Cities of Bethany, Bushnell, Cairo, Carmi, Casey, Flora, Greenup, Marshall, Metropolis, Newton, Rantoul, and Roodhouse, Illinois v. F.E.R.C.
| Decision Date | 01 February 1984 |
| Citation | 727 F.2d 1131 |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of Two Orders of the Federal Energy Regulatory Commission.
Charles F. Wheatley, Washington, D.C., with whom Woodrow D. Wollesen and William Steven Paleos, Washington, D.C., were on the brief, for Cities of Bethany, et al., petitioners in No. 82-2168 and intervenors in Nos. 82-2189 and 82-2301.
Richard D. Avil, Jr., Cleveland, Ohio, with whom Paul T. Ruxin, Chicago, Ill., was on the brief, for Central Illinois Public Service Co., petitioner in No. 82-2189 and intervenor in Nos. 82-2168 and 82-2301. Brian F. Toohey, Cleveland, Ohio, also entered an appearance for Central Illinois Public Service.
Grace Powers Monaco, Washington, D.C., for Illinois Cooperative Group, petitioner in No. 82-2301 and intervenor in Nos. 82-2168 and 82-2189.
Andrea Wolfman, Atty., F.E.R.C., Washington, D.C., with whom Barbara J. Weller, Deputy Sol., and Thajauna D. Miller, Atty., F.E.R.C., Washington, D.C., were on the brief, for respondent.
Before WILKEY and WALD, Circuit Judges, and MacKINNON, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge WILKEY.
Petitioners seek review of two orders of the Federal Energy Regulatory Commission ("FERC" or "the Commission") pertaining to a wholesale rate filing made by Central Illinois Public Service Company ("CIPS") in 1979. 1 The three sets of petitioners are: CIPS, which is a utility that sells electrical power at wholesale; a group of twelve Illinois cities ("the Cities"), all of which are wholesale customers of CIPS; 2 and the Illinois Cooperative Group ("the Coops"), which is comprised of rural cooperatives that also purchase electricity at wholesale from CIPS. Each of the three sets of petitioners challenges different aspects of FERC's orders.
We affirm FERC in all respects except for its interpretation of the contracts between CIPS and four of its municipal customers. We reverse FERC's determination that the rates under the contracts must be applied prospectively only, from the date of FERC's order in this case.
On 2 November 1979 CIPS made a wholesale rate filing with FERC. The rate filing sought rate increases for CIPS's three classifications of wholesale customers: the Coops in group W-1; the full requirements city customers in W-2; and the partial requirements city customers in W-3. Prior to this contested rate filing, CIPS historically had charged the same rate to its W-1 customers (Coops) as it did to its W-2 customers (full requirements cities), despite their separate customer classifications. CIPS's 1979 wholesale rate filing, however, sought a greater increase in the rates to be charged to the W-2 city customers than it did for the rates to be charged to the W-1 cooperative customers. 3
In accordance with contracts between CIPS and the Coops, CIPS had given the Coops six months' advance notice of its proposed wholesale rate filing. Pursuant to this advance notice, CIPS and the Coops entered into settlement negotiations, which resulted in the Coops' agreeing not to challenge the proposed rate filing at FERC. Contracts between CIPS and the Cities did not contain a similar notice provision and CIPS merely gave the Cities the more limited, 60 days' notice required by the Federal Power Act. 4
Because the Coops had agreed to the proposed rate increase in advance, the Commission permitted the W-1 rate to take effect without suspension. FERC, however, imposed a suspension on the effective date of the W-2 and W-3 rate increases, and then proceeded to investigate the propriety of those proposed rates under the Federal Power Act. A hearing on CIPS's proposed increases in rates charged to the Cities was held before an Administrative Law Judge, at which hearing CIPS, the Cities, and FERC's staff all participated.
In the proceedings the Cities challenged the justness and reasonableness of the W-2 and W-3 rates, and also charged that CIPS's proposed rates were unlawfully discriminatory because of the disparity between the rates to be charged to the Coops and the Cities. The Cities further claimed that CIPS's proposed change to a new method of allocating fixed costs among customers was not reasonable. In addition, the Cities raised several miscellaneous cost-of-service issues. The ALJ's Initial Decision of 2 March 1981 concluded that the differential between rates for the Coops and the Cities was unduly discriminatory, and that the CIPS's proposed use of a "3-CP" method of allocating costs was not reasonable. 5 The ALJ ruled against the Cities on several miscellaneous cost-of-service issues.
Exceptions to the Initial Decision were filed with the Commission by CIPS and the Cities. In addition, the Coops were permitted to intervene in the proceedings before FERC in support of CIPS's position, which urged the Commission to reverse the ALJ's rejection of CIPS's proposed method of allocating costs. In addition, four of the Cities made the argument, not previously made to the ALJ, that the proposed rate increase could not be applied to them, because their private contracts with CIPS prohibit unilateral rate filings.
