Borough of Lansdale, Pa. v. FEDERAL POWER COM'N
| Decision Date | 15 March 1974 |
| Docket Number | No. 73-1031 and 73-1649.,73-1031 and 73-1649. |
| Citation | 494 F.2d 1104 |
| Parties | BOROUGH OF LANSDALE, PENNSYLVANIA, Petitioner v. FEDERAL POWER COMMISSION, Respondent Philadelphia Electric Company, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Charles F. Wheatley, Jr., Washington, D. C., with whom Jerome C. Muys, Washington, D. C., was on the brief, for petitioner.
William M. Sawyer, Atty., Federal Power Commission, with whom Leo E. Forquer, Gen. Counsel, and George W. McHenry, Jr., Acting Sol., Federal Power Commission, were on the brief, for respondent.
Ernest R. von Starck, Philadelphia, Pa., of the bar of the Supreme Court of Pennsylvania, pro hac vice, by special leave of court, with whom Abraham R. Spalter, Washington, D. C., was on the brief, for intervenor.
Before WRIGHT and McGOWAN,* Circuit Judges, and WYZANSKI,** Senior District Judge.
The Borough of Lansdale seeks review of several orders,1 issued without an evidentiary hearing, by which the Federal Power Commission authorized the Philadelphia Electric Company (intervenor here) to charge Lansdale higher rates for electric power than those set in an outstanding fixed-rate contract2 between the Borough and the company. Specifically, the orders summarily accepted the company's filing of the higher rates, set a hearing to determine their reasonableness, and provided that the fixed-rate contract would be "immaterial" to the determination because the contract is "presumptively not in the public interest." The Borough relies on FPC v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956), and United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956), which held that the Commission may not sanction rate increases inconsistent with a fixed-rate contract, over objection of one of the parties, unless and until an evidentiary hearing has shown the contract rates to be lower than the "public interest" requires.
The Commission and the company urge before us two grounds for excepting the instant case from the Sierra-Mobile doctrine, both turning on the fact that a prior, unappealed order of the Commission3 had declined to accept the fixed-rate contract involved in this case: (1) It is contended that the Sierra-Mobile doctrine applies only to contracts previously accepted as lawful by the Commission. (2) It is contended that the prior "rejection" of the contract is res judicata, precluding Lansdale from raising the contract as an objection to the company's filed rate increase. We have concluded that the first argument misstates the law and that the second misconstrues the prior order. Accordingly, we in part modify, and otherwise set aside, the orders under review.
From 1956 to 1964 Lansdale generated most of its own power but purchased some electricity from Philadelphia Electric. On March 20, 1964 the Borough and the company signed a fixed-rate contract, subsequently accepted for filing by the Commission, for a monthly supply of not more than 8,000 kilowatts of electric power; the agreement was for a term of three years, and year-to-year thereafter. In 1967 the Borough began to investigate the terms and conditions on which various utility companies, including Philadelphia Electric, would supply all of the Borough's electricity needs. These explorations culminated on November 12, 1971 in a new agreement between Lansdale and Philadelphia Electric. This contract superseded the 1964 agreement and promised the Borough a monthly electric supply of 29,000 kilowatts for a five-year period "in accordance with the terms hereof, including the rate schedule attached hereto and made a part hereof." The attached schedule prescribed fixed rates identical with those set in the 1964 contract. The 1971 agreement incorporated a separate contract, signed the same day, obligating Lansdale to build certain new facilities to carry the increased power supplies from the company.
