1. The declaration of policy in § 201(a) of the Federal Power
Act, that federal regulation is "to extend only to those matters
which are not subject to regulation by the States" is relevant in
resolving ambiguity in specific provisions of the Act which purport
to effectuate that policy. P.
324 U. S.
527.
2. In the provision of § 201(b) of the Federal Power Act that
the Commission shall have jurisdiction over all facilities for the
transmission or wholesale of electric energy in interstate
commerce, "but shall not have jurisdiction, except as specifically
provided in this Part and the Part next following, over facilities
used . . . in local
Page 324 U. S. 516
distribution," the phrase "facilities used in local
distribution" delimits the jurisdiction of the Commission and
establishes a legal standard which must be observed in determining
whether a company is a "public utility" under the Act. P.
324 U. S.
530.
3. The exemption from the Commission's jurisdiction of
"facilities used in local distribution" is not limited to
facilities which distribute no out-of-state energy. Facilities may
carry out-of-state energy exclusively and still be exempt under the
Act. The test is whether they are local distribution facilities. P.
324 U. S.
531.
4. The jurisdiction of the Commission under the Federal Power
Act to regulate accounting practices extends only to companies
which are "public utilities" under the Act --
i.e.,
companies which own or operate facilities that are subject to the
jurisdiction of the Commission. P.
324 U. S.
531.
5. The court below having considered irrelevant the appropriate
test of the Commission's jurisdiction under the Act, its inquiry on
review did not proceed under a correct rule of law, and its
judgment must be reversed. P.
324 U. S.
532.
6. Where a federal agency is authorized to invoke an overriding
federal power except in certain prescribed situations, and then to
leave the problem to traditional state control, the existence of
federal authority to act should appear affirmatively, and not rest
on inference alone. P.
324 U. S.
532.
7. The business of local distribution of electric energy does
not, as a matter of law, exclude the process of reducing
out-of-state electric energy from high to low voltage in
subdividing it to serve ultimate consumers. P.
324 U. S.
534.
8. Upon the record in this case, it is doubtful whether the
Commission applied the correct law, and the case should be remanded
to the Commission for appropriate jurisdictional findings. This
Court does not undertake to decide as an original matter whether
the facilities in question are facilities which subject the company
to the Act, nor whether there was basis for jurisdiction of the
Commission during some past period by reason of the company's
operation of facilities since abandoned. P.
324 U. S.
534.
9. The jurisdiction of the Commission under the Federal Power
Act, over facilities for the transmission of electric energy in
interstate commerce which are not used in local distribution, does
not depend upon whether any particular volume or proportion of
interstate energy is involved, and such a jurisdictional limitation
is not to be supplied by construction. P.
324 U. S.
536.
141 F.2d 14 reversed.
Page 324 U. S. 517
Certiorari, 323 U.S. 687, to review a judgment sustaining an
order of the Federal Power Commission requiring the petitioner to
comply with the uniform system of accounts prescribed by the
Commission under the Federal Power Act.
MR. JUSTICE JACKSON delivered the opinion of the Court.
The Federal Power Commission has asserted jurisdiction to
regulate the accounting practices of the Connecticut Light and
Power Company. The Federal Power Act as amended in 1935, 49 Stat.
838, 16 U.S.C. § 792
et seq., declares a congressional
policy concerning the business of transmitting and selling electric
energy for ultimate distribution to the public, and state that
regulation of
"that part of such business which consists of the transmission
of electric energy in interstate commerce and the sale of such
energy at wholesale in interstate commerce is necessary in the
public interest, such Federal regulation, however, to extend only
to those matters which are
Page 324 U. S. 518
not subject to regulation by the States."
§ 201(a), 49 Stat. 847, 16 U.S.C. § 824(a).
The Company, incorporated by Connecticut, serving customers only
in Connecticut, and owning no utilities property outside of that
state, is comprehensively regulated by the Connecticut Public
Utilities Commission in accounting practices, as in many other
matters, and it challenges the jurisdiction of the Federal Power
Commission.
The Connecticut, appearing
amicus curiae through its
Attorney General, avers that this assumption of jurisdiction by the
Federal Commission
"represents an unwarranted and illegal invasion of the powers of
the State to regulate its local distributing company, which powers
were clearly to be preserved to the State under the provisions of
the Federal Power Act."
The Connecticut Public Utilities Commission joins with the
National Association of Railroad and Utilities Commissioners, also
appearing as
amicus curiae, and they contend that the
Federal Power Commission's order regulating accounting practices
exceeds any authority given by the Federal Power Act and intrudes
upon the field which that Act expressly reserved to local
regulation.
The basic facts are not seriously in dispute. The Company, for
sometime prior to August 26, 1935, the effective date of the
Federal Power Act, operated as a member of the Connecticut Valley
Power Exchange, an interstate power pool which interchanged energy
among certain systems in New York, Massachusetts, and Connecticut.
Had such operation continued, the Company would be subject to the
Act and to the Commission's order. Two days before its effective
date, and frankly for the purpose of avoiding federal regulation,
the Company rearranged its operations with intent to cut every
connection and discontinue every facility whose continued operation
would render it subject to the Federal Power Commission's
Page 324 U. S. 519
control. The Commission conceded in its opinion, and the
Government admits here, the Company's right to do so. [
Footnote 1] But the Commission said
petitioner's effort was "only a gesture," for, while it cut certain
connections, "it did not cut other interconnections over which
interstate energy flowed." Of those facilities which the Commission
held subjected the Company to the Power Act at the time it became
effective, the Company has since divested itself of all but one,
and on that one the Commission rests its present jurisdiction to
control petitioner's accounting. But it also claims that its
accounting orders were entitled to obedience up to the time of the
abandonment of the other facilities and because of them.
