Arkansas Electric Cooperative Corporation v. Arkansas Public Service Commission/Dissent White

by Byron White

JUSTICE WHITE, with whom THE CHIEF JUSTICE joins, dissenting.

I respectfully dissent. I believe that state regulation of rural cooperative wholesale power rates is preempted because Congress has occupied the field of wholesale power rate regulation.

Several years before the expansion of the jurisdiction of the Federal Power Commission to regulate interstate wholesale power rates, this Court had invalidated as repugnant to the Commerce Clause state attempts to regulate interstate power wholesale rates. Public Utilities Comm'n of R.I. v. Attleboro Steam & Electric Co., 273 U.S. 83 (1927). The Court drew a bright line demarking the permissible scope of state regulation. States could regulate retail sales of energy in interstate commerce, but could not regulate wholesale sales of energy in interstate commerce. “Attleboro declared state regulation of interstate transmission of power for resale forbidden as a direct burden on commerce.” United States v. Public Utilities Comm'n of Cal., 345 U.S. 295, 304 (1953). Had there been at the time of Attleboro a cooperative that generated electricity and sold it for resale across state lines, state regulation of such sales would have been foreclosed as an interference with commerce. I do not see how that conclusion could be questioned.

Nor is it sensible to argue that such a cooperative's rates became subject to state regulation when a few years later Congress subjected to federal regulation most wholesale [p397] rates previously unregulated. Quite the contrary is true. Although under the relevant cases, with which it was surely familiar, In re Rahrer, 140 U.S. 545 (1891); Clark Distilling Co. v. Western Maryland R. Co., 242 U.S. 311 (1917),^[1], Congress could have authorized State regulation of such rates, it chose not to do so. See New England Power Co. v. New Hampshire, 455 U.S. 331, 341 (1982) ("Nothing in the legislative history or language of [16 U.S.C. § 824(b)] evinces a congressional intent ‘to alter the limit of state power otherwise imposed by the Commerce Clause,’ . . . or to modify the earlier holdings of this Court concerning the limits of state authority to restrain interstate trade”). Instead Congress enacted Titles II and III of the Federal Power Act, 49 Stat. 847, 16 U.S.C. § 824 et seq. (1976 ed. and Supp. V), in 1935 (and the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717 et seq. (1976 ed. and Supp. V), in 1938) expressly adopting the Attleboro bright-line demarkation, see FPC v. Southern California Edison Co., 376 U.S. 205 (1964); United States v. Public Utilities Comm'n of Cal., supra. That Act provided that the FPC would set just and reasonable rates for a public utilities that sold electric power at wholesale. 16 U.S.C. § 824d(a). The term public utility was defined broadly. [p398] 16 U.S.C. § 824(e) (1976 ed., Supp. V).^[2] Nowhere in the Act is there any indication that state authority to regulate wholesale rates was in any way expanded beyond that permitted by the Commerce Clause as interpreted in Attleboro. “What Congress did was to adopt the test developed in the Attleboro line [of cases] which denied state power to regulate a ‘sale at wholesale to local distributing companies.’” FPC v. Southern California Edison Co., supra, at 214. “The line of the statute was thus clear and complete. It cut sharply and cleanly between sales for resale and direct sales for consumptive uses. No exceptions were made in either category for particular uses, quantities or otherwise.” Panhandle Pipe Line Co. v. Public Service Comm'n of Indiana, 332 U.S. 507, 517 (1947).

Congress thus affirmatively asserted jurisdiction over wholesale rates charged by all entities, either by giving the FPC jurisdiction or by freeing such entities from regulation because of their quasi-governmental nature. Neither of these options leaves room for state control of wholesale rates charged by public utilities (except those that are arms of the state or its political subdivisions), the first gives sole control to the FPC, the latter can be viewed as a decision that the rates of governmental and quasi-governmental entities and are “best left unregulated”, ante at 384.

The Rural Electrification Act, 49 Stat. 1363, 7 U.S.C. § 901 et seq. (1976 ed. and Supp. V), was passed in 1936, and the Federal Power Commission later held that cooperatives such as petitioner are not within its regulatory authority, not because they were exempted by the Rural Electrification Act, but because they are beyond the jurisdiction conferred [p399] on the Commission by the Federal Power Act. Dairyland Power Cooperative, 37 F.P.C. 12, 67 P.U.R.3d 340 (1967).^[3] This left the cooperatives' wholesale rates unregulated and beyond the reach of state authority, just as they would have been immediately after Attleboro. In the 47 years since the passage of the Rural Electrification Act, Congress has not sought to authorize state regulation of the wholesale rates charged by rural cooperatives. It has adhered to its wholesale-retail boundary between federal and state authority. In all these years, there has been no state rate regulation of rural cooperative's wholesale rates. This was the necessary result of Congress adopting as its own the Attleboro line and thereby occupying the field of wholesale regulation.^[4]

[p400] The Court claims support for its apparent view that Congress authorized (or somehow expected) state control over wholesale rates charged by rural cooperatives in the legislative history of the Rural Electrification Act. In particular it points to statements that cooperatives were to comply with state regulation of retail rates, a power which the states possessed in the absence of Congressional authorization. The Court then opines that there is no more reason to control retail rates than there is to control wholesale rates. From these two premises it infers that Congress in effect authorized, or at the very least expected, state regulation that this Court had barred states from engaging in. The two premises, however, do not support the conclusion. Congress did not expressly authorize state regulation of wholesale rates charged by cooperatives and I find nothing in the history of the Rural Electrification Act to indicate that Congress was in any way departing from its basic decision to embrace the holding in Attleboro that the Commerce Clause barred the states from regulating wholesale rates.

