Federal Power Commission v. Florida Power & Light Company/Opinion of the Court

We are asked to determine whether the Federal Power Commission exceeded its statutory authorization when it asserted jurisdiction over the Florida Power & Light Co. Section 201(b) of the Federal Power Act, as amended, 49 Stat. 847, 16 U.S.C. § 824(b), grants the Federal Power Commission jurisdiction over 'the transmission of electric energy in interstate commerce and. . . the sale of electric energy at wholesale in interstate commerce, but. . . not (over) any other sale of electric energy. . ..' Section 201(c) defines energy transmitted in interstate commerce as energy 'transmitted from a State and consumed at any point outside thereof.' In Connecticut Light & Power Co. v. FPC, 324 U.S. 515, 65 S.Ct. 749, 89 L.Ed. 1150 (1945), we noted that by this definition the initial jurisdictional determination 'was to follow the flow of electric energy, an engineering and scientific, rather than a legalistic or governmental, test.' Id., at 529, 65 S.Ct. 749, 755; FPC v. Southern California Edison Co., 376 U.S. 205, 209 n. 5, 84 S.Ct. 644, 647, 11 L.Ed.2d 638 (1964).

In the case now before us the FPC hearing examiner and the Commission itself, utilizing two scientific tests, determined that the Florida Power & Light Co. (FP & L) generates energy that is transmitted in interstate commerce. They therefore held the company subject to the Commission's jurisdiction. Respondent FP & L argues that an alternative model better represents the flow of its electricity; by use of this model it purports to demonstrate that its power has not flowed in interstate commerce. The Court of Appeals for the Fifth Circuit rejected the FPC's tests as 'not sufficient to prove the actual transmission of energy interstate.' 430 F.2d 1377, 1383 (1970). It did not approve FP & L's test ('Both (the FPC and the FP & L tests) suffer from the same vice,' id., at 1385), but because the FPC must shoulder the burden of proof, its finding of jurisdiction was set aside.

We granted certiorari to determine if either of the FPC's tests provides an acceptable basis at law and a sufficient basis in fact for the establishment of jurisdiction. 401 U.S. 907, 91 S.Ct. 873, 27 L.Ed.2d 805 (1971).

* FP & L is Florida's largest electric utility. At the time relevant to this litigation it served nearly one million customers, ranked ninth nationally among electric companies in revenues, 14th in investment in gross utility electric plant, and 16th in kilowatt-hour sales. Despite this significant size, the peninsular nature of Florida, the concentration of the company's sales in the southern part of the State, and the recurrent threat of hurricanes which might sever power lines combine to make the operations of the company unusually insular and independent of the operations of like companies in other States. All of FP & L's equipment, including transmission lines, is confined to Florida and none of its lines directly connect with those of out-of-state companies.

FP & L does, however, indirectly connect with out-of-state companies. As a member of the Florida Pool, it is interconnected with the Florida Power Corp. (Corp), the Tampa Electric Co., the Orlando Utilities Commission, and the City of Jacksonville. These interconnected utilities and authorities coordinate their activities and exchange power as circumstances require. In 1964 FP & L transferred over 107 million kwh to Corp and received over 61 million kwh from Corp. If power from FP & L flows in interstate commerce it is because Corp interconnects just short of Florida's northern border with Georgia Power Co. and regularly exchanges power with it. Georgia's lines transmit the power out of or into Florida. There are numerous instances in which transfers between Georgia and Corp are recorded as coinciding with transfers between Corp and FP & L.

The Georgia-Corp interconnection serves another function. Corp, FP & L, and the other Florida Pool participants are members of the Interconnected Systems Group (ISG), a national interlocking of utilities that automatically provides power in case of emergencies. In time of emergency this power also would flow through Corp's links with Georgia. To date FP & L has had no occasion to call for ISG power. But when a midwestern utility sustained a 580-megawatt generating loss, a regularly scheduled 8-megawatt FP & L contribution to the Florida Pool coincided with an 8-megawatt contribution from the pool to the ISG system.

These relationships establish the focal issue in this case. The FPC may exercise jurisdiction only if there is substantial evidentiary support for the Commission's conclusion that FP & L power has reached Georgia via Corp or that Georgia's power has reached FP & L because of exchanges with Corp. What happens when FP & L gives power to Corp and Corp gives power to Georgia (or vice versa)? Is FP & L power commingled with Corp's own supply, and thus passed on with that supply, as the Commission contends? Or is it diverted to handle Corp's independent power needs, displacing a like amount of Corp power that is then passed on, as respondent argues? Or, as the Commission also contends, do changes in FP & L's load or generation, or that of others in the interconnected system, stimulate a reaction up and down the line by a signal or a chain reaction that is, in essence, electricity moving in interstate commerce? Upon answer to these questions, jurisdiction rides.