The facilities on which jurisdiction is predicated are for two
general types of operation, one being used in receipt of interstate
power, the other for transmission of energy sold to a municipality
which, in turn, sold some part of it for export from the state.
The only presently existing facilities said to confer
jurisdiction are at Bristol. Here, the petitioning company
purchases energy from the Connecticut Power Company, which, despite
a confusing similarity of name, is an entirely separate and
unaffiliated concern. The petitioning company receives power at
66,000 volts from the lines of the Connecticut Power Company over a
short tap line, owned by the Connecticut Power Company, which leads
to petitioner's substation. There, the energy is stepped down to
4,600 and 13,800 volts, and transmitted thence over many circuits
to consumers in and around Bristol. The substation includes all of
the usual equipment, lightning arrestors, disconnects, oil circuit
breakers, busses, stepdown
Page 324 U. S. 520
transformers, and appurtenant structures of an outdoor
substation, and, in the substation building, a synchronous
condenser is owned and operated, as required by the supply
contract, to maintain the power factor.
What is called the East Hampton connection, severed July 1,
1939, consisted of facilities by which the petitioner received
energy from the Connecticut Power Company at 13,800 volts and
transmitted it several miles to its Leesville substation, where it
was reduced to 4,600 volts, and to other substations where it was
reduced to 2,300 volts and supplied to customers. What is referred
to as the Torrington-Winsted District connection, discontinued in
June of 1941, was differently operated. Energy was purchased from
the Torrington Electric Light Company, which in turn had purchased
it from the Connecticut Power Company. Delivery was accepted by
petitioner at the bus bar of the Torrington Company at low voltage,
2,300 volts, petitioner maintained a substation which stepped this
voltage up to 27,600, at which it was transmitted about ten miles
over its lines to a substation at Winsted, where facilities were
operated to lower the voltage to 4,600, whence it was put on
distribution lines.
The Commission held in all three instances that such facilities
of petitioner were "for the transmission of electric energy . . . ,
as distinguished from local distribution thereof." It found that
the energy received from the Connecticut Power Company and
Torrington Company "regularly, frequently, and for substantial
periods of time included electric energy in substantial amounts
transmitted from Massachusetts." Hence, it concluded petitioner
owned facilities for transmission of energy in interstate commerce,
and was a "public utility" under its jurisdiction by virtue of the
Act.
The other type of operation on which it predicated jurisdiction
was terminated in February, 1941. It consisted of sale of energy at
wholesale to the Borough of
Page 324 U. S. 521
Groton, which operated a municipal distribution plant. The
Borough, with knowledge of the Company, resold a portion of this
energy to a corporation which transmitted it to Fishers Island, a
small island off Connecticut shore, but territory of New York.
There, it was distributed to that small community at retail. When
the Groton contract expired in 1940, petitioner refused to renew it
unless the Borough discontinued sales of energy destined for
Fishers Island. This change was required by the Company avowedly to
eliminate flow of its energy to New York, and thus to remove one of
the grounds on which the Commission has asserted jurisdiction.
The Commission held that, from the effective date of the Act to
February 28, 1941, facilities owned by the Company were used to
convey electric energy to the Borough of Groton "for the
transmission and sale at wholesale of electric energy in interstate
commerce," and that such facilities were for transmission of such
energy, "as distinguished from local distribution thereof." Hence,
the Company was held to have been a public utility during the
period of such operation, and subject for that period to the
jurisdiction of the Commission.
It is not denied, although the Commission's findings and opinion
make no mention of the fact and appear to have given it no weight,
that the predominant characteristic of the company's over-all
operation is that of a local and intrastate service. It serves one
hundred seven towns, cities, and boroughs of Connecticut with a
total population of about 660,000, and in addition supplies
substantially all the power used by local companies which serve
communities of Connecticut having a population of 130,000. It owns
no lines crossing the Connecticut boundary, and does not connect
with any other company at the boundary. It has no business other
than Connecticut service for which it needs any facilities
whatever, and, if local distribution service were terminated, no
remaining purpose
Page 324 U. S. 522
or use of any kind is suggested for the facilities in question.
Its purchases and sales, its receipts and deliveries of power, are
all within the state. Its rates and its fiscal and accounting
affairs are fully and, so far as appears, effectively regulated by
the Connecticut.
The Federal Power Commission, on January 7, 1941, issued its
order requiring petitioner to show cause why it should not be held
to be a "public utility" subject to the Act and why it should not
reclassify and keep its accounts according to the Federal
Commission's uniform system. On May 15, 1942, it issued findings
and decision. Rehearing was denied. The Company then applied for
the review by the Court of Appeals of the District of Columbia to
which the statute entitles it. § 313(b) of the Act, 49 Stat.
860.
The Court of Appeals sustained the orders. 78 U.S.App.D.C. 356,
141 F.2d 14, 17. It held that
"The Federal Power Act obviously intends to confer Federal
jurisdiction upon electric distribution systems which normally
would operate as interstate businesses."
It construed the "but clause" of the Act, which we shall later
consider, as
"intended to make it clear that this [the Commission's]
jurisdiction extends even to local facilities where the Act
provides for their regulation, as it does in the case of accounting
practices."
