chet, an a croperatiw by wh..hdc waa already a tnetuber. l'nder. the bydaws, this nicant ^* #" I" an'""" "" '" '"" 'I "' I)'"" "* ^ I nu@'dNxe that the exchtded new8 paper was not only .dcprived of cutting whnicsakr 1,romht* suit again>< the p,naly ownot hidMug the Al's.tre *ervace, but also that all mender pnpers were corporation utm the latar n refu>al to renew his ka c. Whi'e tLe forbidden to .-upply it with news on an exchage basis.-' enurt (oumt tt:st the e<clusion of this whok:akr inan th- ncet <t. place Wotatot the .% nan Art the ,1eeWon is plainly prediated intnh e n The Court Leht: upon the fact < of joint ownerAip anal concernd remlutt The court certai.de did rot sn;g;c>t that an imWLbd j "M.hilo it .14 true in a very general sen.*e that in that case. wndw who Ir.d Id own tiniM'ng wdd have to gran: ace m to y one can th,>ptue of h,a property an he plya<es, hn i cannot go hoyond the excrn3e of this right, and competiu rA hy's h umect no antitrust duty to give f6r que f 6.; ennfr refs et co,alon',fias,a, rapirst or vap!Ic,!= to Ghr. bet *r. cven if mcy's luppens to Iv the cufv Aprinent etnre l tr, open ca outict in a particular salmrton comnhmity. unduly kntder or oh truct the I of cotumerce m the ch.nn:rb inter.* of tate,rre trade.'and. . .natural f ow "The diariet omrt dieuw< at sonic hwth the nu*r nf cA The Sherman Act was qwrifically inteinled 1a pro. of the various type + of tran mis i.nt Enr> hichidnt in Omr Taiti I hihil indetwn.h ni hn*ineces from beetuning 'nuo. ' sy>tein. ( A. 3 kh). All ot' Ar e linc4 tucn tou.ther annunt o 4 ciales' in a wmumn plua which is hunnd in reduen only 8's of the total snifage of natric hncs in Oncr Ta% marhu. their compr litter % opportunity to huv or wil the ing area. &c tos:e 9. srrtea. Furthe rmore. ahhou;;h the cowet thines in which Il<c <neurs runipete. ' Victory of n fotnid that IUfany l Ae and llankindun entd.1 ne t 1+ wrd by IM member of e.neh a rotu/, inn / inst over it4 loisinen kr. Imes (A. .%) the fact i that such Atrdanion (udifics scre rivah achieved by sue's ruller/ ire means egnnt cou. perfectly a.lcepnte with re> pert to all font of the e ther in<m. whiA

• sistently with the Shrrtuars .\ct or with practient; the detrict emirs conAhrnt in any deuib Lc w vs M. nrrt creryday knowledge be attributed to indiridu,4 The rcened ihns contains nn evidcene that Otter Tail had am
• enterprise und c.agacify't such hampering of 1,nxi. over tran mi+Jun with rc*pect in a > ingle town other than 10%

1:ess rivals can on!v be attributed to that which I Ac and ihn!dn*nn. As drwm.trated ainve, Ourr. Tait in Wt j really inakes it po<silde-fler cuHerfire powcr of an did not even base dmn' m ance with rc9ect to sbne sannicipahtia l See pages 8-13. atro.

                    **Scr Neale. atra at (&72.
<      4 2

) e e 9 j f {k'  : i l 't 9 e

                   - ..               .   . _ , . - .                      ---                    .  - - . ~          . '-        - , . - ,                            .,       ,_-n       , , _   . ~ ,

.O t

~~ - . - .. _ .. 79 78

                                                                          ~

both of which had (ca ihle (although omewhat tuore ex. because the parties agreed to allow their tran> minion linca to be used for certain purpo-e4. but not for the tran. mi% ion

       !>ensise) alternative 4 available. S.e paer* 1012,' supra, On thi- ha-i<, a 1.a.ine*, wonhl be und..r an oblicatiim to            of competing energy to their exi* ting cu,tumer<. The Ellow accru to any adsantaneous capital a .-et (whether                court n*-umed, without analy-i , that such arr.mgement4 constitute agreements "to albwate en-tomers or terri.

a distribution wy-tem. a laboratory. oc a trade secret) wherever such use would I.e crononnically desiralie for its tories". (.\.13). In fact, they are nathing of the kinil. In no case did any party hind itself to nefrain from selling competitors. Surely Congren tiever intended that. the Sherman .\ct compel such a mweeping e*4nununalization of in any area or l'roni policitin : the business of an.v en.!mners, privu te ' property. Cf. Unilcol State s v. Tempeo .tworinles, Inc.. tlG l'.N. M (1972); .11oninu:a.Pakula Villitiu s Co. v, it'illiams Electri. G. The district court likewise errul in holdine that Coopnatii e,2t;3 P. 2d 431 d8th Cir.1959). All that the

       - Otter Tail *. refn,al to furni h whole.ah power to munici-            parties did was to allow utters to uso their property upon palitics is unlaw ful under the "a efusal to deal" caec$.              the reasonable condition that the facilities in question would not 1.c utilized to harm them competitively. If any (A. .'N, 39). Scc Kastman Kudak Co. n Sonthcrn I'l<oto Noterial< C.,., 273 t'.S. 35:1 (ltr'7); 1.,oalu .lourtml Co. v.        supplier wished to compete without u ing the other*a prop-
   - l'nifrel Stu.lu, 312 P.S.143 (liGI); Uni!rd Slotes v.                     criv-that i<, hv huilding its own lines or n-iug those of a A'h nrp.i r 1.inen I.o,n.as. lue. 63 F. Supp. 02 (D. "11mn.            third paitv-it ' remained perfectiv free to do so.

19 85).Then ca4e*, in etTect, provide an analogue in the un. U"E 8"'*"I allocat. ion , condit. ions such as those at regulated sector to the statutory duty to serve in regulated bar which are une.dlary to the purchase or u-c of another's industries. It ha- never been out:ge ted that much decisions jumperty, hm never 1,een InM tu violate the an, tit rust law 8 are applicable where, a4 here, there if a .<pecific legi-la: Ice u has I On the contingy, the lerauty uf >uch rcotrict, ms enactment setting fm th the ciremnstan e, and comlitie as recomuzcd ,n noannnalde i ri dec, ,nn, both i<nen fore un

       . under v hich the <1My u .41 nt e-hchwh may be decreed.                 ilm enactment of the Sherman ht. As <tated by Judge Sec Point I, supra. Purthennore, none of the " refusal to              Dator Odd Judee) Tau in UnucJ Mufn n .lJdjfwon deal" en4es reignire that a company which is in the Imsi.              M Pc J Mal Co. 85 F. 271,281 (6th Cir.1898), af'd,175 uces of >elling at retail tou*t mell at who!v-ale to it< com.          I'*8' 2II II6UU)
       . petitor< or former retail etalomere. Combined with its                           ". . covenants in partial re=traint of trado         are hohling as to wheeling this a>pect of the lower court's generally uphehl n* s alid when they me agreements
       - decision would, for esampla, require a department Stmo                          *.. . by the seller of property or hu>inm nat to to aid potentini comt< titors by furni>hisg them witif both                      conipete with the bnycr ,ni *nch a way a< to derogato retail outlets and plotLs of merchandi-o at whoicsale prier <.                    from the value of the propertv or hus,nic85 schi. .

h.o count has heretofore even sugge*ted that flu. .n is the law. Similarly, ns thi4 Cmtrt hebl in Orcsun NIrnm Ship Navi.

7. The district court again crred in huhling that Otttr pation Co. v. It'insor, F7,U.R GI,13 (1873):

Tait *x contracts with the 11nreau of Heclamation and " . . n Mipulation liy Ha vendor of an article to ho various rural electn,e cooperatives weie illegal per ad used in a businca or trade in which he i* himself et. gaged, that it shall not he used within a reasonabl-t . e

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g) 81 region or distance, so na not to interfere with his In short, the di-trict court fundamentally inisconceived said bu inen or trinic, is al>o valid and hinding." the nature of the contracts in innection, and thus erred as to-See also Tri.contino ninl l'inance Corp. v. Tropical .llarine . the con >celuent legal etYvet.<.

            - 1?nterprins,lue. 265 P.2d 610 (5th Cir.1959).
                                                                                               .'8. Throughout its decision, the di<trict court relies The agreements to allow the use of tran>ini.wion lines                  exclusivelv im nicchanical per +c concept < and e* chews nnv in the instant cam. are levally indi-tingui hable in this                    reasoned :Inalysi.s ha=ed upon the particular t conomie reali.

regard from any other funn of lease of real or personal ties and con; w>-lonal oh,icetises rel..vuut to electrie utili. property. They are thu< ;:overned by the well settled prin- ties. The court thus disre;;ard4 tl.e >pecial proh!cnu of ciple of the comumn law, which was codincil by the Sherman .*those arcas, loo <elv spokch of a< natural monopolics or-Act (.!pc r llusicrp Co. v. Leader,310 U.S. 4W,498 (1940) innro broadly--pubfie utilities, in v.hich active retrulation llnilut N/ulcs v. .lsarsinen Tufnicco Co. 221 U.S.100,179 has been foutul necessary to compensate for ihe inai)ility of (1911); .lil,! seto,4 l'ipe # Nicel Co. v. United NIotes, SS competition to provide adeiluate re:tulation." I CC v. RC.! P. 271, 279, 2Sl>2S2 (6ti Cir IW6), a/T*,1,175 U.S. 211 Connuunication.<, lue.,310 P.S. W,92 (1952). .\s one cout t (1890)), that a covenant by a levee not to use the leased of appals has observed, the enactment of Part 11 of the propenty in_ compete nith the le*snr, i.< not an unreasonable - Federal Power Act " evidence.s con;;tessional recognitiott restraint or trade. Nec lhera run:sr or Cosmets } 51G that competition eau assure protee*.lon of the public interest (1932); GA Col. pix os Currnet< 41.Y9 (1N2); 14 Wts.us- only in an industrial setting which is conducive to a free vux ox Cuxuaer< ( 1G12 (ILI ed.-1972). Nic utso 1/ons snarket and can have no plaec in industries which are fnper v. Sterrinw liensta Corp.,102 N.Y.S. 2d GSS (Sup. ' Ct.1950) ratiforni r liidh. Co. v.11ali . En Cal. A pp. 2d 229, iloor"otauntin"ed f* m ro ardias tu'ic) -

                                                                                                                                                                "I 181 P.2d 401 (ILt. Ct. A 1p.1917). Nmaeruus other deci.                      realSi"*d*'    *"re.kd""S prnnertv,                 h" '"" v"PYkl
                                                                                                                     , re . Iinnfhe          "M **"

wany 31618 El *Cn

                                                                                                                                                         "m*"Ca'.

osotm upholding a s. .me surtety of restn.e tions on the use 2i Ik .H CEl.14 tr. 714 (Di Ct. .% P3'% CoPn v. which may be inade of lenwd premises by the lessee are hidangtdin. 50 Warh. 2d 152,310 p.2d 527 (1057): Carmal v. collected ist Annot.,148 .\.I R. 593 (1944). }<endi::. pri Va t.03. 85 S.ls. 2d 2.15 (11G5): Su.hfer-lGinpf Od

                                                                                          . Co. v. >Inci Auto Start. Inc 3M 111.h. 351. 45 N.W.21 316
                    ** A covenant not to cmnpete on the part of the Ic or simitarly          (1951); Cainmn Cauxit 1;Ltg. Corp. v. Suuidard Oil Co.. 16~

ders not con titurc an unrs i unable rv t aint. Equrt I.i.pi..r Salva. F.2d 539 (Tih Cir. P'IM); bid v. Ser.rs.id ebuck & Co., 115 Ic. v. Amnrx Wmh .uw Co 42610 21251 (6th Cir PG0). Conn.122. lu) A. 432 (1032): lic.hy v. Hoan.107 XX. 244 urt. .Icnicd. 400 U.S. Itu) ( PG1); Am.t . 97 A.I It2d 4.14 17 N.F 335 (13.:7) and ven.kes of chanc14. scr. c.n United States

                                                                                      ^      v. Neubury Alig. Cn. 36 F. Sniv. (O2 (D. Mass 19 81). n wina tes
             - ( PW.O. Scc ofw. <p., Utica S.guare. Inc. s. Ikutwrg's ITic., 3)J l'. 2d 876 (OLia 1%O : Up:nwn tend Store. Inc. v. Gin bery. 253               wcate inJ.nu. us d, uicd. 123101 453 (l>t Cir.1911): Wari e v.

Towa 462.123 N.W.2d 59 ( P63); Vaughan v. General Ont ber WDAS 1:raukastin: Stalini, hic. 327 pa.133, tW A. (d! (1107); Adverti.iug Co. 352 NW.2d 5t.2 i K.s. PSI): Nagy v. Gin bug. Efeyce v. E tes.16 8 Ma*. 457,41 N.E. P:3 (1805); Gano v. Ihlms*. 3tt2 App. t Hv. 842.128 NN.S. 2d wo (2nd Dep's 1953): llern.an v. 140 Stiu. 323.105 So. 535 (1425). as w ell as vendors, s.v. cp., 1tergentidd pl.ua. lue. 16 N.J. Super. 320. 85 3. 24 222 (Super. IIerculo pnwder Co. v. Cnsaincutal Can Cn.. l4'. V.i. 935. M S.11 Ct.1951) : Lien v. Northwestern lin;:inreiiue Co.,73 S.D. 84. 39 2d 123 (1955); P.ogart v. Cahlwell. (( So. 2d 6N fl.a. Ct. App. N.W.21483 (191"): G<d.t!<rg v. Tri-States Theatre Corp 126 F. 1953): Rancy v. Tompkins.197 3rd. m. 78 A. 2d 183 (19511: 12mp3nn Lumber Co. v. Caparate.140 Coun. G9.102 A. 2d S75 2d 26 (Sth Cir.1982). (footnotc continued on folleidnq fage) {1954). { (. 4

S2 S3 moin.polie* breau-e of public grant, the exigencies of na. or claiming any ri.: hts under the-e agreemente, and utilities ture, or Iczi-latice preference for a particular way of d..im; will he unable to enter into any similar arrangements in 1,u-ine-*." h unwIrnwin It' ate r # /%ct r t'o. v. Fl'C.193 the future unless they nie willine to ri-k hasing their own P.2J $:0, $14 (D.C. Cir.1951), n/f',/, ;;t3 l'.S. 411 (1952). facilhieu u-e.1 against t hem. The dist rict enurt's blind application of antitru-t has tinis created a major ol-taele Tb . irrational re-uh< th,w.ene from a m.unplist.ie apph.ea- to "the vohuitaty interetnmeetion and coord.niat. ion of t.w 4 antitru t to the complex fact- of a rennlated m . dustry fac.dih. es" win.c h t.,one r. ,- ha.- espre->ly don:ht "to pro-

  . ire proof po-it.ne that antitru-t is inapporite to.ine wavs mote und encourage." I ederal i,ower Act { 2th.!(a)?,

nt har, that the Inocedures and cr.iteria del fnrth .m R et. ion

  !?O2(b) mu.-t be deemed exebisive a< to compulsory whole.                   In sum, the di-tritt com t's decision is totally at odds salin and that tha con =re<>ional policy a ain31 forced                with the principles w hich' Uongr0-4 intended to govern in wheeling mast not be .schvertrd. Thus, the di-triet court's            an area of crucial import.mee to the national welfare.

