Petition — Dallas Power & Light Co. v. Central Power & Light Co.

Supreme Court brief1978

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a Supreme Court, U.S, >] |

FILED

| AUG 24 1978

MICHAR ROBA LERK

In the

Supreme Court of the United States

October Term, 1978 |

No. €0"318

DaLLAs Power & LiGHt CoMPANY, TEXAS ELECTRIC SERVICE

ComPANY, TEXAS Power & LiGHT COMPANY,

Petitioners,

CENTRAL Power & LicgHT CoMPANY, PusBiic SERVICE Com-

PANY OF OKLAHOMA, SOUTHWESTERN ELECTRIC Power Com-

PANY, West Texas Utitities COMPANY, City OF ALTUS,

OKLAHOMA, Crry OF FREDERICK, OKLAHOMA, City OF Cor-

DELL, OKLAHOMA, City OF MANNFORD, OKLAHOMA, VERDIGREE

VALLEY ELEcTRIC COOPERATIVE, INC., INDIAN ELEctTrRIC Co-

OPERATIVE, INc., MUNICIPAL ELECTRIC SYSTEMS OF OKLA-

HOMA, ARKANSAS ELECTRIC COOPERATIVE CORPORATION,

FEDERAL ENERGY REGULATORY COMMISSION, HOUSTON

LIGHTING & Power CoMPANY, City oF SAN ANTONIO, LOWER

CoLoraApo River AUTHORITY,

Respondents.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

Jos. IRION WORSHAM Harry A. Pot, Jr.

M. D. SAMPELS PEYTON G. BowMan, III

FREDERICK K. SLICKER FLoyp L. Norton, IV

WoRSHAM, FORSYTHE & REID & PRIEST

SAMPELS 1701 K Street, N.W.

2500 Bryan Tower Washington, D.C. 20006

Dallas, Texas 75201 (202) 331-1752

(214) 748-9365

Attorneys for Dallas Power & Light Company,

Texas Electric Service Company and

Texas Power & Light Company

CERTIFICATE OF SERVICE

I hereby certify that I have on this 24th day of August,

1978, served a copy of this Petition, herein by mailing three

copies thereof, together with a copy of this Certificate, post-

age prepaid, to counsel for all parties of record as follows:

Wade H. McCree, Jr.

Solicitor General

Department of Justice

Washington, D. C. 20530

McNeill Watkins

Staff Counsel

Federal Energy Regulatory

Commission

825 North Capitol Street,

Lawrence S. Smith

Small, Craig and

Werkenthen

2600 Austin National Bank

Tower

Austin, Texas 78701

R. Gordon Gooch

Baker & Botts

1701 Pennsylvania Avenue,

Leland Leatherman

McMath, Leatherman &

Woods, P.A.

711 West Third Street

Little Rock, Arkansas 72201

Richard D. Cudahy

Isham, Lincoln & Beale

1050 17th Street, N.W.

Washington, D. C. 20036

Jay Galt

Watts, Looney, Nichols,

Johnson and Hayes

219 Couch Drive

Oklahoma City, Oklahoma

73102

Jon C. Wood

Matthews, Nowlin,

Macfarlane and Barrett

1500 Alamo National

Building

San Antonio, Texas 78205

Charles F. Wheatley, Jr.

Wheatley & Miller

2600 Virginia Avenue, N.W.

Washington, D. C. 20037

ae Se Weekon

Jos. Irion Worsham

= LI

SUBJECT INDEX

Page

Opinions Below ai, | a

RS Ot eee es cae oars 2

Question Presented .. ort aaa

Statutory Provisions Involved aes ee

Statement of the Facts . ore 3

Reasons for Granting the Writ 8

I. The Court of Appeals erred as a matter of

law in refusing to resolve the scope of the

Commission’s jurisdiction Sa a

II. The remand by the Court of Appeals flies

squarely in the face of clear ccpecasdin lan-

guage and intent “es ae

IIi. The remand by the Court of Appeals « con-

tradicts this Court’s decision in Connecticut

Light & Power Company v. FPC | 14

Conclusion __ oe ae | anehete 16

EEE Te . 19

Appendix A — Decision of the United States Court of

Appeals for the District of Columbia Circuit, dated

April 10, 1978 . | _ A-1

Appendix B — Order of the United States Cie we

Appeals for the District of Columbia Circuit, denying

a Rehearing, dated May 26, 1978 2000, B-1

Appendix C — Decision of the Federal Power

Commission in its Docket No. E-9558, dated

July 21, 1976 Ren cnc. Rae

Appendix D — Order of the Federal alias Commission

denying a Rehearing, dated September 17, 1976 ...... D-1

Appendix E — Sections 201 and 202 of the Federal

Power Act | Pate, . E-1

Appendix F — Aeneid Final Order of he Texas

Public Utility Commission, dated July 11, 1978 ....... F-1

Appendix G— Summary and Status of Related

RE eae eat Aa tel a wpa SO G-1

TABLE OF AUTHORITIES

Cases

Page

owman Transportation, Inc. v. Arkansas-Best

, Freight akin Inc., 419 U.S. 281 (1974) 00000... 10

Connecticut Light & Power Company v. FPC,

324 U.S. 515 (1945) .... Je ae 9, 14, 15, 16

FPC v. Florida Power & Light Co.,

6 UR, GD CO oil betwen 16

Social Security Board v. Nierotko,

327 U.S. 358 (1946) ....... [es Ong eat 9

Stark v. Wickard, 321 U.S. 288 (1947) ooo 9

Vermont Yankee Nuclear Power Corporation v.

Natural Resources Defense Council, Inc., |

Fe ee ee: ener ee 11

Alabama Power Company v. FPC,

511 F. 2d 383 (1974) . soceesnceenaneenanneeen 10

Kurzon v. United States Postal Services,’

539 F. 2d 788 (1 C.A. 1976) on WD Sitanae 10

Martin v. Federal Security Agency,

73 F. Supp. 482 (W.D. Pa. 1947) ...........---s:cscecscceesseeeees 9

J. B. Montgomery, Inc. v. United States,

206 F. Supp. 455 (D. Colo. 1962) ..............:eee 9

Connecticut Light & Power Company,

ia. ee 15

Statutes

Power Act,

“a 2: Th UA Bee 0 eo 2, 3, 12, 13

wer Act,

"an oo USL. SO isc 2, 3, 13, 14

Federal Power Act,

Section 313, 16 U.G.C, $ GGG .............0...0.-cccccsscscsesscssseness 2

lic Utili tory Act,

a4 ay ag 2 [| eran 4

In the

Supreme Court of the United States

October Term, 1978

No.

Da.ias Power & LicHT Company, TEXAS ELEcTRIC SERVICE

Company, Texas Power & LIGHT CoMPANY,

Petitioners,

CENTRAL Power & LicHt Company, Pustic Service Com-

PANY OF OKLAHOMA, SOUTHWESTERN ELecrric Power Com-

PANY, WesT Texas Utitities Company, City oF ALTUS,

OKLAHOMA, Crry or FREDERICK, OKLAHOMA, Crry oF Cor-

DELL, OKLAHOMA, City oF MANNForD, OKLAHOMA, VERDIGREE

VALLEY ELECTRIC CooperATIvE, INc., INDIAN ELECTRIC Co-

OPERATIVE, INC., MUNICIPAL ELECTRIC Systems OF OKLA-

HOMA, ARKANSAS ELECTRIC COOPERATIVE CORPORATION,

FEDERAL ENERGY REGULATORY CoMMISSION, Houston

LIGHTING & Power CoMPANy, City or SAN ANTONIO, LOWER

Cotorapo River AUTHORITY,

Respondents.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the District of Columbia Circuit

_ The Petitioners, Dallas Power & Light Company (DP&L)

Texas Electric Service Company (TESCO), and Texas

Power & Light Company (TP&L), respectfully pray that

a writ of certiorari issue to review the judgment and opinion

of the United States Court of Appeals for the District of

Columbia Circuit entered in this proceeding on April 10, 1978.

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the District of Columbia Circuit is reported at 575 F. 2d

937 (D.C. C.A. 1978) and is attached hereto as Appendix

A. The unreported order ot the Court of Appeals, denying

a timely Petition for Rehearing and Alternatively Sugges-

tion for Rehearing En Banc, is attached as Appendix B.

The unreported decision of the Federal Power Commission

(now the Federal Energy Regulatory Commission) (Com-

mission), issued July 21, 1976, in Federal Power Commis-

sion Docket No. E-9558, is attached as Appendix C, and

the Commission’s unreported order denying a rehearing,

issued September 17, 1976, is attached as Appendix D.

JURISDICTION

The judgment of the United States Court of Appeals for

the District of Columbia was entered on April 10, 1978. A

timely petition for a rehearing en banc was denied on

May 26, 1978. The jurisdiction of the Court of Appeals

was invoked pursuant to § 313(b) of the Federal Power Act,

16 U.S.C. § 8251(b). This petition, seeking a writ of certiorari

be issued to the United States Court of Appeals for the

District of Columbia, was timely filed within 90 days of

May 26, 1978. The jurisdiction of this Court is invoked under

28 U.S.C. § 1254(1) and § 313(b) of the Federal Power Act,

16 U.S.C. § 8251(b).

QUESTION PRESENTED

The sole question presented for review is whether the

Federal Power Act (Act) delegates to the Commission any

power to exercise jurisdiction over electric utility com-

panies which, at the time of the Commission’s decision and

at all subsequent times, neither own nor operate any facili-

ties outside a single state and which neither, directly nor

indirectly, transmit nor sell, at wholesale or retail, any elec-

tric energy in interstate commerce.

STATUTORY PROVISIONS INVOLVED

Sections 201 and 202 of the Federal Power Act, 16 U.S.C.

§ 824 and § 824a, are set forth as Appendix E.

STATEMENT OF THE FACTS

All facts relevant to a resolution of the jurisdictional

status of DP&L, TESCO and TP&L under the Act are

admitted by all parties and were not in dispute at the

Court of Appeals.

DP&L, TESCO and TP&L are electric utility companies

engaged in the generation, transmission, distribution and

sale of electric energy solely in the State of Texas. Texas

Utilities Company owns 99.6% of the common stock of

DP&L and all the common stock of TESCO and TP&L.

DP&L serves the City of Dallas and three adjoining incor-

porated communities within Dallas County. TESCO serves

customers in 47 counties in north-central and west Texas,

including the cities of Fort Worth, Wichita Falls and 71

other incorporated municipalities. TP&L serves customers

in 51 counties in north-central and east Texas, including 259

incorporated municipalities. DP&L, TESCO and TP&L

are referred to collectively as the TU Companies.

The TU Companies neither own nor operate facilities

located outside the State of Texas which are used in the

generation, transmission, distribution or sale of electric

power. Moreover, the TU Companies have historically a -

ranged the operation of their electrical systems to confine

their operations solely to the State of Texas.’

1 During World War II and the Korean Conflict, the TU Com-

panies were interconnected to interstate systems under exemptions

from the Act. On a limited number of other occasions during the

existence of an electrical emergency, the TU Companies have pro-

vided emergency interconnected service to other systems operating

in interstate commerce. On each such occasion, an exemption from

jurisdiction under the Act has been obtained. 4

Houston Lighting & Power Company (HL&P) is an elec-

tric utility company engaged in the generation, transmission,

distiibution and sale of electric energy in the Texas Gulf

Coast Region, including the cities of Houston, Galveston,

and 151 other cities, villages and communities.

Central Power & Light (CP&L), Public Service Company

of Oklahoma (PSO), Southwestern Electric Power Com-

pany (SWEPCO) and West Texas Utilities Companies

(WTU) are wholly owned subsidiary corporations of Cen-

tral and South West Corporation (CSW), and each is an ©

electric utility company engaged in the generation, trans-

mission, distribution and sale of electric energy. CP&L serves

customers in 44 communities in southern Texas, including

the city of Corpus Christi. WTU serves customers in 50

counties in central and west Texas, including the city of

Abilene. All of the facilities of CP&L and WTU are located

solely within the State of Texas. PSO serves customers

in eastern and southwestern Oklahoma, including the city

of Tulsa. SWEPCO serves customers in northwestern Lou-

isiana, northeastern Texas and northwestern Arkansas, in-

cluding the city of Shreveport, Louisiana.

The TU Companies, HL&P, CP&L and WTU are each

an electric utility within the meaning of the Texas Public

Utility Regulatory Act (Tex. Ver. Code Ann. Art 1446c)

and as such are subject to the jurisdiction of the Texas

Public Utility Commission.

Electric utility companies frequently interconnect with

neighboring electric utility systems to prevent the unex-

pected interruption of electric service to their customers

as a result of lost generation or transmission due to natural

calamities, equipment failures or other causes. Intercon-

nections among electric utilities in Texas have developed

into a compact electrical network consisting of electric sys-

tems with generation capacity exceeding 30,000 megawatts.

This interconnected group of electric utilities is known as

the Electric Reliability Council of Texas (ERCOT),

one of nine regional electric system coordinating councils

located throughout the United States designed to promote

coordinated and long-range planning among such utilities.

ERCOT consists of the TU Companies, HL&P, CP&L,

WTU, the Lower Colorado River Authority, the electric

utility system owned by the city of Austin, the City Public

Service Board of San Antonio, which operates the electric

utility system owned by the city of San Antonio, and var-

ious other municipally-owned electric systems and cooper-

atives located throughout the state of Texas.

Prior to May 4, 1976, the electric systems in ERCOT

and all systems interconnecting any ERCOT system, oper-

ated solely within the state of Texas’.

On May 4, 1976, at approximately 5:30 a.m., WTU uni-

laterally and without prior notice to anyone, wired around

an electrical switch at the Vernon, Texas, substation which

thus permitted electric energy to flow from Texas into

? While WTU did not own any facilities located outside the State

of Texas, it did maintain interconnections with PSO at the Texas-

Oklahoma border. To avoid interstate operation, WTU historically

overated as two separate systems—an interstate system and a

texas intrastate system. The interstate system includes a portion

of its service area adjacent to the State of Oklahoma and lying along

the Texas-Oklahoma boundary from north of Shamrock to east of

Vernon, Texas. WTU’s interstate facilities were so structured as

to permit it to operate in synchronism with either its Texas intra-

state system or with PSO but never in synchronism with both

its Texas intrastate system and interstate system simultaneously.

A contract covering the interconnections between TESCO and

WTU, entered into in 1938, requires both parties to notify the

other prior to the commencement of interstate operations in order

to permit the other party to disconnect, a right clearly provided in

the contract, in order to limit its operations to the State of Texas,

free of the Commission’s jurisdiction.

Oklahoma, and simultaneously disconnected PSO’s facilities,

thereby preventing electricity generated in Oklahoma to

flow into Texas. Thereafter, WTU’s previously intrastate

facilities began serving three small communities in Okla-

homa theretofore served by PSO. This action of WTU was,

without dispute, a clear violation of the WTU-TESCO

agreement. See note 2.

Until 3:43 p.m. on May 4, 1976, the TU Companies and

HL&P remained interconnected with WTU and with the

other member systems of ERCOT.

