Federal Power Commission v. Southern California Edison Company/Opinion of the Court

Petitioner City of Colton, California (Colton), purchases its entire requirements of electric power from respondent Southern California Edison Company (Edison), a California electric utility company which operates in central and southern California and sells energy only to customers located there. Colton applies some of the power purchased to municipal uses, but resells the bulk of it to thousands of residential, commercial, and industrial customers in Colton and its environs. Respondent Public Utilities Commission of California (PUC) had for some years exercised jurisdiction over the Edison-Colton sale but petitioner Federal Power Commission (FPC), on Colton's petition filed in 1958, asserted jurisdiction under § 201(b) of the Fed ral Power Act which extends federal regulatory power to the 'sale of electric energy at wholesale in interstate commerce.' 49 Stat. 838, 847, 16 U.S.C. §§ 791a, 824-824h. The Court of Appeals for the Ninth Circuit set aside the FPC order. 310 F.2d 784.

Some of the energy which Edison markets in California originates in Nevada and Arizona. Edison has a contract with the Secretary of the Interior under which, as agent for the United States, it generates energy at the Hoover power plants located in Nevada. This contract allocates to Edison 7% of the total firm generating capacity of Hoover Dam. Edison is also a party to a 1945 contract with the United States and the Metropolitan Water District of Southern California under which it is entitled to a portion of the unused firm energy allocated to the Water District from Hoover Dam. Payment for this energy is made to the United States for the credit of the Water District. Also, Hoover Dam, Davis Dam in Arizona, and Parker Dam in California are interconnected by a transmission line from which Edison has drawn energy by agreement with the Water District.

The FPC found, on the extensive record made before a Hearing Examiner, that out-of-state energy from Hoover Dam was included in the energy delivered by Edison to Colton, and ruled that the 'sale to Colton § a sale of electric energy at wholesale in interstate commerce subject to Sections 201, 205 and 206 of the Federal Power Act.' 26 F.P.C. 223, 231.

The Court of Appeals did not pass upon the question whether the finding that out-of-state energy reached Colton has support in the record. The court assumed that the finding had such support, but held nevertheless that § 201(b) did not grant jurisdiction over the rates to the FPC. It ruled that the concluding words of § 201(a)-'such Federal regulation, however, (is) to extend only to those matters which are not subject to regulation by the States'-confined FPC jurisdiction to those interstate wholesales constitutionally beyond the power of state regulation by force of the Commerce Clause, Art. I, § 8, of the Constitution. Accordingly, it held that the FPC had no jurisdiction because PUC regulation of the Edison-Colton sale was permissible under the Commerce Clause. Because of the importance of the question in the administration of the Federal Power Act we granted the separate petitions for certiorari of the FPC and Colton. 372 U.S. 958, 83 S.Ct. 1014, 10 L.Ed.2d 11. We reverse. We hold that § 201(b) grants the FPC jurisdiction of all sales of electric energy at wholesale in interstate commerce not expressly exempted by the Act itself, and that the FPC properly asserted jurisdiction of the Edison-Colton sale.

The view of the Court of Appeals was that the limiting language of § 201(a), read together with the jurisdictional grant in § 201(b), meant that the FPC could not assert its jurisdiction over a sale which the Commerce Clause allowed a State to regulate. Such a determination of the permissibility of state regulation would require, the Court of Appeals said, an analysis of the impact of state regulation of the sale upon the national interest in commerce. The court held that such an analysis here compelled the conclusion that the FPC lacked jurisdiction, because state regulation of the Edison-Colton sale would not prejudice the interests of any other State. This conclusion was rested upon the view that the interests of Arizona and Nevada, the only States other than California which might claim to be concerned with the Edison-Colton sale, were already given federal protection by the Secretary of the Interior's control of the initial sales of Hoover and Davis energy. Since the first sale was subject to federal regulation, and since the energy subsequently sold by Edison to Colton for resale was to be consumed wholly within California, there was said to be a 'complete lack of interest on the part of any other state,' and the sale was therefore held to be subject to state regulation and exempt from FPC regulation. 310 F.2d, at 789.

