Following petitioner's application under § 204 of the Federal
Power Act to respondent Federal Power Commission (FPC) for
authorization of a bond issue, two intervening cities opposed the
authorization on the ground that the proceeds of the bond issue
would be used to finance or refinance certain anticompetitive
activities in violation of the antitrust laws, the Federal Power
Act, and the Public Utility Holding Company Act of 1935. Section
204(a) empowers the FPC to authorize a security issue only if the
issue is found to be for some lawful purpose and compatible with
the public interest. The FPC granted the cities' petition to
intervene, denied their request for a hearing, and authorized the
bond issue, holding that the cities' allegations were irrelevant to
a requested authorization of securities under § 204. The Court of
Appeals remanded the case for consideration of the cities' claim,
holding that, in line with the reasoning in
Denver R. G. W. R.
Co. v. United States, 387 U. S. 485, the
FPC should have considered the alleged competitive consequences of
the bond issue in the § 204 proceeding.
Held:
1. The FPC, as a general rule, must consider the anticompetitive
consequences of a security issue under § 204. Pp.
411 U. S.
756-762.
(a) The Federal Power Act did not render antitrust policy
irrelevant to the FPC's regulation of the electric power industry.
Pp.
411 U. S.
757-759.
(b) The fact that the FPC has broad authority under other
provisions of the Act to determine whether a public utility's
conduct is in the public interest does not mean that the same
standard is not equally germane under § 204. P.
411 U. S.
759.
(c) Consideration of antitrust policies in the context of § 204
provides a first line of defense against anticompetitive practices
that might later become the subject of an antitrust proceeding. P.
411 U. S.
760.
(d) The FPC, like the Interstate Commerce Commission, has broad
regulatory authority, which includes responsibility for
considering
Page 411 U. S. 748
antitrust policy in discharging its statutory obligations.
Cf. Denver & R. G. W. R. Co. v. United States, supra.
Pp.
411 U. S.
760-762.
2. Though the FPC is not necessarily required to hold a hearing
or make a full investigation in all cases, its summary disposition
of proffered objections to the security issue requires strict
scrutiny by a reviewing court in light of the Commission's
obligations to protect the public interest and enforce the
antitrust laws. Pp.
411 U. S.
762-763.
3. Unexplained summary administrative action is incompatible
with the requirements of § 204, and precludes appropriate judicial
review. Pp.
411 U. S.
763-764.
147 U.S. App. D.C. 98, 454 F.2d 941, affirmed.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER, C.J., and DOUGLAS, BRENNAN, WHITE, and MARSHALL, JJ.,
joined. POWELL, J., filed a dissenting opinion, in which STEWART
and REHNQUIST, JJ., joined,
post, p.
411 U. S.
764.
Page 411 U. S. 749
MR. JUSTICE BLACKMUN delivered the opinion of the Court.
This case presents the question whether, when a public utility
applies to the Federal Power Commission for authority to issue a
security, as the utility is required to do under § 204 of the
Federal Power Act, 49 Stat. 850, 16 U.S.C. § 824c, [
Footnote 1] the Commission, in passing upon
the application, must consider the issue's anticompetitive effect
in determining whether it is "compatible with the public interest,"
as that phrase is employed in § 204(a).
Page 411 U. S. 750
I
In October, 1970, Gulf States Utilities Company applied to the
Federal Power Commission for authority to issue for cash, on
competitive bidding, $30,000,000 first mortgage 30-year bonds for
the purpose of refunding part of Gulf's then-outstanding commercial
paper and short-term notes. [
Footnote 2]
Gulf, a Texas corporation qualified to do business in Louisiana,
is a public utility within the meaning of § 201(e) of the Federal
Power Act, 16 U.S.C. § 824(e). It is engaged principally in the
business of generating, distributing, and selling electric energy
in southeastern Texas and south central Louisiana in an area of
approximately 28,000 square miles with a population of about
1,225,000. Gulf sells electric energy at retail in numerous
communities in that market and, at the time of the application, was
providing electric energy for resale to nine municipal systems, 11
rural electric cooperatives (one serving four municipal systems),
and one other utility.
The Commission filed notice of Gulf's application. 35 Fed.Reg.
16649 (1970). Thereupon, the cities of Lafayette and Plaquemine,
Louisiana (Cities) filed a protest and petition to intervene in the
proceedings before the Commission and requested a formal hearing on
Gulf's application.
Page 411 U. S. 751
The Cities alleged that Gulf, in concert with two other
investor-owned utilities, Louisiana Power and Light Company
(LP&L) and Central Louisiana Electric Company (CLECO), had
engaged in activities "apparently violative of the anti-trust
laws," as well as of § 10(h) of the Federal Power Act, 16 U.S.C. §
803(h), [
Footnote 3] and of the
Public Utility Holding Company Act of 1935, 49 Stat. 838, 15 U.S.C.
§ 79
et seq.; that these activities, in effect, would be
"financed or refinanced by the bonds here proposed"; and that the
utilities' activities were incompatible with the public interest.
The Cities opposed the requested authorization "unless and until
Gulf States purges itself of these past violations, or unless the
Commission conditions its authorization."
The Cities' claim centered on and stressed a 1968
interconnection and pooling agreement between the Cities, Dow
Chemical Company, and Louisiana Electric Cooperative, Inc. (LEC).
Dow has a plant near the Cities; the plant has generating capacity
that could be used by the other members of the pool as emergency
stabilizing capacity. LEC is a generation and transmission electric
cooperative financed by the Rural Electrification Administration
(REA); it is a super-cooperative composed of 12 electric
distribution cooperatives, all located in the area served by the
three utilities.
In 1964, the REA was considering loans to LEC for the
construction of a generation station and transmission lines through
which LEC would be able to serve eight of its 12 member
organizations. These members were then purchasing their power from
the three utilities. The Cities claimed that the three utilities
had attempted to
Page 411 U. S. 752
destroy LEC, and pointed to a history of "extraordinary
litigation" instituted by the utilities between 1964 and 1970 to
prevent the construction of the station and the lines, and, in
fact, delaying that construction for five years. The arrangement
proposed by the 1968 agreement would assure a market for the
parties' surplus capacity, and would coordinate, at substantial
savings, the construction of new generators by the parties. The
three utilities, correspondingly, would lose substantial business
if the 1968 arrangement were carried out. Accordingly, Cities
alleged, the three utilities engaged in frivolous and repetitive
litigation and launched a public relations and lobbying drive
against LEC in order to block the loan and prevent fulfillment of
the agreement.
Cf. California Transport v. Trucking
Unlimited, 404 U. S. 508
(1972).
