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Hartford Electric Light Co. v. Federal Power Commission.

November 25, 1942


On Petition for Review from an Order of the Federal Commission.

Author: Frank

Before L. HAND, CLARK, and FRANK, Circuit Judges.

FRANK, Circuit Judge.

1. The commission, on June 16, 1936, made its Order No. 42, adopting a Uniform Systen of Accounts for Public Utilities and Lecensees, subject to the provisions of the Federal Power Act, 16 U.S.C.A. ยง 791A et seq. By order dated May 11, 1937, the Commission directed all public utilities subject to its jurisdiction under that Act to submit certain data, statements and information concerning their accounts, records and properties. After notice and hearing, as required by the Act, the Commission, by orders dated February 25, 1941, and October 21, 1941, purporting to be entered pursuant to sections 208 and 301(a) of the statute, directed petitioner, Hartford, to comply with Order No. 42 and the order of May 11, 1937. Petitioner asks this court to review and set aside the orders of February 25, 1941 and October 21, 1941, on the ground that, under the Act, petitioner is not subject to the Commission's jurisdiction in any respect.*fn2

It is clear, and petitioner so concedes, that, if petitioner is a "public utility," as that term is defined in section 201 (e), then those orders are vaild.*fn3 For section 208, found in Part II of the Act, and section 301 (a), found in Part III, each applies to "every public utility."*fn4 And section 201 (e), found in Part II, reads, "The term 'public utility' when used in this Part or in the Part next following [sections 824- 825r of this title] means any person who owns or operates facilities subject to the jurisdiction of the Commission under this Part [sections 824-824h of this title]."*fn5

The pivotal question is, then, whether petitioner owns or operates any facilities subject to the Commission's jurisdiction under Part II.*fn6 For answer to that question, we must turn to Section 201 (b), contained in Part II, which reads as follows: "The provisions of this Part [sections 824-824h of this title] shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but shall not apply to any other sale of electric energy or deprive a State or State commission of its lawful authority now exercise over the exportation of hydroelectric energy which is transmitted across a State line. The Commission shall have jurisdiction over all facilities for such transmission or sale of electric energy, but shall not have jurisdiction, except as specifically provided in this Part and the Part next following [sections 824-824r of this title], over facilities used for the generation of electric energy or over facilities used in local distribution or only for the transmission of electric energy in intrastate commerce, or over facilities for the transmission of electric energy consumed wholly by the transmitter."

2. The facts pertinent to this review may be summarized as follows:

Petitioner is a Connecticut corporation engaged in the business of generating, transmitting, distributing and selling electric energy in and near Hartford, Connecticut. It owns a steam-generating plant in Hartford. For some ten years before the President approved the Act, petitioner was a member of a voluntary arrangement for a "Pool" of electric energy known as the Connecticut Valley Power Exchange. The Exchange consisted of Massachusetts and Connecticut electric utility companies and was formed and operated for the purpose of exchanging electric energy, "at incremental cost," between the members. Through the operations of this Exchange, electric energy generated by petitioner was transmitted to, and sold to, customers in Massachusetts. Among the facilities used by petitioner in these transmissions of energy through the Exchange were these: (a) Facilities, owned by petitioner, between the connections on its generatings in its generating plant and a substation immediately outside its generating plant. (b) That substation, owned by petitioner. (c) A transmission line, owned and operated by the Connecticut Power Company, connecting the substation with the facilities of a Massachusetts member of the Exchange.

In 1936, petitioner withdrew from the Exchange, Connecticut Power then succeeded it as a member of the Exchange, and petitioner then sold to Connecticut Power the substation and the facilities from its bushing s on the wall of its generating plant to the substation. Since then Connecticut has owned and operated these facilities. Petitioner retained ownership and operation of the facilities in its generating plant, and between its generators and those wall bushings. The generators are connected to a "Main Bus" inside the generating plant. Numerous circuits connected to that bus are used solely in intrastate distribution and transmission; but there are three such circuits which lead through the wall bushings of the plant building to the substation; inside the building these circuits to the wall bushings are owned by petitioner, while outside they are now owned by Connecticut Power.

