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Borough of Ellwood City v. Federal Energy Regulatory Commission

decided: August 8, 1978.



Before Aldisert, Gibbons and Higginbotham, Circuit Judges.

Author: Higginbotham


The Borough of Ellwood City (Ellwood) has petitioned this court, pursuant to Section 313(b) of the Federal Power Act, 16 U.S.C. ยง 825L(b), to review an order of the Federal Power Commission*fn1 denying Ellwood refunds from the Pennsylvania Power Company (Penn Power) for the period 1939 to 1964. Ellwood claims that it is entitled to those refunds because it made payments to Penn Power for electrical energy in excess of the rates filed with the Commission governing such sales. We will affirm the order of the Commission.


This case is vivid illustration of Mr. Justice Holmes' maxim, "(A) page of history is worth a volume of logic."*fn2 Only after one understands the history of the relationship between Penn Power, Ellwood, the Federal Power Commission and the Pennsylvania Public Utilities Commission does one recognize that the surface logic of Ellwood's contention leads to a conclusion inconsistent with the relevant statutes and the principle of consumer protection those statutes embody. The complexity of this case has been accentuated by Penn Power's having been lulled for over 25 years into believing that the Commission had no jurisdiction over the sales in question. Penn Power is not to be faulted for this belief, since the Commission itself assumed it was without jurisdiction over these transactions. During the period in which Penn Power did not file with the Commission, it did not operate without regulation. Its rates were reviewed by the Pennsylvania Public Utilities Commission which considered itself to have jurisdiction over these sales. Thus Ellwood is now demanding that the Commission order refunds on the basis of sales that the Commission had initially considered beyond its jurisdiction and which the Pennsylvania Public Utilities Commission had considered within its scope of authority.

With the preceding as introduction, we will now detail the history that has so far only been alluded to. That history begins on November 8, 1934, when Ellwood and Penn Power entered into a five-year contract for the sale of electricity to begin on December 1, 1935.

In October 1938, the Commission directed Penn Power to file the above agreement. Later that month, Penn Power sent to the Commission a rate schedule covering the sales to Ellwood. In November 1938, the Commission replied that the filing of this rate schedule did not comply with the Commission's request and directed Penn Power to file the agreement itself. In December 1938, Penn Power complied with this request. The Commission informed Penn Power, in October 1939, that the 1935 agreement with Ellwood was numbered Pennsylvania Power Company Rate Schedule FPC No. 6 and was given an effective date of December 1, 1935. Later that month Penn Power acknowledged receipt of this information.

Prior to 1939, Penn Power purchased all of its energy from an out-of-state affiliate. In 1939, it began generating power in Pennsylvania although it also continued to buy power from its out-of-state affiliate. Because Penn Power's within-state generating capacity was sufficient to meet the demands of Ellwood and its other Pennsylvania wholesale customers, it considered itself subject to regulation by the Pennsylvania Public Utilities Commission (PUC) rather than the FPC. Rate changes were therefore filed with the PUC. Ellwood participated in some of these PUC proceedings.

In 1964, the Supreme Court decided the Colton case, FPC v. Southern California Edison Co., 376 U.S. 205, 84 S. Ct. 644, 11 L. Ed. 2d 638 (1964). In that case, the Court held that sales of power by a California utility to the City of Colton were subject to Commission jurisdiction because some of the power came from out of state. The utility there, like Penn Power, also generated power within the state. The Court's holding reversed the Ninth Circuit decision that the Commission did not have jurisdiction because the state regulated the sales and such state regulation was permissible under the Commerce Clause.

The Commission then issued Order No. 282, 31 FPC 972 (1964), which provides in part:

The Commission has received a number of inquiries from public utilities who are presently engaged in reviewing the status of their wholesale power sales, in the light of the recent Supreme Court decision in the Colton case, Federal Power Commission v. Southern California Edison Company, 376 U.S. 205 (84 S. Ct. 644) 11 L. Ed. 2d 638, decided March 2, 1964, as to the manner in which the Commission would expect to treat filings made with it of existing wholesale sales which had not previously been filed with this Commission. In response to such inquiries the Commission believes it appropriate to advise all public utilities that, while it of course cannot prejudice the possible rights of interested third parties, its primary objective is in insuring that the rate schedules for all jurisdictional sales are promptly filed with this agency, as required by law, and that where such rate schedules are filed with this agency by August 1, 1964, it does not intend on its own motion to initiate any inquiry into past failures to file such schedules.

In accordance with this policy the Commission, in the absence of valid objection by any interested party, will permit all existing rate schedules to be filed as initial rate schedules pursuant to the provisions of Section 35.1(b) of its Regulations under the Federal Power Act and will give favorable consideration to requests pursuant to the provisions of Section 35.11 of these Regulations to make such schedules effective as of the date of filing or such earlier date as the public utility may show is consistent with the public interest, if such filings are made on or before August 1, 1964.

In June, 1964, Penn Power was told that, in the opinion of the Commission's staff, it did not have to refile the initial rate filings including Rate Schedule No. 6 that covered sales to Ellwood. Penn Power did file the past unfiled wholesale rate schedules and the Municipal Resale Service rate schedule which governed sales to Ellwood since March 1960. In September 1964, the Commission notified Penn Power that these schedules were accepted for filing as of August 3, 1964 and that the Municipal ...

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