The REA loan was effected, however, in 1969. But by that time,
the loan was sufficient only for the generating facilities
exclusive of the lines. Cities, Dow, and LEC, then were forced to
negotiate with the three utilities for the use of the utilities'
lines to transmit their power. Cities contended that the three
utilities continued, through the course of the negotiations, to
block or limit the pool by agreeing only to provide transmission
services to some of the pool members; by refusing to supply
transmission facilities between pool members unless the 1968
pooling agreement were canceled; and by demanding that LEC limit
its power capacity to the wattage already planned, thus giving the
three utilities the exclusive right to supply all further power
needs of LEC's 12 cooperatives and precluding further expansion by
LEC.
Cities, by their proposed intervention, would bring these
allegations before the Federal Power Commission in the § 204
proceeding. They claimed that such anticompetitive conduct was
properly the subject of a § 204 proceeding and that, under §
204(b), 16 U.S.C. § 824c(b), the Commission may condition its
approval of the
Page 411 U. S. 753
bond issue accordingly and place restrictions on Gulf's use of
the proceeds.
By its answer, Gulf denied any violation of the antitrust laws,
of the Federal Power Act, or of the Public Utility Holding Company
Act of 1935. It alleged that the purpose of § 204 of the Federal
Power Act was "to prevent unsound financing which might impair the
financial integrity of public utilities," and that, even if the
allegations of the Cities were accepted as true by the Commission,
those matters were "irrelevant to this application."
By order issued December 3, 1970, 44 F.P.C. 1524, the Commission
granted the Cities permission to intervene. It denied their request
for a hearing, however, and it authorized the issuance and sale of
the bonds. The order recited:
"The requested approval of the issuance of the Bonds allow
[
sic] the Company only to change the form of a portion of
its outstanding indebtedness, it does not call for the initiation
of any construction or other program by the Company which might
effect [
sic] the interest of the Petitioners. The alleged
violations which petitioners attempt to raise in this proceeding
are irrelevant to a requested authorization of securities. There is
no relief that the Commission can order in authorizing the issuance
of the Bonds for refinancing purposes that would have any effect on
the interest of the Petitioners, or solve any of the problems
outlined by them."
Id. at 1525. The Commission specifically found:
"The matters asserted and activities alleged in the filed
protest and petition to intervene by the Cities of Lafayette and
Plaquemine, Louisiana, are irrelevant to the purpose of issuing
bonds to refund short-term
Page 411 U. S. 754
indebtedness heretofore authorized by this Commission."
Id. at 1526.
The petition for rehearing required by § 313(a) of the Act, 16
U.S.C. § 8251(a),
see Department of Fish & Game v.
FPC, 359 F.2d 165, 168-169 (CA9),
cert. denied, 385
U.S. 932 (1966), was filed by the Cities, and was denied.
Review was sought pursuant to § 313(b) of the Act, 16 U.S.C. §
8251(b), in the United States Court of Appeals for the District of
Columbia Circuit. A unanimous panel of that court disagreed with
the Commission and remanded the case to it for consideration of the
claims raised by the Cities,
sub nom. City of Lafayette v.
SEC, 147 U.S.App.D.C. 98, 454 F.2d 941 (1971). The court
recognized that the Commission's contention that Gulf's operations
"could have no meaningful relation to an application that only
sought to replace short-term notes with long-term bonds" was "not
without appeal, and also not without problems."
Id. at
109, 454 F.2d at 952. The court concluded, however, that the
"cryptic statement of the FPC does not permit us to conclude with
reasonable confidence that this was the position taken by the FPC."
Ibid. It observed that the Commission may have rejected
the Cities' allegations out of hand upon the authority of its
earlier decision in
Pacific Power & Light Co., 27
F.P.C. 623 (1962), a position the Court of Appeals viewed as
untenable under this Court's subsequent decision in
Denver
& R. G. W. R. Co. v. United States, 387 U.
S. 485 (1967). [
Footnote
4]
Page 411 U. S. 755
Inasmuch as the decision of the Court of Appeals raised issues
of potential and recurring importance with respect to the
authorization of securities by the Federal Power Commission, we
granted certiorari. 406 U.S. 956 (1972). The Commission took the
position that the
Page 411 U. S. 756
Court of Appeals was in error, but nevertheless opposed the
grant.
II
The mandate that § 204 of the Federal Power Act, 16 U.S.C. §
824c, imposes upon the Commission is a broad and impressive one.
Section 204(a) empowers the Commission to authorize the issue of a
security by a public utility only
"if it finds that such issue . . . is for some lawful object,
within the corporate purposes of the applicant and compatible with
the public interest."
This requires the Commission to inquire into and to be satisfied
with the purposes of the issue and its lawfulness. And even if its
"object" is lawful, the necessary inquiry is not ended, for, in
addition, the object must be "compatible with the public
interest."
In making its determination under § 204(a), the Commission is
given broad powers of inquiry and enforcement. By § 204(b), it may
hold hearings on the application, may grant the application "in
whole or in part," may modify it, and may impose such terms or
conditions "as it may find necessary or appropriate." After
opportunity for hearing, and for good cause shown, it also may
supplement, modify, or condition any previous order "as it may find
necessary or appropriate."
Ibid. Section 204(c) grants the
Commission authority to specify the purpose to which the proceeds
of the security may be applied and the amount allowed for that
purpose. While, as Gulf observes, §§ 204(e) and (f) exempt from §
204(a) certain transactions that concern short-term obligations as
well as public utilities that are "organized and operating in a
State under the laws of which its security issues are regulated by
a State commission," these exemptions [
Footnote 5] do not significantly detract from the
sweeping
Page 411 U. S. 757
powers and responsibilities of the Commission with respect to
public utility security issues generally.
We are asked to hold that the Commission's responsibilities
under § 204 do not extend to consideration on its part of possible
anticompetitive consequences flowing from the issuance of a
security. Gulf and the Commission both argue that administrative
inquiry under § 204 is to be narrowly confined to the prevention of
the issuance of a security that might impair the utility's
financial integrity or its ability to perform its public utility
service and responsibilities. Exactly this interpretation was
placed on § 204 by the Commission in 1962 in
Pacific Power
& Light Co., 27 F.P.C. at 626. [
Footnote 6] Gulf and the Commission contend that
antitrust considerations of the kind asserted by the Cities do not
fall within the limited scope of § 204 as thus defined, and
consideration by the Commission of such broad-ranging issues would
be incompatible with the need for relatively fast action by the
Commission when it passes upon a proposed security issue. It is
said that allegations of anticompetitive conduct properly may be
raised and fully considered in other proceedings related to
interconnections under § 202 of the Act, 16 U.S.C. § 824a, to
dispositions and mergers under § 203, 16 U.S.C. § 824b, to rates
and ratemaking practices under §§ 205 and 206, 16 U.S.C. §§ 824d
and 824e, and to adequacy of service under § 207, 16 U.S.C. §
824f
Although allegations similar to those raised here may, indeed,
be made in such other proceedings under the Federal Power Act, we
do not regard that fact as determinative of the scope of Commission
inquiry under § 204. Instead, the Commission's broad authority to
consider anticompetitive and other conduct touching the "public
interest" under the other sections of the Act emphasizes
Page 411 U. S. 758
the breadth of its authority under the public interest standard
generally and as embodied in § 204. This statute was enacted as
part of Tit. II of the Public Utility Act of 1935, 49 Stat. 803,
850. The Act had two primary and related purposes: to curb abusive
practices of public utility companies by bringing them under
effective control and to provide effective federal regulation of
the expanding business of transmitting and selling electric power
in interstate commerce. 49 Stat. 803-804, 847-848; S.Rep. No. 621,
74th Cong., 1st Sess., 1-4, 17-20; H.R.Rep. No. 1318, 74th Cong.,
1st Sess., 3, 7-8;
Jersey Central Co. v. FPC, 319 U. S.
