Federal Power Commission v. Conway Corp.

Background

A power company that sells electricity both wholesale and retail filed a wholesale rate increase in June 1973. Its wholesale customers included seven municipal electric systems and two electric cooperatives. Those customers told the Federal Power Commission that the proposed wholesale rates, when compared to the company’s retail prices, were discriminatory and designed to drive them from the market. The Commission allowed the customers to intervene but refused to consider the anticompetitive and discrimination claims, saying retail sales were outside its authority.

Reasoning

The Court addressed whether the Commission can consider claims that a jurisdictional wholesale rate creates an unfair relationship with nonjurisdictional retail rates. The Court held that the Commission’s power to require just and nondiscriminatory wholesale rates includes examining the effect of those rates in context. The opinion explained there is a “zone of reasonableness” for rates, so a wholesale rate that is independently reasonable might still contribute to an unfair price squeeze. The Court agreed with the Court of Appeals and said the Commission must consider the customers’ allegations and allocate costs between wholesale and retail to decide whether a wholesale remedy is appropriate.

Real world impact

The ruling sends the case back to the Commission to hear evidence and determine whether the wholesale rate must be changed. The Commission may not order retail prices raised, but it can set or lower wholesale rates to remove any unlawful discrimination. Municipal utilities, cooperatives, and investor-owned utilities will see that retail- wholesale relationships can be part of wholesale-rate proceedings.