*1 v. FEDERAL CO. GULF STATES UTILITIES POWER COMMISSION et al. May 14, 1973 Argued
No. December 1972 Decided 71-1178. *2 J., opinion Court, delivered the in which Blackmun, J., JJ., C. Burger, Douglas, Brennan, White, Marshall, joined. Powell, J., dissenting opinion, filed a in which Stewart JJ., joined, post, p. Rehnquist, 764.
Benny Harry Hughes petitioner. for argued the cause him Benjamin gain. D. Or With on the briefs was Leo Forquer E. argued the respondent cause for Fed- eral Power in support petitioner. With George him on the brief was McHenry, W. Jr.
Robert C. McDiarmid argued for respondent cause Lafayette cities and Plaquemine, Louisiana. With him on the brief George Spiegel.
Howard E. Shapiro argued the for cause the United States as amicus curiae urging him With affirmance. the brief were Solicitor Griswold, General Assistant At torney General Kauper, Samuel Huntington, and Robert B. Nicholson.* *Howard E. Wahrenbrock filed briefs for Company Public Service Indiana, Inc., urging as amicus curiae reversal. Briefs of urging amici curiae affirmance were filed Northcutt Ely for the American Public Assn., Power Charles J.
McCarthy for Dow Chemical Co. opinion delivered the Blackmun
Mr. Justice Court. public presents question whether,
This case when utility applies to the Federal Power Commission au- thority utility security, required to issue a as the is do under of the Federal Power Stat. upon S. C. 824c,1 passing U. the Commission, anticompetitive application, must consider issue’s in determining “compatible effect whether it is with the phrase interest,” (a). as that employed liabilities; filing securities; assumption Issuance of 1 “§824e. duplicate reports Exchange with Securities and Commission.
“(a) public utility any security No shall issue . . unless and . *3 until, only by and upon application then to the that, extent public utility, the Commission order authorizes such issue .... only The shall make such if such Commission order it finds that (a) object, corporate pur- issue ... is for some lawful within the poses applicant compatible public interest, and with the necessary is appropriate proper which or or for consistent performance by applicant utility of service as a and impair ability (b) perform service, not to will and is reasonably necessary appropriate or for purposes. such . ..
“(b) Commission, opportunity hearing, may grant after for any application part, section in whole or in and with upon such may modifications and such terms and conditions it as necessary appropriate, may time, find or to from time after opportunity hearing good shown, sup- for and for cause make such plemental in premises may orders it necessary ap- find or as propriate, may any supplemental modify such order provisions any previous order particular purposes, uses, which, and extent to or any security the conditions under which, so proceeds theretofore authorized or the applied, thereof sub- ject always requirements (a) to the of subsection of this section. “(c) public utility shall, No without the consent of the Commis- any sion, apply any proceeds any or thereof purpose specified order, in supplemental order, the Commission’s or or to any purpose in excess of the purpose amount allowed for such in order, such in otherwise contravention of such order.”
I ap- Company Gulf Utilities In States October authority for Power Commission to the Federal plied first $30,000,000 competitive bidding, cash, for issue part purpose refunding for the 30-year bonds mortgage and short- paper commercial then-outstanding of Gulf’s term notes.2 in do corporation qualified to business a Texas
Gulf, utility meaning within the is a public Louisiana, (e). the Federal Power 16 U. S. C. 824 (e) principally generating, It engaged the business energy electric southeastern distributing, selling approxi- in an Texas and south central Louisiana area mately 28,000 square population miles with a of about electric retail in numerous 1,225,000. energy Gulf sells at and, communities that market the time of the electric application, providing energy resale nine municipal systems, cooperatives rural electric (one serving municipal four systems), and one other utility.
The Commission filed notice of application. Gulf’s Fed. Reg. Thereupon the cities of La- fayette and Plaquemine, (Cities) Louisiana filed a protest petition to intervene in the proceedings before the and requested a formal hearing on ap- Gulf’s
2 Gulf, in its Securities Exchange registration bonds, statement proceeds stated that received from the notes to be refinanced had been used “in connection with the Com pany’s program construction and for corporate other purposes.” App. 162. The notes themselves had been upon issued the author ity of an uncontested order in FPC Docket E-7509. The Commis sion in that proceeding authorized a total $80,000,000 in short- Only term debt. $55,000,000 of this outstanding the time bond Gulf’s authorization proceeding. Thus, apart from the bond issue, Gulf could have borrowed another $25,000,000 in short-term credit without further Commission authorization. with Gulf, concert alleged The Cities
plication. Power Louisiana utilities, investor-owned other two Electric Louisiana and Central (LP&L) Company Light “appar- activities engaged had (CLECO), Company 10§of well as laws,” as anti-trust of the ently violative (h),3 and 803§C. 16 U. S. Power Federal of the (h) ofAct Company Holding Utility Public seq.; et activities, these 79§ S. C. 838, 15 U. Stat. here by bonds refinanced “financed or would effect, incom- were activities the utilities’ and that proposed”; opposed The Cities interest. patible until Gulf States “unless authorization requested the Com- or unless violations, past these purges itself authorization.” conditions its mission inter- a 1968 on and stressed claim centered The Cities’ Cities, between the pooling agreement connection Cooper- Electric and Louisiana Company, Dow Chemical Cities; near the plant has (LEC). Inc. Dow ative, could be used capacity that has plant generating emergency stabilizing pool other members electric and transmission generation LEC is a capacity. Admin- Electrification by the Rural financed cooperative composed super-cooperative it (REA); istration in the all located cooperatives, distribution 12 electric utilities. area served three loans to LEC for considering In the REA was and transmission construction of a station generation eight which LEC would be able to serve through lines 12 member These members were organizations. then power their from the three utilities. purchasing attempted utilities had Cities claimed three 3 “Combinations, understandings, agreements, arrangements, or ex press implied, output energy, restrain or to limit the electrical fix, trade, maintain, energy prices or to or increase for electrical hereby prohibited.” service are *5 history “extraordinary
destroy LEC, pointed and to and by the utilities between 1964 instituted litigation” and the 1970 to the construction of the station prevent years. in for five lines, delaying fact that construction and by the 1968 would arrangement proposed agreement parties’ surplus capacity a market for the assure would at substantial the construc coordinate, savings, by parties. tion of The three utili generators new if ties, would lose correspondingly, substantial business arrangement were carried out. Accordingly, alleged, Cities three utilities frivolous and engaged repetitive litigation and launched relations and lobbying drive against LEC order to block loan prevent fulfillment of the agreement. Cf. California Transport Trucking Unlimited, v. U. S. 508
The REA loan effected, however, 1969. But by that time the loan was only sufficient for the generating facilities exclusive of the lines. Cities, Dow, LEC, then were forced to negotiate with the three utilities for the use of the utilities’ lines to power. transmit their Cities contended that the three utilities continued, through the course of the negotiations, block or limit pool by agreeing only provide transmission services pool some members; refusing supply trans mission pool facilities between members unless the 1968 pooling agreement were canceled; demanding that LEC power limit its capacity to the wattage already planned, thus giving the three utilities the exclusive right to supply all further power needs of 12 coopera LEC’s tives and precluding further expansion by LEC.
