Where a company engaged in the generation and sale of
electricity in one state enters into a time contract with another
company in an adjacent state whereby current, to be paid for at an
agreed rate, is delivered by the first to the second company at the
state line and thence transmitted by the second company and sold to
its customers in the second state, the transaction, and the
transmission of the current, are interstate commerce, and the rate
is not subject afterwards to regulation by the first state, though
this be deemed necessary for the protection of the first company
and its local consumers. Pennsylvania Gas Co. v. Public Service
Commission, 252 U. S. 23
distinguished. P. 273 U. S.
46 R.I. 496 affirmed.
Certiorari (269 U.S. 546) to a judgment of the Supreme Court of
Rhode Island which, on appeal, disapproved an order of the Rhode
Island Public Utilities Commission increasing the rate chargeable
to the Attleboro Company by the Narragansett Electric Lighting
Company, the moving party before the commission, and one of the
petitioners here, for electricity furnished at the Rhode Island and
Page 273 U. S. 84
MR. JUSTICE SANFORD delivered the opinion of the Court.
This case involves the constitutional validity of an order of
the Public Utilities Commission of Rhode Island putting into effect
a schedule of prices applying to the sale of electric current in
The Narragansett Electric Lighting Company is a Rhode Island
corporation engaged in manufacturing electric current at its
generating plant in the City of Providence and selling such current
generally for light, heat, and power. The Attleboro Steam &
Electric Company is a Massachusetts corporation engaged in
supplying electric current for public and private use in the City
of Attleboro and its vicinity in that state.
In 1917, these companies entered into a contract by which the
Narragansett Company agreed to sell, and the Attleboro Company to
buy, for a period of twenty years, all the electricity required by
the Attleboro Company for its own use and for sale in the City of
Attleboro and the adjacent territory at a specified basic rate, the
current to be delivered by the Narragansett Company at the state
line between Rhode Island and Massachusetts and carried over
connecting transmission lines to the station of the Attleboro
Company in Massachusetts, where it was to be metered. The
Narragansett Company filed with the Public Utilities Commission of
Rhode Island a schedule setting out the rate and general terms of
the contract, and was authorized by the Commission to grant the
Page 273 U. S. 85
Attleboro Company 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 the Attleboro Company was dismantled.
In 1924, the Narragansett Company, having previously made an
unsuccessful attempt to obtain an increase of the special rate to
the Attleboro Company, [Footnote
] filed with the Rhode Island Commission 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.
The Attleboro Company was in fact the only customer of the
Narragansett Company to which this new schedule would apply.
The Commission thereupon instituted an investigation as to the
contract rate and the proposed rate. After a hearing at which both
companies were represented, the Commission found that, owing
principally to the increased cost of generating electricity, the
Narragansett Company, in rendering service to the Attleboro
Company, was suffering an operating loss, without any return on the
investment devoted to such service, while the rates to
Page 273 U. S. 86
its other customers yielded a fair return; that the contract
rate was unreasonable, and a continuance of service to the
Attleboro Company under it would be detrimental to the general
public welfare and prevent the Narragansett Company from performing
its full duty to its other customers, [Footnote 3
] and that the proposed rate was reasonable and
would yield a fair return, and no more, for the service to the
Attleboro Company. And the Commission thereupon made an order
putting into effect the rate contained in the new schedule.
From this order the Attleboro Company prosecuted an appeal to
the Supreme Court of Rhode Island, which, considering only one of
the various objections urged, held, on the authority of
Missouri v. Kansas Gas Co., 265 U.
, that the order of the Commission imposed a
direct burden on interstate commerce and was invalid because of
conflict with the commerce clause of the Constitution, and entered
a decree reversing the order and directing that the rate
investigation be dismissed. 46 R.I. 496.
It is conceded, rightly, that the sale of electric current by
the Narragansett Company to the Attleboro Company is a transaction
in interstate commerce, notwithstanding the fact that the current
is delivered at the state line. The transmission of electric
current from one state to another, like that of gas, is interstate
commerce, Coal & Coke Co. v.Pub. Serv. Comm'n,
W.Va. 662, 669, and its essential character is not affected by a
passing of custody and title at the state boundary not arresting
the continuous transmission to the intended destination.
People's Gas Co. v.Pub. Serv. Comm'n, 270 U.
, 270 U. S.
Page 273 U. S. 87
The petitioners contend, however, that the Rhode Island
Commission cannot effectively exercise its power to regulate the
rates for electricity furnished by the Narragansett Company to
local consumers without also regulating the rates for the other
service which it furnishes; that, if the Narragansett Company
continues to furnish electricity to the Attleboro Company at a
loss, this will tend to increase the burden on the local consumers
and impair the ability of the Narragansett Company to give them
good service at reasonable prices, and that therefore the order of
the Commission prescribing a reasonable rate for the interstate
service to the Attleboro Company should be sustained as being
essentially a local regulation, necessary to the protection of
matters of local interest and affecting interstate commerce only
indirectly and incidentally. In support of this contention, they
rely chiefly upon Pennsylvania Gas Co. v. Pub. Serv. Com.,
252 U. S. 23
the controlling question presented is whether the present case
comes within the rule of the Pennsylvania Gas Co.
that of the Kansas Gas Co.
case upon which the Attleboro
In the Pennsylvania Gas Co.
