United States v. City of Fulton

PETITIONER: United States
RESPONDENT: City of Fulton
LOCATION: March Air Force Base

DOCKET NO.: 84-1725
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 475 US 657 (1986)
ARGUED: Jan 21, 1986
DECIDED: Apr 07, 1986

Andrew J. Pincus - on behalf of Petitioner
Charles F. Wheatley, Jr. - on behalf of Respondent

Facts of the case

In 1979, the Southwestern Power Administration, a federal regulatory body acting on behalf of the Secretary of Energy, increased the cost of electricity generated by federally owned dams under its control. The price hike was initially implemented on an interim basis, and three years later, after furher review, the new rates were made permanent. A group of cities that purchased power from the dams filed suit to recover the extra fees it had paid before the interim rates were made final, claiming that Section 5 of the Flood Control Act of 1944 prohibited the imposition of interim fees. The Act stated that new rates would "become effective upon confirmation and approval by the Secretary (of Energy)." The cities asserted that the rates, while in their interim phase, had not yet received "confirmation and approval" from the Secretary and could therefore not be legally implemented.

The Court of Claims sided with the cities, holding that the new rates could only be charged once they received final approval from the Secretary. The Court of Appeals for the Federal Circuit affirmed.


Can the Secretary of Energy or his delegates impose new hydro-electricity prices on an interim basis under Section 5 of the Flood Control Act of 1944?

Media for United States v. City of Fulton

Audio Transcription for Oral Argument - January 21, 1986 in United States v. City of Fulton

Warren E. Burger:

The Court will hear arguments first this morning in United States v. the city of Fulton.

Mr. Pincus, you may proceed whenever you're ready.

Andrew J. Pincus:

Thank you, Mr. Chief Justice, and may it please the Court:

The Federal government operates over 100 hydroelectric dams on the nation's waterways that generate electric power.

This case concerns the scope of the Secretary of Energy's authority to set the rates at which this power is sold to the public.

Specifically, the question presented here is whether the Secretary may place a rate increase into effect on an interim basis pending a final determination regarding the propriety of the new rate.

In April 1978, the Southwestern Power Administration, the entity whose rates are in dispute, issued a public notice of a proposed rate increase.

The notice stated that the SWPA was running a deficit of approximately $20 million and proposed a tentative 42 percent rate increase to enable the SWPA's revenues to cover its costs.

The notice solicited written comments and the SWPA subsequently held public meetings to inform interested parties about the proposed rate increase and to obtain oral comments concerning the proposal.

After considering the public comments, the SWPA reduced the rate increase to 33 percent and submitted it to the Assistant Secretary of Energy for his approval.

The Assistant Secretary reviewed the public comments and observed that this was the first rate increase in the SWPA's general rates in over 20 years.

He concluded that the rate increase satisfied the applicable statutory standard because it would generate revenues that would equal but not exceed the SWPA's costs of generating the power.

The Assistant Secretary therefore issued an order confirming and approving the rates and placing them into effect on an interim basis pending final action by the Federal Energy Regulatory Commission.

The Assistant Secretary's order specified that customers who paid the interim rates would receive a refund with interest if a lower rate eventually was placed into effect by the FERC.

The FERC again solicited public comments regarding the rates and at first issued a decision disapproving the rates because they were too low.

It founds that the rates in fact would not generate revenues equal to the SWPA's costs of producing the electricity.

After reviewing additional data that was subsequently submitted in support of the rates, the FERC reversed itself and approved the new rates in January 1982, 33 months after the rates had been placed into effect on an interim basis by the Assistant Secretary.

Respondents commenced this action in the Court of Claims seeking to recover the money paid pursuant to the rate increase.

They did not... do not challenge the amount of the rate increase.

They argue only that the Assistant Secretary cannot place rates into effect on an interim basis.

The Court of Claims held that the Secretary lacked the statutory authority to place interim rates into effect and that Respondents' contracts with the United States also barred the interim rate increase.

Following a remand to it for the calculation of damages, the Court of Appeals for the Federal Circuit reached the same conclusion.

William H. Rehnquist:

Mr. Pincus, what exactly do you mean by the term FERC?

Andrew J. Pincus:

Yes, the rates... the rates are proposed by the SWPA or the other... any other power marketing administration.

They are examined by the Assistant Secretary who issues an order directing the customers to pay the rate increase, but providing that the rate, that those amounts are subject to refund if the [= FERC], which then considers the rate increase, determines that it is too high and substitutes a lower rate increase.

Warren E. Burger:

What the Assistant Secretary was asking for is the pattern that was familiar with the Interstate Commerce Commission when tariffs were filed, was it not?

The tariff would take effect immediately until the Commission set it aside, but you say that's not permitted here?

Andrew J. Pincus:

Well, this case, this case is... in the Interstate Commerce Commission example, and indeed, in private utility regulation, the utility typically files a rate which will take effect but is subject to suspension by the relevant regulatory body.

Warren E. Burger:

Subject to refunds.

They segregate it, impound it?