Cities, by their proposed would intervention, bring these allegations before the Federal Power Commission in the § 204 proceeding. They claimed that anti- such competitive conduct was properly the subject of a § 204 proceeding and that, under 204§ (b), 16 U. S. C. 824c (b), the Commission may condition approval *6 place restrictions Gulf’s accordingly bond issue use of proceeds. the of anti- any violation the denied
By answer, its Gulf the Public Power or of Act, the Federal laws, trust of alleged Act of 1935. It Utility Company Holding Act was “to of 204 of Federal Power the the purpose § fi- impair which the prevent might financing unsound if that even public utilities,” of nancial integrity by were as true accepted the of the Cities allegations to Commission, those matters were “irrelevant this the application.”
By 3, 44 F. P. 1524, order issued December C. permission the to inter- granted the Cities hearing, vene. It their for request however, denied and it authorized the issuance sale of the bonds. The order recited: requested approval
“The of issuance Company only Bonds allow change [sic] portion form of a of outstanding indebtedness, it call for any does not the initiation of construction program by Company other might effect the interest of the alleged Petitioners. The [sic] which petitioners violations attempt to raise this proceeding are requested irrelevant authoriza- tion of securities. no There relief the Com- can mission order in authorizing issuance for purposes Bonds refinancing any would have on the effect interest the Petitioners, or solve any problems by Id., outlined them.” at 1525. The Commission specifically found:
“The matters asserted and alleged activities filed protest and petition by intervene Cities Lafayette and Plaquemine, Louisiana, are irrele- vant to the purpose of issuing bonds to refund short- by authorized heretofore indebtedness term Id., 1526. Commission.” (a) 313 § rehearing required petition Fish & Department see (a), 825l Act, U. S. C. cert, de (CA9), FPC, F. 2d 168-169 Game v. Cities, and was filed (1966), 385 U. S. nied, was denied. (b) of the pursuant sought
Review Ap Court of (b), in the United States C. 825l U. S. A unani peals for the District Columbia Circuit. *7 the Commission disagreed of court with panel that mous of the claims case to it for consideration and remanded the SEC, City Lafayette Cities, the sub nom. v. raised App. (1971). 147 S. C. F. 2d 941 The 98, U. D. 454 court that Gulf’s recognized that the contention Commission’s operations ap have meaningful “could no relation to an plication only sought replace *8 explained
FPC. It diverse treatment as follows: agency an regulatory jurisdiction “Where has some operations, over it must consider whether there is a reasonable nexus between the subject matters to its surveillance and those under attack on anti- competitive grounds. general But the requiring agency doctrine an to take account of antitrust considerations does not extend to a case like the one before us problem where the antitrust out of arises operations regulated company (past projected) and the agency, SEC, here the given any has not been regulatory jurisdiction operations over company. jurisdiction The SEC has no over operations and stands in a posture different which, from the FPC already noted, as we regulatory have jurisdiction operations has over in view of its authority, alia, inter to direct utilities to interconnect .terms, on- prohibit reasonable or utility to a discriminating in from against rates and municipal facilities its App. customers” 147 U. S. 98, 112-113, D. C. 2dF. (emphasis original). 955-956 Appeals opposed Court of was in but error, nevertheless the grant.
II mandate 204 of the Federal Power 824c, imposes upon U. S. C. the Commission is broad impressive empowers one. 204 (a) Section to security by authorize the issue of a public utility only “if it finds that such issue is ... for some lawful within object, corporate purposes applicant compatible public interest.” requires the Commission inquire This into satisfied with the purposes of the issue and its lawfulness. And if “object” even is lawful, necessary inquiry ended, for, addition, object must be “com- patible public with the interest.”
