Federal Power Commission v. Conway Corp.
426 U.S. 271, 1976 U.S. LEXIS 129, 48 L. Ed. 2d 626 (1976)
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Rule of Law:
A federal agency with jurisdiction over wholesale utility rates must consider the relationship between those wholesale rates and the utility's non-jurisdictional retail rates when evaluating claims that the wholesale rates are discriminatory or anticompetitive. The agency's inability to directly regulate retail rates does not preclude it from considering them as part of the factual context in which the jurisdictional wholesale rates operate.
Facts:
- Arkansas Power & Light Co. (Company) sells electricity at wholesale to several municipally owned electric systems and cooperatives (Customers).
- The Company also sells electricity at retail directly to consumers, including industrial users.
- The Customers resell the wholesale electricity they purchase from the Company and compete with the Company for the same industrial retail customers.
- The Company filed for a rate increase for the wholesale electricity it sold to the Customers.
- The Customers alleged that the proposed higher wholesale rates, when compared to the Company's own lower retail rates, would create a "price squeeze," making it impossible for them to compete with the Company for industrial customers.
Procedural Posture:
- Arkansas Power & Light Co. filed a request for a wholesale rate increase with the Federal Power Commission (FPC), the relevant administrative agency.
- Conway Corp. and other wholesale customers (Customers) intervened in the FPC proceeding, alleging the proposed rates were anticompetitive.
- The FPC ruled that it lacked jurisdiction to consider the alleged anticompetitive relationship between the jurisdictional wholesale rates and the non-jurisdictional retail rates.
- The Customers, as petitioners, sought review of the FPC's order in the U.S. Court of Appeals for the District of Columbia Circuit.
- The Court of Appeals reversed the FPC's order and remanded the case, holding the FPC did have jurisdiction to consider the price squeeze allegations.
- The FPC, as petitioner, successfully petitioned the U.S. Supreme Court for a writ of certiorari to review the Court of Appeals' decision, with Conway Corp. and the other customers as respondents.
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Issue:
Does the Federal Power Commission, which has jurisdiction only over wholesale electricity rates, have the authority to consider the alleged anticompetitive and discriminatory effects of a power company's proposed wholesale rates in relation to its non-jurisdictional retail rates?
Opinions:
Majority - Mr. Justice White
Yes. The Federal Power Commission has the authority to consider the relationship between jurisdictional wholesale rates and non-jurisdictional retail rates to assess claims of discrimination and anticompetitive effects. The FPC's statutory duty is to ensure that wholesale rates are just, reasonable, and not unduly discriminatory. A claim of a "price squeeze" directly implicates the reasonableness and non-discriminatory nature of the jurisdictional wholesale rate, as one rate can be discriminatory in relation to another even if both independently fall within a "zone of reasonableness." While the FPC cannot directly regulate or order changes to retail rates, its remedy for a proven price squeeze is to adjust the jurisdictional wholesale rate, potentially by setting it at the lower end of the zone of reasonableness to mitigate or eliminate the anticompetitive effect. The Federal Power Act grants the FPC authority over practices "affecting" jurisdictional rates, and a company's retail pricing is such a practice.
Analysis:
This decision clarifies that a regulatory agency's jurisdictional limitations do not create blinders, preventing it from assessing the real-world market effects of the rates it approves. It establishes the "price squeeze" theory as a valid basis for a claim before the FPC, compelling the agency to integrate antitrust principles into its ratemaking process. The ruling significantly broadens the scope of the FPC's inquiry, ensuring utilities cannot exploit the split in regulatory authority between federal and state governments to engage in anticompetitive behavior against their own wholesale customers.