impo-ition on Otter Tail of an ab-olute duty to sell at The siniple fact is that i.o per se ru!c can a -ure "an wholesale ai.d wheel to all unmicipalities, regardless of the abundant supply of electrie emi;ny thrun:hout the Unibd circum-tances, not only contratenc< Con res' intent; it State.s " in accorehmcc with Fe.h-r.d l'ower Act goals. This al o directly.+nla ert < ihe ino-t e--enti.d objective. of the objcetive can only 1- ochieved be the spreialized experti>c Federal l'ower .ht. For example, the court refused even

                                                                       ~

and inform-d di cretion of the FPC eperatin.: within the to consider the crosian ni d po--ihte destruction of Otter reguhtory fiamework w hich con ;re's prosided. The di<- Tail ** bu<ines as a factor rel.n ant to its decision. ( A.45). trict ourt has in effect southt to u>e a >b dgehananer on It thus failed to tabe account of the effects of its Judgment a mechanism requiring the careful application of precision on those of Oiler Tail's cu-tomers who either do not wish, tools. The iesulting chaos i< imjustithble as a matter of or cre nnable, in e-enhfi-h their own power companies. antitrust, and datruct*ve of the nation'= wc! fare. An c!cetric utility is nh!c to furni-b ocanomie *ervice only "The district court has even apr!!cd an erroneous pcr se notion if enou h cu4tumers are available to share the fhed to.<ts t einin the emebe d meiaW cnn,thugnM rOtt M a rc7uh. cf generation and di.-liibation. As muniripalities IT;in to av.d even thotirh it hw nev,-r ai>a+1,m .bcci gnocuses. Otter rail opt out of Otter .i. a.d.s sy lent, the c who rema.m v.ill rteeg- is m d amt men.Melh Nured from scckiu; judicial saiily have to pay increa inely lagher rates to ma,minin redres. in the protectiun of its business. service. It would be dillicult to concelec of a result more 4 nt odds with the aim of protectine " power con mmers J l

                                                                       ^            

again-t excenire prices" which this Court has recoiidzed ns a " major purpose of the whole [Frderal l'ower] Act." Pcuspirunia ll'ater / Pou er Co. v. FPC, 313 U.S. 418, 418 (1952). The district court invoked a similar per se rule to con-demn Otter Tail's contracts with the llureau of lleclama-tion and rural electric cooperatives. ( A. 43,95,98,99,00s, a09). As a result, Otter Tail is enjoined from enforcin- l l i e iI i t, 1 e e

.(~

I l 88 h. CONCLUSION I Fer The Reason Stated Above, The Decision 11elow Sh:uld  !!b Reversed And Remanclid With Instructions To Dismisa The Covernment's Complaint. Jic*pectfully subudited, Cynes A. Fn to lhym F. Lexnux' Fiel.1, Arvesen, Donoho, Lundeen & Hori F< rgus F. dis National 11ank 1:a!!. ling I Fergu< Falls,31inne. sata M>:;7 I 3fnerox H.t:m:,r.n AltenArL D. Jirren3ru

                  --                                                   2 Kaye, Scholer, Ficrman, Unys .
                                      & llandler

• 425 Park Aveuuo i New York, N. Y. 20022 Allor:trys for Oiler Tail Pv:ccr Capany

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w e h 1 i i INDEX Page Opinion Uclow 1 Jurisdiction - 1 Question Presented 2 {

                                                         '                                                                 2 Statutes Invcived
               .                                                     Statement -                                           3 A. The Antitrust Suit. In The District Court                                       4 B. The Interconnection Proceedings Before The Commission                              5 Summary Of Argument                                   7
                                                          ,          Argument                                            10 a             The Federal Power Commissicn Has Pri.

i mary Jurisdiction Under The l'cderal Pow-

                               .                          l              cr Act To Order Compulsory interconnec-tiens With Pu!lic Utilitics Subject To Its Jutisdiction And To Consid.r Antier,mpeti-tive Factors In Determining Whether A Compulsory Interconnection is In The Public Interest ... _            - - ,                  10 A. The Doctrino Of Primary Jurisdiction Requires Iniiial Snbmi.ssion To The m              -              Commission Of All Issues Regarding Compultory Intereennections Subject.To Its Jurisdiction .                        12 B. Compulsory Interconnections With Pub-lic Utilities Subject To The Commis-sion's Jurisdiction Should Do Ordered Only If They Licct The Public Interest Standard Of Section 202(b) Of The Federal Power Act                         19
 . . - . - _ .  -      .                                                                                                       i t

t e 9 4

c 11  !!! Page Casce-Continued Page

! Argument-Continued C. Public Utilities Subject To The Com-                                             Pan American trorld Atricans, Inc. v.

United States, 371 U.S. 296 ... . 17,22 micsion's Jurisdiction Should Not ik . Subject To Duplicative Litigation Of ScaWnt Air Line R.R. v. Unitcd States, Anticompetitive Issues 22 34 U.S.151.. . _ . . 10 25 Tess..inal TVarc'ecusc Co. v. Pennsytrania i Conclusion R.R., 207 U.S. 500 _ 16 20 United States v. El Paso Natural Gas Co., Appendix J 376 U.S. G51. 23,24 United Statcs v. Philadciphia National , 12 I CITATIONS . Bunk, 374 U.S. 321.

                                                                                         ' United States v. IVcstcru Pacific R.R.,
, Cases:                                                                                      352 U.S. 59                                                  11,12 Carter v. Macrican Tct. & Tel. Co., 365                 -         --

United States Narication Co. v. Cuaard S.S. Co., 2S 1 U.S. 474 . 15 F.2d 4SG (CA 5), certiorari denied, 23 Village of Elbow Lake, Minuc.u ta v. Otter 385 U.S.100S Far East Confcrcnce v. United Stoics, Tait Poucer Co., FTC Ucchet No. E-342 U.S. 570 -.12,10,17 7278, 40 FPC 12G2, allirmed sub nom. Federal Communicativus Conaairsion v. Ottet Tail Po:icr Co. v. Federal Porcer RCA Communications, Inc., 3-in U.S. Commission,129 Flad 202, ecrtiorari 20,21 denied, 401 U.S. 947 . 4,5,G 86 Federal Maritime Commissimi v. Aktie- Villago of Elbow Lake, Misacsota v. Otter Tail Pvwer Co., FCC Docket No. B-bolaget Sccuska Amerika Linien, 300 l U.S. 20S _. 19 i 7278, appeal pending snh nom. Otter G.tincsrille Utilitics D.~pt. v. Florida Pole- Tail Potccr Co. v. Fedcrol Powcr Com-cr Corg, 40 FPC 1227, afiirmed, , . _ .

                                                                                   .       ,, mission, CA S, No. 72-10SS                                    4,5,7 Gaineerille Utilitics Dept. v. Florid <s                              '

Power Corp., 402 U.S. 515 . 17,21 Keogh v. Chicago and .N.lv. Rg., 200 - Statutes: U.S. 156 15 Louisiana & Arkansas Rs. v. Export Civil Aeronnuties Act of 1938, as amend-Drum Co.,359 F.2d 311_ 11 ed by the Feder:d Aviation Act of 1958, Northern Natural Gas Co.- v. Federal 49 U.S.C. i 1301, et scq. 17 Potecr Commisston,000 F.2d 953 10 l e 4

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~-- - . . . _ _ _ . _ IV Page 311!I}c Eltptrlite ([11tiri 11f fl!cIIttitch 91t11011 Statutes-Continued OCTOBEn TI:nM,1971 Federal Water Power Act (Act of Junc 10, 1920) 11 Stat. 106::, IG U.S.C. ~ Il 791-S23, as subsequently amended (46 Stat. 797) including amendments No. 71-991 and additions and change of name of

                                                                                            "^"'          "    #^#' ^"'"

3 (.cta u t aG If 5,c. GS7 v. 40 Stat. S3S, IG U.S.C. }{ 791a-S25r).10,10, 15,19,24 UNITED STATES OF AMEntCA, APPELLEE

             . Section 201,1G U.S.C. i S21.

11,2G-27 Section 202, IG U.S.C. ] 824a . 3, G, S,13, 17,27 . ON APPCAL FRO't Tuc t?xirco Sf trcs nisrr scr cocnr Sectlon 202(a),1G U.S.C. 2 S24a ' ron rnv mulcr W . tux. wor,- (a) 13,27-28 Section 202(b), IG U.S.C. j F2ia (b) 3, G, 9,14,17,19, 2S.29 Section 202(c),10 U.S.C. S21a(c). 29-00 nulEP OF FEDEltAL POWER CO?.DIISSION AS A311CUS CERIAH IN SUPPORT OF APPE1.1, ANT Section 202(d),16 U.S.C. 824a(d)... 30 Section 200(c),1G U.S.C. 52la(c).. 30-31 Section 202(f),16 U.S,C. S21a(f).-. 31 Sherman Act,15 U.S.C. $ 2 (1890).. _.3,4,32 OPINION DELOW EsecUaneous: , The opinion of the district count (App.1-21)' is Federal Trade Ccmmission, In Response g reported at 301 F. Supp. 54,

                                                                        ~~~

to Sen. Res. No. sa, .31onthly Reports , JUn1SDICTION on the 1:lectric 1%ct r <nid Utilitics in. quiry, S. Doe. No. 02, l'ts.1-81U, 70th The Court below entered Findings of Fact and Con-Cong.,1st Sess. (192S-190G) 13 S. Rep. No. 021, 74th Cong.,1st Sess. ._ 18 clusions of Law (App. 22-107) and its Original Von l'.fehren, The .4ntitrust L<tres & Reyet-

                                                                                   '" App." references are to the appendix to the jurisdic.

lated Inderstrics: The D<,etritie of Pri- tional statement filed by Appe!! ant Otter Tail Power Com-Snary Jurisdictimt, G7 Harv. L. Rev. Pany, No. 71001. 929 (1954). 22

                                                                                                             .(1) i h

1C2 3 2 sr37c,ygNr Judgment ( App.10S-111) on Octcher 22,1971. By crder dated November 10, 1971, the Court bAow This case invm. s the primary jurisdiction of the denied Otter Tail Power Company's (Otter Tail) Federal Powei Commission (Cumminion) under S-e-mction for new trial or amended findings and cun- tion 202 of the Federal Power Act, Iti U.S.C. s Ela, clusions and amended judgment, except to the ex- to order a publie utility subicet to its jurisdiction to tent it modilled its judgment to retinire the Federal interconnect with any pereen if the Conunission in.ds Power Commision's approval cf the terms and con- the interconnection to be in the public interest. after ditions of any wholesale or whcMing service (App. . con;!dering all relevant inues including anticompeti-112-10). The mnend,.d judgment was entered Novem. tive factors. In a civil suit brought by the United ber 10,1971 ( App.114-17). Ohcr Tail filed a Notice States Department of Justice, a federal District Court of Appeal in the District of Minnesota, Sixth Divi. found Otter Tail guilty of attempting to maintain a sion, on December 7,1971 ( App.118-10). This Court monopoly and mcm polizing the retail distribution of noted probable juriedictica on May 22, 1972. fl0 - electric power in citics located in its service area, in U.S.L.W. ORG. The jurisdiction cf this Court is violation of Section 2 of the Sherman Act,15 U.S.C. invoke;l under 15 U.S.C.120. s 2. The Court's decision was based inur an en Otter Tairs refueal to sell at wholesale to municipal QUESTION l'nESENTUn p wei syst ms within its service area. To remedy Whether the Federal Power Commi.wion has nri- ' this situation the District Court cujeined Otter Tail mary jurisdiction under the Federal Power Act to fr m such refusal, crder cempulmry intemonnections veith public utilities One of the mumripal power systems which was re-subject to its jucirdiction and to consider anticompeti- used wholcsale wivice by Otter Tail was that of the tive factors in d.termining vehether a compulsory in- Village of Elbow Lake, Minnewta, a former rit:.il terconnection is in the public interest. custcmer of Otter Tail. Prior to and during the civil suit'in the District Court, the Comminion coaducicd STATUTES INYOIN1:D proccedings under Section 202(h) of the Federrl Sections 301 and 202 of the Federal Power Act, Power Act,1G U.S.C. g 824a(b), to con >ider the appli-IG U.S.C. }} S21 and S2.!a, and Section 2 of the cation of Elbow Lake for a compulsory interconnection Shennan Act,15 U.S.C.12, are set forth in this with 0tter Tail. After considering all relevant factors bner's appemh,x, mfra, pp. 2C-02. and finding 'it to be in the pub!ie interest, the Com-mission ordered a short-term interconnection on No-

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5 4 vember G, IJGS,2 and a long-term interconnection on (App.1410), and (3) by enforcing the provisions of its contracts with the liureau of 1:eclamation and September 13, 1971.2 with Jeetric power cooperatives which prohibit the A. The Antitrust Suit in The District Court use of Otter Tairs transmision lines to transmit In the civil antitrust suit fd:d by the governmcnt power to former retail cuatomers of Otter Tail (App. cn July 14,10G9, Otter Tail was charged with at- 1G-18). The Court found these contracts not to be immune to antitrust (App.18-20). Rejecting Otter tempting to preserve a monopoly over the retail sale of Tail's " erosion" argument that a requirement to tell electric power to municipalitics, in violation of Sec-tion 2 of the Sherman Act,15 U.S.C. ! 0, by refusing power at who!esale or wheel power to former retail to sell at wholes:de and refusing to wheel dectric customers would force it to centribute to its own demise because inercasing numbers of municipal cus-power to municipal power systems, and by engaging in other activities to defeat municipalities' attempts tomers would convert to municipal power sptems, the to establish municipal power system, (App. 3). After Court stated that such crcrion was unlihdy because finding that Otter Tail had monopoly power in the other municipalities could not rdy upon the 13ureau relevant niarket (retail sales of electric power to for power and that the threat of losing busines dcas towns in Otter Tairs service area) (App. 7-S) and not justify or excuse violating the law (App.118-21). had strategle dominance in transmission facilitics in The Court thus enjoined Otter Tail from certain con-its service area (Apo. S-10), the Court fcund that duet, induding rc-fusal to sell electric power at whoh!- Otter Ta!! had sought wrongfully to maintain its sale (App. 21,1151(i). The Court's injunction that monopo!y power (1) by refusing to use its transmis- Otter Tail not refuse to sell at who!esale has the sion facilitica to sell at wholesale or to whcel power . effect of a compulsory interconneetion order. It is to several municipalitics (App.11-13), (2) by en- this portion of the Court's opinion which is the sub-gaging in court litigation to defeat attempts of four ' ject of the Commission's brief as amicus curfac. municipalitics to establish municipal power systems ' -- II. The Interconnection Proceedin::3 liefore The Coeuriicion s VJ! age of ntbor Latce, finnesota v. Otter Tai,2 Pmerr Prior to and concurrently with the civil antitrust Co., FPC Docket No. I ..:73. . 0 1 PC 12G2, afbrined ub suit, Otter Tairs refuzal to sell power at wholesale com. Ottcr Tail Power Co. v. Fede ral Potecr Ccmminion, 420 F.2d 232 (CA S), certiorari denied, 401 l!.S. 017. to municipal systems was also the subjret'. of pro-a vmanc of ntbew Lac, 3ri.unesota v. Otter Teit Po cer ceedings hefore the Commis.,lon. In Villuute of Elbmv c:., FPC Docket No. E.T.fis, coreal vendinc sub rrom. ott Lake, Minnceota. v. Otter Tail Pmccr Co., supro n. T I Power Co. v. F.Jtrul Power Conneduloa, CA 8, No. 72- 2, 3, the Commission considered the application of 1 i 9

• 8 ,P

g 6 l ene ef Otter Tail's former retail munielpal customers, Elbo.w Lake, for an order pursuant to Section 202 of cause Otter Tail would sustain no unduc burden, no enlargement of facilities, not an) impainnent of it.4 the Federal Power Act,16 U.S.C. } S24a, directing ability to serve its customers thereby ( App.140). intercouncetien between Ellmv Lake and Otter Tail. i The Commbsion considered fully the porsible erosion Elbow Lake alleged that it had an operating munici-pal cicetric utility, that it h::d requcyted Otter Tail of Otter Tairs system but found the public interest , to provide wholesale c!cetric service and wheeling to be fat broader than the economic interest of a particuhu power supplier (App.111). The Commis-service, that it had two sources of power but no means sion agreed with the Examiner, howe <er, that Elbow of transminion to Elbow Lake without Otter Tail's Lake had engaged in "an ill-advi.Rd excurcion into assistance, and that Otter Tail had refused to provide the power bminc2s" and the partics? L:tions had re- i

 ;       either wholesale or wheeling service ( App. 121).