The Court concluded that,
"[t]herefore, whether or not the facilities by which petitioner
distributes energy from Massachusetts should be classified as
'local' is not relevant to this case. The sole test of jurisdiction
of the Commission over accounts is whether these facilities,
'local' or otherwise, are used for the transmission of electric
energy from a point in one state to a point in another."
We granted certiorari, 323 U.S. 687.
The first question is whether the reviewing court acted under a
misapprehension as to the meaning of the statute.
The jurisdictional and regulatory provisions of the Federal
Power Act apply only to "public utilities," and the
Page 324 U. S. 523
Act provides that, by "public utilities," it "means any person
who owns or operates facilities subject to the jurisdiction of the
Commission." § 201(e), 49 Stat. 848. These facilities are carefully
defined.
"The Commission shall have jurisdiction over all facilities for
such transmission or sale of electric energy, but shall not have
jurisdiction, except as specifically provided in this Part and the
Part next following, over facilities used for the generation of
electric energy or over facilities used in local distribution or
only for the transmission of electric energy in intrastate
commerce, or over facilities for the transmission of electric
energy consumed wholly by the transmitter."
§ 201(b). Transmission and sale, as used in this provision, are
further defined to mean, respectively, "transmission of electric
energy in interstate commerce" and "sale of electric energy at
wholesale in interstate commerce." And the Act goes on to say:
"electric energy shall be held to be transmitted in interstate
commerce if transmitted from a State and consumed at any point
outside thereof," and that sale of electric energy at wholesale
means "a sale of electric energy to any person for resale." §§
201(c), (d). Of course, as preamble to all of these provisions
stands the policy declaration that Federal regulation
"of that part of such business which consists of the
transmission of electric energy in interstate commerce and the sale
of such energy at wholesale in interstate commerce is necessary in
the public interest, such Federal regulation, however, to extend
only to those matters which are not subject to regulation by the
States."
§ 201(a).
Can it be said in that state of the statute that whether
facilities are local is not relevant to this case? The Court of
Appeals, in returning an affirmative answer to this question, noted
that "[t]here is a superficial inconsistency" between its position
and the last quoted provision of the Act. But it said that we, in
Jersey Central Power & Light Co. v. Federal Power
Commission, 319 U. S. 61, held
this "limitation"
Page 324 U. S. 524
"not to apply to the sections of the Act which specifically give
the Federal Power Commission jurisdiction over matters of financial
arrangements, such as the accounting section which we are
discussing here."
This misapprehends our holding in the
Jersey Central
case. The line did not cross state boarders, and since it was
wholly within one state, it was contended that the line was used
for intrastate transmission and that the Act did not apply although
the line was used to transmit power in its course of exportation
from the State. We denied this contention, and said,
"It is impossible for us to conclude that this definition means
less than it says, and applies only to the energy at the instant it
crosses the state line, and so only to the facilities which cross
the line and only to the company which owns the facilities which
cross the line. The purpose of this act was primarily to regulate
the rates and charges of the interstate energy. If intervening
companies might purchase from producers in the state of production,
free of federal control, cost would be fixed prior to the incidence
of federal regulation, and federal rate control would be
substantially impaired, if not rendered futile."
319 U.S. at
319 U. S. 71-72.
We held that the "primary purpose" of the 1935 amendments to the
power Act was to give the Power Commission control of sales of
energy across state lines which had been held to be beyond the
control of the state of export in
Public Utilities Commission
v. Attleboro Steam & Electric Co., 273 U. S.
83. Here, however, the federal authority to fix the sale
price of the energy coming from Massachusetts in interstate
commerce attaches, and presumably has been, or at least may be,
exercised pursuant to the
Jersey Central holding before
the energy reaches this company. What petitioner does or fails to
do is only after the incidence of federal regulation, and can in no
way frustrate it.
In the
Jersey Central case, on consideration of its
facts, we said, "We conclude therefore that Jersey Central is
Page 324 U. S. 525
a public utility under this Act." 319 U.S. at
319 U. S. 73.
Such a finding made the provisions of the Act apply to it. But the
Company contended, notwithstanding its status as a public utility,
that it was carried out of that particular federal regulation by
the fact that the state regulated its security issues. We held that
state regulation does not operate to exempt from the security
provisions a company otherwise subject to the Commission's
jurisdiction, but that
"The sounder conclusion, it seems to us, is that this limitation
is directed at generation, transmission, and sale, rather than the
corporate financial arrangements of the utilities engaged in such
production and distribution."
Id. at
319 U. S. 74-75.
In other words, the policy admonition is to be heeded in
determining whether particular facilities make their owner a
"public utility," rather than in exempting from specific regulatory
provisions a company found to be a public utility. The
Jersey
Central case does not read the policy declaration out of the
Act, as the court below assumed it to do.
