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BOROUGH OF ELLWOOD CITY v. PENNSYLVANIA POWER CO.

August 31, 1983

Borough of Ellwood City, Pennsylvania, and Borough of Grove City, Pennsylvania, Municipal Corporations, Plaintiffs,
v.
Pennsylvania Power Co., a Pennsylvania Corporation, Defendant



The opinion of the court was delivered by: MCCUNE

 McCUNE, D.J.:

 We consider Pennsylvania Power Company's second motion for summary judgment and plaintiff's motion for leave to amend the complaint. We previously considered defendant's motion to dismiss, which was treated, in part, as one for summary judgment pursuant to Fed. R. Civ. P. 12(b)(6), in Borough of Ellwood City v. Pennsylvania Power Company, 462 F. Supp. 1343 (W.D. Pa. 1979). We incorporate by reference our prior opinion in this matter. For the reasons stated below, defendant's present motion will be granted in part and denied in part, and plaintiff's motion to amend will be denied.

 Plaintiffs, Boroughs of Ellwood City and Grove City (hereinafter Boroughs), are municipal corporations of Pennsylvania located within the service area of defendant, Pennsylvania Power Company (hereinafter Penn Power). Plaintiffs sell electric power at retail to consumers within their respective corporate boundaries. The power that plaintiffs sell is acquired through wholesale purchases from Penn Power, as neither borough has any generation or transmission facilities. Defendant Penn Power has been a wholly-owned subsidiary of Ohio Edison Company since 1944. Penn Power directly services consumers in 137 communities and also sells energy for resale to five municipalities, including plaintiffs.

 Penn Power's wholesale rates are regulated by the Federal Energy Regulatory Commission (hereinafter FERC) *fn1" pursuant to the Federal Power Act, 16 U.S.C. § 824 et seq. (& Supp. V). Penn Power's retail rates are regulated by the Pennsylvania Public Utility Commission (hereinafter PPUC or Commission) pursuant to the Public Utility Code (hereinafter Code), 66 Pa. C.S. § 101 et seq.

 All rates subject to FERC's jurisdiction are required to be just and reasonable and not unduly discriminatory or preferential. 16 U.S.C. § 824d(a) and (b). Penn Power is required to file schedules with FERC listing all wholesale rates, the classifications, practices and regulations affecting the rates, and all contracts relating to the rates. 16 U.S.C. § 824d(c). Pursuant to 16 U.S.C. (Supp. V) § 824d(d), Penn Power must give sixty days notice to FERC and the public before modifying its wholesale rates. In response to a complaint, or on its own initiative, FERC is empowered by 16 U.S.C. § 824d(e) to order a hearing to consider the lawfulness of a filed rate change and authorized to suspend the proposed change for a period not to exceed five months beyond the time when the rate would otherwise go into effect. If a hearing is not ordered, the new rate takes effect at the end of the sixty-day notice period. Pursuant to 16 U.S.C. § 824d(e), if a hearing is not concluded before the expiration of the suspension period, the proposed rate takes effect. Any portion of the increase subsequently determined to be unjustified is then subject to refund with interest.

 Pennsylvania law requires utilities to file all tariffs, defined by 66 Pa. C. S. § 1302 as all rules, regulations, practices or contracts involving any rates, with the PPUC. 66 Pa. C. S. § 1302. *fn2" Rates may not be preferential to any person, corporation or municipal corporation, nor may a public utility unreasonably discriminate between localities or classes of service. 66 Pa. C. S. § 1304. A retail rate may not go into effect until the PPUC approves it. The Code mandates, as does its federal counterpart, that the utility give sixty days notice to the PPUC before changing any existing or established rate. 66 Pa. C. S. § 1308(a). Upon complaint or upon its own motion, the PPUC may order a hearing to consider the lawfulness of a proposed rate change. Absent an order permitting a proposed tariff to become effective, the proposed rate is automatically suspended for up to seven months following the sixty-day notice period. 66 Pa. C. S. § 1308(d). If an order has not been made prior to the expiration of the seven-month period, the proposed rate takes effect, subject to refund. Id.

 Prior to October 7, 1977, the Pennsylvania Public Utility Code had no provision for giving effect to a proposed rate-change should the Commission fail to conclude its hearing and/or reach a decision within the suspension period. However, the PPUC was authorized to suspend rate increases for up to nine months. 66 P. S. § 1148(b). The rate in force at the time the proposed rate was filed remained in effect, unless the PPUC ordered that a temporary rate be collected, until the time that the Commission rendered a final decision. Id. The collection was subject to refund if it were greater than the subsequently approved rate. If it were less than the approved rate, a surcharge could be added. 66 P. S. §§ 1150(e) and 1153(a).

 On October 4, 1977, plaintiffs filed a complaint alleging that Penn Power had violated the Sherman Act, 15 U.S.C. §§ 1 and 2, and the Robinson-Patman Act, 15 U.S.C. § 13(a). The complaint alleges that Penn Power imposed an anticompetitive price squeeze upon Boroughs by manipulating the relationship between its wholesale rate to plaintiffs and its retail industrial rates. We stayed the rate-related aspects of Boroughs' claim until the determination of the rate proceedings then-pending before FERC. Borough of Ellwood City v. Pennsylvania Power Co., supra. Boroughs also allege in their complaint that Penn Power prevented plaintiffs from gaining access to alternative sources of power, refused to deal with Boroughs, adopted a policy of denying access by municipal electric systems to nuclear generating facilities and refused to wheel service to Boroughs. These claims were dismissed by our prior opinion. Id.

