Lead Opinion
delivered the opinion of the Court.
The State of Ohio imposes its general sales and use taxes on natural gas purchases from all sellers, whether in-state or
I
During the tax period at issue,
Since 1935, when Ohio’s first sales and use taxes were imposed, the State has exempted natural gas sales by “natural gas companies]” from all state and local sales taxes. § 5739.02(B)(7).
The very question of such an exclusion, and consequent taxation of gas sales or use, reflects a recent stage of evolution in the structure of the natural gas industry. Traditionally, the industry was divisible into three relatively distinct segments: producers, interstate pipelines, and LDC’s. This market structure was possible largely because the Natural Gas Act of 1938 (NGA), 52 Stat. 821,15 U. S. C. § 717 et seq., failed to require interstate pipelines to offer transportation services to third parties wishing to ship gas. As a result, “interstate pipelines [were able] to use their monopoly power over gas transportation to create and maintain monopsony power in the market for the purchase of gas at the wellhead and monopoly power in the market for the sale of gas to LDCs.” Pierce, The Evolution of Natural Gas Regulatory Policy, 10 Nat. Resources & Env’t 53, 53-54 (Summer 1995) (hereinafter Pierce). For the most part, then, producers sold their gas to the pipelines, which resold it to utilities, which in turn provided local distribution to consumers. See, e. g., Associated Gas Distributors v. FERC,
Congress took a first step toward increasing competition in the natural gas market by enacting the Natural Gas Policy Act of 1978, 92 Stat. 3350, 15 U. S. C. § 3301 et seq., which was designed to phase out regulation of wellhead prices charged by producers of natural gas, and to “promote gas transportation by interstate and intrastate pipelines” for third parties. 57 Fed. Reg. 13271 (1992). Pipelines were reluctant to provide common carriage, however, when doing so would displace their own sales, see Associated Gas Distributors v. FERC, supra, at 993, and in 1985, the Federal
Although FERC did not intrastate pipelines to provide local transportation services to ensure that gas sold by producers and independent marketers could get all the way to the point of consumption,
This new market structure led to the question whether purchases from non-LDC sellers of natural gas qualified for the state sales tax exemption under Ohio Rev. Code Ann. § 5739.02(B)(7) (Supp. 1990). In Chrysler Corp. v. Tracy, the Ohio Supreme Court held that they do not. The court reasoned that independent marketers do not “suppl[y]” natural gas as required by § 5727.01(D)(4), because they do “not own or control any physical assets to .. . distribute natural gas.”
During the tax period in question here, petitioner General Motors Corporation (GMC) bought virtually all the natural gas for its Ohio plants from out-of-state marketers, not LDC’s.
“On close inspection, GM actually argues that the commissioner’s application burdens out-of-state vendors of natural gas. However, GM is not a member of that class and lacks standing to challenge the constitutionality of this application on that basis; our further comment on this question is inappropriate.” Ibid.
Finally, the court dismissed GMC’s equal protection claim as “submerged in its Commerce Clause argument.” Id., at 81-32,
II
The Supreme Court of Ohio held GMC to be without standing to raise this Commerce Clause challenge because the company is not one of the sellers said to suffer discrimination under the challenged tax laws. But cognizable injury from unconstitutional discrimination against interstate commerce does not stop at members of the class against whom a State ultimately discriminates, and customers of that class may also be injured, as in this case where the customer is liable for payment of the tax and as a result presumably pays more for the gas it gets from out-of-state producers and marketers. Consumers who suffer this sort of injury from regulation forbidden under the Commerce Clause satisfy the standing requirements of Article III. See generally Lujan v. Defenders of Wildlife,
h — I I — I
I
The negative or dormant implication of the Commerce Clause prohibits state taxation, see, e. g., Quill Corp. v. North Dakota,
B
Since before the Civil War, gas manufactured from coal and other commodities had been used for lighting purposes, and of course it was understood that natural gas could be used, the same way. See Dorner, Initial Phases of Regulation of the Gas Industry, in 1 Regulation of the Gas Industry §§ 2.03-2.06 (American Gas Assn. 1996) (hereinafter Dorner). By the early years of this century, areas in “proximity to the gas field[s],” West v. Kansas Natural Gas Co.,
Almost as soon as the States began regulating natural gas retail monopolies, their power to do so was challenged by interstate vendors as inconsistent with the dormant Commerce Clause. While recognizing the interstate character of commerce in natural gas, the Court nonetheless affirmed the States’ power to regulate, as a matter of local concern, all direct sales of gas to consumers within their borders, absent congressional prohibition of such state regulation. See, e. g., Pennsylvania Gas Co. v. Public Serv. Comm’n of N. Y.,
When federal regulation of the natural gas industry finally began in 1938, Congress, too, clearly recognized the value of such state-regulated monopoly arrangements for the sale and distribution of natural gas directly to local consumers. Thus, § 1(b) of the NGA, 15 U.S.C. § 717(b), explicitly exempted “local distribution of natural gas” from federal regulation, even as the NGA authorized the Federal Power
“The declaration [in the NGA], though not identical in terms with the one made by the McCarran Act, 59 Stat. 33,15 U. S. C. § 1011, concerning continued state regulation of the insurance business, is in effect equally clear, in view of the [NGA’s] historical setting, legislative history and objects, to show intention for the states to continue with regulation where Congress has not expressly taken over. Cf. Prudential Ins. Co. v. Benjamin,328 U. S. 408 [(1946) (upholding discriminatory state taxation of out-of-state insurance companies as authorizedby the McCarran Act)].” Panhandle-Indiana, supra, at 521.