By order dated November G, IDGS, the Commission sulted in serious economic wa.ste (Ap) .140-41). The Commission emphasized that municipalities should found that a short.tcrm interconnection was in the identify and study all ahernatires and prcbable con-public interest because Elbow Lake sun'ered a shortage 1 sequences before entering into the power busiaeu of installed reserves and becaun an interconnection (App.142). After deciding that an interconnection would not pose an undue physical burden on Otter was in the public interest, the Commission determiced Tail (App. 100-131). Accordingly, the Commission the terms it considered fair to the parties and their ordered a short-term interconnection pursuant to Soc-customers ( App.1.t3 53). tion 202(b) cf the l'cAral Pi,v,er Act, IG U.S.C. l 821a(b), until the completion of stud:es and hear- On December 23,1971, the Commission denied re-ings on the question of the best long-term transmis- hearing of its order of September 13, 1971, review of wh;ch now is pending in the United States Court of sion and supply arrangements (App.120-T.5) 40 FPC 12G2, allinned, Ottcr Tail Potcce Co. v. Federal Powcr Appeals for the Ei",hth Circuit, sub m.m. Otter Teil Commission,429 F.2d 232 (CA 8), certiorari denied, Powco Co. v. Federal Powcr Commission, No. 72-1033.4 401 U.S. 047. , . _ . . Subsequently, on September 13, 1971, the Com- SUMMAnY OF ARGU. MENT mission ordered a long-term intereennection between . .. . . Elbow Lake and Otter Tail (App.10G-150). The in- 3" "'"' * *

                                                                                                                        ""* * ","3" #.

tcrconneetton was found to be m.. the pubh.c interest diction face duph.

h. ion of aniitrust issues cative litigat.

in accordance with Section 202(b) standatds, becauso

                                                                                  *The only luue which Petitioners hace raised in this Elbow Lake's consumers needed assistance and be.                        appeal concerns the terms an I conditions of the intercon-nection order.

1 , i i . 1, . i i I t l L

u=e 8 9 in a growing number of administrative and judicial B. forums. The controversy here imolves repetitive ju-Section 202(b) prescribes a strict public interest dicml and Commwton proceedmy, both arismg out standant for compulsory interconnections, yet the cf a fcdcrally regulated pubhe utihty's refusal to sell Court below appliul only antitrurt principles before at wholesale to a fonner retail customer and bolli . in effect ordering Otter Tail to interconnect with any resulting in compulsory interconnection crders. We nmnicipal power system which makes a request. This subnut that the Court below crred m enj_ommg Otter is contrary to the m:my decisions of this Court that ' Tail from refusing to sell at wholesale because Sec- imtitrust laws are just one tool to be used in dder-- tion 202 of the Federal l'ower Act gives the Com- mining the public interest, and that competition is mission prunary jurisdiction over compulsory inter- neither the single nor controlling c!cment in that de-connections with public utilities subject to its juris- termination. diction. - Under Section 202(b) the protection of all con-

                   -.~                                           ~

sumers and the possible alternatives to interemmcc. As numerous decisions of this Court reveal, tftc tion are factors in the public interest equation. In ' doctrine of primary jurisdiction requires submivion addition to anticompetitive factora the Commission to an administrative agency of all issues regarding is required to considet inter alla the possibility of an the legality of conduct subject to it_s regu!atory jurist unduc bunlen upon the public utility, y hether an en-diction. This luinciple hns been he!d many times to largement of generating facilities is requited, mid l bar antitrust ::ctions in federal courta and require whcther the public utility's ability to render ude-parties to litigato all issues, inelnding anticompetitive quate 8ervice to its customers would ha impaired. questions, before the appropriate agency. Under Sec- While the Court below failed to consider any iuuc tion 202 of the Federal Power ~Act the Commission except anticompetitive eficcts, the Commisalon's estab-has full authority to coordinate c!cetric facilities and lished practice is to evaluate all factors bearing or. to compel interconnection where it is in the public , _ , . the.public intemt, including potential antico:.ipctitive , interest, in onler to assure consumers an adequate efIccts, in comlndsory interconnection proceedings. l and economical source of electric power. The decision The Commission must be permitted to bring this I of the Court below to enjoin Otter Tail from refusing experience to bear, thereby giving full drect to the  ! to sell power at wholesale has the effect of a compul- requitunents of the Federal Power Act and the anti-sory interconnection onler and abrogates the Federal trust laws. Power Act's grant of such nuthority to the Commis-sion. Accordingly, the decision should be reversed under the doctrine of primary jurisdiction. l e N ,, 9

         ~

(,~ t 10 g Publie utilities subject te the Commission's jurisdie-

               ,                                                                                          tion under Section ::01 of the Federal Power Act,16 '                       ,

Application of the doctrine of primary jurisdiction U.S.C. ] Sil, face a growing antitrust gauntlet of ' is necessary to protect consunu rs of electric power repetitive administrative agency hearings and court i from the ill cfreets of dual ragulation of public utili- litigation each time they act. -Decisions of United ties under the Federal Power Act and antitrust laws. - States Courts of Appeals have subjected them, erro-This Court and others have recognized the dangers neously we have argued elsewhere, to duplientive liti-cf the collision of the<o two reg!mes and the opera- gation of antitrust issues in numerous administrative tional chaos which can result from court's independ- forums, even in preecedings where antitrust allega-ent application of antitrust principles to regulated tions are not directly'rclated, such as the authoriza- , conduct of public utilities. Faced with the tuluire- tion' of sceurities issuances. See e.g. Brief foi the i ments of duplicative litigation of antitrust issues and Federal Power Commissien in GnIf Stalc.< UUNues

. the probable inconsistency of decisions in various
'                                                                                                         Company v. Federal Poicci Commission, No. 71-1178.

forums, it is ine.reasin[:ly difiicult for publie utilities _ The decision of the Court below superimposes on the to take necessary steps to meet the growing energy various agency proceedings a judicial arena in which i demands of coutumers. For the consumers' protec- the same antitrust issues can be tried, regardless of tion within the comprehensive requ!atory scheme of administrative jurirdiction and public interest stand-

   , the Federal Power Act, such issues must be submitted -                                               ards. The resulting burdens and potentially incorsht-to the Cnromicrion, which hns the authority and the                                                  ent realts from such multiplicituus litigatmn of an-experience to properly determine whether the con-                                                    titrust issues will have dire cliects on such public                          ,

duct subject to its regulatory jmndiction is in the . utilitics' ability to fulfi!! their responsibility to men public interest. the energy need.4 of consumers. If these companica AltGUMP.NT are to be efTectively regulated so as to protect the pubh.em

                                                                                                                   . temst., courts must, be reilmrcd to apply the                      ,

Ths Federal l'osser Commicion lias l'rimary .Turisdies . - - doctrinc of primary jurisdiction,' to permit the Com-lisn Under The Federni l'ower Art Tu Dider Compul. anry Inscrcunnectiar: With I'uh!ic Utilitie4 8uldert To sThis Court should properly npply the doctrine of pri-IM .lutisdiction and To Consider Anticomrctitive mary jurimlidion even if it is not raised at an earlier stare Factura In Determinin:- Wl: ether A Compul ary Inter. In the proceedin;m for, beina a quc> tion of the proper allo. crnnection In In The l'ulelic Inicie.st.' cation of busintM between the tourts and adminivrative t This caso presents a classic example of the prob!cm ancncies, it li nut subject to waiter. Un4rd Nb. @ n.n 3,> U.S. a m L<>Wd<<,m 4 Arhi<+ sus Ry. v. E.cport Drn,a Co., Oso F.2d 311, :n1 (CA 5). policy, within a Liturcated system of enforcement. b y .

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13 12 Pert agency charged with the task of coordination mission to employ its regulatory experience and to and with a specialized public interest standard pre-evaluate all factors, including anticompetitive issues, scribed for compulsory interconnection 8, which the relevant to a determination of whether an intercon. District Court entneously ignored in enjoining Otter nection >hould be ordered. Tail from refusing to scll power at whole.<nle. A. Tlic Doctrine of I' sir.mru JuridictInn Requires Following an extensive federal investigation of \mb-initial Sub:enssion To 7 he t venon!-wn O/ allt issuron lic utilities," Congress cuatted Parts 11 and 111 of the Regarding Cornf,utsury Inforconna tions Sut,fect To Federal Power Act,' authorizing the Commission to Its Jurisdictiun. regulate both the financial practices and operations As this Court has stated, "The doctrine of primary of public utilities subject to its jurisdiction. As par:

    - jurisdiction * *

• applies where a claim is originally of this comprehensive regulatory scheme for the pro-cognizable in the courts. and comes into play when. tection of consumers and investors, Congrees provided ever enfoteement of the claim requires the resolu. for the regional coordination of electric facilities, tion of inuciWhich, under a regulatory reheme, have _

under the supervision and direction of the Commi;- been phiced within the special competence of an ad. sion. Section 202, IG U.S.C. 5 82-la. l_n addition to ministrative body; in such a cose the judicial process delega'ing to the Comminion the task of coordine-is suspended pending referral of such is>ues to the tion, Cr.ngicss committed the question of intercon-admini',trctive b9dy for its vicw." Uid/cd States v. ncetien in most instances to vchmtary agreement by Western l'acific R.R., 352 U.S. 50, GJ-G1. The doe-public utilities. Section 202(a), IG U.S.C. ] S21a(a), trine is based on the principle "that in cases raising provides in pertinent part: irsues of fact not within the conventional experience of judges or cases requiring the exereire of adminis-

• For the purpora of assuring an abundant trative discretion, agencies created by Cungress for supply (,f electric ennrgy throughout the Unite.d States with the greatest. posihk ceonomy and regulating the subject matter should not be passed with regard to the proper utilization and con-crer," Tar East Confercn<c v. Uni (cd States, M2 .

                                                                                                   ., ' servation of natund resources, the Commiceioa '

U.S. 570, 571, and "rcquires judicial abstention in ' is empowered and directed to divide the countr,; ca:es where protection of the integrity of a regula- ' tory scheme dictates preliminary reFort to the agency ' Sc e Tmh ConnuWan, in Romne to Sen. Rgs j No. S.y 1tonthly Reports usi the Cicetrs,e 1% e e n,ul Utilit. s which administers the reheme*" United States v. Phil- , , , Ingniry, s. Isoe, No. 32,1.ts.1.s ur, 7oth cong.,1st seu. adelphict Nat. Ilank,374 U.S. 321,053. The Federal-(102tMG)- l Power Act presents just such a regulatory scheme 'Titte II of the Public Utility Act of loss, .to stat. sa.i. f:r the coordination of e!cetric facilitics, with one ex-f i

                                                                                                                                                             ~

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15 14 vested in the Federal Power commission. The order mto reg.mnal distr.ic ts' for the voluntary inter-of the District Court, which has the effect of order-coimection and coordination of facilities for the generation, transmission, and sale of electric ing a compulsory interconnection, constitutes an ab-energy * * *. It shall le the duty of the Com- rogation of these provisions of the Federal I'ower mission to promote and encourage such inter- get, , connection and coordination within each rudt Since 1922 this Court has forbidden judicial in-district and Intween such districts. *

• j tru> ion into the administrative bailiwith by cen-Ilowevci, Congre s was not unaware th,at situations sistently applying the doctrine of primary jurisdie-

' like the one at bar would devolup in which voluntary tion to require submission to regulatory agencies of agreement to an interconnection could not he cases involving antitrust issues. In Kcogh v. Chierro reached. Accordingly, it authori..ed the Comm!>sion & N.ly. Ry., 200 U.S.150, the doctrine was lahl to order compulsory interconnections and prescribed to b'ar an antitruat suit for trehle dameges for ra'.ee a public interest standard to be applied in sueh in- allegedly fixed conspiratorially by railroads subject i stances. Sectim 202(b), IG U.S.C. S2ia(h), pt,9- . to the ICC s remilatory jurisdiction. This Caurt. vides in pertincut part: pointed out that parties had a remedy before the ICC for rates found to be unreasonably high cr W1.cnever the Commission * * .* finds such action necessary or appropriate in the }mblic in.- discriminatory and conid not, believe "that Conme s 1 - terest it may by order dirce; a public utility (if intended.to prmide the shipper, from whom illegal the commiselon sinds that no undue burden will rate., have been exacted, with an additional remy be placed upon such i l ublie utility therchy) t tmder the Anti. trust Act . . ." Id. at 102. In ruling establish phym,eal conreetion of its transunwon . in another car.c that a party could not bring an , facilities with the facdit,es i of one or more other ~ antitrust action hared on ennduct f.ub;. ce t to the pro. persons engated in the transminion or sale of visions of the Shipping Act, the Cmitt ruled tha eicetric cuecgy, to sell energy to or exchange. ( energy with such perdons: Pn,cidni, That the when the enumerated of antitrust charges are to Commiuinn shall have no authority to compel . -- interrelated with provisions of regulatory kgtsh. tion. the enlargement of generating facilities for such the remedy is that niforded by such legislation, which j.irposes, nor to compel r.uch public utility to sell to that extent supersedes the antitrust laws. Unihd cr exchange energy when to do do would unpair si tes Naciqation, Co. v. Cunant S.S. Co:, 2S! U.S. Its ability to render adequate setTiec to its 474 480. customers, . . . Jurisdiction to coordinato electrical facditics and b " firmly established principh" of pri-inary jurisdiction was held to bar the government : order compulwry interconnection is thus clearly 1 0 9 1 i f i