61,
319 U. S. 67-68
(1943);
see North American Co. v. SEC, 327 U.
S. 686 (1946). The Act was passed in the context of, and
in response to, great concentrations of economic and even political
power vested in power trusts, and the absence of antitrust
enforcement to restrain the growth and practices of public utility
holding companies.
See S.Rep. No. 621,
supra, at
11-12; Utility Corporations -- Summary Report, 70th Cong., 1st
Sess., S.Doc. No. 92, Part 73-A, pp. 47-54; 79 Cong.Rec. 8392
(1935).
In order to achieve federal regulation of these and other
perceived problems on the operational level of the interstate
public utility business, Tit. II was enacted. S.Rep. No. 621,
supra, at 17; H.R.Rep. No. 1318,
supra, at 7.
Part II of Tit. II was denominated the Federal Power Act, 49 Stat.
863. Title II certainly did not preclude the operation of the
antitrust laws, and it vested the Federal Power Commission with
important and broad regulatory power in the areas described above.
See Otter Tail Power Co. v. United States, 410 U.
S. 366 (1973); Meeks, Concentration in the Electric
Power Industry: The Impact of Antitrust Policy, 72 Col.L.Rev. 64
(1972). This power clearly carries with it the responsibility to
consider, in appropriate circumstances, the anticompetitive effects
of regulated aspects of interstate
Page 411 U. S. 759
utility operations pursuant to §§ 202 and 203, and under like
directives contained in §§ 205, 206, and 207. The Act did not
render antitrust policy irrelevant to the Commission's regulation
of the electric power industry. Indeed, within the confines of a
basic natural monopoly structure, limited competition of the sort
protected by the antitrust laws seems to have been anticipated.
See Otter Tail Power Co. v. United States, supra, at
410 U. S.
373-374;
California v. FPC, 369 U.
S. 482 (1962); S.Rep. No. 621,
supra, at 12;
Hearings before the House Committee on Interstate and Foreign
Commerce on H.R. 5423, 74th Cong., 1st Sess., 157-159 (1935);
Summary Report,
supra, at 52; Meeks,
supra.
Nothing in the Act suggests that the "public interest" standard
of § 204 contains any less broad directive than that contained in
the other similarly worded and adjacent sections. Under the express
language of § 204, the public interest is stressed as a governing
factor. There is nothing that indicates that the meaning of that
term is to be restricted to financial considerations, with every
other aspect of the public interest ignored. Further, there is the
section's requirement that the object of the issue be lawful. The
Commission is directed to inquire into and to evaluate the purpose
of the issue and the use to which its proceeds will be put. Without
a more definite indication of contrary legislative purpose, we
shall not read out of § 204 the requirement that the Commission
consider matters relating to both the broad purposes of the Act and
the fundamental national economic policy expressed in the antitrust
laws.
See FMC v. Svenska Amerika Linien, 390 U.
S. 238,
390 U. S. 244
(1968);
California v. FPC, 369 U.S. at
369 U. S. 48 85;
FCC v. RCA Communications, Inc., 346 U. S.
86,
346 U. S. 94
(1953);
McLean Trucking Co. v. United States, 321 U. S.
67,
321 U. S. 80
(1944).
Cf. Report of National Power Policy Committee on
Public-Utility Holding Companies, in S.Rep. No. 621,
supra, at 55, 59
Page 411 U. S. 760
(App.). Consideration of antitrust and anticompetitive issues by
the Commission, moreover, serves the important function of
establishing a first line of defense against those competitive
practices that might later be the subject of antitrust proceedings.
This is particularly significant in the context of a security issue
under § 204, for appropriate consideration at a pre-issue stage may
avoid the need later to unravel complex transactions in granting
relief under the antitrust laws or other sections of the Federal
Power Act.
Our conclusion is reinforced by the decision in
Denver &
R. G. W. R. Co. v. United States, 387 U.
S. 485 (1967). In that case, the Court concluded that
the Interstate Commerce Commission, in performing its duty under §
20a(2) of the Interstate Commerce Act, 49 U.S.C. § 20a(2), to
determine whether the issuance of a particular security is "for
some lawful object . . . and compatible with the public interest,"
is required, as a general rule, to consider the anticompetitive
consequences of the issue. Section 204 of the Federal Power Act was
modeled upon § 20a of the Interstate Commerce Act. The initial
draft of § 204 was without any broad reference to the public
interest. Instead, it identified four specific purposes for which a
utility could issue a security (property acquisition; expansion or
improvement of facilities or service; discharge or lawful refunding
of obligations; and reimbursement of other expenditures for such
purposes). H.R. 5423, § 206, 74th Cong., 1st Sess., 108-109; S.
1725, § 206, 74th Cong., 1st Sess., 109-110. [
Footnote 7] This
Page 411 U. S. 761
provision intentionally was replaced with the broader language
now contained in § 204 in order
"to attain greater flexibility and workability than would have
been possible under the original section. The language defining the
purposes for which securities may be issued has been taken
substantially from section 20a of the Interstate Commerce Act,
which has proved its usefulness."
S.Rep. No. 621,
supra, at 20. There was, thus, a
departure from the specific, and a selection of the general. We
perceive no reason to view the responsibility placed on the FPC
under § 204 differently from the ICC's responsibility under § 20a
of the Interstate Commerce Act. Each agency possesses broad
regulatory authority. Each is charged with responsibility for
considering antitrust policy under its statute. And § 204 and § 20a
are virtually identical in language. [
Footnote 8] The fact that the ICC has a specific
obligation under § 11(a) of the Clayton Act, 15 U.S.C. § 21(a), to
enforce § 7 of that Act, as well as a responsibility to advance the
National Transportation Policy, did not control the decision in the
Denver case,
see 387 U.S. at
387 U. S.
492-493, and the absence of a parallel reference in § 11
of the Clayton Act with respect to the FPC is not to be
Page 411 U. S. 762
deemed controlling.
