1. The conclusion of the Federal Power Commission in this case
that facilities owned and operated by a power company within a
State -- which connected with facilities of a second company, also
within the State, whose facilities connected with those of a third
company, in another State -- were utilized for the transmission of
electric energy across state lines
held supported by
substantial evidence. P.
319 U. S.
67.
2. Federal regulation of the transmission of electric energy in
interstate commerce, under the Federal Power Act of 1935, is not
limited to energy at the instant it crosses the state line, nor to
companies which own the facilities which cross the line. P.
319 U. S.
71.
3. The jurisdiction of the Federal Power Commission does not
extend to all connecting transmission facilities, but only to those
which transmit energy actually moving in interstate commerce. P.
319 U. S.
72.
4. Since the power company here in question owns and operates a
transmission line which is a facility within the jurisdiction of
the Federal Power Commission under § 201(b), it is a "public
utility" under § 201(e). P.
319 U. S.
73.
5. The purchase by a company which is a public utility under the
Federal Power Act of the stock of another company which also is a
public utility under the Act requires the approval of the Federal
Power Commission, notwithstanding that the purchase could be, and
the transfer is, regulated by the State. P.
319 U. S.
74.
6. The limitation of § 201(a) of the Federal Power Act -- "such
federal regulation, however, to extend only to those matters which
are not subject to regulation by the States" -- is inapplicable to
regulation under § 203(a) of the acquisition of securities. P.
319 U. S.
76.
129 F.2d 183 affirmed.
Page 319 U. S. 62
Certiorari, 317 U.S. 610, to review the affirmance of an order
of the Federal Power Commission, 30 P.U.R.(N.S.) 33.
MR. JUSTICE REED delivered the opinion of the Court.
These two cases bring here for review the construction of
sections 201 and 203(a) of the Federal Power Act, as amended by the
Public Utility Act of 1935. [
Footnote 1] These sections are included in Title II, Part
II, of the latter act, which Part relates to federal regulation of
the business of the transmission of electric energy in interstate
commerce and the sale of such energy at wholesale. By these
sections, the public utilities subject to the Federal Power
Commission are defined and the acquisition of securities of such
utilities by any other utility subject to the act is forbidden
without authorization of the Commission.
I. After the enactment of the above amendments to the Federal
Power Act, and without seeking Commission authorization, the New
Jersey Power & Light Company purchased from others than the
issuer certain securities of the Jersey Central Power & Light
Company. The Federal
Page 319 U. S. 63
Power Commission, being of the opinion that both the purchaser
and the issuer were public utilities within the definition of the
Federal Power Act and that, therefore, the acquisition of the stock
was illegal, on June 7, 1938, entered an order that the purchaser
submit information concerning the acquisition of the stock and show
cause why the Commission should not proceed to enforce the
requirements of the act. To this order, the purchaser answered that
the Jersey Central was not a public utility within the definition
of the act, and that the approval by the Federal Power Commission
to the acquisition was therefore not required by law. By permission
of the Commission, the Jersey Central intervened and made the same
contention as to its status. Thus, there was presented for
determination two questions: first, whether Jersey Central was a
public utility under the act, and second, whether, if it was a
public utility, this acquisition of its stock was permissible in
view of the declaration of section 201(a) that federal regulation
should "extend only to those matters which are not subject to
regulation by the States." This purchase is subject to regulation
by New Jersey.
It is admitted that the purchaser, Jersey Power, is a public
utility under the act. The Commission, after investigation and
hearing, held that Jersey Central also was a public utility under
the act. 30 P.U.R.((N.S.)) 33. This holding was based on findings
that Jersey Central owns and operates transmission facilities (an
electric line) extending from its substation adjacent to its
generating plant in South Amboy, New Jersey, to the south bank of
the Raritan River in the same state where the line joins the
transmission facilities of another company, not here involved, the
Public Service Electric & Gas Company. This latter company
transmits the energy from the point of junction on the Raritan to a
common bus
Page 319 U. S. 64
bar [
Footnote 2] in one of
its substations, located also in New Jersey at Mechanic Street,
Perth Amboy. From the bus bar, Public Service has transmission
facilities extending to the mid-channel of Kill van Kull, a body of
water between New Jersey and Staten Island, New York. At
mid-channel, Staten Island Edison Corporation, another utility,
connects with its transmission facilities which extend to its own
Atlantic substation on Staten Island. The Commission further found,
in the words quoted below, that energy generated in New Jersey by
Jersey Central was consumed in New York, and energy generated in
New York was consumed in New Jersey. [
Footnote 3]
The evidence upon which these findings were based showed that
the energy was delivered from Jersey Central
Page 319 U. S. 65
to and from Public Service under contract, and that Public
Service likewise delivered and received energy under contract to
and from Staten Island Edison. Jersey Central had no control over
the destination of its energy after it made delivery to Public
Service at the Raritan, but it did, of course, control the
distribution of energy received from Public Service. The deliveries
from Jersey Central to Public Service were substantial, above
fifty-five million kilowatt hours in each year of the period 1934
to 1937, inclusive. Those from Public Service to Staten Island were
smaller for the same period, amounting to three to four million
k.w.h. annually and the flow from Staten Island to Public Service
aggregated about the same amount. Although, as will appear
hereafter, the evidence shows some Jersey Central energy is
consumed in New York, the amount is unknown.
The connection between Public Service and Staten Island is
maintained primarily to guard the Staten Island distribution
against breakdown. It is used for emergencies a few times per year
on an average. Surplus energy is occasionally sold. The rest of the
time, the line is maintained "in balance." This is to avoid a delay
of transmission in an emergency. If the connection were not
maintained, an appreciable time would be lost in communicating and
reestablishing the connection. Any oscillation of the balance,
created by increased demand in New York or New Jersey, carries
energy in one direction or in another to be consumed on one side or
the other of the line between the states. This is called
"slop-over" energy. These bulk deliveries were the subject of the
sale agreements between Public Service and Staten Island.
