# Appendix — Ratepayers Fight Back v. Middle South Energy, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_1105%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1986 - **Citation:** 474 U.S. 1102 ## Text B5-a95” a SUPREME COURT OF THE UNITED an . VOCE RH F. SPANIOL, OCTOBER TERM, 1985 Supreme Court, U.S | FILED NOV 2y 1985 NO. RATEPAYERS FIGHT BACK PETITIONER V. MIDDLE SOUTH ENERGY, INC. ARKANSAS POWER & LIGHT CO. ARKANSAS PUBLIC SERVICE COMMISSION ATTORNEY GENERAL OF ARKANSAS RES PONDENTS... APPENDIX TO PETITION FOR A WRIT OF CERTIORARI November 21, 1985 JAY THOMAS YOUNGDAHL YOUNGDAHL, YOUNGDAHL & WRIGHT, P.A. 2101 Main Street P. O. Box 6030 Little Rock, Arkansas 72216 (501) 376-6355 Counsel for the Petitioner II. iil. TABLE OF CONTENTS Opinion of Court of Appeals Judgment and Opinion of District Court District Court's Order Denying Motions To Amend and Stay Judgment APSC Order to Show Cause Constitutional and Statutory Provisions Page A-106 UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT No. 84-2409 No. 84-2410 No. 84-2480 Middle South Energy, Inc., and Arkansas Power and Light Company, Appellees, Vv. Arkansas Public Service Commission; Robert E. Johnston, Commissioner; Patricia S. Qualls, Commissioner; and James W. Daniei, Commissioner; Attorney General of ‘Arkansas; and Ratepayers Fight Back, Appellants. Appeal from the United States District Court for the Eastern District of Arkansas Submitted: April 8, 1985 Filed: August 23, 1985 Before ROSS and JOHN R. GIBSON, Circuit Judges, and MEREDITH,* Senior District Judge. JOHN R. GIBSON, Circuit Judge. *The HONORABLE JAMES H. MEREDITH, Senior United States District Judge for the Eastern District of Missouri, sitting by designation. The issues before us involve a judgment of the district court! enjoining the Arkansas Public Service Commission from continuing proceedings to determine whether it should declare void ab initio certain contracts entered into by Arkansas Power and Light Company with respect to the purchase of power from, or payment for construction of, a nuclear power plant located in ~, lfhe Honorable Henry Woods, United States District Judge for the Eastern District of Arkansas. A-1 Mississippi. The Arkansas Public Service Commission, the Attorney General of Arkansas, and a consumer group called Ratepayers Fight Back argue that the district court erred in finding that the Federal Energy Regulatory Commission has exclusive jurisdiction over the contracts that were the subject of the APSC's proceedings. They further argue that the district court lacked subject matter jurisdiction, that the litigation was not ripe, and that the court abused its discretion by failing to abstain pending the outcome of the state agency proceedings and by granting overbroad relief. We have carefully considered these arguments, and because we believe that the actions threatened by the APSC would burden interstate commerce, we affirm the judgment of the district court. The Arkansas Power and Light Company, together with the Louisiana Power and Light Company, the Mississippi Power and Light Company, and New Orleans Public Service, Inc., are wholly-owned operating subsidiaries of Middle South Utilities, Inc. The operating companies provide electric service to wholesale and retail consumers in Arkansas, Louisiana, Mississippi, and Missouri, with an aggregate consumer population of approximately five million people. Planning and operation of the electric generation and transmission facilities needed to meet the demands of the MSU system are performed according to systems agreements. "Transmission and generation functions are so coordinated and integrated as to permit an instan- “ taneous transfer of electrical power to any part of Middle South's transmission network." Arkansas Power & Light Co. v. Federal Power Commission, 368 F.2d 376, 378 (8th Cir. 1966). Because the need was seen in the early 1970's to develop additional power generating facilities, Middle South Energy, iInc., also a wholly-owned MSU subsidiary, was created in 1974 to finance, construct, and Operate a two-unit nuclear generating plant to be located in Port Gibson, Mississippi and known as the Grand Gulf Nuclear Electric Station.2 The creation of MSE was necessary because none of the four operating subsidiaries had _ suf- ficient resources to finance and construct the nuclear generating plant. This case involves contracts 2Grand Gulf Unit No. l was scheduled to commence commercial opera- tion on July 1, 1985, while the construction of Grand Gulf Unit No. 2 A-4 entered into with respect to the financing and construction of the plant, as well as agreements made concerning the sale of the power to be generated. MSE has financed the three billion dollar cost of the first unit by selling common stock to MSU,2 borrowing from commercial banks, and issuing first a has been suspended. 3mMsuU is registered under and subject to Securities and Exchange Commission authority by the Public Ucility Holding Company Act of 1935. 15 U.S.C. §§ 79 to 792-6 (1982). These stock sales received SEC approval. Middle South Utilities, SEC Public Utility Holding Co. Act Rel. No. 23,579 (Jan. 23, 1985). In opposing approval of the most recent stock sale, APSC urged that the SEC withhold authoriza- tion until AP&L could show compliance with Arkansas law. The SEC rejected this argument, but assured the APSC that the federal securities authorization did not "supersede requirements of state laws as they may eventually be established in respect to AP&L's commit- ments in the financing of the Grand Gulf project." Id. at 7. A-5 mortgage4 and pollution control bonds .> In 1974, through a document called the Availability Agreement, MSE obtained from each of the MSU operating companies their commitment to purchase power from the Grand Gulf project. The operating companies agreed to pay MSE, beginning on specific dates, amounts needed for MSE to meet its operating expenses, whether or not the two units of the pro- ject were then operating. Payments would be credited to the cost of their future power purchases from MSE. The Availability Agreement has been essen- 4This transaction was approved by the SEC. Middle South Energy, SEC Public Utility Holding Co. Act Rel. No. 23,3526 (Dec. 12, 1964). SThis transaction was approved by the SEC. Middle South Energy, SEC Public Utility Holding Co. Act Rel. No. 23,495 (Nov. Energy, SEC Public Utility Holding Co. Act Rel. No. 23,495 (Nov. 23, 1984). APSC urged the SEC to withhold approval on the ground that AP&L had not complied with state law. The SEC declined, but noted that the SEC A-6 tial to the financing of the project. 6 Pursuant to a series of ten agreements entered into between 1977 and 1984, MSE has assigned its rights under. the Availability Agreement to secure indeb- tedness in excess of $2.5 billion.’ The Availability Agreement § ini- tially provided that the share of Grand Gulf power taken by the operating com- "does not resolve disputed issues of state law and the order in this case does not prejudice. the Arkansas Commission, which may assert its juris- diction under whatever procedures the state laws permit." Id. at 2 (footnote omitted). 6The financing aspects of the Original Availability Agreement were approved by the SEC. Middle South Utilities, SEC Public Utility Holding Co. Act Rel. No. 18,437 (June 4, 1974). APSC did not intervene in this pro- ceeding. Its attacks on the agreement in collateral proceedings before the SEC have been rejected. See supra notes 3 & - 7A number of agreements were executed in which the operating com- panies agreed that in case of default by MSE they would make payments due under the Availability Agreement directly to A-7 ‘ panies would vary relative to their respective needs. In June 1981, the Availability Agreement was amended’ to fix the allocations of power in these percentages:9 AP&L - 17.1%; LP&L - 26.9%; MP&L - 31.3%; NOPSI - 24.7%. On July 28, 1981, MSE and the Operating companies entered into a Reallocation Agreement, under which the Operating companies agreed to purchase power in- the following percentages: the banks. In return, the lenders agreed that, should some regulatory agency prohibit the operating companies from making payments under the Availability Agreement, the lenders would make unsecured advances to MSE equal to the amounts it would have received under the Availability Agreement. 