Arkansas Electric Cooperative Corporation v. Arkansas Public Service Commission

Appellant is a customer-owned rural power cooperative established with loan funds and technical assistance provided by the federal Rural Electrification Administration (REA), but unlike most such cooperatives, which provide power directly to consumers, appellant's sole members and primary customers are 17 smaller Arkansas rural power cooperatives which in turn serve the ultimate consumer. Although tied into an interstate "grid" arrangement with other producers, appellant obtains most of its energy from power plants located in Arkansas, which it wholly or partially owns, and sells most of what it generates to its member cooperatives. Appellee Arkansas Public Service Commission entered an order asserting jurisdiction over the wholesale rates charged by appellant to its member cooperatives, concluding that state regulation was neither forbidden by Public Utilities Comm'n of R.I. v. Attleboro Steam & Electric Co., 273 U.S. 83—which held that while consistent with the Commerce Clause the States could regulate retail sales of electricity, they could not regulate wholesale sales—nor pre-empted by the Federal Power Act or the Rural Electrification Act of 1936. On review, the Pulaski County Circuit Court set aside appellee's order, but the Arkansas Supreme Court reversed.

Held:

1. Appellee's assertion of jurisdiction over the wholesale rates charged by appellant to its members does not offend the Supremacy Clause of the Constitution. Pp. 383–389.

(a) Neither the Federal Power Act nor administrative actions taken thereunder pre-empt state regulation. The Federal Power Commission determined in 1967 that it did not have jurisdiction under the Act over the wholesale rates charged by rural power cooperatives under the supervision of the REA, and such decision was based on the Commission's conclusion that the relevant statutes gave the REA exclusive authority among federal agencies to regulate rural power cooperatives, not on a conclusion that, as a matter of policy, such cooperatives that are engaged in sales for resale should be left unregulated. Pp. 383–385.

(b) The Rural Electrification Act does not expressly pre-empt state rate regulation of power cooperatives financed by the REA, and the legislative history of the Act establishes that, although the REA was expected to assist the fledgling rural power cooperatives in setting their [p376] rate structures, it would do so within the constraints of existing state regulatory schemes. In addition, the REA's present policy is wholly inconsistent with pre-emption of state regulatory jurisdiction over wholesale rates. Pp. 385–389.

2. Appellee's assertion of regulatory jurisdiction over wholesale rates does not offend the Commerce Clause. Pp. 389–395.

(a) If the mechanical wholesale/retail test articulated in Attleboro, supra, were applied here, it would require setting aside appellee's assertion of jurisdiction. However, the general trend in this Court's modern Commerce Clause jurisprudence is to look in every case to the nature of the state regulation involved, the State's objective, and the effect of the regulation upon the national interest in the commerce involved, and that modern jurisprudence, rather than the mechanical line drawn in Attleboro, must govern the decision here. Pp. 389–393.

(b) "Where [a] statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to putative local benefits" Pike v. Bruce Church, Inc., 397 U.S. 137, 142. Economic protectionism is not implicated here, and state regulation of the wholesale rates charged by appellant to its members is well within the scope of "legitimate local public interests," particularly considering that although appellant is tied into an interstate grid, its basic operation consists of supplying power from generating facilities located within the State to member cooperatives, all of which are located within the State. Although appellee's regulation of appellant's rates charged to its members will have an incidental effect on interstate commerce, "the burden imposed on such commerce is not clearly excessive in relation to the putative local benefits." Pp. 393–395.

273 Ark. 170, 618 S.W.2d 151, affirmed.

BRENNAN, J., delivered the opinion of the Court, in which MARSHALL, BLACKMUN, POWELL, REHNQUIST, STEVENS, and O'CONNOR, JJ., joined. WHITE, J., filed a dissenting opinion, in which BURGER, C.J., joined, post, p. 396.

Robert D. Cabe argued the cause for appellant. With him on the brief was Leland F. Leatherman.

Jeff Broadwater argued the cause for appellee. With him on the brief was Robert H. Wood, Jr.