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Law School Case Brief

Pub. Utils. Comm'n v. Attleboro Steam & Elec. Co. - 273 U.S. 83, 47 S. Ct. 294 (1927)

Rule:

The forwarding state obviously has no more authority than the receiving State to place a direct burden upon interstate commerce. The test of the validity of a state regulation is not the character of the general business of the company, but whether the particular business which is regulated is essentially local or national in character; and if the regulation places a direct burden upon its interstate business it is none the less beyond the power of the State because this may be the smaller part of its general business.

Facts:

In 1917, Narragansett Electric Lighting Company, a Rhode Island corporation engaged in manufacturing electric current and selling such current for light, heat and power, and Attleboro Steam & Electric Company, a Massachusetts corporation engaged in supplying electric current for public and private use, entered into a contract by which Narragansett agreed to sell, and Attleboro to buy, for a period of 20 years, all the electricity required by Attleboro for its own use and sale, at a specified basic rate. Narragansett filed with the Public Utilities Commission(PUC) of Rhode Island a schedule setting out the rate and general terms of the contract and was authorized by the Commission to grant the Attleboro the special rate therein shown; and the two companies then entered upon the performance of the contract. Current was thereafter supplied in accordance with its terms; and the generating plant of Attleboro was dismantled.

In 1924 Narragansett -- having previously made an unsuccessful attempt to obtain an increase of the special rate to the Attleboro -- filed with the PUC a new schedule, purporting to cancel the original schedule and establish an increased rate for electric current supplied, in specified minimum quantities, to electric lighting companies for their own use or sale to their customers and delivered either in Rhode Island or at the State line. Attleboro was in fact the only customer of Narragansett to which this new schedule would apply. Upon conducting an investigation, the PUC found that in rendering service to Attleboro, Narragansett was suffering an operating loss, without any return on the investment devoted to such service. Furthermore, the PUC found out that the contract rate was unreasonable and a continuance of service to Attleboro under it would be detrimental to the general public welfare; therefore, the PUC found that the new proposed rate was reasonable and thereupon made an order putting into effect the rate contained in the new schedule. The State Supreme Court, however, found that the order of the PUC imposed a direct burden on intestate commerce and was invalid because of conflict with the commerce clause of the Constitution. It thereby entered a decree reversing the order and directing that the rate investigation be dismissed. Narragansett appealed.

Issue:

Did the PUC’s order putting into effect the new proposed rate of Narragansett impose a direct burden on intestate commerce?

Answer:

Yes.

Conclusion:

On certiorari review, the United States Supreme Court upheld the state supreme court's order, sustaining the state court's holding that the increased rate would burden interstate commerce. The court further rejected the claim that the PUC had the power to issue the order, holding that the increased rate would not constitute a local matter but would have a direct impact on interstate commerce, which was beyond the regulatory power of the state.

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