Supreme Court Bars Rhode Island From Setting Rate for Power Sold Across Line

The Supreme Court ruled Monday that a state may not set the price of electricity sold at wholesale to a utility in another state, holding that such an order is a direct burden on interstate commerce that only Congress may regulate. Justice Sanford wrote the opinion in Public Utilities Commission of Rhode Island v. Attleboro Steam & Electric Co., which affirms the Rhode Island Supreme Court. Justice Brandeis dissented.

The dispute grew out of a 1917 contract under which the Narragansett Electric Lighting Company, a Rhode Island corporation, agreed to supply Attleboro, a Massachusetts utility, with all the current it needed for twenty years at a set basic rate. The power was delivered at the Rhode Island and Massachusetts line and metered at Attleboro’s station in Massachusetts. Attleboro then dismantled its own generating plant.

In 1924 Narragansett filed a new schedule with a higher rate for bulk sales to lighting companies. Attleboro was the only customer it would have affected. The Rhode Island commission found that rising generating costs meant Narragansett was losing money on the Attleboro service while its other customers produced a fair return, held the contract rate unreasonable and approved the higher rate. The state Supreme Court, relying on the earlier case of Missouri v. Kansas Gas Co., held that the order burdened interstate commerce and reversed it.

Sanford agreed. The sale was interstate commerce, he wrote, and a state regulation that imposes a direct burden on it must fall regardless of its purpose. The Court distinguished a case in which a state had regulated local retail service from this one, in which the regulated sale was wholesale and crossed a state line. It reasoned that Rhode Island, as the state sending the power, has no more authority to burden the traffic than Massachusetts, the receiving state, and warned that if Rhode Island could defend its order as a benefit to its own customers, Massachusetts could use the same logic to lower the rate for its customers. The interest in the business between the two companies, the Court concluded, is not local to either state.

Brandeis saw it differently. He called the business essentially local, noting that Attleboro took less than 3 percent of Narragansett’s output, and said the commission’s aim was to prevent discrimination against Rhode Island customers. In his view the order was a valid exercise of the state’s police power, and Congress’s silence on the subject did not bar state action.

The practical effect is that the rate for power sold across a state line is, for now, outside the reach of either state’s utility commission, and any regulation would have to come from Washington.