Cf. California v. FPC, 369 U.
S. 482 (1962).
III
Our conclusion that the FPC must consider anticompetitive
aspects of a security issue to which § 204 applies does not end the
inquiry, for two subordinate questions remain: whether the agency
abused its authority in refusing to hold a hearing on the Cities'
objections, and whether, on the facts of this case, the Commission
improperly rejected the Cities' allegations out of hand on the
ground that they were irrelevant to the security issue for which
Gulf sought approval.
Gulf asserts that, even if the Commission is required to
investigate and to consider the Cities' objections under § 204, its
refusal to do so here was not error, for the Commission may
summarily dispose of objections of this kind without a hearing and
extended investigation. Our conclusion that, as a general rule, the
Commission must consider anticompetitive consequences of a security
issue under § 204 does not mean that the Commission must hold a
hearing on objections in every case. Neither does it mean that
every allegation must be fully investigated regardless of its
facial merit, or that consideration of the allegations may not, in
appropriate circumstances, be deferred, or that the major portion
of a securities issue may not forthwith be authorized and only the
remainder withheld for further study. [
Footnote 9] So strict a rule would unduly limit the
discretion the Commission must have in order to mold its procedures
to the exigencies of the particular case, and would be unrealistic
in the light of the nature of a proceeding under § 204. The need
for flexibility, planning, and rapid coordinated action is
particularly
Page 411 U. S. 763
acute with respect to the sale of a security on the market. But
where the Commission summarily disposes of proffered objections, or
where it exercises its discretion to approve an issue without
considering its anticompetitive consequences,
"the reviewing court must closely scrutinize its action in light
of the . . . statutory obligations to protect the public interest
and to enforce the antitrust laws. Whether or not an abuse of
discretion is present must ultimately depend upon the transaction
approved, its possible consequences, and any justifications for the
deferral"
or summary treatment.
Denver, 387 U.S. at
387 U. S. 48.
Denver, as we have noted, concerned the ICC, but the
foregoing quotation from that opinion has equally forceful
application in the FPC context.
Gulf also strenuously urges that the Commission, in fact, did
consider Cities' allegations, although summarily, and properly
rejected them on their merits as having no relation to the security
issue or to any possible future anticompetitive conduct in which
Gulf might engage. We have noted above that the Court of Appeals
observed, 147 U.S.App.D.C. at 109, 454 F.2d at 952, that certain
aspects of this argument are not without substantial appeal. On the
basis of the record before us, we cannot say that, upon
consideration of the objections raised by the Cities, the
Commission would not be justified in rejecting them summarily. But
such summary action may not go unexplained in the face of the
statutory obligation placed on the Commission under § 204. The
decision the Commission thus far has made provides us with an
inadequate explanation of its reasons for disposing of the Cities'
objections on their merits, if that, in fact, is what occurred. We
are provided with no explanation of why summary action was
warranted, and we are provided with no reason for the Commission's
possible conclusion that the objections were meritless.
Page 411 U. S. 764
Without more, we are unable "closely [to] scrutinize" the
Commission's action. Nor may we supply an alternative, unstated
ground to support an agency's decision if that ground is one that
"the agency alone is authorized to make."
SEC v. Chenery
Corp., 318 U. S. 80,
318 U. S. 88
(1943).
The decision of the Court of Appeals in remanding the case to
the Federal Power Commission is
Affirmed.
[
Footnote 1]
"§ 824c. Issuance of securities; assumption of liabilities;
filing duplicate reports with Securities and Exchange
Commission."
"(a) No public utility shall issue any security . . . unless and
until, and then only to the extent that, upon application by the
public utility, the Commission by order authorizes such issue. . .
. The Commission shall make such order only if it finds that such
issue . . . (a) is for some lawful object, within the corporate
purposes of the applicant and compatible with the public interest,
which is necessary or appropriate for or consistent with the proper
performance by the applicant of service as a public utility and
which will not impair its ability to perform that service, and (b)
is reasonably necessary or appropriate for such purposes. . .
."
"(b) The Commission, after opportunity for hearing, may grant
any application under this section in whole or in part, and with
such modifications and upon such terms and conditions as it may
find necessary or appropriate, and may from time to time, after
opportunity for hearing and for good cause shown, make such
supplemental orders in the premises as it may find necessary or
appropriate, and may by any such supplemental order modify the
provisions of any previous order as to the particular purposes,
uses, and extent to which, or the conditions under which, any
security so theretofore authorized or the proceeds thereof may be
applied, subject always to the requirements of subsection (a) of
this section."
"(c) No public utility shall, without the consent of the
Commission, apply any security or any proceeds thereof to any
purpose not specified in the Commission's order, or supplemental
order, or to any purpose in excess of the amount allowed for such
purpose in such order, or otherwise in contravention of such
order."
[
Footnote 2]
Gulf, in its Securities and Exchange Commission registration
statement for the bonds, stated that the proceeds received from the
notes to be refinanced had been used "in connection with the
Company's construction program and for other corporate purposes."
App. 162. The notes themselves had been issued upon the authority
of an uncontested order in FPC Docket E-7509. The Commission in
that proceeding authorized a total of $80,000,000 in short-term
debt. Only $55,000,000 of this was outstanding at the time of
Gulf's bond authorization proceeding. Thus, apart from the bond
issue, Gulf could have borrowed another $25,000,000 in short-term
credit without further Commission authorization.
[
Footnote 3]
"Combinations, agreements, arrangements, or understandings,
express or implied, to limit the output of electrical energy, to
restrain trade, or to fix, maintain, or increase prices for
electrical energy or service are hereby prohibited."
[
Footnote 4]
Cities also opposed an application of LP&L for approval by
the Securities and Exchange Commission of bond and stock issues,
the proceeds of which were to be used to repay short-term
obligations and for other corporate purposes. Cities contended that
the proceeds of these issues would be used for the construction of
facilities that would further the unlawful objectives of LP&L,
Gulf, and CLEC, and asked that approval by the SEC to conditioned
on cessation of the illegal activities and the establishment of a
program to remedy the damage already done.
The jurisdiction of the SEC in this instance was based on §§ 6
and 7 of the Public Utility Holding Company Act of 1935, 15 U.S.C.
§§ 79f and 79g, which are part of Tit. I of the Public Utility Act
of 1935, 49 Stat. 803, 814-817. Sections 6 and 7 contain a number
of requirements that must be met for SEC approval of a security
issue. The most relevant of these is in § 7(d), which requires that
the SEC
"shall permit a declaration . . . to become effective unless the
Commission finds that -- . . . (6) the terms and conditions of the
issue or sale of the security are detrimental to the public
interest or the interest of investors or consumers."