The Court of Appeals expressly rejected the argument that § 201(b) incorporated a congressional decision against determining the FPC's jurisdiction by such a case-by-case analysis, and in favor of employing a more mechanical test which would bring under federal regulation all sales of electric energy in interstate commerce at wholesale except those specifically exempted, and would exclude all retail sales. In reviewing the court's ruling on this question we do not write on a clean slate. In decisions over the past quarter century we have held that Congress, in enacting the Federal Power Act and the Natural Gas Act, apportioned regulatory power between state and federal governments according to a test which this Court had developed in a series of cases under the Commerce Clause. The Natural Gas Act grew out of the same judicial history as did the part of the Federal Power Act with which we are here concerned; and § 201(b) of the Power Act has its counterpart in § 1(b) of the Gas Act, 15 U.S.C. § 717(b), which became law three years later in 1938.

The test adopted by Congress was developed in a line of decisions beginning with Public Utilities Comm'n for State of Kansas v. Landon, 249 U.S. 236 39 S.Ct. 268, 63 L.Ed. 577, and Pennsylvania Gas Co. v. Public Service Comm'n, 252 U.S. 23, 40 S.Ct. 279, 64 L.Ed. 434. In those cases this Court held that the Commerce Clause does not prohibit a State from regulating the sale of gas directly to consumers even though the gas be drawn from interstate mains. Missouri ex rel. Barrett v. Kansas Natural Gas Co., 265 U.S. 298, 309, 44 S.Ct. 544, 546, 68 L.Ed. 1027, sketched in the other side of the picture by holding that a State is prohibited from regulating the rate at which gas from out-of-state is sold to independent distributing companies for resale to local consumers. The last decision in this line, and the one which directly led to congressional intervention, was Public Utilities Comm'n of Rhode Island v. Attleboro Steam & Elec. Co., 273 U.S. 83, 47 S.Ct. 294, 71 L.Ed. 549. There the Public Utilities Commission of Rhode Island asserted jurisdiction over the rates at which a Rhode Island company sold energy generated at its Rhode Island plant to a Massachusetts company, which took delivery at the state line for resale to the City of Attleboro. The Court held that Kansas Gas, supra, controlled, that the case did not involve 'a regulation of the rates charged to local consumers,' and that since the sale was of concern to both Rhode Island and Massachusetts it was 'national in character.' Consequently, 'if such regulation is required it can only be attained by the exercise of the power vested in Congress.' 273 U.S., at 89-90, 47 S.Ct., at 296, 71 L.Ed. 549.

Congress undertook federal regulation through the Federal Power Act in 1935 and the Natural Gas Act in 1938. The premise was that constitutional limitations upon state regulatory power made federal regulation essential if major aspects of interstate transmission and sale were not to go unregulated. Attleboro, with the other cases cited, figured prominently in the debates and congressional reports. In Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371, we were first required to determine the scope of the federal power which Congress had asserted to meet the problem revealed by Attleboro and the other cases. The specific question in that case was whether a company selling interstate gas at wholesale to distributors for resale in a single State could be required by that State's regulatory commission to extend its facilities and connect them with those of a local distributor, or whether such extensions were exclusively a matter for the FPC. The Court noted that prior to the Natural Gas Act there had been another line of cases which adopted a more flexible approach to state power under the Commerce Clause; these cases had been 'less concerned to find a point in time and space where the interstate commerce in gas ends and intrastate commerce begins, and (have) looked to the nature of the state regulation involved, the objective of the state, and the effect of the regulation upon the national interest in the commerce.' 314 U.S., at 505, 62 S.Ct., at 387, 86 L.Ed. 371. But the Court held that Congress, rather than adopting this flexible approach, which was applied by the Court of Appeals in the instant case, 'undertook to regulate * *  * without the necessity, where Congress has not acted, of drawing the precise line between state and federal power by the litigation of particular cases.' Id., 314 U.S., at 506-507, 62 S.Ct., at 388, 86 L.Ed. 371. What Congress did was to adopt the test developed in the Attleboro line which denied state power to regulate a sale 'at wholesale to local distributing companies' and allowed state regulation of a sale at 'local retail rates to ultimate consumers.' 314 U.S., at 504, 62 S.Ct., at 386, 86 L.Ed. 371.

