City of Cleveland, Ohio v. Federal Power Commission
| Decision Date | 09 January 1976 |
| Docket Number | No. 73--1282,73--1282 |
| Citation | 525 F.2d 845,174 U.S.App.D.C. 1 |
| Parties | , 13 P.U.R.4th 524 CITY OF CLEVELAND, OHIO, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Cleveland Electric Illuminating Company, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Reuben Goldberg, Washington, D.C., with whom David Hjelmfelt, Washington, D.C., was on the brief, for petitioner.
Scott M. DuBoff, Atty., F.P.C., of the pro hac vice, Washington, D.C., for respondent. Leo E. Forquer, Gen. Counsel, F.P.C., and George W. McHenry, Sol., F.P.C., Washington, D.C., were on the brief, for respondent. John H. Burnes, Jr., Atty., F.P.C., Washington, D.C., also entered an appearance for respondent.
Harry A. Poth, Jr., Washington, D.C., with whom Robert T. Hall, III, Washington, D.C., was on the brief, for intervenor.
Before FAHY, Senior Circuit Judge, and ROBINSON and WILKEY, Circuit Judges.
This petition for review poses centrally the question whether the Federal Power Commission erred in adopting a rate structure specified in a schedule filed by a public electric utility without resolving its municipal customer's contention that the schedule contravenes a preexisting agreement between the parties. We answer that question in the affirmative. Accordingly, while we affirm the Commission on all other issues presented, we remand the case for further proceedings.
The City of Cleveland, Ohio, operates an electric light plant from which a part of the electrical power it consumes is derived. Its remaining requirements are served by the Cleveland Electric Illuminating Company (CEI), a public utility as defined by the Federal Power Act. 1 During the 1969 Christmas season, the municipal plant suffered a forced outage of its largest generating unit, which rendered it unable to supply normal street lighting and customer service. The train of activity designed to meet this crisis led ultimately to the litigation now before us.
Negotiations between the City and CEI produced an early understanding on a temporary load transfer service 2 to alleviate the emergency. 3 To satisfy a requirement of the City's charter, 4 its City Council, on January 19, 1970, passed Ordinance No. 161--70 5 authorizing a contract with CEI for the service at rates previously worked out. 6 On the following day, representatives of the parties signed a letter agreement 7 calling for the service for a maximum term expiring on December 31, 1971. 8 The letter agreement and subsequent modifications 9 were later submitted to 10 and accepted by the Commission for filing as a rate schedule. 11
CEI commenced service in February, 1970, and the City made payments therefor through March, 1971. At this point, the City challenged CEI's billings on the ground that the rates which it had filed with the Commission exceeded those which the parties had agreed to and which Ordinance No. 161--70 had authorized. This dispute, together with another over amounts allegedly owed by the City, 12 disrupted efforts to arrange a permanent interconnection, and precipitated a suit by CEI for arrearages, 13 a complaint by the City launching the proceeding under review, 14 and a notice by CEI that it was cancelling the service. 15
In its complaint to the Commission, filed May 13, 1971, the City sought a permanent interconnection with CEI, 16 a ruling on the rate and arrearages issues, and an order forbidding termination of the temporary service. 17 CEI extended its cancellation notice to December 16, 1971, at which time the Commission suspended the notice until May 17, 1972, 18 and on May 18 continued the service and the filed rates in effect pending further order. 19 On May 30, the Commission fixed interim rates for continuation of the service until entry of its final order in the proceedings. 20
During March and April, 1972, hearings were conducted by an examiner 21 who, on July 12, issued an initial decision 22 finding that a permanent synchronous interconnection would serve the public interest. 23 He directed the interconnection on specified terms and conditions, including authority to levy a charge for late payment of bills, 24 and proceeded to set rates for the permanent service. 25 The examiner found wanting the City's argument that the rates filed by CEI, and exacted until the Commission-fixed rates went into operation, 26 did not abide the actual agreement of the parties. 27
Both the City and CEI filed exceptions, upon consideration of which the Commission, in Opinion No. 644, adopted the examiner's decision in all but several relatively minor respects. 28 Adjustments were made in the rates, 29 which were to include the effects of an Ohio excise tax, 30 an item which the examiner had excluded. 31 The Commission retained and refined the examiner's late-charge feature, 32 and left standing his rejection of the City's objection to the filed rates. 33 By Opinion No. 644--A, the City's application for rehearing was denied, 34 whereupon its petition for review by this court followed.