Since the bus bar into which the Jersey Central energy is fed
also receives large amounts of energy from other sources, the facts
heretofore detailed do not prove conclusively that energy generated
by Jersey Central passes to and is consumed in New York. This
further evidence
Page 319 U. S. 66
appears from testimony presented by investigators of the
Commission. Their examination of Public Service records discloses
that there were moments of time between January 26, 1937, and
September 6, 1938, when all the energy flowing into the bus bar at
Mechanic Street came from Jersey Central, and, at the same moments,
energy flowed from Mechanic Street in New Jersey to the Atlantic
substation in New York. As no pools of energy exist from which the
flow to New York could have been drawn, it necessarily follows that
Jersey Central production was instantaneously transmitted to New
York.
Cf. Utah Power & Light Co. v. Pfost,
286 U. S. 165. The
amount of energy transmitted was small. The evidence was developed
from 184 log readings selected from 25,000. Of the 184 log
readings, 12 showed this flow of energy from Jersey Central to New
York between August 26, 1935, the effective date of the federal
Power Act, and March 14, 1938, the date of the present purchase of
stock. [
Footnote 4] Twelve
showed such flow shortly after the purchase.
Page 319 U. S. 67
This evidence, we think, furnishes substantial basis [
Footnote 5] for the conclusion of the
Commission that facilities of Jersey Central are utilized for the
transmission of electric energy across state lines.
Petitions for rehearing were denied. An appeal was taken to the
Circuit Court of Appeals under the provisions of section 313 of the
act. [
Footnote 6] The
determination of the Commission was affirmed, 129 F.2d 183, and, in
view of the important questions of federal law raised by the
petitions for certiorari, we granted review. 317 U.S. 610.
The primary purpose of Title II, Part II of the 1935 amendments
to the Federal Power Act,
supra, note 1 was to give a federal agency power to regulate
the sale of electric energy across state lines. Regulation of such
sales had been denied to the States by
Public
Utilities
Page 319 U. S. 68
Commission v. Attleboro Steam Co., 273 U. S.
83. On account of the development of interstate sales of
electric energy, it was deemed desirable by Congress to enter this
field of regulation. [
Footnote
7]
II. Petitioners concede that some energy generated by Jersey
Central and sold and delivered by it to Public Service passes
thereafter to New York. Their contention is that the arrangements
by which this energy passes to New York does not make Jersey
Central a public utility,
Page 319 U. S. 69
within the definition of the act because it
"does not own or operate facilities for the transmission of
electric energy, or sale of electric energy at wholesale, in
interstate commerce. . . . A person owning or operating facilities
. . . must own the facilities which transmit -- send across -- the
energy, and this connotes voluntary, intentional action."
From the asserted fact that Jersey Central has no control over
the energy produced by it after its delivery to Public Service,
petitioners conclude that this short transmission and sale, wholly
in New Jersey, is an intrastate transaction. Without this
separation from the movement across the New Jersey-New York line,
the transmission by Jersey Central would fall within the definition
of commerce declared by two former decisions of this Court.
In
Public Utilities Commission v. Attleboro Steam Co.,
273 U. S. 83,
273 U. S. 86,
this Court held in interstate commerce the sale of locally produced
electric current at the state boundary with knowledge that the
buyer would utilize the energy extrastate. The passage of custody
and title at the line was held immaterial. We see no distinction
between a sale at or before reaching the state line.
The other case is
Illinois Gas Co. v. Public Service
Co., 314 U. S. 498. In
this case, a wholly owned subsidiary bought gas in Illinois from
its parent corporation. The parent had transported the gas across
the state line and delivered it at a reduced pressure to the
subsidiary in Illinois. The subsidiary transported the gas wholly
intrastate and sold and, on again reducing pressure, delivered it
to an Illinois distributing company. The intrastate movement by the
subsidiary was held by us to be a part of interstate commerce. We
said that the point at which title and custody passed, without
arresting movement, did not affect the essential interstate
movement of the business.
But we need not decide whether the intervention of Public
Service between Jersey Central and Staten Island
Page 319 U. S. 70
Edison and the consequent loss of actual control of the energy
by Jersey Central is significant to distinguish the two cases just
cited. Petitioners, as we understand their briefs, concede, and
rightly so, that power rests in Congress to regulate such a flow of
energy from Jersey Central as here occurs. Such a flow affects
commerce.
Cf. Wickard v. Filburn, 317 U.
S. 111, and cases cited. [
Footnote 8] But petitioners say that Congress did not
intend to exercise its full power over interstate transmission, and
directed only that transmission "in interstate commerce" should be
regulated. As contrasted with "affecting commerce" in the Public
Utility Holding Company Act of 1935, 49 Stat. 803, § 1(c), or the
"current of commerce" in the Commodity Exchange Act, 42 Stat. 998,
or the broad language of The Bituminous Coal Act, 50 Stat. 83, or
the Agricultural Adjustment Act, 50 Stat. 246, the words "in
interstate commerce" are said by petitioners to be the "strictest
test of jurisdiction available to Congress." But the argument, we
think, gives no effect to the definition of "transmitted in
interstate commerce" as used in this act. In the note below, there
is set out the pertinent provisions of section 201 which indicate
the meaning given the phrase, which provisions are italicized for
quick reference. [
Footnote 9]
Subsections (a) and (b) show the intent to regulate such
transactions as are beyond state power under the
Attleboro
Page 319 U. S. 71
case,
supra. Subsection (c) defines the electric energy
in commerce as that "transmitted from a State and consumed at any
point outside thereof." There was no change in this definition in
the various drafts of the bill. The definition was used to "lend
precision to the scope of the bill." [
Footnote 10] 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
Page 319 U. S. 72
prior to the incidence of federal regulation and federal rate
control would be substantially impaired, if not rendered
futile.