By 3:43 p.m. on May 4, 1976, all interconnections, directly

or indirectly, of the TU Companies. with WTU and CP&L

were separated so that the TU Companies thereafter oper-

ated electrically isolated from all systems operating either

directly or indirectly in interstate commerce or subject to

the jurisdiction of the Commission. These facts are

undisputed.

Since 3:43 p.m. on May 4, 1976, the TU Companies have

not owned or operated any facilities used in the transmis-

sion, sale, receipt or delivery of electric energy in interstate

commerce, have not transmitted or sold, at wholesale or

retail, electric energy outside the state of Texas, and have

not been interconnected, directly or indirectly, with the

facilities of any other system used for the transmission or

sale of electric energy in interstate commerce which could

subject the TU Companies to the jurisdiction of tne Com-

mission.”

3Qn May 2, 1977, the Texas Public Utility Conunission, after a

full hearing on the merits, ordered all electric systems to return to

the historical intrastate mode of operation which existed prior to

May 4, 1976. Since May 4, 1977, that mode of operation has been

restored and all interconnection between the ERCOT systems re-

main in place. The Amended Final Order of the Texas Public

Utility Commission dated July 11, 1977, is attached as Appendix F.

On May 4, 1976, at approximately 9:30 a.m., the CSW

subsidiaries filed a petition with the Commission seeking

among other things, an order declaring the TU Companies

and HL&P jurisdictional by virtue of the surreptitious ac-

tions taken by WTU four hours earlier.

Based upon the undisputed facts, the Commission found

on July 21, 1976, that it had no power over the TU Com

panies or HL&P, since at the time of its decision, no factual

predicates for the exercise of jurisdiction existed. In so hold-

ing, the Commission expressly adopted the conclusions of its

General Counsel, whose memorandum was attached to the

Commission’s decision.

The General Counsel’s memorandum sets forth his con-

clusion quite succinctly:

My conclusions are fourfold:

Prior to May 4, 1976, the aforementioned four systems

were operating in electrical isolation from any electric

system which transmitted or sold electric energy gen-

erated in one state and consumed in another, and, there-

fore, they were not susceptible to classification as

‘public utilities’;

During May 4, 1976, from 5:30 a.m. to 3:43 p.m., the

aforementioned four systems operated in parallel — or

electrical synchronizism [sic] —with other electric

utilities which transmitted or sold electric energy gen-

erated in one state and consumed in another, and, there-

fore, they were susceptible to review by the Commission

as to their ‘public utility’ status;

Subsequent to May 4, 3:43 p.m., the aforementioned

four systems [the TU Companies and HL&P] have been

operating in electrical isolation from any electric system

which transmitted or sold electric energy generated in

one state and consumed in another, and, therefore, they

ose! not susceptible to classification as ‘public utilities’;

and,

During the 10-hour period of synchronous electrical

operation on May 4, the facilities and operations of the

aforementioned systems were, for all practical purposes,

those for the transmission of electric energy in intra-

state commerce, . . . and such systems fall within the

commission’s rule of determining ‘public utility’ status

based upon the overall characteristics of the electric

system’s operations, notwithstanding some interstate

transmission of electric energy. [Emphasis added. ]

The Court of Appeals found the basis for the Commis-

sion’s decision confusing:

.. . the general counsel’s memorandum indicates that

the HL&P and TU companies were, at all times, out-

side the Commission’s jurisdiction as a matter of law,

ie., the exercise of jurisdiction was not a matter for

the Commission’s discretion. But the authorities cited

by the general counsel are cases which involved or dis-

cussed the Commission’s discretion to decline juris-

diction over a firm even though it might have been a

public utility within the meaning of the Federal Power

Act. 575 F. 2d at 939.

Thus, the court, without deciding the scope of the Com-

mission’s jurisdiction, remanded for clarification of its rea-

soning the order of the Commission, even though the court

expressly acknowledged that “a reading of the Commis-

sion’s decision does not establish that it was purporting to

exercise discretion.” 575 F. 2d at 939.

REASONS FOR GRANTING THE WRIT

The Court of Appeals erred as a matter of law in not de-

ciding the question of jurisdiction on the merits. The remand

for clarification of the Commission’s reasoning flies squarely

in the face of a clear statutory demarcation of jurisdiction

beyond which the Commission was prohibited to act. The

remand also contradicts this Court’s decision in Connecticut

Light & Power Co. v. FPC, 324 U.S. 515 (1943). Finally,

the action of the Court of Appeals raises an issue of critical

importance not only with respect to the scope of the Com-

mission’s jurisdiction over electrical utilities operating solely

in intrastate commerce but also in the delicate balance of

federal regulation and complementary state regulation. Con-

sequently, the Court of Appeals’ action so far departs from

the accepted and usual course of judicial proceedings as to

necessitate intervention by this Court with the issuance of

a writ of certiorari.

I. The Court of Appeals erred as a matter of law in

refusing to resolve the scope of the Commission’s

jurisdiction.

The threshold issue before the Commission and the Court

of Appeals and the sole issue before this Court is the proper

scope of the Commission’s jurisdiction. All relevant facts

necessary to a resolution of this issue are undisputed and

admitted.

As this Court has said, the scope of an administrative

agency’s jurisdiction is to be finally determined by the

courts and not by the agency. See, e.g., Social Security

Board v. Nierotko, 327 U.S. 358, 369 (1946); J. B. Mont-

gomery, Inc. v. United States, 206 F. Supp. 455, 458 (D.

Colo, 1962), aff’d., 376 U.S. 389 (1964); Martin v. Federal

Security Agency, 73 F. Supp. 482, 489 (W. D. Pa. 1947),

aff’d., 174 F. 2d 364 (3 C.A. 1949).

The appellate court is charged with the duty and re-

sponsibility to decide jurisdiction and cannot relegate that

judicial function to the agency. See Stark v. Wickard, 321

U.S. 288, 309-10 (1943).

This Court requires appellate courts to “uphold a deci-

sion of less than ideal clarity if the agency’s path may rea-

sonably be discerned.” Bowman Transportation, Inc. v. Ark-

ansas-Best Freight System, Inc., 419 U.S. 281, 286 (1974).

Moreover, in Alabama Power Co. v. FPC, 511 F. 2d 383

(D.C.C.A. 1974), the Court of Appeals for the District of

Columbia Circuit itself said: “We do not review agency ac-

tion in order to perfect the administrative process to the nth

degree. A court should uphold an agency even when its

findings lack ideal clarity, if ‘the agency’s path may reason-

ably be discerned.’ ” Id. at 392. See Kurzon v. United States

Postal Service, 539 F. 2d 788 (1 C.A. 1976).

Moreover, the Court of Appeals’ search for ideal clarity

in this case resulted not only in an unnecessary remand

but also in a court confused by its own misapprehension

of both the law and the facts. The Court of Appeals read

the General Counsel’s memorandum as indicating “that the

HL&P and TU Companies were, at all times, outside the

Commission’s jurisdiction as a matter of law. 575 F. 2d at

939. (Emphasis added.) The General Counsel’s memoran-

dum, however, in unmistakable language, concluded that the

TU Companies were “susceptible to review” by the Commis-

sion as “public utilities” within the meaning of the Act only

during the ten-hour period on May 4, 1976. Thus, the Com-

mission possessed discretion to exercise jurisdiction over the

TU Companies only so long as the TU Companies remained

interconnected with WTU after WTU began service to the

small communities in Oklahoma. When those connections

were opened, all power of the Commission to assert juris-

diction ceased.

Moreover, the Court correctly concluded that the decision

by the Commission holding that the TU Companies were

not jurisdictional did not purport to reflect that the Com-

mission, in so holding, was exercising its discretion. The

Court observed that: “It is hornbook law that the court must

appraise agency action not on grounds advanced by counsel

but on those identified by the agency as reasons for its ac-

tions.” 575 F. 2d at 938. Nevertheless, the Court became

confused because of the oral and written arguments to it by

FERC counsel “that the decision not to assert jurisdiction

was a proper exercise of agency discretion.” big F. 2d at 938.

This kind of logical inconsistency by the Court in the

face of its demand for perfect clarity of reasoning on the

part of the agency is entirely inexplicable. Thus, the remand

for clarification of reasoning by the Court might result in a

lengthy and totally unnecessary inquiry by the Commission

into issues wholly irrelevant to a determination of the

Commission’s jurisdiction.‘

The failure of the Court of Appeals to reach the merits

of the simple jurisdictional issue raised in this case illus-

trates that Court’s inclination for judicial nitpicking which

this Court recently criticized in Vermont Yankee Nuclear

Power Corp. v. Natural Resources Defense Council, Inc.,

98 S. Ct. 1197 (1978).

The basic issue is stark and simple: May the Commission,

as a matter of law, assert jurisdiction over an electric utility

where it has no interstate facilities and no interstate trans-

missions of electric power, simply because at one time, for

ten hours and without its knowledge, it may be found to

have engaged, indirectly through its interconnections with

another, in the interstate transmission of electricity? If it

may not, it is an exercise in futility to require the Commis-

sion to review the circumstances that would lead it to assert

or refuse to assert jurisdiction, since it had no such options.

*A summary of related proceedings is as Appendix G.

Moreover, an explication by the Commission of its ration-

ale in language of “ideal clarity” will not lift from the Court

of Appeals and ultimately from this Court the burden of

resolving the proper scope of the Commission’s jurisdiction.

Consequently, the remand serves no logical or legal purpose

and merely postpones for a later day the final resolution of

an important issue of the scope of federal administrative

power over the delivery of electric energy, a matter declared

by Congress to be affected with a public interest (Section

201(a) of the Act, 16 U.S.C. §824(a)) and a matter of

intense national concern. This Court should not countenance

the refusal of the Court of Appeals to decide the scope of

jurisdiction in this case.

Il. The remand by the Court of Appeals flies

squarely in the face of clear statutory language

and intent.

In enacting the Federal Power Act, Congress drew a bright

line of demarcation separating matters over which the Com-

mission has jurisdiction and matters over which the Com-

mission possesses no power to act. Congress thereby struck

a delicate balance between matters of essentially national

concern and matters falling within the scope of local regu-

lation. It is axiomatic that the Commission’s jurisdiction is

coextensive with the Act; if jurisdiction exists at all, it must

flow from the Act. Clearly the Commission has no power,

mandatory or discretionary, over matters outside the scope

of persons and subject matters delineated in the Act.

A plain reading of the Act is dispositive of the jurisdic-

tional issue in this case. Had the Court of Appeals analyzed

the Act, it would have concluded, just as the Commission

concluded, that the Commission possessed no power to

assert jurisdiction over the TU companies or HL&P as a

matter of law.

Section 201(b) of the Act defines the scope of matters

covered and the scope of the Commission’s power over such

matters:

(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 inter-

state commerce, but shall not apply to any other sale of

electric energy or deprive a State or State commission

of ite lawful authority now exercised over the exporta-

tion 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 spe-

cifically provided in this Part and the Part next follow-

ing, 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 com-

| merce, or over facilities for the transmission of electric

oO wholly by the transmitter. 16 U.S.C.

Section 201(c) of the Act defines energy transmitted in

interstate commerce as

electric energy . . . transmitted from a State and con-

sumed at any point outside thereof; but only insofar

as such transmission takes place within the United

States. 16 U.S.C. § 824(c).

Section 202(b) of the Act defines the power of the Com-

mission to order interconnections among jurisdictional util-

ities:

(b) Whenever the Commission, . . . finds such action

necessary or appropriate in the public interest it may

by order direct a public utility (if the Commission

finds that no undue burden wili be placed upon such

public utility thereby) to establish physical connection

of its transmission facilities with the facilities of one

or more other persons engaged in the transmission or

sale of electric energy, to sell energy to or exchange

energy with such persons. (Emphasis added.) 16 U.S.C.

§ 824a(b).

Consequently, the plain meaning and language of the Act

results in the conclusion that the Commission has jurisdic-

tion over a utility only so long as the utility is a “public

utility” within the meaning of the Act, that no utility is a

“public utility” unless it “owns or operates facilities subject

to the jurisdiction of the Commission,” and that the Com-

mission’s jurisdiction extends only to facilities used “for

the transmission of electric energy in interstate commerce

and to the sale of electric energy at wholesale in interstate

commerce.”

III. The remand by the Court of Appeals contradicts

this Court’s decision in Connecticut Light &

Power Company v. FPC.

This Court has long recognized that the test of jurisdiction

must be measured from facts which exist at the time the

agency asserts jurisdiction. In Connecticut Light & Power

Company v. FPC, 324 U.S. 515 (1945) this Court stated:

Of those facilities which the Commission held sub-

jected the Company to the Power Act at the time it

became effective the Company has since divested itself

of all but one, and on that one the Commission rests its

present jurisdiction to control petitioner’s accounting.

Id. at 519... . The order must stand or fall on whether

the company owned facilities that were used [at the

time the Commission found it possessed jurisdiction]

in transmission of interstate power and which were not

facilities in local distribution. Id. at 531. (Emphasis

added. )

In the present case, the undisputed evidence clearly estab-

lished that at all times after 3:43 p.m., May 4, 1976, the TU

Companies have operated electrically isolated from all sys-

tems susceptible to the jurisdiction of the Commission

under the Federal Power Act.

Moreover, both this Court and the Commission have spe-

cifically recognized the right of utilities susceptible to the .

Commission’s jurisdiction to withdraw therefrom and the

right of otherwise non-jurisdictional utilities to so structure

their affairs as to remain not susceptible to the Commission’s

jurisdiction. In Connecticut, this Court observed:

Two days before [the Federal Power Act’s] effective

date and frankly for the purpose of avoiding federal reg-

ulation the Company rearranged its operations with

intent to cut every connection and discontinue every

facility whose continued operation would render it sub-

ject to the Federal Power Commission’s control. The

Commission conceded in its opinion and the Govern-

ment admits here the Company’s right to do so. 324

U.S. at 518-19. (Emphasis added.)

On remand of Connecticut by this Court, the Commission

repeated the principle that an electric utility had the right

to avoid jurisdiction:

The circumstances of this case illustrate strikingly the

manner in which a company, by a series of calculated

actions may, step by step, remove itself from the juris-

diction of this Commission. .. . The Company is now

about to remove any remaining shadow of doubt as to

its status by cutting its last remaining connection with

out-of-state power at its Bristol substation. It will then

become wholly intrastate, subject only to jurisdiction

of the Connecticut Commission. In so doing the com-

pany is clearly within its legal rights. Connecticut

Light & Power Company, 6 F.P.C. 104, 110 (1947).

(Emphasis added.)

What Connecticut did by selling the only facility by which

it was jurisdictional, the TU Companies did by 3:43 p.m.,

_ May 4, 1976, by opening all its interconnections with WTU

and others engage, directly or indirectly, in the sale, trans-

mission, receipt or delivery of electric energy in interstate

commerce, thereby electrically confining their operations

solely to Texas.