case, the company
transmitted natural gas by a main pipeline from the source of
supply in Pennsylvania to a point of distribution in a city in New
York, which it there subdivided and sold at retail to local
consumers supplied from the main by pipes laid through the streets
of the city. In holding that the New York Public Service Commission
might regulate the rate charged to these consumers, the court said
that, while a state may not "directly" regulate or burden
interstate commerce, it may in some instances, until the subject
matter is regulated by Congress, pass laws "indirectly" affecting
such commerce when needed to protect or regulate matters of local
interest; that the thing which the New York commission had
undertaken to regulate, while part of an interstate transmission,
was "local in its nature,"
Page 273 U. S. 88
pertaining to the furnishing of gas to local consumers, and the
service rendered to them was "essentially local," being similar to
that of a local plant furnishing gas to consumers in a city, and
that such "local service" was not of the character which required
general and uniform regulation of rates by congressional action,
even if the local rates might "affect" the interstate business of
In the Kansas Gas Co.
case, the company, whose business
was principally interstate, transported natural gas by continuous
pipelines from wells in Oklahoma and Kansas into Missouri, and
there sold and delivered it to distributing companies, which then
sold and delivered it to local consumers. In holding that the rate
which the company charged for the gas sold to the distributing
companies, those at which these companies sold to the local
consumers not being involved, was not subject to regulation by the
Public Utilities Commission of Missouri, the Court said that while,
in the absence of congressional action, a state may generally enact
laws of internal police although they have an indirect effect upon
interstate commerce, "the commerce clause of the Constitution, of
its own force, restrains the states from imposing direct burdens
upon interstate commerce," and a state enactment imposing such a
"direct burden" must fall, being a direct restraint of that which,
in the absence of federal regulation, should be free, Minnesota
Rate Cases, 230 U. S. 352
230 U. S. 396
that the sale and delivery to the distributing companies was
"an inseparable part of a transaction in interstate commerce,
not local but essentially national in character, and enforcement of
a selling price in such a transaction places a direct burden upon
such commerce inconsistent with that freedom of interstate trade
which it was the purpose of the commerce clause of secure and
that, in the Pennsylvania Gas Co.
case, the decision
rested on the ground that the service
Page 273 U. S. 89
to the consumers for which the regulated charge was made was
"essentially local," and the things done were after the business in
its essentially national aspect had come to an end, the supplying
of local consumers being "a local business" even though the gas be
brought from another state, in which the local interest is
paramount and the interference with interstate commerce, if any,
indirect and of minor importance; but that, in the sale of gas in
wholesale quantities not to consumers, but to distributing
companies for resale to consumers, where the transportation, sale,
and delivery constitutes an unbroken chain, fundamentally
interstate from beginning to end, "the paramount interest is not
local, but national, admitting of and requiring uniformity of
"even though it be the uniformity of governmental nonaction, may
be highly necessary to preserve equality of opportunity and
treatment among the various communities and states concerned."
It is clear that the present case is controlled by the
Kansas Gas Co.
case. The order of the Rhode Island
Commission is not, as in the Pennsylvania Gas Co.
regulation of the rates charged to local consumers, having merely
an incidental effect upon interstate commerce, but is a regulation
of the rates charged by the Narragansett Company for the interstate
service to the Attleboro Company, which places a direct burden upon
interstate commerce. Being the imposition of a direct burden upon
interstate commerce, from which the state is restrained by the
force of the commerce clause, it must necessarily fall, regardless
of its purpose. Shafer v. Farmers' Grain Co., 268 U.
, 268 U. S. 199
Real Silk Mills v. Portland, 268 U.
, 268 U. S. 336
Di Santo v. Pennsylvania, ante,
p. 273 U. S. 34
. It is
immaterial that the Narragansett Company is a Rhode Island
corporation subject to regulation by the Commission in its local
business, or that Rhode Island is the state from which the electric
current is transmitted
Page 273 U. S. 90
in interstate commerce, and not that in which it is received, as
in the Kansas Gas Co.
case. The forwarding state obviously
has no more authority than the receiving state to place a direct
burden upon interstate commerce. Pennsylvania v. West
Virginia, 262 U. S. 553
262 U. S. 596
Nor is it material that the general business of the Narragansett
Company appears to be chiefly local, while, in the Kansas Gas
case, the company was principally engaged in interstate
business. 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 nonetheless beyond the power of
the state because this may be the smaller part of its general
business. Furthermore, if Rhode Island could place a direct burden
upon the interstate business of the Narragansett Company because
this would result in indirect benefit to the customers of the
Narragansett Company in Rhode Island, Massachusetts could, by
parity of reasoning, reduce the rates on such interstate business
in order to benefit the customers of the Attleboro Company in that
state, who would have, in the aggregate, an interest in the
interstate rate correlative to that of the customers of the
Narragansett Company in Rhode Island. Plainly, however, the
paramount interest in the interstate business carried on between
the two companies is not local to either state, but is essentially
national in character. The rate is therefore not subject to
regulation by either of the two states in the guise of protection
to their respective local interests, but, if such regulation is
required it can only be attained by the exercise of the power
vested in Congress. See Covington Bridge Co. v. Kentucky,
154 U. S. 204
154 U. S. 220
Hanley v. Kansas City S. Ry. Co., 187 U.
, 187 U. S.
The decree is accordingly
In 1921, the Commission had authorized the Narragansett Company
to put into effect a schedule increasing the special rate to the
Attleboro Company, but its enforcement had been enjoined on the
ground of the lack of an essential finding by the Commission.
Attleboro Steam & E. Co. v. Narragansett E. Light Co.,
295 F. 895.
No other electric lighting company supplied by the Narragansett
Company required, either then or prospectively, the quantity of
current necessary to make the proposed rate applicable. The
Commission stated that the Attleboro Company was the only customer
of the Narragansett Company affected by the proposed rate, and the
brief for the petitioners states that the Attleboro Company was the
only customer then falling within the schedule class.
The evidence showed that, in 1923, the Narragansett Company had
71,554 customers, and that about one thirty-fifth of the current
which it produced went to the Attleboro Company.