And Congress once again acknowledged the important role of the States in regulating intrastate transportation and distribution of natural gas in 1953 when, in the wake of a decision of this Court permitting the FPC to regulate intrastate gas transportation by LDC’s, see FPC v. East Ohio Gas Co.,
For 40 years, the complementary federal regulation of the interstate market and congressionally approved state regulation of the intrastate gas trade thus endured unchanged in any way relevant to this case. The resulting market structure virtually precluded competition between LDC’s and other potential suppliers of natural gas for direct sales to consumers, including large industrial consumers. The simplicity of this dual system of federal and state regulation began to erode in 1978, however, when Congress first encouraged interstate pipelines to provide transportation services to end users wishing to ship gas,
To this day, all 50 States recognize the need to regulate utilities engaged in local distribution of natural gas.
The State also required LDC’s to serve all members of the public, without discrimination, throughout their fields of operations. See, e. g., Industrial Gas Co. v. Public Utilities Comm’n of Ohio,
IV
The fact that the local utilities continue to provide a product consisting of gas bundled with the services and protections summarized above, a product thus different from the marketer’s unbundled gas, raises a hurdle for GMC’s claim
A
Conceptually, of course, any notion of discrimination
“Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation, that no home embargoes will withhold his exports, and no foreign state will by customs duties or regulations exclude them. Likewise, every consumer may look to the free competition from every producing area in the Nation to protecthim from exploitation by any. Such was the vision of the Founders; such has been the doctrine of this Court which has given it reality.” H. P. Hood & Sons, Inc. v. Du Mond, 336 U. S. 525 , 539 (1949).
See also, e. g., Wyoming v. Oklahoma,
Our cases have, however, rarely discussed the comparability of taxed or regulated entities as operators in arguably distinct markets; the closest approach to the facts here occurred in Alaska v. Arctic Maid,
Arctic Maid provides a partial analogy to this case. Here, natural gas marketers did not serve the Ohio LDCs’ core market of small, captive users, typified by residential consumers who want and need the bundled product. See, e. g., Darr, A State Regulatory Strategy for the Transitional Phase of Gas Regulation, 12 Yale J. Reg. 69, 99 (1995) (“[T]he large core residential customer base is bound to the LDC in what currently appears to be a natural-monopoly relationship”); App. 199 (a marketer from which GMC purchased gas does not hold itself out to the general public as a gas supplier, but rather selectively contacts industrial end users that it has identified as potentially profitable customers). While this captive market is not geographically distinguished from the area served by the independent marketers, it is defined economically as comprising consumers who are captive to the need for bundled benefits. These are buyers who live on sufficiently tight budgets to make the stability of rate important, and who cannot readily bear the risk of losing a fuel supply in harsh natural or economic weather. See, e. g., Consolidated Edison Co. of N. Y. v. FERC,
On the other hand, one circumstance of this case is unlike what Arctic Maid assumed, for there is a possibility of competition between LDC’s and marketers for the noncaptive market. Although the record before this Court reveals virtually nothing about the details of that competitive market, in the period under examination it presumably included bulk buyers like GMC, which have no need for bundled protection, see, e. g., State Issue: Atlanta Gas Light Takes Step to Abandon Gas Sales by Unbundling Services for Non-Core Customers, Foster Natural Gas Report, June 20, 1996, p. 22 (indicating that prior to “unbundling” marketers accounted for 80% of sales to large commercial and industrial users in Georgia), and consumers of middling volumes of natural gas who found
B
In sum, the LDCs’ bundled product reflects the demand of a market neither susceptible to competition by the interstate sellers nor likely to be served except by the regulated natural monopolies that have historically supplied its needs. So far as this market is concerned, competition would not be served by eliminating any tax differential as between sellers, and the dormant Commerce Clause has no job to do. There is, however, a further market where the respective sellers of the bundled and unbundled products apparently do compete and may compete further. Thus, the question raised by this case is whether the opportunities for competition between marketers and LDC’s in the noncaptive market requires treating marketers and utilities as alike for dormant Commerce Clause purposes. Should we accord controlling significance to the noncaptive market in which they compete, or to the noncompetitive, captive market in which the local utili
1