 We initially address Boroughs' motion for leave to amend the complaint. Plaintiffs wish to amend para. 14 to state (A) defendant's actions, as indicated in the 1977 and 1981 docket proceedings before FERC, constitute unlawful violations of the Federal Power Act and the Sherman Act, and (B) defendant's wheeling rate filed with FERC on November 1, 1982, in response to Grove City Borough's proposed Shenango River Hydroelectric Project, constitutes an unlawful constructive refusal to wheel and refusal to deal in violation of the Federal Power Act and the Sherman Act.

 Leave to amend pleadings out of time under Fed. R. Civ. P. 15(a) is discretionary with the trial court. Foman v. Davis, 371 U.S. 178, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). In exercising its discretion, the court may consider the following factors: undue delay, bad faith or dilatory motive on the movant's part, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party by virtue of the allowance of the amendment, and futility of the amendment. Addington v. Farmer's Elevator Mut. Ins. Co., 650 F.2d 663 (5th Cir. 1981). However, there are additional considerations when a plaintiff files a motion to amend after the defendant has moved for summary judgment, as in the present case. *fn3" In such a case, the motion to amend

 
will not be granted unless the party seeking amendment can show not only that the proposed amendment has "substantial merit," Verhein v. South Bend Lathe, Inc., 598 F.2d 1061, 1063 (7th Cir. 1979), but also come forward with "substantial and convincing evidence" supporting the newly asserted claim. Artman v. International Harvester, Inc., 355 F. Supp. 476, 481 (W.D. Pa. 1972). . . . This more demanding burden, which the party seeking amendment bears at this procedural juncture, evolves from the truism that "prejudice to the non-moving party is the touchstone for denial of the amendment." Cornell & Co., Inc. v. Occupational Safety and Health Administration, 573 F.2d 820 (3d Cir. 1978).

 Carey v. Beans, 500 F. Supp. 580, 582 (E.D. Pa. 1980), aff'd mem., 659 F.2d 1065 (3d Cir. 1981). The trial court's decision is not subject to reversal except for an abuse of discretion. Heyl & Patterson International v. F.D. Rich Housing, 663 F.2d 419 (3d Cir. 1981), cert. denied, 455 U.S. 1018, 102 S. Ct. 1714, 72 L. Ed. 2d 136 (1982).

 The proposed amendment alleging violations of the Sherman Act would cause defendant to suffer undue prejudice because it would cause discovery, now completed, to begin again. We note, infra, that discovery in this complex case has been extensive and lengthy. Plaintiffs note, at p. 38 of their brief in opposition to the motion for summary judgment, that should the amendment be permitted, they will begin discovery concerning Penn Power's actions regarding the Shenango hydro project. To require defendant, at this late date, to begin discovery anew is indefensible. See Roberts v. Arizona Bd. of Regents, 661 F.2d 796 (9th Cir. 1981) (Court of Appeals upheld district court's refusal to permit amendment of complaint, where the issue was raised at the "eleventh hour," after discovery was virtually complete, and the defendant's motion for summary judgment was pending before the court). See also Mende v. Dun & Bradstreet, Inc., 670 F.2d 129 (9th Cir. 1982). Accordingly, the motion for leave to amend the complaint is denied.

 The proceedings before FERC required two separate opinions and orders because the administrative law judge had severed the price squeeze issue from the issues of cost of service, rate design and compliance. The latter were considered in Phase I, Opinion No. 89, 21 F. P. S. 5-37, issued July 18, 1980. The price squeeze claim was dealt with in Phase II, Opinion No. 157, 23 F. P. S. 5-928, issued December 21, 1982. FERC denied Penn Power's and Boroughs' requests for rehearing in Opinion No. 157-A, 24 F. P. S. 5-115, issued February 18, 1983. A petition for review has been filed. Boroughs of Ellwood City v. FERC, 701 F.2d 266 (D.C. Cir. 1983).

 As noted above, FERC considered, in Opinion No. 157, whether Penn Power engaged in an anticompetitive price squeeze. Boroughs argued to FERC, and argue here, that the disparity between the wholesale rate they paid, and the retail rate charged to industrial customers, created a price squeeze. It's effect was to preclude competition between Boroughs and Penn Power. In resolving this claim, FERC compared the rates of return indicated by consistent cost of service analyses of the wholesale and relevant retail rates. FERC concluded that a disparity of rates of return, which was unexplained by differences in cost factors, existed during the period from September 11, 1977, to September 1, 1978. However, FERC also determined that factual circumstances existed that justified the tolerance of the price discrimination.

 As noted previously, Penn Power's retail rates are governed by the PPUC, and wholesale rates are governed by FERC. Thus, different statutes and agencies govern the rates and the dates on which changes in the rates may be implemented. This dual utility rate regulation was a significant factor in FERC's ...


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