If FP & L were directly involved in power exchanges with Georgia, there would be no serious question about the resolution of this case. Section 201 of the Federal Power Act owes its origin to the determination of this Court that a direct transfer of power from a utility in Rhode Island to a utility in Massachusetts is in interstate commerce. See Public Utilities Comm'n v. Attleboro Steam & Electric Co., 273 U.S. 83, 47 S.Ct. 294, 71 L.Ed. 549 (1927). 'Part II (of the Act) is a direct result of Attleboro.' United States v. Public Utilities Comm'n of California, 345 U.S. 295, 311, 73 S.Ct. 706, 715, 97 L.Ed. 1020 (1953). There can be no doubt that § 201 achieves its end and fills the 'Attleboro gap' by giving the FPC jurisdiction over direct exchanges. Connecticut Light & Power Co. v. FPC, 324 U.S. 515, 65 S.Ct. 749, 89 L.Ed. 1150 (1945).

Nor would there be any difficulty in resolving this case if the company or companies that stood between FP & L and the out-of-state power companies could be shown to be sometimes no more than a funnel. In Jersey Central Power & Light Co. v. FPC, 319 U.S. 61, 63 S.Ct. 953, 87 L.Ed. 1258 (1943), the first of the major FPC jurisdictional cases to be considered by this Court, Jersey Central supplied power to the Public Service Electric & Gas Co. (also a New Jersey company), which in turn had exchange arrangements with Staten Island Edison Corp. (a New York company). The transfer from PSE & G to Staten Island was effected through a 'bus'-a transmission line of three conductors into which a number of subsidiary lines connect. The FPC showed through extensive sampling of the logs of the relevant companies, that on at least a dozen occasions when Staten Island drew power from the bus only Jersey Central was supplying the bus. Thus, the intermediate presence of PSE & G was shown to be, in some circumstances, a null factor, and it was established that Jersey Central energy was moving in interstate commerce.

In the litigation before us the record does not disclose situations in which Corp operated as a null or insufficient factor. Thus, the FPC has not in this litigation demonstrated with the clarity and certainty obtaining in the Jersey Central case that the energy flows that are a prerequisite to jurisdiction occurred.

This is not, however, the equivalent of saying that the flows did not occur or that there was not substantial evidence for concluding that they did. The Court of Appeals was hardly less emphatic than the Federal Power Commission in its conclusion that FP & L's 'proof' that the flows did not occur was unconvincing. The court purported to have no opinion whether the flows had actually occurred. The question that must be resolved, therefore, is whether the evidence presented, though not so certain and convincing as that which the FPC offered in Jersey Central, was nonetheless adequate to establish jurisdiction.

We turn first to the conflicting contentions of the parties.

The Federal Power Commission followed alternate routes to its conclusion that FP & L energy moved in interstate commerce. The first course, based on what the Commission called the electromagnetic unity of response of interconnected electrical systems, is best represented in the words of the hearing examiner:

'(N)one of the connected electric systems including that of     Florida, Corp, and Georgia has any control over the actual      transfers of power at each point of interconnection because      of the free flow characteristics of electric networks. . ..

'An electric utility system such as Florida (Power & Light)     is essentially an electro-mechanical system to which all      operating generators on the interconnected network are      interlocked electromagnetically. This means that electric     generators, under ordinary operating conditions run either at      exactly the same speed or at speeds which will result in a      frequency of 60 cycles. No operating generator can change its     speed by itself as long as it operates connected to the      network. All generators connected to the same network must     follow each other as to speed and frequency whenever there is      a change in frequency, and the frequency of all interlocked      generators is always exactly the same.

. . . . . ..

'If a housewife in Atlanta on the Georgia system turns on a     light, every generator on Florida's system almost instantly      is caused to produce some quantity of additional electric      energy which serves to maintain the balance in the      interconnected system between generation and load. If     sensitive enough instruments were available and were to be      placed throughout Florida's system the increase in generation      by every generator on Florida (Power & Light) could be      precisely measured.' The hearing examiner concluded:

'The cause and effect relationship in electric energy     occurring throughout every generator and point on the      Georgia, Corp and Florida systems constitutes interstate      transmission of electric energy by, to, and from Florida. It     is the electromagnetic unity of response of Florida, Corp,      Georgia and other interconnecting systems that constitutes      the interstate transmission of electric energy by Florida.'

By this analysis a change in FP & L's load or generating pattern depletes or adds to the force available in out-of-state lines; therefore FP & L is transmitting energy in interstate commerce.

