Otter Tail Power Co. v. United States

Facts

Otter Tail Power Company operated as a vertically integrated power company selling electricity at retail in 465 towns across three states, representing 91% of the retail market in its service area. The company operated under municipally granted franchises limited to 10-20 years. When these franchises expired, some towns voted to establish their own municipal distribution systems. Otter Tail attempted to prevent these municipal systems from forming through several tactics: refusing to sell power at wholesale to the new systems, refusing to “wheel” power from other suppliers, initiating litigation to delay or prevent the establishment of municipal systems, and invoking restrictive provisions in its transmission contracts with other power suppliers. The critical events centered on four towns – Elbow Lake, Minnesota; Hankinson, North Dakota; Colman, South Dakota; and Aurora, South Dakota. In Elbow Lake and Hankinson, Otter Tail simply refused to deal, while against Colman and Aurora, it used litigation as a weapon. The litigation strategy was particularly effective because municipal power systems are financed through bonds, which cannot be sold if there is pending litigation that might impair their value.