The SEC refused to entertain the Cities' protest, concluding
that its authority under § 7(d)(6) related solely to the terms and
conditions of the security to be issued, and did not extend to
collateral and unrelated controversies in which LP&L might be
engaged. The Cities petitioned the United States Court of Appeals
for the District of Columbia Circuit for review of the SEC orders,
and the matter was consolidated with the present case. The Court of
Appeals affirmed the SEC orders, but remanded Gulf's case to the
FPC. It explained this diverse treatment as follows:
"Where an agency has some regulatory jurisdiction over
operations, it must consider whether there is a reasonable nexus
between the matters subject to its surveillance and those under
attack on anticompetitive grounds. But the general doctrine
requiring an agency to take account of antitrust considerations
does not extend to a case like the one before us, where the
antitrust problem arises out of operations of the regulated company
(past and projected) and the agency, here the SEC, has not been
given any regulatory jurisdiction over operations of the company.
The SEC has no jurisdiction over operations, and stands in a
different posture from the FPC which, as we have already noted, has
regulatory jurisdiction over operations in view of its authority,
inter alia, to direct utilities to interconnect on
reasonable terms, or to prohibit a utility
from
discriminating in rates and facilities against its municipal
customers."
147 U.S.App.D.C. 98, 112-113, 454 F.2d 941, 955-956 (emphasis in
original).
[
Footnote 5]
These exemption provisions have no application to Gulf's
security issue challenged by the Cities here.
[
Footnote 6]
Cf., however,
Black Hills Power & Light
Co., 28 F.P.C. 1121 (1962), and 31 F.P.C. 1605 (1964).
[
Footnote 7]
"Sec. 206(a). No public utility shall issue any security, or
assume any obligation or liability as guarantor, indorser, surety,
or otherwise in respect of any security of another person, unless
and until, and then only to the extent that, upon application by
the public utility, the Commission by order authorizes such issue
or assumption of liability. The Commission shall make such order
only if it finds that such issue or assumption of liability is for
one or more of the following purposes and no others, and is
reasonably necessary or appropriate for such purpose or purposes;
the acquisition of property; the construction, completion,
extension or improvement of the facilities or service of the public
utility; the discharge or lawful refunding of its obligations; and
the reimbursement of moneys actually expended from sources other
than the issue of securities for any of the aforesaid purposes in
cases where the applicant shall have kept its accounts and vouchers
for such expenditures in such manner as to enable the Commission to
ascertain the amount of moneys so expended and the purpose for
which such expenditure was made."
The foregoing was the Senate version. Except for one spelling
and two punctuational differences, the House version was
identical.
[
Footnote 8]
The FPC has so recognized.
Pacific Power & Light
Co., 27 F.P.C. 623, 627 (1962).
[
Footnote 9]
The Court of Appeals meticulously outlined various options
available to the Commission. 147 U.S.App.D.C. at 110-111, 454 F.2d
at 953-954.
MR. JUSTICE POWELL, with whom MR. JUSTICE STEWART and MR.
JUSTICE REHNQUIST join, dissenting.
This case raises the question whether the Federal Power
Commission (the Commission) must consider the possible
anticompetitive effect of a public utility's application under §
204 of the Federal Power Act, 16 U.S.C. § 824c, for authority to
issue a security. Section 204 provides in relevant part that the
Commission shall authorize the issuance of a security
"only if it finds that such issue or assumption (a) is for some
lawful object, within the corporate purposes of the
applicant and compatible with the
public interest, which
is necessary or appropriate for or consistent with the proper
performance by the applicant of service as a public utility and
which will not impair its ability to perform that service, and (b)
is reasonably necessary or appropriate for such purposes."
16 U.S.C. § 824c(a) (emphasis supplied).
Rejecting the Commission's own structuring of its
responsibilities and repudiating its uniform administrative
interpretation for more than a third of a century, the Court today
finds implicit in § 204's use of the phrase "the public interest" a
duty on the part of the Commission, when acting upon a financing
application, to consider any possible anticompetitive effect that
may be
Page 411 U. S. 765
alleged. As I am persuaded neither by the majority's analysis of
the statutory language nor by its discussion of the regulatory
context, I remain of the view that the Commission's position is
consistent with the statute, and I would accord it the deference to
which it is entitled. [
Footnote
2/1] Moreover, for the reasons stated below, I believe that the
Court's decision is incompatible with the interest of the public in
assuring that utilities are enabled to meet their necessary
requirements for capital upon the most favorable terms.
Accordingly, I dissent.
I
The present proceedings were initiated on October 12, 1970, when
Gulf States Utilities Co. (Gulf States) filed an application under
§ 204 seeking authority to sell $30 million of first mortgage bonds
at competitive bidding. The stated purpose for the issuance was to
pay off part of its commercial paper and short-term notes, whose
issuance previously had been approved by the Commission.
The cities of Lafayette and Plaquemine, Louisiana (the Cities),
filed a motion to intervene on November 2, alleging a continuing
conspiracy among Gulf States, Louisiana Power & Light Co., and
Central Louisiana Electric Co. to block the implementation of an
Interconnection and Pooling Agreement which would link the Cities,
Dow Chemical Co., and Louisiana Electric
Page 411 U. S. 766
Cooperative, Inc. (the Cooperative). The Cooperative had applied
in 1964 to the Rural Electrification Administration for a loan to
build a generating facility and transmission lines. The Cities
contended that Gulf States and its coconspirators had used a number
of techniques, including frivolous litigation, to delay approval of
the loan until 1969, with the result that the amount of the loan no
longer sufficed to build transmission lines as well as a generating
plant. The Cooperative was thus forced to rely for transmission
services on Gulf States, which, allegedly, would agree to sell them
only if the Cooperative would restrict the scope of its operations.
The Cities asserted, finally, that the proceeds from the present
bond issue would in some way support Gulf State's anticompetitive
actions. [
Footnote 2/2]
On December 3, the Commission granted the Cities' motion to
intervene, but declined to hold a hearing on their allegations. The
Commission's order explained more fully:
"The requested approval of the issuance of the Bonds allow[s]
the Company only to change the form of a portion of its outstanding
indebtedness, it does not call for the initiation of any
construction or other program by the Company which might effect
[
sic] the interest of the Petitioners. The alleged
violations which petitioners attempt to raise in this proceeding
are irrelevant to a requested authorization of securities. There is
no relief that the Commission can order in authorizing the issuance
of the Bonds for refinancing purposes that would have any
Page 411 U. S. 767
effect on the interest of the Petitioners, or solve any of the
problems outlined by them."