On 12 July 1982 the Commission affirmed in part and reversed in part the ALJ's Initial Decision, and FERC's order established the just and reasonable rates that CIPS was permitted to charge. 6 FERC affirmed the ALJ's decision with respect to the demand cost allocation method and several miscellaneous cost-of-service issues. While adopting the ALJ's findings of fact on the discrimination claim, however, FERC determined that the rate differential between the Cities and the Coops was not unduly discriminatory, overruling the ALJ on that point. Finally, FERC interpreted the contracts between four municipal customers and CIPS as prohibiting unilateral rate filings by CIPS. It construed those contracts to provide that FERC itself would establish rates under the contract when the parties failed to agree on specific rates, and that those established rates could only be applied prospectively. Accordingly, it ordered CIPS to refund to the four cities the increases in rates collected from the four Cities from the time of the effective date of CIPS's unilateral filing to the date of the Commission's order setting the reasonable rates in this case.
On 30 September 1982 FERC issued a subsequent order, in which it denied applications for rehearing and it further explained its determinations on the discrimination and contract issues. 7 Petitioners petitioned this court for review of those two orders of the Commission.
A principal element in CIPS's rate schedule is the demand charge, which allocates fixed costs among customers. CIPS's 1979 rate filing proposed to allocate fixed costs among customers based on each customer's demand for electricity during CIPS's peak sales months of June, July and August. This method of cost allocation is known as a 3-CP method, because of its use of a coincident peak of three months. Prior to its 1979 filing, CIPS had used a 12-CP method, which apportioned fixed costs among customers based on each customer's demand for electricity in each of twelve months. Because the Cities' purchases of electricity are the greatest during the summer months and the Coops' demand peaks in the winter, CIPS's proposed use of the 3-CP method would have resulted in a higher proportion of fixed costs being allocated to the Cities than was allocated to them under the previously employed 12-CP method.
The Commission affirmed the ALJ's conclusion that CIPS's proposed use of a 3-CP method of allocating costs among classes of customers was not reasonable. On review, the Coops argue that FERC and the ALJ used an incorrect legal standard to assess the propriety of CIPS's proposed use of a 3-CP cost allocation method. 8 CIPS contends that FERC's decision on the demand cost allocation method is not supported by substantial evidence on the record considered as a whole. Both FERC and the Cities take the position that FERC made a reasonable policy determination on the proper cost allocation method and that FERC's decision is supported by substantial evidence on the record considered as a whole.
The Coops' contention that the ALJ erred by requiring CIPS to prove that the proposed 3-CP method was more reasonable than the 12-CP method is not correct; neither the ALJ nor FERC employed that standard. The Federal Power Act requires that all rates charged by public utilities be "just and reasonable." 9 In the past FERC has interpreted its authority to review rates under this provision of the Act as limited to an inquiry into whether the rates proposed by a utility are reasonable--and not to extend to determining whether a proposed rate schedule is more or less reasonable than alternative rate designs. 10 Adopting the usual standard, the ALJ determined, and the Commission agreed, that CIPS only bore a burden to demonstrate that its proposed 3-CP method of allocating costs was reasonable; CIPS was not required to prove that its proposed 3-CP method was more reasonable than the 12-CP method which it had previously employed. The ALJ stated:
[T]he standard for the decision is ... not...
To continue reading
Request your trial
-
Louisiana Ass'n of Independent Producers and Royalty Owners v. F.E.R.C.
...rate differential. United Mun. Distribs. Group v. FERC, 732 F.2d 202, 212 (D.C.Cir.1984); Cities of Bethany, Bushnell, Cairo, Etc. v. FERC, 727 F.2d 1131, 1139 (D.C.Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d 229 (1984); Boroughs of Chambersburg and Mont Alto v. FERC, 580 F......
-
Associated Gas Distributors v. F.E.R.C., 85-1811
...4 and 5 of the NGA. But "the mere fact of a rate disparity" is not enough to constitute unlawful discrimination. Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C.Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d 229 (1984). The reporting system will enable the Commission to mo......
-
Maine v. Fed. Energy Regulatory Comm'n
...206 authority to impose a new rate. See, e.g. , Atl. City Elec. Co. v. FERC , 295 F.3d 1, 10 (D.C. Cir. 2002) ; Cities of Bethany v. FERC , 727 F.2d 1131, 1143 (D.C. Cir. 1984). The burden of demonstrating that the existing ROE is unlawful is on FERC or the complainant, not the utility. 16 ......
-
S.C. Pub. Serv. Auth. v. Fed. Energy Regulatory Comm'n
...and cost allocation practices were unjust or unreasonable “warrants substantial deference from this court.” Cities of Bethany v. FERC, 727 F.2d 1131, 1137 (D.C.Cir.1984). “[T]he Commission may rely on ‘generic’ or ‘general’ findings of a systemic problem to support imposition of an industry......