Alabama Elec. Co-op., Inc. v. F. E. R. C.
| Decision Date | 23 July 1982 |
| Citation | 684 F.2d 20 |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory commission.
D. Biard MacGuineas, Washington, D. C., with whom Bennett Boskey, Washington, D. C., was on the brief, for petitioners.
Joel M. Cockrell, Atty., F.E.R.C., Washington, D. C., with whom Charles A. Moore, Gen. Counsel, and Barbara J. Weller, Deputy Sol., F.E.R.C., Washington, D. C., were on the brief, for respondent.
Arnold Fieldman, Washington, D. C., with whom Robert A. Buettner and Rodney O. Mundy, Birmingham, Ala., were on the joint brief for intervenors, Alabama Power Co. and Municipal Elec. Utility Ass'n of Alabama, et al.
Before MacKINNON and WILKEY, Circuit Judges, and GREENE, * United States District Judge for the District of Columbia.
Opinion for the Court filed by Circuit Judge WILKEY.
If the usual setting for an allegation of unlawful rate discrimination is a case where a utility applies different rates or charges to groups of customers which are claimed to be similarly situated, then this is the unusual case. We are called upon to determine whether an application of the same rate to two groups of customers which are similar in many respects may nevertheless violate statutory prohibitions against unduly discriminatory rate schemes. For reasons set out in detail below, we hold that it may. We also hold, in response to a second question before us, that the petitioners raised their objections in a timely fashion before the Federal Energy Regulatory Commission (FERC), and that the issue of unlawful discrimination should have been resolved. We vacate FERC's approval of the subject rate filings and remand to the Commission for appropriate action.
On 17 June 1974 Alabama Power Company filed with what was then the Federal Power Commission a proposed $12 million increase in its wholesale rates to rural electric distribution cooperatives (Cooperatives) and to municipal electric distribution systems (Municipalities). The proposed rates were such that, when applied to the test year data, they allowed "an overall rate of return of 8.72 and 8.89 percent, respectively, on the capital devoted to serving the Municipalities and Cooperatives." 1
The proposed rates became effective, subject to refund, on 12 September 1974, and were referred to an administrative law judge for hearings on their reasonableness. On 30 April 1976 Alabama Power filed a superseding rate increase which, by Commission order, 2 became effective on 1 October 1976, also subject to refund. As a result of this subsequently-filed rate increase, the terms of which were the product of negotiations between the parties, the proceedings related to the June 1974 filing became restricted to an evaluation of the reasonableness of the rates which were in effect for a locked-in period from 12 September 1974 through 30 September 1976.
The ALJ's initial decision, rendered on 22 October 1976, called for revisions in Alabama Power's filings and held, meantime, that the proposed rates were not just and reasonable. 3 This decision was modified on 1 August 1979 by FERC's Opinion No. 54, which disallowed the rate increase until Alabama Power filed a revised cost-of-service study and other "necessary amendments" to its rate schedule. 4 The Commission further clarified the determinations of Opinion No. 54 in an order issued 28 September 1979 and directed Alabama Power to submit compliance filings in accordance therewith. 5
Alabama Power's 1 November 1979 filing of a revised cost-of-service study and amended rate schedules triggered protests from both the Cooperatives and the Municipalities, who claimed that the filing did not comply with the Commission's directives. The Cooperatives argued also that the company's revised schedules embodied rates which
would have the effect of allocating improperly the responsibility for test year revenues between two wholesale groups. Indeed, ... application of such a single rate would result in the Cooperatives being required to pay approximately $361,000 more, and the Municipalities approximately $338,000 less, than the test year revenue for which each is responsible under Alabama Power's revised cost of service. Furthermore, this proposed single rate would have the effect ... of permitting the Company to collect approximately $23,000 more in test year revenue than it is entitled to collect under its own revised cost of service. Such results that would be obtained by application of this single rate to both wholesale groups is clearly unjust, unreasonable, and unduly discriminatory for the Cooperatives. 6
