The U.S. Supreme Court case Arcadia, Ohio, et al. v. Ohio Power Company, et al., 1990 revolved around the issue of whether a state could regulate rates charged by an electric company for wholesale sales to municipalities and other political subdivisions within its borders when those entities resold the power at retail to their inhabitants. The court held that states do not have jurisdiction over such sales as they are subject to exclusive federal regulation under the Federal Power Act (FPA). The decision was based on two main reasons: first, Congress intended FPA's comprehensive scheme of federal regulation of "all wholesales of energy in interstate commerce" to be all-encompassing; secondly, allowing states to regulate would undermine effective federal regulation by creating potential inconsistencies between state and federal law.

In the dissenting opinion for Arcadia, Ohio v. Ohio Power Company, Justice Stevens argued that the majority's interpretation of Federal Energy Regulatory Commission (FERC) authority was too narrow and inconsistent with congressional intent. He contended that Congress intended to give FERC broad powers to regulate all aspects of wholesale electricity rates under the Federal Power Act. This includes not only direct charges but also ancillary costs such as those at issue in this case - transmission costs incurred by utilities when they purchase power from other sources and transmit it over their own lines. The majority's decision effectively allows local utilities to pass these costs onto consumers without any federal oversight or regulation, which is contrary to what Congress had envisioned when it enacted the Federal Power Act.