Petitioners make the point, however, that this interpretation
subjects connected facilities to the Commission's jurisdiction
which facilities were deliberately eliminated by Congress. As an
illustration, they cite the provisions of section 201(a) as they
appeared in a predecessor bill. [
Footnote 11] We do not think that the result which the
petitioners apprehend follows from our interpretation. The language
of section 201(a) and (b) indicates a distinction between the
facilities for generation or production and those for transmission.
Also, it is sales at wholesale only which are regulated, and,
finally, Commission power does not extend over all connecting
transmitting facilities, but only over those which transmit energy
actually moving in interstate commerce. Mere connection determines
nothing.
Further, we think the definition in subsection (e) of "public
utility" covers Jersey Central, since that company owns and
operates the transmission line to the Raritan, and that line, as a
result of the interpretation of interstate commerce in the
preceding paragraph, is a facility under Commission jurisdiction by
the terms of subsection (b). Subsection (b) declares that the
provisions of this part apply "to the transmission of electric
energy at wholesale in interstate commerce." This subsection gives
jurisdiction over facilities used for such transmission. The
business of transmitting and selling electric energy is said
Page 319 U. S. 73
to be affected with a public interest, and federal regulation of
a portion of that business is declared necessary. Section 201(a).
The fact that a company is engaged in this business is not
determinative of its inclusion in this act. The determinative fact
is the ownership of facilities used in transmission. Such use makes
the owner or operator of such facilities a public utility under the
act (e). We conclude, therefore, that Jersey Central is a public
utility under this Act. It is quite clear, however, from section
201 that, although a company may be a public utility under
subsection (e), all of its transactions do not thereby fall under
the regulatory power of the Commission. In the next section of this
opinion, we consider whether this purchase of stock is subject to
Commission regulation.
III. Although only the facilities of a public utility used in
the transmission or sale at wholesale of electric energy in
interstate commerce or the rates and charges for such energy are
subjected by Parts II and III of the act to regulation by the
Federal Power Commission, that Commission has general power over
the issue of all securities or assumption of all obligations by
such a public utility. [
Footnote
12] This generality of control is, in turn, limited by an
exception in the case of utilities organized and operating in a
state where its security issues are regulated by a state
commission. [
Footnote
13]
Page 319 U. S. 74
In the section of Part II in question here, however, which
prohibits the purchase of the security of any other public utility
without authorization of the Commission, there is no exception of
any kind. [
Footnote 14]
Consequently, the action of Jersey Power, admittedly a public
utility under Part II, in purchasing the stock of Jersey Central,
hereinbefore held to be a public utility under the act, requires
Commission approval unless some other provision of law exempts the
transaction from this control. Petitioners find this exemption in
the concluding words of section 201(a) -- "such Federal regulation,
however, to extend only to those matters which are not subject to
regulation by the States." [
Footnote 15] The Commission denies that this limitation
is to be read into section 203(a). If the limitation is to be read
as applying to section 203(a), the limitation exempts this
transaction, and the purchase here involved is beyond the reach of
Commission power for the reason that the purchase could be, and the
transfer is, regulated by the State of New Jersey. [
Footnote 16]
It will be observed that section 201(a) is a declaration of the
end sought by the enactment of this Part -- that is, federal
regulation of the generation, transmission. and sale of electric
energy in commerce. 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
Page 319 U. S. 75
and distribution. This conclusion finds strong support in the
fact that not only section 203(a), here under discussion, but
sections 204(a), [
Footnote
17] 208, [
Footnote 18]
and 301(a) [
Footnote 19]
regulate matters obviously subject to state regulation. If the
scope of the limitation was as broad as petitioners contend, none
of these sections just referred to would be effective. Section
203(a) would be a nullity, as, of course, the disposition and
acquisition of facilities, merger, consolidation, or purchase of
securities by their utilities may be regulated by the States. But
this does not follow where a specific limitation is placed on the
issue of securities by section 204. Section 204 is not rendered
useless by subsection (f), since it is applicable to states without
state commissions authorized to regulate security issues.
See notes
12 and 13
supra. In view of the contemporaneous legislation as
to
Page 319 U. S. 76
holding companies (Title I, Public Utility Act of 1935, 49 Stat.
803) which left independent operating companies or subsidiaries of
unregistered holding companies free to acquire securities in other
operating companies, [
Footnote
20] it is difficult to conclude that, by section 201(a),
Congress limited the regulation of the acquisition of securities by
section 203(a). [
Footnote
21]
The legislative history points to this result. When S. 2796,
containing the progenitor of the disputed section, was reported by
the Committee on Interstate Commerce of the Senate, [
Footnote 22] section 201(a) concluded:
"It is further declared to be the policy of Congress to extend
Federal regulation to those matters which cannot be regulated by
the States, and also to exert Federal authority to strengthen and
assist the States in the exercise of their regulatory powers and
not to impair or diminish the powers of any State commission."
The same bill had sections 208(a) and 301(a), just referred to,
which did regulate matters which could be regulated by the states.