8The amendment was approved by the SEC. Middle South Energy, Public Utilities Holding Co. Act Rel. No. 22,098 (June 22, 1981). 9South Mississippi Electric Power Association, which is not a sub- Sidiary of MSU, owns 10% of the Grand Gulf project. The allocation figures pertain to the 90% share owned by MSE. A-8 APSL - 0%; LP&L - 38.57%; MP&L ~- 31.63%; NOPSI - 29.80%.19 In June 1982, MSE and the operating companies entered into an agreement, the Unit Power Sales Agreement, which required each operating company to purchase the shares of power specified in the Reallocation Agreement. AP&L signed the UPSA but, in accordance with the terms of the Reallocation Agreement, did not agree to purchase any power from the project. The UPSA was filed with the Federal Energy Regulatory Commission for approval as a wholesale power sales agreement. In February 1984, a FERC admin- istrative law judge rejected the allo- cation in the UPSA and obligated the operating companies to purchase power from Unit No. l as follows: AP&L - 363%; lOfhis agreement was approved by the SEC. Middle South Energy, Public Utility Holding Co. Act Rel. No. 22,280 (Nov. 18, 1981). A-9 LP&L - 14%; MPSL - 33%; NOPSI =- 17%. The ALJ reasoned that: [T7he evidence of Middle South's witnesses is overwhelming that the Middle South system is a_ single integrated and coordinated electric system operating in Louisiana, Mississippi, Arkansas and Missouri. Planning, construction, and operations are conducted for the system as a whole. Loads on the system are met by centrally dispatching the most economical mix of generators wherever located in the system. Middle South Utilities, Inc. owns the stock of the operating utilities as well as the stock of MSS and MSE. When difficult system decisions have to be made, such as deciding the alloca- tion of Grand Gulf, it is the Board of Directors of Middle South utilities, Inc., that ultimately makes the decision, not an individual subsidiary company or qa group of subsidiaries. The Grand Gulf project was initiated in the 1970's to meet the then projected demand on the Middle South system by the end of that decade and not just the load of any Middle South operating company or companies. Constructing generation to meet system load was true of every unit constructed on the Middle South system. Under these circumstances the costs of Grand Gulf capa- city and energy should be shared equitably by MSU's operating companies and their customers. Middle South Energy, 26 F.E.R.C. q@ 63,044, at 65,106 (1984), aff'd., 31 F.E.R.C. {¢ 61,305 (1985). The APSC had actively intervened in the proceedings before FERC. It had contended that FERC had no jurisdiction to obligate AP&sL to take a share of Grand Gulf and that Arkansas neither wanted or needed the relatively high-cost power from the pro- ject. These arguments were rejected. Approximately one month later, the APSC issued two orders instituting for- mal inquiries into AP&L's role in the Grand Gulf project. Predicting that Grand Gulf would result in “dramatic [rate] increases" which would place an “intolerable burden" on AP&L's customers and have a "crippling effect" on the Arkansas economy, Arkansas Power & Light Co., Ark. Pub. Serv. Comm'n Docket No. 84-041-OII, at 1 (Mar. 12, 1984), the APSC ultimately sought to “protect the interests of the residential, business, and industrial customers of AP&L and preserve the viability of the economy of the State of Arkansas." Arkansas Power & Light Co., Ark. Pub. Serv. Comm'n Docket No. 84-040-OII, at 2 (Mar. 12, 1984). On August l, 1984, the APSC ordered AP&L to appear and “show cause why all contracts and agreements made by it with respect to any obligations to purchase power from or to pay for construction and operation costs of the Grand Gulf project should not be held to be void ab initio as a matter of law." Arkansas Power & Light Co., Ark. Pub. Serv. Comm'n Docket No. 84-190-U, at 6 (Aug. l, 1984). The APSC had already concluded that thirty-six such agreements constituted prima facie violations of Arkansas law requiring APSC approval of certain transactions by public utilities. Id.; see Ark. Stat. Ann. 8 73-253(a) (3) (1979 Repl.) (utility must have APSC approval to "sell, acquire, lease or rent any public utility plant or property constituting an operating unit or system"); id. § 73-255 (Supp. 1983) (utility must have APSC approval to “issue stocks, bonds, notes or other evidence of indebtedness payable at periods of more than thirty- Six (36) months"). After AP&L's motion to dismiss the show cause order for lack of jurisdiction was denied, MSE filed suit in the district court to tem porarily and permanently enjoin the pro- ceedings before the APSC. AP&L intervened as a plaintiff, while the Arkansas Attorney General and Ratepayers Fight Back intervened as defendants. A hearing was held on the consolidated issues of preliminary and permanent relief. The district court found that the APSC's actions were preempted by the Federal Power Act, 16 U.S.C. §§ 824-824k (1982), and permanently enjoined APSC from conducting further proceedings on the show cause order. Regarding the need for equitable relief, the court found: MSE must raise an addi- tional several billion dollars in the next few years to pay constrution and financing costs. The ability to raise these funds is dependent on the enforceability of the threatened agreements. If the actions of the APSC are not enjoined, the cost of capital to MSE will be raised to the point that the Project is jeopardized, and the ability of MSE to provide its multi- state wholesale customers with power will be irreparably impaired. Middle South Energy, Inc. v. Arkansas Public Service Commission, No. LR-C-84-778, slip op. at 5 (E.D. Ark. Sept. 14, 1984).11 The APSC, the Arkansas Attorney General, and Ratepayers filed an appeal with this court.12 After the case was llthe SEC noted recently that delaying commercial operation of the reactor would increase costs by about $28 million per month, primarily in finance charges. Middle South Utilities, Public Utility Holding Coc. Act Rel. No. 23,579 at 9 (Jan. 23, 1985). l2arkansas Electric Energy A-15 argued, FERC arfirmed the order of the ALJ allocating AP&L 36% of the Grand Gulf capacity. Middle South Energy, 31l F.E.R.C. ¢ 61,305 (1985). I. As an initial matter, amicus curiae on behalf of the apsci3 asserts that MSE's suit does not “aris({e! under the Constitution [or] laws *** of the United States" as required to invoke federal question jurisdiction under 28 U.S.C. § 1331 (1982) because, pursuant to the "“well-pleaded complaint" rule, the federal question must be raised necessarily as an element of the plain- Consumers and Reynolds Metals Company filed an amicus curiae brief, as did the Metropolitan Life Insurance Company and other holders of MSE's first mortgage bonds. l3we consider this issue, though not raised by a party, since subject matter jurisdiction cannot be waived or conferred by consent. Insurance Corp. A-16 tiff's entitlement to relief and cannot merely be a response to an anticipated Gefense. See generally Francise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 7-12 (1983) (citing older cases). Specifically, amicus curiae argues that jurisdiction is lacking because MSE's preemption claim is merely a defense to the state admi- nistrative action. See id. at 15-16 (discussing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950)). This argument ignores the recognition by the Supreme Court that “a claim of federal preemption does not always arise as a defense to a coercive action." Franchise Tax, 463 U.S. at 12 n.12; see of Ireland v. Compacnie des Bauxites de Guinea, 456 U.S. 694, 702 (1982); United States ex rel. Burnette v. Driving Hawk, 587 F.2d 23, 24 (8th Cir. 1978). A-17 Aluminum Co. of America v. Utilities Commission, 713 F.2d 1024, 1028 (4th Cic. is6s). eart.. gdenieag,. i864 Ss. Ct. 1326 (1984). The "not a defense to a state action" rule is premised on the determination that the declaratory judgment act, 28 U.S.C. § 2201 (1982), is merely procedural and that Congress thereby did not enlarge the subject matter jurisdiction of federal courts. