United States v. Public Utilities Commission of California/Opinion of the Court

Respondent California Electric Power Company produces electricity in California, partially by hydroelectric projects licensed under Part I of the Federal Power Act, 41 Stat. 1063, as amended by Title II of the Public Utility Act of 1935, 49 Stat. 838, 16 U.S.C. § 791a et seq., 16 U.S.C.A. § 791a et seq., and markets the greater portion of it, subject to respondent Public Utilities Commission's authority, in that state. The jurisdictional dispute which is our present concern relates only to certain power sales by the Company to the Navy Department and to Mineral County, Nevada, for consumption there. This power, following production, is transmitted at 55,000 volts to the Company's Mill Creek substation in California, about 25 miles from the border, on its own lines. There it is figuratively taken over by the Navy and by the County, and delivered on their lines at the same high voltage to Hawthorne, Nevada, where it is stepped down for local distribution and consumption. The Navy's power is used at its ammunition depot, largely in official industrial operations; between 15% and 29%, however, is distributed for consumption in the private households and enterprises of tenants at the Navy's low-cost housing project nearby. These sales are metered individually and each purchaser is billed according to his own use. The power purchased by the County is all resold to local consumers, with the exception of minor line losses and official use.

The Navy's contract for purchase of the power was negotiated in 1943, and provided for termination on 60-day notice; the County's was entered into in 1945 for a stated period of three years. In 1947 the Power Company applied to the State Commission for a general rate increase which, after hearings at which the Navy was represented, was granted. Thereafter, the Company terminated its Navy contract and failed to renew that with the County, giving notice of its intention to apply the new schedule to these sales. Both purchasers demurred, and the Company reapplied to the State Commission for a ruling as to the applicability of the general schedule to these particular operations. After some early state exploratory hearings, the Federal Power Commission, on February 15, 1950, issued an order to the Company to show cause as to why the rates were not subject to exclusive federal jurisdiction. Thus joined, the issues were heard by both agencies at a joint proceeding on March 20 and 21, 1950. Both eventually decided in favor of their own asserted authority. The State Commission's supporting opinion was denied review by the California Supreme Court on January 21, 1952, thus affirming its holding, while that of the Federal Power Commission was likewise approved by the Federal Court of Appeals for the Ninth Circuit, California Electric Power Co v. Federal Power Commission, 199 F.2d 206. As a federal question concerning the applicability of Part II of the Act was raised, certiorari was granted, 344 U.S. 810, 73 S.Ct. 37, to bring the record here from the state proceedings under 28 U.S.C. § 1257(3), 28 U.S.C.A. § 1257(3).

Federal authority, which we think obtains, is asserted under Part II of the Federal Power Act. This applies 'to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce'. § 201(b). Regulation of the rates of such sales-other types of authority in connection with such interstate transmission operations are granted in other sections-rests on §§ 205(a) and 206(a). The preliminary issue as to whether the operations in question fall within the concept of interstate commerce, on which the federal power initially depends, can be shortly disposed of, for Powell v. United States Cartridge Co., 339 U.S. 497, 509-515, 70 S.Ct. 755, 761-765, 94 L.Ed. 1017, firmly established that commerce includes the transportation of public property, while the irrelevance of the fact that this electricity is transmitted across the state boundary over lines owned by the Navy and by the County, as purchasers, may be seen from Jersey Central Power & Light Co. v. Federal Power Commission, 319 U.S. 61, 69, 71, 63 S.Ct. 953, 957, 958, 87 L.Ed. 1258, and Illinois Natural Gas Co. v. Central Illinois Public Service Co., 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371.

The most serious contentions pressed in opposition to application of Part II, arise from the self-limiting statement therein that the Act is 'to extend only to those matters which are not subject to regulation by the States.' So respondents contend that Power Commission jurisdiction only begins where the local regulatory power ends, and point to Part I, § 20, as supporting their contention that the limitation applies to the facts of this case. Section 20 provides that when power from projects licensed under Part I, which that energy sold to the Navy and the County includes,

'shall enter into interstate or foreign commerce the rates *     *  * and the service *  *  * by any *  *  * licensee *  *  * or by      any person, corporation, or association purchasing power from      such licensee for sale and distribution or use in public      service shall be reasonable *  *  * to the customer *  *  * ; and      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 *  *  *      jurisdiction is hereby conferred upon the commission *  *  * to      regulate *  *  * so much of the services *  *  * and of the rates      *  *  * therefor as constitute interstate or foreign commerce.'