16 17 from suing for an injunction of shipping companies' Section 202 of the Federal Power Act similarly em-use of a dual-rate system as a violation ef the Sher- bodies a completc system for the coonlination of , . man Act. Par. East Conference v. United States, c!cetric facilities. > topping not with the Comminion's supra. This Court held in that case that the queation authority to plan and encourage voluntary agree-of the legality of the dual-rate system must he sub- ments but instead granting it plenary authority to mitted to the federal agency. In Tuminul irorchone order compnleury interconnections it fir.ds to be in Co. v. Pennnicania It.!!., 297 U.S. 500, this Court the public inten.st. In Pan .Imcrican Irodd 4irtrays, held that a warehouse owner could not bring an Inc. v. Unlied States, 071 U.S. 23G, this Court held antitrust action attaching an exclusive arrangement that the govermnent's suit under the Sherman Act betwten a ralhoad and a warehouse, saying (id, at against two airlinc companics for their agreement 514): allocr.+ing terrpories and routes was banned because

          * * ' Certain then it is that the Anti-Trust the prob!cm of division .of territories and routes lay Laws are ' inapplicable in all their apparent                  within the purview of the CAR under the Civil Acro-breadth to carricts by rail or water. A con. signor      -

nautics Act of 193S, as amended by the Feder:d Avi-or consignec aggrieved by such a wrong must ation Act of 195S, 40 U.S.C. $ 1501 et .vg. resort to the appropriate administrative agency, Under these cases it is cleat that the culy remedy at least for many purpcses.1f he is remitted t for Otter Tail's refusal to sell liower at wholesale the Commerce Att or the Sh,ippmg Act to canec'l . is provt&d by Scet. ion 202(b) of the Feder:d 1,ower the illegat pn fen. nee oiar he pa. s _over ihm acts and revert to the Cla'yton or the Sherman Act, and that th- Commision has primary jurzrdie-Act for the purpose of reemering dantages? The tion to consider the 1cgality of such refusal and Commerce Act like the Shipising Act embodies whether a compulsory interconnection would be in a remedial system that is comp!ctc and self- the public interest. This Court recently recogalacd contained. It provides the means for:u.ecrtaining the Commission's authority over compulrory inter. the existence of a preferenee,1;ut it does imt

                            ,                                           con. nectica orders, Caincuril/n Utillfic.< /A pi v. Florida stop at that liomt. As alread3* shmvn m tius poicer Corp., 402 U.S. 515, f>21-2, yet this authority opmmn, it gives a cauce of act,on   i   for damages not only against the carrier, but also hgainst                 was ignored by the Court below.

shippers and consignees who have incited or In addition to Section 202's express gr; tnt of au-- abetted. For the wrongs that it denounces it thority to the Commission, this Court's rensoning in _ prescribes a fitting remedy wliich, we think, was Far East Confercuce as to why cases should be sub-meant to be exclusive. * *

• mitted to the adminis".rative agency dictates the sarte procedure in the case of compulso1T intercon-nections:

4 9 D a

                                                                =

b

                         -- s                            --                                                  -

) 18 39 This legislative scheme of planned coordination by

          . Uniformity and consistency in the regulation of -

busmess entrusted to a particular agency are the Commission, voluntary cooperation by public utili-securtd, and the I,mnted funetanu of review by ties, and compulsory .mtemonneet.mn when m. the the judiciary are more rationally exerciced, by public intercat, is Ufeated by the District Court's ad prdiminary res. rt for ascertaining and inter,

• hoc, narrow application of per se antitrust standards j preting the circumstances underlying legal is. to Otter Tairs refusa!.s to sell or exchange power.

sues to agencies that are hatter (quipped than Therefere, if Congnssional goals under the Federal 3 courts by specialir.ntion, by insight gained Power Act are to be achieved, the decision must' be through experience, and by more 11exib!c procc-dure. 342 U.S. at 57!.5. reverced. The " circumstances underlying legal inuca" in this u. corrrpulsorti Interevnnections 1ritto l' urate Utitilica CasO itWolVe Congress' provision in the Federal Power #"6l"' 7'" The c..m.utub,u , /uri<a4 tion sr.o as llc Ortlered Only Il TI.ru Mce! The l'rblic Intero.l i Act for the plunned coordination of the electric Uower ! .- Standard Of Scriian 202(b) of The Fcarrul I'mccr Sndu.ntry, .m order to murc custcmcrs an adcquato A ct. and the most economical supply of dcctric energy. Section 202(b) prescrib:s a public interest stand-The Scuate Report int'erpreted Section 202 as fol- ard for comptdswy interconnections, and the hiw is IOW8: clear that the public interest requires the considera-tion of dwre than. merely antitrust principles, in-l Under this rulactien[(a)] the Commission wouhl have authority to wg.rk out the ideal deed, thia Court and others have specifically held 1-utility map of the (.ountry and supervire the development, of the ludustry toward that ideal. # " #E '.'** * *

• E#"*!.#

act. ion to bem! the ##pubbe D"!*I.m'terest, it can authorr The Committee in contident that enlinhlened self. interest will lead the utilitica to cooperate with the action, though it might otherwise violate anti-the Conanission and with cah of her in bringing trust h:we. Seaboard elir Ehre R.R. v. Uni!cd S/ntce, 7 about, the wacmies which can s.bue be secured -- 383 U.S.151,13G.7; Nerthcrn Notaral Uns Co. v. through the planned coordination which has hihg Fcdcral Poseer Commision, 399 F.2d 053,'UG1 Leen advocated by the most able and progresaive thinkers on the subjtet. (CADC). Antitrust laws are another tool w When interco>mettion cannot be secured by nguldory agency may employ to a greater er Ioner voluntary action,+ubscelton (b) gives the Com- U" E.# ,, ." mission limited authority to compei interstate statutory concept of the 'public interest.'" Tcdcraf utilities to connect their lines and sell or exchange Maritime Comminion v. Aktichologet Svenska elmcr-energy * " *. S. Ilep. No. G21, 74th Cong., ist ika Linien, 300 U.S. 2::S, 2 14. Ecss. 49 (1905).

                                                                                .                                                                           ,o I

i l e l { 1

20 21 The decision of the Court below efreetivelv destroys "" publie interest standant which Conprer.4 i[itendedto is enttroly cons. u tent with the Comm.' iu:on s estal- O g vern compujsory mterconnect. ion, mid substitutes lished pract. ice of evaluat.ing potentud anticompeti-Inste'ld tlic dincle narrow antitru3t standard. So t.ive elTeets m compuhory . m terconneet. tea proeced.mgs. rderluaie consideration was g.iven to the cont.inued . .. viabi!!ty of Otter Tail or its ability tu render ade- I,ake proceeducp the Conumssinn connuered the pes-quate remcc to other customers. 3.eu.her was there sible u.necquences of m.erensed nuan. .i ipal compet.i-any con.;ayerat. ion of whether some other power ar- "" " # I rangements might afrurd Letter and more economical 141). .Joreovei, m a recent m;tIcau.Smterconnectmn prott,et. ion, yet the (.emmiesian con.ydered b.ith of case, the Conun.isnan ovalunted the elle;ad competi- .. 11leso itun$ m t3!c orders .m its Otter Tail.I'lbow Lake Interconntetion pieceedings (App. 1001,1[1-0). In #" "" " " " ""#"" " "" contrast, the Court below asked only (1) if Otter the pubh. c utility required tom ."terconn ct. Gru.n c s- I rpai g }ind mo Woly power and (2)i .f Otter Tail had v d.ic Utililo.c.t Dem,.. v. I..we:Ja l'o<ccr Cor;>.' 40 E1.C trie(; to preserve that mcnopoly; it found allirmative 1227,1211, ath.rmed Gm.nexed. le Uta..,.Is.cs Dept. v. . . ansv crs to thera questions and therem. *n c r se anti- I.lon.da oi om Corp., nipra. The Ct umussmn har trust s.tala. tions. 'l.he Court d.isnuned Otter TaiPs thus comph.e d wa. h th.is Court.s requitement that an u cruelen thcory,, in.. ita general imdig:, abant the prob-agency utih.ze its n. un ight g:aned throu:;,a i xperience,, a31e futmc generating cap::eity of cluy cne comI'etina * #'"""""C O soutee ef . power and with the rtatement that thU . . ." .. the pubb." mmm'e e mterest. # ## f""t "2P#l7' I,coual " ""ea., "t;m s.,o,nunn. uthreat of losm.g bus. ness does not nutify or excuse Comnn..mn v.1 CA (,om munleatw.ur' lac.' supra at 03-Os. ,I,l e Comnu.<sion is c!carly the culy forum vio,.ating the law,, ( App. ,,0 21). Such a stcrd.e appli-cation of ant.i trust law cleatly does net satisfy this wh.teh can bring experience to bear .m evahiatm.-" ah. Court,s o,cc. .ulen that the encouragement of compeli-in dcter- , fact or.s, melud.mg anticompetit. 1 ivet.is.meelth a pubh,e tion L. not the Fmg,.e or controlh.ng reh.ance for gafn- ' _, ,

                                                                                                  "E"b" guarding the public inten st. Fed, rol Comnntnica-                        "utility
                                                                               """U.is" m  ." "the puhh.'I        .

e mterest. neconnec ion wi tions Comminion v. llCA Communiuitions, In'c., 31G U S. 80* 9'1-cr:d com t 4.houu not be nue to order Otb r Tail to inter-ec.nucct teith n!! williny somi<titors in unter to promote enm. i pctition. What enay soletactially ter.wn competition in tiinse j

      'In RC.1 Courminaientions thin Court ruh d that the regn.             area.s whac competition is the m.,in reliance fer n rula-lat ry cgea.y had to do more than acume the *Irnntares                     tion of the nml,ct ennue.1 Le automatie;dly uansplanted in                                      I ef competition before licosii.g radiotelegr.gih facilities                 areas in which actisc ref olation in entru.tta to an admin-which dup;icated existing facif lics. It follows that a fed-               tstrative agency. O!G U.S. at DS.

l 1 D

22 23

c. I'ut> tic l stritics sub/cet To TI,c commini,m*. Ju- sions reviewing a Commision onler and a judicial

          .rl3<ti.tien .wurd xor Itc sut+ci ro nuplicutire              antitruct decision, given tl.e dichotomy of public in-I.itifolion Uf .1ntics:r;t;:s titive intas s.               gcyggg gny ,,g,. g; gutitynyt (zgndgydg, ggn pay 3}yy The need to prevent the dual regulation of ecm-                    even a healthy publie utility und prevent it from tak-Imnies has been frequentif rteo;:nized. As one au-                     ing action nece.<sary to supply consumer # power thority accurately phmed the prob:cm:'                                 uccds. "[Tihe time has come when thi< duplicative and . . . anachnsniale system of dual nauMon Aould The doctrine of primary jurisdiction is essen-tial to eficctive regulation. Without it members                 be reexamined." UnitcJ SIaics v. El Paxo NcIzoal of reguh'ted indn<tries would be cuhjeet to the                  Gas Co., 07G U.S. G51, GG1 (reparate cii nion).

commarda of two snasters-the regidatory statuto The Court of Appeals for the District of Columbia as administend by the ngency and the antitrust Circuit has abo recognized this problem of muhiple laws as administered by the courts. forums in holding that thc l'ederal Connutmicatians These differcut' laws can be coordinated only it.the Commission has primary jurisdiction over a telephone Commission iu twrmitted to apply both. As this Court _ company's alleged prohibition against it.4 customt rs stated in Pon American li'. > fd Airrup4, supra at dealing wil the producer of a new phnoe device. 310, "if the courts were te intrude inderendently Certer v. American Tel. & Td. Co., 035 F."d 4SG with their construction of the antitrust laws, two. (CA 5), certiorari denied,25 U.S.100s. While such regimes n.ight collide." conduct might constitute a per se violation of anti-The decir,io't of the Cot:rt below permits parallel trust laws, the Court in Cme.r stres<cd its relativn-litigation in at bast two or more arenas, placing ship to nmtters within the Cummision's jurisdiction public utilities in the untenable puitien of having to and held that the Commision must be permitted to litigate the rame antitruet ismes in different forums, rule on the conduct's lega'ity, in order to pievent, op-subject to different standank and subicet to jndicial crational chaos. Id. at 10G. This Ccurt can and thculd review in dim rent Coarts of Appeals. The burden prevent such chaos in the instant care by giving effect. of meeting such heavy litigation demands can spell the .~ to Congress' delegation of primary jurisdiction crer ruin of a public utility, to the certain detriment of compulsory interconncetions to the Commir:. ion. "The consumers depending upon it to supply their 1owcr $ extravagant brandi.4hings of antitrustees, the repeti-needs. The probable incenristency in diLrent deci- tion of inflanunatory epithets of . . . monopolictie aim, the frequent incantation of the antitrust, laws,

    ' Von Ehren, tin: ,1utitrnt I, arcs & Readstra ludstrics:            and the fervent desire to 1:cep the case . . . in a Fed-tac Doct,iac of Primary Jurisdictio,r, G7 miry. L. Rev.                cral Court cannot extinguish the [ Federal Power Act)

D':0, 065 (1%1).