Finally, even under the “electromagnetic” test of juris-

diction announced by this Court in FPC v. Florida Power &

Light Co., 404 U.S. 453 (1972), no jurisdiction exists in this

case since no electricity generated in the TU Companies’

systems could flow in interstate commerce without the inter-

connections closed which were opened by TESCO at

3:43 p.m. on May 4, 1976.

CONCLUSION

The Court of Appeals committed error in three ways.

First, it refused to address the merits of the scope

of the Commission’s jurisdiction. Second, had it analyzed

Sections 201 and 202 of the Federal Power Act, it would

have concluded that the Commission had no discretion to

exercise since as a matter of law under the undisputed

facts the Commission possessed no jurisdiction over the TU

Companies. Third, the Court misread both the decision of

the Commission and the Federal Power Act and refused to

apply this Court’s decision in Connecticut Light & Power

Company v. FPC.

Therefore, unless this Court grants the writ hereby sought,

the limits of federal regulatory authority over electric util-

ities will be brought into question, the scope of complemen-

tary state regulation will be cast in doubt and the clear line

of demarcation between federal and state authority of the

electric utility industry will be made fuzzy. Further, the

failure of this Court to correct the clear error of the Court

of Appeals may result in the useless proliferation of an

already complex maze of related litigation and will result in

the unnecessary postponement of the final resolution of an

important issue of critical national concern and importance.

Neither the Congress in enacting the Federal Power Act

nor this Court in deciding Connecticut Light & Power

Company v. FPC, supra., intended such a result. Moreover,

neither the electric utility industry nor the public can

tolerate such consequences.

For all these reasons, Dallas Power & Light Company,

Texas Electric Service Company and Texas Power & Light

Company pray that this Court grant this petition for a

writ of certiorari to the United States Court of Appeals for

the District of Columbia Circuit, that this Court reverse

the decision of that Court of Appeals and that this Court

direct the Court of Appeals to sustain the Commission’s

determination that it is without jurisdiction over the TU

Companies as a matter of law. ~

Respectfully submitted,

rion Worsham

M. D. Sampels

Frederick K. Slicker

WorsHAM, ForsyTHE & SAMPELS

2500-2001 Bryan Tower

Dallas, Texas 75201

(214) 748-9365

Harry A. Poth, Jr.

Peyton G. Bowman, III

Floyd L. Norton

Rew & Priest

1701 K Street, N.W.

Washington, D.C. 20006

(202) 331-1752

Of Counsel:

Erle Nye, Esquire

Legal Counsel

Dallas Power & Light Company

1506 Commerce Street

Dallas, Texas 75201

CANTEY, HANGER. GOOCH,

Cravens & MUNN

1800 First National Bank Building

Fort Worth, Texas 76102

Burrorp & RYBURN ane

1511 Fidelity Union Life Building

Dallas, Texas 75201

ATTORNEYS FOR

DaLLAs Power & LicgHT COMPANY

Texas ELectric SERVICE COMPANY AND

Texas Power & LIGHT COMPANY

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1995

CENTRAL Power & LiGHT COMPANY,

PusLic SERVICE COMPANY OF OKLAHOMA,

SOUTHWESTERN ELEcTRIC Power CoMPANY, and

West Texas UTILit1Es CoMPANY,

Petitioners,

FEDERAL ENERGY REGULATORY COMMISSION,

° Respondent,

ARKANSAS ELECTRIC COOPERATIVE Corp.

Houston LicHtinc & Power ComMPaANyY,

Crry or SAN ANTONIO,

Lower CoLorapo River AUTHORITY,

Da.ias Power & Licht CoMPANY, et al.,

Intervenors,

No. 76-2012

City or ALTuS, FREDERICK, et al.,

Petitioners,

FEDERAL ENERGY REGULATORY COMMISSION,

Respondent,

Da.ias Power & Licht CoMPANY,

Houston LicHTING & Power CoMPANY,

Lower CoLorapo River AUTHORITY,

Intervenors.

A-1

Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Argued February 27, 1978

Decided April 10, 1978

Richard D. Cudahy with whom Robert H. Loeffler was

on the brief, for petitioners in No. 76-1995. Also Richard D.

Ferguson and Paul T. Ruxin entered appearances for peti-

tioners in No. 76-1995.

Charles F. Wheatley, Jr. and Robert A. O’Neil were on

the brief, for petitioners in No. 76-2012.

McNeill Watkins, II, for respondent. Drexel D. Journey,

General Counsel. Robert W. Perdue, Deputy General

Counsel, Allan Abbot Tuttle, Solicitor and Allan M. Garten,

Attorney, Federal Energy Regulatory Commission were on

the brief, for respondent.

Gordon Gooch with whom Bruce Kiely and Steven

Huncicker [sic] were on the brief, for intervenor, Houston

Lighting and Power Company in Nos. 76-1995 and 76-2012.

Argued on behalf of all intervenors.

Lawrence S. Smith was on the brief for intervenor, Lower

Colorado River Authority in Nos. 76-1995 and 76-2012.

Jon C. Wood was on the brief, for intervenor, The City

of San Antonio, Texas in No. 76-1995.

Also Harry A. Poth, Jr., Richard M. Merriman, and

Peyton G. Bowman, III entered appearances for intervenor,

Dallas Power and Light Company in No. 76-1995 and

76-2012.

A-2

Also Robert Weinberg entered an appearance for inter-

venor, Arkansas Electric Cooperative Corp. in No. 76-1995.

Before: McGowan, LEvENTHAL and Ross, Circuit Judges.

Opinion Per Curiam.

Per CuriaM: This case involves a challenge to a ruling

by the Federal Power Commission (now the Federal Energy

Regulatory Commission (FERC) ) that it could not compel

interconnection among the West Texas Utilities Company

(WTU), the Houston Lighting & Power Company (HL&P),

and the Texas Utilities Company (TU) under § 202(b),

(1976), because it did not have jurisdiction over the latter

two companies. All three utilities were members of a Texas

intrastate power pool (ERCOT).

There is confusion as to the basis of the FERC’s action.

The Commission’s: brief argues that the decision was

grounded in material part on the fact that HL&P’s and TU’s

nexus with interstate transmission was the product of a

breach of contract: a ten hour period on May 4, 1976, during

which WTU transmitted power to an affiliated company in

Oklahoma without the knowledge of HL&P and TU and in

express violation of a contract between WTU and the Texas

Electric Utility Company [sic], a subsidiary of TU. Thus

the FERC argues that the decision not to assert jurisdiction

was 2 proper exercise of agency discretion.

One difficulty with this contention is the failure +> con-

front questions as to the legality of the contract. Petitioners’

central position is that the agreement among the Texas

utilities not to transmit interstate was part of a group boy-

cott in violation of the antitrust laws. While the FERC does

not have authority to adjudicate antitrust actions, antitrust

A-3

considerations are relevant when it exercises its discretion

subject to a public interest mandate. Gulf States Utilities

Company v. FPC, 411 U.S. 747 (1973), and cases cited

therein. There is no evidence in the record that the FERC

considered petitioners’ antitrust contentions.

Another problem is whether the breach of contract was

actually material to the Commission’s conclusion. The Com-

mission’s order simply states that it adopts the general

counsel’s conclusion that HL&P and the TU companies are

not “public utilities” within the meaning of § 201(e) of the

Federal Power Act, 16 U.S.C. § 824(e) (1976). Appendix at

117. Section 201(e) simply defines “public utility” as “any

person who owns or operates facilities subject to the juris-

diction of the Commission under this subchapter.” There is

no mention of the contract in the general counsel’s memo-

randum. Jd. at 122-24. It is hornbook law that the court

must appraise agency action not on grounds advanced by

counsel but on those identified by the agency as reasons

for its actions. SEC v. Chenery Corporation, 318 U.S. 80,

92-94 (1943).

There is further confusion concerning the basis of the

Commission’s ruling: the general counsel’s memorandum

indicates that the HL&P and TU companies were, at all

times, outside the Commission’s jurisdiction as a matter of

law, ie., the exercise of jurisdiction was not a matter for

the Commission’s discretion. But the authorities cited by

the general counsel are cases which involved or discussed

the Commission’s discretion to decline jurisdiction over a

firm even though it might have been a public utility within

the meaning of the Federal Power Act. Connecticut Light &

Power Company v. FPC, 324 U.S. 515, 536 (1945); Letter

of the FPC to Home Light and Power Company, dated

May 28, 1965 (Appendix at 127).

A-4

In argument to this court in support of the Commission’s

ruling, FERC counsel contends that what the general coun-

sel intended to indicate in his memorandum was that an

exercise of jurisdiction was within the Commission’s dis-

cretion. He further argues that although the general counsel

could not exercise that discretion for the agency, he could

make a recommendation, and that that.in fact is all he did

in this case. Again, a reading of the Commission’s decision

does not establish that it was purporting to exercise discre-

tion. Furthermore, discretion can be exercised only in light

of all the relevant factors. Totally absent from the general

counsel’s memorandum and the Commission’s opinion is any

reference to antitrust considerations or any other compon-

ent of a public interest determination. As the Supreme

Court observed in Gulf States Utilities, “where the Com-

mission summarily disposes of proffered objections, or

where it exercises its discretion . . . without considering . . .

anticompetitive consequences, ‘the reviewing court must

closely scrutinize its action in light of the . . . statutory obli-

gations to protect the public interest and to enforce the

antitrust laws.’” 411 U.S. at 763 (quoting Denver &

R.G.W.R. Co. v. United States, 387 U.S. 485, 498 (1967) ).

Our judicial function embraces ruling on what we fairly

discern as the basis of the Commission’s action, but it does

not include speculating on the Commission’s intentions.

Id, at 764. We do not say the result reached by the Com-

mission is contrary to law. What we do say is that the

FERC has not complied with its obligation to articulate its

reasoning. We therefore remand for clarification of that

reasoning. In the event exercise of discretion is involved,

as was put to us in support of this order, it must be accom-

panied by some indication in the record that all relevant

factors were taken into account.

So ordered.

A-5

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1977

No. 76-1995

CENTRAL Power 4ND LIGHT COMPANY,

PusLic SERVICE COMPANY OF OKLAHOMA,

SOUTHWESTERN ELEcTRIC Power CoMPANY, and

West Texas UTILITIES CoMPANY,

Petitioners,

FEDERAL ENERGY REGULATORY COMMISSION,

Respondent,

ARKANSAS ELEctric COOPERATIVE Corp., et al.,

Intervenors.

and consolidated case No. 76-2012

BEFORE: Wright, Chief Judge; Bazelon, McGowan,

Tamm, Leventhal, Robinson, MacKinnon,

Robb and Wilkey, Circuit Judges

ORDER

The suggestion for rehearing en banc filed by intervenors

Dallas Power and Light Company, et al, and of the mem-

orandum filed by intervenor Houston Lighting and Power

Company in support of the petition for rehearing and/or

suggestion for rehearing en banc, having been transmitted to

the full Court and no Judge having requested a vote with

respect thereto, it is

ORDERED by the Court en banc that intervenors’ afore-

said suggestion for rehearing en banc is denied.

Per Curiam

For the Court:

George A. Fisher

Clerk

APPENDIX C

UNITED STATES OF AMERICA

FEDERAL POWER COMMISSION

Before Commissioners: Richard L. Dunham, Chairman;

Don S. Smith, John H. Holloman III,

and James G. Watt.

Central Power & Light Company,

Public Service Company of

Oklahoma,

Southwestern Electric Power Docket No. E-9558

Company, and

West Texas Utilities Company

ORDER REJECTING IN PART AND ACCEPTING IN

PART APPLICATION FOR ACTION

PURSUANT TO SECTION 202

(Issued July 21, 1976)

On May 4, 1976, Central Power & Light Company

(CP&L), Public Service Company of Oklahoma (PSO),

Southwestern Electric Power Company (SWEPCO), and

West Texas Utilities Company (WTU), (Applicants) filed

a petition and application with this Commission stated to

be pursuant to Sections 202(a) and 202(b) of the Federal

Power Act. On May 5, 1976, the Lower Colorado River

Authority, (LCRA), a political subdivision of the State of

Texas, requested an order of the Commission requiring

Applicants to remain connected with Houston Power and

Light (HP&L) [sic] Texas Electric Service Company

(TESCO), Dallas Power and Light (DP&L) and Texas

Power and Light Company (TP&L). On May 13, 1976,

Applicants filed a motion application to

“.,. require the emergency reconnection of electric

facilities described below, pursuant to Section 202(c)

of the Federal Power Act.”

C-1

Applicants state that on May 4, 1976 as a result of a

determination that a portion of PSO’s load at Davidson,

Frederick and Tipton, Oklahoma could be served more

economically from the southern part of WTU’s system by a

69 kv line from WTU’s Vernon Substation, WTU began

transmitting and selling electricity for resale to PSO. As a

result, Applicants state,

“the interconnections between the electrical facilities of

PSO and WTU resulted in the transmission of electric

energy at wholesale in interstate commerce by all the

members of ERCOT and SWPP. Because HL&P,

DP&L, TESCO and TP&L each own and operate facil-

ities for such transmission and sale of electric energy,

and because none is otherwise exempt from the juris-

diction of the Federal Power Commission, each, like the

Applicants, is a public utility within the meaning of the

Federal Power Act.” (See page 4 of Petition and

Application).

Based upon such facts as alleged by the Applicants, and

citing Section 202(a) of the Federal Power Act, Applicants

have requested that the Federal Power Commission:

(1) Conduct such investigations and issue such orders

as are necessary and proper under Section 202 (a)

of the Federal Power Act, to promote and en-

courage continued and expanded interconnection

of facilities for the generation, transmission and

sale of energy between members of SWPP and

ERCOT;

(2) Issue such orders under Section 202(b) of the Fed-

eral Power Act, as may be necessary to continue

and maintain the existing interconnections between

Petitioners and members of ERCOT; and

(3) Conduct such investigations and issue such orders

under Section 202(b) of the Federal Power Act,

as are necessary to establish additional intercon-

nections between members of ERCOT and mem-

bers of SWPP.

C-2

After transmission of electric energy in interstate com-

merce by TWU on May 4, 1976, this Commission was

notified by HL&P and TESCO that they had severed all

previous interconnections with WTU and CP&L in order

that they retain within Texas the physical operation of

transmitting and selling electric energy generated within

the State of Texas.

On May 5, 1976, the General Manager of LCRA, filed

a protest with the Federal Power Commission stating

that LCRA was interconnected with WTU and CP&L,

and that the severing of interconnections by TESCO,

DP&L, TP&L, and HL&P “* * * may well jeopardize the

reliability of service of the Lower Colorado Power Au-

thority [sic] * * *”.

On May 13, 1976, CP&L, and WTU filed “Motion for

Emergency Interconnection Pursuant to Section 202(c)

of the Federal Power Act”. WTU and CP&L agree in their

Motion that HL&P has opened its long standing intercon-

nections with CP&L and also its interconnections with

LCRA and TP&L. On or about May 4-5, 1976, TESCO,

DP&L and TP&L opened all of their interconnections except

those existing among themseves. In addition, TESCO has

opened its long standing interconnections with WTU.