In making its determination under § 204 (a), the Com- mission is given powers broad inquiry and enforcement. By (b) may § 204 it hold hearings the application, may grant application “in whole or in part,” may modify it, and may impose such terms or conditions “as may it necessary find or appropriate.” After opportunity for hearing, and for good cause shown, it also sup- plement, modify, any previous condition order “as it may find necessary or appropriate.” Ibid. Section 204 (c) grants the Commission authority specify pur- pose to which proceeds of the security may be ap- plied and the amount allowed purpose. While, as Gulf observes, 204 (e) §§ and (f) exempt from 204§ (a) certain transactions that concern short-term obliga- tions well as utilities that are “organized and operating a State under the laws of which its security issues are regulated by a State commission,” these ex- emptions do not significantly detract from the sweeping exemption These provisions have application no Gulf’s *9 challenged by issue the Cities here. with re- of the Commission powers responsibilities generally. security issues spect public utility to responsi- hold that the Commission’s are asked to We on its consideration do extend to under 204§ bilities anticompetitive consequences flowing part possible and the Commis- security. of a from issuance Gulf inquiry under 204§ administrative sion both argue narrowly prevention to confined to the issu- be utility’s security impair ance of financial might ability utility perform serv- integrity or its Exactly interpretation ice responsibilities. placed by the 1962 in Commission § Pacific Co., Power Light C., & F. P. 626.6 Gulf and the Commission contend that antitrust considerations of the by kind Cities do not within the limited asserted fall scope of § 204 as thus and consideration defined, Commission of would be in- broad-ranging such issues compatible relatively with the need for fast action passes proposed it upon Commission when allegations anticompetitive issue. It is said con- fully duct properly raised and considered other proceedings related interconnections under 202 of § Act, 824a, dispositions U. S. C. and mergers § under 824b, § § 16 U. prac- S. C. rates and rate-making tices under §§ §§ 205 and 16 U. C. 824d and 824e, S. and to adequacy of service under 207,16 U. C. 824f.
Although allegations similar to those raised may, here indeed, be made such other proceedings under the Federal Power we do not regard that fact as deter- minative scope inquiry 204. Instead, authority Commission’s broad to consider anticompetitive other touching conduct the “public interest” under the other sections of the Act emphasizes 6 Cf., however, Light Hills Co., Black Power & 28 F. P. C. (1962), and 31 C. F. P. *10 758 public under the interest authority breadth in 204. This stat- and embodied generally
standard as Utility II of the Public part was enacted of Tit. ute pri- The Act had two 1935, 803, 49 Stat. 850. Act practices to curb mary purposes: and related abusive utility companies by them under effective public bringing provide regulation and effective federal control, business of and electric expanding transmitting selling power interstate commerce. 49 847- 803-804, Stat. Rep. 621, Cong., Sess., 17-20; 848; 1-4, S. No. 74th 1st Rep. R. 1318, Cong., Sess., 3, 7-8; H. No. 74th 1st FPC, Jersey Central Co. v. 319 U. see 61, (1943); S. 67-68 American SEC, North Co. v. 327 (1946). U. S. passed Act was in the of, response context and in to, great political concentrations of economic even power in power vested trusts, and absence en- antitrust forcement to restrain the growth practices utility companies. holding Rep. supra, See S. No. 621, 11-12; Utility at Corporations Summary Report, 70th — 1st Cong., Sess., Doc. 73-A, pp. S. No. Part 47-54; Rec. Cong. (1935).
In order to achieve
regulation
federal
of these and other
perceived problems on the operational
level of the inter-
public utility
state
II
business, Tit. was enacted.
Rep.
621, supra,
No.
at 17;
Rep.
H. R.
No. 1318, supra,
7.
II of
II
Part
Tit.
was denominated the Federal Power
Stat. 863.
II
Title
certainly did
preclude
operation
of the antitrust
laws, and it vested the
Federal Power Commission with important and broad
regulatory power in the areas described above. See Otter
Tail Power Co. v.
States,
United
Nothing “public the Act interest” suggests that any § standard 204 contains less broad directive than similarly in the other adjacent that contained worded and express language public sections. Under the of 204 the interest is stressed governing factor. There is noth- ing that indicates that of that term to be meaning is restricted to financial considerations, every other aspect public of the ignored. interest there is Further, the section’s requirement object that of the issue be lawful. The Commission is inquire directed to into to evaluate the purpose the issue and the use to which proceeds will put. more its Without a definite indi- contrary cation of legislative shall purpose, we not read out of 204 the requirement the Commission con- sider matters to both relating purposes the broad Act and the fundamental national economic policy ex- pressed in the antitrust laws. See FMC v. Svenska Linien, Amerika 390 U. 238, S. 244 (1968); v. California FPC, 369 U. atS., 484-485; FCC v. RCA Communica- tions, Inc., 346 U. S. 94 86, (1953); McLean Trucking Co. States, v. United 321 U. 67, (1944). S. Report Cf. National Power Policy Committee on Public-Utility Holding Companies, Rep. No. 621, supra, anticompetitive (App.). Consideration of antitrust important moreover, issues serves Commission, against function of a first line of defense establishing the sub- competitive practices might those later be ject particularly sig- of antitrust This is proceedings. security nificant in the of a issue under context appropriate pre-issue consideration at a avoid stage complex granting need later to unravel transactions relief under the laws or other sections antitrust Federal Power Act. in Denver
Our conclusion is reinforced the decision States, & G.R. W. R. Co. v. United U. S.