After its passage through the Senate in this form, the bill went to
the House, and 201(a) was there amended by the Committee on
Interstate and Foreign Commerce (H.Rep. No. 1318, 74th Cong., 1st
Sess., June 24, 1935) to conclude, as it now does, "such Federal
regulation, however, to extend only to those matters which are not
subject to regulation by the States." The report, although it
commented on the section, did not mention this change as one of
substance from the conclusion of the Senate Bill. H.Rep. No. 1318,
74th Cong.,
Page 319 U. S. 77
1st Sess., p. 26. Sections 208 and 301, with their regulation of
matters subject to state regulation, remained unchanged. More
significant even than these indicia of the scope of the concluding
words of section 201(a) is the fact that the Committee which
adopted the new concluding words adopted also section 204,
subsection (f), withdrawing federal regulation from security issues
where such issues are "regulated by a State commission." While, of
course, this may have been done to make certain that state power
would not be infringed, such meticulous care was entirely
unnecessary if the wording of section 201(a), simultaneously added,
had the effect now urged. [
Footnote 23] One might deduce from the language of the
report in the House that the precise question at issue here was in
the mind of the House Committee, and was resolved in accord with
our conclusion. [
Footnote
24] From this record of the pains taken by the Congress to make
clear the respective responsibilities
Page 319 U. S. 78
of federal and state authorities, we conclude that power was
given the Federal Power Commission by section 203 to regulate the
present transaction.
The judgment of the Circuit Court of Appeals is
Affirmed.
* Together with No. 329,
New Jersey Power & Light Co. v.
Federal Power Commission, also on writ of certiorari, 317 U.S.
610, to the Circuit Court of Appeals for the Third Circuit.
[
Footnote 1]
49 Stat. 803, 847, 849, 16 U.S.C. §§ 824, 824b(a).
[
Footnote 2]
A bus conductor, or group of conductors, is a switchgear
assembly which serves as a common connection for three or more
circuits, American Standard Definitions of Electric Terms,
published by American Institute of Electrical Engineers, p. 97.
[
Footnote 3]
30 P.U.R., (N.S.), 33, 36:
"that the transmission facilities described provide a direct and
interconnected line for the flow of electric energy between the
substation of Jersey Central Power & Light Company located
adjacent to its generating plant in South Amboy and Atlantic
substation of Staten Island Edison Corporation on Staten Island in
the state of New York, via Mechanic street substation, and electric
energy was transmitted over such transmission facilities between
such points via Mechanic street substation on numerous occasions
during certain days, and almost daily throughout 1936, 1937, and to
September, 1938; that there is no evidence or testimony of any
change in such operations during this period or subsequent thereto;
that electric energy transmitted over facilities extending from the
substation adjacent to the generating plant of Jersey Central Power
& Light Company in South Amboy, New Jersey, to Atlantic
substation, on Staten Island, in the state of New York, via
Mechanic street substation, is generated in the state of New Jersey
and consumed in the state of New York; that electric energy
transmitted from Atlantic Street substation to the substation of
Jersey Central Power & Light Company in South Amboy, New
Jersey, via Mechanic street substation, is generated in the state
of New York and consumed in the state of New Jersey. . . ."
[
Footnote 4]
There is dispute as to whether the 184 instances selected for
examination were typical. In view of the evidence just detailed as
to the service arrangements between Jersey Central and Public
Service, and Public Service and Staten Island Edison, this seems of
no importance. There is no contention that the energy actually
transmitted interstate shall be treated as accidental, or that it
falls under the
de minimis rule. The method of selection
is explained as follows:
"Q. . . . Then you have taken some 150* readings out of
approximately 25,000 readings. Just why did you take these
particular 150, Mr. Grimsley?"
* The Commission's witness Grimsley spoke of 150 instances, but
actual count discloses 184.
"A. At times when considerable power was going over from Jersey
Central, and, for the same period, it was going to Staten Island.
That was necessary to make my determination. Now we might get
15,000, I don't know, to compare with those, but the point was to
establish certain conditions at time of flow, and, at times when
there was no energy flowing to Staten Island, there was no point in
taking those readings."
"Q. These are hand-picked readings where you worked toward a
particular result and you selected those that would best show what
you desired to establish?"
"A. I was trying to get a condition when the energy was coming
over from Jersey Central and flowing to Staten Island, and, over a
period, that might be considered typical."
"Q. Just a moment --"
"A. [interposing] I don't know unless we go through all of them
and compare them with these."
"Q. I suppose it would be pretty easy to pick out 150 other
examples when power is flowing from Metuchen substation to Staten
Island supplying the Mechanic street load, would it not?"
"A. Oh, I think so, yes. Maybe more."
[
Footnote 5]
"The finding of the Commission as to the facts, if supported by
substantial evidence, shall be conclusive." Sec. 313(b), 49 Stat.
860, 16 U.S.C. § 8251(b).
[
Footnote 6]
The order entered determined that Jersey Central Power &
Light Company is a public utility, and that the acquisition of its
stock by New Jersey Power & Light Company was a violation of
section 203(a) of the Federal Power Act. 30 P.U.R. (N.S.), 33, 36.
This order fixed the status of Jersey Central as a utility amenable
to the provisions of the Act:
e.g., rates, sec. 205(a);
ascertainment of cost of property, sec. 209(a); accounts, sec. 201.
Rochester Telephone Corp. v. United States, 307 U.
S. 125;
Federal Power Commission v. Pacific
Co., 307 U. S. 156;
Columbia Broadcasting System v. United States,
316 U. S. 407.
[
Footnote 7]
S.Rep. No. 621, 74th Cong., 1st Sess., p. 17:
"In recent years, the growth of giant holding companies has been
paralleled by the rapid development of the electric industry along
lines that transcend State boundaries. To a great extent through
the agency of the holding company, local operating units have been
tied together into vast interstate systems. As a result, the
proportion of electric energy that crosses State lines has steadily
increased. While, in 1928, 10.7 percent of the power generated in
the United States was transmitted across State lines, the
percentage had increased by 1933 to 17.8. The amount of energy
which flowed in interstate commerce in 1933 exceeded the entire
amount generated in the country in 1913."
"The new part 2 of the Federal Water Power Act would constitute
the first assertion of Federal jurisdiction over this major
interstate public utility. The decision of the Supreme Court in
Public Utilities Commission v. Attleboro Steam Co.,
273 U. S.
83, placed the interstate wholesale transactions of the
electric utilities entirely beyond the reach of the States. Other
features of this interstate utility business are equally immune
from State control, either legally or practically."