Both Nevada and California have regulatory agencies with certain rate powers. And we may assume, though the Government asserts otherwise, that both agencies can enforce reasonable rate orders and have not disagreed. Respondents point to this as satisfying § 20, and thus ousting any Part II regulation. In short, they contend-what at first blush may appear anomalous-that federal rate jurisdiction under Part II may be prohibited by the fact that some portion of the power sold originated in hydroelectric projects federally licensed under Part I. We do not agree.

Admittedly, § 20 contemplated state regulation. And it may well be, as indicated by the congressional hearings, that Congress quite frankly chose the local authorities to regulate the bulk of interstate sales of electricity from licensed projects. In fact, a contrary view would have been almost astonishing as an historical proposition, for neither the large interstate operations of electric utilities that have developed during the last thirty years, nor the concomitant desirability of federal regulation, could have been foreseen in 1920. Long-range transmission was not then adequately developed, nor had the various local utilities by then undergone the integration into large centralized systems which later came about. So we may assume that Congress, as a policy judgment, accepted and adapted the substantial tradition of local utility regulation to power production licensed under the federal Act.

But there is no evidence that this was done with any firm intent to settled with the states a power essentially national. For whatever views of the draftsmen of § 20 as to the efficacy of state regulation, the jurisdictional lines between local and national authority were not finally determined until this Court's opinion in Public Utilities Commission v. Attleboro Steam & Electric Co., 273 U.S. 83, 47 S.Ct. 294, 71 L.Ed. 549. This decision followed the Federal Water Power Act by some seven years. In short, that case established what has unquestionably become a fixed premise of our constitutional law but what was not at all clear in 1920, that the Commerce Clause forbade state regulation of some utility rates. State power was held not to extend to an interstate sale 'in wholesale quantities, not to consumers, but to distributing companies for resale to consumers'. 273 U.A. at page 89, 47 S.Ct. at page 296. Attleboro reiterated and accepted the holding of Pennsylvania Gas Co. v. Public Service Commission, 252 U.S. 23, 40 S.Ct. 279, 64 L.Ed. 434, that sales across the state line direct to consumers is a local matter within the authority of the agency of the importing state. But it prohibited regulation of wholesale sales for resale by either interested commission.

Respondents seek to escape that doctrine, however, by pointing to the fact that there was not there involved sales of electricity produced at a project licensed under Part I. They admit that absent § 20 of that Part, the later Part II authority would apply exclusively and determine the result. But, they say, § 20 creates an exception, which the language of Attleboro did not reach, for hydroelectric energy transmitted across state lines under the aegis of coordinated state regulation. In short, it is alleged that § 20 'conferred jurisdiction' on the states.

We do not agree. Attleboro declared state regulation of interstate transmission of power for resale forbidden as a direct burden on commerce. The states may act as to such a subject only when Congress has specifically granted permission for the exercise of this state power over articles moving interstate which would otherwise be immune. In Re Rahner, 140 U.S. 545, 560-562, 11 S.Ct. 865, 868-869, 35 L.Ed. 572. Section 20 cannot bear this interpretation; it did not establish the source of the energy as a significant factor determining whether state or federal authority applied. It is quite different from those few unique federal statutes this Court has heretofore considered, 'subjecting interstate commerce * *  * to present and future state prohibitions,' or regulation, James Clark Distilling Co. v. Western Maryland R. Co., 242 U.S. 311, 326, 37 S.Ct. 180, 185, 61 L.Ed. 326, in the exercise of the constitutional commerce power. Its language indicates no consideration or desire to alter the limits of state power otherwise imposed by the Commerce Clause; it merely states that the federal power shall not be invoked unless certain conditions of state inability to regulate obtain. Section 20 quite obviously is not based on any recognition of the constitutional barrier, but rather assumes what Attleboro held did not exist-state authority to reach interstate sales of energy for resale; its sole concern is the application of federal regulation on the possible failure of the states to empower their regulatory agencies or their inability to agree.