In that case the Court concluded Interstate Commission, duty Commerce in performing (2) § 20a of the Interstate Commerce U. S. C. (2), § 20a to determine whether the issuance of par ticular is “for object some lawful . . . and compatible with the interest,” required, as a general rule, consider the anticompetitive consequences *12 of the issue. Section 204 of the Federal Power Act was modeled upon 20a of the § Interstate Commerce Act. The initial draft of 204 any § was without broad refer ence public to Instead, interest. it identified four specific purposes for utility which a could issue security a (property expansion acquisition; or improvement of fa cilities or service; discharge or lawful refunding of obliga tions; and reimbursement of other expenditures for such purposes). H. 5423, § R. 74th 206, Cong., 1st Sess., 108- 109; S. 1725, § 74th Cong., 1st 109-110.7 Sess., This (a). public “Sec. No utility any shall issue security, or any obligation assume liability or guarantor, indorser, surety, or respect any otherwise in of of person, another unless and until, only and then to the extent upon application by that, public utility, order authorizes such issue or assumption liability. The Commission shall only make such order if it finds that such issue or assumption liability for one or lan- the broader intentionally replaced provision greater “to attain in 204 in order § now contained guage possible been have workability than would flexibility language defining The original under the section. been taken has for securities be issued purposes which Commerce substantially from 20a of the Interstate section Rep. its usefulness.” S. No. Act, proved has departure from the supra, was, thus, There a at 20. perceive of the We no specific, general. and a selection responsibility placed the FPC under reason to view the differently responsibility under 20a § § from ICC’s agency possesses of the Act. Interstate Commerce Each authority. with re- regulatory charged broad Each is sponsibility its considering policy antitrust under stat- virtually ute. are identical in § And 204 and 20a lan- § specific guage.8 obligation fact ICC a has Clayton of the 15 U. C. 21 (a) Act, (a), § responsibility to enforce of that as well as did Transportation Policy, advance the National not con- case, trol the in the Denver see 387 S., decision U. parallel reference in 11 492-493, the absence Clayton respect Act with to the FPC is not to be others, more following purposes reasonably of the and no and is necessary appropriate purpose purposes; acquisi- or for such tion of property; construction, completion, extension or im- provement utility; facilities or service of the the dis- charge refunding or lawful obligations; its and the reimburse- moneys actually ment expended from sources other than the any issue of securities for purposes aforesaid cases where applicant kept shall have and vouchers accounts for such expenditures in such manner as to enable the Commission to ascertain *13 moneys expended amount of purpose so and the for which such expenditure was made.” foregoing The Except was the Senate spelling version. one punctuational differences, two the House version identical. 8 recognized. Light FPC has so Co., Power & 27 Pacific (1962). F. P. C. FPC, v. 369 U. S. Cf. controlling. deemed California Ill consider anticom- must FPC Our conclusion applies security § to which 204 aspects of petitive a issue questions subordinate inquiry, for two does not end the re- authority in its agency abused remain: whether objections, on hearing a the Cities’ fusing hold im- the Commission case, on whether, the facts out hand rejected Cities’ properly allegations security issue they were to the ground irrelevant approval. for which sought Gulf required if is Gulf asserts that even the Commission objections under and to consider Cities’ investigate error, its do so for the Com refusal to here was summarily objections of this may dispose mission investigation. kind Our hearing without a extended must that, general rule, conclusion as a anticompetitive consequences consider issue under 204 does not mean that the Commission must objections every hold a case. does hearing on Neither every fully allegation it mean that investigated must regardless merit, facial or that consideration of the allegations may not, appropriate circumstances, be deferred, major portion securities issue only not forthwith be authorized and remainder study.9 withheld for further strict a un So rule would duly limit the discretion the Commission must have in order to procedures mold its exigencies par to the case, ticular and would be in the unrealistic light nature of a proceeding 204. The need for flexi bility, planning, rapid coordinated particu- action Appeals The Court of meticulously options outlined various available to the App. C., Commission. 110-111, U. S. D. 2d, F. at 953-954. *14 on security larly respect to the sale of acute with summarily disposes But where the Commission market. its discre- proffered or where it exercises objections, its considering without anti- approve tion to an issue court must competitive consequences, reviewing “the statutory closely in . . light its action scrutinize . protect interest and to enforce obligations to an the antitrust laws. Whether or not abuse of discre- present ultimately depend upon tion is must trans- possible any justi- approved, consequences, action summary for the Den- fications deferral” treatment. ver, Denver, atS., noted, U. 498. as we have con- cerned the but ICC, foregoing quotation from that opinion equally application has forceful in the FPC context. strenuously
Gulf also urges that fact did consider Cities’ allegations, summarily, although properly rejected on them their no having merits any relation to the issue or to possible future anticompetitive conduct might which Gulf engage. We have noted above that the Appeals observed, Court of App. C., U. S. D. at 2d, 454 F. cer- aspects tain argument of this are not without substantial appeal. On the basis of the record before us, we cannot say that, upon objections consideration of the raised the Cities, justified Commission would not rejecting summarily. them But such summary action may go unexplained in the face statutory obli- gation placed the Commission under 204. The de- cision the Commission thus far provides has made us with inadequate an explanation of its reasons dis- posing the Cities’ objections on their if that merits, in fact is what provided occurred. We are no explanation why summary action was warranted, and provided we are with no reason for the Commission’s possible conclusion objections were meritless. “closely scrutinize” the we are unable more, Without [to] alternative, supply Nor we an Commission’s action. if an decision support agency’s unstated ground *15 alone is agency is one that “the authorized ground Chenery Corp., SEC v. 318 U. make.” Appeals remanding The of the Court of decision case to the Federal Power Commission is
Affirmed. with whom Justice Justice Powell, Stew- Mr. Mr. Rehnquist art and Mr. join, dissenting. Justice This case Federal question whether raises the Power (the Commission) must consider possible anticompetitive of public utility’s appli- effect cation under 204 of the Federal Power Act, U. S. C. for 824c, authority to issue a security. Section provides in part relevant that the Commission shall authorize the a security issuance of
“only if it finds that such assumption (a) issue or is for some object, within the corporate pur- lawful poses of applicant and compatible with the public interest, which necessary is appropriate for or consistent with the proper performance by the applicant of service a public utility and which will impair ability its perform service, that and (b) is reasonably necessary or appropriate for such purposes.” 16 U. S. (a) §C. 824c (emphasis supplied).