44 F.P.C. 1524, 1525. In the same order, the Commission
authorized the issuance and sale of the bonds. It subsequently
modified the order in respects not relevant here, and denied a
petition for rehearing.
Reviewing the Commission's order at the behest of the Cities,
the Court of Appeals held that, in a § 204 application proceeding,
the Commission must consider claims of anticompetitive conduct when
urged by intervenors. 147 U.S.App.D.C. 98, 454 F.2d 941 (1971).
While the court's ruling was flexible in terms, allowing the
Commission to reject without a hearing claims which are
"insubstantial or barren" or lack a "reasonable nexus" with the
purpose of the securities issuance, it required an explanation
"supported in the record," presumably something in addition to that
offered by the Commission in this case. 147 U.S.App.D.C. at 110,
454 F.2d at 953. [
Footnote 2/3]
II
It is common ground that the Commission has a responsibility to
deal with anticompetitive practices in the power industry. Section
10 of the Act, 16 U.S.C. § 803, provides that the Commission may
issue licenses to public utilities "on the following conditions,"
one of which is that:
"(h) Combinations, agreements, arrangements, or understandings,
express or implied, to limit the output of electrical energy, to
restrain trade, or to fix,
Page 411 U. S. 768
maintain, or increase prices for electrical energy or service
are hereby prohibited."
16 U.S.C. § 803(h). The question before the Court, then, is not
whether the Commission has responsibility, but how and when it
shall exercise it.
Stated abstractly, the Commission's position is that the most
sensible method of regulating anticompetitive conduct is to focus
on the conduct itself, rather than on the means by which it may
possibly be financed. The Commission acknowledges a duty to
scrutinize allegedly anticompetitive behavior in proceedings: to
order an interconnection, § 202 of the Act, 16 U.S.C. § 824a; to
approve an acquisition or merger, § 203 of the Act, 16 U.S.C. §
824b; to review rates, §§ 205 and 206 of the Act, 16 U.S.C. §§ 824d
and 824e; and to review a charge of unduly discriminatory rates or
practices, § 205 of the Act, 16 U.S.C. § 824d, or of inadequate
service, § 207 of the Act, 16 U.S.C. § 824f. Additionally, the
Commission may investigate unlawful conduct upon a complaint by
"[a]ny person, State, municipality, or State commission," § 306 of
the Act, 16 U.S.C. § 825e, or on its own motion, § 307 of the Act,
16 U.S.C. § 825f. Indeed, upon the complaint of the respondent
Cities, the Commission is presently investigating the conduct at
issue here.
The Cities of Lafayette and Plaquemine, Louisiana
v. Gulf States Utilities Co., F.P.C. Doc. No. E-7676.
[
Footnote 2/4]
Given its broad direct authority and its undertaking to
investigate allegations of anticompetitive behavior in exercising
that authority, the Commission does not think it necessary or
appropriate to convert § 204 into an all-purpose
Page 411 U. S. 769
sword. [
Footnote 2/5] As the
Court of Appeals recognized, there may be no nexus or only a very
weak one between the issuance of a security and alleged
anticompetitive conduct and, in any event, the charges may be
unfounded. It is no answer, in the Commission's view, to say that
nexus and merit must be determined on the facts of each case
because the process of investigating the allegation will delay the
financing and often frustrate the utilities' efforts to obtain a
favorable price for their securities.
The Commission is properly sensitive to the complexities and
subtleties of raising vast sums of money in the financial markets.
[
Footnote 2/6] Utility financing
normally is accomplished through competitive bidding participated
in by a relatively small number of national investment firms which
specialize in the purchase from issuers and the wholesaling of
utility securities. The market is highly competitive, and is
particularly sensitive to uncertainties. The maintenance of an
orderly market, with dependable marketing timetables, is essential
to the financing process and to favorable decisions by the
investment bankers as to rates and other terms. It is settled
Page 411 U. S. 770
practice to "bring an issue to market" pursuant to a carefully
structured time schedule. When favorable market conditions are
observed or anticipated, this time schedule is compressed --
usually within a period from 45 to 90 days. The longer the lead
time is extended and uncertainties injected into the process, the
greater the risk of market change or reevaluation with a resulting
adverse effect on the cost of capital and, in the end, on the cost
of service to the public. Indeed, the public has a double interest
in this process. Apart from the ultimate impact on rates which may
be occasioned by disruption of the financing process, the utilities
may simply be unable to keep pace with the burgeoning public demand
for electric energy. [
Footnote
2/7]
Both the delicacy of financing and the availability of
alternative means for regulating anticompetitive conduct, then,
strongly support the Commission's interpretation of the Act. Nor
does anything in the legislative history
Page 411 U. S. 771
of § 204 require a contrary conclusion. [
Footnote 2/8] The Senate Report states
straightforwardly:
"Control over the capitalization of operating utilities is
plainly an essential means of safeguarding the public against the
unsound financial practices which make impossible the
proper and most economical performance of public utility
functions."
S.Rep. No. 621, 74th Cong., 1st Sess., 50 (1935) (emphasis
supplied). And in companion legislation entrusting to the
Securities and Exchange Commission (SEC) the responsibility to
regulate the issuance of securities by public utility holding
companies, Congress declined to require the SEC to investigate
anticompetitive conduct, at least in the ordinary case. [
Footnote 2/9] Even apart from its relevance
to congressional purpose, the absence of a requirement for such an
investigation when a public utility holding company seeks
authorization to issue a security supports the Commission's
Page 411 U. S. 772
prudent judgment to accord like treatment to applications from
operating utilities.
The securities of public utility holding companies compete in
the financial markets with the securities of public utility
operating companies. It makes little sense, especially in
construing companion legislation applicable to the same industry,
to construe the term "public interest" when applied to the
operating companies to mean something different, and to impose a
more burdensome procedure, than when applied to utilities which are
within a holding company system. [
Footnote 2/10] Yet, this will be the bizarre result of
today's decision by this Court.
III
The Court rests its decision in part on
Denver & R. G.
W. R. Co. v. United States, 387 U. S. 485
(1967), a case involving the issuance of a controlling stock
interest in a carrier regulated by the Interstate Commerce
Commission (ICC). In my view, that case falls far short of being a
persuasive precedent. The transaction under consideration there was
a proposed issuance of common stock by the Railway Express Agency
(REA). Approximately 2,000,000 shares of REA stock were held
exclusively by railroads, each of which was obligated to offer its
shares to the others before selling them to outsiders. REA also was
authorized to issue 500,000 shares to whomever it wished, and it
entered into an agreement to sell such shares to Greyhound on the
condition that
Page 411 U. S. 773
Greyhound would offer to purchase an additional 1,000,000 shares
from present stockholders, the offer to remain open for 60
days.
