Electricity means the flowing motion of electric charge. Just as the flow of water in a river constitutes a current of water, flow of charge, i.e. charges in motion constitute an electric current. The term electricity includes many easily recognizable phenomena such as lightning, static electricity, electromagnetic field, and electromagnetic induction.
Electricity is a consumable product. Electricity whether made by artificial means, or electric current, is a property. In the U.S., water power rests within the exclusive control of the federal government. Therefore, the water power, the right to convert it into electric energy, and the electric energy thus produced constitute property belonging to the U.S. Authority to dispose of property constitutionally acquired by the U.S. is expressly granted to Congress by § 3 of Article IV of the U.S. Constitution. In United States v. Chandler-Dunbar Water Power Co., 229 U.S. 53, 72 (U.S. 1913), the court stated that “Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States; and nothing in this Constitution shall be so construed as to Prejudice any Claims of the United States, or of any particular State”.
The industrial and residential use of electricity occurred in the late nineteenth century. Modern industrial society remains much reliant on the use of electrical power. Electricity’s extraordinary adaptability as a source of energy means it can be put to an almost limitless set of applications which include transport, heating, lighting, communications, and computation.
An electric cooperative is governed largely by its bylaws, which details membership rights, and provide for a system of election and removal of officers or directors.
When the U.S. has constitutionally acquired property suitable for the production of electricity, it is entitled to generate and sell power without encroaching on the rights reserved to the states or to the people by the Tenth Amendment.
Three major segments of electric utility industry are production, transmission and distribution. Larger generating plants that were cheaper to build and operate were located farther from population centers. Individual central-station entrepreneurs gave way to corporate systems, and corporate systems formed holding companies. In the electric utility industry, holding companies developed certain characteristics that later led to congressional action in 1935 to constrain this form of ownership. The federal legislative programs aim to restructure dramatically the privately owned utility holding companies, impose more effective regulation, and to move boldly into federal development of hydroelectric power and electrification in rural areas. Legislation such as the Public Utility Act of 1935, the Tennessee Valley Authority Act of 1933, and the Rural Electrification Act of 1936 were enacted with an intention to strengthen governmental control of electric utilities. In 1992, Congress enacted the Energy Policy Act of 1992 (EPACT) to promote greater competition in bulk power markets.
The second major segment of the electric utility industry is transmission. Generally, high-voltage lines move the electric energy from the point of generation to local distribution systems, where the voltage is reduced through transformers and the energy distributed to customers. In the early days of the industry electric generation plants tended to be located close to the customers they served. In more recent years, generating plants have tended to be placed in relatively remote locations for environmental, operational, and economic reasons. With the growth of the industry and improvements in technology, the U.S. is covered by a transmission grid, in which many lines are interconnected and operated in synchronization.
The transportation or transmission of electric current from state to state through appropriate instrumentalities constitutes commerce between the states. A corporation that conducts those activities through the instrumentality of holding companies is subject to federal regulation. The transmission of electric current directly from the seller in one state to the consumer in another for immediate or practical immediate use, subject only to a temporary transition for the purpose of reducing the current to a commercial voltage, remains interstate commerce. A state may not prohibit the exportation of hydroelectric energy produced within its borders by a federally licensed facility[i].
The third basic segment of the electric utility industry is distribution. It involves activities such as receiving electric energy from the transmission system, reducing it by transformation to distribution voltages, and delivering it to the ultimate consumers. The distribution function is generally carried out by an entity having a franchise, territorial assignment, or other right to serve all of the customers in a particular geographical area.
It is an accepted proposition that electric current is a commodity; and that the owner of an apartment house becomes the owner of electric current.[ii] A private individual, without special legislative authority, has a legal right to generate and sell electricity for public and private purposes. S/he has the right to light the streets of a town, provided s/he has a legal permit from the municipal officers of the town to erect and maintain the system of poles and wires along the public highways. The right to furnish electric light and power, aside from the right of eminent domain, is not strictly speaking a franchise, but a privilege or power which is granted to a corporation by the legislature. However, this right is open to any individual without such grant. There is nothing pertaining solely to sovereignty in the selling of electricity for lighting purposes[iii].
A municipality’s power to establish or buy and maintain an electric plant is conferred by constitution or statute. The corporate power of a city to own and operate a municipal electric plant and supply its inhabitants at prescribed rates light, heat, and power is conferred by statute and the Constitution. “The municipal corporations shall have power, when properly exercised by its council by ordinance, to establish and maintain municipal lighting, power and heating plants”[iv].
The police power of the state includes the power to issue regulations by which electric companies construct their systems and conduct their business within the state[v].
The Public Utility Regulatory Policies Act (PURPA) is a federal law created to reduce the country’s dependence on imported fuels by encouraging the addition of cogeneration and small power production facilities to the nation’s electrical generating system. A part of the Act establishes federal standards for electric utility ratemaking in the interest of energy conservation, as well as standards to promote the optimal use and efficiency of electric power and provide equitable rates to consumers[vi].
Additionally, state regulatory powers over electric companies extend to the provision of reasonably adequate service, the installation and repair of electrical wires and equipment, and insulation of wires[vii].
[i] Pipe Line Cases, 234 U.S. 548, 560 (U.S. 1914).
[ii] Sixty-Seventh South Munn, Inc. v. Board of Public Utility Comm’rs, 106 N.J.L. 45, 47 (Sup. Ct. 1929).
[iii] State ex rel. Martin v. Ohio Electric Power Co., 35 Ohio App. 481, 489 (Ohio Ct. App., Huron County 1928).
[iv] Lakewood v. Cleveland Elec. Illuminating Co., 29 Ohio Dec. 355, 360 (Ohio C.P. 1918).
[v] State ex rel. Martin v. Ohio Electric Power Co., 35 Ohio App. 481, 483 (Ohio Ct. App., Huron County 1928).
[vi] 16 USCS § 2621.
[vii] Lakewood v. Cleveland Elec. Illuminating Co., 29 Ohio Dec. 355, 360 (Ohio C.P. 1918).