The alternative analysis by the Commission and its staff experts concentrates on power flow within the 'Turner bus'-the point of connection between Corp's and FP & L's systems. Power supplied to the bus from a variety of sources is said to merge at a point and to be commingled just as molecules of water from different sources (rains, streams, etc.) would be commingled in a reservoir. On this basis the FPC need only show (1) FP & L power entering the bus and (2) power leaving the bus for out-of-state destinations at the same moment, in order to establish the fact that some FP & L power goes out of state. The FPC purported to make this demonstration by a series of tracing studies.

FP & L objects. The first approach is said to be technologically sound, but legally insufficient in that it does not demonstrate that any FP & L power flows in interstate commerce, but only that it affects interstate commerce. Congress, it is argued, could have chosen to grant the FPC jurisdiction over activities affecting commerce, but it clearly did not do so.

The second approach of the FPC purports to meet the standard at law, but according to FP & L it is technologically unsound. A bus is not a point, but rather a tangible, physical three-strand power line, in this case 225 feet in length. It is argued that it is not a general reservoir. Power, according to this argument, enters and is drawn off the line at discrete identifiable points. Power from any given source will not flow further along the line than loads of wattage cumulatively equal to the wattage of the power source. The distribution of entry lines and wattage loads on the Turner bus is said to demonstrate that all of the FP & L's power will be exhausted by Corp's load lines before the point, further down the line, where Georgia's load intervenes. When power flows in the opposite direction (i.e., north to south) again the effect is one of displacement: Georgia's power goes to Corp's loads and the output of Corp's generators is thus displaced to FP & L.

We do not find it necessary to approve or disapprove the Federal Power Commission's analysis based on unity of electromagnetic response. Its alternative assertion that energy commingles in a bus is, in our opinion, sufficient to sustain jurisdiction.

In evaluating this second approach, the courts are called upon to do no more than assess the Commission's judgment of technical facts. If the Commission's conclusion of commingling is not overturned, then the legal consequences are clear.

The conclusion of the FPC that FP & L energy commingled with that of Corp and was transmitted in commerce rested on the testimony of expert witnesses. The major points expounded by these witnesses were probed, and in our opinion not undercut, by the hearing examiner's questions, FP & L's cross-examination, and rebuttal testimony of FP & L witnesses. The hearing examiner found the testimony persuasive and held that his conclusions could be independently reached upon it. A majority of the Commission, reasoning similarly, endorsed these conclusions.

A court must be reluctant to reverse results supported by such a weight of considered and carefully articulated expert opinion. Particularly when we consider a purely factual question within the area of competence of an administrative agency created by Congress, and when resolution of that question depends on 'engineering and scientific' considerations, we recognize the relevant agency's technical expertise and experience, and defer to its analysis unless it is without substantial basis in fact. An appreciation of such different institutional capacities is reflected in the congressional directive defining the terms of judicial review of FPC action: 'The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive.' Federal Power Act § 313(b), 16 U.S.C. § 825l(b). See Gainesville Utilities Dept. v. Florida Power Corp., 402 U.S. 515, 526-529, 91 S.Ct. 1592, 1598, 29 L.Ed.2d 74 (1971).

The Court of Appeals appears to have rejected the Commission's conclusions for two reasons. First, it apparently regarded these conclusions as supported by mere speculation rather than evidence. In its view, expert opinion about the nature of reality, however logically compelling, is not fact. Second, even if the Commission's views might be said to be supported by substantial evidence, the Court of Appeals apparently thought it important that the Commission acknowledged that its conclusions rest upon representations of a reality imperfectly understood. From this the Court of Appeals concluded that it was dealing with a 'simplified characterization' that, despite the frequent use of that same characterization by other courts of appeals, was too uncertain in its application to any particular situation to be used as the basis for establishing jurisdiction.

We reverse and reinstate the FPC's order because we do not think these points are well taken. As to the Court of Appeals' first reservation, we hold that well-reasoned expert testimony based on what is known and uncontradicted by empirical evidence may in and of itself be 'substantial evidence' when first-hand evidence on the question (in this case how electricity moves within a bus) is unavailable. This proposition has been so long accepted, and indeed has been so often applied specifically to challenges to the FPC's determination of technical matters, that we do not consider it fairly in dispute. See, e.g., FPC v. Southern California Edison Co., 376 U.S. 205, 209 n. 5, 84 S.Ct. 644, 647, 11 L.Ed.2d 638 (1964); Travelers' Indemnity Co. v. Parkersburg Iron & Steel Co., 70 F.2d 63, 64 (1934); United States ex rel. Chapman v. FPC, 191 F.2d 796, 808 (1951) aff'd, 345 U.S. 153, 73 S.Ct. 609, 97 L.Ed. 918 (1953). As Judge Parker said in the Court of Appeals' opinion in the latter case:

'The (substantial-evidence) rule is no different because the     questions involve matters of scientific knowledge and the      evidence consists largely of the opinion of experts. The     court may not, for that reason, ignore the conclusions of the      experts and the Commission and put itself in the absurd      position of substituting its judgment for theirs on      controverted matters of hydraulic engineering. It is in just     such matters that the findings of the Commission, because of      its experience and the assistance of its technical staff,      should be accorded the greatest weight and the courts should      be most hesitant to substitute their judgment for that of the      Commission.' 191 F.2d, at 808.