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). This concern is not implicated when the declaratory plaintiff has independent grounds for federal relief such as an injunction. Note, Federal Jurisdiction over Declaratory Suits Challenging State Action, 79 Colum. L. Rev. 983, 1001 (1979).14 thus, the district court 147% deny access to federal court when, regardless of the existence of procedures for declaratory relief, an injunction would otherwise have been A-18 available would contract the jurisdic- tion of the federal courts. Note, Supra, at 1001. Cases that appear to have taken this route have generally relied on the Supreme Court decision of Public Serv. Comm'n v. Wycoff Co., 344 U.S. 237 (1952), which actually turned on the failure of the plaintiff to establish a ripe controversy or to iden- tify what right it was asking the court to declare. Id. at 244-46; see Franchise Tax, 463 U.S. at 16 n. 14. Furthermore, the widely quoted Wycoff dictum suggesting that even if the controversy had been ripe, federal sub- ject matter jurisdiction would have been lacking, is again couched solely in terms of declaratory relief, the Court having determined that the plaintiff had abandoned its request for an injunction because of the absence of proof of the | threatened injury necessary to support that form of relief. 344 U.S. at 241. The Supreme Court itself has never | interpreted Wycoff, as some courts of appeals have, to hold that subject matter jurisdiction does not exist any | time a federal claim can be litigated as a state defense. Illinois v. General Baee. GCO., 663 F.2d 206, 211 (7th Cir. 1982), cert. denied, 461 U.S. 913 (1983); Braniff Int'l v. Florida Pub. Serv. Comm'n, 576 F.2d 1100, 1104 (5th Cir. 1978). Concerns with the timing of adjudication need not distort analysis of subject matter jurisdiction but instead can be--and more appropriately are--handled through the discretion of courts in matters involving equitable relief and through doctrines such as exhaustion of administrative remedies | and abstention. Note, supra, at 1001. A-19 SS had subject matter jurisdiction pursuant to MSE's complaint, wh’ch on its face properly raises the federal question of whether the state proceeding should be enjoined on preemptionl5 grounds .16 Shaw v. Delta Air Lines, 463 U.S. 85, 96 n.14 (1983). Appellants nevertheless argue that jurisdiction is lacking because there will be no "ripe" case or controversy until the APSC reaches some deter- Mination as to the validity of the contracts and the effects of that deter- 15rt makes no difference to sub- ject matter jurisdiction that we ultima- tely choose not to decide this case on preemption grounds. Furthermore, the operation of the commerce clause in limiting state authority is sufficiently Similar to preemption that we believe the same jurisdiction analysis applies. l6fhere are no Eighth Circuit decisions to the contrary. Despite the representations of amicus curiae, three of the cases it cites stand only for the proposition that a preemption claim does A-20 mination are felt by MSE. See Abbott not raise a federal question un_er sec- tion 1331 when, absent the availability of the declaratory judgment procedure, lit would have arisen only as a defense to a state action. Neither the language nor context of these cases extends this interpretation of the well-pleaded complaint rule to foreclose injunctions sought on preemption grounds. E.g., First Fed. Sav. & Loan Ass'n v. Anderson, 681 F.2d 528 (8th Cir. 1982) (declaratory judgment only sought; no pending state proceeding to enjoin); Lawrence County v. South Dakota, 668 F.2d 27 (8th Cir. 1982) (same); First Nat'l Bank v. Aberdeen Nat'l Bank, 627 F.2d 843 (8th Cir. 1980) (en banc) (removal to federal court improper when based on ground that preemption would be raised as a defense to state tort action). The one case cited by amicus Curiae in which we did find subject matter jurisdiction lacking despite a request for an injunction is distinguishable in that the panel expressly found the preemption claim there to be only in the nature of a defense to the state administrative pro- ceeding. Home Fed. Sav. & Loan Ass'n v. Insurance Dep't, 571 F.2d 423, 427 (8th Cir. 1978). Since MSE is seeking affir- Mative relief from the APSC's attempts to even inquire into certain affairs relating to its business, we need not decide if the characterization of the preemption claim in Home Federal remains viable in light of Shaw. A-21 ~ Laboratories v. Gardner, 387 U.S. 136, 148-49 (1967). This argument again ignores the true nature of the relief sought. MSE challenges not the state's ultimate substantive decision but its authority to even conduct the con- templated proceeding. It can hardly be doubted that a controversy sufficiently concrete for judicial review exists when the proceeding sought to be enjoined is already in progress. Il. The district court's decision on preemption grounds was based on the Federal Power Act. Congress's purpose in enacting the Act was to regulate “the transmission of electric energy in interstate commerce and *** the sale of electric energy at wholesale in interstate commerce." 16 U.S.C. § 824(b) (1982). To accomplish this goal, Congress gave FERC the power to make “just and reasonable" any public utility “rule, regulation, practice or contract affecting [a] rate, charge, or Classification [that] is unjust, unreasonable, unduly discriminatory or preferential.” Id. § 824e(a) (emphasis added). The district court held that the Availability Agreement and its amend- ments were “agreements for the purchase of wholesale power in interstate com- merce or are so integrally related to such purchases that they are subject to the exclusive jurisdiction of the FERC." Slip op. at 7. The other agreements subject to the APSC order were found to be “essential to the interstate whole- sale sale of power and therefore *** not subject to state jurisdiction." Id. We read the district court's order as finding preemption on the ground that the threatened actions of the APSC would block the acomplishment of the purpose behind the Federal Power Act. See Hines v. Davidowitz, 312 U.S. 52, 67 (1941). Essentially, the APSC is trying to secure for Arkansas the zero allocation embodied in the UPSA. Such a result would be contrary to the 36% allocation recently approved by FERC in regulating the wholesale aspects of the Grand Gulf project. Thus, a strong argument can be made that the APSC's powers have been preempted by the Federal Power Act. The appellants, on the other hand, urge that we examine the APSC's powers in light of other federal legislation, the Public Utility Holding Company Act of 1935. This law, they argue, expressly reserves to the states some jurisdiction to regu- late the securities dealings of utility holding companies and their subsidiaries. See 15 U.S.C. §§ 79f(b), 79g(g), 79u (1982); infra at 17-20; Supra notes 3 & 5. The district court's order did not Qu by appellants. We are not convince that the district court improperly based its decision on preemption grounds. Nevertheless, we choose not to address the difficult question of whether the authority denied the states under the Federal Power Act may be granted to them by the Holding Company Act, because the case can be disposed of under well- settled commerce clause principles. See pe S@S SSSSSSSESSESESEE New England Power Co. v. New Hampshire, 455 U.S. 331, 334 n.10 (1983) (deferring avor rh resolution of preemption issues in of commerce grounds). Ifill. The commerce clause grants Congress the power to regulate commerce among the eee Use. CONSt., art. I, §$ 8, cl. 3. It has long been recognized as implying limits on the powers of the states to erect barriers against interstate trade. South-Central Timber Development Vv. Wunnicke, 104 S. Ct. 2237, 2240 (1984); see Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 317-18 (1852). Absent conflicting federal legislation, the States may exercise police power over matters of legitimate local concern even though such regulation may affect pee eS eS Se See SSS SRE EE = interstate commerce. Philadelphia v. New Jersey, 437 U.S. 617, 623-24 (1978); Raymond Motor Transporation v. Rice, 434 U.S. 429, 440 (1978). Incidental bur- dens on interstate commerce may be una- voidable when a state legislates to protect its citizens. Philadelphia v. New Jersey, 437 U.S. at 623-24. Nevertheless, the safeguarding of local interests must ultimately yield to the principle that "one state in its dealings may not place itself in a posi- tion of economic isolation." Baldwin v. G.A.F. Seeling, Inc., 294 U.S. 5ll, 527 (1935). "“(T)he regulation of utilities is one of the most important of the func- tions traditionally associated with the police power of the states." Arkansas Electric Cooperative Corp. v. Arkansas Public Service Commission, 461 U.S. 375, 377 (1983). “Need for new power facili- ties, their economic feasibility, and rates and services, are areas that have been characteristically governed by the States." Pacific Gas & Electric Co. v. State Energy Resources Conservation & Development Commission, 461 U.S. 190, 205 (1983); see also Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557, 569 (1980) ("The states's concern that rates be fair and efficient represents a clear and substantial governmental interest."). At the same time, however, the “production and transmission of energy is an activity particularly likely to affect more than one state, and its effect on interstate commerce is often significant enough that uncontrolled regulation by the States can patently interfere with broader national interests." Arkansas Electric, 461 U.S. at 377. The dispositive issue here is whether the APSC's desire to protect Arkansas' interest has resulted in an impermissible burden on interstate commerce. IV. The Attorney General argues that Since the APSC has only issued a show Cause order, and not actually voided the contracts in issue, there is no signifi- cant burden on interstate commerce. The APSC's position in the administrative proceedings surrounding Grand Gulf, however, leaves little doubt that APSC intends to substantially reduce or eli- Minate AP&L's participation in the pro- ject. The threat of enforcement presented by the show cause order is sufficient to support an injunction against further proceedings. On March 12, 1984, the APSC issued two orders instituting investigations. The first, retrospective in nature, referred to developments in FERC pro- ceedings that “portend[{ed] catastrophi- cally enormous rates increases" for APS&L customers. Arkansas Power & Light Co., Ark. Pub. Serv. Comm'n Docket No. 84-040-OII, at 1 (Mar. 12, 1984). The second order, prospective in nature, was to look forward to ascertain what the ratepayers of AP&L, AP&L itself, the Commission, the Governor, and the General Assembly may do to circumvent or deflect the economic harm that looms over the State from the imminent prospect of being mandated by a federal agency tc pay for a power generating plant that is possibly neither needed or wanted by anyone in A-30 iar Arkansas, *** and that would, if forced upon the State potentially resuit in suc immense amounts of exces generating capacity that 1 could neither be used or sol by AP&L. J (ctr Ww , m a a oe - % mt Co., AEFK. Pub. 5 | ~ Arkansas Power §& rt Serv. Comm'n Docket No. 84-041-0II, at 2 (Mar. 12, 1984); see supra at 6. Nearly five months later, APSC issued the show cause order that gave rise to this lawsuit. It listed thirty- Six agreements relating to the Grand was and is dependent on the[se] agreements.” Arkansas Power & Light Co Ark. Pub. Serv Comm'n Docket No. 84-190-U, at 5 (Aug. 1, 1984). The APSC Stated that its approval, required by Arkansas law, had not been given the agreements and that some or all were "Drima facie violations of Arkansas law." Id. at 6. AP&L was ordered to apoear and show cause "why all contracts and agreements made by it with respect to any obligations to purchase power from or to pay for construction and Operation costs of the Grand Gulf Project should not be held void ab initio as a matter of law." Id. The APSC later denied AP&L's motion to dismiss the show cause order for lack of jurisdiction based On FERC's exclusive jurisdiction over the agreements. Arkansas Power & Light Co., Ark. Pub. Serv. Comm'n Docket No. 84-190-U (Aug. 31, 1984). The APSC argued vigorously before both FERC and the SEC for a reduction or elimination of AP&L's role in Grand Gulf. In an SEC proceeding to authorize the sale of common stock by MSE, the APSC asked the Commission to consider the "discontinuance or moth-balling" of the Grand Gulf project. Middle South Utilities, SEC Public Utility Holding omen MeL. NO. 23,579 at 9 (Jan. 23, 1985). In litigation before FERC, the APSC sought to avoid the allocation of any Grand Gulf power to Arkansas, claiming that the state does not need and cannot economically use the power. Middle South Eneray, 26 F.E.R.C. meeeepuee (1984), aff'd, 31 F.E.R.C. @ 61,305 (1985).17 The threat posed by the show cause Order is sufficient to warrant the injunction. In Pennsylvania v. West Wargania, 262 U.S. 553 (1923), two sta- ‘ tes brought Suits to enjoin West l7purther, after this lawsuit was filed, the following account appeared in the press: "“"[A]n attorney representing the Arkansas utility com- A-33 a ai ai caeai tecnica initia Virginia from enforcing legislation that would have reduced out-of-state delivery of West Virginia natural gas. The Court rejected the argument that the suits were premature, finding that the gas curtailment was "presently threatened and likely to be productive of great injury." Id. at 591. In proceeding to consider the merits of the commerce clause issue, the Court observed: "One does not have to await the consummation of threatened injury to obtain preven- tive relief. If the injury is certainly impending that is enough." Id. at 593; see also Pacific Gas & Electric Co. v. mission said the commission staff is confident it can defend its order against the Middle South suit. He added that "if the APSC voids AP&L's part (of Grand Gulf), the whole thing goes down the toliet." Wall St. J., Sept. 6, 1984, at 7, col. 4-5 (Plaintiff's Ex. 10). A-34 State Energy Resources Conservation & Development Commission, 461 U.S. 190, 201 (1983) (decision on preemption of state nuclear-waste disposal law should not be delayed because postponement "would likely work substantial hardship on the utilities"). The mere possibility that a state's interpretation of its law may avoid the necessity for an injunction does not preclude federal review. In City of Chicago v. Atchison, Topeka & Santa Fe Railway, 357 U.S. 77 (1958), the Court rejected an argument in a commerce clause case that a declaratory judgment Should not issue because the state courts had not been given a chance to act. Among other things, the Court reasoned that: "Remission to [state court] would involve substantial delay and expense, and the chance of a result different from that reached below, on the issue of applicability, would appear to be slight." Id. at 84. In this case, as in the West Virginia and Pacific Gas cases, the threatened action is likely to cause great injury, in the form of higher financing costs for MSE. Also, as in City of Chicago, the chance of a state adjudication obviating the commerce clause issue is’ remote. Thus, we conclude that a commerce clause viola- tion can be found notwithstanding that the APSC has not actually voided the agreements. Cf. Northern Natural Gas Co. v. State Corpvoration Commission, 372 U.S. 84, 92 (1963) ("{A]lthough colli- sion between the state and federal regu- lation may not be an inevitable consequence, there lurks such imminent possibility of collision in orders pur- posely directed at interstate wholesale purchasers that the orders must be declared a nullity."); Public Service Commission v. Wycoff Co., 344 U.S. 237, 245 (1952) (Court refused to