By a letter dated December 27, 1971, Philadelphia Electric sent the new contract to the FPC, attaching the facilities agreement as an appendix.4 Noting that the new contract superseded the 1964 agreement and that the 1964 rates were continued unchanged under the new contract, the letter asked the Commission to "permit this new agreement to become effective November 12, 1971 so that * * * the changes in present facilities can proceed without delay."5 The Commission deferred docketing and awaited "comments from Philadelphia with respect to the prematurity of such filing."6 (Apparently the Commission thought filing should not precede by more than 90 days the point when monthly service to Lansdale was to exceed the 8,000 kilowatts specified in the 1964 contract.7 Meanwhile, pursuant to the 1971 facilities agreement Lansdale proceeded with the construction necessary to carry the additional service, completing this on July 26, 1972 at a cost of about $350,000 to the Borough.8
While Lansdale was laboring to fulfill its obligations under the 1971 agreements, Philadelphia Electric apparently decided to breach the agreements. Without notice to the Borough, the company withdrew from the Commission the letter filing of the agreements and, on May 1, 1972, the company proffered a new filing which proposed rates substantially higher than those set in the 1971 contract.9 Lansdale asked the Commission to reject the new filing summarily as a unilateral attempt to abrogate the 1971 contract in violation of the Sierra-Mobile doctrine. Philadelphia Electric answered that it would suffer a loss on its service to Lansdale under the 1971 contract and that parol evidence would show that the Borough had understood that the 1971 contract rates could be altered unilaterally.
On August 31, 1972 the Commission issued an "Order Rejecting Proposed Rate Agreement" which was appealed by neither party and is no longer subject to judicial review.10 The order found that the 1971 contract unambiguously prescribed fixed rates for electric service so that "there is no need to consider the parol evidence advanced by Philadelphia nor to invoke the parol evidence rule."11 The order also granted Lansdale's motion to reject summarily the proposed rate increases on Sierra-Mobile grounds:
The Commission * * * concludes that Philadelphia\'s proposed increase in rates to Lansdale is in violation of the principle enunicated sic by the United States Supreme Court in F.P.C. v. Sierra Pacific Power Company, 350 U.S. 348 76 S.Ct. 368, 100 L.Ed. 388 (1956) and in United Gas Pipe Line Company v. Mobile Gas Service Corporation, 350 U.S. 332 76 S.Ct. 373, 100 L.Ed. 373 (1956) and should accordingly be rejected. The Sierra-Mobile rule provides that a public utility cannot file a unilateral change in rates under a "fixed rate" contract with a customer.12
But the Commission expressed discontent with the rule:
We recognize that we are bound by the current state of the law as interpreted in Mobile, Sierra and Memphis United Gas Pipe Line Co. v. Memphis Light, Gas & Water Div., 358 U. S. 103 79 S.Ct. 194, 3 L.Ed.2d 153 (1958) and we will continue to be governed by the principles set forth therein. However, it is our intention in future cases involving new fixed rate contracts to scrutinize the provisions of each such contract in order to determine whether it is in the public interest.13
Several paragraphs later, without further explanation, the Commission stated:
In rejecting the proposed change in rate schedule for service to Lansdale we shall not accept the agreement providing for full requirements service to Lansdale by Philadelphia.14
In summarizing its order the Commission stated that the company's filed rate increase was "rejected and not allowed to become effective," and that "Philadelphia's agreement with Lansdale for full requirements service is not allowed to become effective.15
The August 31, 1972 order left the 1964 contract as the only document physically on file with the Commission covering the company's service to Lansdale. But that contract provided for only 8,000 kilowatts per month, and service in excess of 8,000 kilowatts began September 1, 197216 and has continued since, as the 1971 contract contemplated. On October 24, 1972 the company submitted a new filing which assumed that the 1971 contract rates were a dead letter.17 The filing provided that the 1964 contract govern service up to 8,000 kilowatts per month until March 23, 1973.18 For service in excess of 8,000 kilowatts, and for all service after March 1973, substantially higher rates were proposed.19 The Borough asked that the Commission summarily reject the new filing as inconsistent with the 1971 contract and that the Commission direct the company to file that contract instead.
On November 22, 1972, in the first order challenged here,20 the Commission denied Lansdale's motion to reject the filing summarily. Instead the Commission suspended the company's filing until November 25 and set a hearing on the "lawfulness" of both the "proposed rate schedule tendered for filing by Philadelphia" and 21 The Commission rejected Lansdale's demand that Philadelphia be ordered to file the 1971 contract rates:
We indicated in our order of August 31, 1972, in which we rejected that contract, that it is our intention in future cases involving new fixed rate contracts to scrutinize the provisions of each contract in order to determine whether it is in the public interest. It is stated in the filing that Lansdale has required service substantially in excess of 8,000 kw demand * * *. * * * Under these circumstances we believe it is appropriate to require Philadelphia to submit the November 12, 1971, contract to the Commission in order for us to...
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