This conclusion has been consistently reaffirmed in subsequent cases. In Panhandle Eastern Pipe Line Co. v. Public Service Comm., 332 U.S. 507, 68 S.Ct. 190, 92 L.Ed. 128, which considered the reach of § 1(b) of the Natural Gas Act, the Court said that '(t)he 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.' 332 U.S., at 517, 68 S.Ct., at 195, 92 L.Ed. 128. In United States v. Public Utilities Comm. of California, 345 U.S. 295, 73 S.Ct. 706, 97 L.Ed. 1020, the Court said that 'Congress interpreted that case (Attleboro) as prohibiting state control of wholesale rates in interstate commerce for resale, and so armed the Federal Power Commission with precisely that power,' 345 U.S., at 308, 73 S.Ct., at 714, 97 L.Ed. 1020, and further that 'Part II (of the Power Act) is a direct result of Attleboro. They are to be read together. The latter left no power in the states to regulate licensees' sales for resale in interstate commerce, while the former established federal jurisdiction over such sales.' 345 U.S., at 311, 73 S.Ct., at 715, 97 L.Ed. 1020.

Plainly, the Court of Appeals' reading of the § 201(a) proviso as requiring an appraisal in each case of the impact of the particular sale, is inconsistent with these decisions. Section 201(b) embodies a clear grant of power, and we have held that § 201(a) was merely a 'policy declaration * *  * of great generality. It cannot nullify a clear and specific grant of jurisdiction, even if the particular grant seems inconsistent with the broadly expressed purpose.' Connecticut Light & Power Co. v. Federal Power Comm., 324 U.S., at 527, 65 S.Ct., at 754, 89 L.Ed. 1150. We reiterated this view in United States v. Public Utilities Comm. of California, supra, 345 U.S., at 311, 73 S.Ct., at 715, 97 L.Ed. 1020, where we also said, '(t)o conceive of it (§ 201(a)) now as a bench mark of the Commission's power, or an affirmation of state authority over any interstate sales for resale, would be to speculate about a congressional purpose for which there is no support.' In short, our decisions have squarely rejected the view of the Court of Appeals that the scope of FPC jurisdiction over interstate sales of gas or electricity at wholesale is to be determined by a case-by-case analysis of the impact of state regulation upon the national interest. Rather, Congress meant to draw a bright line easily as ertained, between state and federal jurisdiction, making unnecessary such case-by-case analysis. This was done in the Power Act by making FPC jurisdiction plenary and extending it to all wholesale sales in interstate commerce except those which Congress has made explicitly subject to regulation by the States. There is no such exception covering the Edison-Colton sale.

The PUC and Edison would alternatively find a congressional exemption in the asserted fact that Congress has exempted from FPC regulation all sales of energy generated at Hoover Dam. Section 6 of the Boulder Canyon Project Act, 45 Stat. 1061, 43 U.S.C. § 617e, grants the Secretary of the Interior 'control of rates and service in the absence of State regulation or interstate agreement' and provides that '(h)e shall also conform with other provisions of the Federal Water Power Act and of the rules and regulations of the Federal Power Commission, which have been devised or which may be hereafter devised, for the protection of the investor and consumer.' The FPC reversed the Hearing Examiner's ruling that § 6 was an exclusive grant to the Secretary of regulatory power over Hoover energy, and held that 'what authority to regulate rates that is here granted to the Secretary of the Interior is authority that would be subject to the later enactment of the Federal Power Act in 1935 containing a comprehensive scheme for the regulation of sales at wholesale in interstate commerce (Section 201(b)).' 26 F.P.C., at 227. The Court of Appeals did not decide the question but assumed that it was properly determined in favor of FPC and Colton. 310 F.2d, at 786, n. 2.