Applicants further state, in their May 13, 1976 Motion

that the interconnections opened by HL&P, TESCO and

TP&L have been in operation for many years and are a

factor in the amount of capacity installed in Texas to

meet the loads imposed on all parties described in the

Motion. According to that Motion these interconnections

were designed to provide a sufficient reserve margin of

electric generation capacity to ensure the reliable flow

of electric energy to the customer of all the parties; the

systems of the various parties, were alleged to have been,

designed and operated to rely on the continued inter-

C-3

connections among them all; and to the extent such inter-

connections are interrupted, reliability is allegedly impaired

and the public interest not be served by the unilateral

realignment imposed by HL&P and TESCO on May 4,

1976, or any other realignment which excludes WTU and

CP&L. For these reasons the Applicants request that the

Commission enter an order under Section 202(c) of the

Federal Power Act, to require immediate resumption and

continuation of all the interconnected service among all of

the parties as it was on May 3, 1976. In addition, Applicants

propose that the compensation among the systems for the

services thereby provided would be at the rates and charges

in effect prior to May 4, 1976.

On May 14, 1976 HP&L filed, “Response of Houston

Lighting and Power Company to Motion of Central Power

and Light Company and West Texas Utilities Company

for Emergency Interconnection Pursuant to Section 202 (c)

of the Federal Power Act.” The Response states in part

(p. 1):

HL&P hereby objects to this motion and submits that

the Commission should not order the actions requested

therein without first convening a hearing in order to

determine whether an emergency exists within the

meaning of the Act and the Commission’s regulations

thereunder. Furthermore, regardless of what action may

be taken by the Commission, it should deny the claim

made by Movants that HL&P and the other named

TIS member companies be denied their statutory right

to proceed under Section 202(d) should the Commission

determine that an emergency exists.

In addition, on May 17, 1976 the “Reply of Dallas Power

and Light Company to Motion of Central Power and

Light Company and West Utilities Company [sic] for Emer-

C-4

gency Interconection Pursuant to Section 202(c) of the

Federal Power Act,” was filed. That Reply states in part

(pp. 2, 6):

The simple facts are, however, that the emergency, if

any, which is now claimed by CP&L and WTU is of

their own creation and is based on wholly ulterior mo-

tives. By now this Commission is fully aware of the

pre-dawn escapade of WTU on Tuesday, May 4, 1976,

when it voluntarily commenced electric service to three

small communities in Oklahoma from its previously

Texas intrastate generating facilities in violation of its

contract with Texas Electric Service Company

(TESCO), fully cognizant that such action would pro-

voke a disconnection by TESCO of its several ties with

WTU and of the several ties with certain other mem-

bers of the Texas Interconnection System. (pg. 2).

No attempt, however, has been made to establish the

existence of any of the basic criteria prerequisite to the

invocation of emergency action under, Section 202(c)

of the Act and Section 32.61(e) of the Regulations.

There is no showing:

(a) Of the problem situation;

(b) Of the resource limitations which require elec-

tric power and/or emergency transfers;

transfers the applicants will be unable to main-

tain electric utility service required in public

interest;

(d) Of the firm amounts of electric power and

energy received from and delivered to other

systems;

(e) That despite “diligent best efforts” additional

power and energy cannot be purchased; or

(f) Of what steps have been taken to secure

voluntary interconnections and emergency

transfers.

C-5

On May 18, 1976, DP&L, TESCO, and TP&L filed a

petition to intervene. On May 19, 1976, LCRA also filed

a petition to intervene. And on May 25, 1976, the City of

San Antonio through its City Public Service Board (CPSB) ;

and the Cities of Altus, Frederick, Cordell, Mannford;

Verdigree Valley Electric Coop, Inc.; Indian Electric Coop,

Inc., the Municipal Electric System of Oklahoma (Cities)

petitioned to intervene on June 25, 1976, Arkansas Electric

Cooperative Corporation petitioned to intervene.

On May 19, 1976, LCRA filed “Response of Lower

Colorado River Authority To Motion Of Central Power

and Light Company and Texas Utilities Company For

Emergency Interconnection”. LCRA’s filing states in part:

Since May 4, 1976, the major electric generating utilities

in Texas have been operating in two separate groups.

Houston Lighting and Power Company, the operating

subsidiaries of Texas Utilities and the Texas Municipal

Power Pool, with an aggregate of appréximately 75%

of the generating capacity in the state, are intercon-

nected among themselves, and West Texas Utilities,

Central Power and Light Company, the City of Austin,

City Public Service Board of San Antonio, and LCRA

are interconnected.

Since the date the Texas Interconnected System be-

came bifurcated the group of which LCRA is a part

has already experienced an episode of severely fluctu-

ating frequency caused by the sudden loss of a moderate

amount of generating capacity. As the heat of the sum-

mer and its attendant peak load conditions approach,

such disturbances can only be exacerbated to the point,

in LCRA’s judgment, of forced load shedding on the

part of one or more of the utilities with which it is

interconnected. Under the circumstances, the present

situation constitutes an emergency within the meaning

of the Federal Power Act. [Section 202(d)]. An order

of the Federal Power Commission to allow the systems

C-6

previously members of TIS to restore temporarily the

connections which were disconnected on May 4, 1976,

is necessary and appropriate to meet this emergency.

On May 21, 1976, CP&L and WTU filed a Response to the

Replys [sic] of DP&L, et al., HP&L [sic] and LCRA. The

Response reasserts the previously stated position of CP&L

and WTU.

On June 21, 1976, CP&L, WTU et al. filed a Motion

with the Commission requesting an order initiating and

scheduling hearings on their previously iiled application of

May 4, 1976 and their Motion of May 13, 1976. On June 30,

1976 DP&L, TESCO and TP&L responded requesting

denial of the Motion and on July 6, 1976 HP&L responded

also requesting denial of the Motion.

CP&L, WTU et al., on July 6, 1976 filed an additional

motion asserting in part:

Currently there are substantial controversies both of

fact and of law as to whether an emergency affecting the

electric utilities in Texas in fact exists. If such an

emergency may be said to exist, there is significant dis-

agreement as to its nature and expected duration. Hence

it is crucial to the public interest that any order entered

by the Commission and responsive to an emergency,

however defined, be based upon an adequate record.

In addition the Motion of June 6, 1976 states:

Applicants contend that, by reason of the legal re-

sponsibilities of Texas Electric Service Company and

Houston Lighting and Power Company to interconnect

with West Texas Utilities Company and Central Power

and Light Company and the fact that Central Power

and Light Company and West Texas Utilities Company

are engaged in the transmission of electric energy in

interstate commerce, and otherwise, Texas Electric

Service Company and Houston Lighting and Power

Company are subject to the jurisdiction of the Com-

mission.

C-7

Based on the above allegations the motion of CP&L,

WTU, et al., requests:

. . . that the Commission conduct hearings prior to

issuing any order under Section 202(c) or 202(d) or to

issuing any order purporting to decide the question of

the jurisdiction of the Commission over the Texas

Utilities subsidiaries or Houston Lighting and Power

Company. .

We find that based upon the pleadings filed by all of the

parties to this proceeding, the facts surrounding the events

of May 4, 1976, are uncontested. Therefore, pursuant to

Section 201 of the Federal Power Act, 16 USC 824, the

Commission finds Central Power & Light Company and

West Texas Utilities Company to be “public utilities” within

the meaning of the Act and, therefore subject to the

jurisdiction of this Commission. The Commission on June 30,

1976 requested its General Counsel to address the “public

utility” jurisdictional status as it relates to HL&P, TP&L,

DP&L, and TESCO. By memorandum dated July 1,

1976,’ the General Counsel concluded, “. . . the four systems

are, and have been ... Texas intrastate systems, not “public

utilities”. The Commission adopts its General Counsel’s

conclusion and therefore dismisses Applicant’s request for

relief pursuant to Section 202(b) of the Federal Power Act

on the basis of no jurisdiction.

Based upon the representations of LCRA and other of the

participants in this matter it does not appear that a

physical operating condition now exists within the State

of Texas which would warrant this Commission taking

action under Section 202(c) of the Federal Power Act.

However, we are ordering the Staff to commence a

Section 202(a) study to update and amend as necessary

the 1972 staff report entitled “Study of Proposed Intercon-

1 Appendix I to this order.

C-8

nection Between Electric Reliability Council of Texas and

Southwest Power Pool.”

An examination of the pleadings filed in this proceeding

has led us to conclude that conditions do warrant action

under Section 202(d) to forestall probable operating diffi-

culties pending resolution of this proceeding, and that an

“emergency” within the meaning of Section 202(d) of the

Act now exists. No major transmission system outage within

the ERCOT system from the time WTU.- began service

to the three Oklahoma cities on May 4, 1976, through the

date of this order has occurred. However, the “emergency”

contemplated by Section 202(d) does not require the fait

accompli of an actual outage of service or even such

preliminary indications of system instability as frequency

excursions and/or voltage reductions. Such an interpreta-

tion would place this Commission in the untenable position

‘of only being able to act when an outage occurs, even

though the possibility of the occurrence of such an

emergency may be predictable, and discernable by the

exercise of the Commission’s expertise, as in the instant

case.

We find that the public interest here clearly requires

that action under Section 202(d) be taken by the Com-

mission because the facts indicate that there is a reason-

able probability of a major outage which may be averted

through reestablishment of the interconnections due to one

or more problems arising from (1) generating facilities,

(2) primary and secondary bulk transmission facilities,

or (3) other unforeseen causes including fuel shortages.*

2 The Texas Company, Docket No. E-6115 7 FPC 364; Gulf Oil

Corp., Docket No. IT-6055, 6 FPC 685; Kansas Power & Light

Co. and Kansas Gas and Electric Co., Docket Nos. E-6116 and

E-6110, 7 FPC 452; Central Maine Power Company, Docket No.

F-6247, 8 FPC 1248; Kansas Power & Light Co., Docket Nos.

E-6568 and E-6749 19 FPC 39; The Kansas Power & Light Co.,

Docket No. E-6568, 13 FPC 1315 Homestake Mining Co. Docket

No. IT-6093, 6 FPC 1076 [sic].

C-9

Furthermore, we do not find that the definition of

“emergency” concerning Section 202(d) found in Section

32.20 of our Rules and Regulations confine our finding of

an “emergency” to the actual failure of facilities as stated in

that section. We will in the future as we have in the past

apply Section 32.20 to include conditions which show reason-

able probability in our determination of emergency con-

ditions under Section 202(d) of the Act.

An additional concern to this Commission are those utilities

which are dependent to a significant extent on gas supplied

by Lo-Vaca Gathering Company and/or Coastal States Gas

Producing Company, subsidiaries of Coastal States Gas

Corporation.*

The bifurcation of the Texas Interconnected System

has resulted in the greater sensitivity of frequency change

for a given loss of generation and the increased operating

cost resulting from carrying a higher spinning reserve

level than that required when the ERCOT system is totally

interconnected. The loss of load probability has been in-

creased due to the loss of capacity availability on a com-

mon basis. As a result, the capability of the power systems

to respond to a single event or a sequence of events such as

* At the present time, CP&L depends on gas supplied by Coastal

States and/or Lo-Vaca for about 53% of their fuel supply. The

Cities of Austin and Brownsville, CPSB, LCRA, South Texas

Electric Cooperative, and Medina Electric Cooperative are virtually

100% dependent. (FPC Form 423, 1975) TP&L, DP&L and

TESCO may also face gas supply difficulties in the event of a

Lo-Veca bankruptcy. A portion of the gas which these companies

purchase from their wholly-owned subsidiaries, Texas Utilities Fuel

Company and Old Ocean Fuel Company is transported through

the Lo-Vaca system. Furthermore, their principal outside fuel sup-

plier, Lone Star Gas Company, Division of Enserch Corporation

is dependent on Lo-Vaca for about 20% of its system requirements.

Cf. Homestake Mining Co., Docket No. IT-6093, 6 FPC 1076.

C-10

loss of the largest plant, loss of the largest transmission

line, etc., is reduced. Moreover, voltage levels are highly

likely to be affected adversely in this mode of operation.

We find that it is in the public interest to take action to

ensure maximum system reliability when remedies are

available to this Commission.

Section 32.20 (18 CFR 32.20 et seq.) contemplates power

and energy transfers without jurisdictional consequences

flowing therefrom, when connections are authorized. Con-

ditions as contemplated by Section 202(d) cover factual

situations of the type here before the Commission. The

May 5, 1976, request of LCRA and their Response of

May 19, 1976, to the Motion of WTU and CP&L, falls

within the scope of that section and the Commission

will treat it as such. Based upon those filings and other

information available within the files of the Commission,

the conditioned disconnection of the foregoing systems

creates conditions which are unforeseen occurrences and

not within the power of LCRA to prevent and which may

render it unable to provide service to its customers. The

Commission is, therefore, authorizing pursuant to Section

202(d) of the Federal Power Act all of the affected systems

to temporarily reestablish their previously operational inter-

connections, pending further Commission order in this

matter.

The Commission finds:

(1) Intervention by the Lower Colorado River Authority,

Houston Lighting & Power Company, Dallas Power & Light

Company, Texas Electric Service Company, Texas Power

& Light Company, City Public Service Board of San

Antonio, and Cities of Altus, Frederick, Cordell, Mannford,

Oklahoma (Cities); Verdigree Valley Electric Coop, Inc.;

Indian Electric Cooperative, Inc.; the Municipal Electric

C-11

Systems of Oklahoma and the Arkansas Electric Co-

operative Corporation in this proceeding are in the public

interest.

The Commission orders:

(1) Central Power & Light Company and West Texas

Utilities Company are “public utilities” pursuant to Sec-

tion 201 of the Federal Power Act (18 U.S.C. 824 [sic]) and

therefore subject to the jurisdiction of this Commission.

(2) Houston Power & Light Company, Dallas Power

and Light Company, Texas Power and Light Company and

Texas Electric Service Company are not “public utilities”

pursuant to Section 201 of the Federal Power Act (18 U.S.C.

824 [sic]) and therefore are not subject to the jurisdiction of

this Commission.

(3) The Motions of CP&L, WTU et al. filed on June 21,

1976, and July 6, 1976, are hereby denied.

(4) The Commission hereby authorizes HL&P, TESCO,

DP&L, and TP&L to maintain as temporary connections

within the meaning of Section 202(d) of the Federal Power

Act all physical interconnections which those systems main-

tained and operated prior to May 4, 1976, with the systems

of CP&L, WTU, LCRA, City of Austin and City Public

Service Board of San Antonio.

(5) The authorization of the temporary connections as

referred to in paragraph (3) [sic] shall continue until

further Commission order. During the period that these

temporary interconnections are utilized, HL&P, TESCO,

DP&L, and TP&L shall not be determined to be “public

utilities” under the Federal Power Act by reason of opera-

tions under the interconnections.

C-12

(6) The Application of May 4, 1976 and the May 13, 1976

“Motion of Central Power and Light Company and West

Texas Utilities Company for permanent and Emergency

Interconnection Pursuant to Section 202(b) and (c) of the

Federal Power Act” are dismissed.