Legislative history is illuminating as to the congressional
purpose in putting these provisions into the Act. As frequently is
the case, this original bill was drafted by the counsel and aides
of the agency concerned. [
Footnote
2] In its support, Commissioner Seavey of the Federal Power
Commission said to the House Committee,
"The new title II of the act is designed to secure coordination
on a regional scale of the Nation's power resources, and to fill
the gap in the present State regulation of electric utilities. It
is conceived entirely as a supplement to, and not as a substitution
for, State regulation. [
Footnote
3]"
Progress of the bill through various stages shows constant
purpose to protect, rather than to supervise authority of the
states. In reporting a
Page 324 U. S. 526
revised bill to the Senate the Committee on Interstate Commerce
said,
"Subsection (a). . . declares the policy of Congress to extend
that regulation to those matters which cannot be regulated by the
States and to assist the States in the exercise of their regulatory
powers, but not to impair or diminish the powers of any State
commission. [
Footnote 4]"
The Report of the House Committee on Interstate and Foreign
Commerce, in presenting the amended bill, called attention to
Public Service Commission v. Attleboro Steam & Electric
Co., 273 U. S. 83,
holding that rates charged in interstate wholesale transactions may
not be regulated constitutionally by the states, and expressed the
purpose to give federal jurisdiction to regulate rates of wholesale
transactions, but not to give jurisdiction over local rates. It
said:
"The bill takes no authority from State commissions, and
contains provisions authorizing the Federal Commission to aid the
State commissions in their efforts to ascertain and fix reasonable
charges. . . . The new parts are so drawn as to be a complement to,
and in no sense a usurpation of, State regulatory authority, and
contain, throughout, directions to the Federal Power Commission to
receive and consider the views of State commissions. Probably no
bill in recent years has so recognized the responsibilities of
State regulatory commissions as does title II of this bill."
"
* * * *"
"Subsection (b) confers jurisdiction upon the Commission over
the transmission of electric energy in interstate commerce and the
sale of electric energy at wholesale in interstate commerce, but
does not apply to any other sale of electric energy, or deprive a
any lawful authority now exercised over the exportation of
hydroelectric energy transmitted out of the State. As
Page 324 U. S. 527
in the Senate bill, no jurisdiction is given over local
distribution of electric energy, and the authority of States to fix
local rates is not disturbed even in those cases where the energy
is brought in from another State. [
Footnote 5]"
If we consider the professions of the sponsors of this bill to
have been in good faith, where are we to find them written into the
Act?
The policy declaration that federal regulation is "to extend
only to those matters which are not subject to regulation by the
States" is one of great generality. It cannot nullify a clear and
specific grant of jurisdiction, even if the particular grant seems
inconsistent with the broadly expressed purpose. But such a
declaration is relevant, and entitled to respect as a guide in
resolving any ambiguity or indefiniteness in the specific
provisions which purport to carry out its intent. It cannot be
wholly ignored.
The declared purpose might also be looked for in specific
denials of power to the Commission, such as that found in § 204(f),
which provides that its controls, relating to issuance of
securities, shall not extend to a public utility operating in a
state under the laws of which its securities are regulated by a
state commission. But such exemptions from particular regulations
apply only to companies found in general to be subject to federal
regulation, and do not protect the state's general control over its
local utilities.
The assurance which the sponsors of this legislation expressed
as to protection of the general jurisdiction of a state over
electric utilities of this character either is not given effect by
this Act at all or it is to be found in the words of § 201(b),
"but shall not have jurisdiction, except as specifically
provided in this Part and the Part next following, . . . over
facilities used in local distribution. . . ."
The court below, following a statement in
Page 324 U. S. 528
Hartford Electric Light Co. v. Federal Power
Commission, 131 F.2d 953, 962, held that this "but" clause
"is intended to make it clear that this jurisdiction extends
even to local facilities where the Act provides for their
regulation, as it does in the case of accounting practices."
This seems to get the cart before the horse, for whether the Act
provides for such regulation depends on whether the facilities are
under the jurisdiction of the Commission; the Commission's
jurisdiction does not depend on some independent application of the
regulatory provisions. But the cited decision, pointing out that
one of the several types of facilities mentioned as exempt in the
"but" clause --
i.e., those "used
only for the
transmission . . . in intrastate commerce'" -- could not possibly
be used for interstate transmission, rejected the whole provision
to avoid a "foolish interpretation." It concluded,
"The 'but' clause then shows up not as one reducing
jurisdiction, but as a negatively worded confirmation of the
Commission's jurisdiction, in certain circumstances, over the
facilities mentioned in the 'but' clause. [
Footnote 6]"
The Commission takes much the same position here.
It is hard for us to believe that Congress meant us to read
"shall have jurisdiction" where it had carefully written
Page 324 U. S. 529
"but shall not have jurisdiction." The command "thou shalt not"
is usually rendered as to forbid, and we think here it was employed
without subtlety or contortion, and in its usual sense. If
otherwise in doubt, this provision should be read in harmony with
the policy provision. So read, its terms seem plainly to state
circumstances under which the Commission shall not have
jurisdiction. As such, it is the provision which loomed importantly
in the minds and speech of its sponsors, perhaps was necessary to
get the bill passed, and is one which the Commission must observe
and the courts must enforce.
This bill came before Congress as prepared by the staff of the
Commission, couched largely in the technical language of the
electric art. Federal jurisdiction was to follow the flow of
electric energy, an engineering and scientific, rather than a
legalistic or governmental, test. Technology of the business is
such that, if any part of a supply of electric energy comes from
outside of a state, it is or may be present in every connected
distribution facility. Every facility, from generator to the
appliance for consumption, may thus be called one for transmitting
such interstate power. By this test, the cord from a light plug to
a toaster on the breakfast table is a facility for transmission of
interstate energy if any part of the load is generated without the
state. It has never been questioned that, technologically,
generation, transmission, distribution, and consumption are so
fused and interdependent that the
Page 324 U. S. 530
whole enterprise is within the reach of the commerce power of
Congress, either on the basis that it is, or that it affects,
interstate commerce if at any point it crosses a state line. Such a
broad and undivided base for jurisdiction of the Power Commission
would be quite unobjectionable, and perhaps highly salutary if the
United States were a unitary government and the only conflicting
interests to be considered were those of the regulated company.
