City of Seattle v. F.E.R.C., 88-1716
| Decision Date | 01 September 1989 |
| Docket Number | No. 88-1716,88-1716 |
| Citation | 883 F.2d 1084 |
| Parties | The CITY OF SEATTLE, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Walter L. Williams, with whom Brian V. Faller, Seattle, Wash., was on the brief, for petitioner.
Robert H. Solomon, Atty., F.E.R.C. ("FERC"), with whom Catherine C. Cook, Gen. Counsel, and Joseph S. Davies, Deputy Sol., FERC, Washington, D.C., were on the brief, for respondent.
Before WALD, Chief Judge, and RUTH BADER GINSBURG and BUCKLEY, Circuit Judges.
Opinion for the court filed by Circuit Judge BUCKLEY.
The City of Seattle petitions for review of Federal Energy Regulatory Commission ("FERC" or "Commission") orders holding Seattle liable for certain annual charges, which were billed in 1985, for its use of federal lands to operate a Commission-licensed hydroelectric project from 1977 to 1985. FERC ruled that because the City had agreed to subject its license to all the Federal Power Act's provisions and related regulations, the Commission had the authority to increase Seattle's annual charges based on a new ratemaking methodology introduced in its 1977 regulations. The City argues that the license fixed annual charges at a much lower dollar amount, that FERC billed Seattle (and received) this amount for each year from 1977 through 1983, and that the Act bars the Commission from increasing annual charges unilaterally and without notice.
We conclude that the City agreed to subject its license to FERC's authority, under section 10(e) of the Act, to adjust annual charges, but reject the Commission's claim that it was empowered to increase Seattle's annual charges retroactively. We therefore hold that the Commission had the authority to increase the charges prospectively, beginning with 1984 (the first year for which FERC exercised its power), but vacate the charges assessed retroactively for the years 1977 through 1983.
Section 4(e) of the Federal Power Act ("FPA" or "Act"), 16 U.S.C. Sec. 797(e) (1982 & Supp. V 1987), authorizes FERC to issue licenses to municipalities to construct and operate hydroelectric facilities. Section 6 of the Act, id. Sec. 799, provides:
Licenses ... shall be issued for a period not exceeding fifty years. Each such license shall be conditioned upon acceptance by the licensee of all of the terms and conditions of this chapter and such further conditions, if any, as the Commission shall prescribe in conformity with this chapter, which ... shall be expressed in said license. Licenses ... may be altered ... only upon mutual agreement between the licensee and the Commission after thirty days' public notice.
Section 10, id. Sec. 803, describes certain general licensing conditions. Subsection (a) grants FERC "authority to require the modification of any project ... before approval." Subsection (e)(1) requires each licensee to pay
reasonable annual charges in an amount to be fixed by the Commission for the purpose of reimbursing the United States for the costs of the administration of this subchapter; [and] for recompensing it for the use, occupancy, and enjoyment of its lands or other property ... and any such charges may be adjusted from time to time by the Commission as conditions may require ....
(emphasis added).
FERC's fixing of annual charges and other costs is currently governed by 18 C.F.R. Secs. 11.1-11.21 (1988). In 1942, section 11.21 provided that FERC's predecessor, the Federal Power Commission ("FPC"), would calculate yearly charges for use of most federal land by multiplying the national average land value per acre (then $50) by a four percent interest rate, with annual charges for transmission line rights-of-way fixed at one-half this ordinary usage charge. On December 29, 1976, the FPC issued Order No. 560, 56 F.P.C. 3860, which amended section 11.21 to reflect the increase in average land value (to $150 an acre) and to replace the four percent interest rate with a fluctuating rate to be revised annually according to certain government interest indices.
In 1927, the FPC issued the City of Seattle a fifty-year license for the Skagit River Project No. 553 ("Project 553") in northwestern Washington, which acknowledged Seattle's authority to operate the existing Gorge Dam, reservoir, and powerhouse and authorized the City to construct and operate the Diablo hydropower project. Article 24 of the license prescribed Seattle's obligation to pay "reasonable annual charges" to compensate the United States for the use of federal land and for the FPC's administrative costs. The charges would be determined in accordance with FPC regulations (issued pursuant to section 10(e) of the Federal Water Power Act, 41 Stat. 1063, 1069 (1920) ("FWPA"), the FPA's predecessor).