Where a choice is possible, as it is here, the importance of traditional regulated service to the captive market makes a powerful case against any judicial treatment that might jeopardize LDCs’ continuing capacity to serve the captive market. Largely as a response to the monopolistic shakeout that brought an end to the era of unbridled competition among gas utilities, regulation of natural gas for the principal benefit of householders and other consumers of relatively small quantities is the rule in every State in the Union. Congress has also long recognized the desirability of these state regulatory regimes. Supra, at 291-293. Indeed, half a century ago we concluded that the NGA altogether exempts state regulation of retail sales of natural gas (including in-state sales to large industrial customers) from the strictures of the dormant Commerce Clause, see Panhandle Eastern Pipe Line Co. v. Public Serv. Comm’n of Ind.,
This Court has also recognized the importance of avoiding any jeopardy to service of the state-regulated captive market, and in circumstances remarkably similar to those of the present case. In Panhandle Eastern Pipe Line Co. v. Michigan Pub. Serv. Comm’n,
“[a]ppellant asserts a right to compete for the cream of the volume business without regard to the local public convenience or necessity. Were appellant successful in this venture, it would no doubt be reflected adversely in [the LDC’s] over-all costs of service and its rates to customers whose only source of supply is [the LDC]. This clearly presents a situation of. . . vital interest to the State of Michigan.” Id., at 334.
In view of the economic threat that competition for large industrial consumers posed to gas service to small captive
The continuing importance of the States’ interest in protecting the captive market from the effects of competition for the largest consumers is underscored by the common sense of our traditional recognition of the need to accommodate state health and safety regulation in applying dormant Commerce Clause principles. State regulation of natural gas sales to consumers serves important interests in health and safety in fairly obvious ways, in that requirements of dependable supply and extended credit assure that individual buyers of gas for domestic purposes are not frozen out of their houses in the cold months. We have consistently recognized the legitimate state pursuit of such interests as compatible with the Commerce Clause, which was ‘“never intended to cut the States off from legislating on all subjects relating to the health, life, and safety of their citizens, though the legislation might indirectly affect the commerce of the country.’ ” Huron Portland Cement Co. v. Detroit, 362 U. S.
2
The size of the captive market, its noncompetitive character, the values served by its traditional regulation: all counsel caution before making a choice that could strain the capacity of the States to continue to demand the regulatory benefits that have served the home market of low-volume users since natural gas became readily available. Here we have to assume that any decision to treat the LDC’s as similar to the interstate marketers would change the LDCs’ position in the noncaptive market in which (we are assuming) they compete, at least at the margins, by affecting the overall size of the LDCs’ customer base. As we recognized in Panhandle, a change in the customer base could affect the LDCs’ ability to continue to serve the captive market where there is no such competition.
To be sure, what in fact would happen as a result of treating the marketers and LDC’s alike we do not know. We might assume that eliminating the tax on marketers’ sales would leave those sellers stronger competitors in the noncap-tive market, especially at the market’s boundaries, and that any resulting contraction of the LDCs’ total customer base would increase the unit cost of the bundled product. We might also suppose that the State would not respond to our decision by subjecting the LDC’s and marketers both to the
The degree to which these very general suggestions might prove right or wrong, however, is not really significant; the point is simply that all of them are nothing more than suggestions, pointedly couched in terms of assumption or supposition. This is necessarily so, simply because the Court is institutionally unsuited to gather the facts upon which economic predictions can be made, and professionally untrained to make them. See, e. g., Fulton Corp. v. Faulkner,
3
Prudence thus counsels against running the risk of weakening or destroying a regulatory scheme of public service and protection recognized by Congress despite its noncompetitive, monopolistic character. Still less is that risk justifiable in light of Congress’s own power and institutional competence to decide upon and effectuate any desirable changes in the scheme that has evolved. Congress has the capacity to investigate and analyze facts beyond anything the Judiciary could match, joined with the authority of the commerce power to run economic risks that the Judiciary should confront only when the constitutional or statutory mandate for judicial choice is clear. See, e. g., Bush v. Lucas,
* * *
Accordingly, we conclude that Ohio’s regulatory response to the needs of the local natural gas market has resulted in a noncompetitive bundled gas product that distinguishes its regulated sellers from independent marketers to the point that the enterprises should not be considered “similarly situated” for purposes of a claim of facial discrimination under the Commerce Clause. GMC’s argument that the State discriminates between regulated local gas utilities and unregulated marketers must therefore fail.
