Arkansas Public Service Commission v. Arkansas Electric Cooperative Corp.

Darrell Hickman, Justice. In 1979 the Public Service Commission decided to exercise jurisdiction over the rates and charges of the Arkansas Electric Cooperative Corporation. The hearing preceding the order and the issues on appeal form only one question, whether the Commission is attempting to regulate wholesale interstate sales of electricity. The Commission concluded that it was not and could, therefore, assume jurisdiction. Arkansas Electric Cooperative Corporation was formed to serve its seventeen members who are all Arkansas electric cooperatives. The only Arkansas cooperative that is not a member is one located at Newport, Arkansas. The appellee corporation was formed by the seventeen cooperatives so that the customers of the cooperatives could be better served; borrowing and purchasing power are more economical through a joint effort. The appellee generates some of its electricity and buys the remainder from utility companies located in Arkansas. Apparently the appellee sells some of its electricity to these same utility companies when there is a surplus of energy. Other than those sales, all the power generated and bought by the appellee is sold to the seventeen Arkansas cooperatives. It is conceded that these cooperatives must buy the power and that the rate is determined by the appellee. It is not a negotiated rate and the rate is not regulated by any state or federal agency. The PSC decided that it could exercise jurisdiction over those sales which were “essentially local.” In its order the PSC said, “This Commission would not attempt to regulate the rate at which AECC purchases power in interstate commerce and that rate, of course, must act as a base for the price at which it resells that power to its members.” The corporation appealed the order to circuit court and the court reversed the Commission’s decision. The court found that the sales of the corporation were wholesale sales in interstate commerce over which the PSC had no jurisdiction. We find the Commission had the authority by Arkansas statutes to exercise jurisdiction and that this authority is neither preempted by any federal law nor prohibited by the Commerce Clause of the United States Constitution. The Arkansas statutes give the Commission the authority over public utilities and the appellee is such a utility. See Ark. Stat. Ann. § 73-201, et seq. (Repl. 1979). There are no exceptions for regulating wholesale sales. Ark. Stat. Ann. § 73-202(a) (Repl. 1979). The Commission concedes it cannot regulate wholesale sales in interstate commerce and contends that it has no intention of doing so. The appellee cites authority that the Commission’s order will do just that. The distinguishing features in this case are as follows: The appellee is an Arkansas corporation formed for the purpose of serving seventeen Arkansas cooperatives. While it may incidentally and from time to time buy or sell electricity that may cross a state line, that is not its purpose. The utility companies that it buys from and sells surplus electricity to do serve customers in other states. Those are Arkansas Power & Light Co., which is a part of Middle South Utilities, Southwest Electric Power Co., and Southwestern Power Administration. But the Commission found: ... AECC’s business, indeed its very reason for existence, is the generation, purchase and transmission of electricity for and to its members, seventeen Arkansas electricity distribution cooperatives, who retail the electricity to their members in this State. The appellee cites several cases as authority for its position. They are all distinguishable. Public Utilities Commission v. Attleboro Steam & Electric Co., 273 U.S. 83 (1927) is not controlling because in that case a Rhode Island utility company had a wholesale customer in Massachusetts. The court found the regulation by Rhode Island was not local but essentially national. The Court prevented Rhode Island from setting the rate. The appellee in this case exists to serve seventeen Arkansas cooperatives; it sells to none in other states. The case of Federal Power Commission v. Southern California Edison Co., 376 U.S. 205 (1965) is not controlling because that case interpreted the Federal Power Act and did not involve a cooperative. The Federal Power Commission took jurisdiction over wholesale rates charged by Edison, a California utility company, to the city of Colton, which is also in California. A small amount of power sold by Edison originated in other states. This case does not control because it concerned an interpretation of the Federal Power Act. The Federal Power Commission has held that the Federal Power Act does not apply to cooperatives financed by the Rural Electrification Administration. Re Dairyland Power Cooperative, 67 PUR 3d 340 (1967). The appellee concedes that the Federal Power Commission has not attempted to regulate its rates. Tri-State Generation & Transmission Association v. Public Service Commission, 412 F. 2d 115 (10th Cir. 1969)is not controlling because of distinguishing facts. Cooperatives in three states, Colorado, Wyoming, and Nebraska, formed a corporation just like the appellee. The Circuit Court of Appeals found the Wyoming Public Service Commission had prevented the Wyoming cooperative from paying contractual obligations to Tri-State which imposed a burden on interstate commerce. The appellee consists of cooperatives only in Arkansas and there is no evidence of a burden on interstate commerce. In Missouri v. Kansas Natural Gas Co., 265 U.S. 298 (1924), Missouri sought to regulate a situation where power originating in Oklahoma passed through Kansas and was sold in Missouri. The Court held that the sale of this power was “an inseparable part of a transaction in Interstate Commerce — not local, but essentially national in character . . .” In distinguishing this case, the appellant Commission found: . . . [I]t seems to us that the rates and charges of AECC that could effectively be regulated by this Commission are for transactions essentially local in character. Unlike Kansas Gas, [Missouri v. Kansas Natural Gas Co., 265 U.S. 98 (1924)] which sold in an open interstate market, AECC exists to serve its members. Its transactions with them do not constitute “an unbroken chain, fundamentally interstate from beginning to end.” Those transactions begin and end here in Arkansas. This service is hardly “of the character which require(s) general and uniform regulation of rates by Congressional action.” Unlike the Narragansett Company, AECC does not serve customers in other states whose authorities might retaliate, to the detriment of interstate commerce. Unlike Rhode Island, this Commission does not seek to regulate, nor do we read our statutes as requiring us to regulate, interstate transactions of AECC, if there be any. If our regulation of rates charged to local customers has an “effect” unto interstate commerce, it can only be incidental, given a continuation of the present circumstances and policies of the company, which there is no reason not to expect. (That issue, however, can properly be dealt with only when and if it arises.) Nor does it matter that AECC’s transactions with its members may be characterized as wholesale, for, as the Court said in Attleboro [Public Utilities Commission v. Attleboro Steam & Electric Co., 273 U.S. 83 (1927)] the test “is not the character of the general business ... but whether the particular business which is regulated is essentially local or national in character.” The particular business this Commission must regulate, between AECC and its members, is decidedly local, having its paramount impacts and consequences in Arkansas and having little or no relation to any other place. The hearing did not delve into whether the appellee had been fair in its charges to its seventeen members. The only suggestion that the appellee’s costs might be excessive was a reference to the fact that the appellee had thirty-four board members who met once a month and received $75.00 per diem for that meeting. We find the appellant has the authority to take jurisdiction as it proposes and reverse the judgment of the circuit court. Reversed. Holt and Dudley, JJ., dissent. George Rose Smith, J., not participating.