Rejecting the Commission’s own structuring of re- its sponsibilities and repudiating its uniform administrative interpretation for more than a third of a century, Court today implicit finds in § 204’s use of the phrase public “the interest” a duty on part of the Commis- sion, when acting upon a financing application, to con- any sider possible anticompetitive effect majority’s I am neither persuaded As alleged. discussion analysis statutory language nor I remain of the view that regulatory context, is with the statute position Commission’s consistent I to which it entitled.1 would accord it deference below, I believe for the reasons stated Moreover, interest of incompatible the- decision is with the Court’s enabled to meet are assuring utilities requirements capital upon their the most necessary favorable I terms. dissent. Accordingly,
I present were initiated on October proceedings States) 1970, when Gulf Co. filed (Gulf States Utilities *16 an application authority $30 to sell seeking of million mortgage competitive bidding. first bonds at purpose The stated pay for the issuance off part of its paper notes, commercial and short-term whose is- suance previously approved by had been the Commission.
The Lafayette cities and Plaquemine, Louisiana (the filed a Cities), motion to on intervene November 2, a alleging continuing conspiracy among States, Gulf Louisiana & Power Light and Central Co., Louisiana Electric Co. to block the implementation of an Inter- connection and Pooling Agreement which would link the Dow Cities, Chemical Co., Louisiana Electric interpretation The great is entitled to deference: problem “When faced with a statutory construction, Court this great shows interpretation deference to the given the the statute agency charged officers or with its administration. ‘To sustain the application Commission’s statutory term, we need not find that only its construction is the one, reasonable or even it that the result we would have reached question had the in the arisen first judicial instance in proceedings.’ Unemployment Comm’n v. Aragon, 143, 329 U. S. 153.” Tollman, Udall v. 1, 380 U. S. Cooperative The (the Cooperative). Inc. Cooperative, Ad- Electrification Rural the 1964 to applied had facility generating a loan to build ministration Gulf contended lines. The Cities transmission number had used coconspirators States ap- delay litigation, techniques, including frivolous result the loan until proval of build transmis- loan sufficed to longer no amount Cooperative The plant. generating as well as a sion lines Gulf on rely for transmission services was thus forced only them which, agree would to sell allegedly, States, opera- scope of its Cooperative if restrict would finally, proceeds asserted, The Cities tions. way support would in present from the bond issue some actions.2 anticompetitive Gulf State’s granted On December the Commission the Cities’ motion declined to hold a hearing but intervene, explained allegations. their order Commission’s fully: more requested
“The approval of the issuance Company change Bonds allow only to [s] portion form of a outstanding indebtedness, of its it does not call for the initiation construction any program other Company might which effect alleged interest of the Petitioners. The [sic] violations petitioners attempt to raise in this *17 proceeding are irrelevant to a requested authoriza- tion of securities. There is no relief that the Com- can mission order in authorizing the issuance of the Bonds for refinancing purposes that would have any 2 petitioner’s It was stated in brief, challenged, and was not that any Commission records fail to show petition other like to inter financing vene in a application under 204 since its enactment in remedy 1935. The which seeking intervenors are to establish is a one new necessary heretofore deemed by or appropriate anyone. Brief for Petitioner 26.
767 or solve Petitioners, any interest of the effect on the 44 F. P. C. them.” by outlined problems 1524, 1525. the issu-
In authorized order, the same the Commission modified subsequently It ance and sale the bonds. a peti- in denied respects the order not relevant here and tion for rehearing. order the behest of
Reviewing the at Commission’s in a Appeals the Court of held that Cities, application proceeding Commission must consider by of anticompetitive claims conduct when inter- urged App. venors. U. 2d 941 98, D. C. F. While the court’s ruling terms, allowing was flexible reject hearing Commission to without a which claims are or “insubstantial barren” or lack a “reasonable nexus” purpose with the of the securities issuance, required it an explanation “supported in the record,” presumably some- thing addition that offered Commission App. case. U. S. D. atC., 110, 454 F. 2d, 953.3
II It common ground has Commission a re- sponsibility to deal with anticompetitive practices in the power industry. Section 803, 16 U. S. C. § provides that the Commission issue to pub- licenses lic utilities “on the following one of conditions,” is that:
“(h) Combinations, agreements, arrangements, understandings, express or implied, to limit the out- put of electrical to restrain energy, trade, fix, or to 3 One would thought have its use of phrase “irrelevant requested securities,” authorization of F. P. C. already had found —to language use the of the court— the claims lacked a “reasonable nexus” with purpose securities issuance. *18 768 or energy electrical prices
maintain, or increase (h). 803§ 16 C. U. S. hereby prohibited.” are service the is not whether then, Court, before the question The it and when how but responsibility, has Commission it. shall exercise is that position the Commission's abstractly,
Stated anticompetitive of regulating sensible method most on than itself rather on the conduct conduct is focus may be financed. by possibly it the means allegedly a duty to scrutinize acknowledges Commission an to order proceedings: anticompetitive behavior 824a; to § 16 U. S. C. interconnection, Act, 202 § 16 or 203 of the approve acquisition Act, § an merger, 205 and 206 §§ U. S. to review 824b; rates, §C. 824e; and to review Act, 16 U. S. C. §§ 824d unduly or charge practices, § rates discriminatory Act, 824d, inadequate service, § U. C. or of Act, Additionally, § 16 U. 824f. § S. C. may investigate upon unlawful conduct complaint by person, or “[a]ny State, municipality, State commission,” § or Act, 825e, 16 U. S. C. its own motion, § 307 of In U. S. C. 825f. deed, upon the complaint respondent Cities, presently Commission is investigating conduct at issue here. The Lafayette Cities Plaquemine, Loui siana Co., v. States Utilities F. P. C. Doc. No. Gulf E-7676.4