C
GMC also suggests that Ohio’s tax regime “facially discriminates” because the State’s sales and use tax exemption would not apply to sales by out-of-state LDC’s. See, e. g., Reply Brief for Petitioner 2, n. 1. As respondent points out, however, the Ohio courts might well extend the challenged exemption to out-of-state utilities if confronted with the question. Indeed, in Carnegie Natural Gas Co. v. Tracy, No. 94-K-526 (Ohio Bd. Tax App., Nov. 17, 1995), reported in CCH Ohio Tax Rep. ¶ 402-254, the Ohio Board of Tax Appeals accepted the argument of a Pennsylvania public util
V
Finally, GMC claims that Ohio’s tax regime violates the Equal Protection Clause by treating LDCs’ natural gas sales differently from those of producers and marketers. Once again, the hurdle facing GMC is a high one, since state tax classifications require only a rational basis to satisfy the Equal Protection Clause. See, e. g., Amerada Hess Corp. v. Director, Div. of Taxation, N. J. Dept. of Treasury,
It is true, of course, that in some peculiar circumstances state tax classifications facially discriminating against interstate commerce may violate the Equal Protection Clause even when they pass muster under the Commerce Clause. See Metropolitan Life Ins. Co. v. Ward,
* * *
We conclude that Ohio’s differential tax treatment of public utilities and independent marketers violates neither the Commerce Clause nor the Equal Protection Clause and that petitioner’s claims are without merit otherwise. The judgment of the Supreme Court of Ohio is affirmed.
It is so ordered.
Notes
The natural gas purchases that gave rise to petitioner’s challenge were made during the period from October 1,1986, to June 80, 1990.
The exemption was originally codified at Ohio Gen. Code Ann. § 5546-2(6) (Baldwin 1952). As part of a general recodification in 1953, it was moved to Ohio Rev. Code Ann. § 5739.02(B)(7), where it remains today.
Section 1(b) of the NGA, 52 Stat. 821, 15 U. S. C. § 717(b), explicitly exempts “local distribution of natural gas” from federal regulation. In addition, the Hinshaw Amendment to the NGA, 15 U. S. C. § 717(c), exempts from FERC regulation intrastate pipelines that operate exclusively in one State and with rates and service regulated by the State. See ANR Pipeline Co. v. FERC,
App. 156. Pursuant to Ohio’s regulations authorizing LDC’s to provide local transportation services, GMC took delivery of much of this gas from local utilities. Id,., at 156-157.
During this period, “ ‘[t]he public grew weary of the interminable rate wars which were invariably followed by a period of recoupment during which the victorious would attempt to make the price of the battle of the consumers by way of increased rates. Investors suffered heavy losses through the manipulation of fly-by-night paper concerns operating with ‘nuisance’ franchises. . . . Everybody suffered the inconvenience of city streets being constantly torn up and replaced by installation and relocation of duplicate facilities. The situation in New York City alone, prior to the major gas company consolidations, threatened municipal chaos.’” Dorner § 2.03 (quoting Welch, The Odyssey of Gas — A Record of Industrial Courage, 24 Pub. Utils. Fortnightly 500, 501-502 (1939)).
Reticence was not the order of the day. When, for example, the last two surviving gas companies supplying the citizens of Brooklyn announced their merger in October 1883, they also announced that gas prices would immediately double. Dorner §2.03.
The electric industry burgeoned following Thomas Edison’s patent on the first incandescent electric lamp in 1878. Dorner, Beginnings of the Gas Industry, in 1 Regulation of the Gas Industry § 1.06 (American Gas Assn. 1996). Again, after an initial period of unsuccessful regulation by state statute, States mostly left regulation of the electric industry to municipal or local government. Swartwout, Current Utility Regulatory Practice from a Historical Perspective, 32 Nat. Res. J. 289, 298 (1992). “[M]ultiple franchises were handed out, and duplicative utility systems came into being.” Id., at 299. The results were “ruinous and short lived.” Ibid. For example, 45 mostly overlapping franchises were granted for electric utility operation in Chicago between 1882 and 1905. By 1905, however, a single monopoly entity had emerged from the chaos, and customers ended up paying monopoly prices. Id., at 300.