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. . ." Id. at 404. This Court should reverse the dai-sion of 'the Court bekne, which has "the efTect of For the reasons stated, the judgment of the Dis-placing the Department of Justice in the driver's tr.ict Court thouhl be reversed. scat even thou;h Congress has lodged primary regu-latory authority elsewhere." Unit.d Stata v. EI Paso . Respectfully submitted. Nettunal Gas Co., supeu at 0G1 (nimrate opinion). While advocating that the District Court erred in in the present ca:e tiirough its failure to apply the doctrine of primary jurialietion, we reec.gnize that LM E: l' $N Actsu:p Ge oa ,ct Cusuel, pubh.e utilit.ies may m some situations engage in con-duct rnising antitrivt inues which can be reached by C'[,]$;f,;,11l, , ,, ., litigation in the Di.ctrict Court. liowever, where tho Jo.m E. IlrtutacNra, A nomy, remedy scught is.-clently within the j.uri< dict. ion of nteral rou o con, minion, the Commission-such as a compu!5ory interconnec- _ tion-the ndministrative prccers should not be avoid-ed, and the Commissirn should be permitted to make its decision en the Luis of all public interest con.' I authorize the filing of the above brief. siderr.t! c, includimr the impact upan competition. Otherwiec, there can be no adequate protection for Emvin N. Cr.iswa.b, the broad consuming public which is the intended ##'N N " C'd " beneficitoy of the Federal l'uwer Act. At'at:sr 1072. m .~ .. 9 9 e

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Appendix D UNITED STATES OF c... :ICA FEDERAL POWER COMMISSION WHOLESALE ELECTRIC RATES - Denial of Rehearing Before Commissioners: John N. Nassikas, Chairman; Albert B. Brooke, Jr. , Rush Moody, Jr. , and William L. Springer. Southern California Edison Company ) Docket No. E-8176 ORDER DENYING REHEARING AND AMENDED PETITION TO INTERVENE (Issued September 21, lo73) On July 25, 1973, we issued an order in this proceeding which granted certain petitions to intervene with the condition that the participation of the intervenors would be limited to matters other than the anticompetitive activities alleged in their respective petitions. 1/ We found that the intervenors had not specified the facts relied on, the anticompetitive practices challenged, nor the relief which this Commission could grant. We stated that our decision was based on our Indiana and '.41chigan Electric Company (I&M) order, Docket No. E-7740 issued on May 31, 1973. On August 24, 1973, Cities filed an Application for Rehearing of that order, alleging that they complied with the requirements of the I&M order, and that this Commission was imposing unreasonably strict pleading requirements on Cities. Cities also seeks to clarify the issues they raised in their initial petition to intervene, to support Cities ' claim that it has complied with the I&M Order. On Augus t 10, 1973, Anza Electric Cooperative, Inc. (Anza), filed an Amended Petition For Intervention, which it states

       ,-   complies with the requirements of ou'r I&M Order. 2/

1/ Intervenors alleging such activities are Cities of Anaheim Azuza, Banning, Colton, and Riverside, California , j ointly (Cities) and Anza Electric Cooperative, Inc. (Anza). 2/ Southern California Edison Company (SCE) filed an Answer to An'za's pleading on August 27, 1973. Anza replied to that pleading on September 6, 1973. gu my

b ( Docket No. E-8176 I

              ,Both petitioners, at the outset, suggest that our order in 1&M must not be construed to impose overly strict pleading requirements on intervenors.        However, the 1&M order due: not impose unreasonably strict pleading requirements but rather sets forth guidelines to insure that an antitrust issue is presented which is capable of resolution by this Coumission i n t.he context of the proceeding at hand. As the Supreme Court in its Gulf States Opinion clearly states , its ruling in that case is          '

not to be interpreted as saying the Commission must always hold - a hearing on the antitrust issue. 3/ The Court also noted, without obj ection, that the Court of Appeals had observed that , the summary disposition of the antitrust argument in c proceeding might be acceptable provided such disposition does not go unexplained. 4/ Accordingly, our requirements in I&M are designed to elicit such information as is necessary in order for the Commission to determine whether a hearing is appropriate on the antitrust issue. We therefore do not believe we have burdened the parties with overly technical pleading requirements. Cities Application For Rehearing Citics' application is directed specifically to a " price I squeeze" which, they allege, could result from the proposed raten. Cities states that SCE has filed for an industrial rate increase before the California Public Utilities Commission (CPUC) as well as for the wholesale increase requested in this proceeding. Since the retail rate cannot be raised without a final decision by the CPUC, Cities argues that they will be in a " price squeeze"

 .       and will be unable to compete with SCE for industrial loads.

Moreover, Cities states that, even if both increases were made effective simultaneously, the proposed retail industrial rate would still be lower than the proposed wholesale rate, and could result in a permanent " price squeeze" sicuation. The specific relief Cities seeks in the context of the proceeding is, "that the Commissicn fix the rates of SCE to Cities at a level which will l at no tin.c res. ult in higher charges to Cities for any given large size load than would result from application of SCE's then effective large industrial retail rate" (Application, P. 4). 3/ Gul f Statew Utili ties (:o. , v . F.P._Q._, et al., 41 LW 4637, 4642 (1973). 4/ Ibid

                                                                       -r

i y Docket No. E-8176 Upon review of Cities pleading, we find no grounds for reversal of our July 25, 1973, order. The relief sought by Cities is beyond the authority granted to us under the Federal Po.ier Act. This Commission is directed by the Federal Power Act to

    . review rate applications to insure that the rates proposed are just and reasonable, and we fully intend to perform that function in this proceeding. SCE submitted a full cost of service as well as testimony and exhibits of their witnesses which they state support the increase. That evidence, including SCE's allocation of costs to its wholesale service, is, of course, subject to review and cross examination by the Commission Staff and the intervenors in hearing, as well as being subject to our review. Wholesale rates must recover allocated wholesale costs. Cities suggested relief is a rate related not to wholesale costs but rather related to SCE's retail rates.        However, SCE's retail rate level and the accounting and rate making principles underlying that rate level is under the sole jurisdiction of the CPUC and not the
  ,     Federal Power Commission.       Cities' proposal would subordinate our authority to set wholesale rates to the retail ratemaking juris-diction of the CPUC. We cannot permit our jurisdiction to be limited by events and regulatory affairs over which we have no control.      Cities' allegation of " price squeeze", in and of itself, does not constitute anticompetitive behavior by SCE given the fact that any rates we approve must be based on fully allocated wholesal costs.      To approve rates which recover less than those costs would produce grave consequences, since such action would be tantamount to imposing confiscatory rates on SCE and possible subsidization of SCE's wholesale service by SCE's retail customers.             Accordingly, we find that Cities petition for rehearing should be denied.

Anza's Petition We likewise find Anza's petition insufficient to justify an antitrust issue in the hearing on this proposed rate increase. Although Anza states that its amended petition satisfies the Conmission's requirements specified in the I&M order, in our opinion it does not. No facts are provided to support the charge of anticompetitive behavior. ' Anza makes' reference to a

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n ., U:(1 rc ,;rn rF.S OP 'AMC:1CA FEDEML POWEd COMv.1'iSIO!; [ d';')t,3 h, D j Wo .ww 13c farc Co: missioners : John N. Nassikas, Chairman; Albert B. Brooke, Jr. , Rusit rioouy , Jr. , and William L. Springer. WHOLESALE ELEC'fRIC RATES - Rehearing, Intervention, Antitrust Union Electric Company ) Docket No. E-8215 ORDER DENYING MOTION TO REJECT AND PERMITTING ADDITIONAL INTERVENTIONS (Issued January 3, 1974) on fia',' 18, 1973, Union Electric Company (Union) tendered for filing proposed changes in its FPC Electric f a r i f f '.-l- 2 and its PPC : tate schedule No. 49 Public notice of t! in filing was issued on June 18, 1973, with pr, tests or petitions to intervene .iue by July 5,1973. On July 16, 1973, the Cormiscion, inter alia, accepted the proposed changes for filing, suspended them for five months , established hearing procedures, and granted intervention to several petitioners. In the July 16, order we also deferred action on a July 5, 1973, motion,to rej ec t , protest, and petition to intervene j aintly filed by the t;ity o f Kirkwood, Mi.ssnuri, and the Citizens Electric Corporation (Petitioners), until all parties had the oppurtunity to answer as provided by Section 1.3(c) of the Com-mission's .iules o f Practice and Procedure. No responses to such pleading have been received. Petitinners request that the Canaission reject Union's filing as being contrarv to the requirements of the Federal Pouer Act. Specifically, Petitioners assert that the rate filing is discrir.- inatory because Union's date Schedule FPJ No. 4 7, governing sales between 1'nion an! Misswri 'Jtilities :;rpany (Misc 3uri) will continue in effect f,r n periad of two to ;cuenteen vears at rates not less than 1404 oelns th se propimed fer Kirhunod. l'hc Pet i - tioners also allei;e that the proposed U-2 rate i e, uninirly hi;;h when comnare.' to Uniin's direct industrial 'ates an:' will limit DC-24

6

   .u.eket No. E-8215                    retitioners' ability to compete for new industrial customers.
   .\ecording to Petitioners, this has the effect of squeezing them out of the market for industrial customers.

Upon review of the anticanpetitive allegations contained in Petitioner's motion, we note first that Union's Rate Schedule No. 47, of which Petitioners complain, consists of a fixed rate contract which cannot be modified by this Commission except upon the conclusion of an investigation. We cannot determine whether the alleged discrimination actually exists until the conciusion of the evidentiary hearing ordered in this docket. Following the heariu; the just and reasonable rate proper for Union to charge Petitioners will be determined. On the basis of the pleadings alone, we are unabic to determine whether the resulting rate will be greater than, equal to, or less than the rate Union charged under Rate Schedule No. 47. Whatever the eventual decision, Union's wholesale rate applicable to Petitioners will be determined on the basis of properly allocated wholesale costs and not on the basis of a pre-existing contractually fixed rate applicable to another customer in the same class. Consistent with the foregoing, evidence on this issue is proper for examination in this docket. As to the allegations'concerning price squeeze with regara to industrial sales, we shall refer to our recent order denying rehearing in the Southern California Edison Ccmpany case. 1/ There, we discussed at some length our position that remedies for alleged anticompetitive conduct similar to those suggested here are beyond the authority granted us by Sections 205 and 206 of the Federal Power Act. We shall adhere to that decision and limit the participation of petitioners as hereinafter ordered. Kirkwood also requests that the Commission reject the pro-posed W-2 rate as being in violation of Phase III price stabili-zation standards. In our July 16, 1973 order we indicated, in ordering paragraph (G), that Union has the responsibility to com-ply with the Economic Stabilization Act, the enforcement of which is charged to the Cost of Living Council and nor.this Commission. 1/ Southern Calif ornia Edison Comoany, Docket No. E-8178, Order issued Nove'mber 2,1973. 6 0 4

6

 ...chet No. E-8215                  retitioners ' ability to compete for new indus trial cus tomers .
 .\ecording to Petitioners, this has the effect of squeezing them out of the market for industrial customers.

Upon review of the anticompetitive allegations contained in Petitioner's motion, we note first that Union's Rate Schedule No. 47, of which Petitioners complain, consists of a fixed rate contract which cannot be modified by this Commission except upon the conclusion of an investigation. We cannot determine whether the alleged discrimination actually exists until the conclusion of the evidentiary hearing ordered in this docket. Following the heariu, the just and reasonable rate proper for Union to charge Petitioners will be determined. On the basis of the pleadings alone, we are unable to determine whether the resulting rate will be greater than, equal to, or less than the rate Union charged under Rate Schedule No. 47. Whatever the eventual decision, Union's wholesale rate applicabic to Petitioners will be determined on the basis of properly allocated wholesale costs and not on the basis of a pre-existing contractually fixed rate applicable to another customer in the same class. Consistent with the foregoing, evidence on this issue is proper for examination in this docket. As to the allegations ~concerning price squeeze with regara to industrial sales, we shall refer to our recent order denying rehearing in the Southern California Edison Company case. 1/ There, we discussed at some length our position that remedies for alleged anticompetitive conduct similar to those suggested here are beyond the authority granted us by Sections 205 and 206 of the Federal Power Act. We shall adhere to that decisicn end limit the participation of petitioners as hereinafter ordered. Kirkwood also requests that the Commission reject the pro-posed W-2 rate as being in violation of Phase III price stabili-zation standards. In our July 16, 1973 order we indicated, in ordering paragraph (G), that Union has the responsibility to com-ply with the Economic Stabilization Act, the enforcement of which is charged to the Cost of Living Council and nor.this Commission, 1/ Southern California Edison Company, Docket No. E-8178, Order issued Nove'mber 2, 1973. , I I 1

UNITED STATES OF AMERICA ' (' FEDERAL POWER COMMISSION OPINION NO. 681 Commonwealth Edison Conpany ) Docket No. E-7578

                                         )

City of Geneva, Illinois )

v. ) Docket No. IN-989 Commonwealth Edison Company )

                                         )

City of Batavia, Illinois )

v. ) Docket No. IN-991 Commonwealth Edison Company )

OPINION AND ORDER ACCEPTING RATE INCREASE SUBJECT TO CONDITION l Issued: January 7, 1974 l S DC-47

Dockat Nos. E-7578, at al. - 5. The Company filed with us a new cities' rate in 1970. The new rate involved an increase of about 10%. Six of the seven affected cities became intervenors and protested, focusing upon the demand charge in the higher (above 1000 kw) brackets, where the new cities' rate would be 10c higher than the industrial rate. The six Cities did not and do not contend that the rate to them is, in absolute terms, too high. That rate would result in an overall return to the Company of 5.89%, a figure accepted by the Administrative Law Judge as just and reasonable and not challenged by any party. The Cities instead contend that the 10c differential deprives them of the opportun-ity to compete with the Company for industrial loads.

6. Following a one-day suspension, the new rate went into I e ffect on February 2,1971. The following December 13, however, the Company's industrial rate was increased by action of the Illinois Commission, so tha t it thereafter became equal to or l higher than the cities' rate. The Cities' complaint, there fore ,

ceased as of December 13, 1971, but it continues to apply to the locked-in period of 314 days (about 10 months) from February 2, ' l 1971, to December 13, 1971. Very little money is involved. The increase is found by the Administrative Law Judge to be under 2% in the amount paid by each city to the Company, or about $71,000 for all of them for the ten months. The Question of Comparing a Jurisdictional and a Noniurisdictional Pate

7. The Initial Decision of the Administrative Law Judge rests on his conclusion that in a case involving alleged discrimina-tion, there is no bar to our comparing a rate that is subject to our jurisdiction with a rate that is subject to the juris-diction of a State commission. In this case, Commonwealth EdisoW s rate to its municipal custome.rs is subject to our jurisdiction; its rate to the industrial customers is subject to the jurisdiction of the Illinois Commerce Commission. On i the basis of the foregoing conclusion, plus his further con-clusion (discussed below) tha t the two services are comparable, the Administra tive Law Judge ultima tely ordered tha t Commonwealth Edison's rate to its municipal customers be reduced to a level no higher than its rate to its industrial customers.

4 I i I

                                                                                              , ~ . , - - - , , ,, - - . ,

Docket Nos. E-7578, et al. /

8. The issue of comparing jurisdictional and nonjurisdictional rates, and the remedy proposed in the Initial Decision, have lately been before us in Spuchern California Edison, Docket No. E-8176. In our Order of September 21, 1973, in tha t case, we stated:

We have no jurisdiction over SCE's /[outhern California Edison's7 retail rates, and we do not choose to open this hearing to an examination of the relationship between the wholesale and retail rates of SCE. Such an action would require a detailed analysis of SCE's retail cost of service. . .and would result in this Commission interjecting i.tself into an area in which it has no jurisdiction. (p. 4) In connection with the request of the municipal intervenors in that case, that the rates to them be no higher than Southern California Edison's rate to its large industrial customers, we said in part: Cities' proposal would subordinate our authority to set wholesale rates to the retail ratemaking juris-diction of the CPUC / California Public Utilities Commission 7. We cannot permit our jurisdiction to be limited by events and regulatory affairs over which we have no control. (p. 3)

9. Most recently, in our further order in Southern California Edison, issued on November 2,1973, we sta ted our views at greater length. The Anza Electric Cooperative ("Anza")

took the position that we should consider the retail business of a utility when we set rates that are subject to our juris-diction. We therein responded:

       . .  .we fully intend to design wholesale rates which recover properly allocable wholesale costs , and we certainly shall consider the cost responsibility of SCE's direct industrial sales in determining costs oroperly allocable to SCE's wholesale service. This is, however, an entirely different matter from Anza's suggestion tha t we mus t subordina te our jurisdiction to that of the state commissions by basing wholesale rates on retail ra tes.

