Electrical Dist. No. 1 v. F.E.R.C., s. 83-1627

• Decision Date: 04 October 1985
• Docket Number: 83-1656,Nos. 83-1627,s. 83-1627
• Citation: 774 F.2d 490,249 U.S.App.D.C. 190
• Parties: ELECTRICAL DISTRICT NO. 1, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arizona Public Service Company, Intervenor. PAPAGO TRIBAL UTILITY AUTHORITY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arizona Public Service Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 490

774 F.2d 490

249 U.S.App.D.C. 190

ELECTRICAL DISTRICT NO. 1, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arizona Public Service Company, Intervenor.

PAPAGO TRIBAL UTILITY AUTHORITY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arizona Public Service Company, Intervenor.

Nos. 83-1627, 83-1656.

United States Court of Appeals District of Columbia Circuit.

Argued Dec. 11, 1984.

Decided Oct. 4, 1985.

Melvin Richter, Washington, D.C., with whom James T. McManus, Washington, D.C., was on brief, for petitioners in No. 83-1627.

Richard I. Chaifetz, Washington, D.C., with whom Arnold D. Berkeley, Washington, D.C., was on brief, for petitioner in No. 83-1656.

Joshua Rokach, Federal Energy Regulatory Commission, Washington, D.C., for respondent in Nos. 83-1627 and 83-1656. Barbara J. Weller, Deputy Sol. and Arlene Pianko Groner, Washington, D.C., were on brief for respondent in Nos. 83-1627 and 83-1656.

Vicki G. Sandler, Phoenix, Ariz., with whom Thomas E. Parrish, Steven M. Wheeler, Phoenix, Ariz., Richard M. Merriman and Brian J. McManus, Washington, D.C., were on brief, for intervenor in Nos. 83-1627 and 83-1656. Daniel J. Wright Washington, D.C., also entered an appearance for intervenor.

Before MIKVA and SCALIA, Circuit Judges, and BAZELON, Senior Circuit Judge.

SCALIA, Circuit Judge:

This case arises out of a ratemaking proceeding before the Federal Energy Regulatory Commission under Sec. 206 of the Federal Power Act, 16 U.S.C. Sec. 824e (1982). In terms familiar to the energy bar, the question it presents is the lawfulness of FERC's decision to make a rate increase effective as of the date of its order directing a compliance filing, rather than upon the date of acceptance of the compliance filing. In less technical terms, the question is whether new rates can lawfully be made effective as of the date on which the Commission outlines the factors on the basis of which the rates should be calculated, but before the rates themselves are effectively filed.

I

Arizona Public Service Company ("APS") sells electricity under contract to petitioners, the Papago Tribal Utility Authority and a number of electrical, irrigation and water conservation districts. These contracts do not allow APS unilaterally to increase its rates pursuant to the procedures of Sec. 205 of the Federal Power Act, 16 U.S.C. Sec. 824d, but rather require that all new rates be fixed by FERC in proceedings under Sec. 206. See Papago Tribal Utility Authority v. FERC, 610 F.2d 914, 930 (D.C.Cir.1979). When APS sought to increase the rates here at issue, it therefore filed the proposed rates with FERC for its approval. In its Opinion No. 137, FERC held that although APS was entitled to a return (an allowable "cost of service") in excess of that produced by the existing rates, the proposed rates produced an excessive return, and in some respects misallocated the burden of that return among APS's various customers. The Commission directed APS to make, within forty-five days, what is generally called a "compliance filing," see 18 C.F.R. Sec. 35.18 (1985)--i.e., to file "a revised cost of service, revised rate schedules and revised tariff sheets which reflect the findings in this decision." 18 F.E.R.C. (CCH) p 61,197, at 61,401 (Mar. 2, 1982). Before the compliance filing was due, APS and petitioners sought rehearing of FERC's order; APS also requested and received an extension of time until forty-five days after the order on rehearing to make its compliance filing. On rehearing, FERC issued Opinion No. 137-A, which modified and clarified its order in several respects, and let it stand as to the remainder, including, of course, the direction for a compliance filing. 20 F.E.R.C. (CCH) p 61,407 (Sept. 30, 1982). ¹ APS made the compliance filing November 12, 1982 and subsequently revised it on November 17, 1982. Pursuant to delegated authority, 18 C.F.R. Sec. 375.308(w)(1) (1984), the designee of the Director of the Office of Electric Power Regulation accepted the filing and made the rates effective as of the date of acceptance, February 7, 1983.