Nor can it soundly be said that Congress in § 20 of Part I charged the States with responsibility of regulating rates of interstate sales of electricity through the use of the federal power over government property. U.S.Const., Art. 4, § 3, cl. 2. As indicated in our discussion of the commerce power, there was in 1920 when § 20 was enacted no full appreciation of the limits of state power over sales of electricity for export or import for resale. So that language of § 20 required reasonable rates to consumers of electricity moving interstate and then added the provision that when no state commission was provided to enforce reasonable rates, or the states interested could not agree, the Federal Power Commission could act. We do not think such an arrangement for water power electricity as Part I, § 20, provides can be held to block the general authority of Part II. See note 13, infra.

The actions of the Congress following the Attleboro decision do not reflect any different interpretation of § 20. We note some interest in the application of that section in the light of the opinion, but nothing that is decisive of respondent's contentions. In 1929, Senator Couzens introduced an amendment to his then pending bill, S. 6, 71st Cong., 1st Sess., to establish federal regulation of communications. The amendment, § 47 et seq., would have established a federal rate authority over all interstate power sales. 'Power' was defined, § 47(a)(4), to include electric energy, 'whether or not produced by a licensee under the Federal Water Power Act.' The bill was referred to Committee, but Congress took no final action. In the next year, the same Committee held hearings on S.Res. 80, concerning a purported breakdown in the investigative powers of the Federal Power Commission as it then was constituted. The decision of the Commission of February 28, 1929, reported F.P.C. Ninth Ann.Rep.119, was introduced. This argued that, as a result of Attleboro, the Commission had exclusive jurisdiction over rates of interstate wholesale-for-resale sales of licensed hydroelectric power, until displaced by a § 20 agreement of the interested states which received congressional approval as a compact.

The first positive congressional action in the field, of course, was the Federal Power Act of 1935. The sweep of the statute is wholly inconsistent with any asserted state power as fixed by § 20 of the 1920 Act. We have examined the legislative history; its purport is quite clear. Part II was intended to 'fill the gap'-the phrase is repeated many times in the hearings, congressional debates and contemporary literature-left by Attleboro in utility regulation. Congress interpreted that case as prohibiting state control of wholesale rates in interstate commerce for resale, and so armed the Federal Power Commission with precisely that power. There is nothing to indicate 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.

This would largely determine our interpretation of the ambiguous reference to 'matters * *  * subject to regulation by the States', § 201(a), if nothing more were available to work with. However, there is other proof that Congress did not have in mind § 20-type state regulation. The limiting clause is spoken of only as protecting state regulation of local affairs, including rates of intrastate and interstate-for-consumption sales: 'Facilities for local distribution and for the production and transmission of energy solely for one's own use and not for resale are excluded.' Hearings, House Committee on Interstate and Foreign Commerce, on H.R.5423, 74th Cong., 1st Sess. 385. The phrase is not once mentioned as the distinct affirmation of state power over interstate sales-for-resale under § 20 that respondents apparently would recognize it to be. There are indeed further reasons for rejecting respondents' construction of § 201(a). The nature of the generating facilities, in the first place, has no functional significance for rate regulation; the same considerations that lead Congress to enact federal authority over interstate electricity in general would have been similarly applicable to power generated at licensed projects. Secondly, contemporary literature was frankly divided over whether any power over interstate sales for resale remained with the states after Attleboro. We cannot assume that Congress enacted Part II with the purpose of permitting the states to regulate hydroelectric energy through § 20. This is especially so in view of the dearth of legislative discussion of the matter.