But state lines and boundaries cut across and subdivide what,
scientifically or economically viewed, may be a single enterprise.
Congress is acutely aware of the existence and vitality of these
state governments. It sometimes is moved to respect state rights
and local institutions even when some degree of efficiency of a
federal plan is thereby sacrificed. Congress may think it expedient
to avoid clashes between state and federal officials in
administering an act such as we have here. Conflicts which lead
state officials to stand shoulder to shoulder with private
corporations making common cause of resistance to federal authority
may be thought to be prejudicial to the ends sought by an act and
regulation more likely to be successful, even though more limited,
if it has local support. Congress may think complete centralization
of control of the electric industry likely to overtax
administrative capacity of a federal commission. It may, too, think
it wise to keep the hand of state regulatory bodies in this
business, for the "insulated chambers of the states" are still
laboratories where many lessons in regulation may be learned by
trial and error on a small scale without involving a whole national
industry in every experiment.
But, whatever reason or combination of reasons led Congress to
put the provision in the Act, we think it meant what it said by the
words "but shall not have jurisdiction, except as specifically
provided in this Part or the Part next following . . . over
facilities used in local distribution."
Page 324 U. S. 531
Congress, by these terms, plainly was trying to reconcile the
claims of federal and of local authorities and to apportion federal
and state jurisdiction over the industry. To define the scope of
state controls, Congress employed terms of limitation perhaps less
scientific, less precise, less definite than the terms of the grant
of federal dower. The expression "facilities used in local
distribution" is one of relative generality. But, as used in this
Act, it is not a meaningless generality in the light of our history
and the structure of our government. We hold the phrase to be a
limitation on jurisdiction and a legal standard that must be given
effect in this case in addition to the technological transmission
test.
Nor do we think the exemption of "facilities used in local
distribution" exempts only those which do not carry any trace of
out-of-state energy. Congress has said without qualification that
the Commission shall not, unless specifically authorized elsewhere
in the Act, have jurisdiction "over facilities used in local
distribution." To construe this as meaning that, even if local,
facilities come under jurisdiction of the Federal Commission
because power from out of state, however trifling, comes into the
system, would nullify the exemption and, as a practical matter,
would transfer to federal jurisdiction the regulation of many local
companies that we think Congress intended to leave in state
control. It does not seem important whether out-of-state energy
gets into local distribution facilities. They may carry no energy
except extra-state energy and still be exempt under the Act. The
test is whether they are local distribution facilities. There is no
specific provision for federal jurisdiction over accounting except
as to "public utilities." The order must stand to fall on whether
this company owned facilities that were used in transmission of
interstate power and which were not facilities used in local
distribution.
Page 324 U. S. 532
Since the Court of Appeals considered irrelevant the
jurisdictional test which we find to be imposed by Congress, the
inquiry on review has not proceeded under a correct rule of law,
and it follows that the judgment of the Court of Appeals must be
reversed.
Whether the Commission's decision was reached under the same
misapprehension of the law of its jurisdiction is not made so clear
from its findings or opinion. Of course, under the Act, "The
finding of the Commission as to the facts, if supported by
substantial evidence, shall be conclusive." § 313(b). The
Commission has found that each of the facilities in question is
"used for the transmission of electric energy purchased as
aforesaid from the Connecticut Power Company, as distinguished from
local distribution thereof."
It has not, however, made an explicit finding that these
facilities are not used in local distribution, and we are in doubt
whether, by application of the statute as herein construed, it
could have done so. We have said, and it is applicable to this
case, that,
"Where a federal agency is authorized to invoke an overriding
federal power except in certain prescribed situations and then to
leave the problem to traditional state control, the existence of
federal authority to act should appear affirmatively, and not rest
on inference alone."
Yonkers v. United States, 320 U.
S. 685,
320 U. S. 692;
Florida v. United States, 282 U.
S. 194,
282 U. S.
211-212;
cf. Palmer v. Massachusetts,
308 U. S. 79,
308 U. S. 84;
Federal Trade Commission v. Bunte Bros., 312 U.
S. 349,
312 U. S. 351.
Nothing except explicit findings excluding the grounds of state
control gives assurance that the bounds of federal jurisdiction
have been accurately understood and fully respected, and that state
power has been considerately and deliberately overlapped.
The findings and opinion of the Commission leave us in doubt, to
say the least, as to whether what we consider limitations on the
jurisdiction of the Commission were so considered by it. The only
specific reference to the subject
Page 324 U. S. 533
is the statement that
"Respondent's contentions that it is subject to regulation by
the Public Utilities Commission of the Connecticut, and therefore
not subject to the regulation provided by the Federal Power Act,
must be rejected,"
citing
Northwestern Electric Company v. Federal Power
Commission, 125 F.2d 882, and
In Matter of Hartford
Electric Light Co., 2 F.P.C. 502,
aff'd, Hartford Electric
Light Co. v. Federal Power Comm'n, 131 F.2d 953. In both of
those cases, factual differences in reference to the status of the
company as a public utility were involved, and we agree with the
Commission that, once a company is properly found to be a "public
utility" under the Act, the fact that a local commission may also
have regulatory power does not preclude exercise of the
Commission's functions.
