Appalachian Power Co. v. Federal Power Commission
| Decision Date | 08 January 1976 |
| Docket Number | Nos. 73--1290,73--2085,s. 73--1290 |
| Citation | 529 F.2d 342,174 U.S.App.D.C. 100 |
| Parties | APPALACHIAN POWER COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Cities of Danville et al., Virginia, et al., Intervenors. KENTUCKY UTILITIES COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Electric and Water Plant Board of the City of Frankfort, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Peter J. Schlesinger, New York City, for petitioner in No. 73--1290.
Jerome C. Muys, Washington, D.C., with whom Thomas M. Debevoise, Washington, D.C., was on the brief, for petitioner in No. 73--2085.
Thomas M. Walsh and A. Lee Wallace, Attys., Federal Power Commission, with whom Leo E. Forquer, General Counsel, and George W. McHenry, Sol., Federal Power Commission, were on the brief, for respondent.
Northcutt Ely, Washington, D.C., with whom Frederick H. Ritts, Washington, D.C., was on the brief, for intervenors Cities and Virginia Polytechnic Institute and State University in No. 73--1290.
Sandra J. Strebel, Washington, D.C., for intervenors Electric and Water Plant Board of the City of Frankfort, and others in No. 73--2085.
Before LUMBARD, * Senior Circuit Judge for the Second Circuit, and TAMM and ROBINSON, Circuit Judges.
In these consolidated cases, petitioners Appalachian Power Company (AP) and Kentucky Utilities Company (KU), public electric utilities regulated under the Federal Power Act, 1 seek review of orders of the Federal Power Commission rejecting increased rates proposed for electric power to be supplied certain customers pursuant to preexisting contracts. Petitioners contend that the Commission erroneously construed the contracts as fixed-rate agreements, as such protected by the Act against unilateral change. We sustain the Commission's interpretations and affirm the orders under review.
At the outset, we pause briefly to consider three decisions of the Supreme Court staking out the principles governing resolution of issues of the kind presented here. The first, United Gas Pipe Line Company v. Mobile Gas Service Corporation, 2 involved a federally regulated natural gas pipeline bound by a ten-year contract to supply a distributor at a particular rate. During the term of the agreement the pipeline filed with the Commission a new rate schedule lacking the concurrence of its customer and purporting to fix the rate above that called for by the contract. The Court noted that the Natural Gas Act 3--the relevant provisions of which 'are in all material respects substantially identical to the equivalent provisions of the' Federal Power Act 4--'expressly recognizes that rates to particular customers may be set by individual contracts' 5 and 'evidence no purpose to abrogate private rate contracts as such.' 6 After analyzing the statutory text, 7 the Court concluded 'that theNatural Gas Act gives a natural gas company no power to change its contracts unilaterally,' 8 and accordingly held 'that the new schedule filed by (the pipeline) was a nullity insofar as it purported to change the rate set by its contract with (the distributor) and that the contract rate remained the only lawful rate.' 9
The second case, Federal Power Commission v. Sierra Pacific Power Company, 10 decided the same day, presented a cognate issue under the parallel provisions of the Federal Power Act. 11 The question was whether the Commission could raise the rate established by a supply contract between a regulated electric utility and a distributor on a finding that the new rate was not unreasonably high. The Court, extending Mobile's Gas Act interpretation to the Power Act's counterparts 12 held that 'neither (the utility's) filing of the new rate nor the Commission's finding that the new rate was not unlawful was effective to change (the utility's) contract with' the distributor. 13
The third case, decided two years later, fell outside the scope of the Mobile-Sierra doctrine. In United Gas Pipe Line Company v. Memphis Light, Gas & Water Division, 14 service contracts between a gas pipeline and a distributor-customer provided that
(a)ll gas delivered hereunder shall be paid for by Buyer under Seller's Rate Schedule . . ., or any effective superseding rate schedules, on file with the Federal Power Commission.
