United States v. City of Stilwell, et al., Civ. No. 96-196 B, Response of the United States to Public Comments Concerning the Proposed Consent Decree

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. City of Stilwell, et al., Civ. No. 96-196 B,

Response of the United States to Public Comments Concerning the

Proposed Consent Decree

Pursuant to Section 2(d) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(d), the United States publishes below the written

comments received on the proposed Consent Decree in United States v.

City of Stilwell, et al., Civil Action No. 96-196 B, United States

District Court for the Eastern District of Oklahoma, together with its

response thereto.

Copies of the written comments and the response are available for

inspection and copying in Room 215 of the U.S. Department of Justice,

Antitrust Division, 325 Seventh Street, NW, Washington, DC 20530

(telephone 202-514-2481) and at the Office of the Clerk of the United

States District Court for the Eastern District of Oklahoma, United

States Courthouse, 5th and Okmulgee, Muskogee, Oklahoma.

Rebecca P. Dick,

Deputy Director of Operations.

United States' Response To Public Comments

[Case No. CIV 96-196B]

Pursuant to section 2(d) of the Antitrust Procedures and Penalties

Act, 15 U.S.C. 16(d), the United States files this response to a public

comment regarding the proposed Final Judgment submitted for entry in

this civil antitrust proceeding.

This action began on April 25, 1996, when the United States filed a

Complaint charging defendants, City of Stilwell and Stilwell Area

Development Authority, with violations of the antitrust laws. The

Complaint alleges that in the portions of Stilwell annexed into the

City since 1975, the defendants violated the antitrust laws by refusing

to sell sewer and water service to customers (services for which

defendants had monopoly power) unless the customer would also agree to

purchase electricity from defendants (service for which defendants

faced competition). The effect of this ``all-or-none'' policy was to

eliminate retail electric competition in the annexed areas of Stilwell.

After more than two years of litigation, and with trial scheduled

to commence several weeks later, defendants agreed to the entry of a

court order enjoining them from continuing such practices. Thus, on

July 15, 1998, the United States filed a proposed Final Judgment, a

Competitive Impact Statement, and a stipulation signed by defendants

for entry of the proposed Final Judgment.

The APPA provides for a 60-day public comment period on the

proposed Final Judgment. The 60-day comment period commenced on August

3, 1998, and expired on October 2, 1998. The United States received one

comment on the proposed Final Judgment, from the National Rural

Electric Cooperative Association (``NRECA''), a not-for-profit national

service organization representing approximately 100 rural electric

cooperatives. As required by 15 U.S.C. 16(b), NRECA's comment is being

filed with this response. (Exhibit A).

NRECA ``applauds'' the United States' suit. NRECA observed that the

electric industry is becoming more competitive, but warned that

practices like that employed by defendants work to deprive consumers of

a choice of electric service providers. NRECA encouraged the Department

of Justice ``to continue monitoring and challenging these types of

anticompetitive actions to ensure that the evolving electric market is

in fact more competitive.'' Finally, NRECA ``thank[ed] the government

for its actions'' in this case.

NRECA's comment supports the common sense view that enjoining

defendants from continuing to engage in the anticompetitive practices

at issue is in the public interest.

The proposed Final Judgment provides all the substantive relief

requested in the Complaint against defendants, without the substantial

expense of a trial. The relief provided in the decree will eliminate

the anticompetitive all-or-none policy. Thus, entry of the proposed

Final Judgment is in the public interest.

Respectfully submitted,

John R. Read,

Michele B. Cano,

Michael D. Billiel,

United States Department of Justice, Antitrust Division, 325 Seventh

Street, N.W., Suite 500, Washington, D.C. 20530, (202) 307-0468.

October 13, 1998.