allow suit for declaratory relief against state commission where no “risk of suffering penalty, liability or prosecution was shown"); Natural Gas Pipeline Co. v. Slattery, 302 U.S. 300, 308-09 (1937) (declining to find a commerce clause violation in utilities commission merely seeking records, the Court noted that no action based on discovered information was alleged and that it “will be time enough to challenge such action of the commission when it is taken or at least threatened") (emphasis added) (citations omitted). oe4 cons - — nex ve . = ~~ commer interstate have on may W) Cc 9 “4 4J U ~ the upon the states Con not otherwise that they would ~ cy abili Ti) 7 — inten (1982) (quoting Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 427 (1946); United States Vv. Public Utilities Commission, 345 U.S. 295, 319 (1953) (Jackson, J., concurring)). Rather, "for a state regulation to be removed from the reach of the dormant commerce clause, congressional intent must be unmistakably clear." South-Central Timber Develooment v. Wunnicke, 104 S. Ct. 2237, 2242 (1984). Ratepayers urge that there has been an “explicit recognition by Congress of the authority of a state to regulate the securities of an electric utility Operating within its borders." It is true that the Public Utility Holding Company Act of i935 (BCA), i585 U.S.C. §§ 79 to 792-6 (1982), expressly reser- ves some regulatory powers to the sta- a *f tes. Nevertheless, the provisions that Ratepayers rely upon show nc congressional purpose to insulate the APSC's activity from commerce clause scrutiny. The HCA generally requires registered companies and their sub- Sidiaries to file declarations with the SEC that must be approved before securi- ties may be issued or sold. ao @,8.C. oases, 79¢. Section 79f(b) exempts from the declaration requirement securi- ties of a subsidiary company of a registered holding company, “if the issue and sale * * * are solely for the purpose of financing the business of such subsidiary company and have been expressly a ‘thorized by the State Commission of the state in which such Subsidiary company is organized and doing business." This narrow exemption obviously envisions a transaction completely different from the Grand Gulf agreements. The documents of concern to the APSC involve all the entities in the Middle South system. They implicate interstate commerce far more than the intrastate dealings between a state com- mission and a single subsidiary do. Thus, we find in section 79f(b) no express statement by Congress to exemp the APSC's activity from the commerce clause. A related provision, section 79g(g), provides for state input during the SEC's consideration of proposed declarations: If a State commission or State securities commis- sion having jurisdiction over any of the acts enumerated in subsection (a) of section 79f of this title, shall inform the Commission * * * that A-41 ee State laws applicable to the act in question have not been complied with, the Commission shall not permit a declaration * * * to become effective until and unless the Commission is satisfied that such compliance has been effected. Like section 79f(b), this section con- tains no direction from Congress con- cerning immunity from the commerce clause. These conclusions are supported by New England Power Co. v. New Hampshire, Sse U.8.. 334 (1982). In New England Power, the Court considered the rela- tionship of the commerce clause to the Federal Power Act. A state utilities commission had sought to restrict the export of hydroelectric energy generated within the state. The state claimed that this action was not invalid under the commerce clause because a section in the Federal Power Act provided that the Act “shall not * * * 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." Id. § 824(b). The Court interpreted this section as doing nothing more than saving from federal preemption state authority that was otherwise lawful. It concluded that section 824(b) is in no sense an affirmative grant of power to the states to burden interstate commerce "in a manner which would cther- wise not be permissible." * * * Nothing in the legislative history or language of the statute evinces a congressional intent "to alter the limits of state power otherwise imposed by the Commerce Clause," or to modify the earlier holdings of this Court concerning the limits of state authority to restrain interstate trade. Rather, Congress' concern was Simply “to define the extent of the federal legislation's pre-emptive effect on state law." 455 U.S. at 341 (citations omitted). The provisions of the HCA discussed above are facially similar to the sta- tute at issue in New England Power. Moreover, the Federal Power Act and the HCA have similar legislative histories. Compare New England Power, 455 U.S. at 341 ("The legislative history of the (Federal Power] Act * * * indicates that Congress intended only that its legisla- tion ‘tak{e] no authority from State commissions.'") (quoting 4. R. Rep. No. 1318, 74th Cong., lst Sess. 8 (1935)), with Alabama Electric Cooperative v. Securities & Exchange Commission, 353 F.2d 905, 907 (D.C. Cir. 1965) ("The purpose of the Public Utility Holding Company Act, as shown by its legislative history, was to supplement state regulation-- not to supplant it."). oad Thus, sections 79f(b) and 79g(g) do not preclude us from finding a violation of the commerce clause here. oF cTt oo wy ct Ratepayers also conten | amd ui i ep) () re 79u saves any commerce clause transgression. This section pro- vides: ([Nlor shall anything in this chapter affect the jurisdict of any other commission, boa agency or offic a State or politi of any State, ov security, Or contract, insofar as such jurisdiction does not conflict with any provision of this chapter or any rule, regu- lation, or order thereunder. n In Edger v. Mite Corp., 457 U.S. 624 (1982), the Supreme Court considered whether a state tender offer statute violated the commerce clause. The federal securities laws contained a pro- vision nearly identical to section 79u. See 15 U.S.C. § 78bb(a) (1982). There was no suggestion made that this savings provision could authorize state viola- tions of the commerce clause. Rather, Justice White interpreted the statute as leaving to the courts to decide whether Similar state legislation may be preempted.. 457 U.S. at 631. Although Justice White did not speak for the whole Court, Mite supports a conclusion that section 79u does not insulate the APSC's actions from examination under the commerce clause. VI. We must next determine the appropriate level of scrutiny under the commerce clause. The Supreme Court has recently applied two tests to state restrictions on the flow of interstate power. In New England Power Co. v. New Hampshire, 455 U.S. 331 (1982), the New Hampshire Public Utilities Commission sought to restrict the export of hydroelectric energy produced within the State. The Commission's purpose was to contain the cost savings associated with this cheaper form of electrical genera- tion to the citizens of New Hampshire. This savings was to be obtained at the expense of customers in neighboring sta- tes that had been sharing the power pro- duced in New Hampshire. Id. at 335-36, CEL The Supreme Court had no trouble concluding that this sort of "protectionist regulation” was forbidden by the commerce clause. Id. at 339. Two reasons were cited for reaching this result. First, the utilities commission had made clear that its order was "designed to gain an economic advantage for New Hampshire citizens at the expense of * * * customers in neigh- boring states." Id. Second, the Court found indisputable that the ""exportation ban' place({d] direct and Substantial burdens on transactions in interstate commerce." Id. (citing Public Utilities Commission v. Attleboro Steam & Electric Co., ats - Baba 83 (1927)). There was no discussion of balancing the state's interest against the detriment to interstate commerce. A different analysis was used the next year in Arkansas Electric Cooperative Corp. v. Arkansas _ Public Service Commission, 461 U.S. 375 (1983). At issue was an order of the APSC asserting jurisdiction over the whole- sale rates charged retail distributors by a rural~ power cooperative. The cooperative argued that this assertion violated the commerce clause under the test articulated in Attleboro, which invalidated regulations imposing a "direct" rather than “indirect" burden on interstate commerce. 