In Arkansas Elec. Cooperative Corp. v. Arkansas Pub. Serv. Comm’n,
For a more complete description of these changes in federal regulatory-policy, and the relevant modifications of Ohio, regulation of loeal utilities that they prompted, see supra, at 283-285.
Alabama: Ala. Code §37-4-l(7)(b) (Supp. 1996); see generally §§37— 1-80 through 37-1-105 (1992 and Supp. 1996); Alaska: Alaska Stat. Ann. §§42.05.141, 42.05.291, 42.05.990(4)(D) (1989 and Supp. 1995); see generally §§42.05.010-42.05.995; Arizona: Ariz. Rev. Stat. Ann. §§40-201.4, 40-203 (1996); see generally §§40-201 through 40-495; Arkansas: Ark. Code Ann. §§ 23-l-101(4)(A)(i), 23-4-101 (1987 and Supp. 1995); see generally §§23-1-101 through 23-4-637; California: Cal. Pub. Util. Code Ann. §§216, 701 (West 1975 and Supp. 1996); see generally §§201 through 882 (West 1975 and Supp. 1996), §§1001 through 1906 (West 1994 and Supp. 1996); Colorado: Colo. Rev. Stat. §§ 40-l-103(l)(a), 40-3-101 (1993); see generally §§40-1-101 through 40-8.5-107 (1993 and Supp. 1996); Connecticut: Conn. Gen. Stat. Ann. §§ 16-l(a)(4), (9), 16-6b (West 1988 and Supp. 1996); see generally §§16-1 through 16-50f; Delaware: Del. Code Ann., Tit. 26, § 102(2) (Supp. 1996); see generally Tit. 26, §§ 101 through oil (1989 and Supp. 1996); District of Columbia: D. C. Code Ann. §§43-203, 43-212 (1990); see generally §§43-101 through 43-1107 (1990 and Supp. 1996); Florida: Fla. Stat. Ann. §§366.02(1), 366.03 (West Supp. 1997); see generally §§366.01 through 366.14 (West 1968 and Supp. 1997); Georgia: Ga. Code Ann. § 46-2~20(a) (1992); see generally §§ 46-2-20 through 46-2-94 (1992 and Supp. 1996); Hawaii: Haw. Rev. Stat. Ann. §§269-1, 269-6, 269-16 (Michie 1992 and Supp. 1996); see generally §§269-1 through 269-32; Idaho: Idaho Code §§61-129, 61-501, 61-502 (1994); see generally §§61-101 through 61-714; Illinois: Ill. Comp. Stat., ch. 220, §§5/3-105, 5/ 4-101, 5/9-101 (1994); see generally ch. 220, §§5/1-101 through 5/10-204; Indiana: Ind. Code §§8-l-2-l, 8-1-2-4, 8-1-2-87 (West Supp. 1996); see generally §§ 8 — 1—2—1 through 8-1-2-127; Iowa: Iowa Code Ann. §476.1 (West Supp. 1996); see generally §§476.1 through 476.66 (West 1991 and Supp. 1996); Kansas: Kan. Stat. Ann. §§ 66-104, 66-1,200 through 66-1,208 (1985 and Supp. 1995); Kentucky: Ky. Rev. Stat. Ann. § 278.010(3)(c) (Baldwin 1992); see generally §§278.010 through 278.450; Louisiana: La. Rev.
Ohio’s Amended Substitute House Bill 476, signed into law in 1996, requires the state Public Utilities Commission to exempt certain sales of natural gas and/or related services by an LDC from this rate regulation if the commission finds that the LDC is subject to effective competition with respect to such service and that the customers for such service have reasonably available alternatives, Ohio Rev. Code Ann. §4929.04, as amended by H. R. 476, §1, effective Sept. 17, 1996. Although this law had not been enacted at the time of the purchases involved in this case, petitioner contended at oral argument that during the tax period in question here, Ohio permitted some natural gas sales by public utilities at unregulated, negotiated rates, and that those sales were not subject to
Although GMC raises only a “facial discrimination” challenge to Ohio’s tax scheme, our cases have indicated that even nondiscriminatory state legislation may be invalid under the dormant Commerce Clause, when, in the words of the so-called Pike undue burden test, “the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits,” Pike v. Bruce Church, Inc.,
In the present ease, the parties have not briefed the question whether the present amended version of the NGA and related federal legislation continues the express Commerce Clause exemption for state regulation and taxation of retail natural gas sales recognized in Panhandle-Indiana, and we do not decide this issue. We note, however, that the language of § 1(b) of the NGA, which the Panhandle-Indiana Court construed as creating the exemption, itself remains unchanged. (Compare 52 Stat. 821 with 15 U. S. C. § 717(b) (1994).)