"The necessity for Federal leadership in securing planned
coordination of the facilities of the industry which alone can
produce an abundance of electricity at the lowest possible cost has
been clearly revealed in the recent reports of the Federal Power
Commission, the Mississippi Valley Committee, and the National
Resources Board. Assertion of the power of the Federal Government
in this direction becomes the more important at the time when the
Federal Government is compelling the reorganization of holding
companies along regional lines. The new part 2 of the Federal Water
Power Act seeks to bring about the regional coordination of the
operating facilities of the interstate utilities along the same
lines within which the financial and managerial control is limited
by title I of the bill."
[
Footnote 8]
Cf. Peoples Natural Gas Co. v. Federal Power
Commission, 127 F.2d 153, 157;
Hartford Electric Light Co.
v. Federal Power Comm'n, 131 F.2d 953, 958.
[
Footnote 9]
The Federal Power Act of 1935, 49 Stat. 847:
"Section 201. (a) It is hereby declared that the business of
transmitting and selling electric energy for ultimate distribution
to the public is affected with a public interest, and that Federal
regulation of matters relating to generation to the extent provided
in this Part and the Part next following and 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."
"(b) The provisions of this Part shall apply to the transmission
of electric energy
in interstate commerce and to the sale
of electric energy at wholesale
in interstate commerce,
but shall not apply to any other sale of electric energy or deprive
a State or State commission of its lawful authority now exercised
over the exportation of hydroelectric energy which is transmitted
across a State line. 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."
"(c) For the purpose of this Part, electric energy shall be held
to be transmitted in interstate commerce if transmitted from a
State and consumed at any point outside thereof, but only insofar
as such transmission takes place within the United States."
"
* * * *"
"(e) The term 'public utility' when used in this Part or in the
Part next following means any person who owns or operates
facilities subject to the jurisdiction of the Commission under this
Part."
[
Footnote 10]
S.Rep. No. 621, 74th Cong., 1st Sess., p. 49.
[
Footnote 11]
S. 1725, 74th Cong., 1st Sess., February 6, 1935:
"The provisions of this title shall apply to the transmission
and sale of electric energy in interstate commerce and to the
production of energy for such transmission and sale, but shall not
apply to the retail sale of energy in local distribution. The
Commission shall have jurisdiction over all facilities for such
transmission, sale, and/or production of energy by any means, and
over all facilities connected therewith as parts of a system of
power transmission situated in more than one State. . . ."
[
Footnote 12]
"Sec. 204. (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. . . ."
There is the same extent of control over records and accounts.
Section 301(a).
[
Footnote 13]
"Sec. 204. (f) The provisions of this section shall not extend
to a public utility organized and operating in a State under the
laws of which its security issues are regulated by a State
commission."
[
Footnote 14]
"Sec. 203. (a) No public utility shall sell, lease, or otherwise
dispose of the whole of its facilities subject to the jurisdiction
of the Commission, or any part thereof of a value in excess of
$50,000, or by any means whatsoever, directly or indirectly, merge
or consolidate such facilities or any part thereof with those of
any other person, or 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. . . ."
[
Footnote 15]
See Note 9
supra.
[
Footnote 16]
Section 19 of the Act of April 21, 1911, as amended. New Jersey
Stat.Ann. 48:3-10.
[
Footnote 17]
See Note 12
supra.
[
Footnote 18]
"Sec. 208. (a) The Commission may investigate and ascertain the
actual legitimate cost of the property of every public utility, the
depreciation therein, and, when found necessary for ratemaking
purposes, other facts which bear on the determination of such cost
or depreciation, and the fair value of such property."
"(b) Every public utility, upon request, shall file with the
Commission an inventory of all or any part of its property and a
statement of the original cost thereof, and shall keep the
Commission informed regarding the cost of all additions,
betterments, extensions, and new construction."
49 Stat. 853, 16 U.S.C. § 824g.
[
Footnote 19]
"Section 301. (a) Every licensee and public utility shall make,
keep, and preserve for such periods, such accounts, records of
cost-accounting procedures, correspondence, memoranda, papers,
books, and other records as the Commission may by rules and
regulations prescribe as necessary or appropriate for purposes of
the administration of this Act, including accounts, records, and
memoranda of the generation, transmission, distribution, delivery,
or sale of electric energy, the furnishing of services or
facilities in connection therewith, and receipts and expenditures
with respect to any of the foregoing:
Provided, however,
That nothing in this Act shall relieve any public utility from
keeping any accounts, memoranda, or records which such public
utility may be required to keep by or under authority of the laws
of any State. . . ."
Id., 854, 16 U.S.C. § 825.
[
Footnote 20]
Sec. 9(a) and (b), 49 Stat. 817.
[
Footnote 21]
S.Rep. No. 621, 74th Cong., 1st Sess., p. 50, in referring to
what is now § 203(a) said:
"In this way, the Commission would have authority to keep the
same kind of check upon the creation of spheres of influence among
operating companies that the Securities and Exchange Commission has
over holding companies under title I."
[
Footnote 22]
Id.
[
Footnote 23]
The language added to section 201(a) and section 204(f) is
practically identical with the suggestions made by the National
Association of Railroad and Utility Commissioners. Senate Hearings,
Committee on Interstate Commerce, Public Utility Holding Company
Act of 1935, p. 748-51.
[
Footnote 24]
Public Utility Act of 1935, H.Rep. No. 1318, 74th Cong., 1st
Sess., General Purpose of Title.
"Part II gives control over security issues of interstate
operating companies in cases where no State commission has control
and over the consolidation, purchase, and sale of interstate
operating properties."
Page 8.
Sectional Analysis of Bill:
"Section 203. Disposition of Property; Consolidations; Purchase
of Securities."