Roger W. Fones,

Chief; Transportation, Energy and Agriculture Section, Antitrust

Division; United States Department of Justice, 325 Seventh Street,

Northwest, Suite 500, Washington, D.C. 20530

Re: Proposed Final Judgment and Competitive Impact Statement; United

States v. City of Stilwell, OK, et al.; 63 Fed. Reg. 41,292 (1998)

Dear Mr. Fones: The National Rural Electric cooperative

Association (NRECA) is a not-for-profit national service

organization representing approximately 100 rural electric

cooperatives (RECs) that provide central station electric service to

approximately 30 million consumers in 46 states. Nearly all of

NRECA's members meet the definition of ``small entity'' under the

Small Business Regulatory Enforcement Fairness Act. Of these rural

systems, more than 60 are generation and transmission (G&T)

cooperatives, which are owned by and serve nearly 750 of the more

than 900 distribution cooperatives. Kilowatt-hour sales by RECs

amount to 7.4 percent of total electricity sales in the United

States, and produce revenues of over $14 billion. RECs owned

approximately 32.8 million kilowatts of installed electric capacity,

or 4.5 percent of all capacity in the country. RECs own and maintain

more than 2 million miles of power lines to serve their consumers

(approximately 44 percent of the total miles of power lines operated

by all electric utilities in the United States).

In the August 3, 1998 Federal Register, the Antitrust division

of the United States Department of Justice published a proposed

final judgment in United States of America v. City of Stilwell,

Oklahoma and Stilwell Area Development Authority, United States

District Court for the Eastern District of Oklahoma Case No. CIV 96-

196-B. Proposed Final Judgment and Competitive Impact Statement;

United States v. City of Stilwell, OK, et al., 63 Fed. Reg. 41,292

(1998).

As explained in the proposed final judgment, the City of

Stilwell, Oklahoma and the Stilwell Area Development Authority

(``Defendants'') are the sole suppliers of water and sewer service

to customers within Stilwell's city limits. Through an all-or-none

utility policy, Defendants denied water or sewer service to any

customer who did not also purchase electric power from Defendants

(``Policy''). In areas of Stilwell annexed after 1961, Defendants

compete with Ozarks Rural Electric Cooperative (``Ozarks''), an

NRECA member, in selling electric power to new customers. Alleging

restraint of trade or commerce, monopolization, and attempts to

monopolize, the United States of America sued Defendants for

violating section 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 & 2.

In general, the proposed final judgment enjoins Defendants from

enforcing the Policy, requires Defendants to include appropriate

disclaimers on certain written materials, orders Defendants to

maintain an antitrust compliance program, and grants the United

States certain enforcement rights. The proposed final judgment,

however, expires ten years from the date of entry.

As specified in the August 3, 1998 Federal Register, and

pursuant to 15 U.S.C.A. Sec. 16 (1997), NRECA comments upon the

proposed final judgment.

NRECA applauds the challenge of the Defendants' Policy. Congress

enacted federal antitrust laws to prevent actions that thwart

competition authorized under state law. Under existing state law,

certain Stilwell residents may choose their electrtic power

provider. Because Defendants' Policy prevents these Stilwell

residents from choosing an electric power provider other than

Defendants, Defendants' Policy violates sections 1 and 2 of the

Sherman Act.

[[Page 57314]]

There is an underlying programmatic concern to NRECA, its

members, and all consumers of electricity. The electric utility

industry is becoming more competitive. In this atmosphere of

heightened competition, the role of antitrust laws as guardians of

competition becomes even more critical.

NRECA is concerned that other municipal entities may operate,

formally or informally, under all-or-none utility policies similar

to Defendants' Policy. Many NRECA members, such as Ozarks, are

located near these municipalities, and have the lawful right to

provide electric power to qualified municipal residents who choose

them. Policies similar to Defendants' Policy deprive these consumers

of choosing an electric power provider. NRECA encourages the

Department of Justice to continue monitoring and challenging these

types of anti-competitive additions to ensure that the evolving

electric market is in fact more competitive.

NRECA appreciates the opportunity to comment upon the proposed

final judgment, and again thanks the government for its actions

regarding Defendants' Policy. If you have any questions regarding

these comments, please call me or Tyrus H. Thompson, NRECA Corporate

Counsel, at 703-907-5855.

Sincerely,

Wallace F. Tillman,

Chief Counsel.

WFT/ks

Cc: Larry Watkins

Charles Cosby

[FR Doc. 98-28731 Filed 10-26-98; 8:45 am]

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