(7) The Commission hereby orders the Staff of the

Federal Power Commission to commence a Section 202 (a)

study to update and amend as necessary the 1972 staff

report entitled “Study of Proposed Interconnection Between

Electric Reliability Council of Texas and Southwest

Power Pool.”

(8) Lower Colorado River Authority; Dallas Power and

Light Company; Texas Electric Service Company; Texas

Power and Light Company; City Public Service Board of

San Antonio; Cities of Altus, Frederick, Cordell, Mannford,

Oklahoma (Cities); Verdigree Valley Electric Coop., Inc.;

Indian Electric Cooperative, Inc.; the Municipal Electric

Systems of Oklahoma and the Arkansas Electric Cooperative

Corporation are hereby permitted to intervene in these pro-

ceedings subject to the rules and regulations of the Com-

mission; Provided, however, that participation of such inter-

venors shall be limited to matters affecting asserted rights

and interests as specifically set forth in their petitions to

intervene; and Provided, further, that the admission of such

intervenors shall not be construed as recognition by the

Commission that they might be aggrieved because of any

orders of the Commission entered in this proceeding.

(9) The Secretary is hereby directed to cause this order

to be published in the Federal Register and in addition, is

hereby directed by mail to provide a copy of this order to

all members of the Electric Reliability Council of Texas

C-13

(ERCOT) and to all members of the Southwest Power

Pool (SWPP).

By the Commission. Commissioner Watt, concurring in part

(SE A L) and dissenting in part, filed a separate

statement appended hereto.

Kenneth F. Plumb,

Secretary.

C-14

Docket No. E-9558 °

APPENDIX I

July 1, 1976

MEMORANDUM TO: The Commission

FROM: General Counsel

SUBJECT: Jurisdictional Status

Pursuant to your request at yesterday’s Commission meet-

ing, I have reviewed the question of “public utility” juris-

dictional status as it relates to the operation of Dallas

Power & Light Company, Houston Power & Light Com-

pany [sic], Texas Electric Service Company, and Texas

Power & Light Company.

As defined in the Federal Power Act, a “public utility”

means any person who owns or operates facilities subject

to the Part II jurisdiction of the Commission, § 201(e).

Facilities of that type are facilities for the transmission or

sale at wholesale for resale of electric energy generated in

one state and consumed in another, but not facilities for

generation, facilities used in local distribution, facilities for

the transmission of electric energy in intrastate commerce

or facilities for the transmission of electric energy consumed

wholly by the transmitter, § 201(b) (c). My conclusions are

fourfold:

Prior to May 4, 1976, the aforementioned four systems

were operating in electrical isolation from any electric

system which transmitted or sold electric energy gen-

erated in one state and consumed in another, and, there-

fore, they were not susceptible to classification as

“public utilities”;

During May 4, 1976, from 5:30 a.m. to 3:43 p.m., the

aforementioned four systems operated in parallel — or

electrical synchronizism [sic] —with other electric

C-15

utilities which transmitted or sold electric energy gener-

ated in one state and consumed in another, and, there-

fore, they were susceptible to review by the Commis-

sion as to their “public utility” status;

Subsequent to May 4, 3:43 p.m., the aforementioned

four systems have been operating in electrical isolation

from any electric system which transmitted or sold

electric energy generated in one state and consumed in

another, and, therefore, they are not susceptible to

classification as “public utilities”; and

During the 10-hour period of synchronous electrical

operation on May 4, the facilities and operations of the

aforementioned systems were, for all practical purposes,

those for the transmission of electric energy in intra-

state commerce,* and such systems fall within the Com-

mission’s rule of determining “public utility” status

based upon the overall characteristics of the electric

system’s operations, notwithstanding some interstate

transmission of electric energy. See attached letter of

the Commission dated May 28, 1965, Home Light and

Power Company.

“Public utility” status** under the Federal Power Act is

determined by an engineering and scientific factual show-

ing, resting upon substantial evidence, that an electric

system’s facilities are used for the transmission or sale

of energy generated in one state and consumed in another.

FPC vy. Florida Power & Light Co., 404 U.S. 453, 463

(1972). Most recent Commission cases as referred to by the

* And/or facilities for generation, for local distribution, or facili-

ties for the transmission of electric energy consumed wholly by the

transmitter.

** A company may make no jurisdictional sales and still be found

to be a “public utility.” In such instances, the company would not

have wholesale rate schedules on file under §§ 205 and 206, but such

company could be a “public utility” subject to regulation under the

other sections of Parts II and III applicable to public utilities, (e.g.,

§§ 202(b), 203, 204, 301, and 305 of the Power Act).

; C-16

Supreme Court in that case have reviewed the nature of an

electric system’s operations and have applied to the

transmission networks, an electromagnetic unity of re-

sponse/commingling theory to comprise the necessary

showing for public utility status. For purposes of this

memorandum, I have assumed and equated synchronous

electrical operation with electromagnetic unity of response

and commingling. I have further assumed the overall intra-

state character of the aforementioned four Texas systems

which Justice Douglas recognized in his dissent to the

Court’s opinion in Florida Power & Light Co., 404 U.S. 474.

Applying the Commission’s Home ruling, I conclude that

the four systems are, and have been throughout the three

time periods, Texas intrastate systems, not “public utilities.”

The legal authority for the Commission to apply, the Home

ruling, rests upon the Supreme Court’s holding in Con-

necticut Light and Power v. FPC, 324 U.S. 515, 536

(1945):

* * * Congress appears to have left to the Commis-

sion’s sound administrative discretion to determine

whether or not to assert its authority in such situations.

aed

Drexel D. Journey

*** How the Commission will exercise such discretion depends

upon the particular facts before it; i.e., largely those concerned with

patterns of physical operation of the utilities and the purposes

which FPC controls would serve in light of Federal/state regulatory

interests. See City of Colton, 26 FPC 223, 236 (1961), affirmed

sub nom, FPC v. Southern Cal Edison, 376 U.S, 205 (1964); and

Florida Power & Light Co., 37 FPC 544, 552 (1967).

C-17

3. Furthermore, it is difficult for TUS to determine

whether CP&L and WTU are even claiming an emergency,

as that term is defined in the rules and regulations of this

Commission, in light of their wholly inconsistent positions

expressed this past week to the United States District

Court for the Northern District of Texas (District Court)

and to the Public Utilities Commission of Texas (PUC).

We believe that the underlying motives of CP&L and

WTU are crystal clear when their latest action is viewed

in context with the chronology of events of the recent past.

These events should be considered by this Commission

in evaluating the action to be taken on the Motion now

pending before it.

1975 — Following complaints that CSW is not an inte-

grated public utility system within the meaning of

Section 11 of the 1935 Act, CSW proposes the pervasive

integration of the Texas Interconnected System (TIS),

including the TUS companies and Houston Lighting &

Power Company (HLP), with the Southwest Power

Pool (SWPP).

1975 — TUS rejects the CSW proposal.

January 5, 1976 — CSW serves its Supplemental Memo-

randum filed with the Securities and Exchange

Commission (SEC) proposing the same pervasive inte-

gration of TIS and SWPP, and at page 8, threatens that

“in the event that their (TUS and HLP) cooperation

is not forthcoming on a voluntary basis, other options

for securing necessary cooperation will be considered.”

January 30, 1976 — CSW’s status as a single integrated

electric holding company within the meaning of Sec-

tion 11 of the 1935 Act questioned by the SEC in Admin.

Proc. File No, 3-4951.

May 3, 1976 (4:50 p.m.) — CP&L and WTU file suit in

the United States District Court seeking, among other

things, an order to prevent TESCO from disconnecting

from WTU, alleging that they are certain that when

TESCO becomes aware of any institution of interstate

service by WTU it will disconnect its ties with WTU.

C-18

May 4, 1976 (5:30 a.m.)—WTU breaches its long-

standing contract with TESCO by instituting service

to Oklahoma from its previously intrastate generating

facilities.

May 4, 1976 (Approx. 9:00 a.m.) — CSW files a petition

with the Federal Power Commission seeking, among

other things, a determination that as a result of the

short period of time when TESCO was involuntarily

interconnected with WTU while it was selling power to

Oklahoma, TESCO became a public utility within the

meaning of Section 201 of the Act.

May 4, 1976 (11:00 a.m.) — TUS is made aware of the

interstate tie and disconnects from WTU at 3:43 p.m.

May 4 1976 (5:00 p.m.) —CP&L and WTU seek and

are refused a temporary restraining order by the Dis-

trict Court prohibiting TESCO from disconnecting or,

in the alternative, requiring it to reconnect with WTU,

on the basis that irreparable injury and harm would

result to CP&L and WTU if TESCO were permitted to

disconnect or not ordered to reconnect its facilities

with those of WTU.

May 4 1976 (5:30 p.m.) — After being denied the tem-

porary restraining order, CP&L and WTU ask the

District Court to enter an order requiring them to cease

interstate service to Oklahoma.

May 4, 1976 (5:40 p.m.) — After the District Court

refuses the request by CP&L and WTU to order them

to cease interstate service to Oklahoma, CP&L and

WTU offer to discontinue interstate service if TESCO

will reconnect, under a written agreement, with WTU.

May 4, 1976 (5:40 p.m.) — TESCO accepts the proposal

and agrees to reconnect its ties with WTU.

May 5, 1976 (11:00 a.m.) —CP&L and WTU, by tele-

phone, state they have changed their minds and with-

draw their offer to discontinue interstate service to

Oklahoma.

C-19

May 6, 1976 —WTU and CP&L submit an order to

the District Court denying their motion for a temporary

restraining order indicating in their transmittal letter

that “The Plaintiffs have decided not to voluntarily

disconnect their service into Oklahoma so that the

Defendants will voluntarily reestablish automatic con-

nections with the Plaintiffs. It is also the Plaintiffs’

belief that rights already exist which will provide for

the resumption of service in the event of an emergency,

and that a written agreement with the Defendants in

this regard is not required.”

May 7, 1976 — CP&L and WTU testify under oath in a

hearing called by the PUC that no emergency exists

and that they have no need for interconnection with

TUC or HLP.

May 7, 1976 — The PUC finds that no present emer-

gency exists on any electric system operating in Texas,

including CP&L and WTU, and orders all electric gen-

erating companies in Texas, including CP&L and WTU

to report to it on May 21, 1976 which system — an intra-

state... [sic]

Docket No. E-9558

FEDERAL POWER COMMISSION

Washington, D. C. 20426

May 28, 1965

Home Light & Power Company

810 Ninth Street

Greeley, Colorado

Attention: Warren A. Terry, President

Dear Sirs:

The Commission has reviewed the available information

regarding the operations of Home Light & Power Company

in the light of Mr. Terry’s testimony on S. 218 before the

United States Senate Commerce Committee on Thursday,

May 13, 1965. Without making any definitive determina-

tion of the questions raised by Home’s contention that it

is not a “public utility” within the meaning of the Federal

Power Act, but without prejudice to any claim of Home to

complete exception, it is apparent that Home’s facilities and

operations are for most practical purposes those of a local

distribution company. In these circumstances the Com-

mission sees no present necessity for exercising such jurisdic-

tion as it may have to require Home’s compliance with the

Commission’s accounting regulations.

Accordingly, you are advised that Home is not being re-

quired to take any present action which might be necessary

to bring its books of account into compliance with the Com-

mission’s Uniform System of Accounts and is excused from

the requirement thereof for the filing of reclassification and

original cost studies of electric plant. Home will, of course,

C-21

continue to be required to file the informational reports

provided for in accordance with the provisions of section

311 of the Federal Power Act which expressly applies to

all electric utilities whether or not they fall within the Acts’

[stc} definition of “public utilities”.

By direction of the Commission.

J. H. Gutride

Secretary

C-22

—_—

Central Power & Light Company,

Public Service Company of

Oklahoma,

Southwestern Electric Power Docket No. E-9558

Company, and

West Texas Utilities Company

(Issued July 21, 1976)

WATT, Commissioner, concurring in part and dissenting in

part:

For the most part, I agree with today’s decision. I

emphatically agree that Houston Power and Light Com-

pany, [sic] Dallas Power and Light Company, Texas Power

and Light Company and Texas Electric Service Company

are not subject to FPC jurisdiction. The Commission should

not condone such blatant attempts as has occurred here

to force jurisdiction upon otherwise non-jurisdictional

companies.

I must, however, dissent to the Commission’s finding

that an emergency exists within the meaning of Section

202(d) of the Federal Power Act. Based on the state-

ments of the Public Utility Commission of Texas and

the FPC Bureau of Power, I simply cannot reach a con-

clusion that an emergency exists. For reasons which I do

not understand, the majority insists on creating by

definition an emergency. An emergency which cannot be

defined or terminated by events other than FPC administra-

tive action.

Today’s decision stands for the proposition that the

FPC can allow electricity to flow between jurisdictional

and non-jurisdictional companies on a day-to-day basis in

anticipation of a future emergency. I am not aware of any

case which is similar to this and do not believe it wise

C-23

to break such “new ground” given the facts which are before

us. Earlier cases dealt with by the FPC allowed permanent

facilities to be built for anticipated emergencies but re-

quired that the ties remain open until the real emergency

came into being.

Today’s action allows the creation by definition of an

emergency to allow the interconnection of interstate and

intrastate systems without bringing about federal juris-

diction. I like the result but not the legal fiction created

to get there.

I share my fellow Commissioners’ concern for the

maintenance of reliable service within the ERCOT group.

I also agree it is the Commission’s purpose to assure as far

as is reasonably practicable against any devastating effects

which could follow any such emergency.

The filing of appropriate applications and the issuance

of orders by this Commission after the onset of any such

emergency could result in an intolerably long (even if only

several hours) disruption in service. To permit the

previously intrastate, interconnected companies to respond

without delay to any such emergency, I would declare our

intention not to assert jurisdiction over those companies

which respond to such an emergency, pending the filing

of and ruling upon appropriate pleadings under Section

202(d). If based upon the facts adduced the Commission

then were unable to determine a bona fide emergency

situation exists I would allow those companies which re-

sponded in good faith to what appeared to be an emergency

situation to return to totally intrastate operations by the

reopening of the various ties with the interstate parties.

If, on the other hand, the Commission were to find an

emergency to exist, it could permit operation under Section

C-24

202(d) for the duration of such emergency period with full

assurance that otherwise intrastate utilities will not lose

their status as companies not subject to the jurisdiction of

the Federal Power Commission.

Under such a plan, the Commission would not be forced

to strain the traditional definition of an emergency and

could adequately protect the public.

/s/ JAMES G. WATT

Commissioner

C-25

« won thnk ae ore 2 tl lll

= et a

APPENDIX D

UNITED STATES OF AMERICA

FEDERAL POWER COMMISSION

Before Commissioners: Richard L. Dunham, Chairman;

John H. Hollomon III, and

James G. Watt.