Given its broad direct authority and its undertaking to investigate allegations of anticompetitive behavior exercising think authority, the Commission does not it necessary or appropriate to convert 204 into an all- 4 Nor does jurisdiction Commission have exclusive over anti trust violations utilities. Antitrust brought by suits private parties the Antitrust Division of the Depart Justice ment and afford other means of relief. *19 purpose Appeals As of recognized, sword.5 the Court may only very there no or weak one between be nexus a alleged anticompetitive the of a issuance and in any event, charges conduct be unfounded. the and, say is in to view, It no the answer, Commission’s each nexus and merit be on the facts of must determined the of process allegations case because the investigating delay financing the and often the utilities’ will frustrate efforts to a for securities. price obain favorable their to properly
The Commission is sensitive the com- money plexities and subtleties of raising vast sums normally in is Utility financing the financial markets.6 accomplished competitive bidding participated through relatively in a small of national investment number specialize firms in purchase which the from issuers wholesaling utility is securities. The market highly competitive particularly and is un- sensitive to certainties. The maintenance of an orderly market, dependable timetables, marketing is essential process financing to favorable the invest- decisions ment bankers as to rates and other It is terms. settled Light Co., Power & In (1962), 27 F. P. C. 623 the Com Pacific position mission took the same analogous circumstances. There, approved proposed issuance of securities to fund politically line, construction of a controversial transmission stating: plain purpose prevent
“The Section is to se- the issuance of might impair curities company’s integrity financial or its ability perform public utility responsibilities.” Id., 626. recognized The importance Commssion has expedition adherence to time schedules in the administration 204 of Act:
“It procedures should considering security also observed that expeditious if, issues must be of changing marketing view con- ditions, are money utilities to be able to carry raise the needed to out Id., responsibilities. their . . .” at 629. practice to a “bring pursuant an issue market” favorable carefully structured time schedule. When this time anticipated, market conditions are observed from compressed usually period schedule within a days. to 90 lead time is extended longer the injected greater uncertainties into the process, the risk change resulting of market or re-evaluation with capital end, adverse on the and, effect cost of public. cost service to the has Indeed, a double process. Apart interest from the ulti- *20 impact may mate rates which be occasioned dis- ruption of the financing simply process, the utilities keep pace unable to the public burgeoning de- mand for electric energy.7
Both delicacy the of financing availability and the of alternative means for regulating anticompetitive conduct, support then, strongly the interpretation Commission’s of the Act. Nor does anything the legislative history 7 has Prof. Priest commented urgency capital on the of new for industry: the electric II, “Since problem World War capital been, of new has and will be, compellingly urgent continue public managements.” utility for Priest, Principles A. 1 Utility Regulation of Public After describing “spectacular” growth utility of the electric in- dustry, compared Prof. urgency Priest of capital access to the markets of utilities with enterprises: industrial capital requirements new utility industry “[T]he in the years next ten extraordinary will call for effort. The obvious rea- (1) regulated sons are public literally utilities produce cannot as through much cash earnings retained unregulated as industrial enterprises (2) utilities, any event, need a much larger per investment dollar of annual revenue than the characteristic Id., industrial.” at 452. It petitioner’s brief, stated in questioned, and not
43 applications were filed with the covering Commission the issuance nearly $1.8 of billion of securities. Brief for Petitioner 24. Re- require contrary conclusion.8 Senate port straightforwardly: states operating utili- capitalization
“Control over the plainly safeguarding ties is an means essential practices public against unsound financial impossible make and most economical proper Rep. performance public-utility functions.” S. (emphasis (1935) 74th Cong., Sess., No. 1st supplied). companion
And in Securities legislation entrusting Exchange (SEC) responsibility regulate by public utility issuance of hold- securities ing companies, Congress require the SEC declined to investigate anticompetitive in the ordi- conduct, least nary apart case.9 Even from congres- its relevance to sional purpose, the absence requirement an such investigation when a utility holding company seeks authorization to a security supports the issue Com- part Utility Section was enacted II of the Public Tit. Act of 1935. Title II amended the Federal Water Power Act and redesignated it the Federal Act. Power *21 9 Utility The Holding Company Public Act I was enacted as Tit. of Utility 8, Public Act of (d) 1935. See n. supra. Under 7§ (6) Utility of the Public Holding Company Act, the SEC directed to disapprove an issue of if securities its terms and conditions are public “detrimental to the interest or the interest of investors or (d) 79g consumers.” 15 U. C. S. The interpreted SEC has § language this as requiring to investigate alleged it anticompeti conduct, applied tive interpretation aspect in an of this litigation involving substantially a challenge identical by these same Cities proposed to a by issuance of securities Louisiana Power & Light Co., public a utility holding company allegedly con spired ante, with Gulf 75r-755, States. See at n. 4. The SEC re jected protests pertaining the Cities’ to “collateral and unrelated controversies,” 147 App. C., 103, 2d, U. D. at 454 F. at upheld by was Appeals. Id., of 2d, Court 454 F. at 955. treatment accord like to judgment prudent mission’s utilities. operating from applications to com- companies utility holding public of The securities securities markets with the financial pete in the espe- sense, little It makes companies. utility operating applicable legislation companion cially construing in interest” “public the term to construe industry, the same some- mean companies to operating to the applied when pro- more burdensome a impose and to different, thing within are utilities which applied to cedure, than when bizarre this will be the system.10 Yet, company a holding today’s by decision this Court. result