Dock 3t Nos. E-7578, at al. / In a similar vein, Anza attempts to draw an analogy between our jurisdiction to eliminate discrimination and anticompetitive rate provisions between wholesale cus tomers , and wha t Anza asserts should be our jurisdiction to review discrimination between customers where one of the customers is nonjurisdictional. Our jurisdiction to eliminate discrimination and anticompetitive rate provisions extends only to sales which arte jurisdictional. Even i f we a s sume , a rguendo , taat we have the authority to review discrimination betwe.en customers where one of the customers is nonjurisdictional, the exercise of such authority would necessitate an extensive review of SCE's direct industrial rates to determine the basis upon which such rates were fixed. However, rates ) . fixed by contract with industrial customers are subject l to review by the state commission. Such contract rates may be established by utilizing such nrinciples as a reproduction-cost of investment, value of service, or the s ta te commission's recognition of the prooriety l of arms-length bargaining in contract ra te nego tia tions  ; vithout relationship to cost. This Commission, in I designing wholesale rates , however, does not intend to utilize any standard other than the cost-plus-fair-return standard traditionally apolied in determining just and reasonable electric rates pursuant to Section 205 of the Federal Power Act. Under Anza 's theory, ve would presumably be required to utilize the s ta te commission's standards and thus allow our jurisdiction to be subordina ted to tha t o f the sta te commission. On the other hand, if we were to simply accept Anza's l nronosition that SCE's wholesale rates should be keyed I to the direct sale industrial rates, ve would also be accenting the assumption implicit therein that Anza's rates are not competitive due to misdesign of SCE's rates. However, Anza's alleged inability to compete with SCE for indus trial loads may be a ttributable to its own retail rate design which may require Anza's industrial rates te bear a disproportionate share of the retail cos ts . (PP. 2-3)

i Dockot Nos. E-7578, at al. We thereupon affirmed our earlier conclusions that the relief l requested was beyond our jurisdiction, contrary to the purposes of the Federal Power Act, and inannropriate, inasmuch as the purpose of the proceeding was to inquirs into the justness  : and reasonableness of proposed wholesale rates. */ l

10. Our conclusions there apply here. In summary, if we  !

undertake to explore rates that are subject to the jurisdiction i of the Illinois Commission, we will be interjecting ourselves into an area tha t is beyond our business; we will be under-taking to make j idgments concerning the appropriateness of standards that we may not ourselves apply; and, if we were i to key jurisdictional wholesale ra tes to nonjurisdictional I retail rates, we would be sbdicating our own responsibilities, i In its Initia? Brief in the instant case, the Staff suggests ' tha t

            . . .non-jurisdictional business has relevance to the determinatien of jurisdictional rates, but only under                                             l unusual and special circumstances.       Where a compacj-

business is so comoletely integra ted tha t expenses and ) plant related to jurisdictional activities cannot be ) or have not been separately determined, then the non-jurisdictional business has obvious relevance in making the necessary judgments in order to establish jurisdic-tional ra tes. (p. 14) We agree. And conversely, as a general rule we will not be willing to explore questions that relate to rates or other matters that are outside of our jurisdiction. The Question of Comoarability of Service

11. A second conclusion , crucial to the ultima te decision o f the Administra tive Law Judge , is tha t the service offered by Commonwealth Edison to its municipal and its industrial cus tomers is comoarable. We think it is not.

 */

_ Cf. Duke Power Co. , Oninion No. 641, December 18, 1972, mimco , a t 5, 11-12.

                                               ~

             .g                                                                                                                -~

APPENDIX E {'

                                                                         ..                                                       j y                                                                                                                                  ,

UNITED DTATES 0F AMERICA . BEFORE TIIE FEDERAL PCWER C0:4'IODION .

                                                            ~                                          .

1!! Ti!E IWITER OF TIIE APPLICATIOI:3 0F: )

                                                                      )

The Detroit Edison Company and ) , Concumers Power Company for amendment ) of Order Authorizing Transmission of ) Docket flo.,.E-7 ecd Elcetric Energy to Canada and Cuper- )

       -       seding Prior Authorization, issued                     )

October 10, 1972 ) and I The Detroit Edison Company for further ) amendment of Presidential Permits ) iccued October 12,1953, l' arch 1, ) 1966 and September 15, 1972, for the ) ' construction, operation, maintenance ) Docket No. E- 616 /3 p'Sr; J L. and connection at the borders of the ) Docket No. E 7 q07 United States of facilities for the ) trar.: mission of electric enerCy between ) ti.c United States and Canada. )

                                                                       )              .

APPLICATION How come The Detroit Edicen Company (" Edison") and Consumers ( Power Company ( Con raers"), the applicant: herein, and respectfully pc-tition the Commission pursuant ',o Section 202(e) of the Federal Power Act and Executive Order 10l685, issued Septe::.ber 3,1958, as follows: (a) The exact 1ccal nones of the applicants are: P0 ', y r. 'Y/f Tile DER 0IT EDICOU C0!TAUY w

                                                                                                      ' ,y i                 <P,      ,

COCSMRS POWER CO!'PAhT \ .! oi  ! (b) CorresporIdence in regard to this application cha h N E ;ggN addressed to: i F. le.. Echoc , Cecret ary P. A. Perry, Secretary 1 The Det roit Edinon Co:npany Con:umers Power Ccmpany 7-000 Cocond Avenue Elf Wect Michi an C Avenue Jackcon, l'ichigan l 01

                                                                                          .i9:

Detroit,!:lchirftn 19076 4 l

m _h _ APPENDIX E UNITED STATES 0F A l. E R I C A . , I BEFORE Tite FEDERAL PCWER CO:0:ISSIO i .

                                                              ~                                                                      .

4 IN TIIE !"ATTER OF TIII APPLICAT10I S OF: ) t ) . 1 The Detroit Edison Company and ) Consumers Pow'er Company for amendment ) of Order Authoriair.g Tran,smission of ) Docket tio..E-7E. . W Electric Ener6y to Car.ada and Super- )

        -         seding Prior Authorization, incued                           )

October 10, 19'72 ) and i The Detroit Edison Company for further )

.                 amendment of Presidential Permits                            )

iccued October 12, 1953, tr. arch 1, ) 1966 and September 15, 1972, for the ) _ j construction, operation, minter.ance ) DocketNo.Eg616 _ [S t, DocketNo.Ej and connection at the borders of the ) j q07 - United States of facilities for the ) trar.cmisnion of electric energy between ) the United State: and Canada. '

                                                                                 )
                                                                                 )                 ,

APPLTCATION Ucu come The Detroit Edicen Company (" Edison") and Consumers [ Power Company ("Concumers"), the applicants herein, and respectfully pc-tition the Commission pursuant to Section 202(e) of the Federal Power Act and Executive Order 10h85, issued Septe::.ber 3,1958, as follows:

                                                                                                                                  .~

(a) The exact 1cgal names of the applicant are: p ( h . DOCil P O. P,T,9 , , 'D / } O T!!E DICROIT EDISO:i CO ?ANY w w ' ,y , a 'g'f+ CO::STERS POWER CO TA!W k ~O r,o .! pl

                                                                                                                                                           .c (b) Corre porIdence in regard to this application chal gk,WSQ3 N

( ~ addresned to: F. l/.. F.choe , Secret ary P. A. Perry , Secretary . I

                                  - The Det roit Edinon Co:npany              Concumers Power Company p000 Cecond Aver:ue                        P1f Wcat !41 chiCan Avenue Jackson,l'.ichigan Ji9: 01 Det.roi t , !/ ichig ui 4D6 4

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

e . . . - 8

8. Subsequent to the entablinhment of the third interconnection facility between Edinon and Hydro in 1%6, peld lond: on the systemn of the r A

applicantn have increa:ed by nbout fifty percent, and citen of generating ,

                                                                                                     ]

units have increased more than two-fold. The largest genernting unita in  ! l service in Michigan and Ontario in 1906 were rated at 330,000 kilowatt: 1 i and 282,000 kilowatts respectively. Ivo 800,000 kilowatt units are now in / service in Michigan and units rated at 800,000 and 1,150,000 kilowatts are now under construction. Similarly, Hydro hac several 500,000 kilowatt units in service and has 750,000 kilowatt units under construction. For reliable 8

       . operation of large interconnected networks such as those of Fdison, Concuners and Hydro, interconnection capacity between systems should be adequate to provide cmcrgency assistance during periods of multipic forced outeges of the larger generating unite in the system, as well as to provide significant sca-

+ sonal diversity exchange and other interconnection service: such as those described in paragraph 3 above. The construction of the proposed intercon- ] nection as described in paragraph numbered 6 above is required, in view of the additional and larger generation in both Ontario and Michigan, to main-tain the degree of system reliability which has previously been provided by the three existing interconnections between Edicon and Ontario. Morcover, as previously discussed, applicants have interconnections, and coordinate their activitics, with other cicetric utilitics in the United States under the co-called "MIIO" agreements, and Ontario Hydro has interconnections,  ; 1 and coordinates its activitics, uith Hincara "chawk and PASHY. The con-struction of the proposed interconnection will also be of significant value in maintaining reliability of.cicetric nervice in the areas served by the MII0 companien, Niagara.Kohawk and PASNY. 9 The effective interchange capability betwcon Ontario and Michigan is assumed to be the amunt of electric enerCy which can be trans-ferred over all availabic facilities (without exceeding circuit ratings) t .m...

9 follovitg the loss of nny singic or double circuit transmicnicn line. The thcmn1 limits of the exinting nn:1 prcposed in'Lerconnectionn between Fdicon and Ontario Hydro are significantly t:reater than the effective interchange capability, which is dependent upon a variety of operating conditions (for extmple, lead and generation distribution, availaoility of transmission facilities and scheduled interchanges between electric systems) in both the United States and Canada. This arises from the circumstance that Edison, Consumers and Ontario Hydro are part of a large and complex nctwork of interconnected electric systems, all of whose operations may be affected o-by actions in other parts of the United States and Canada. At the present time (with existing interconnections), the design interchange capability is approximately 1,450 MW for transfers to Ontario and 1,300 FM for trans-fers to Michigan. The present design interchange capability to Ontario is uI considerably less than the rates (2,200,000 kVA) at which applicants are currently authori:cd to export electric energy to Canada. The availability of the new interconnection proposed herein will . increase such design inter-change capability to 1,950 FM for transfers to Canada and 2,100 MW for \l transfers to Michigan. (These design interchange capability values assure r 400 VA of " Lake Erie circulating power"* on the interconnections between Edison and Ontario Hydro.) The significant increase in design interchange capability which will be provided by the proposed interconnection (500 MW to Canada and 800' M4 to Michigan) will only permit applicants to more i closely approach the rates of export currently authorized by the Commission.

• Circulating power is power which flows bet. ween any electric cyctem and other electric systems to which it is interconnected at more than one point. The characteristics of the electric systems of Edison, Consumers, Ontario Hydro and other systems surrounding, Lake Eric to which they are interconnected are such that a large circulating power flow generally.exista in a clockwice direction around Lake Eric.

9 i

e . . _ . .- -- _ - - ._

10. If the interconnection proponed herein in not const ructe!,

the operating flexibility avn11able to applienntn throuch coordination with Ontario will bc Inrgely lost, becnuac rates of export approaching those cur-rently authorized crumot be conciatently attained over the existing and limited intercennection facilities. More cerious, a failure to uprate the'* interconnection facilition between Edicon and Ontario liydro could eventually prevent the paral.lc1 operation of the systems in MichiCan and Ontario.

11. The benefits provided by import-export with Ontario Hydro capability could alternatively be provided by the installation of new gen-crating capacity by applicants; however, the coats of instal"l'ing such ncv

   /*

generating capacity crc approxbnntely 20 times the cost of installinq the new interconnection facilitics propoced herein and would reprecent an un-neces:ary and duplicetive cmployment of resources better committed elcewhere.

12. .The cmount of cicetric cncrcy which applictnt are currently authorized to export, and which applicants do not herein seek to increase, represents a very small percentage of applicants' total annual production of electric energy, amounting to an estimated 6.3 percent of anticipated 1973 production, 6.0 percent of anticipated 1974 production and 4.1 per-

   '"     cent of anticipated 1930 production. More importantly, there vill be offcet against these exports of electric energy, imports by applicants from Ontario l{ydro under the arrangements described in paragraph nur.bered 3 above. Het deliveries of electric energy on an annual bacis will normally be only a                   i small fraction of applicants' annual export nuthoriration. A compilation                  j of gross receipt of electric energy by applicants from Ontario Hydro and gross deliveries by applicants to Ontario IWdro over the past five years is               l contained in Exhibit X-3 attached hereto. As shown in this exhibit, gross receipts by applica' nts during the 5-year period ended December 31, 1972 have exceeded grocs deliveries by almnat two billion kilouatthour:.
                                               - - -                                  . _ - - -      i

11 An ontbante of future deliverlen of electric encrr,y betwcen Appliennts nnd Ontario llydro is chcun in l'xhibit X h attached hereto. As shown in this exhibit, appliennts' potentini annual exportation or importation of , cicctric energy from and to Canada may approach 3,700,000 mecavatthourn. 13 For the reasons described above, the construction of the proposed interconnection, as doncribed in parngraph numbered 6 hereof, and the transmission of cicctric encrcy an proposed herein, will improve the reli6bility and sufficiency of, and will make more economi, cal, the supply of electric encrcy in both the United States and Canada, and ({. r-most particularly in Michigan, Ontario, and New York. Further, the in-creased design interchange capability will not impede or tend to impede coordination of electric energy supply in the United States, but will rather greatly, improve applicants' ability to coordinate their operations k._L

    ,8 with other electric systems to which they are intercennected.

14 The total cost of the prcposed interconnection and related facilitics is estimated to be approximately $7,350,000, of which $3,050,000 will be spent in respect of facilitics to be constructed in the United N:p-States. All costs of the proposed interconnection and related facilities will be shared equally by (i) applicants and (ii) Ontario }{ydro.

15. Additional Inforr.ation (a) The nource of the electric energy to'be exported by applicants as proposed herein, as in the case of the energy currently exported by them, will be appli,ennts' total resources, includinc enercy generated or purchaned by thtm. All cicctric energy exported will not impair the ability to. supply the requirements of accessibic United States markets at the time of its exportation.

t I t

t

  ',                           CONSUtERS POWER COMPANY MIDLAND UNITS 1 AND 2 AEC DOCKET NOS. 50-329A, 50-330A VOLUME I:

Number Pages Doponent 1001 37 Original Exhibits of Janjai Chayavadhanangkur . Additional Revenue from 1002 1 180,000 k.w. unit 1004 11-15', 21-28, 44-50, Alphonso H. Aymond -- Deposition 55-57, 83, 52, lil-112, 124-125, 137-138, 154-155, 166-271 1005 1-111 Harry R. Wall -- Entire Deposition 1006 27-32, 48-67, 187-Robert L. Paul 196. 1007 14-17, 26-27, 94-127, l B. G. Campbell , 136, 168-180, 193-  ; t

                                                             !   201, 221-222, 244-248,  j
                                                '                269-271, 462-463, i                           l 502-505, 556            1 i     1008      38, 49-57, 76-79, William Jack Mosley.

