Municipality Monopoly Is Not Fun For Everyone


Originally published in Law360, New York (February 24, 2012).

Unlawful tying arrangements are a frequent point of contention between electric cooperatives and municipalities. On Jan. 17, 2012, the U.S. Supreme Court let stand a decision that permits an unlawful tying/monopolization claim to go forward against the city of Newkirk, Okla.

The underlying facts are as follows: Newkirk and Kay Electric Cooperative are both electric providers in Oklahoma. Newkirk typically provides electric service to customers within its city limits, and Kay, a nearby utility, normally serves customers outside the city limits.

After it was announced that a new jail was being built outside the city limits of Newkirk, Kay offered to provide electricity. Newkirk, however, later annexed the area around the jail into the city limits and made its own offer.

Even though Kay offered a far more competitive rate for electricity than Newkirk, the jail chose Newkirk. The reasoning for that choice, as explained by the U.S. Tenth Circuit Court of Appeals, was that the jail found itself “stuck between a rock and a pile of sewage.”

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