So we conclude that the limitations of § 201(a) on federal regulation cannot, and were not intended to, preserve an exclusive state regulation of wholesale hydroelectric sales across state borders. Even if we conceived of the matter as one peculiarly limited to the statutory wording of § 201(a), our statement that '(e)xceptions to the primary grant of jurisdiction in the section are to be strictly construed', Interstate Natural Gas Co. v. Federal Power Commission, 331 U.S. 682, 690-691, 67 S.Ct. 1482, 1487, 91 L.Ed. 1742, would be as applicable here as to § 1(b) of the Natural Gas Act, 15 U.S.C.A. § 717(b). 'Production' and 'distribution' are elsewhere specifically excluded from Commission jurisdiction, § 201(b); the phrase relied on in § 201(a) was originally drafted as a declaration of 'policy,' and the rewording which gave it its present more succinct form was unaccompanied by any 'mention (of) this change as one of substance'. Jersey Central Power & Light Co. v. Federal Power Commission, 319 U.S. 61, 77, 63 S.Ct. 953, 961, 87 L.Ed. 1258, referring to H.R.Rep.No.1318, 74th Cong., 1st Sess., p. 26. '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 Commission, 324 U.S. 515, 527, 65 S.Ct. 749, 754, 89 L.Ed. 1150. To conceive of it 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.

Part II 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. Discussion of the constitutional problem as reflected in that statute and the Natural Gas Act in recent cases support this conclusion. Especially in the litigation arising under the Gas Act has this Court expressed the view that the limitations established on Commission jurisdiction therein were designed to coordinate precisely with those constitutionally imposed on the states. Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 609-610, 64 S.Ct. 281, 291, 88 L.Ed. 333; Panhandle Pipe Line Co. v. Public Service Commission, 332 U.S. 507, 514-515, 68 S.Ct. 190, 193-194, 92 L.Ed. 128; Interstate Natural Gas Co. v. Federal Power Commission, 331 U.S. 682, 690-691, 67 S.Ct. 1482, 1487, 91 L.Ed. 1742; Illinois Natural Gas Co. v. Public Service Co., 314 U.S. 498, 506, 62 S.Ct. 384, 387, 86 L.Ed. 371.

We turn next to a definitional problem raised by respondents, relating to the sales to Mineral County. In short, it is this: § 201 extends Commission jurisdiction to 'sale of electric energy at wholesale in interstate commerce'. Subsection (d) of that section states:

'The term 'sale of electric energy at wholesale' when used in     this Part means a sale of electric energy to any person for      resale.'

And § 3(4) equates 'person' with 'individual or a corporation', while § 3(3) excludes municipalities defined in § 3(7) from the scope of the latter term. So respondents argue that the sales to Mineral County are neatly and decisively excluded from Part II rate regulation.

The use of these sections in support of an indirect exception to Part II has no support in the statutory scheme as a whole. Sections 306 and 313(a), in fact, look quite the other way. They provide for complaints and petitions for rehearing by municipalities. And § 3(7) contemplates municipalities as users and distributors of power. To accept respondents' contention as to Mineral County would thwart the premise of these provisions: that such political subdivisions of the states can be aggrieved by the failure of a public utility selling power to them to satisfy the requirements of Part II.

Nor do we find any evidence of conscious coordination of §§ 3(3), (4) and 201(d) from the legislative history. True, they were simultaneously enacted, and, in fact, the interpolation of the word 'person' into § 201(d) occurred after the §§ 3(3) and 3(4) definitions were in existence in S. 2796, 74th Cong., 1st Sess., as passed by the Senate and reported to the House, June 13, 1935. But this alteration came at the insistence of the House. The Senate had provided for jurisdiction over sales occurring before or after interstate transmission, ibid., § 201(f), and the House amendment, from which § 201(d) in its present form stemmed, covered sales during the transmission across state lines for the first time. So the House Report is, we think, significant in its redefinition of the section: 'A 'wholesale' transaction is defined to mean the sale of electric energy for resale.' H.R.Rep. No. 1318, 74th Cong., 1st Sess., p. 8. We conclude, therefore, that the Congress attached no significance of substance to the addition of the word 'person,' and in fact did not intend it as a limitation on Commission jurisdiction. Indeed quite the contrary was sought by the House amendment of § 201(d).

A third factor, in addition to the statutory scheme and legislative history of § 201(d), is the rejection of respondents' contention by the Commission and courts. Three circuits have just recently done so, and the Federal Power Commission's long assertion that it has authority over rates of sales to municipalities has probably risen to the dignity of an agency 'policy.' We have often stated our sympathy with established administrative interpretations such as this. Cf. United States v. American Trucking Ass'ns, 310 U.S. 534, 549, 60 S.Ct. 1059, 1067, 84 L.Ed. 1345.