"Under the provisions of this section, approval must be secured
for the sale, lease, or other disposition by a public utility of
all of its facilities subject to the jurisdiction of the
Commission, or any part of the facilities in excess of a value of
$100,000, and for mergers or consolidations of such facilities or
for the purchase by a public utility of the securities of any other
public utility company. Commission approval of an acquisition,
consolidation, or control would remove such transaction from the
prohibitory provisions of any other law."
Page 28.
Section 204:
"The requirement of subsection (f) of the Senate bill that
applicable State laws must be complied with before Commission
approval may be given has been changed to authorize security issues
without Federal approval where such issues are regulated by a State
commission in which the public utility is organized and
operating."
Page 28.
MR. JUSTICE ROBERTS.
The sole question is whether Jersey Central Power & Light
Company is a public utility within the meaning of subchapter II of
the Federal Power Act.
The company's business is the generation of electricity within
New Jersey and distribution of it in the State, principally by
retail sale to the public. Its physical property is within New
Jersey. It neither owns nor operates any facility which crosses a
state line.
Jersey Central exchanges electric energy with another utility,
Public Service. The physical hook-up by which this exchange is
effected is such that Jersey Central at times transmits electricity
to Public Service and at times receives electricity from Public
Service. Jersey Central owns and operates a transmission line
seven-eighths of a mile long extending from its power plant to
another point in the State where the line connects to a cable owned
by Public Service running to a station owned by the latter at Perth
Amboy, New Jersey. Over these connecting facilities, exchanges of
two sorts are made. One is of emergency service whereby, in case of
a breakdown in either company's system, energy is drawn from that
of the other.
Page 319 U. S. 79
The second is of economy flow energy, delivery of which takes
place to either company when the other is able to generate at less
cost than the receiving company could with its own facilities. The
savings effected by the latter exchange are divided between the
companies.
Any flow of electric energy from Jersey Central to Public
Service is carried from the point of connection over Public Service
cable to a so-called bus bar, a facility of Public Service located
in New Jersey having a number of connections, one of which is with
a transmission line connecting the Public Service system with that
of Staten Island Edison in the New York. Over this lin,e Public
Service and Staten Island exchange from time to time emergency
service. To accomplish this, the lines of the two companies are
always connected, so that, whenever there is demand for additional
energy by either company, the current flowing from the plant of the
other supplies the deficiency until a speed up of the generators of
the receiving company takes care of the load and stops the draught
upon the energy supply of the other.
The lines of Jersey Central and Public Service are likewise
always connected so that, in case of emergency, some of the energy
generated by Jersey Central may pass over the lines of Public
Service or vice versa. Thus, energy generated by any of the three
systems at times reaches that of one of the others in case of a
deficiency of generation on the line of that other. This current,
passing for short periods from time to time, due to an imbalance of
potential between the interconnected systems, is called slopover
current.
Jersey Central has no contractual relations with Staten Island,
and does not sell it any energy. Jersey Central's relations with
Public Service are independent of any contractual relations between
the latter and Staten Island. At times when energy is flowing from
Jersey Central to Public Service, it is also flowing from Public
Service to
Page 319 U. S. 80
Staten Island and, in fact at such times, some of the energy
sold by Jersey Central to Public Service passes from Public Service
to Staten Island under Public Service's contractual arrangements
with Staten Island.
On the basis of these facts, the Commission held that Jersey
Central owned and operated transmission facilities utilized for the
transmission of electric energy in interstate commerce, and was
therefore a public utility within the meaning of the Act, although
the company sells no electricity directly in interstate
commerce.
I am of opinion that the provisions of the Act require the
contrary conclusion, and this reading of the statute is powerfully
reinforced when the mischief intended to be remedied and the
legislative history of the Act are considered.
There is no dispute concerning the exigency which moved Congress
to adopt the statute. It had been settled that the transmission and
sale of a commodity, such as electricity or gas, produced in one
state, transported and furnished directly to consumers in another
state, in interstate commerce, did not preclude regulation of the
rates to the consumer by the state of delivery. [
Footnote 2/1] In 1927, however, this court held
that, where a company generated electric energy and transmitted it,
under contract, to another public utility in an adjoining state at
the state line, whence the purchasing company transmitted and sold
the energy to its consumers, the rate at which the first company
sold to the second was not subject to regulation by the authorities
of the state of origination. [
Footnote
2/2] The court stated:
"The rate is therefore not subject to regulation by either of
the two States in the guise of protection to their respective local
interests; but, if such regulation is required, it can only be
attained by the exercise of the power vested in Congress."
It is clear that the mischief to be
Page 319 U. S. 81
remedied was the incompetence of the states to regulate rates
for the sale by the producer of electricity at wholesale to be
transmitted and delivered to an extra-state utility at or across a
state line. This was the problem, and the only problem, which
confronted the Congress. The legislation itself discloses that, in
enacting Part II of the Act, Congress did not go beyond the needs
of the situation.
Jersey Central's security issues are not subject to regulation
under § 203 unless it is a public utility within the definition of
the Act. To determine whether it is, we must turn to § 201.
Subsection (e) defines a public utility as "any person who owns or
operates facilities subject to the jurisdiction of the Commission
under this Part." We must look to other provisions of the section
to ascertain what facilities are subject to the Commission's
jurisdiction.
Subsection (a) reads:
"It is hereby declared that the
business of
transmitting and selling electric energy for ultimate distribution
to the public is affected with a public interest, and that Federal
regulation of matters relating to generation to the extent provided
in this Part . . . and 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."
(Italics supplied.)
It is conceded that Jersey Central, as respects generation and
sale of the energy in question, and as respects also its security
issues, was, at the date of adoption of the federal Act, and still
is, subject to regulation under the law of New Jersey, and that law
does regulate these matters. [
Footnote
2/3]
Page 319 U. S. 82
The nature of Jersey Central's dealing with Public Service
certainly does not fairly fall within the scope of the statutory
description of the "business" of transmitting and selling electric
energy in interstate commerce. But, out of abundance of caution,
Congress added that the federal regulation should extend only "to
those matters which are not subject to regulation by the States."
