City of Winnfield, La. v. F.E.R.C.
| Decision Date | 02 October 1984 |
| Docket Number | No. 82-1224,82-1224 |
| Citation | 744 F.2d 871 |
| Parties | CITY OF WINNFIELD, LOUISIANA, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Louisiana Power & Light Company, Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory commission.
Wallace Brand, Washington, D.C., with whom Sean T. Beeny was on the brief for petitioner.
Joseph S. Davies, Jr., Attorney, F.E.R.C., Washington, D.C., with whom Jerome M. Feit, Sol., F.E.R.C., Washington, D.C., was on the brief for respondent.
James K. Mitchell, Washington, D.C., with whom Richard M. Merriman, Lisa H. Powell, Washington, D.C., and Andrew P. Carter, New Orleans, La., were on the brief for intervenor.
Before WRIGHT and SCALIA, Circuit Judges, and WEIGEL, * Senior District Judge for the Northern District of California.
Opinion for the Court filed by Circuit Judge SCALIA.
This appeal involves the Federal Energy Regulatory Commission's authorization of an increased rate under the Federal Power Act. We are of the view that the procedures used by the Commission were proper, and that the decision of the Administrative Law Judge, as adopted by the Commission, correctly stated the law applicable to the facts. With one exception, the issues resolved do not occasion an opinion. See D.C.Cir. Rule 13(c). We publish our conclusions regarding whether it was proper for the Commission to authorize not only a lower rate than that sought by the utility, but a different type of rate than that proposed by the utility.
Winnfield, a city in Louisiana with a population of approximately 7,000, had purchased power from Louisiana Power & Light Company ("LP & L") under a series of contracts containing rates based on LP & L's average system fuel costs. When the last of these expired on May 14, 1981, LP & L tendered a proposed agreement with rates based on incremental fuel costs, which meant that, for any hour Winnfield took power from LP & L, the rate would be based on the highest cost LP & L incurred during that hour for power going to its total load. When Winnfield refused to sign, LP & L filed a copy of the unexecuted agreement with the Commission as its proposal for continued service. On July 10, 1981, the Commission accepted the new rates for filing and suspended their effectiveness, subject to refund, until December 12, 1981, as the Commission is authorized to do under Sec. 205 of the Federal Power Act, 16 U.S.C. Sec. 824d (1982). It ordered that the prior rates and contract terms become part of LP & L's filed rate schedule and remain in effect until superseded by a rate schedule allowed to take effect. Louisiana Power & Light Co., 16 F.E.R.C. (CCH) p 61,019 (1981).
After considerable procedural wrangling, including a petition for review to the United States Court of Appeals for the Fifth Circuit, the parties submitted prepared direct testimony on September 4, 1981. LP & L asserted the superiority of its incremental pricing system over the prior average cost rates. The City of Winnfield contended that the proposed rates lacked the requisite justification on various grounds, and sought continued service under an average cost rate. The Commission staff agreed with Winnfield; it recommended that the average cost rates be continued, and that LP & L be allowed a rate increase which would provide a 16.5% return on common equity. Rebuttal testimony was taken, an extensive hearing was held, and post-hearing briefs were filed with the ALJ. In its brief, LP & L indicated that should the Commission reject its proposed incremental cost rate schedule, the utility would accept the FERC staff proposal for increased average cost rates, and suggested modifications of its own.
On November 2, 1981, the ALJ issued an order which rejected LP & L's proposed incremental rates as unjust and unreasonable, yet granted LP & L the increase in average cost rates the Commission staff had proposed, based on the staff's cost-of- service and rate-of-return studies. Louisiana Power & Light Co., 17 F.E.R.C. (CCH) p 63,020 (1981) (Initial Decision). On December 11, 1981, FERC adopted this initial decision, with certain modifications not relevant here, Louisiana Power & Light Co., 17 F.E.R.C. (CCH) p 61,230 (1981), over the dissent of Commissioner Sheldon, who thought the rate increase was "gratuitous," one "for which [LP & L] did not apply nor [sic ] justify." Id. at p. 61,443-44. The Commission later denied rehearing, again over the dissent of Commissioner Sheldon. Louisiana Power & Light Co., 18 F.E.R.C. (CCH) p 61,202 (1982). Winnfield brought a timely petition for review in this court under 16 U.S.C. Sec. 825l (1982).