The Commission noted numerous deficiencies in the compliance filing and encouraged the company, intervenors, and Commission staff to meet informally to discuss the matter. Following the meeting, held in April 1980, the Cooperatives notified FERC that their contention that the overall rate structure should be designed to produce revenues which matched, as closely as practical, the costs of service for each group-Cooperatives and Municipalities-remained unresolved. And when Alabama Power tendered another revised compliance filing on 8 January 1981, the Cooperatives once again objected, arguing that, while the figures were different, the revised schedule retained the fundamental defect to which the Cooperatives had objected earlier-a single rate yielding disparate overall rates of return on the costs to Alabama Power of providing service to the Municipalities and Cooperatives respectively. The Cooperatives indicated in their formal protest to the Commission that
application of this proposed rate would result in the Cooperatives being required to pay approximately $173,000 more, and the Municipalities approximately $171,000 less, than the test year revenue for which each is responsible under Alabama Power's cost of service.... The results obtained by the application of this proposed rate to both wholesale groups is clearly unjust, unreasonable, and unduly discriminatory and causes substantial economic injury to the Cooperatives. 7
The Municipalities protested the new compliance filings on other grounds, but opposed the Cooperatives' contentions.
FERC noticed the revised filing on 30 January 1981 8 and on 1 May 1981 issued a "By Direction" letter accepting the filing. 9 The Commission's letter did not address the merits of the Cooperatives' complaint, but stated only that "(b)ecause (Alabama Power) proposed a single wholesale rate applicable to both customer classes and the issue of separate rates for the two customer classes was not raised prior to the compliance date of this proceeding, Cooperatives' request for rate design revision is untimely and inappropriate." 10
FERC denied rehearing on 29 June 1981 and the Cooperatives subsequently petitioned for this court's review.
The opposing sides in this controversy do not actually meet head-on. The Cooperatives are firm in their contention that the rate accepted by FERC is unduly discriminatory. This particular argument is not directly countered on the merits, either by FERC or by the intervenors. These parties, for their part, have taken a procedural stance, casting the Cooperatives' position as a demand for separate rates and then insisting that the demand was simply made too late in the proceeding. Thus by these separate, in a sense converging, but not necessarily opposing arguments, we must address two principal issues: the first, whether the Cooperatives' objections were raised in a timely manner before the Commission; the second, whether there is a basis in law for the Cooperatives' argument that Alabama Power's revised rate schedule was unlawfully discriminatory. If the answer to both of these issues is in the affirmative, then we must conclude that FERC erred in failing to consider the objections raised. We shall address each in turn.
FERC's position before this court is the same one taken in its denial of the petitioners' application for rehearing below-that because petitioners' objections to Alabama Power's revised rates did not relate specifically to the compliance of the company's filings with the Commission's directions in Opinion No. 54 and "could have been raised earlier," they were inappropriate to the compliance stage of the rate proceedings. The Commission points for support to United States v. Tucker Truck Lines 11 and related cases 12 for the proposition that "a reviewing court should not overturn an administrative decision unless the agency has erred in the face of objection made at the time appropriate under agency practice." 13 We do not question the accuracy of FERC's statement of this general rule. We simply cannot accept the Commission's insistence that the rule applies under the facts of this case.
First of all, FERC's contention depends strongly on its own insistence that the Cooperatives' protest against Alabama Power's compliance filing was (and is) simply a demand for separate rates. 14 We are not persuaded by this characterization of the petitioners' case.
It is clear from the record that the Cooperatives' objections to Alabama Power's rate schedule are not leveled at the company's application of a single rate, per se, but only at the fact that the particular single rate ultimately revised and filed in this case creates what the Cooperatives maintain to be an undue disparity between the rates of return to Alabama Power on its sales to the two groups of wholesale customers. Petitioners clearly articulated to FERC that they were not necessarily demanding a multiple rate schedule but simply a...
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