APS appealed the issue of the effective date to FERC, requesting that the new rates be made effective as of March 2, 1982, the date of Opinion No. 137. The Commission acceded to APS's request. Order Setting Effective Date of Rates, 23 F.E.R.C. (CCH) p 61,077 (Apr. 6, 1983). The present petitioners sought rehearing of this order from the Commission, and after denial of their request filed an action for review in this court under 16 U.S.C. Sec. 825l (b) (1982). We granted FERC's request for remand to permit FERC to consider the significance of Opinion No. 137-A's modifications to the ratemaking principles set forth in Opinion No. 137. On January 26, 1984, FERC issued its order on remand, 26 F.E.R.C. (CCH) p 61,087 (1984), reaffirming that the rates were effective as of the date of Opinion No. 137 rather than Opinion No 137-A. Petitioners now seek review of FERC's order on remand and its Order Setting Effective Date of Rates under 16 U.S.C. Sec. 825l (b).

II

FERC argues that because Sec. 205(a) of the Federal Power Act provides that "[a]ll rates and charges ... shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful," 16 U.S.C. Sec. 824d(a), it follows that a new rate must go into effect as of the date that FERC finds an existing rate to be unjust or unreasonable, because it would be unlawful to allow the unjust or unreasonable rate to continue in effect. It seems to us, however, no more inevitable that the Commission has the obligation to end an unlawful rate from the moment it finds unlawfulness than that an unlawful rate must be regarded as null and void from the moment it becomes unlawful. (A customer cannot, of course, refuse to pay a rate currently in effect on the ground that it has become unlawfully high and therefore void; nor, after payment of such a rate, can the Commission order a refund, see, e.g., Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246, 254, 71 S.Ct. 692, 696, 95 L.Ed. 912 (1951); FPC v. Hope Natural Gas Co., 320 U.S. 591, 618, 64 S.Ct. 281, 295, 88 L.Ed. 333 (1944) (comparable provision of the Natural Gas Act); Maine Public Service Co. v. FPC, 579 F.2d 659, 664 (1st Cir.1978).) Or to use a more remote analogy, it is not the case that once a court has concluded that a particular action challenged before it is unlawful it must immediately issue an injunction, instead of taking time for further deliberations necessary to determine what the precise terms of that injunction should be. The moment of required and authorized Commission action in the present case is to be determined not on the basis of an abstract principle such as "once unlawfulness is known agency action must be taken," but rather on the basis of the procedures that the statute establishes for adjusting unlawful rates. And those procedures are not at all ambiguous: "Whenever the Commission ... shall find that any rate ... collected by any public utility ... is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate ... to be thereafter observed and in force, and shall fix the same by order." 16 U.S.C. Sec. 824e(a) (emphasis added).

FERC further contends, however, that even if this prescription governs, its order making APS's rates effective as of the date of Opinion No. 137 is in compliance, since "[i]n Opinion [sic ] Nos. 137 and 137-A the Commission fixed the rates the petitioners must pay...." Brief for Respondent at 23. Petitioners reply that FERC's opinions only set revenue levels and ordered APS "to file, for Commission approval by subsequent order, new rates designed to implement the revenue levels thus determined." Substitute Initial Brief for Petitioners Districts at 11. Thus, the core of this dispute is--as we think it properly should be--whether Opinions Nos. 137 and 137-A fixed rates. ²

The difference between the parties on this central issue boils down to a disagreement over what it means to "fix" a rate within the meaning of 16 U.S.C. Sec. 824e(a). It is uncontested (and uncontestable) that under current FERC practice no numerical rate is specified until after the compliance filing is accepted. The assumption of the Commission's argument, however, is that to "fix" a rate within the meaning of the statute it is enough to prescribe the legal and accounting principles which, properly applied, will yield one particular rate; whereas petitioners maintain that the statute means what it says, and requires the rate itself to be specified. We agree with petitioners, since we think the provision must be read in light of the Federal Power Act's primary purpose of protecting the utility's customers. See Town of Alexandria, Minnesota v. FPC, 555 F.2d 1020, 1028 & n. 42 (D.C.Cir.1977). The wholesale purchasers of electricity cannot plan their activities unless they know the cost of what they are receiving, particularly if they are retailers, who must calculate their appropriate resale rates, cf. Indiana & Michigan Electric Co. v. FPC, 502 F.2d 336, 344 (D.C.Cir.1974), cert. denied, 420 U.S. 946, 95 S.Ct. 1326, 43 L.Ed.2d 424 (1975), but also if they are large-scale purchaser-users. Providing the necessary predictability is the whole purpose of the well established "filed rate" doctrine, which "forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101 S.Ct. 2925, 2930, 69 L.Ed.2d 856 (1981) (citation omitted). In direct frustration of this goal, FERC's new policy of making rates effective as of the date of an order setting forth no more than the basic principles pursuant to which the new rates are to be calculated would make unforeseeable liabilities a...