After finding the incremental cost rates LP & L proposed to be unjust and unreasonable, the ALJ found the authority to impose higher average cost rates in the combination of Secs. 205(e) and 206(a). She stated:
Under Sections 205(e) and 206(a) of the Act, once the Commission finds the proposed rate unjust, unreasonable, or unduly discriminatory, it shall determine the just, reasonable and lawful rate.
Initial Decision, supra, at p. 65,047. The Commission affirmed without explaining whether it had acted under Sec. 205 or Sec. 206.
In this appeal, Winnfield claims that before setting a just and reasonable rate under Sec. 206(a), the Commission must find the existing rate unjust or unreasonable, which it asserts was not done here; and that the Commission cannot approve under Sec. 205 a rate increase of a sort different from that requested. Brief of Petitioner at 47-53. LP & L claims that the Commission need not find the existing rate unlawful in order to set a just and reasonable rate under Sec. 206, but may do so when it finds that a utility's proposed rate under Sec. 205 is unlawful. Brief of Intervenor LP & L at 21-26. The Commission agrees with Winnfield's construction of Sec. 206, but claims that its action was based upon and authorized under Sec. 205. As the Commission sees the law:
If, on its own initiative or pursuant to a complaint, the Commission proceeds to determine whether a current rate is "unjust, unreasonable or unduly discriminatory or preferential," as specified under Section 206(a), 16 U.S.C. Sec. 824e(a), it must make such a determination as to the existing rate before setting a new rate. However, where as here, the Commission proceeds to establish a rate pursuant to a change proposed by the company, Section 205 controls; and a finding that the current rate is unreasonable is not a prerequisite to the Commission's setting a new rate.
Section 205 allows utilities to charge new rates by filing them with the Commission. They take effect after a statutorily required notice period, Sec. 205(d), 16 U.S.C. Sec. 824d(d) (1982), unless the Commission suspends them (for up to five months), Sec. 205(e), in order to investigate their lawfulness. Section 205(e) provides:
Whenever any such new schedule is filed the Commission ... may suspend the operation of such schedule and defer the use of such rate, charge, classification, or service but not for a longer period than five months beyond the time when it would otherwise go into effect; and after full hearings, either completed before or after the rate, charge, classification, or service goes into effect, the Commission may make such orders with reference thereto as would be proper in a proceeding initiated after it had become effective.... At any hearing involving a rate or charge sought to be increased, the burden of proof to show that the increased rate or charge is just and reasonable shall be upon the public utility, and the Commission shall give to the hearing and decision of such questions preference over other questions pending before it and decide the same as speedily as possible.
16 U.S.C. Sec. 824d(e) (1982). As is evident, Sec. 205, unlike Sec. 206, allows the Commission to approve rate increases without a showing that current rates are unjust and unreasonable; it need only find the proposed rates to be just and reasonable.
Petitioner, repeating the position taken in dissent by Commissioner Sheldon, contends that when acting under Sec. 205 the Commission must act within the confines of the utility's proposals; that it may not allow the utility a rate increase of a sort it neither requested nor justified. Nothing in the text of Sec. 205 requires this result. To the contrary, by specifying that "the Commission may make such orders with reference [to a newly filed rate, charge, classification, or service] as would be proper in a proceeding initiated after it had become effective," the section appears to envision the same breadth of authority as is available under Sec. 206. The case law, however, suggests a limitation that is apparent from the structure of the Act rather than from the terms of its individual sections. In Public Service Commission of New York v. FERC, 642 F.2d 1335 (D.C.Cir.1980), we analyzed the provisions of the Natural Gas Act which, in relevant part, are identical in form to Secs. 205 and 206, and have been treated by the courts as identical in substance. Compare 15 U.S.C. Secs. 717c(e) & 717d(a) (1982) (natural gas) with 16 U.S.C. Secs. 824d(e) & 824e(a) (1982) (electric power); see FPC v. Sierra Pacific Power Co., 350 U.S. 348, 350-51, 76 S.Ct. 368, 369-70, 100 L.Ed. 388 (1956); Kansas Cities v. FERC, 723 F.2d 82, 91 (D.C.Cir.1983). We noted that
Section 4(e) [analogous to Sec. 205(e) ] ... cannot be used by the Commission to institute any change in a rate-making component, such as cost allocation, that does not represent at least partial approval of the change for which the enterprise had petitioned in its filing. If the Commission seeks to make such changes, it has no alternative save compliance with the strictures of section 5(a) [analogous to Sec. 206(a) ].
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