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When a power company that sells electricity at both wholesale and retail seeks to raise its wholesale rates, the Federal Power Commission has jurisdiction to consider the allegations of the company's wholesale customers that the proposed wholesale rates, which are within the Commission's jurisdiction, are discriminatory and noncompetitive when considered in relation to the company's retail rates, which are not within the jurisdiction of the Commission.
An Arkansas public utility company (hereinafter Company) that makes wholesale interstate electricity sales, as well as retail industrial sales in competition with some of its wholesale customers (including respondents, seven municipally owned electric systems and two cooperatives, operating within Arkansas) filed a wholesale rate increase with the Federal Power Commission (FPC). Respondents sought to intervene before the FPC, urging that the increase be rejected on the ground that it was "an attempt to squeeze [respondents]… out of competition and make them more susceptible to the persistent efforts of the Company to take over the publicly owned systems in the State." The FPC allowed only limited intervention, excluding the alleged anticompetitive activities as outside the FPC's jurisdiction, which does not reach retail sales. The Court of Appeals on review took a contrary position, holding that the Company's retail rates "in a market in which it is competing with its own customers are part of the factual context in which the proposed wholesale rate will function…" and should be considered in determining whether or not the rate increase was just and reasonable.
Did the FPC have jurisdiction to consider petitioner public utilities' retail rates when determining whether its proposed wholesale rates were unjust, unreasonable, or unduly discriminatory or preferential under 16 U.S.C.S. §§ 824e(a) and 824d(b)?
The court affirmed a judgment holding that the FPC had authority, pursuant to the Federal Power Act, 16 U.S.C.S. § 824(b), to consider petitioner public utilities' retail rates when determining whether its proposed wholesale rates were unjust, unreasonable, or unduly discriminatory or preferential under 16 U.S.C.S. §§ 824e(a) and 824d(b), and held that even if the proposed wholesale rates were within the "zone of reasonableness," they could be deemed discriminatory or anticompetitive when compared to retail rates. Respondent wholesale customers alleged that petitioner utility, which sold electricity at both wholesale and retail, was in competition with them for industrial retail accounts, and that petitioner's wholesale rate increase would make it impossible for them to sell power to industrial accounts at a competitive price. The court held that even though the FPC had no jurisdiction over retail prices, it had the power to consider the entire "factual context in which the proposed" rate would function, including the relationship between jurisdictional and nonjurisdictional rate structures.