As required by § 20a of the Interstate Commerce Act, 49 U.S.C. §
20a, REA applied to the ICC for authorization to issue the 500,000
shares. Under the terms of that section, the ICC may grant
authorization
"only if it finds that such issue . . . is for some lawful
object within [the applicant's] corporate purposes, and compatible
with the public interest. . . ."
49 U.S.C. § 20a(2). The ICC authorized the issue without
granting a hearing on an intervenor's claim that issuance to
Greyhound would give it "control" over REA, or, at a minimum, would
lead to a lessening of competition in the freight transportation
market. On review in this Court, the ICC argued that its
responsibility under § 20a was limited to protecting against
financial manipulation, but that, even if it did have an obligation
to consider "control" and "anticompetitive" effects of the
issuance, it could properly defer such consideration until the
expiration of Greyhound's offer to purchase a large additional
portion of REA's outstanding stock. 387 U.S. at
387 U. S.
491-492.
In addressing the ICC's first contention, the Court gave scant
attention to the legislative history of § 20a. After noting that an
earlier version of what was to become the Interstate Commerce Act
"led to a study which condemned as a
public evil'
intercorporate holdings of railroad stock," id. at
387 U. S. 492
n. 4, the opinion shifted focus:
"Even if Congress' primary concern was to prevent [fiscal]
manipulation, the broad terms 'public interest' and 'lawful object'
negate the existence of a mandate to the ICC to close its eyes to
facts indicating that the transaction may exceed limitations
imposed by other relevant laws."
Id. at
387 U. S. 492.
One of the ICC's responsibilities, the Court found, was to consider
possible control and anticompetitive consequences,
Page 411 U. S. 774
a responsibility deriving specifically from § 5 of the
Interstate Commerce Act, 49 U.S.C. § 5, and from § 11 of the
Clayton Act, 15 U.S.C. § 21. Under § 5, any conjoining of two or
more carriers, either by merger or by transfer of a controlling
interest of stock, must be submitted for approval to the ICC, whose
approval confers antitrust immunity. Section 11 of the Clayton Act
grants to the ICC authority to enforce compliance with the
antitrust provisions of § 7 of the same Act, 14 U.S.C. § 18, which
prohibit the acquisition by one corporation of the stock or the
assets of another where "the effect of such acquisition may be
substantially to lessen competition, or to tend to create a
monopoly." On the facts before it, the Court saw no abuse of
discretion in the ICC's decision to postpone consideration of
possible control of REA by Greyhound until the expiration of
Greyhound's 60-day offer, but held it an abuse of discretion to
defer consideration of possible § 7 violation.
Section 20a of the Interstate Commerce Act, interpreted in
Denver, was, as the majority points out, the model for §
204 of the Federal Power Act. [
Footnote 2/11] But this tie by no means requires that
the two sections be given identical constructions. [
Footnote 2/12] The
Denver case
involved a different
Page 411 U. S. 775
statute and regulatory framework, with a different
administrative history. [
Footnote
2/13] Moreover, the transaction involved in
Denver,
Greyhound's purchase of stock in a regulated carrier, was arguably
a
per se violation of the antitrust laws: the effect of
the acquisition might have been "substantially to lessen
competition, or to tend to create a monopoly" in violation of § 7
of the Clayton Act. As indicated above, the legislative history of
the Interstate Commerce Act showed particular concern with
"intercorporate holdings of railroad stock." The immediacy of the
antitrust issue and the obligation imposed by § 5 on the ICC with
respect to Clayton Act violations justified the Court in overriding
the ICC's decision not to address the issue.
In sum,
Denver has little precedential weight in a case
under the Federal Power Act, especially where the transaction does
not involve, on its face, an arguable violation of the antitrust
laws.
IV
I return now to the facts in this case. The relationship between
Gulf States' proposal to sell bonds for cash on the open market and
the anticompetitive activities alleged by the Cities is, at best,
an attenuated one. Indeed, the Cities do not claim that the
issuance itself will have an
Page 411 U. S. 776
anticompetitive effect. Nor do they claim that the simple
refunding of obligations will have such an effect. Their assertion
of a relationship barely goes beyond a bald insistence that the
anticompetitive conduct alleged will be "financed or refinanced by
the bonds here proposed." Brief for Respondent Cities 9. Their
focus consistently has been not so much on the uses to which the
proceeds from the bonds will be put as on the conditions which the
Commission might impose on their issuance. Indeed, the Commission
believes that the lack of a substantial relationship between the
Cities' allegations and petitioner's bond issue is characteristic
of the lack of nexus between § 204 financing proposals generally
and anticompetitive conduct by utilities. [
Footnote 2/14]
This, then, is a particularly unlikely case in which to force
the Commission to investigate allegations of anticompetitive
conduct. The Court apparently considers that the Cities' claim of
anticompetitive conduct is at least colorably relevant to the
proposed refinancing. If so, it is unlikely that any claim can be
found wholly irrelevant. On the basis of today's precedent, the
only justification reasonably open to the Commission for refusing
to consider allegations of anticompetitive conduct will be that the
allegations themselves are patently false.
If the field of inquiry is, as the Cities insist, all of a
utility's proposed actions and all of its past actions as they
reflect on its proposed actions, it should be no difficult task for
an intervenor to force a hearing and findings of fact. As the
present case amply demonstrates, the questions of fact may be
complicated ones unsuited to summary adjudication. If the
intervenor will remain free to seek judicial review of the
Commission's findings, and thereby cause further delay.
In converting a special purpose proceeding into a general
purpose one, the Court renounces an administrative interpretation
of § 204 founded on the practicalities of utility financing and
regulation. [
Footnote 2/15]
Although other established means are available for policing
anticompetitive conduct, [
Footnote
2/16] the Court imposes fresh and ill-defined obstacles to the
necessary raising of capital by an industry that needs an
expeditious and dependable regulatory process. And, finally, in the
name of the "public interest," it ignores the critical fact that
mandating a prolonged factfinding process will preclude the
Commission from vindicating these aspects of the public interest
peculiarly implicated by financing proposals.
I would uphold the Commission, and would reverse the decision of
the Court of Appeals.
[
Footnote 2/1]
The interpretation is entitled to great deference:
"When faced with a problem of statutory construction, this Court
shows great deference to the interpretation given the statute by
the officers or agency charged with its administration."
"To sustain the Commission's application of this statutory term,
we need not find that its construction is the only reasonable one,
or even that it is the result we would have reached had the
question arisen in the first instance in judicial proceedings."
"
Unemployment Comm'n v. Aragon, 329 U. S.
143,
329 U. S. 153."
Udall v. Tallman, 380 U. S. 1,
380 U. S. 16
(1965).