461 U.S. at 390; see Attleboro, 273 U.S. at 90. The Court, however, decided to apply "an analysis grounded more solidly" in modern commerce clause cases: "Where [a] statute regulates evenhandedly to effectuate .a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in rela- tion to the putative local benefits." 461 U.S. at 393-94 (quoting Pike v. Bruce Church, 397 U.S. 137, 142 (1970)). After applying this test, the Court upheld the APSC's assertion of jurisdiction. Thus, the Court has applied a rule of presumptive invalidity to regulations designed to further economic protec- tionism, and a balancing test, which if far more deferential to the states, to facially neutral regulations. See Generally Baltimore Gas & Electric Co. v. Heintz, 760 F.2d 1408, 1420-22 (4th Cir. 1985) (discussing flux in commerce clause jurisprudence). New England Power and Arkansas Electric can be har- monized under the following standard: "(W]here simple economic protectionism is effected by state legislation, a vir- tual per se rule of invalidity has been erected. In contrast, legislation that visits its effects equally upon interstate and local business may sur- vive constitutional scrutiny if it is narrowly drawn." Lewis v. BT Investment Managers, 447 U.S. 27, 36 (1980). The "crucial inquiry," therefore, is whether the APSC's action “is basically a pro- tectionist measure, or whether it can fairly be viewed as a law directed to legitimate local concerns, with effects upon interstate commerce that are only incidental." Philadeiphia v. New Jersey, 437 U.S. 617, 624 (1978). rE a discriminatory purpose is found, there is no need to engage in the Bruce Church balancing ‘approach. Bacchus Imports, Ltd. v. Dias, 104 S. Ct. 3049, 3055 (1984). "A finding that state legislation constitutes ‘economic protectionism' may be made on the basis of either discrimi- natory purpose or discriminatory ample evidence of both. The APSC seeks to cancel the Grand Gulf agreements ostensibly because they have not approval. Its apparent concern, which has been made abundantly plain in its Orders and its arguments before the SEC and FERC, however, is the economic to be rate increases of more than $3.5 _ : > _" billion over the next ten years .+8 Given . ~ _ _- _-_ burden to the citizens of MiISSiSSIi1ppl - 7 . ~ »* and Louisiana, citizens who are ~ = ~” 4 - i ne , +n) ance he wer e — he we 11irFectly iad LU l8see Middle South Energy, 26 F.E.R.C. at 65,097: Because the costs In New England Power, New Hampshire sought to contain within the state the benefits of low-cost power. Arkansas, conversely, seeks to ciose its borders to high-cost electricity. The effect of both actions is the same: a preference for citizens in the regulating jurisdic- tion gained at the expense of out-of- state customers. Nor can it be doubted that the APSC's action would constitute a direct and substantial burden on interstate commerce. The integrated nature of MSU and MSE, particularly the Gulf are perceived to be much higher “han the costs of power from other sour- ces on the MSU system, it is not Surprising that each of these parties Supports an allocation of power which results in the lowest allocation to the MUS operating company or companies in which the party is interested, espe- Cially during the early years of opera- tion of Grand Gulf when the costs of Grand Gulf are higher than in later years. A-53 Grand Gulf project, represents commerce that is interstate in a most basic form. Thus, this case is controlled by New England Power, and the APSC must be pro- hibited from voiding AP&L's role in the Grand Gulf project. See also Philadelphia v. New Jersey, 437 U.S. at se eS SSS SSS ES 624 ("The clearest example of [protectionist] legislation is a law that overtly blocks the Flow of interstate commerce at a state's borders.").19 VII. Finally, appellants assert that the district court should have used its discretion to withhold the exercise of its powers under any of several dectri- nes concerned with premature federal interference with state procedings. 19fhe APSC's reliance on Indiana & Mich. Power Co. v. Michigan, 405 Mich. 400, 275 N.W.2d 450 (1979), is A-54 i Under Burford v. Sun Oil Co., 319 U.S. 315 (1943), for example, a federal court should abstain when the action before it involves matters of state law best left to the state alone. The very premise of this doctrine, however, is lacking when, as here, federal law or Constitution makes the proceeding or regulation at issue beyond the state's authority. South Central Bell Telephone Co. Vv. Louisiana Public Service Commission, 744 F.2d 1107, 1123-24 (5th Cir. 1984), petition for cert. filed, 53 U.S.L.W. 3449 (U.S. Nov. 30, 1984) (No. 84-870). There is no concern with pro- tecting a legitimate state regulatory misplaced, for that case did not involve state regulation with protectionist motives. See Michigan Gas Storage Co. v. Michigan Pub. Serv. Comm'n, 405 Mich. 376,275 N.W.2d 457 (1979) (companion case). scheme, Baggett ws Department of Professional Regulation, 717 F.2d 521, 524 (llth Cir. 1983), and the question becomes one of basic federal supremacy, which does not turn on local factors or local expertise. South Central Bell, 744 F.2d at 1123. Similarly, the rule of Younger v. Harris, 401 U.S. 37 (1971), limiting injunctions of pending state proceedings embodies the principle of our federal System that legitimate state functions be respected. 29 This “comity,” however, is not strained when a federal court cuts off state proceedings that entrench upon the federal domain. Baggett, 717 Pian. at S26. The legitimate state interest contemplated by Younger, see Middlesex County Ethics Committee vv. 20Because of our ultimate conclusion, we may assume without deciding that the Younger doctrine, which was developed in the context of A-56 Garden State Bar Association, 457 U.S. 423, 432 (1982), does not exist when the State action has been preempted or foreclosed by the Constitution. Champion International Corp. v. Brown, 731 F.2d 1406, 1408 (9th Cir. 1984). Abstention uhder Railroad Commission v. Pullman Co., 312 U.S. 496 (1941), focuses on whether a decision by a state court might clarify state law so as to make it unnecessary to reach a constitutional issue otherwise pre- sented. Preemption and the commerce clause, however, are matters of federal law, and there is no interpretation of state criminal proceedings, applies to the show cause order and proceedings contemplated by the Arkansas Public Service Commission. See generally Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432 (1982) (discussing scope of Younger). A-57 Arkansas law which could make it unne- cessary for us to reach the question as to whether the Constitution forecloses even the mere issuance of the show cause order entered here by the APSC. See Hotel & Restaurant Employees Union Local 54 v. Danziger, 709 F.2d 815, 832 (3d Cif. 1983), vacated on the merits sub nom. Brown v. Hotel & Restaurant Emplovees Union Local 54, 104 S. Ct. 3179 (1984). Finally, the doctrine of exhaustion of administrative remedies in the con- text of state agency proceedings simply addresses many of the same concerns which the various types of abstention are designed to reach. ee 4 K. Davis, Administrative Law Treatise § 25:l, at 35@ (1983); see also West v. Bergland, 6l1l F.2d 710, 715-17 (8th Cir. 1979) (developing factors used in determining whether to require exhaustion), cert. denied, 449 U.S. 821 (1980). To the degree that irreparable harm also must be shown, see West, 6ll F.2d at 719-20, MSE alleges such injury in the form of loss through exhaustion of the very right--the right to be free of the state administrative proceeding--it seeks to protect. The Supreme Court recognized such a right on similar facts in Public Utilities