Metropolitan Edison Company v. Federal Energy Regulatory Commission, Borough of Middletown, Pennsylvania, Intervenor

595 F.2d 851, 194 U.S. App. D.C. 44, 1979 U.S. App. LEXIS 16407, 1979 WL 405510
CourtCourt of Appeals for the D.C. Circuit
DecidedMarch 8, 1979
Docket76-1866
StatusPublished
Cited by19 cases

This text of 595 F.2d 851 (Metropolitan Edison Company v. Federal Energy Regulatory Commission, Borough of Middletown, Pennsylvania, Intervenor) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Metropolitan Edison Company v. Federal Energy Regulatory Commission, Borough of Middletown, Pennsylvania, Intervenor, 595 F.2d 851, 194 U.S. App. D.C. 44, 1979 U.S. App. LEXIS 16407, 1979 WL 405510 (D.C. Cir. 1979).

Opinions

Opinion for the Court filed by Circuit Judge SPOTTSWOOD W. ROBINSON, III.

Dissenting opinion filed by Circuit Judge WILKEY.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge:

We address on this review an electric utility’s claim of discrimination assertedly requiring upward revision of a wholesale rate otherwise shielded against unilateral alteration by the well-known Mobile-Sierra doctrine.1 Metropolitan Edison Company (Met-Ed) seeks reversal of an order2 of the Federal Power Commission3 repulsing its effort under Section 206(a) of the Federal Power Act4 to bypass a contract in terms obligating it to furnish power to the Borough of Middletown, Pennsylvania, at a fixed rate. We find the Commission’s disposition unimpeachable and accordingly affirm.

I

In 1906, York Haven Water & Power Company, Met-Ed’s corporate predecessor, contracted to supply Middletown’s electrical requirements in their entirety 5 at a rate of one cent per kilowatt hour.6 The contract’s penultimate paragraph is of great significance in this litigation. It states:

Inasmuch as the Borough is practically abandoning its present electric light plant at great loss to itself and has been induced by the Company to use the electricity and electric power of the Company as [854]*854a matter of economy and advantage to the Borough, it is agreed that this contract shall continue in full force indefinitely until terminated by the Borough upon six months’ notice in writing to the Company.7

Met-Ed first voiced dissatisfaction with the Middletown agreement in 1971 — 65 years after its execution. By then, rising fuel costs were about to turn the once remunerative pricing provision into a losing proposition for Met-Ed, a consequence likely to worsen with the passage of time. In 1972, Met-Ed’s revenues from its Middle-town service were $368,990, some $9,000 less than corresponding operating expenses.8 Those revenues were as much as $294,189 less than Met-Ed would have derived had Middletown been charged the same rate as Kutztown, Pennsylvania, a Met-Ed wholesale customer akin to Middletown in type and quantity of service provided.9 However, though hardly a boon to Met-Ed’s growth, the shortfalls generated by the Middletown contract presently pose no threat to the company’s financial health and stability. In 1972, when Met-Ed lost $9,000 on Middletown, its overall revenues exceeded total operating costs by some $33 million,10 and in the next year total income outpaced costs by more than $36 million.11

In 1974, Met-Ed petitioned the Commission for an investigation of the Middletown arrangement with a view toward an increase of the one-cent rate.12 The Commission instituted the requested proceeding,13 which progressed to a hearing before an administrative law judge. Met-Ed assailed the contract rate on the ground that it jeopardized the public interest by eroding Met-Ed’s ability to discharge its service obligations, by imposing a disproportionate financial burden on other customers and — in comparison with rates charged similarly situated customers — by discriminating.14 In an initial decision, the judge rejected MetEd’s assessment on all three counts15 and, concluding that the Middletown contract was insulated by the Mobile-Sierra doctrine against unilateral modification,16 dismissed Met-Ed’s petition.17

Met-Ed filed exceptions to this ruling. The Commission, adopting the initial decision, affirmed,18 and subsequently refused to reconsider.19 This petition for review then ensued. Met-Ed, abandoning two of its earlier positions, presses for reversal solely on the theory that the one-cent contract rate is unduly discriminatory.20

[855]*855II

The relevant legal terrain is largely charted by the Supreme Court’s decision in FPC v. Sierra Pacific Power Co.21 The Court there held that a public electric utility subject to regulation under the Federal Power Act cannot unilaterally abrogate a contractually-fixed rate simply by filing a new rate under Section 205(d) and securing Commission approval thereof under Section 205(e).22 Rather, the Court explained, the Commission may change the agreed-upon rate only if it finds under Section 206(a) that it is "unjust, unreasonable, unduly discriminatory or preferential.”23 And since, as the Court declared, “the purpose of the power given the Commission by § 206(a) is the protection of the public interest, as distinguished from the private interests of the utilities,”24 that power is exercisable only when “the [contract] rate is so low as to adversely affect the public interest — as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.” 25

The service agreement in suit makes clear beyond peradventure the parties’ bargain on duration of the one-cent rate established for power supplied to Middletown. It specifies unequivocally that “this contract shall continue in full force indefinitely until terminated by the Borough upon six months’ notice in writing to the Company.” 26 This provision, we conclude, is intercepted by the Mobile-Sierra doctrine,27 and [856]*856thus can be revised only in conformity with Sierra criteria.28 Indeed, Met-Ed does not argue to the contrary;29 instead, it grounds its attack on the Middletown compact exclusively on discrimination,30 the third Sierra-mentioned foe of the public interest.31 Initially, Met-Ed argues that the Commission adopted an unduly restricted view of its authority under Section 206(a) to modify a fixed-rate contract as discriminatory.32 Met-Ed then disputes the Commission’s treatment of the rate differential among Met-Ed’s customers occasioned by the Middletown agreement.33 Neither contention persuades us.

Ill

On the first matter, Met-Ed argues that each of Sierra’s three illustrations of adverse consequences warranting disregard of a contractually-fixed rate possesses independent force, but that the Commission considered the third — undue discrimination — to be merely repetitive of the second — excess burden on other customers.34 To be sure, the Commission did point to the lack of financial harm to anyone but Met-Ed in finding the Middletown contract rate not unduly discriminatory.35 That reference, however, is perfectly understandable and acceptable on this record, where nothing beyond disparate rates among MetEd’s customers has been shown.

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Bluebook (online)
595 F.2d 851, 194 U.S. App. D.C. 44, 1979 U.S. App. LEXIS 16407, 1979 WL 405510, Counsel Stack Legal Research, https://law.counselstack.com/opinion/metropolitan-edison-company-v-federal-energy-regulatory-commission-cadc-1979.