Cf. Northwestern Electric Co. v.
Federal Power Commission, 321 U. S. 119. But
such a rejection of state control as grounds of exemption must be
preceded by the finding, giving due weight to the policy
declaration in doubtful cases, that the company in question is a
"public utility" by reason of ownership of facilities not used in
local distribution.
In determining this, the Commission announced and applied a rule
which appears to be one of law as to interstate transmission:
"Such transmission, in our opinion, extends from the generator,
where generation is complete [citing
Utah Power & Light Co.
v. Pfost, 286 U. S. 165,
286 U. S.
181] to the point where the function of conveyance in
bulk over a distance, which is the essential characteristic of
'transmission,' is completed and the process of subdividing the
energy to serve ultimate consumers, which is the characteristic of
'local distribution,' is begun [citing
Southern Natural Gas
Corp. v. Alabama, 301 U. S. 148,
301 U. S.
155, and
East Ohio Gas Co. v. Tax Commission,
283 U. S.
465,
283 U. S. 471]."
The
Southern and
East Ohio cases both involved
natural gas transportation into a state and sales of gas at retail
therein. Each was a tax case in which the state
Page 324 U. S. 534
asserted that the sales within the state constituted an
intrastate business which, in one case, would support a state levy
of an annual franchise tax based on the actual amount of capital
employed in the state, and, in the other, an excise tax based on
gross receipts from the business within the state. The companies
each contended that sales made to consumers within the state were
still within interstate commerce, and hence there was no state
jurisdiction to tax. In neither case was this Court required to
determine the exact point at which interstate commerce ceased and
intrastate commenced. It was required to find only some "doing of
business" within the state in order to sustain the
constitutionality of the statutes involved. In both cases, it
upheld the power of the state to tax, and in both held that the
distribution at low pressure was a local business for taxation
purposes, as distinguished from transmission in interstate
commerce. But a holding that distributing gas at low pressure to
consumers is a local business is not a holding that the process of
reducing it from high to low pressure is not also part of such
local business. Insofar as the Commission found in these cases a
rule of law which excluded from the business of local distribution
the process of reducing energy from high to low voltage in
subdividing it to serve ultimate consumers, the Commission has
misread the decisions of this Court. No such rule of law has been
laid down.
But for such an erroneous view of the law established by our
decisions, it seems doubtful if the Commission would have reached
the conclusion that it did upon this record. Nor is it clear that,
if it were reached, it would be supported by substantial evidence.
Expert testimony received by the Commission on the subject from the
Commission's own experts seems to have been predicated upon the
Commission's understanding of the law. It is not for us to make an
original appraisal of the facts. We do not, therefore, undertake to
decide as an original matter
Page 324 U. S. 535
whether the facilities in question are or are not facilities
which can subject the Company to the act.
Nor do we undertake to pass upon the contention of the
Government that, even if the present facilities do not constitute a
sufficient basis for federal jurisdiction, the operation of other
facilities since abandoned subjects the company to the accounting
order of the Commission for the period of January 1, 1937, when it
became effective, until June 1, 1941 or some other date, depending
on the facility found to be the basis of jurisdiction. The Company
contends that to make it install an expensive system of accounting
for a period that was short and has already expired would be a mere
waste of time and money, and would be of no practical benefit. The
Commission contends that the accounting requirements and
information would tend to discourage further write-ups and
inflation of accounts and would amount to "regulation by the
informatory process." It contends that this company has been guilty
of accounting abuses in the nature of write-ups and the creation of
fictitious surpluses which would be eliminated, or at least
discouraged, by an application of its uniform system of accounts.
The Company denies that such abuses exist. It is not, however,
contended that Congress has conferred any jurisdiction upon the
Commission to reach accounting abuses when and if they exist except
as to companies which own facilities subject to the jurisdiction of
the Commission. In other companies, the correction of these abuses,
if they exist, is left to the state government, which has this
company completely within its power and whose constituents are the
sufferers by any abuses that may exist. We will not undertake to
make an original finding as to jurisdiction for a period, any more
than as to jurisdiction, at the present time.
Another contention made by the Company may be shortly disposed
of. It is contended that the volume of energy passing over certain
of these facilities is insignificant
Page 324 U. S. 536
in proportion to the total. Only about one-fifth of one percent
of all the energy received and generated by the Company throughout
the State of Connecticut was transmitted out of the State during
the time of the connection of Fishers Island with the Borough of
Groton. Congress appears to have left to the Commission's sound
administrative discretion to determine whether or not to assert its
authority in such situations. Congress annually receives a report
of the Commission's work and appropriates the funds for its
continuance. If it thinks the Commission is overextending its
attention to trivial situations, it has ready means of control in
its hands. The wisdom of its work is not our concern, but only its
legal justification. We do not find that Congress has conditioned
the jurisdiction of the Commission upon any particular volume or
proportion of interstate energy involved, and we do not think it
would be appropriate to supply such a jurisdictional limitation by
construction.
For the reasons stated, the judgment of the Court of Appeals is
reversed with instructions to remand the cause to the Federal Power
Commission for further proceedings consistent with this
opinion.
Reversed.
MR. JUSTICE RUTLEDGE concurs in the result.
[
Footnote 1]
Cf. Re Twin State Gas & Electric Co., 33 P.U.R.(NS)
39, where the Commission approved a public utility's sale of
certain facilities even though the sale might have been
"a step in the direction that eventually results in the vendor
company obtaining a status other than that of a public utility
within the jurisdiction of this Commission."