The 1936 sale of assets to Connecticut Power was admittedly made in the hope of escaping the Commission's jurisdiction. After that sale to Connecticut Power, no physical change was made in the transfers of energy under the Exchange arrangement, and the physical plan of operations of the Exchange continued as theretofore. Connecticut Power supplies to other Exhange members energy which it receives principally from petitioner, and receives from them energy, a considerable part of which it supplies to petitioner. Financial benefits, by way of savings, which had formerly accrued to petitioner as a member of the Exchange, now are received and retained by Connecticut Power. It is admitted by petitioner that it knows that the amount of energy it sells to Connecticut Power exceeds the latter's load requirements for its needs in the State of Connecticut; that such excess is utilized by Connecticut Power in connection with the operations of the Exchange; that, in such operation, energy is transmitted across the State boundary to Massachusetts, where it is used (except for losses) for sales to ultimate consumers; and that the supply of energy by petitioner is essential to the operations of the Exchange.*fn7

Petitioner has a contract with Connecticut Power which obligates petitioner to supply Connecticut Power the firm capacity, up to a designated limit, required by Connecticut for its sales of energy to intrastate customers in a designated area. Outside its contract commitments, petitioner also sells Connecticut Power surplus energy. Were it not for this surplus energy thus sold by petitioner to Connecticut Power, the latter could not transmit energy under the Exchange arrangement. Although in this way energy generated by petitioner is transmitted and resold in Massachusetts, petitioner never sells any designated block of energy for specific interstate use. Connecticut Power may either distribute a particular purchase to its customers or put it in the transmission line to Massachusetts. Petitioner has no interstate energy business except in so far as its sales of energy to Connecticut Power transmitted to Massachusetts may, as " a matter of law" under the Act, constitute interstate transactions by petitioner.

Petitioner owns 9.19% of the common stock of Connecticut power. Four of the eleven directors of petitioner are among the fourteen directors of Connecticut Power, and two of the principal officers of the two companies are the same.

Through the three circuits, above mentioned, which lead from petitioner's generating plant to the substantion owned by Connecticut Power, 166,144,000 kilowatt hours of electric energy from petitioner's generating plant were supplied to Connecticut Power in the first nine months of 1939, of which 97,932,000 were transmitted to Massachusetts. From June 1 to September 30, 1939, approximately a third of the net generation at petitioner's plant was sent to Massachusetts.

3. Section 201(d) defines the "sale of electric energy at wholesale" to mean "a sale of electric energy to any person for resale." Petitioner sells electric energy to Connecticut Power. The Exchange arrangements result in resales, whether they be regarded as sales to the Exchange*fn8 and resales by the Exchange, or as sales by the Exchange as agent for the members or as an agency whereby each member acts as agent for the others in selling the energy supplied by the others. For the inescapable fact is that energy sold by petitioner to Connecticut Power is resold to consumers in Massachusetts. There can be no doubt that petitioner is making sales at wholesale, as that term is defined in the Act.

Petitioner concedes that Congress has the constitutional power to regulate the sales transactions in which it is engaged, but argues that Congress has not exercised that power in this Act, because it has used the expression "in interstate commerce," a phrase, says petitioner, not sufficiently comprehensive to cover such transactions.*fn9 A similar contention was made in Peoples Natural Gas Co. v. Federal Power Commission, App. D.C., 127 F.2d 153, 155, in which a gas company had sold natural gas in Pennsylvania to another company which immedicately transported the gas to New York, where it sold it to others for resale. The court rejected the argument, stating that the words "sale in interstate commerce" aptly described such a transaction.*fn10 We adopt that court's excellent discussion of the pertinent authorities. See also Shafer v. Farmers' Grain Co., 268 U.S. 189, 199, 45 S. Ct. 481, 485, 69 L. Ed. 909, ...

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