Under today’s altered market structure, see supra, at 283-285, several Courts of Appeals have held that the NGA confers jurisdiction on FERC, rather than the States, to regulate such bypass arrangements for supplying gas to large industrial consumers when the sale of gas itself occurs outside the State and an interstate pipeline merely transports the gas to the industrial consumer for delivery in-state. See Cascade Natural Gas Corp. v. FERC,
Of course, if a State discriminates against out-of-state interests by drawing geographical distinctions between entities that are otherwise similarly situated, such facial discrimination will be subject to a high level of judicial scrutiny even if it is directed toward a legitimate health and safety goal. See, e. g., Philadelphia v. New Jersey,
For example, public utilities pay personal property tax on 88% of true value, Ohio Rev. Code Ann. §5727.111 (1996), while marketers pay personal property tax on 25% of their true value, § 5711.22(D). Public utilities also pay a special tax assessment for the expenses of the Public Utility Commission, § 4905.10 (1991), and for the expenses of the Ohio Consumer Counsel, §4911.18. Moreover, natural gas utilities must pay a gross receipts tax of 4.75% on gas sales, §5727.38 (1996), while marketers pay none. Independent marketers, for their part, are subject to a franchise tax, § 5733.01, that does not apply to utilities, § 5733.09(a). Thus, this sales and use tax challenge would not be the last available to marketers and their customers; the franchise tax, which also does not apply to utilities, is presumably next in line.
Ward involved an Alabama statute that facially discriminated against interstate commerce by imposing a lower gross premiums tax on in-state than out-of-state insurance companies. The case did not present a Commerce Clause violation only because Congress, in enacting the McCarran-Ferguson Act, 15 U. S. C. §§ 1011-1015, intended to authorize States to impose taxes that burden interstate commerce in the insurance field. Ward,
Concurrence Opinion
concurring.
I join the Court’s opinion, which thoroughly explains why the Ohio tax scheme at issue in this case does not facially discriminate against interstate commerce. I write separately to note my continuing adherence to the view that the so-called “negative” Commerce Clause is an unjustified judicial invention, not to be expanded beyond its existing domain. “The historical record provides no grounds for reading the Commerce Clause to be other than what it says — an authorization for Congress to regulate Commerce.” Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue,
I have previously stated that I will enforce on stare decisis grounds a “negative” self-executing Commerce Clause in two situations: (1) against a state law that facially discriminates against interstate commerce, and (2) against a state law that is indistinguishable from a type of law previously held unconstitutional by this Court. West Lynn Creamery, Inc. v. Healy,
Dissenting Opinion
dissenting.
In Ohio, as in other States, regulated utilities selling natural gas — referred to by the Court as “LDC’s” — operate in two markets, one that is monopolistic and one that is competitive.
In the first, they sell a “noncompetitive bundled gas product,” ante, at 310, to small consumers who have no practical alternative source of supply. The LDCs’ dominant position in that market justifies detailed regulation of their activities in order to protect consumers from the risk of exploitation by a seller with monopoly power. See ante, at 294-297. The basic purpose of that regulation is to protect consumers, not to subsidize the LDC’s.
The second market in which LDC’s sell natural gas is a competitive market in which large customers like the General Motors Corporation (GMC) have alternative sources of supply. Although Ohio possesses undoubted power to regulate the activities of all sellers in that market, Panhandle Eastern Pipe Line Co. v. Michigan Pub. Serv. Comm'n,
It is not uncommon for a firm with a monopolistic position in one market also to sell a second product in a competitive market. See, e. g., International Business Machines Corp. v. United States,
It may well be true that without a discriminatory tax advantage in the competitive market, the LDC’s would lose business to interstate competitors and therefore be forced to increase the rates charged to small local consumers. This circumstance may require the States to find new, and nondiscriminatory, methods for accommodating the needs of small
Accordingly, while I agree with Parts II and IV of the Court’s opinion, I respectfully dissent from the judgment.