Commission v. United Fuel Gas Co., 317 U.S. 456 (1943), when an interstate gas supplier sought to rh enjoin the enforcement against it of a state agency order requiring it to prove the reasonableness of the rates it charged a customer utility within that nothing to that point but assert juris- diction, id. at 465, the Court upheld the injunction on the ground that the supplier suffered injury from the enfor- cement of the order for proof itself and that the expense of complying with such orders was among the contingencies against which Congress sought to guard in creating exclusive federal jurisdic- tion. Id. at 469; see also Public Utilities Commission v. United States, 355 U.S. 534, 540 (1958) ("But where the Only question is whether it is constitu- tional to fasten the administrative pro- cedure onto the litigant, the administrative agency may be defied and judicial relief sought as the only effective way of protecting the asserted constitutional right."); Panhandle Eastern Pipe Line Co. v. Public Service Commission, 332 U.S. 507, 512 (1947) (state agency order requiring interstate gas supplier to file certain tariffs, rules, and regulations was not just a threat to apply the state regulatory plan but constituted actual application of the plan in its initial stages); cf. Monahan v. Nebraska, 645 F.2d 592, 597 (8th Cir. 1981) (claim that state procedure itself conflicted with federal act could not be effectively addressed by exhausting state procedure). Here the mere assertion of juris- diction by the APSC had a negative impact on MSE's~) ability to obtain investors and complete its project, thus Similarly interfering with the exclusive federal scheme for governing interstate power transmission and sales. And, as in United Fuel, we observe that. MSE raised the preemption question before the APSC in a motion to dismiss the show cause order for lack of jurisdiction and only filed this suit when such motion was denied. 317 U.S. at 470 (distinguishing Natural Gas Pipeline Co. v. Slattery, 302 U.S. 300 (1937)). we thus conclude that neither the failure of MSE to pursue further state remedies nor the abstention doctrines of Burford, Younger, or Pullman make the district court's resolution of this case an abuse of discretion. Nor are we convinced that the district court improperly determined the need for equitable relief or the scope of the injunction. The judgment of the district court is affirmed. A true copy. Attest: CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT. A-62 IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF ARKANSAS WESTERN DIVISION MIDDLE SOUTH ENERGY, INC., Plaintiff, and ARKANSAS POWER & LIGHT COMPANY, Plaintiff-Intervenor, Ve No. LR-C-84-778 ARKANSAS PUBLIC SERVICE COMMISSION; ROBERT E. JOHNSON, COMMISSIONER; PATRICIA S. QUALLS, COMMISSIONER; and JAMES W. DANIEL, COMMISSIONER, Defendants, and ATTORNEY GENERAL OF ARKANSAS, Defendant-Intervenor, oO 1 rh (Db ) Q ju °) ct i rot ) ct (D a | = Powers of congress. [ l1.] The congress shall have power : To regulate commerce with foreign nations, and among the several states, and with the Indian tribes. Bx Federal Power Act, 16 U.S.C. §§ 824(a) & (b), 824c(£), 824d(a), and 825q. § 824(a) It is declared that the business of transmitting and selling electric energy for ulti- mate distribution to the public is affected with a public interest, and that Federal regulation of mat- ters relating to generation to the extent provided in this subchapter and subchapter III of this chapter 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. A-106 § 824(b). The provisions of this subchapter shall apply to the transmission of electric energy in interstate commerce and to the sale of electric energy at wholesale in interstate commerce, but shall nct 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 jurisdic- tion over all facilities for such transmission or sale of electric energy, but shall not have juris- diction, except as specifically provided in this subchapter and subchapter III of this chapter, 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 faci- lities for the transmission of electric energy consumed wholly by the transmitter. § 824c(f). The provisions of this section shall not extend to a public utility organized and operating in a State under the laws of which its security issues are regulated by a State commission. § 824d(a). Rates and charges; schedules; suspension of new rates. (a) All rates and charges made, demanded, or received by any public A-107 : utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reaso- nable, and any such rate or charge that is not just and reasonalbe is hereby declared to be unlawful. § 825q. Conflict of jurisdiction. If, with respect to the issue, sale, or guaranty of a security, or assumption of obligation or liabi- lity in respect of a security, the method of keeping accounts, the filing of reports, or the acquisi~ tion or disposition of any security, capital assets, facili- ties, or any other subject matter, any person is subject both to a requirement of sections 79 to 792-6 of Title 15 or of a rule, regula- tion, or order thereunder and to a requirement of this chapter or of a rule, regulation, or order thereunder, the requirement of sec- tions 79 to 792-6 of Title 15 shall apply to such person, and such per- son shall not be subject to the requirement of this chapter, or of any rule, regulation, or order thereunder, with respect to the same subject matter, unless the Securities and Exchange Commission has exempted such person from such requirement of sections 79 to 792-6 of Title 15, in which case the A-108 requirements of this chapter shall apply to such person. 30 Public Utility Holding Company iS 0G.8.€. $8 Watb)(1), Wate), 79b(a) (16), 79d(a) and (b), 79gla), (b) (g), and 79u. § 79a. Necessity for control of holding companies. (b) Upon the basis of facts disclosed by the reports of the Federal Trade Commission made pur- Suant to S.Res. 83 (Seventieth Congress, first session), the reports of the Committee on Interstate and Foreign Commerce, House of Representatives, made pur- Suant to H.Res. 59 (Seventy-second Congress, first session) and H.J.Res. 572 (Seventy-second Congress, second session) and otherwise disclosed and ascer- tained, it is declared that the national public interest, the interest of investors in the securities of holding companies and their subsidiary companies and affiliates, and the interest of consumers of electric energy and natural and manufactured gas, are Or may be adversely affected -- A-109 (1) - when such investors cannot obtain the information necessary to appraise the financial position or earning power oof the issuers, because of the absence of uniform standard accounts; when such securities are issued without the approval or consent of the States having jurisdiction over subsidiary public-utility companies; ... (c) When abuses of the character above enumerated become persistent and wide-spread the holding company becomes an agency which unless regulated, is injurious to investors, consumers, and the general public; and it is declared to be the policy of this chapter, in accordance with which policy all the provisions of this chapter shall be interpreted, to meet the problems and eliminate the evils as enumerated in this section, con- nected with public-utility holding companies which are engaged in interstate commerce or in activi- ties which directly affect or bur- den interstate commerce; and for the purpose of effectuating such policy to compel the simplification of public-utility holding-company systems and the elimination therefrom of properties detrimental to the proper functioning of such systems, and to provide as soon as practicable for the elimination of public-utility holding companies except as otherwise expressly pro- vided in this chapter. A-110 § 79b(a)(16). “Security" means any note, draft, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, other mineral royalty or lease, any collateral-trust cer- tificate, preorganization cer- tificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, receiver's or trustee's certificate, or, in