In a July 23, 1937 order, the FPC authorized the amendment of the Project 553 license to permit construction of the Ruby (now Ross) Dam and powerplant upstream from Diablo. The FPC made Seattle's license "subject to the [newly enacted FPA] ... [and] to the rules and regulations of the Commission thereunder," and amended article 24 to provide for the City's payment "of annual charges in the amount hereinbefore found reasonable."
On June 9, 1942, the FPC modified and supplemented its 1937 order and submitted to Seattle "Amendment No. 1," which would be effective retroactively to July 23, 1937 and make two important changes. First, Amendment No. 1 incorporated the clause in the 1937 order subjecting the Project 553 license to "all the terms and provisions of the [Federal Power] Act and of the rules and regulations of the Commission pursuant thereto...." Second, it amended article 24 to delete reference to regulations promulgated under the FWPA and instead required the City to pay annual charges "[s]ubject to the provisions of Section 10(e) of the [FPA]," and fixed annual charges at $215.36 for federal land used for transmission lines and $1,066.57 for land used for other purposes. Seattle accepted Amendment No. 1 on January 5, 1943.
Article 24 of the Project 553 license has been altered a number of times to increase annual charges. Most recently, in 1964, the FPC fixed annual charges at $320.40 for transmission lines on federal lands and $1,830.89 for other uses. City of Seattle, 31 F.P.C. 1268, 1273 (1964). Since that time, the Commission has never changed these dollar amounts.
On July 5, 1977, six months after the effective date of Order No. 560 (), the FPC amended the Project 553 license in Opinion No. 808, 59 F.P.C. 196 (1977), aff'd sub nom. Swinomish Tribal Community v. FERC, 627 F.2d 499 (D.C.Cir.1980). Opinion No. 808 authorized Seattle to raise the height of the Ross Dam, which would create a reservoir extending for several miles into British Columbia. While article 24 was revised to reflect the project's increased authorized installed capacity of 1,057,000 horsepower, it retained the annual charges for land use at the 1964 levels. 59 F.P.C. at 236-37.
The FPC, however, did add articles 66 and 67 to the license. See id. at 242. Article 66 required Seattle, "within one year after completion of construction" of the Ross Dam extension, to file revisions to Exhibits F and K documenting the "acreage of project lands, including U.S. lands, within the project boundary...." Article 67 provided: "The Commission reserves the right to determine additional annual charges, if any, for the use and occupancy of U.S. lands until after revised Exhibits F and K are filed."
As it turned out, articles 66 and 67 never took effect because of a 1984 agreement in which Seattle cancelled the planned increase in the height of Ross Dam (which would have flooded lands on the British Columbia side of the Skagit River), and British Columbia in return promised to deliver to Seattle a quantity of electric power equivalent to that which would have been generated by raising the dam. This agreement was approved by treaty. See Treaty Between the United States of America and Canada Relating to the Skagit River and Ross Lake, and the Seven Mile Reservoir on the Pend D'Oreille River, Apr. 2, 1984, Sen. Treaty Doc. No. 98-26, 98th Cong., 2d Sess. (1984), --- T.I.A.S. ---- ("Treaty"). If British Columbia ever breached the agreement, Seattle would have the right to increase the height of Ross Dam pursuant to Opinion No. 808. Id. art. II, Sec. 1(a).
On October 25, 1977, two days before Seattle's fifty-year Project 553 license was to expire, the Commission issued the City a one-year license containing the same terms and conditions as the existing license, to be reissued annually until the agency ruled on Seattle's new license application. FERC's subsequent billings, for the years 1977 through 1983, reflected annual charges to the City of $320.40 for use of 95.5 acres of federal land for transmission lines and $1,830.89 for use of 15,200.41 acres for other project purposes.
On August 22, 1985, the Commission sent Seattle a bill requesting payment of $979,633 in additional charges assessed for its use of federal land from 1977 through 1983. In a letter dated October 2, 1985, FERC asserted that its "grossly low" earlier assessments were not intended as final determinations of section 10(e) "reasonable annual charges" for the years 1977 through 1983 and that the revised charges had been computed according to Order No. 560's "fluctuating interest rate" methodology. On October 8, the City petitioned for a declaratory order that these retroactive increases violated article 24 of the Project 553 license, which specified the dollar amounts of the annual charges owed by Seattle.
On August 3, 1987, the Commission denied the petition and ruled that Seattle must pay annual charges as adjusted...
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