The petition presents for our decision contentions that the Commission erred (a) in adhering to the rates filed by CEI despite the claims that they did not accurately reflect those previously agreed to; 35 (b) in prescribing permanent rates allegedly lacking substantial supporting evidence; 36 (c) in including the amount of the Ohio excise tax in the makeup of the permanent rates; 37 and (d) in sanctioning the charge for late payment. 38 We agree with the City on the first point, 39 and with the Commission on the others. 40
The City's primary argument is that CEI's filings with the Commission, which eventuated as the schedule governing the rates payable until the Commission fixed rates of its own, 41 departed from the preexisting agreement of the parties. As we approach our examination of that position we pause at the outset to more precisely define the problem. Save for different expressions of the formula for computation of CEI's charges for the load transfer service, the rates respectively specified in the parties' letter agreement, 42 in Ordinance No. 161--70 43 and in the filed schedule 44 are virtually the same. 45 The controversy arises from a variance, between the letter agreement and the rate schedule on the one hand and the ordinance and the antecedent agreement on the other, concerning an aspect of the City's liability beyond payment for the load transfer service at the stated rates. The letter agreement, and by virtue of its filing 46 the schedule in turn, contained what is known as a 'rachet clause;' in stark contrast, no comparable element of the overall rate structure was mentioned in the ordinance or, at least from the City's viewpoint, during the prior negotiations between the parties. Consequently, the City contends that this feature was not a part of their bargain, and that its representative lacked authority to enter into an agreement containing such a provision.
The rachet clause provides in substance that when the amount of electrical energy actually supplied by CEI exceeds the amount called for by the letter agreement, the contract demand will thereupon increase by the amount of the excess. 47 The practical effect of this provision is that each time consumption of energy above that specified in the agreement rises to a new level, the demand charge is elevated to that new level and is never reduced, even if actual demand thereafter declines substantially. The impact of the clause thus is upon the ultimate dollar amount owed by the City rather than upon the rate determining the charge for the energy used. Considering the potential of this clause for major, automatic increases in the price of electricity to the City and its customers, the importance of the issue over it can hardly be downplayed.
The examiner upheld the applicability of the rachet clause in reliance on the so-called 'filed rate doctrine'--the principle that a public utility may charge only the rate on file with the Commission unless changed in a manner sanctioned by the governing regulatory statute. 48 He said:
City Ordinance 161--70, passed January 19, 1970, did not establish a contract between CEI and the City. It was a unilateral action by the City Council authorizing MELP (Municipal Electric Light Plant) to enter into an agreement with CEI for the load transfer service. The agreement of January 20, 1970, between CEI and MELP defines the contract between the parties and the terms of the load transfer service (Ex. 51--54). Rate Schedule No. 7, embodying that contract, was filed with the Commission by CEI, as Rate Schedule FPC No. 7. Under Section 205(c) and (d) of the Act, and the regulations issued pursuant thereto, the only legal rates are those rates which are on file with the Commission. The so-called Ordinance rate was never agreed to by the parties or filed with the Commission. The agreement of January 20, 1970, was signed by the appropriate City officials, the Director of MELP and the Director of Law, and filed with the Commission. (Ex. 51--54) Any alleged violation of the Ordinance is a local matter between the City and its officials. The Ordinance cannot modify the provisions of the Federal Power Act or the regulations duly issued thereunder. As noted by the Court in Northwestern Public Service Co. v. Montana-Dakota Utils. Co., . . . 49
'So long as the filed rate is not changed in the manner provided by the Act it is to be treated as though it were a statute, binding upon the seller and the purchaser alike.' 50
The Commission, following exceptions by the City to the examiner's decision, 51 disposed of the City's objection in an even more summary fashion:
The so-called ordinance 161--70 rate, according to the Initial Decision, was never agreed to by the parties or filed with the Commission. Any alleged violation of the ordinance is a local matter between the City and its officials. The ordinance cannot...
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