[
Footnote 2]
Hearings, Senate Committee on Interstate Commerce on S. 1725,
74th Cong., 1st Sess., 223.
[
Footnote 3]
Hearings on H.R. 5423, House Committee on Interstate and Foreign
Commerce, 74th Cong., 1st Sess., 384.
[
Footnote 4]
Sen.Rep. No. 621, 74th Cong., 1st Sess.
[
Footnote 5]
H.R. Rep. No. 1318, 74th Cong., 1st Sess., 7, 8, 27.
[
Footnote 6]
The statement was not decisive of the result, which rested on an
alternative ground, and the court did recognize need for the
further step of finding that the generating facilities were used as
facilities for interstate wholesale sales, and therefore were
within § 201(b). The court below failed expressly to find existence
of jurisdictional facilities under § 201(b). The quoted statement
reads in full:
"Moreover, among the facilities described in the 'but' clause of
§ 201(b) are those used 'only for the transmission . . . in
intrastate commerce;' as such facilities could not possibly be
among those used for interstate transmission or interstate
wholesale sales, the 'but' clause becomes foolish if interpreted as
carving out of the authority granted in the earlier part of the
same sentence the facilities described in the 'but' clause. Such a
foolish interpretation is avoided by giving effect to a phrase in
the 'but' clause --
i.e., 'except as specifically provided
in this Part or the Part next following sections 824-825r of this
title.' The 'but' clause then shows up not as one reducing
jurisdiction, but as a negatively worded confirmation of the
Commission's jurisdiction, in certain circumstances, over the
facilities mentioned in the 'but' clause. In other words, the 'but'
clause is to be construed as if it read:"
"Wherever it is so specifically provided in Parts II and III,
the Commission shall have jurisdiction over the facilities used for
generation, for local distribution, for intrastate transmission,
etc."
Hartford Electric Light Co. v. Federal Power
Commission, 131 F.2d 953, 962.
MR. JUSTICE MURPHY, dissenting.
The findings and opinion of the Federal Power Commission in this
case make clear that they are substantially and reasonably rooted
in fact and law, and that proper respect has been shown for
jurisdictional limitations. Remand of the case to the Commission
for further consideration thus can only serve to produce needless
delay and to force the Commission to make certain minor and
unnecessary changes in its written opinion.
Cf. dissenting
opinion in
Securities and Exchange Commission v. Chenery
Corp., 318 U. S. 80,
318 U. S.
95.
Page 324 U. S. 537
The basic jurisdictional fact necessary to sustain the
imposition on petitioner of the Commission's accounting standards
is that petitioner be a public utility within the meaning of the
Federal Power Act. In the setting of this case, petitioner must
thus be found to own or operate facilities for the "transmission of
electric energy in interstate commerce." § 201(b). Nowhere in the
Act has Congress defined "transmission" or "facilities" other than
to say, in § 201(c), that "electric energy shall be held to be
transmitted in interstate commerce if transmitted from a State and
consumed at any point outside thereof." The Commission therefore
has the duty in the first instance of interpreting and applying
these terms to the factual situation confronting it. A court's
function in reviewing this jurisdictional determination is
necessarily limited to ascertaining whether that determination has
warrant in the record and a reasonable basis in law, giving due
weight to the fact that the Commission is an expert body designated
by Congress, and specially equipped to grapple with the highly
technical problems arising in this field.
Labor Board v. Hearst
Publications, 322 U. S. 111,
322 U. S.
130-131.
The Commission here has found that petitioner owns and operates
an electric utility system in the State of Connecticut. It is
undisputed that electric energy generated in Massachusetts is
transmitted over the wires of other companies to petitioner's
facilities at Bristol, Connecticut. In order to transmit power
economically for such a long distance, it is necessary to raise the
voltage and reduce the current in Massachusetts as the energy
starts its interstate journey. But the high voltage needed for
transit purposes cannot be utilized by consumers. It therefore is
necessary to employ apparatus at the receiving end of the
interstate transmission to lower the voltage. Petitioner
accordingly maintains stepdown transformers and substation
facilities at Bristol for that purpose. After the voltage is
lowered, the energy is subdivided and distributed
Page 324 U. S. 538
over petitioner's wires to consumers in and around Bristol.
The Commission concluded that the functions of the Bristol
step-down transformers and substation facilities constitute
transmission of energy in interstate commerce, since it felt that,
in its opinion, such transmission
"extends from the generator, where generation is complete, to
the point where the function of conveyance in bulk over a distance,
which is the essential characteristic of 'transmission,' is
completed and the process of subdividing the energy to serve
ultimate consumers, which is the characteristic of 'local
distribution,' is begun."
In other words, the Commission viewed the interstate
transmission as complete only after the energy is converted back
into a form suitable for local distribution and use and the
facilities used for such conversion purposes are necessarily
facilities for interstate transmission.
The jurisdictional determination of the Commission must
therefore stand or fall upon the validity of its analysis of when
long distance transmission of electrical energy across state lines
is at an end. Only if we can point to an absence of any substantial
evidence to support the Commission's view or if we can find legal
or statutory principles compelling the opposite view can we
justifiably say that the Commission had no jurisdiction in this
case or that remand should be made to the Commission for further
proceedings. But the Commission's view cannot be undermined on
either basis and it should therefore be affirmed.
