## Facts

- A public utility in Arkansas sold electricity at wholesale to municipal systems and cooperatives and also sold electricity at retail to industrial customers, sometimes competing with its wholesale customers for those retail loads.
- The utility filed a proposed wholesale rate increase with the Federal Power Commission (FPC).
- Several municipal and cooperative wholesale customers intervened, alleging the rate increase was part of a plan to disadvantage them in retail competition by raising their wholesale costs while the utility kept its own retail industrial rates relatively low.
- The intervenors claimed the wholesale increase was discriminatory against their customer class and not justified by cost differences.
- The FPC allowed intervention but limited the proceeding by excluding evidence and argument about alleged anticompetitive conduct and the relationship between the proposed wholesale rates and the utility’s nonjurisdictional retail rates.
- The court of appeals set aside the FPC’s narrow jurisdictional approach, reasoning that retail rates in a market where the utility competes with its wholesale customers are part of the factual setting for evaluating whether a wholesale rate is just and reasonable.

## Issues

1. Whether the FPC, in reviewing a wholesale electric rate increase under the Federal Power Act, may consider evidence that the rate is part of a “price squeeze” or other effort to suppress the wholesale customers’ ability to compete at retail.
2. Whether the FPC may assess the relationship between jurisdictional wholesale rates and nonjurisdictional retail rates to determine if the wholesale rate is unjust, unreasonable, or unduly discriminatory.

## Decision

- The Supreme Court affirmed the court of appeals.
- The Court held that the FPC’s jurisdiction over wholesale rates permits consideration of the utility’s alleged purpose to forestall its customers from competing with it at retail.
- The Court rejected the view that the presence of nonjurisdictional retail rates bars the FPC from examining how a proposed wholesale rate functions in its economic and competitive setting.
- The Court emphasized that any remedy must remain confined to the jurisdictional rate (the wholesale rate), not direct regulation of retail rates.

## Legal Principles

- Under the Federal Power Act, the regulator may consider the competitive effects and factual context of a proposed jurisdictional wholesale rate when determining whether it is “just and reasonable” and not “unduly discriminatory” (including under § 205(b)).
- Discrimination can arise from the relationship between two rates; a wholesale rate that appears reasonable in isolation may be unduly discriminatory when compared to a utility’s own retail rates in a market where it competes with its wholesale customers.
- The regulator lacks authority to set retail rates, but it may examine retail prices as evidence bearing on whether the jurisdictional wholesale rate creates an unreasonable rate differential or competitive harm traceable to the wholesale rate.
- If discriminatory effects are traceable to the jurisdictional wholesale rate, the regulator may correct the problem by modifying the wholesale rate under its remedial authority (including under § 206), without regulating retail rates.

## Conclusion

The Court held that the federal wholesale-rate regulator must be able to consider alleged “price squeeze” evidence and the wholesale–retail rate relationship when assessing whether a proposed wholesale rate is just, reasonable, and non-discriminatory, while limiting any corrective action to the jurisdictional wholesale rate.


Fed. Power Comm’n v. Conway Corp., 426 U.S. 271 (1976)