Central Power & Light Company,

Public Service Company of

Oklahoma, Docket No. E-9558

Company, and

West Texas Utilities Company

ORDER DENYING REHEARINGS

(Issued September 17, 1976)

On July 21, 1976, the Federal Power Commission in

the above-titled docket issued its “Order Rejecting In Part

And Accepting In Part Application For Action Pursuant

To Section 202.” The Commission in its order issued July 21,

1976, ordered inter alia:

(1) Central Power & Light Company and West Texas

Utilities Company are “public utilities” pursuant to

Section 201 of the Federal Power Act (18 U.S.C. 824

[stc]) and therefore subject to the jurisdiction of this

Commission.

(2) Houston Power & Light Company [sic], Dallas

Power and Light Company, Texas Power and Light

Company and Texas Electric Service Company are not

“public utilities” pursuant to Section 201 of the Federal

Power Act (18 U.S.C. 824 [sic]) and therefore are not

subject to the jurisdiction of this Commission.

(4) The Commission hereby authorizes H&LP [sic],

TESCO, DP&L, and TP&L to maintain as temporary

connections within the meaning of Section 202(d) of

the Federal Power Act all physical interconnections

Southwestern Electric Power

D-1

which those systems maintained and operated prior to

May 4, 1976, with the systems of CP&L, WTU, LCRA,

City of Austin and City Public Service Board of San

Antonio.

(5) The authorization of the temporary connections

as referred to in paragraph (3) [sic] shall continue

until further Commission order. During the period that

these temporary interconnections are utilized, HL&P,

TESCO, DP&L, and TP&L shall not be determined to

be “public utilities[”] under the Federal Power Act

by reason of operations under the interconnections.

(7) The Commission hereby orders the Staff of the

Federal Power Commission to commence a Section

202(a) study to update and amend as necessary the

1972 staff report entitled “Study of Proposed Inter-

connection Between Electric Reliability Council of

Texas and Southwest Power Pool.”

On August 20, 1976, applications for rehearing of the

Commission’s July 21, 1976, order were filed by the follow-

ing intervenors (1) Arkansas Electric Cooperative Cooper-

ation, (2) the Cities of Altus, Frederick, Cordell, Mannford,

and Verdigree Valley Electric Cooperative, Inc. and Indiana

Electric Co-op, Inc. and the Municipal Electric Systems of

Oklahoma (Cities - Co-ops) and (3) Central Power & Light

Company (CP&L), Public Service Company of Oklahoma

(PSO), Southwestern Electric Power Company (SWEPCO)

and West Texas Utilities Company (WTU) (collectively,

Applicants) .

Arkansas Cooperative alleges in its August 20, 1976, Ap-

plication for Rehearing that if it is to experience satisfac-

tory reliability of service, the Southwest Power Pool must

be interconnected with the Texas Utilities. In addition,

the Cooperative urges that the Commission make a complete

and thorough investigation of the matter in which Dennison

Dam, a Federal project operated by the Corp [sic] of Engi-

D-2

Oe OS ae

neers and the power marketed by Southwest Power Admin-

istration (SPA), is being operated to determine whether the

best and most productive use is being made of the interstate

water supply from the Red River. The Cooperative further

requests, “that the Commission hold the necessary hearings

and make a thorough investigation of the consequences of

the Texas Companies’ stubborn refusal to make the inter-

connections required to insure reliability and achieve obvious

economies.”

On August 20, 1976, the Cities - Co-ops filed a Petition

for Rehearing of the Commission’s July 21, 1976, order in

the above-entitled docket. The Cities - Co-ops allege inter

alia, that the Commission erred in determining that HP&L

[sic], DP&L, TP&L and TESCO were not public utilities

pursuant to Section 201 of the Power Act. The Cities-Co-ops

further allege that it was an error for the Commission to

deny the May 13, 1976, Motion of CP&L and WTU for

permanent and emergency interconnection pursuant to Sec-

tions 202(b) and (c) of the Federal Power Act. Based upon

its Petition for Rehearing the Cities - Co-ops request this

Commission to institute hearings and to modify its July 21,

1976, order consistent with the arguments presented in its

petition.

Applicants, on August 20, 1976, filed an Application for

Rehearing of the Commission’s July 21, 1976, order in the

above-entitled docket. In general, the Applicants Petition

for Rehearing alleges that the Commission abused its dis-

cretion in failing to conduct hearings in this matter; that

the Commission erred in failing to consider the anti-com-

petitive effects of its order, and that the material relied

upon was inadequate to support the conclusion that the

Texas Companies were not public utilities. Based upon the

allegations set forth in their Petition for Rehearing Appli-

cants request that the Commission set this matter for

D-3

hearing with respect to the relief requested under Sections

202(a) (b) and (c) of the Federal Power Act.

The Commission finds:

The Applications for Rehearing filed on August 20, 1976,

by (1) Arkansas Electric Cooperative Cooperation [sic],

(2) the Cities of Altus, Frederick, Cordell, Mannford, and

Verdigree Valley Electric Cooperative, Inc. and Indiana

Electric Cooperative, Inc. and the Municipal Electric Sys-

tems of Oklahoma and (3) Central Power & Light Com-

pany, Public Service Company of Oklahoma, Southwestern

Electric Power Company and West Texas Utilities Com-

pany, present no facts or legal principles which would war-

rant any change in or modification of the Commission’s

order issued July 21, 1976, in this docket.

The Commission orders:

The Petitions for Rehearing of the Commission’s July 21,

1976, order in this docket are hereby denied.

By the Commission.

(SEAL)

Kenneth F. Plumb,

Secretary.

D-4

a aa

— te

APPENDIX E

PART II — REGULATION OF ELECTRIC

UTILITY COMPANIES ENGAGED IN

INTERSTATE COMMERCE

DECLARATION OF PoLicy; APPLICATION OF PART; DEFINITIONS

Section 201. (a) It is hereby declared that the business

of transmitting and selling electric energy for ultimate dis-

tribution 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. [49 Stat. 847; 16 U.S.C,

824 (a) |

(b) The provisions of this Part shall apply to the trans-

mission 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

E-1

energy consumed wholly by the transmitter. [49 Stat. 847-

848; 16 U.S.C, 824(b) |

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. [49 Stat, 848; 16 U.S.C, 824(c) ]

(d) The term “sale of electric energy at wholesale” when

used in this Part means a sale of electric energy to any

person for resale. [49 Stat, 848; 16 U.S.C, 824(d) }

(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 Com-

mission under this Part. [49 Stat. 848; 16 U.S.C. 824(e) ]

(f) No provision in this Part shall apply to, or be deemed

to include, the United States, a State or any political sub-

division of a state, or any agency, authority, or instrumen-

tality of any one or more of the foregoing, or any corpora-

tion which is wholly owned, directly or indirectly, by any

one or more of the foregoing, or any officer, agent, employee

of any of the foregoing acting as such in the course of his

official duty unless such provision makes specific reference

thereto. |49 Stat. 848; 16 U.S.C. 824(f) }

INTERCONNECTION AND COORDINATION OF FACILITIES;

EMERGENCIES; TRANSMISSION TO FOREIGN COUNTRIES

Sec. 202. |As amended August 7, 1953.) (a) For the

purpose of assuring an abundant supply of electric energy

throughout the United States with the greatest possible

economy and with regard to the proper utilization and

conservation of natural resources, the Commission is empow-

ered and directed to divide the country into regional districts

E-2

for the voluntary interconnection and coordination of facili-

ties for the generation, transmission, and sale of electric

energy, and it may at any time thereafter, upon its own

motion or upon application, make such modifications thereof

as in its judgment, will promote the public interest. Each

such district shall embrace an area which, in the judgment

of the Commission, can economically be served by such

inverconnected and coordinated electric facilities. It shall be

the duty of the Commission to promote and encourage such

interconnection and coordination within each such district

and between such districts. Before establishing any such

district and fixing or modifying the boundaries thereof the

Commission shall give notice to the State commission of

each State situated wholly or in part within such district,

and shall afford each such State commission reasonable

opportunity to present its views and recommendations, and

shall receive and consider such views and recommendations.

[49 Stat. 848; 16 U.S.C, 824a(a) ]

(b) Whenever the Commission, upon application of any

State commission or of any person engaged in the trans-

mission or sale of electric energy, and after notice to each

State commission and public utility affected and after op-

portunity for hearing, finds such action necessary or appro-

priate in the public interest it may by order direct a public

utility (if the Commission finds that no undue burden will be

placed upon such public utility thereby) to establish physical

connection of its transmission facilities with the facilities

of one or more other persons engaged in the transmission

or sale of electric energy, to sell energy to or exchange

energy with such persons: Provided, That the Commission

shall have no authority to compel the enlargement of

generating facilities for such purposes, nor to compel such

public utility to sell or exchange energy when to do so would

E-3

impair its ability to render adequate service to its customers.

The Commission may prescribe the terms and conditions

of the arrangement to be made between the persons affected

by any such order, including the apportionment of cost

between them and the compensation or reimbursement

reasonably due to any of them. [49 Stat. 848-849; 16 U.S.C.

824a (b) ]

United States is engaged, or whenever the Commission

determines that an emergency exists by reason of a sudden

increase in the demand for electric energy, or a shortage of

electric energy or of facilities for the generation or trans-

mission of electric energy, or of fuel or water for generating

facilities, or other causes, the Commission shall have

authority, either upon its own motion or upon complaint,

with or without notice, hearing or report, to require by order

such temporary connections of facilities and such genera-

tion, delivery, interchange, or transmission of electric energy

as in its judgment will best meet the emergency and serve

the public interest. If the parties affected by such order fail

to agree upon the terms of any arrangement between them

in carrying out such order, the Commission, after hearing

held either before or after such order takes effect, may

prescribe by supplemental order such terms as it finds to be

just and reasonable, including the compensation or re-

imbursement which should be paid to or by any such party.

[49 Stat. 849; 16 U.S.C. 824a(c) ]

(d) During the continuance of any emergency requiring

immediate action, any person engaged in the transmission

or sale of electric energy and not otherwise subject to the

jurisdiction of the Commission may make such temporary

connections with any public utility subject to the juris-

diction of the Commission or may construct such temporary

E-4

FIL AD A eR Senta ath Re Reel Tin at se RM NE 2 “anc at seit coe ta ea anna

See ee ee ee Cae a Senn ee Sen

facilities for the transmission of electric energy in interstate

commerce as may be necessary or appropriate to meet such

emergency, and shall not become subject to the jurisdiction

of the Commission by reason of such temporary connection

or temporary construction: Provided, That such temporary

connection shall be discontinued or such temporary con-

struction removed or otherwise disposed of upon the termi-

nation of such emergency: Provided further, That upon

approval of the Commission permanent connections for

emergency use only may be made hereunder. [49 Stat. 849;

16 U.S.C. 824a(d)]

(e) After six months from the date on which this Part

takes effect, no person shall transmit any electric energy

from the United States to a foreign country without first

having secured an order of the Commission authorizing it

to do so. The Commission shall issue such order upon

application unless, after opportunity for hearing, it finds

that the proposed transmission would impair the sufficiency

of electric supply within the United States or would impede

or tend to impede the coordination in the public interest of

facilities subject to the jurisdiction of the Commission. The

Commission may by its order grant such application in

whole or in part, with such modifications and upon such

terms and conditions as the Commission may find necessary

or appropriate, and may from time to time, after op-

portunity for hearing and for good cause shown, make such

supplemental orders in the premises as it may find neces-

sary or appropriate. [49 Stat. 849; 16 U.S.C. 824a(e) ]

(f) The ownership or operation of facilities for the

transmission or sale at wholesale of electric energy which

is (a) generated within a State and transmitted from that

State across an international boundary and not thereafter

transmitted into any other State, or (b) generated in a

E-5

foreign country and transmitted across an international

boundary into a State and not thereafter transmitted into

any other State, shall not make a person a public utility

subject to regulation as such under other provisions of this

part. The State within which any such facilities are located

may regulate any such transaction insofar as such State

regulation does not conflict with the exercise of the Com-

mission’s powers under or relating to subsection 202(e).

[67 Stat. 461; 16 U.S.C. 824a(f) ]

E46

oo es

Appendix F

DOCKET NO. 14

Re: THE APPLICATION OF

Houston LIGHTING

AND Power COMPANY,

ET AL, RECONNEC-

TION OF THE TEXAS

INTERCONNECT SYSTEM

Tue Pustic UTILity

COMMISSION OF TEXAS

Amended Final Order

After hearing and considering all motions for rehearing

on July 11, 1977, the Commission hereby amends its final

order to be and read as follows:

Houston Lighting & Power Company, herein referred to as

HL&P, Texas Power & Light Company, herein referred to as

TP&L, Dallas Power and Light Company, herein referred to

as DP&L, and Texas Electric Service Company, herein re-

ferred to as TESCO, filed with The Public Utility Commis-

sion of Texas on January 7, 1977, complaints against West

Texas Utilities Company, herein referred to as WTU, and

Central Power and Light Company, herein referred to as

CP&L, alleging that they had breached their contract with

other members of the Texas Interconnect System, herein-

after referred to as TIS, causing a disruption of such system

resulting in loss of economical, reliable, and safe electrical

service to the rate payers of such interconnected systems, and

praying for reconnection of such system as it existed on

May 3, 1976.

F-1

That subsequently the following parties answered or inter-

vened to become parties to the proceedings in said docket:

Central Power and Light Company

West Texas Utilities Company

Lower Colorado River Authority, herein referred

to as LCRA

The City of Austin, Texas

City Public Service Board of City of San Antonio,

herein referred to as CPSB

South Texas Electric Cooperative, Inc.

Brazos Electric Power Cooperative, Inc.

Medina Electric Cooperative, Inc.

Western Farmers Electric Cooperative

Southwest Texas Electric Cooperative, Inc.

Concho Valley Electric Cooperative, Inc.

Texas Municipal Power Agency

Based upon the pleadings and evidence submitted during

the several public hearings in said docket and in the final

hearing of said docket, Federal Power Commission Order in

Docket No. E-9583, and Docket No. E-9558, which in com-

pliance with Council’s [sic] request during the course of

such proceedings and without objections raised during such

hearing the Commission takes official notice of, the Com-

mission makes the following Findings of Fact and Conclu-

sions of Law:

Findings of Fact

1. That the TIS had developed over a long period of

time, some of such interconnections going back

as far as 1924.

2. That as the interconnections increased, the trans-

mission and generating facilities of TIS were de-

F-2

ae ew cea alll

he hl ARO OI ETD atte: aa Bh Ri

10.

11.

veloped to operate in synchronism, so that the loss

of any unit on the system automatically caused the

other units to increase output to pick up the lost

load.

That as of May 3, 1976, there were 282 generating

units in the TIS synchronous operation.

That the TIS prior to May 3, 1976, utilized central

planning for operational controls to insure reliabil-

ity, and stability of the system.

That the TIS was not designed to operate in syn-

chronism with the Southwest Power Pool or any

other large system.

That the TIS cannot operate in synchronism with

the Southwest Power Pool or any other large

system without the expenditure of large sums of

money for new and improved transmission lines.

That the costs for adequate transmission lines for

the TIS to operate in synchronism with the South-

west Power Pool could equal or exceed one billion

dollars.

That interconnection with the Southwest Power

Pool would not increase the reliability of TIS, but

would increase the time required for stablization

of the system in case of the loss of load on one of the

systems.