sjeneral, any instrument commonly known as a "security"; or any certificate of interest or participation in, tem- porary or interim certificate for, receipt for, guaranty of, assump- tion of liability on, or warrant or right to subscribe to or purchase, any of the foregoing. § 79£f£(a). Except in accordance with a declaration effective under section 79g of this title and with the order under such section per- mitting such declaration to become effective, it shall be unlawful for any registered holding company or subsidiary company thereof, by use of the mails or any means or instrumentality of interstate com- merce, or otherwise, directly or indirectiy (1) to issue or sell any security of such company; or (2) to exercise any privilege or right to alter the priorities, preferences, voting power, or other rights of A-111l the holders of an outstanding security of such company. (b)... The Commission by rules and regulations or order, subject to such terms and conditions as it deems appropriate in the public interest or for the protection of investors or consumers, shall exempt from the provisions of sub- section (a) of this section the issue or sale of any security by any subsidiary company of a registered holding company, if the issue and sale of such security are solely for the purpose of financing the business of such subsidiary company and have been expressly authorized by the State commission of the State in which such sub- sidiary company is organized and doing business. § 79¢. Declarations by registered companies in respect to security transactions. (a) A registered holding company or subsidiary company thereof may file a declaration with the Commission, regarding any of the acts enumerated in subsection (a) of section 79f of this title, in such form as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for protection of investors or consumers. Such declaration shall include (b) A declaration filed under this section shall become effective within such reasonable period of time after the filing thereof as the commission shall fix by rules and regulations or -order, unless the commission prior to the expira- tion of such period shall have issued an order to the declarant to show cause why such declaration sould become effective. Within a reasonable time after an oppor- tunity for hearing upon an order to show cause under this subsection, unless the declarant shall withdraw its declaration, the Commission shall enter an order either per- mitting such declaration to become effective as filed or amended, or refusing to permit such declaration to become effective. Amendments to a declaration may be made upon such terms and conditions as the Commission may prescribe. (g) If a State commission or State securities commission, having jurisdiction over any of the acts enumerated in subsection (a) of section 79f of this title, shall inform the Commission, upon request by the Commission for an opinion or otherwise, that State laws appli- cable to the act in question have not been complied with, the A-113 Commission shall not permit a declaration regarding the act in question to become effective until and unless the Commission is satisfied that such compliance has been effected. § 79u. Effect on other laws. Nothing in this chapter. shall affect (1) the jurisdiction of the Commission under the Securities Act of 1933, as amended, oor the Securities Exchange Act of 1934 over any person, security, or contract, or (2) the rights, obli- gations, duties, or liabilities of any person under such Acts; nor shall anything in this chapter affect the jurisdiction of any other commission, board, agency, or officer of the United States or of any State or political subdivision of any State, over any person, security, or contract, insofar as such jurisdiction does not conflict with any provision of this chapter Or any rule, regulation, or order thereunder. A-114 4. Arkansas Statutes Annotated §§ 73-238, 73-254, and 73-255. 73-238. Contracts in violation of act void - Cancelation and recoup~ ment. - Any contract made in violation of this Act, or any lawful order of the Department [Commission], shall be void and subject to cancelation and recoup- ment by action in any court of com- petent jurisdiction. Where a contract is made contrary to the provisions of this Act, or any lawful order of the Department [Commission], the Department [Commission] may, after notice and hearing, order the public utility to take steps within ten [10] days to recover the funds, or assets thus illegally loaned or trans-~ ferred, by action in a court of competent jurisdiction, or to take such other proceedings as may be effective to release the public utility from any such contract. 73-254. Issuance of stocks and bonds and creation of liens under supervision of commission. - The power of public utilities to issue stocks, stock certificates, bonds, notes and other evidences of indeb- tedness, in case of public utili- ties incorporated under the laws of this state, and to create liens on property in this state, in case of public utilities incorporated under the laws of any state or foreign A-115 country, is a special privilege, the right of supervision, regula- tion, restriction and control of which is, and shall continue to be vested in the state, and such power shall be exercised as provided by law and under such rules and regu- lations as the Department [Commission] may prescribe. 73-255. Stock or evidence of indebtedness issued under authority of commission - Amount of issue and application of proceeds fixed - Exception - Limitation on amount of issue - Accounting for proceeds. - A public utility may, when authorized by order of the Commission, and not otherwise, issue stock, bonds, notes or other evidence of indebtedness payable at periods of more than thirty-six (36] months after the date thereof when necessary for the acquisition of property, the construction, extension or improvement of its facilities or the improvement of its service, or for the discharge of lawful refunding of its obliga- tions, or reimbursement of moneys actually expended from the income from any source, or for any of such purposes. The order of the Commission shall fix the amount of any such issue and the purposes to which it or its proceeds are to be applied. No such public utility shall, without the consent of the Commission, apply any such issue or its proceeds to any purpose not A-116 specified in the order. Such public utility may issue notes for proper corporate purposes and not in violation of any provision of this Act, or of any other act, payable at periods of not more than thirty-six (36) months, without the consent of the Commission; but no such note, in whole or in part, shall be refunded by any issue of stock or bonds or by any evidence of indebtedness, with maturity date later than thirty-six (36) months from date of issue, without the consent of the Commission. The Commission shall have no power to authorize the issuance of stocks, notes, bonds or other evi- dences of indebtedness of = any public utility in aggregate amount at any time exceeding the fair value of the properties of the issuer and the reasonable cost of the issuance and sale of = such issues. The Commission shall have ‘power to require every public uti- lity, other than municipalities, to account for the disposition of the proceeds of all sales of stocks, bonds, notes or other evidences of indebtedness, in such form and detail as it may deem advisable, and to establish such rules and regulations as it may deem necessary to insure the disposition of such proceeds for the purpose specified in its order. No provision of this Act, and no deed or act done or performed under Or in conaection therewith shall be A-117 construed to obligate the State of Arkansas to pay or guarantee, in any manner whatsoever, any stock, bond, mote or other evidence of indebtedness, authorized, issued or executed under the provisions of this Act. All securities issued without the approval of the Commission shall be void. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385018_1105%3A2. Public record. Not legal advice.