536 F. 2d 240 - Otter Tail Power Company v. Federal Power Commission

Otter Tail Power Company filed this petition to review orders1 of the respondent Federal Power Commission (FPC) rejecting as premature the filing of rates by Otter Tail for transmission electric power service to various municipalities located in Minnesota and South Dakota. See 16 U.S.C. §§ 824d(c), (d). The FPC concluded that a contract between Otter Tail and the United States Bureau of Reclamation (USBR) obligates Otter Tail to provide the municipalities with transmission service at a fixed rate through December 31, 1976. Essentially, Otter Tail contends that the FPC erred in determining, without an evidentiary hearing, that the USBR-Otter Tail contract was not rendered invalid as a result of the Supreme Court's decision in Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), aff'g, 331 F.Supp. 54 (D.Minn.1971). We affirm.

The USBR-Otter Tail contract executed on June 14, 1955, expressly requires Otter Tail to furnish transmission service to certain municipalities at a specified rate until December 31, 1976. We concur with the FPC's summary rejection of Otter Tail's proposed rate increase. See 18 C.F.R. §§ 35.3, 35.5, 35.15. It is clear that rate filings inconsistent with contractual obligations are invalid. See United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 347, 76 S.Ct. 373, 382, 100 L.Ed. 373, 388 (1956); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 352-53, 76 S.Ct. 368, 371-72, 100 L.Ed. 388, 393-94 (1956); Richmond Power and Light v. FPC, 156 U.S.App.D.C. 315, 481 F.2d 490, 492-93, cert. denied, 414 U.S. 1068, 94 S.Ct. 578, 38 L.Ed.2d 473 (1973). Otter Tail may not act unilaterally to circumvent the express terms of the contract.

We are unconvinced by Otter Tail's central contention that its existing contractual responsibility, as established by the USBR-Otter Tail agreement, was vitiated by the Supreme Court's decision in Otter Tail Power Co. v. United States, supra, 410 U.S. at 377-79, 93 S.Ct. at 1029-30, 35 L.Ed.2d at 367-69. The Supreme Court rendered invalid only the provision of the contract that permitted Otter Tail to refuse to sell power at wholesale rates to proposed municipal systems in the communities where it had been transmitting power at retail rates. The Court held that such a provision, which was designed to prevent municipal systems from eroding Otter Tail's monopolistic position, constituted a per se violation of the Sherman Act, 15 U.S.C. § 2. Although one provision of the USBR-Otter Tail contract was invalidated, there is a clear policy favoring the severance of invalid restrictions appearing in agreements in restraint of trade and supporting the continued validity of the remainder of such contracts. See Kelly v. Kosuga, 358 U.S. 516, 518, 79 S.Ct. 429, 430-31, 3 L.Ed.2d 475, 477 (1959); Oregon Steam Navigation Co. v. Winsor, 87 U.S. (20 Wall.) 64, 70, 22 L.Ed. 315, 319 (1874); Beloit Culligan Soft Water Service, Inc. v. Culligan, Inc., 274 F.2d 29, 33-34 (7th Cir. 1959); Sealy Mattress Co. v. Sealy, Inc., 346 F.Supp. 353, 358-60 (N.D.Ill.1972). The determination of the viability of the USBR-Otter Tail contract involved a question of law, rather than a dispute of fact, that the FPC could resolve without an evidentiary hearing.2 See Citizens for Allegan County, Inc. v. FPC, 134 U.S.App.D.C. 229, 414 F.2d 1125, 1128-29 (1969).

Affirmed.