91-92, 121-132, 189 - l f' 191, 198-207, 214-215, 225-229, 283-285, 295-e I 300, 313, 321-322 l 1009 18-20, 37-39, 40-42, W. A. Hedgecock l

                                                      ~

62-63 1010 5-6, 10-20, 25-32, l H. Kaiser 37-42, 56-57, 59-62, 92-100, 146-147, 155-6 156

/~ Number Paaes VOLUME II 1016 10, 127-142 Robert C. Conden -- Deposition DISCOVERY DOCUMENTS 1017 3 Letter, S. K. Martens to Mayor and Mem-berc of the City Council, Grayling, Michigan, dated August 24, 1960 9 Letter, Romney Wheeler to B. G. Campbell 1018 et al; re- meeting the competitive challenge, dated October 29, 1965 1019 3 Survey of -Electric Companies with competition in certain cities; re-Jackson, Michigan 2 Balfour to file - Memo - re- Discussions 1020 - on August 9, 1963 about Rogers City Power Company, dated August 13, 1963 1021 1 Letter, Unsigned to A. H. Aymond; re-Acquisition of customer-owned line, Camp Grayling 1022 8 Letter, R. L. Paul to Ralph Hahn; re-Analysis of Wolverine Electric Coopera-tive proposal to City of St. Louis, dated August 17, 1965 1 Memo, R. L. Paul to A. H. Aymond, et al; 1023 re- Purchase offer to City of St. Louis dated July 13, 1965 e

l - DISCOVERY DOCUMENTS (cont.) Number Paaes Memo, R. L. Paul to File; re- 1024 2 Suggested purchase price for Alpena Power Company, dated May 28, 1971 Letter, J. B. Falahee to W. R. Boris; 1025 14 re- Agreement to purchase the City of Charlevoix's municipal electric facilities, executed on January 31, 1963, dated February 1, 1963 Letter, T. P. Martin to Maurice 1026 4 Gerhard; re- City of Charlevoix Earnings, dated January 31, 1963 Letter, B. G. Campbell to Mayor and 1027 2 City Council, Charlevoix, Michigan, dated December 13, 1962 Letter, J. W. Kluberg to B. G. Campbell 1028 1 re- City of Charlevoix, dated August 11, , 1961 Letter, J. W. Kluberg to D. E. Karn, et 1029 1 al; dated June 22, 1961 Statiatics and Information, City of 1030 15 Charlevoix, prepared August 1961, _ Consumers Power Company Resolution adopted by Allegan City 1032 1 Council on March 14, 1966 Letter, A. H. Lee to Mayor and Council 1033 3 of City of Allegan, dated June 13, 1966 , Minutes, Allegan City Council Meeting 1034 1 dated July 28, 1966 -

DISCOVERY DOCUMENTS (cont.) Number Pages Resolution adopted by Allegan City 1035 1 council on August 8, 1966 Letter, Signature illegible to B. G. 1036 8 Campbell; re- Benefits to the City of Allegan from the sale of its electrical system to Consumers Power Company, dated May 27, 1966 Letter, B. D. Hilty to Judd L. Bacon, 1037 1 dated December 13, 1965 Resolution adopted by Petoskey City 1038 1 Council on November 15, 1965, dated December 8, 1965 Letter, J. W. Kluberg to B. G. Camp- 1039 1 bell; re- Kogomic Area Distribution Facilities, dated October 20, 1965 Telegram, B. D. Hilty to City Commission 1040 1 Petoskey, Michigan, dated October 29, 1965 Letter, R. L. Paul to Ralph Hahn, dated 1041 3 September 22, 1966 Letter, R. L. Paul to B. G. Campbell, 1042 9 dated September 19, 1966 C" l Letter, R. L. Paul to G. R. Lambke, 1044 1 dated July 29, 1965 l Letter, R. L. Paul to Ralph Hahn, re- 1045 7 Approved proposal to be submitted to the City of St. Louis for the purchase of its electric system, dated July 29, 19,65 I l

e DISCOVERY DOCUMENTS (cont.) Number Pages Letter, C. E. Waits to W. J. Jeffer- 1046 1 son, re- Appraisal of City of St. Louis' municipal system, dated July 9, 1965 Report and appraisal of electric distri- 1047 28 bution system of St. Louis, Michigan dated July 6, 1965 Report of examination, City of St. Louis 1048 15 electric utility, St. Louis, Michigan dated June 30, 1965 Letter, J. L. Bacon to B. D. Hilty; re- 1049 1 Kegonic Line Purchase, dated December 24, 1965 , Notes, Value of Municipal Electric 1050 1 System, (Allegan, St. Louis), dated 1966 Notes, Incremental Expense Factors 1051 1 Notes, Value of Municipal Electric 1052 1 System, (St. Louis) Notes, Value of Municipal Electric 1053 1 System, (Allegan) Letter, unsigned to Mr. Nash, dated 1054 1 April 18, 1967, re- letter of March 23, 1967 on proposed new contract for electric service beyond May 21, 1967 Letter, H. F. Small to A. F. Brewer, 1055 3 dated November 21, 1966, re- Michigan. Pool Study Letter, Keith B. Norris to Al Southwick 1056 2 dated January 23, 1963, re- Lakewood Public School

s

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DISCOVERY DOCUMENTS (cont.) Number Pages Generation Reserve Comparison 1058 1 1060 7 Memo, Division Managers from R. D. Davey, Jackson, Michigan, dated September 27, 1971 1061 4 Comparison of Estimated Annual Power Costs Platte, River Hatchery, Phase I, II and III R. L. Paul to State of Michigan 1062 1 Letter, Department of Conservation, Attention: Mr. H. C. MacSwain, Lansing, Michigan dated November 12, 1968 Letter, Matthew L. Bruce to R. L. Paul, 1063 2 dated January 23, 1966 Letter, D. T. Egly, R. R. Pegg to R. L. 1064 1 Paul, dated September 14, 1971 File Memo, re- Northern Electric Coopera-1065 1 tive, dated August 27, 1964 Letter, Leonard Lamb, et al., to B. G. 1066 1 Campbell, dated October 15, 1965 Letter, M. A. Beach to A. H. Lee, dated 1067 1 October 1, 1969 Letter, R. L. Paul to F. M. Hoppe, dated 1068 2 June 22, 1970 Letter, G. Elenbaas to R. L. Paul, 1069 2 dated June 17, 1970

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Letter, B. D. Hilty to H. R. Wall, 1070 l dated February 12, 1969

a DISCOVERY DOCUMENTS (cont.) Number Pages Letter, W. C. Allen to R. L. Paul, 1071 3 ~ dated June 27, 1969 Annual Report, Top-O-Michigan, REA 1072 1 1961, dated April 17, 1962 Letter, Jensen to Paul, dated February 1073 1 17, 1970, re- Petoskey State Park Letter, Paul to Campbell, dated July 28, 1074 1 1969, re- City of Harbor Springs Letter, Bruce to Stutesman, dated June 1075 2 10, 1969, re- Wholesale power supply to Coop. Memo, Paul to Campbell, dated January 16,1076 1 1968, re- purchase of Presque Isle Electric Coop. Letter, Eugene J. Yehl to Glen Phillips 1077 2 re- Brook Hollow Recreational Project Barryton, Michigan, dated April 20,

• 1965 Memo, E. H. Kaiser to A. H. Aymond, etal 1078 1 re- Letter Agreement, dated January 26, 1971(1079)

Letter, E. B. Easson to W. J. Mosley, 1079 5 et al; re-Agreement dated January 5, 1971 Study MIIO System Performance during 1080 9 extreme emergencies (1970 System) Draft, Direct Testimony of W. J. Mosley 1081 20 m p-/ f - Letter,_H. C. Reasoner, et al; re- 1082 1 Consumers Power Co. - Detroit Edison Company, dated January 21, 1969 l Number Paaes DISCOVERY DOCUMENTS (cont.) 1083 2 Letter, H. R. Wall, et al; to Toledo Edison Company, dated October 16, 1968 1084 1 Letter, H. R. Wall, et al; to Toledo Edison Co., dated October 16, 1968 1085 10 Study, Interconnection effects on Michigan reserve requirements, dated September 18, 1963 1 Letter, E. H. Kaiser to G. L. Heins, re- 1086 Memo, (017171 - 017172), dated June 23, 1972 1087 2 Memo, E. H. K. to file; dated June 23, 1972 1088 3 Memo, E. H. Kaiser to file; re- MIIO Companics responses to Consumers Power initial offer to lease pumped storage, dated September 27, 1967 1089 2 Letter, G. L. Heins to E. H. Kaiser, et al; re- Lulu-Allen Junction 345 KV line, dated February 25, 1972 1 Letter, G. L. Heins to W. J. Mosley; re- 1090 Argenta-Alkhart 345 KV double circuit tower line, dated October 10, 1969 Letter, H. R. Wall et al to T. J. Hagel 1091 3 dated October 29, 1969 Letter, W. Jack Mosley to J. H. Campbell 1092 2 re- Cost sharing for Argenta-Elkhart line, dated March 4, 1970 ,

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1093 2 Study, E. H. K. to filer re- MIIO Group Prototype generation expansions, _ dated March 1963 Memo, Possible solution to Michigan-AEP- 1094 1 CE problem, dated February 10, 1969 l

       .                                                                  Pages Number _

DISCOVERY DOCUMENTS (cont. ) 1095 1 Memo, A. H. Lee to H. P. Graves, et al; re- 17595, dated August 18, . 1967 1096 1 Letter, Mary A. Simons, Executive Secretary, Allegan Area Chamber of Commerce to Federal Power Commission dated August 17, 1967 1097 1 Letter, R. A. Condon to M. W. Balfour; re- Alpena Power Company, dated July 31, 1964 1098 1 Letter, Ralph G. Fletcher to Louis A. Vaupre, dated July 28, 1964 1099 2 Letter, B. G. Campbell to A. H. Aymond, dated May 19, 1966 2000 1 Letter, R. L. Paul to R. A. Lamley, dated April 22, 1966 2001 15 Study Draft, M.C.R. to File; re-Michigan Pool Data for EEI Task Force on Power Capacity for Pooling, dated July 20, 1959 1 Map / Chart, Michigan Pool Interconnections 2002 as of December 1958 2003 1 Letter, Leo W. Hoffman to H. P. Graves, 17858 - 17861, dated November 2, 1967 2004 3 Letter, Leo W. Hoffman to Editor, Allegan News Gazette 2005 1 Letter, William B. Barrons, City Manager, City of St. Louis to Ralph

• Hahn, dated January 11, 1966 ,

1 Letter, William B. Barrons, City Manager 2006 City of St. Louis to Ralph Hahn, dated April 20, 1965 ( 1 Letter, R. L. Paul to Division Managers 2007 et'al; dated July 8, 1966 _g_ l

DISCOVERY DOCUMENTS (cont.) Number Pages

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Letter, E. H. Kaiser to R. A. Lamley 2008 1 et al; re- Supplement C-4 (18247-18262), dated February 19, 1970 Supplement C-4 Consumers Power- 2009 17 Detroit Edison Electric Power Book - Pool Unit No. 4 Capacity and Energy Sharing and Costs, approved as revised on July 4,1969 and August 7, 1969 Letter, H. R. Wall'to H. C. Reasoner, 2010 2 dated March 21, 1972 Letter, E. H. Kaiser to A. K. Falk; re- 2011 1 18274-18276, dated March 21, 1972 Draft, E.H.K. to file; re- New Consumers 2012 a Edison Agreement, dated March 17, 1972 Memo, W. J. Mosely to U.R.W., re- 18310- 2013 1 1G322, dated February 3, 1965 Study / Presentation Consumers Power 2014 13 Detroit Edison Powr Pool, dated January 15, 1964 Letter, H. P. Graves to Hubert H. Nexon, 2015 3 dated February 25, 1966 Minutes Regular Meeting of the Board of 2016 2 Directors of the Rogers City Power Company, held on July 25, 1966 Minutes, Special Meeting of the Board of 2017 2 Directors of the Rogers City Power Company, held on November 10, 1966 Minutes, Special Meeting of the Board of 2018 2 Directors of the Rogers City Power-Company, held on November 16, 1966 . Minutes,IMiscellaneous 2019 3 l

1 Chart, Rogers City Power Company's 2020 4 Customers Receiving Increases when billed on Consumers Power Company's Rates, 12 months ending November 1966, dated May 23, 1967.

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DISCOVERY DOCUMENTS (cont.) Number Pages Chart, CE Nuclear Fuel Cycle Cost 2021 1 Estimates, dated June 1, 1966 Letter, W. H. Whitley, publisher, 2022 1 Presque Islo County Advance to B. G. Campbell, dated July 15, 1964 Letter, A. H. Aymond et al to W. H. 2023 3 Whiteley, Precident Rogers City Power Company, dated July 8, 1964 Study, RLP to File; re- City of 2024 10 Hillsdale Power Supply and Cost Study, dated December 29, 1966 Memo / Address RLP to file; re- Munici- 2025 7 pal, REA, Other Wholesale Power Business and_Related Problems, dated Nay 17, 1966 General Memo, RLP to File; re-review 2026 4 of the City of St. Louis Report on Electric Power Survey and Analysis of Total Power Purchase, dated May 4, 1966 a

• v o w m e - 3 E .:

Letter, M. H. Gerhard to B. G. Camp- 2027 1 bell; re- City of Grayling, dated May 17, 1961 Letter, R. L. Paul to John N. Malone; 2028 1 re- Contract No. 65-05-DR-(5)-20014, dated November 4, 1971 Letter, Gerritt Elenbaas to Robert L. 2029 1 Paul; re- Bill of sale for East Bay View Electric distribution system; dated January 18, 1966

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Memo, R. L. Paul to W. C. Allen.; re- 2030 1 Camp Grayling - Purchase of distribu-tion line, dated July 9, 1969 i Memo, R. L. Paul to B. E. Hagen; re- 2031 1 Bill of Sale, Camp Grayling Line, dated June 5, 1969

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Study, City of Portland: Wholesale 2032 6 r. Electric Service Proposal, dated November 9, 1971 Study, City of Potoskey, Mi .higan: 2033 3 Increased Electric Power Supply, dated July 8, 1969 Study, Study and Proposal for Increased 2034 2 Wholesale Power Supply to the City of Potoskey, Michigan Letter, A.H.L. to President and Council 2035 5 of the Village of Paw Paw, Michigan; re- Wholesale Contract Rate for Re-sale Service / Partial Purchase, dated October 10, 1966 Letter, A. H. Lee to B. G. Campbell; 2036 1 re- 19798, dated January 5, 1966 Letter, N. L. Adamson, Village Clerk, 2037 1 Paw Paw, Michigan to Arthur Lee; re- 19798, dated January 4, 1966 Resolution, Village of Paw Paw, Michigan 2038 1 adopted December 27, 1965 and dated January 4, 1966 Study, (incomplete) City of Hillsdale: 2039 3 Power Supply and Cost Study, dated December 30, 1966 Study, Consumers Power Company Purchase 2040 3 Proposal City of Grand Rapids Street Lighting System Study / Memo / Brochure, Some Questions and 2041 8 Answers on Electric Rates and Service in Bay City Latter, W.E. Sherwood to M.H. Gerhard;nt- 2042 1 City of Holland: Information Regarding Municipal Utilities, dated February 15, 1962

Numbers Paaes DISCOVERY DOCUMENTS (cont.) Charts, H.J. Neal to file; re-Competi- 2043 2 tion Ecport, dated February 23, 1966 Study, Bay City Proposal, etc. 2044 13 Letter, L. A. Vaupre to W.A. Hedgecock; 2045 1

            .       re- City Light Department, Bay City, Michigan (21917-21918), dated Septem-ber 27, 1965 o