We think that the reasoning underlying our decisions in United States v. Public Utilities Comm. of California, supra, and Pennsylvania Water & Power Co. v. Federal Power Comm., 343 U.S. 414, 72 S.Ct. 843, 96 L.Ed. 1042, is directly applicable here, and requires a decision upholding FPC jurisdiction. Those cases involved the question whether FPC jurisdiction under § 201(b) was precluded by a provision of the 1920 Water Power Act which is similar to § 6. The Water Power Act became Part I of the Federal Power Act when Part II was enacted in 1935. Section 20 provided that the rates and services in connection with sales of energy generated at hydroelectric projects licensed under that Act were to be regulated by the FPC whenever 'any of the States directly concerned has not provided a commission or other authority to enforce the requirements of this section within such State * *  * or such States are unable to agree through their properly constituted authorities on the services *  *  * or on the rates *  *  * .' In United States v. Public Utilities Comm., supra, the PUC asserted jurisdiction over rates of a company licensed under Part I of the Federal Power Act. The FPC ordered the licensee to show cause why the rates were not subject to exclusive federal jurisdiction. The PUC argued that § 201(b) was inapplicable, relying upon the concluding words of § 201(a), and contending that since § 20 contained an affirmative grant of power to the States, FPC regulation was precluded. This Court held that there is no evidence that Congress intended to give the states what was essentially national power, for that question was not determined until Attleboro, and:

'The sweep of the statute (201(b)) is wholly inconsistent     with any asserted state power as fixed by § 20 of the 1920      Act. We have examined the legislative history (of § 201(b));     its purport is quite clear. * *  * There is nothing to indicat      that Congress' conception of the states' disability in 1935,      or of the power it gave the Commission by Part II, did not      include Part I electricity. In fact, the unqualified     statements concerning Part II favor the opposite      construction, for we find the Act explained time and again as      empowering the agency with rate authority over interstate      wholesale sales for resale; not once is this authority spoken      of as one conditioned on the electricity concerned having      been produced by steam generators or at nonlicensed dams.'      345 U.S., at 307-308, 73 S.Ct., at 714, 97 L.Ed. 1020.

In the Pennsylvania Water case the FPC asserted jurisdiction over the rates charged by a licensee to a Maryland distributor of electric power. In sustaining FPC jurisdiction we rejected the contention that because Pennsylvania Water was a licensee under Part I of the Federal Power Act, and therefore subject to regulation under that Part, its regulation under Part II was precluded. 343 U.S., at 418-419, 72 S.Ct., at 845-846, 96 L.Ed. 1042.

We think the power given the Secretary under § 6 of the Boulder Canyon Project Act is similar in scope to the power of the FPC under § 20 of the 1920 Water Power Act. Under the Water Power Act the principal function of the FPC, then composed of the Secretaries of War, Interior, and Agriculture, was the licensing, construction and operation of hydroelectric development projects. Its power to regulate rates was based upon the national power over navigable waters and public lands, and not upon power over interstate commerce. It was exercised only as an incident of the licensing power, and then only to fill a hiatus which might otherwise exist in the absence of state regulation. The legislation rests on the assumption that the FPC would regulate only in the absence of state regulation.

An analysis of § 6 of the Boulder Canyon Project Act compels the same conclusion. The parallel between the two sections is unmistakable. Licensing by the FPC for the construction of Hoover Dam was unnecessary because Congress itself had authorized the construction. Since general supervisory power was given to the Secretary rather than the Commission, § 6 of the Act gave him powers analogous to those given the FPC by § 20 of the Water Power Act. While the words of § 6 do not precisely track those of § 20, the history of § 6 belies the assertion that it contained an affirmative grant of power to the States. It merely assumed, contrary to Attleboro, a breadth of state regulatory power which made unnecessary all but intersticial federal regulation. Although § 6 did not become law until two years after Attleboro was decided, that section was in the legislation proposed two years earlier, and it does not appear from the legislative history of § 6 that the attention of Congress was ever directed to the significance of that decision upon the effectiveness of the section.

On the other hand, the legislative history of Part II of the Power Act demonstrates that Congress believed that Attleboro and the related cases compelled it to forego its assumption as to state regulation and displace it with comprehensive federal regulation. A proper concern for this objective requires the conclusion that Part II superseded and repealed any regulation under § 6 by the Secretary of the Interior or the States of interstate wholesales of electric energy subsequently made of Hoover power.

The judgment of the Court of Appeals is reversed.

Reversed.