[
Footnote 2/2]
It was stated in petitioner's brief, and was not challenged,
that the Commission records fail to show any other like petition to
intervene in a financing application under § 204 since its
enactment in 1935. The remedy which intervenors are seeking to
establish is a new one not heretofore deemed necessary or
appropriate by anyone. Brief for Petitioner 26.
[
Footnote 2/3]
One would have thought that, by its use of the phrase
"irrelevant to a requested authorization of securities," 44 F.P.C.
1524, 1525, the Commission had already found -- to use the language
of the court -- that the claims lacked a "reasonable nexus" with
the purpose of the securities issuance.
[
Footnote 2/4]
Nor does the Commission have exclusive jurisdiction over
antitrust violations by utilities. Antitrust suits may be brought
by private parties or by the Antitrust Division of the Justice
Department and afford other means of relief.
[
Footnote 2/5]
In
Pacific Power & Light Co., 27 F.P.C. 623 (1962),
the Commission took the same position under analogous
circumstances. There, the Commission approved a proposed issuance
of securities to fund construction of a politically controversial
transmission line, stating:
"The plain purpose of Section 204 is to prevent the issuance of
securities which might impair the company's financial integrity or
its ability to perform its public utility responsibilities."
Id. at 626.
[
Footnote 2/6]
The Commission has recognized the importance of expedition and
adherence to time schedules in the administration of § 204 of the
Act:
"It should also be observed that procedures for considering
security issues must be expeditious if, in view of changing
marketing conditions, utilities are to be able to raise the money
needed to carry out their responsibilities. . . ."
Id. at 629.
[
Footnote 2/7]
Prof. Priest has commented on the urgency of new capital for the
electric industry:
"Since World War II, the problem of new capital has been, and
will continue to be, compellingly urgent for public utility
managements."
A. Priest, 1 Principles of Public Utility Regulation 451 (1969).
After describing the "spectacular" growth of the electric utility
industry, Prof. Priest compared the urgency of access to the
capital markets of utilities with industrial enterprises:
"[T]he new capital requirements of the utility industry in the
next ten years will call for extraordinary effort. The obvious
reasons are (1) that regulated public utilities literally cannot
produce as much cash through retained earnings as unregulated
industrial enterprises, and (2) that the utilities, in any event,
need a much larger investment per dollar of annual revenue than the
characteristic industrial."
Id. at 452.
It is stated in petitioner's brief, and not questioned, that in
1971, 43 applications were filed with the Commission covering the
issuance of nearly $1.8 billion of securities. Brief for Petitioner
24.
[
Footnote 2/8]
Section 204 was enacted as part of Tit. II of the Public Utility
Act of 1935. Title II amended the Federal Water Power Act and
redesignated it the Federal Power Act.
[
Footnote 2/9]
The Public Utility Holding Company Act was enacted as Tit. I of
the Public Utility Act of 1935.
See 411
U.S. 747fn2/8|>n. 8,
supra. Under § 7(d)(6) of the
Public Utility Holding Company Act, the SEC is directed to
disapprove an issue of securities if its terms and conditions are
"detrimental to the public interest or the interest of investors or
consumers." 15 U.S.C. § 79g(d)(6). The SEC has interpreted this
language as not requiring it to investigate alleged anticompetitive
conduct, and applied this interpretation in an aspect of this
litigation involving a substantially identical challenge by these
same Cities to a proposed issuance of securities by Louisiana Power
& Light Co., a public utility holding company which allegedly
conspired with Gulf States.
See ante at
411 U. S.
754-755, n. 4. The SEC rejected the Cities' protests as
pertaining to "collateral and unrelated controversies," 147
U.S.App.D.C. at 103, 454 F.2d at 946, and was upheld by the Court
of Appeals.
Id. at 112, 454 F.2d at 955.
[
Footnote 2/10]
Further evidence of congressional intent can be gleaned from the
fact that Congress exempted from scrutiny under § 204 securities of
"a public utility organized and operating in a State under the laws
of which its security issues are regulated by a State commission."
§ 204(f) of the Act, 16 U.S.C. § 824c(f). At the time of the Act,
32 States regulated the issuance of utility company securities. 79
Cong.Rec. 10378 (1935). Had Congress intended to subject securities
issues to antitrust screening, it would not, presumably, have
established this exception.
[
Footnote 2/11]
The Senate Report indicated that § 204
"follows section 20a of the Interstate Commerce Act in defining
the conditions under which such authorization is to be given, the
Commission's power to issue orders, and the duty of the public
utilities to comply with such orders."
S.Rep. No. 621, 74th Cong., 1st Sess., 50 (1935).
[
Footnote 2/12]
One can hardly suppose that Congress in 1935 specifically
intended to borrow the words of § 20a as they would be construed by
the Court in 1967. Congress borrowed the language as it was then
understood, because it had "proved its usefulness."
Id. at
20.
Moreover, Congress departed from the Interstate Commerce Act
model when it established an exception for state-regulated
securities,
see 411
U.S. 747fn2/10|>n. 10,
supra, an exception which is
not found in the Interstate Commerce Act.
[
Footnote 2/13]
No less important are the practical differences between utility
and railroad financing. Because for several decades the railroads
have contracted, rather than expanded, facilities and services,
they have, for the most part, been able to meet their capital needs
from retained earnings and equipment trust financing without
resorting to the national markets for additional capital:
"Railroads may not enlarge their trackage significantly and may
continue to rely largely on internal resources and the ubiquitous
equipment trust to finance additional and more efficient rolling
stock. But the electric, natural gas, communications, and water
industries, as well as the airlines, must go to the investment
fraternity for staggering amounts."
Priest,
supra, 411
U.S. 747fn2/7|>n. 7, at 451.
[
Footnote 2/14]
It is worthy of note that a transaction between two public
utilities resembling the transaction proposed in
Denver &
R. G. W. R. Co. would be submitted to the Commission not under
§ 204, but under § 203, which provides in pertinent part that:
"(a) No public utility shall . . . purchase, acquire, or take
any security of any other public utility without first having
secured an order of the Commission authorizing it to do so."
16 U.S.C. § 824b. In passing on an application under § 203, the
Commission would investigate charges of anticompetitive practices.
See supra at
411 U. S. 768.
Thus, the specific problem addressed by the Court in
Denver would not arise under § 204.
[
Footnote 2/15]
I would not foreclose the possibility that the Commission should
consider in the context of a § 204 application an allegation that
the issuance of the security was itself an antitrust violation.
But see 411
U.S. 747fn2/14|>n. 14,
supra. The present case is
not remotely of this type.
[
Footnote 2/16]
See 411
U.S. 747fn2/4|>n. 4,
supra.