That the costs for proper interconnections between

the TIS and the Southwest Power Pool exceeds

the benefits to the rate payers on the Texas Inter-

connect System.

That the rate payers of the TIS can ill afford to

carry the extra burden of interconnection with the

Southwest Power Pool in addition to the cost of

converting the generating facilities of such system

so as to use more abundart fuels.

That each of the members of the TIS in order to

protect themselves against the cost and loss of

F-3

12.

13.

14.

15.

16.

17.

stability of interconnection with the Southwestern

Power Pool or other large systems had conditioned

such interconnection on intrastate operation of each

of the interconnected companies through individual

contracts or through the terms aad conditions of

membership in the Electric Reliability Council of

Texas, hereinafter referred to as ERCOT.

That such condition was contractual and if not

covered by individual contracts was part of the

terms and conditions of the ERCOT agreement

and was predicated upon the fact that once a com-

pany enters interstate commerce some other State

or Federal Authority may order interconnection re-

gardless of the costs or benefits to the members of

the Texas Interconnected System.

That if any one of the interconnected companies

goes into interstate commerce all the intercon-

nected companies are placed in interstate com-

merce.

That each company should have the choice of

operating in the mode which best serves the interest

of its customers.

That WTU is currently, and was prior to May 3,

1976, operating in intrastate commerce through its

southern division, and in interstate commerce

through its northern division.

That any party to the interconnected system which

wishes to withdraw from such intrastate system

should first furnish the Commission with complete

plans for such withdrawal, together with the costs

thereof, as well as sufficient engineering data to

establish the reliability of service after withdrawal.

That each company in the TIS should have the

right to operate in interstate commerce if it so

desires provided that it does not increase the

costs or lessen reliability to its rate payers as the

results of such operations, and provided further

F-4

SI tite ssa on nied

18.

19.

20.

21.

22.

that it first withdraws from the Texas Interconnect

System.

That all the members of TIS were also members

of ERCCT and such interconnections being con-

ditioned on contracts between the various parties,

such contracts are presumed to be valid until set

aside or voided by a court of general jurisdiction.

That the mode of operations by WTU after May 4,

1976, was not in the public interest or the interest

of its rate payers, but was done for the benefit

of the corporate interest of Central and South-

west Corporation, the holding company owning

its common stock.

That the mode of operation of WTU subsequent

to May 4, 1976, caused the dissolution of the TIS

resulting in loss of reliability and increased operat-

ing costs for the customers of all the members of

the system.

That the radial tie into Oklahoma from WTU’s

southern division did not serve any interest except

the Corporate interest of Central and Southwest

Corporation, the holding company for WTU and

CP&L.

That the radial tie into Oklahoma from WTU’s

southern division on May 4, 1976, resulted in dis-

solution of the Texas Interconnect System and

increased operating costs to all rate payers of all

the members of such system.

That WTU gave no notice to any other member

of the TIS of the radial tie into Oklahoma because

the purpose of such tie was to force all members

of such system into interstate commerce for the

benefit of the corporate interest of Central and

Southwest Corporation.

That synchronous operations between WTU and

the Southwest Power Pool which began August 28,

F-5

25.

26.

27.

28.

30.

1976, and continued to January 22, 1977, was

unsatisfactory for WTU and all companies inter-

connected with them because of the wide power

swings and delayed stabilization time after an

outage.

That the corporate interest of Central and South-

west Corporation and the public interest are not

necessarily parallel.

That the public interest requires electric utilities

to maintain such transmission interconnections as

are helpful to the reliable and efficient utilization

of existing and proposed generation and transmis-

sion capacity.

That the series of interconnections between and

through the TIS has been relied upon historically

to provide, and is presently capable of providing

the interconnections necessary for the efficient and

reliable utilization of the generation and transmis-

sion capacity of the electric utilities heretofore

interconnected to said system.

That the present plant of utilities connected by

and through the generation and transmission net-

work of the TIS as of May 3, 1976, is designed in

reliance upon said network and depends upon

maintenance of said connections for its reliable and

efficient operation.

That no other system of interconnections is in place

or proposed which will reliabily [stc] and efficiently

utilize the generation and transmission capacity of

existing or proposed plant of the electric utilities

heretofore connected.

That construction of planned new generation and

transmission capacity essential to meet future load

growth, and to implement necessary conversion

to fuels other than natural gas, requires certainty

that the utility systems connected together in the

F-6

31,

32.

34.

TIS will remain so interconnected or substantially

so, henceforth, insofar as can now be forseen.

That the TIS was founded and based upon con-

tractual conditions, either directly or through

ERCOT terms and conditions for membership, and

its dissolution resulted from the breach of such

contractual conditions by WTU.

That since the TIS, either directly or through the

ERCOT agreements, is founded upon contracts be-

tween parties hereto, even if WTU and CP&L claim

such contracts are void or voidable as being against

public policy, until such contracts are adjudicated

to be void or voidable by a final judgment of a

court of competent jurisdiction, this Commission

should not require a reconnection which would force

any party to waive its rights under a contract en-

tered into in good faith between the parties hereto

with respect to the formation and operation of such

system.

That there is presently pending in the Federal

District Court for the Northern District of Texas,

sitting at Dallas, Texas, an action to determine

whether such contracts are void or voidable, and

this Commission has neither the jurisdiction nor

the inclination to pre-empt said Court on the

matter.

That a radial tie off WTU’s southern division sy-

stem which on May 1, 1977, was serving few custo-

mers in Oklahoma had no significant economic

impact, and since the Order in Federal Power Com-

mission Docket No. E-9283 had no jurisdictional

impact, but was maintained solely for the purpose

of precluding a reconnection of the TIS unless all

other parties should agree to waive their contract

rights as to the character and operation of such

system.

F-7

35.

37,

39.

That this Commission is not concerned with the

question of whether the TIS or any member there-

of operates in intrastate or interstate commerce,

but instead is concerned only with the public

interest.

That the radial tie from WTU’s southern division

into Oklahoma is contrary to the terms and con-

ditions of the ERCOT agreement which consti-

tute a part of WTU’s contract with other members

of the TIS and is an impediment to the reconnec-

tion of such system and is not in the public interest

and should be removed or disconnected.

That to order a reconnection of the TIS without

the removal of such radial tie would compel TP&L,

DP&L, TESCO and HL&P to operate contrary to

the terms of their interconnection contracts, and

would in effect usurp the rights of the Federal Dis-

trict Court to pass on the validity of such contracts.

That existing transmission facilities of WTU are

not capable of sustaining synchronous operations

between the utility systems connected through the

TIS and those connected through the Southwest

Power Pool, and the additional high-voltage trans-

mission facilities which would be necessary in

Texas electrically to sustain such synchronous

operations are not presently in place or under

construction or covered by certificates of conven-

ience and necessity or by applications for such

certificates.

That the existing plant of CP&L is not capable

of providing reliable low-cost electric power and en-

ergy if disconnected from the generation and trans-

mission interconnections which existed through

the TIS as of May 3, 1976.

That the public interest requires the maintenance

of the series of interconnections existing on May 3,

F-8

41.

42.

45.

1976, between the electric utilities then intercon-

nected by and through the TIS.

That pursuant to the interim order of this Com-

mission of May 2, 1977, the interconnections of

the TIS have been restored as they existed on

May 3, 1976, and that WTU has disconnected its

northern division facilities from that portion of

its system interconnected with the TIS.

That CP&L and WTU have given notice of their

intention to challenge the authority of this Com-

mission to enter any order affecting in any way the

flow of electricity across state boundaries on the

grounds that such orders are violative of the su-

premacy clause and the commerce clause of the

Federal Constitution.

That the period between May 3, 1976, and May 2,

1977, during which the TIS was bifurcated, was

characterized by reduced reliability, increased

spinning reserves, higher costs, and greater con-

sumption of natural gas than had been the period

preceding May 3, 1976; that such undesirable

conditions can be expected to recur if this Com-

mission were to permit the TIS again to be

bifurcated.

Although at this time the Commission does not

find an immediate need for the expansion of the

TIS into a power pooling network, neither does

this Commission reject its responsibility to provide

for such an arrangement at such time in the future,

if any, when it would benefit the rate payers of

the State of Texas.

That the objections and exceptions to the final

order herein contained in the motions for rehear-

ing except to the extent adopted herein should be

overruled for want of merit.

Conclusions of Law

. That the Commission has jurisdiction over the

parties.

. That utilities which undertake to provide electric

utility service in the State of Texas are under a

duty to provide and maintain such service, instru-

mentalities and facilities as shall be adequate, effi-

cient and reasonable for the provision of such

service irrespective of whether such utilities also

provide service to or receive service from other

states or are subject to the jurisdiction of the Fed-

eral Power Commission.

. That the State of Texas has the authority and

power to insure that utilities providing service in

this State meet their public utility duties irrespec-

tive of whether such utilities also provide service

to or receive service from other states or are also

subject to the jurisdiction of the Federal Power

Commission and that such power and authority is

vested in this Commission.

. That the incidental and insubstantial effect upon

interstate commerce of the exercise of such juris-

diction in this case does not constitute an undue

burden on interstate commerce.

. That this Commission has the power to compel

interconnection of utilities in the public interest.

. That the public interest requires this Commission

to order the immediate and permanent reconnec-

tion of the interconnection between the utility sys-

tems comprising the Texas Interconnected System.

. That this Commission has no jurisdiction to adjudi-

cate the validity or invalidity of the contractual

obligation of WTU to refrain from interstate sales

of electric energy through its southern division

system.

F-10

—

Arte tnd eat onde Maden i

MD bitin scssiter —.

8. That there is no showing in this proceeding that

the public interest requires or would justify this

Commission in relieving WTU of its contractual

obligations or requiring HL&P, TESCO, DP&L

or TP&L to waive their contract rights within the

standards pronounced in Federal Power Commis-

sion v. Sierra Pacific Power Co., 350 U.S. 348

(1958), and High Plains Natural Gas Co. v. Rail-

road Commission of Texas, 467 S.W. 2d 532 (‘Tex.

Civ. App. — Austin 1971, writ ref’d n.re.).

ORDER

The following, therefore, is the ORDER of this

Commission:

1. The Interim Order of this Commission of May 2,

1977, and the actions of the parties pursuant

thereto, are confirmed and approved; the said In-

terim Order is now incorporated into this amended

Final Order by reference.

2. All interconnections presently in existence between

the utility systems comprising the TIS, together

with all such future interconnections as may here-

after be established between them with the ap-

proval of this Commission shall henceforth remain

connected, unless, upon application to this Com-

mission and notice to all parties to this proceeding,

this Commission shall find that and proposed dis-

connection would serve the public interest.

. WTU may block over electric loads between its

northern division system and its southern division

system which does not result in the interstate

transmissions or sale of electric energy by or at

the southern division system.

. WTU is prohibited from re-establishing a connec-

tion between the southern division of its system

which is now connected to the TIS and the north-

F-11

ern division of its system being that segment

which is not now so connected, unless:

A. The contractual prohibitions against inter-

state sales shall be finally adjudicated to

be void or voidable.

B. This Commission shall authorize or the

Federal Power Commission shall order a

connection, or

C. A court of competent jurisdiction shall or-

der WTU to take action inconsistent with

the foregoing prohibition.

5. WTU operating through its southern division and

all other operating utility systems connected with

the TIS are prohibited from making connections

with utility systems not so connected or with seg-

ments thereof and from providing service outside

of their certificated areas, unless:

A. The service is authorized by specific pro-

visions of The Public Utility Regulatory

Act, Art. 1446(c) V.A.C.S.

B. The Federal Power Commission shall ae

such a connection or,

C. This Commission shall; guthorize &fieh -.

connection or service,(a) to copé with an »

emergency or (b) upor’ ‘applicatign, notice

to all parties hereto,,and finding thatthe \

proposed interconnectiom or servicé mi

serve the public interest. J) ,

OC @

6. That any party to the ‘intercon ted system

which wishes to withdraw. and” disconneet er A

such intrastate system shall furnish the C

sion with complete plans. for such. with

together with the costs thereof,.as Well l as s

cient engineering data to establish the relia ity “ye

service after withdrawal and disconnection,’ sai

F-12 a a

4\ 2

. Neleroes OES ROA shee nln Sd 2 ne ti

7. That such information required in Section #5

above shall:

Be given to the Commission at least thirty

days prior to the planned withdrawal and

disconnection,

Such notice of the planned withdrawal and

disconnection shall be given to each mem-

ber utility of the TIS at least thirty days

prior to the planed withdrawal,

. The cost information provided to the Com-

mission shall be sufficient to allow the

Commission to determine the probable

economic impact of the planned withdrawal

on the rate payers of both the withdrawing

utility and the rest of the TIS utilities,

. The engineering information provided to

the Commission shall be sufficient to allow

the Commission to determine the probable

impact of the planned withdrawal and dis-

connection on the system reliability of both

the withdrawing system and the rest of

the TIS utilities.

. The rest of the members of the TIS, within

ten days of receiving notice from the mem-

ber utility of its planned withdrawal and

disconnection, shall file jointly or individ-

ually with the Commission, information

regarding the probable impact of the

planned withdrawal on system operating

costs and system reliability, and notice

of any significant changes in TIS operation

which the planned withdrawal and discon-

nection will necessitate.

8. Members of the TIS shall file with the Commission

every six months a report detailing the utility’s fuel

conversion program. The report should provide

information on present fuel mix, conversion

F-13

10.

11.

achieved in the reporting period, and conversion

scheduled in the coming period. Information should

be provided for all available capacity and the actual

capacity used. Information should be provided de-

scribing the utility’s fuel acquisition program to

meet the conversion schedule described. The reports

shall be due January and July 1st of each year.

Members of the TIS shall file monthly with the

Commission a record of all forced outages exper-

ienced by the utility during the reporting period.

The report should include the date, size (MW)

duration and probable cause of the outage. The re-

port shall also provide the MW remaining in service

during the outage, the coincident system peak dur-

ing the outage, and the percentage generating ca-

pacity reserve of the system at its lowest point

during the outage. The report should detail any

load interruptions, frequency changes, or other al-

terations in normal service, if any, which were un-

dertaken by the utility during the period of outage.

The report shall be due at the Commission not

more than thirty days after the reporting period.

Each party hereto which is connected to the TIS

and which shall henceforth file an application with

this Commission for certification of transmission

facilities, shall give immediate notice to all other

parties to this proceeding of the filing of such

application.

Each numbered paragraph of this Order and each

supplemental Order which may be entered pursuant

hereto, is intended to be and is severable from each

other numbered paragraph of this Order and each

supplemental Order pursuant hereto. The invali-

dation of any numbered paragraph of this Order or

of any supplemental Order which may be entered

pursuant hereto, shall in no wise affect any other

numbered paragraph of this Order or any other

supplemental Order, but the same shall remain in

full force and effect.

F-14

Sate Acie ou we

Nisa di Seiles S Sahase i Aden ac tbew

12. All motions, objections and requested findings of

fact and conclusions of law not included in the above

findings and conclusions are hereby overruled for

want of merit of each of them.