Language could not be plainer, nor more clearly exclude the present
case. Congress desired to fill the gap left by the inability of the
states to regulate certain forms of interstate transmission and
sale. Congress made clear that it intended to go no further. The
opinion of the Court ignores this fundamental declaration of
purpose and policy, and reads as an independent mandate
in
vacuo the words of subsection (e). This I think is not a fair
construction.
Subsection (b) provides:
"The provisions of this Part shall apply to the transmission of
electric energy in interstate commerce and to the sale of electric
energy at wholesale
in interstate commerce, but shall not apply
to any other sale of electric energy. . . ."
(Italics supplied.) Here again, Congress is at pains to restrict
the federal regulation to a commercial transaction in interstate
commerce to which the company to be regulated is a party.
The electric current which sometimes reaches Staten Island is,
no doubt, "propelled" in some measure by Jersey Central's dynamos,
but whether the current shall go to Staten Island or be used within
the State is a matter wholly beyond Jersey Central's control in
point either of law or of fact. Public Service may or may not
choose to transmit and sell the energy interstate as a part of the
interstate business which is subject to regulation by the
Commission. The current flows beyond the State line only because
Public Service maintains wires for that purpose and turns the
current into them. What § 201 authorizes the Commission to regulate
is "that part of such
Page 319 U. S. 83
business which consists of the transmission of electric energy
in interstate commerce." Jersey Central is not engaged in the
business of transmitting electric energy beyond the point of
connection with Public Service's system, certainly not beyond the
bus bar where Public Service alone determines its destination. Nor
is Jersey Central engaged in interstate commerce because, after the
current reaches the bus bar of Public Service, that company diverts
it to Staten Island.
The construction now given to the Act makes the Commission's
power to regulate Jersey Central depend not on the nature of its
own business, as § 201(a) and (b) plainly require, but on the
interstate character of the business of Public Service, over which
Jersey Central has no control and which is subject to regulation by
the Commission. § 201(b) and (e). I can find no support in the
language, history, or avowed purposes of the Act for such a
construction. Moreover, it is in flat contradiction to the words of
§ 201(a), (b), and (e), which, when read together, explicitly
exclude from the jurisdiction of the Commission a "person" who
"owns or operates facilities" otherwise subject to the jurisdiction
of the Commission by providing, in § 201(a), that the federal
regulation is "to extend only to those matters which are not
subject to regulation by the States." Jersey Central is engaged in
generating electricity which it sells and delivers to Public
Service, all within the State. When the present Act was adopted, it
was not doubted, and, in the light of our decisions, it could not
be, that the seller's business was intrastate, and subject to state
regulation. The manufacture and sale of a product wholly within a
state is not interstate commerce, even though the product is
destined by the buyer to be shipped out of the state in interstate
commerce. [
Footnote 2/4] That this
is equally the case where
Page 319 U. S. 84
the product produced and sold within the state is gas or
electricity is implicit in our decisions. [
Footnote 2/5] As will presently appear more in detail,
while it was the purpose of Congress, in enacting the Federal Power
Act, to extend the national control over the interstate
transmission and sale of electrical energy, which had been held to
be beyond the control of the states, the purpose was equally to
preserve unimpaired the existing state power of regulation over
intrastate production and sale. The provisions of § 201 to which I
have referred were introduced into the legislation which became the
Federal Power Act in the course of its progress through Congress
with the repeatedly declared object of accomplishing that precise
purpose.
I submit that to argue that, as Jersey Central's seven-eighths
mile intrastate line which connects with the lines of its
intrastate customer, Public Service, is a facility over which flows
energy which sometimes ultimately finds its way from Public
Service's system into New York, and, hence, a facility for
transmission of electric energy interstate, ownership of which
subjects the owner to the Commission's jurisdiction, is to tie
together two phrases found in separate provisions of the Act and to
ignore the statute's provisions viewed in their integrity and
entirety. By this process, any desired result may readily be
reached.
I conclude that the provisions of § 203 [
Footnote 2/6] relating to regulation of security issues
should not be considered, since
Page 319 U. S. 85
§ 201 wholly excludes Jersey Central from the scheme of control
established by the Act. But, if this conclusion were less obvious
from the face of the Act, the legislative history is
convincing.
When a proposed bill first came before a committee of the House
of Representatives, the chairman of the Federal Power Commission,
its sponsor, said: [
Footnote
2/7]
"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 a
substitute for, State regulation."
(Italics supplied.)
Section 201(a) of the bill as presented granted the Commission
control of the "production" of electric energy, and "over all
facilities" for its transmission and sale in interstate commerce,
"and over all facilities connected therewith as parts of a system
of power transmission situated in more than one State. . . ."
The National Association of Railroad and Utility Commissioners,
while recognizing the need of federal legislation to fill the "gap"
created by decisions of this court, urged that the bill, as
introduced, would overlap and break down state regulation, and
submitted amendments designed to avoid this result. [
Footnote 2/8]
The spokesman for the Association said of these proposed
changes: [
Footnote 2/9]
"We have accordingly sought to make it as clear as language will
that Congress does not in this case intend to regulate anything
except interstate power, sold at wholesale."
With alterations of expression not
Page 319 U. S. 86
affecting their sense, the proposed amendments of § 201(a) were
embodied in the section as enacted.
I need not follow in detail the changes which were made in the
bill in both branches of Congress. Suffice it is to say that they
progressively emphasized the purpose to regulate only those matters
which the states could not regulate.
In reporting the revised bill to the Senate, the Committee said:
[
Footnote 2/10]
"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. [Italics supplied.]"