Where the language and purpose of the questioned statute is clear, courts, of course, follow the legislative direction in interpretation. Where the words are ambiguous, the judiciary may properly use the legislative history to reach a conclusion. And that method of determining congressional purpose is likewise applicable when the literal words would bring about an end completely at variance with the purpose of the statute. Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553; Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152; International Longshoremen's & Warehousemen's Union v. Juneau Spruce Corp., 342 U.S. 237, 243, 72 S.Ct. 235, 239, 96 L.Ed. 275; Johansen v. United States, 343 U.S. 427, 432, 72 S.Ct. 849, 853, 96 L.Ed. 1051. So here, since it is our judgment that neither the legislative aim nor the realities of coordinated rate regulation compel it, we reject respondents' plea that the Federal Power Commission can exercise no authority over sales to Mineral County, and, for similar reasons, the Company's contention in No. 205 that the sales to the Navy are not sales to a 'person.'

The claim that the sales here occurred over 'local distribution' facilities, § 201(b), and were not 'for resale' because the contracts did not state as much, are insubstantial. The sales were made in California but the facilities supplied 'local distribution' only after the current was subdivided for individual consumers. But a final question-whether the Federal Power Commission may exercise rate authority over the entire amount of power sold or merely that which is resold by the Navy and the County-requires rather more extended discussion.

Certainly the concrete fact of resale of some portion of the electricity transmitted from a state to a point outside thereof invokes federal jurisdiction at the outset, despite the fact that the power thus used traveled along its interstate route 'commingled' with other power sold by the same seller and eventually directly consumed by the same purchaser-distributor. But the Government argues from this that all the power exchanged between the same parties over the same facilities is subject to Commission order, irrespective of whether resold or not. For this proposition is relies on an alleged similarity between the problem as thus stated and that decided in Pennsylvania Water & Power Co. v. Federal Power Commission, 343 U.S. 414, 419, 72 S.Ct. 843, 845, 96 L.Ed. 1042. We held there that the federal rate authority must apply to all electricity sold, despite the fact that it was made up of power transmitted across state lines as well as that produced locally. The impossibility of separating interstate from intrastate electricity consumed by each purchaser is patent. In such a case, federal rate jurisdiction must attach to each distributor's negotiated agreement with the seller irrespective of occasional and unpredictable use of nonjurisdictional intrastate power.

There, however, the problem was whether the sales of electricity were in 'interstate commerce.' Here, it is a different one whether the entire sale is a 'sale for resale.' For purposes of this case, we need not decide the question of whether a somewhat similar 'commingling'-of power resold with that consumed directly by the purchaser-requires entire federal jurisdiction. For, even assuming arguendo respondents' proposition that it may be proportionally limited, we hold that the record before us in this case does not present a set of facts or findings justifying that result. By the statute, Commission jurisdiction extends to 'sales for resale,' 'but not to any other sale.' § 201(b). The problem, then, in applying respondents' suggested interpretation, is to decide just what power transaction falls within this category of 'sale for resale'-whether one involving the entire volume of electricity transmitted to the Navy or merely that which the buyer resells to others; the determinant is the delineation of 'sale for resale.' See Panhandle Pipe Line Co. v. Public Service Commission, 332 U.S. 507, 516-517, 68 S.Ct. 190, 194-195, 92 L.Ed. 128. Assuming respondents' theory, this would turn, of course, on whether an essentially separate transaction covering the power directly consumed by the purchaser is identifiable. The present record will not permit such a finding. It may be that as an enginerring proposition, accurate measurement of the volume resold and the volume directly consumed by the two parties is possible for each billing period. But there is no record evidence of separate rates, separate negotiations, separate contracts or separate rate regulation by official bodies, in short that the 'sales' themselves were separate, and it is in these terms that the Act would require us to fix the limits of the jurisdictional grant. The attention of the Commission was not directed towards this matter. The question will not be ripe for our consideration until the California Commission has had an opportunity to perfect the record and to consider the problem.

Reversed.