On affirming, this Court noted,

'(W)e cannot say, within the limited scope of review open to     us, that the Commission's findings were not warranted. Judgment upon these conflicting engineering and economic     issues is precisely that which the Commission exists to      determine, so long as it cannot be said, as it cannot, that      the judgment which it exercised had no basis in evidence and      so was devoid of reason.' 345 U.S., at 171, 73 S.Ct., at 619      (1953).

The elusive nature of electrons renders experimental evidence that might draw the fine distinctions required by this case practically unobtainable. That does not mean that expert testimony is insubstantial and that FP & L is beyond federal regulation.

We think the second, related, concern expressed by the Court of Appeals exaggerates the standard of proof required in civil cases such as this. The lower court would apparently require tracing studies showing an energy flow-through like that demonstrated in Jersey Central.

We do not think Jersey Central sets such high jurisdictional standards. Special circumstances in that case (the occasional operation of PSE & G as a null factor) permitted the FPC to present clear and compelling proof of interstate transactions. But we assessed the FPC's determination, not by the standards of certainty, but rather by the substantial-evidence test. The fact that the FPC was exceptionally convincing in that leading case does not raise the standard that it must meet in all future cases.

Finding no reason in the case law for imposing a standard of certainty, we are not willing to construct one. It is not true, as argued by respondent, that an engineering test of certainty is needed to reserve an area of state jurisdiction. On top of the 'engineering and scientific test' that controls this case, the Federal Power Act imposes a 'legalistic or governmental' test. Federal jurisdiction may not reach 'facilities used in local distribution' of energy. 16 U.S.C. § 824(b). Thus, state jurisdiction is clearly demarcated and preserved. Connecticut Light & Power Co. v. FPC, 324 U.S. 515, 65 S.Ct. 749, 89 L.Ed. 1150 (1945).

A requirement of tracing studies of the sort demanded by the Court of Appeals-if they are feasible at all -would take one to two years to conduct. Even under FPC's supposedly too easily met criteria of jurisdiction, the FP & L matter took almost four years to pass through Commission proceedings; it has been before the courts for four more years. It the congressionally mandated system is to function meaningfully, the judiciary cannot overwhelm it with unworkably high standards of proof. New England Divisions Case, 261 U.S. 184, 197, 43 S.Ct. 270, 275, 67 L.Ed. 605 (1923); Railroad Comm'n of Wisconsin v. Chicago, Burlington & Quincy R. Co., 257 U.S. 563, 579, 42 S.Ct. 232, 234, 66 L.Ed. 371 (1922).

We note, moreover, that Jersey Central type tracing studies become less feasible as interconnections grow more complicated. Arkansas Power & Light Co. v. FPC, 368 F.2d 376, 382 (CA8 1966), quoting 34 F.P.C. 747, 751. The requirement of Jersey Central type tracing might encourage the artificial and wasteful complication of interconnections for the purpose of avoiding federal jurisdiction. More important, as interconnections proliferate and energy pools grow larger, jurisdictional hurdles like those erected by the Court of Appeals would become ever more difficult to clear. Thus, the greater the need for regulation, the more likely it would become (under the Court of Appeals' rule) that regulation would not be achieved.

As pointed out by the Court of Appeals for the Seventh Circuit in an FPC case similar to this one, even in a criminal prosecution where the highest standards of proof are required, guilt may be shown by circumstantial evidence. The FPC has used tracing studies to show what went into and out of the Turner bus at a given moment; it has marshaled expert opinion to suggest what may reasonably be said to have occurred in the bus at the instant of transmission; it has presented this evidence in a closely reasoned and empirically uncontradicted opinion. Recognizing that the men responsible do not now fully understand electricity, though they know how to use it, and use it on an ever-expanding basis, we do not demand more of the Commission than that its conclusions be substantially supported by expert opinion that is in accord with the facts known for certain. The Commission has done enough to establish its jurisdiction.

The decision of the Court of Appeals is reversed and the case is remanded for reinstatement of the order of the Federal Power Commission.

Reversed and remanded.

Mr. Justice STEWART, Mr. Justice POWELL, and Mr. Justice REHNQUIST took no part in the consideration or decision of this case.

Mr. Justice DOUGLAS, with whom THE CHIEF JUSTICE concurs, dissenting.