III & Denver part rests its decision Court States, (1967), R. G. W. Co. v. United R. 387 U. S. inter- controlling a of a stock involving case the issuance carrier Interstate Commerce regulated est a (ICC). In that case falls far my view, The transaction being persuasive precedent. short of proposed under there was a consideration issuance Railway Express (REA). common stock Agency Approximately 2,000,000 REA stock were held shares exclusively by of which railroads, obligated each was offer its shares to the before selling others them to out- siders. REA also 500,000 authorized issue shares to whomever it wished, it entered into an agreement Greyhound sell such shares to on the condition that congressional Further evidence gleaned intent can be from Congress exempted scrutiny the fact from under se public utility organized curities “a operating a State regulated by the laws of which its issues are (f) Act, (f). State commission.” C. 824c U. S. At regulated utility the time of the 32 States the issuance of *22 company Cong. (1935). securities. 79 Congress Rec. 10378 Had subject intended to screening, securities issues to antitrust it would not, presumably, exception. have established this 1,000,- purchase an additional
Greyhound would offer remain offer to present stockholders, the 000 shares from days. open for 60 20a of the Interstate Commerce required by §
As for authoriza- 20a, applied C. REA to the ICC § U. S. 500,000 Under the terms of that tion issue shares. “only if it section, authorization finds grant ICC object within that such issue ... some lawful [the applicant’s] corporate compatible with the purposes, . . The ICC interest . U. C. 20a .” authorized hearing the issue without on an granting Greyhound intervenor’s claim that would issuance to give it “control” over aat would REA, or, minimum, lead to a lessening competition in trans- freight portation market. On review ICC Court, the. argued responsibility 20a was limited to protecting against manipulation, financial but that even if it did have obligation an to consider “control” and “anticompetitive” effects of issuance, prop- it could erly defer such expiration Grey- until the consideration hound’s offer to purchase large portion additional RBA’s outstanding S., stock. 387 U. at 491-492.
Ill addressing the ICC’s contention, first the Court gave scant attention to the legislative history of 20a. After noting that an earlier version of what was to become the Interstate Commerce Act “led to a study which con- ‘public demned as a evil’ intercorporate holdings rail- id., road stock,” n. 4, opinion shifted focus: “Even if Congress’ primary concern prevent was to manipulation, [fiscal] ‘public broad terms inter- est” and ‘lawful object’ negate the existence of a mandate to the ICC to eyes close its to facts indi- cating that the transaction may exceed limitations imposed by other relevant Id., laws.” at 492. One of the ICC’s responsibilities, the Court found, was possible consider control and anticompetitive conse- *23 774 responsibility a from of
quences, deriving specifically § 5 Act, the Interstate Commerce 49 U. and from 5, § S. C. Clayton 11 Act, §5, of the 15 U. C. Under § §21. S. any by of two or more conjoining carriers, merger either byor transfer of a controlling stock, interest must be for approval ICC, approval submitted to the whose con- immunity. Clayton fers antitrust Section Act grants authority to the compliance ICC to enforce with provisions the antitrust of 7 of the same 15 U. C.S. 18, which prohibit acquisition by corporation one the stock or the assets another where “the effect of such acquisition substantially to lessen or competition, to tend to monopoly.” create a On the facts it, before the Court saw no abuse discretion in the ICC’s decision postpone consideration of possible by control REA Greyhound expiration until Greyhound’s 60-day offer, but held it an abuse of discretion to defer consider- ation of a possible 7§ violation.
Section 20a of the Interstate Act, interpreted Commerce Denver, in was, as the majority points out, the model for § 204 of the Federal Power Act.11 But this tie no requires means the two be given sections identical constructions.12 The Denver case involved a different Report The Senate indicated that 204§ “follows section 20a of the Interstate Commerce Act in defining the conditions under which such authorization is given, to be the Com- power mission’s to issue duty orders and the utilities to comply with such orders.” Rep. Cong., No. 74th Sess., 1st hardly One can suppose Congress specifically in tended to borrow the words of 20a they would be construed this Court in Congress 1967. borrowed language as it then was understood, “proved because it had Id.., usefulness.” at 20. Moreover, Congress departed from the Interstate Commerce Act model when it established exception an for state-regulated securities, 10, supra, see n. exception an which is not found in the Interstate Commerce Act. a different admin- framework,
statute and regulatory involved history.13 Moreover, the transaction istrative Denver, Greyhound’s purchase regulated of stock per se violation of the anti- carrier, arguably have acquisition might trust laws: the effect of the “substantially competition, been to lessen tend *24 monopoly” Clayton to a of 7 of the create violation history of the legislative Act. As indicated above, particular Commerce Act showed concern with Interstate “intercorporate The holdings railroad stock.” imme- diacy obligation imposed by of the antitrust issue and the on respect Clayton § 5 the ICC with Act violations justified in overriding the Court decision not to ICC’s address the issue.