Certainly there is ample testimony in this case by engineers to
the effect that the Bristol substation equipment constitutes
"facilities for transmission of electric energy in interstate
commerce," as distinguished from "facilities used in local
distribution." And the very fact that the Commission, with all its
accumulated wisdom and experience, is of the opinion that
interstate transmission ceases
Page 324 U. S. 539
only after the transmitted energy has been converted into a form
suitable for local distribution and use is not without weight and
significance.
From a legal standpoint, the Commission made no plain error.
Clearly, no opinion in this Court has purported to decide at what
precise point interstate transmission of electrical energy ends and
local distribution commences. This seems to be a novel point
insofar as legal precedent is concerned. The Commission's
conclusion in this respect hardly seems so unreasonable and unsound
as to require us to hold, as a matter of law, that interstate
transmission ends just before the voltage is decreased. And this
Court does not pretend so to hold in this case.
The Court criticizes the Commission and remands the case to it,
however, mainly because it cited
Southern Natural Gas Corp. v.
Alabama, 301 U. S. 148,
301 U. S. 155,
and
East Ohio Gas Co. v. Tax Commission, 283 U.
S. 465,
283 U. S. 471,
in a footnote in support of its proposition that interstate
transmission ends only after the energy is converted back into a
form suitable for local distribution. It is said that the
Commission erroneously assumed that those cases set forth a rule of
law which excluded the process of reducing energy from high to low
voltage in subdividing it to serve ultimate consumers from the
business of local distribution. But, even assuming that these two
cases do not enunciate such a rule and do not directly support the
Commission's proposition, it does not follow that the Commission
committed reversible error by citing them in a footnote. The
Commission's proposition was grounded not on these two cases, but
upon the testimony in the record and its own knowledge and
experience pertaining to electrical transmission. This is plainly
revealed by the use of the phrase "in our opinion" in the sentence
setting forth the Commission's distinction between interstate
transmission and local distribution. The slight reference to the
Southern Gas and
East Ohio cases was, at most,
for purposes of
Page 324 U. S. 540
analogy, and cannot serve to impair the true underlying basis of
the Commission's proposition. Presumably, all the Commission need
do on remand in this respect is to remove the footnote reference to
these cases -- a fact that makes obvious the proposition that more
than an irrelevant, or even erroneous, citation of a case should be
required before we are justified in reversing an administrative
determination and sending it back for further consideration.
The Court also deals at great length with the policy declaration
in § 201(a) of the Act that federal regulation is "to extend only
to those matters which are not subject to regulation by the
States," and with the "but" clause in § 201(b), which states that
the Commission shall not have jurisdiction, except as specially
provided, over certain facilities, including those used in local
distribution. But neither of these provisions is controlling in
this case, where the Commission has made a clear and supportable
finding that petitioner is a public utility within the meaning of
the Act and where the only federal regulation sought to be imposed
is the accounting requirements of § 301(a).
It may be conceded that this Court, in
Jersey Central Power
& Light Co. v. Federal Power Commission, 319 U. S.
61, did not read out of the Act the policy declaration
in § 201(a). But it did make clear that the declaration, which
speaks solely in terms of "regulation," was directed solely at
proposed federal regulation of the generation, transmission, and
sale of electric energy, rather than at proposed federal regulation
of the corporate financial arrangements of utilities, such as their
accounting methods. 319 U.S. at
319 U. S. 74-75.
Congress did not intend, in other words, to intrude upon state
regulation of generation, transmission, and sale of energy, but it
did intend to impose financial regulations on public utilities
engaged in interstate transmission of energy, even though states
might also impose financial
Page 324 U. S. 541
regulations. This means, under the facts of this case, that
interstate transmission of energy is a proper test of whether
federal accounting standards may be imposed. What sort of
transmission may be a proper subject of federal regulation, in and
of itself, if the Connecticut already regulates the transmission
facilities is not in issue. The Commission clearly did not
misconceive the meaning of this policy declaration, and, in light
of this Court's opinion, it apparently need do no more than spell
out its recognition of the scope and present inapplicability of the
declaration.
Nor did the Commission do violence to the "but" clause of §
201(b). Here, the Commission, following the rule stated in the
Jersey Central case, 319 U.S. at
319 U. S. 73,
that "the determinative fact is the ownership of facilities used in
transmission," has found that petitioner is a public utility, since
it owns and operates facilities used in interstate transmission of
energy. The Commission thus has jurisdiction over petitioner for
accounting purposes. The denial of jurisdiction in the "but" clause
where facilities are used for transmission of energy in local
commerce has no relevance in this case, an obvious fact which the
Commission apparently now must make explicit on remand.
The Commission is dealing here with a difficult marginal case.
The precise dividing line between interstate transmission and local
distribution can only be drawn by those familiar with the
engineering and electrical problems involved. The problem in this
case, moreover, is a relatively unique one. An informal survey by
the Commission has shown that, out of a total of about 1,000
privately owned electric utilities, there are only 12 which own or
operate step-down substation facilities for taking out-of-state
energy and which would not otherwise be public utilities under the
Act. The problem is thus one peculiarly within the competence of
the Commission, which has shown no desire to use the principle it
has enunciated in
Page 324 U. S. 542
this case, and could not use it as a vehicle for assuming
unjustified jurisdiction over the facilities of all the local
distributing companies in the nation. It has given proper respect
to the dictates of Congress relative to state regulation. We should
therefore affirm its action in this case without burdening it with
requirements of artistic refinement and of negations of the
applicability of irrelevant statutory provisions.