This agreement in all respects shall be subject to the applicable provisions of such rate schedules and to the General Terms and Conditions attached thereto and filed with the Federal Power Commission which are by reference made a part hereof. 15
The Court held that this provision did not set 'a single fixed rate, as in Mobile, but . . . what in effect amounted to its current 'going' rate,' 16 and that '(c)ontractually this left (the pipeline) free to change its rates from time to time, subject, of course, to the procedures and limitations of the Natural Gas Act.' 17 As the Court explained, '(t)he important and indeed decisive difference between this case and Mobile 18 is that in Mobile one party to a contract was asserting that the Natural Gas Act somehow gave it the right unilaterally to abrogate its contractual undertaking, whereas here (the pipeline) seeks simply to assert, in accordance with the procedures specified by the Act, rights expressly reserved to it by contract.' 19 Consequently, the pipeline's unilateral rate elevation was fully compatible with the parties' contract and therefore valid. 20
As this court fairly recently observed,
(t)he rule of Sierra, Mobile and Memphis is refreshingly simple: The contract between the parties governs the legality of the filing. Rate filings consistent with contractual obligations are valid; rate filings inconsistent with contractual obligations are invalid. 21
In the past we have had occasion, in investigating the congruence of contract provisions and unilateral rate increases, to apply the Mobile-Sierra-Memphis principles thus summarized. 22 Today, in the cases at bar, we must do so once again.
AP filed with the Commission unilateral increases in its rates for electric power to be sold to its wholesale customers. Intervenors 23 customers in Virginia, moved to reject the filing on the ground that the proposed increases violated their allegedly fixed-rate contracts with AP and thus clashed with the Mobile-Sierra doctrine. In response, AP averred that the parties had assumed that Virginia law applied to the service agreements and that, construed accordingly, they were beyond the ambit of Mobile-Sierra. The Commission, unimpressed by that argument, granted the motions. 24
As the Commission found, each of the contracts in question stipulates that the '(c)ustomer agrees to pay the Company monthly for electric energy delivered' thereunder at an expressly designated rate. 25 The Commission, finding no language reflecting an intent to permit unilateral changes, 26 deemed Virginia law inapposite. 27 On rehearing, the Commission adhered to that position, 28 and to its conclusion that the agreements established fixed-rates protected by Mobile-Sierra against unilateral increases. 29
The sole claim of error advanced here is the Commission's refusal to consider Virginia law in deciding whether the contracts fell within Mobile-Sierra or instead within Memphis. AP told the Commission that the parties had taken for granted the applicability of Virginia law to their agreements, and that under the law of that state 'fixed and unalterable rate contracts were prohibited and upon the exercise of regulatory authority, (AP) has the unquestioned right and power to file changes in its contract rates.' 30 On that basis, AP urged the Commission to read the contracts as going-rate compacts, 31 and now contends that our decision in Richmond Power & Light v. Federal Power Commission 32 requires that result. 33
We hold that the Commission properly treated Virginia law as irrelevant to interpretation of the contracts in suit. 34 To be sure, the parties are free to forge a going-rate agreement by a reference to state-law principles which impart that effect. 35 But it is well settled that '(i)n the absence of ambiguity the intent of the parties to a contract must be ascertained from the language thereof without resort to parol evidence or extrinsic circumstances.' 36 Here the service agreements unequivocably specify the rates chargeable, 37 and all that remains is 'the question whether (they) reserved to (AP) the power to make rate changes' without customer concurrence. 38 The Commission could find nothing in the contracts explicitly conferring that authority or indicating that such authority was contemplated. 39 Our attention has not been directed to any language susceptible to the construction that the rate may be altered while the contracts subsist. In these circumstances, the parties' rights and liabilities viz-a-viz the designated rate must be determined from the contracts as written, 40 and the Mobile-Sierra proscription comes into full play. 40
Our decision in Richmond Power & Light does not support the thesis that state law may confer contractual permission to revise unequivocal rate-fixing provisions. There the agreements under scrutiny expressly adopted the rate set in a tariff on file with a state regulatory agency. 42 That internal reference drew state law into the process of ascertaining whether unilateral rate raises were envisioned. 43 In the instant case, however, the contracts contain no hint whatever that state law is to affect the price that AP can exact. 44 Rather, AP would reach outside the unambiguous contracts for an argument seeking to impart uncertainty, and then again utilize the extrinsic material to resolve the so-called doubt. 45 Well settled principles preclude both the Commission and this court from endorsing that technique. 46
KU filed...
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