The second source for its apparent view that the Rural Electrification Act allows state regulation of wholesale rates is a statement appearing in a Rural Electrification bulletin. The statement basically instructs the borrower to comply with the wholesale rate orders of any body that has jurisdiction to make such rate orders. This statement is supposed to express a “policy of the REA [that] is wholly inconsistent with the preemption of state regulatory jurisdiction” over wholesale rates. Ante, at 387. The Court's reliance on [p401] this statement is misplaced. First, given the silence of the Rural Electrification Administration on this point, an isolated reference in an administrative bulletin is not persuasive evidence of the Administration's position. Second, in the absence of any persuasive evidence that Congress intended to depart from the Attleboro line in the case of cooperatives, I doubt seriously that the REA itself would purport to adopt a policy at odds with the law. And surely it did not do so in advising cooperatives to comply with the orders of any authority having jurisdiction. Nor am I persuaded that there was a general understanding at the state level that each of the states to which a generating cooperative delivered power at the wholesale level was free to regulate that cooperative's wholesale prices. Finally, the statement could have been intended to direct wholly intrastate cooperatives to comply with the orders of state commissions. In such a situation a state would have jurisdiction over wholesale rates and the Administration might well have concluded that it should honor state control over intrastate rates.^[5]

Given the 48-year period in which Congress has asserted jurisdiction over wholesale rates and never manifested any belief that its policies would be furthered by state regulation of such rates, this Court should not purport to negate the Congressional decision to abide by Attleboro. I would hold, as a matter of preemption, that absent a contrary indication from Congress States may not regulate wholesale rates of cooperatives.^[6]

Notes

1. Clark Distilling upheld the Webb-Kenyon Act, 37 Stat. 699, prohibiting importation into a State of liquor to be received, possessed, or sold in violation of the laws of the state. About the time Congress passed the Public Utilities Holding Company Act Congress also enacted a law substantially similar to the Webb-Kenyon Act, the Ashurst-Summers Act, 49 Stat. 494, which made it unlawful to transport goods made by convict labor into any state where the goods were to be received, sold, or possessed in violation of its law. See Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U.S. 334, 351 (1937) (“The Ashurst-Summers Act as to interstate transportation of convict-made goods has substantially the same provisions as the Webb-Kenyon Act as to intoxicating liquors. . . . The subject of the prohibited traffic is different, the effects of the traffic are different, but the underlying principle is the same.”)
    
   But see Cooley v. Board of Wardens, 12 How. 299 (1851) (dicta).
    
2. Section 824(e) defines a public utility as “any person who owns or operates facilities subject to the jurisdiction of the Commission under this subchapter.” Section 796(4) defines a person as “an individual or a corporation.” Section 796(3) defines corporation as “any corporation, joint-stock company, partnership, association, business trust, organized group of persons, whether incorporated or not . . . .”
    
3. The Court accepts the holding in Dairyland that the FPC lacks jurisdiction over rural cooperatives. It then notes that the FPC believed that regulation of some rural cooperatives would be proper. From all this the court concludes that the lack of regulation of rural cooperatives does not represent a judgment that their wholesale rates are “best left unregulated,” ante, at 384. The FPC, however, did not suggest that the state had any role to play in filling this regulatory void. Furthermore, there is no evidence that Congress thinks, or thought, that the cooperatives' wholesale rates should be regulated, or that, if they should be, the states rather than the FPC or the Rural Electrification Administration should do the regulating.
    
4. Indeed, the only indication of the views of Congress with respect to the question of jurisdiction over the rates of rural cooperatives is the spate of bills introduced around the time that the FPC was considering the Dairyland Power case. These bills were designed to add rural cooperatives to the list of governmental instrumentalities exempt from FPC jurisdiction, e.g., H.R. 5348, 90th Cong., 1st Sess. (1967); H.R. 8426, 90th Cong., 1st Sess. (1967), and reaffirm the jurisdiction of the Rural Electrification Administration over rural cooperatives. S. 1365, 90th Cong., 1st Sess. (1967), (introduced by Sens. Holland and Smathers); H.R. 7799, 90th Cong., 1st Sess. (1967), (introduced by Rep. Fascell). The Department of Justice, the FPC, and the Department of Agriculture (of which the REA is a part) took the position that the legislation was not needed to protect cooperatives from FPC control in light of the Commission's decision, in Dairyland Power (which had been announced by the start of the hearings on the bill), that rural cooperatives were governmental instrumentalities [p400] exempt from FPC jurisdiction. Hearings on H.R. 5348 et al. before the Subcommittee on Communications and Power of the House Committee on Interstate and Foreign Commerce, 90th Cong., 1st Sess., 3 (letter from Lee C. White, Chairman, Federal Power Commission, to Hon. Harley O. Staggers); id., at 5 (letter from Orville L. Freeman, Secretary of Agriculture, to Harley O. Staggers); id., at 6 (letter from Warren Christopher, Deputy Attorney General, to Harley O. Staggers). The bills were not reported out of committee.
    
5. It is surely more reasonable to read a statement that a borrower is to comply with rate orders of any body that has jurisdiction to mean only that borrowers should comply with regulations governing intrastate wholesale sales, over which a state could constitutionally exercise jurisdiction, rather than reading it to mean that borrowers are to comply with rate orders of commissions whose exercise of jurisdiction is clearly unconstitutional.
    
6. I do not reach the question of whether the limitation on state power implicit in the Commerce Clause proscribes Arkansas's assertion of jurisdiction in this case.