In sum, precedential Denver has little in case weight under the Act, especially Federal Power where the trans- action does not involve on arguable its face an violation of the antitrust laws.
IV I return now to the facts case. The relationship between Gulf proposal States’ to sell for bonds on cash open market the anticompetitive and activities alleged by the is, best, Cities at an attenuated one. Indeed, the do not claim that Cities issuance itself will have an important practical utility No less are the differences between financing. and railroad Because for several decades the railroads have expanded they contracted rather than services, facilities and part have for the most been able to meet capital their needs from earnings retained equipment financing resorting trust without the national capital: markets for additional may enlarge “Railroads not trackage significantly their rely largely continue to on ubiquitous internal resources and the equipment trust to finance additional rolling and more efficient stock. electric, But the gas, communications, natural industries, and water as well airlines, go as must fraternity the investment staggering supra, Priest, amounts.” at n. 451. simple that the Nor do claim they effect. anticompetitive an Their effect. will have such obligations refunding in- beyond barely bald relationship goes of a assertion will be anticompetitive alleged conduct sistence that proposed.” here by the or refinanced bonds “financed consistently focus Respondent Cities Their Brief for 9. proceeds on which the the uses to has been so much from will be put the bonds conditions on their might impose Indeed, Commission issuance. rela- the lack of a substantial believes that tionship petitioner’s between the Cities’ allegations is bond issue characteristic lack nexus between proposals anticompetitive § 204 financing generally conduct utilities.14
This, then, unlikely is a particularly case which to force the Commission investigate allegations anti- competitive apparently conduct. Court considers the Cities’ claim anticompetitive conduct *25 colorably least proposed relevant If refinancing. so, unlikely any it is claim wholly can be found irrelevant. On the of today’s basis only precedent, justification open reasonably to the Commission for re- fusing to consider of allegations anticompetitive conduct will be that the allegations patently themselves are false.
If the field of inquiry is, as the Cities all insist, of a utility’s proposed actions all its past of actions as worthy It of note that a public transaction between two resembling utilities in Denver & R. G. W. proposed transaction R. Co. be would Commission, submitted to the not under but § under provides pertinent part § that: “(a) public utility No purchase, shall . . . acquire, any or take any public of other utility, without having first secured an order authorizing Commission it to so.” do U. S. C. 824b. § passing In application on an 203, the would in- vestigate charges supra, anticompetitive of practices. See at 768. Thus specific problem Denver would addressed Court not arise under 204.
they be no diffi- proposed reflect on its should it actions, an findings cult task for intervenor to force a hearing present amply As the demonstrates, fact. case questions unsuited complicated fact ones summary adjudication. If no the Commission finds anti- competitive conduct, the intervenor will remain free to judicial seek review of the Commission’s findings, thereby delay. cause further
In converting special-purpose proceeding into a general-purpose one, the Court renounces an administra- interpretation tive practicalities 204 founded on the of utility financing and regulation.15 Although other es- tablished means are available for policing anticompetitive conduct,16 imposes the Court fresh and ill-defined ob- necessary to the capital by stacles raising industry an expeditious that needs an dependable regulatory process. And, finally, in “public in- name terest,” ignores it the critical fact that mandating pro- longed factfinding process preclude will the Commission from vindicating aspects those interest peculiarly implicated by financing proposals.
I would uphold the Commission and would reverse the decision of the Appeals. Court of
15 I would not possibility foreclose the the Commission should consider in the application allegation context of a 204 an issuance of the was itself an antitrust violation. But see 14, supra. n. present remotely type. case is of this 4, supra. See n. that notes short-term long term bonds” “not appeal, without and also problems.” Id., not without 109, F. 454 at 952. 2d, The court however, concluded, “cryptic that the state of the ment FPC does permit us to conclude with reasonable confidence that this position was the taken the FPC.” It Ibid. observed that the Commission rejected have the Cities’ allegations of hand upon out the authority of earlier its decision in Light Power & Pacific Co., 27 F. P. C. 623 (1962), position the Ap Court of peals viewed as untenable under this Court’s subsequent decision in Denver & R. W.G. R. v. States, Co. United 387 U. S. (1967).4 485 4 opposed Cities also an application of approval LP&L for by the Securities and Exchange Commission of issues, bond and stock proceeds of which were to be repay used to obligations short-term and for other corporate purposes. Cities contended pro that ceeds of these issues would be used for the construction of facilities that would further objectives unlawful LP&L, Gulf, and CLEC, and approval asked that by the SEC be conditioned on 755 Appeals the decision of the Court Inasmuch as importance with potential recurring raised issues by the Federal to the authorization of securities respect certiorari. 956 Commission, Power we granted U. position The Commission took program illegal and the establishment of a cessation of activities already remedy damage done. jurisdiction was based on 6 and The of the SEC this instance §§ Utility 1935, Holding Company Act of of the Public 15 U. S. C. Utility 79g, part 79f and which are I of the Public Act of Tit. §§ number 49 Stat. 814-817. contain a Sections requirements security approval that must be of a issue. met SEC (d), requires The most relevant of these is in permit “shall SEC declaration to become effective unless the ... (6) finds that —. . . the terms and conditions of the security issue or detrimental sale are interest or the interest of investors or consumers.” protest, concluding The SEC refused entertain the Cities’ authority (d) (6) solely related to the terms and con- issued, to be and did not extend ditions to collateral might engaged. unrelated controversies which LP&L petitioned Cities Appeals United Court of States for the Dis- trict orders, of Columbia Circuit for review of the SEC and the present matter was consolidated with the case. The Court of Appeals orders, affirmed the SEC but remanded case to the Gulf’s