Memo, L. A. Vaupre to file re- Ad Hoc 2046 1 Meeting, dated September 10, 1965 Memo, L. A. Vaupre to file; re- Bay 2047 1 City Light: Advertising Program-Competitive, dated September 27, 1965 Letter, L. A. Vaupre to W. J. Jefferson 2048 1 re- Ad Hoc Committee Report: Bay City Electric Light Department, dated July 23, 1965 Letter, L. A. Vaupre to W. A. Hedgecock 2049 1 dated June 24, 1965 Letter, L. A. Vaupre to M. W. Balfour; 2050 1 re- Kiesel Substation, dated June 4, 1965 Study, Report on Bay City Co'mpetitive 2051 13 Situation, presented by W. J. Jefferson et al; dated April, 1965, Section II (13 pages). , Letter, W. J. Jefferson to L. A. Vaupre, 2052 1 dated March 26, 1965 Mn no, R. D. Davey to Division Managers 2053 1 re- 2054, dated July 26, 1971 Chart, typical net monthly bills for 2054 1 residential electric service, dated July 1971 I i l i j i i

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D7GCOVERY DOCUMENTS Numbers Paces Letter, Uncigned to B. G. Campbell, dated 2056 1

 ~
       -              December 6, 1967 Study, City of Pontiac Electric Study,1970        2057     5 Letter, B. D. Hilty to C. A. Mulligan; re-        2058     2 East Bay View or the Kegonic Area, dated December 3, 1964 Letter, B. G. Campbell to D. E. Karn; re-         2059     2 Kegonic Line Acquisition:     Pctoskey dated January 14, 1965 Letter, R. J. Van Ess to William Reid; re-        2060     2 Hydroelectric plant abandonment losses, dated April 18, 1966 Memo, G.L.H. to file; re- Rural Electrifi-        2061     3 cation Association Study, dated January 23, 1964 Letter, J. W. Kluberg to B. G. Campbell; re-      2062     1 City of Grayling, dated August 11, 1961 Study, City of Grayling: General Information      2063     4 and Physical Inventory Study / Memo, A.M.N. et al; re- Economic          2064     3 Analysis of Southern Interconnectionr 1969 versus 1970, dated July 17, 1964 Memo, Illegible to R. L. Paul et al; re-          2065     1 2066, dated August 12, 1968 Draft, No. 2 Supplement E; Principles Relat-      2066     4 ing to Extension of Pooling Privileges to Third Parties Minutes (extracts) Meeting of Board of Direc- 2067          1 tors of Consumers Power Company, held on April 11, 1972 Service. Schedule E, Sale of Portion of Gen-      2068   10 erating Capability of Ludington Pumped Storage Plant by Consumers to Commonwealth, under Agreement dated March 1, 1966 among Consumers Power Company, et al.

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3~ DISCOVERY DOCUMENTS (cont.) Number Paaes Memo, B. G. Campbell to Executive Officers 2069 1 et al; re- 23555-23562, dated December 3, , 1965. - - . . - Letter, R. L. Paul to Division Managers; re- 2071 1 23723-23724, dated March 28, 1966 2072 2

            , Exhibit A, Case No. U-2291 Rules Governing the Extension of Single-Phase Electric Service in Areas Served by Two or More Utilities Rate Instruction Bulletin No. 13-5; re- Rate    2073        6 Schedule MPSC No. 7-Electric, dated April 14, 1966 Letter, H.J. Jensen to R.C. Youngdahl; re-      2074        1 Petoskey State Park, dated February 17, 1970.

Service Inquiry No.189, Village of Paw Paw, 2075 1 dated September 22, 1966 Letter, Harry R. Wall to A. H. Aymond et al; 2076 1 re- Pumped hydro discussion with MIIO Representatives (024177 - 024184), dated August 23, 1967 Data, Blue Ridge Pumped Storage, dated August 2077 4 30, 1967 Memo, Review of City of St. Louis Report 2078 2 Memo / Study, Northern Michigan Electric 2079 15 Cooperatives, dated February 7, 1963_ Memo, A.F.G. to H.R.W., et al; re- City of 2080 1 Big Rapids Surplus Power, dated November 21, 1962

(

f". Pages_ DISCOVERY DOCUMENTS (cont.) 2081 1 Letter, Tom G. Fletcher to A. H. Aymond, dated May 25, 1971 2083 1 Letter, Tom G. Fletcher to A. H. Aymond, dated August 24, 1971 2082 5 Charts, Alpena Power Company, dated July 25, 1969 2084 1 Letter, Tom G. Fletcher to A. H. Aymond, dated June 15, 1971 2085 1 Memo, " Virginia" to A.H. Aymor_d, dated November 9, 1962 2086 2 Letter, Unsigned to Nolan E. Isom, Onaway News, Onaway, Michigan; re-2087 dated April 5, 1966 2087 6 Charts, Comparison: Consumers Power Comp./ Presque Isle Electric Corporation /Presque Isle Electric Cooperative, dated April 4, 1966 2088 1 Letter, Earl C. Hurley, Manager, O & A Elec-tric Cooperative, dated December 7, 1965 1968 2089 2 Lett9r, Paul to Hilty, dated March 19, - . 2092 1 Brainstorming the Ad Hoc Committee; Vaupre Vaughn, Shepart 2093 1 Letter, Mainey to Vaupre, dated August 25,

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1967 _ 9 C DISCOVERY DOCUMENTS (cont.) Numbers Pages Letter, Shepart to Bevan, dated April 8, 2098 1 1968, re-Electric Boundary Lines Statement, Consumers Power Company, re- Bay 2103 2 City Light department Memo, Unsigned to A. Mulligan, dated May 22, 2104 1 1962 Letter, Kluberg to Vaupre, dated October 2, 2105 2 1964, re- Bay City Report Letter 1-1-lega. ole to "whom it may concern", 2106 1 dated May 1, 1962, re- Bay City Letter, Unsigned to A. H. Lee, Kalamazoo, 2108 1 dated August 13, 1968; re- letter from C.C. Burns to F.C. Voss of August 1, 1968 re- requested information on City of Allegan Telegram, dated July 29, 1964, from Louis 2109 1 L. Sappanos to Consumers Power Co., re-South Haven Power Plant h

C.

• DISCOVERY DOCUMENTS (cont.) Number Pages Memo from E. L. Lance, Consumers Power 2111 1 Company, re- Comments on Allegan City Light Letter from A. H. Lee to C. A. Mulligan, 2112 2 dated October 14, 1960, re- News Clip from Kalamazoo Gazette dated October 13, 1960 Questions and Answers, re- Bay City 2113 1 Light Department Questions and Answers for Charlevoix 2114 11 Boo'klet, B. D. Hilty, Consumers Power Company Charlevoix Booklet: Questions and Answers 2115 5 B. D. Hilty, Consumers Power Company Report on Power Supply of South Haven, 2116 2 Michigan, dated November 1963 Memo, dated August 24, 1966, re- Consumers 2117 2 Power Company's offer to the City of Allegan for purchase of electric distri-bution Charts, City of Allegan to Consumers Power 2118 2 Co., Comparisons of water heating rates Letter, B. G. Campbell to A. H. Aymond, 2119 2 dated May 19, 1966, re- Appraisal of Allegan City Electric System by Consumers
• Power Company Facts pertaining to Electric Department 2120 2 Operations, undated j u - ..'. ...m.

l Some Questions and Answers on Electric 2122 8 l Rates and Service in Bay City (s Memo concerning advantages of leasing a 2123 1 city municipal electric system rather than making an outright purchasing offer l

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DISCOVERY DOCUMENTS (cont.) Number Pages Handwritten note, re- Bay City Area 2124 1 Detroit Edison Company - Consumers Power 2125 2 Company- Service in Areas adjoining the tuo companies Letter to B. D. Hilty to Mayor, City 2126 1 Council of Charlevoix, dated March 17, 1961 Letter, City of Charlevoix to Consumers 2127 1 Power Company, dated August 7, 1961, re- survey of the Charlevoix Municipal Electric Utility Memo, R. L. Paul to files, dated June 12, 2128 1 1970, re- Farm River Township Questionnaire " Population trend survey", 2129 1 Traver'sc City, Michigan M. - Letter, Willis C. Allen to Omar Garbenson, 2130 1 dated April 9, 1968 Memo, W.K. Mar'kus to W.C. Allen, re- Tra- 2131 2 verse City Letter, Unsigned to B.D. Hilty, dated 2132 1 April 16, 1962; re- Professional Club Subdivision Meeting, Memo Rogers City 2133 2 Letter unsigned to C. A. Mulligan, dated 2134 1 October 16, 1964, re- Traverse City Letter unsigned to George G. Schmid, dated 2135 3 May 25, 1966 Memo, City of Zeeland - 2136 1 Letter, G.M. to W.N. McClelland, dated 2137 1 September 28, 1966 ks Letter, R.L. Paul to A.C. Fagerlund, 2138 1 dated July 10, 1967; re- City of Hart l 1

DISCOVERY DOCUMENTS (cont.) Number Pages ( Letter, Philip C. Webb to Board of 2139 2 Trustees, Glen Oaks Community College Centreville, Michigan, dated January 10, 1966 Letter, Philip C. Webb to Norman Haas, 2140 2 dated February 6, 1967 l l Letter, P. C. Webb to G. W. Howard, et al; 2141 2 dated December 28, 1966; re- Glen Oaks , Community College Letter, Robert E. Brewster to Dr. Eleanor 2142 2 M. Gillespie, dated November 22,19' 66 Questions & Answers, Power Plant Expansbn 2143 1 Biographical Data, Paul H. Todd 2144 1 Memo, E. A. Riedel to C. J. Herron, dated 2145 1 May 12, 1972; re- Traverse City Letter, B. D. Hilty to Lyle E. Beattie, 2146 1 dated March 18, 1968 Letter, W. A. Hedgecock to G. W. Howard 2147 1 et al; dated November 1, 1965 Memo, B. G. Campbell et al; to R. L. Paul 2148 1 dated August 19, 1968 (?) re- Draft No. 2, Supplement E, Power Pool Agreement Memo, W. J. Mosley et al, to R. C. Paul, 2149 1 et al., dated September 11, 1968, re- . Pooling Agreement ) Letter, R. L. Paul to W. C. Allen, dated 2150 2 March 26, 1970, re- Cherryland Cooperative

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Memo, R. L. Paul to R. A. Conden, et al., 2151 2 dated February 20, 1970, re- Status of Appraisals ( Memo, L. L. Novak to H. J. Jensen, et al., 2152 1 dated February 18, 1970; re- Appraisal Review 20 -

o .,^s

• 1 Number  ? aces DISCOVERY DOCUMENTS (cont.)

2153 5 Minutes, Meeti0e of Executive Committee e of Board of Jirectors 2154 1 Memo, C.E.M. to file, dated October 31, 1969; re- City of Manton Purchase 2155 1 Memo, R. L. Paul to H. J. Jensen, et al., dated January 6, 1970; re- City of Eaton Rapids 2156 1 Letter, R. A. Conden to B. G. Campbell, dated April 1, 1968; re- Alpena Pouer Company 1 Letter, B. G. Campbell to Executive Officers 2157 et al., dated December 3, 1965 -: 2160 1 Routing slip, unsigned to G. W. Patterson re- South Haven (handwritten notation) dated April 23, 1962 2161 1 Letter, R. E. Doyle, Jr., Indiana and Michigan to V. M. Marquis, dated April 18, 1962 2 Letter, V. M. Marquis to Mr. Coo ^k, re- City 2162 of South Haven, Michigan, dated April 19, 1962 2163 4 Deposition, Patterson, by Grossman, re-Justics Department Exhibits 106, 107, 108 2164 1 Memorandum of Understanding, dated August 26, 1969 - 31 Economic Analysis 1979 Generation Addition 2165 l Nuclear and Intermediate, dated March 26, 1971 ( l l

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 ~                                                       Number  Faces DISCOVERY DOCUMENTS (cont.)

Consumers Powcr Company EHV Transmission 2166 29 System Development 1972-1982 2167 7 Remarks of James G. Campbell, Press Conference, dated June 19, 1960 2168 7 Memo - E. H. Kaiser to R. C. Youngdahl, dated May 20, 1970, with attachments Subject Delay of Palisades. 2169 1 Memo - C. F . Brown to B .G. Campbell, dated February 25, 1972 - Proposed 50% Hough Bill 2170 1 Memo - C.F. Brown to B.G. Campbell, dated April 6, 1972 - Delhi Township Association. Memo - R.L. Paul to L.L. Booth, H.S. Smith, 2171 3 B.G. Campbell, R.A. Conden, dated 7/10/67 with attached 2 pages. City of Hart. Memo - R.L. Paul to H.P. Graves, A.C. 2172 1 Fagerlund dated October 2, 1969, The City of Seton Rapids. Letter - G.L. Carson to B.G. Campbell 2174 1 dated February 26, 1960 - Lowell Memo - R.L. Paul to A.C. Fagerlund dated 2175 3 March 21, 1969 City of Essexville with attached memo and Service Inquiry. Memo - to. Summers to R.L. Paul, dated 2176 1 July 17, 1969 - Essexville Waste Treatment Plant Standby Electric Service. _ t

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          . '* DISCOVERY DOCUMENTS (cont.)               Number  Pages Memo - R.L. Paul to T. Summers dated         2177   2 July 31, 1969 City of Essexville Duplicate Service.

Kalamazoo Stte Hospital - Western 2178 2 Michigan University - Steam Plant Operation; Report on Meeting of Consumers Power Company Study Team July 25, 1964, by R.L. Paul 7/29/64. Memo - Meeting of Legislative Interim 2179 2 Study Committee - RLP 9/10/64 Memo - Meeting of Legislative Interim 2180 3 Study Committee RLP 1/14/54 with attached Cost Schedule. Letter from W. R. Boris to Robert W. 2181 Hartwell, May 8, 1972 ; Letter from A. W. Land to Garrett G. Hasper, May 2, 1972. Letter to 35 Senators 2182 Letter fom A. W. Land to B. R. Brown, 2183 May 16, 1972. July 23, 1971, service 2184 Handwritten document by-A. W. Land 2185 Senate Bill 1065-1964 Session. 2186 e 0 l

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     -           -   - . . .        . . . _   VERIFICATION-I certify that I have read the foregoing Brief on Proposed Findings of Michigan Cities and Cooperatives. To the best of my knowledge the statements contained therein are true and 4

, accurate. I further certify that I am authorozed 4 to make them. Y' ,

                                                                     /"

Robert A. Jablon October 9, ]974

                                                ,        m             '.

This_ verification was signed October 9, 1974 to the corrected brief. Earlier copies were served October 8, 1974. Q b) ia s. . e

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I NOTICE - DIVISION OF DOCUMENT CONTROLTHE A S OF THE CHARGED TO YOU FOR ADAND LIMITED TIME PERIO. THEY MUST BE BRANCH 016. RETURNED TO THE RECORDS FACILITY PLEASE CHARGED OUT THROUGH THE MAllDO NOT SEND DOCUMENTS BE REFERRED TO FILE PERSONNELPAGE(S . UCTION MUST DEADLINE RETURN DATE D' 6 %; , . a.%Q. ,; ~;;

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