"Subsection (b) defines the scope of this part of the act and
the jurisdiction of the Commission. . . . This subsection leaves to
the States the authority to fix local rates even in cases where the
energy is brought in from another State. In
Pennsylvania Gas Co. v.
Public Service Commission (252 U.S. 23), the
Supreme Court held that such rates may be regulated by the States
in the absence of Federal legislation. The present bill carefully
refrains from asserting Federal jurisdiction over these rates. The
ratemaking powers of the Commission are confined to those wholesale
transactions which the Supreme Court held in
Public Utilities
Commission v. Attleboro Steam & Electric Co.
(273 U.S. 83), to be beyond the reach of the States."
Notwithstanding the statement in the Senate Committee's report
on the Senate bill that "[t]he revision has also removed every
encroachment upon the authority of the States," the House, not
satisfied that State power had been adequately protected, struck
out the entire Senate bill by amendment and substituted a new
draft. In presenting
Page 319 U. S. 87
the amended bill to the House, the Committee reported: [
Footnote 2/11]
"The new Parts [II and III] are designed to meet the situation
which has been created by the recent rapid growth of electric
utilities along interstate lines. . . . Under the decision of the
Supreme Court of the United States in
Public Utilities
Commission v. Attleboro Steam & E. Co. (273
U.S. 83), the rates charged in interstate wholesale transmission
may not be regulated by the States. Part II gives the Federal Power
Commission jurisdiction to regulate these rates. A 'wholesale'
transaction is defined to mean the sale of electric energy for
resale, and the Commission is given no jurisdiction over local
rates even where the electric energy moves in interstate
commerce."
"Part II gives control over security issues of interstate
operating companies in cases where no State commission has control
and over the consolidation, purchase, and sale of interstate
operating properties. . . ."
"
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. . . .
Probably, no bill in recent years has
so recognized the responsibilities of State regulatory commissions
as does title II of this bill."
(Italics supplied.)
In Conference Committee, § 201(a)(b) took its present form,
which is the language of the House bill in all particulars here
material. In the light of this history, it is evident the Congress
specifically refrained from the regulation of the business of any
utility whose business transactions, especially as respect
transmission and sale of energy, state authority could regulate.
Such is the instant case.
Both the language of the Act and the legislative history show
that Congress did not intend to regulate matters
Page 319 U. S. 88
affecting commerce, as well as commerce itself. It is
interesting to compare, in this connection, other statutes enacted
by the same Congress. Three adopted in July and August, 1935,
covered activities "affecting" commerce; [
Footnote 2/12] three, including the Federal Power Act
in question, adopted in August, 1935, did not cover activities
"affecting" commerce. [
Footnote
2/13] Thus, the legislature's discriminating use of language
argues strongly for denial of the jurisdiction the Commission
asserts.
I think the judgment should be reversed.
THE CHIEF JUSTICE and MR. JUSTICE FRANKFURTER concur in this
opinion.
[
Footnote 2/1]
Pennsylvania Gas Co. v. Public Service Commission,
252 U. S. 23.
[
Footnote 2/2]
Public Utilities Commission v. Attleboro Steam Co.,
273 U. S. 83.
[
Footnote 2/3]
N.J.Rev.Stats., 1937, Title 48, chaps. 1 to 3; N.J.Stats.Ann.
48:1-1 to 48:3-20.
[
Footnote 2/4]
See Chassaniol v. Greenwood, 291 U.
S. 584;
Parker v. Brown, 317 U.
S. 341,
317 U. S.
360-361, and cases cited.
[
Footnote 2/5]
Union Dry Goods Co. v. Public Service Corp.,
248 U. S. 372;
Public Utilities Commission v. Landon, 249 U.
S. 236,
249 U. S. 245;
Pennsylvania Gas Co. v. Public Service Commission,
252 U. S. 23;
Missouri v. Kansas Gas Co., 265 U.
S. 298,
265 U. S. 308;
East Ohio Gas Co. v. Tax Commission, 283 U.
S. 465,
283 U. S. 471;
cf. Utah Power & Light Co. v. Pfost, 286 U.
S. 165;
Coverdale v. Arkansas-Louisiana Pipe Line
Co., 303 U. S. 604,
303 U. S.
611.
[
Footnote 2/6]
It is to be noted that, even if Jersey Central were a utility
within the Act, the proviso in § 201(a) limits the jurisdiction of
the commission under § 203 respecting the company's acquisition and
disposition of facilities and issue of securities, just as it
limits the commission's authority over other phases of the
business, since these matters are subject to regulation, and are,
in fact, regulated by New Jersey.
[
Footnote 2/7]
Hearings on H.R. 5423 before House Committee on Interstate and
Foreign Commerce, 74th Congress, 1st Session, p. 384.
[
Footnote 2/8]
Hearings,
supra, pp. 1620, 1622.
[
Footnote 2/9]
Id., p. 1638.
[
Footnote 2/10]
Senate Report No. 621, 74th Cong., 1st Sess., p. 48.
[
Footnote 2/11]
House Report No. 1318, 74th Cong., 1st Sess., p. 7.
[
Footnote 2/12]
See National Labor Relations Act, § 2(7), 49 Stat. 449,
450, 29 U.S.C. § 152(7); Public Utility Holding Company Act, §
1(c), 49 Stat. 803, 804, 15 U.S.C. § 79a(c); Bituminous Coal
Conservation Act, § 1, 49 Stat. 991, 992.
[
Footnote 2/13]
See Federal Power Act, § 201(b), 49 Stat. 838, 847, 16
U.S.C. § 824(b); Motor Carrier Act, § 202(b), 49 Stat. 543, 49
U.S.C. § 302(b); Federal Alcohol Administration Act, § 3, 49 Stat.
977, 978, 27 U.S.C. § 203.