13. The failure of any party or parties to make compb-

ance with this Order shall subject the defaulting

party or parties to all penalties provided in the law

for violation of an Order of this Commission.

14. The motions for rehearing, except to the extent

that the grounds therefor are incorporated in this

Amended Final Order, are overruled for want of

merit.

ENTERED AT AUSTIN, TEXAS, this 11th day of July, 1977.

SicNeD: /s/ GARRETT Morris

Garrett Morris

SicNEp: /s/ ALAN R. Erwin

George M. Cowden

ATTEST:

/s/ Roy J. HENDERSON

Roy J. Henderson

Commission Secretary and

Director of Hearings

F-15

; ~osriinamcocsannanll

Appendix G

SUMMARY OF

ADMINISTRATIVE PROCEEDINGS AND RELATED

LITIGATION INVOLVING CENTRAL AND

SOUTHWEST CORPORATION,

TEXAS UTILITIES COMPANY

AND HOUSTON LIGHTING & POWER COMPANY

Securities and Exchange Commission

Administrative Procedure File No. 3-4951

On March 26, 1974, a motion was filed with the SEC by

the Oklahoma Cities of Altus, Frederick, Cordell and Mann-

ford and Verdigree Valley Electric Cooperative and Indian

Electric Cooperative, Inc. requesting, among other things,

that the SEC undertake a review of the status of Central

and South West Corporation (“CSW”) and its subsidiaries

under the Public Utility Holding Company Act of 1935

(“1935 Act’).

On December 31, 1975, CSW filed a memorandum with

the SEC reporting on the conclusion of an initial engineer-

ing study undertaken by a consulting firm for CSW which

evaluated several alternative modes of future operation of

its system, some of which involve interconnecting facilities

of the subsidiaries of Texas Utilities Company (“TU”) and

adjacent utilities, with existing and proposed interstate

facilities of CSW.

On January 30, 1976, the SEC issued a Notice of and

Order for Hearing relating to the economical operation of

the electric utility facilities of the subsidiaries of CSW as a

single integrated and coordinated system under the 1935 ~

Act and the various plans referred to in the memorandum.

G-1

A pretrial conference in this case was scheduled on May 12,

1976, one week after the events triggered by WTU’s com-

mencement of interstate service from its Texas intrastate

system on May 4, 1976. @ iSsues ave;

1. Whether the electric utility facilities of the subsid-

iaries of CSW, supplemented as planned or pro-

posed, are capable of being economically operated

as a single integrated and coordinated system;

2. Whether the proposals presented by CSW and its

subsidiaries, with any amendments or modifications

which may be developed during the proceeding,

represent a reasonable prospect of achieving such

economical operation, and what contingencies, if

any, may affect carrying out any of such proposals.

3. Whether the Commission’s determination of Febru-

ary 16, 1945, that the electric utility facilities of

C&SW’s subsidiaries constituted a single integrated

system should be modified or set aside in the event

the record in this proceeding does not support a

finding now that those facilities are operated as a

single integrated system or are capable of such

operation under any of the proposals that C&SW

has presented to comply with the standards of

Section 11(b) (1).

DALLAS FEDERAL DISTRICT COURT SUIT

Hearings in this proceeding have occurred in October

1976, January, February, May and September 1977, and in

February and March 1978. Additional hearings are scheduled

to resume in December 1978 at which time CSW will com-

plete its direct case.

Texas Electric Service Company and Houston Lighting &

Power Company were named defendants in a suit filed

against them on May 3, 1976, in the U.S. District Court for

G-2

a A AL TI NS tN ee abe

. tne rene .

: oO eS we

Br emens eras et SRO Ua cad “1S REL

the Northern District of Texas, Dallas Division, by WTU

and CP&L. The suit alleges that the maintenance of a policy

to operate solely within the State of Texas constitutes an

unlawful restraint of trade on a group boycott and concerted

refusal to deal in violation of Section 1 of the Sherman Act.

The suit generally seeks to require TESCO and HL&P to

operate interconnected with the interstate facilities of WTU

and CP&L. The Court denied Plaintiffs’ request for a tem-

porary restraining order and preliminary injunction. All

parties filed motions for summary judgment, all of which

were denied by the Court on June 14, 1977. A trial on the

merits is scheduled to begin on October 2, 1978.

Public Utility Commission of Texas

Docket No. 14

After being informed that WTU had connected service

across the Oklahoma state line and that the TU companies

and HL&P had disconnected from the Texas Interconnected

System (“TIS”) because of this, the PUC called an emerg-

ency hearing for May 7, 1976, at which all members of TIS

were represented. At the conclusion of this hearing, the

PUC found that the interest of the public required the im-

mediate reestablishment of an intrastate interconnected sys-

tem among the companies which wished to continue to oper-

ate intrastate only and issued an interim order requiring,

among other things, those members of the TIS wishing to

remain in intrastate commerce to commence negotiations

immediately for the reestablishment of an intrastate inter-

connected system, and directing all parties to advise the

PUC by May 21, 1976, of the steps taken in this regard.

Following receipt of responses from all parties, the PUC,

on May 24, 1976, found, among other things, that a Texas

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intrastate interconnect system had been reestablished by the

reconnection of HL&P and the TU companies and issued a

final order permitting, among other things, the reconnection

of the other members of TIS with such intrastate system

provided any such reconnection did not put the intrastate

system into interstate commerce.

On January 7, 1977, DP&L, TESCO and TP&L filed a

motion with the PUC requesting that the PUC enter an

order requiring WTU and CP&L (i) to appear and show

cause why they should not be ordered to return to the pre-

May 4, 1976 mode of operation and, pending final outcome

of the proceeding, (ii) to cease implementing any plans

which would facilitate in any manner interconnected oper-

ation with any electric utility outside the State of Texas.

The motion alleged that unless the requested order were

issued, the conduct of WTU and CP&L may frustrate the

proper exercise of PUC jurisdiction and cause irreparable

injury to, and result in a significant adverse impact upon, all

electric utilities in the State of Texas and their customers.

HL&P, LCRA and others also filed similar motions.

At a hearing held on May 2, 1977, the PUC entered an

Interim Order in effect requiring all parties to return to

the pre-May 4, 1976 mode of operation and WTU to sever

its interstate tie into Oklahoma.

On June 2, 1977, following a full hearing, the PUC issued

its Final Order which, among other things, confirmed its

Interim Order. On July 11, 1977, following a hearing on

various motions for rehearing, the PUC entered an Amended

Final Order (which is Appendix F) which clarified but did

not substantively change its June 2 Final Order. On July 22,

1977, CP&L and WTU filed a motion for rehearing of the

Amended Final Order which was denied.

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seein ee Te

weer CE Naty

In May, 1977, CP&L and WTU instituted a statutory

appeal to the District Court of Travis County, Texas, seek

ing to set aside the Interim Order issued by the PUC on

May 2, 1977. The Plaintiffs’ petition was amended on Au-

gust 2, and September 16, 1977, seeking to set aside the

Amended Final Order entered by the PUC on July 11,

1977, and the Interim Order as incorporated therein. The

TU companies and HL&P intervened as Defendants in this

proceeding in October, 1977. Oral Arguments are scheduled

to be heard in this proceeding on November 20, 1978.

In May, 1977, CP&L and WTU also filed a complaint

against the PUC in the United States District Court for the

Western District of Texas, Austin Division, seeking a declar-

atory judgment that the Interim Order entered by the

PUC is void. On July 29, 1977, CP&L and WTU amended

their complaint to seek a declaratory judgment that the

Amended Order of July 11, 1977, and the Interim Order

as incorporated therein, is void. In October, 1977, the TU

companies and HL&P intervened as Defendants in this

appeal. In early May, 1978, the United States and the

Federal Energy Regulatory Commission intervened as Plain-

tiffs therein. Upon the motion of the Defendant PUC, joined

in by the TU companies, HL&P and other parties which

intervened as Defendants, the Court, on May 11, 1978, dis-

missed the appeal without prejudice to the refiling thereof

after the Texas courts have addressed the state law questions

in the case. This action by the U.S. District Court is on

appeal to the Court of Appeals for the Fifth Circuit.

Nuclear Regulatory Commission

Docket Nos. 50-498A and 50-499A

CP&L is one of four holders of a joint license issued by

the Nuclear Regulatory Commission to construct the South

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Texas Project, a two-unit nuclear generating station near Bay

City, Texas. CP&L, on June 4, 1976, filed a petition to inter-

vene and request for hearing out of time with the NRC,

requesting the NRC to conduct an antitrust hearing as a

part of construction permit proceedings for the South Texas

Project. A Licensing Board of the NRC granted CP&L’s

request and ordered a hearing. Upon appeal, the Atomi

Safety and Licensing Appeal Board, by its Decision dated

March 18, 1977, reversed the order granting a hearing and

directed that CP&L’s petition be dismissed for lack of

jurisdiction. CP&L sought and was denied an extension of

time to seek reconsideration of the Safety and Licensing

Board’s order and a request for reconsideration was sub-

sequently denied. Review by the NRC is discretionary and

on March 31, 1977, it announced that it had decided not to

review the decision of the Safety and Licensing Appeal

Board. On May 18, 1977, CP&L petitioned the United States

Court of Appeals for the District of Columbia Circuit to

review the NRC orders and remand the cause to the NRC

with directions to hold a prompt hearing on the antitrust

issues raised by CP&L. HL&P has intervened in this appeal.

HL&P, a co-holder of the permit for the construction

of the South Texas Project, filed a request on February 10,

1977, with the NRC for a waiver of an NRC rule which

would permit tiie NRC Staff to initiate the operating license

antitrust review for the South Texas Project under section

105(c) of the Atomic Energy Act of 1954, as amended.

CP&L, in response to the request for waiver, urged that the

NRC Commissioners should order a hearing with respect

to the antitrust issues raised by its petition to intervene

outside the confines of an operating license review under

section 105(c) of the Atomic Energy Act of 1954, as

amended. The NRC entered an order on June 15, 1977 in

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SiC gna GRO Ula te bE eet

Hon ose

which it declined to direct a hearing, granted HL&P’s rc-

quest for waiver and directed the NRC Staff to seek the

further advice of the Department of Justice with respect to

the operating license antitrust review for the South Texas

Project. On July 26, 1977, CP&L petitioned the United

States Court of Appeals for the District of Columbia Cir-

cuit to review the June 15, 1977 order of the NRC and

remand the cause to the NRC with directions to hold a

prompt hearing on the antitrust issues raised by UP&L.

CP&L also moved to consolidate this petition for review

with the petition for review filed by it on May 18, 1977. The

two petitions for review filed by CP&L have been consoli-

dated and briefs have been filed by the parties.

By letter dated February 21, 1978, the Department of

Justice, in response to the request of the NRC Staff pur-

suant to the above-mentioned Order of June 15, 1977, ren-

dered the requested advice, indicated that the intrastate

provisions of agreements among TIS members may raise

serious antitrust issues, and concluded that changed circum-

stances required that an antitrust hearing be held on the

operating license application. Thereafter, a Notice of Anti-

trust Hearing on Operating License Application was pub-

lished in the Federal Register on April 14, 1978. Texas

Utilities Generating Company, DP&L, TESCO and TP&L

filed a petition to intervene in this proceeding (Docket Nos.

40-498A and 50-499A) on April 28, 1978. By Answer, dated

May 16, 1978, the NRC Staff has opposed the petition to

intervene filed by the TU companies.

On May 17, 1978, the Atomic Safety & Licensing Board

issued a Notice of Special Prehearing Conference in this

proceeding to be held on June 21, 1978, at which conference

the Board will consider, among other things, the identifica-

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tion of key issues in the proceeding, the ruling on inter-

vention petitions, and the establishment of a schedule for

further actions in the proceeding.

Other FPC (FERC) Proceedings

Various other motions and petitions are pending seeking

relief substantially the same as that sought in the May 4,

1976 and May 13, 1976 petitions of the CSW subsidiaries,

as follows:

1. Docket No. E-9593. On April 27, 1977, CP&L, PSO,

SWEPCO and WTU filed an Emergency Petition for Pro-

ceedings and Joint Hearings Pursuant to Sections 307 and

209(B) of the Federal Power Act, requesting that the Com-

mission initiate a proceeding to conduct joint hearings with

the Public Utility Commission of Texas concernng the ques-

tion of intrastate and/or interstate service of Texas inter-

connected public utility systems raised by the motions

filed with the Texas PUC by HL&P and the TU companies

on January 7, 1977. This petition was denied by order of

the Commission dated July 5, 1977. On July 22, 1977, the

Corporation Commission of the State of Oklahoma filed an

application for rehearing of the July 5 order, ciaiming that

in its petition to intervene, in addition to its request for

intervention, it requested the Commission to institute an

investigation pursuant to Section 207 of the Federal Power

Act “to determine whether or not adequacy or sufficiency of

service to the people of the State of Oklahoma has been

affected by the recent disconnection of service between WTU

and PSO.” The Corporation Commission stated that the

Commission failed to address this request in its July 5

order. On August 1, 1977, the Oklahoma Association of

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Electric Cooperatives filed an application for rehearing for

the same reason, among others, stated by the Corporation

Commission. On August 4, 1977, the CSW subsidiaries ap-

plied for rehearing of the order for the same reason as the

Corporation Commission. On August 18, 1977, the FPC

issued an order granting rehearing solely for the purposes

of further consideration.

3. Docket No. E-9578. On December 22, 1976, Tex-La

Electric Cooperative, Inc. filed a petition with the Federal

Power Commission, requesting the Commission to commence

an investigation to determine whether TP&L engages in

interstate commerce, and to determine whether TP&L’s

wholesale sales are subject to the jurisdiction of the Texas

Public Utility Commission or the jurisdiction of the Federal

Power Commission, alleging that TP&L receives energy

from the Denison Dam, and the “Denison Dam is located

in Oklahoma and Texas.” On the same date Tex-La filed

a similar petition with the Texas Public Utility Commis-

sion. Tex-La represents 14 rural electric cooperatives engaged

in the distribution and sale of electric power and energy.

Tex-La purchases power and energy for the use and bene-

fit of its member cooperatives from TP&L pursuant to a

contract dated June 12, 1973. On January 25, 1977, the

subsidiaries of CSW and certain Oklahoma consumers filed

petitions to intervene in this proceeding. TP&L filed an-

swers asserting that the Tex-La petition should be denied

because no jurisdictional interstate energy had been trans-

mitted into or out of the TU system. On October 31, 1977,

the Federal Energy Regulatory Commission (successor to

the FPC) issued an order, a copy of which is attached as

Attachment 4, stating that the issue raised as to the inter-

state character of transactions in Denison Dam energy was

not disposed of by prior FPC orders, permitted intervention

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by certain CSW subsidiaries and others, and ordered a pub-

lic hearing now scheduled to commence in 1979, concerning

the investigation of matters contained in the Tex-La petition

relating to whether there has been jurisdictional transmission

of interstate energy into or out of the TU system through

facilities at Denison Dam.

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.