Middle South Energy, Inc. v. F.E.R.C.
| Decision Date | 06 November 1984 |
| Docket Number | 83-1810 and 83-1811,Nos. 83-1632,83-1772,s. 83-1632 |
| Parties | MIDDLE SOUTH ENERGY, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arkansas Public Service Commission, Cities of Conway and West Memphis, Arkansas, Cities of Benton, et al., City of New Orleans, Louisiana, Louisiana Public Service Commission, Mississippi Public Service Commission, International Paper Company, Intervenors. MIDDLE SOUTH ENERGY, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Tennessee Gas Pipeline Company, Cities of Conway and West Memphis, Arkansas, International Paper Company, Intervenors. MIDDLE SOUTH ENERGY, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arkansas Public Service Commission, Cities of Conway and West Memphis, Arkansas, Occidental Chemical Corporation, Louisiana Public Service Commission, International Paper Company, Intervenors. MIDDLE SOUTH ENERGY, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Louisiana Public Service Commission, International Paper Company, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Richard M. Merriman, Washington, D.C., with whom Floyd L. Norton, IV, and Stephen L. Huntoon, Washington, D.C., were on the brief, for petitioner.
Arlene Pianko Groner, Atty., F.E.R.C., Washington, D.C., with whom Stephen A. Melton, Acting Gen. Counsel, Barbara J. Weller, Deputy Sol. and A. Karen Hill, Attorney, F.E.R.C., Washington, D.C., were on the brief, for respondent, Joanne Leveque, Attorney, F.E.R.C., Washington, D.C., also entered an appearance for respondent.
Glen L. Ortman, Washington, D.C., with whom Clinton A. Vince, Gregg D. Ottinger and Paul E. Nordstrom, Washington, D.C., were on the brief, for City of New Orleans, Louisiana, intervenor in No. 83-1632.
Michael R. Fontham and William E. Brown, New Orleans, La., were on the brief for Louisiana Public Service Com'n, intervenor in Nos. 83-1632, 83-1810 and 83-1811.
William F. Cockrell, Jr., Washington, D.C., and Hiram C. Eastland, Jackson, Miss., were on the brief for Mississippi Public Service Com'n, intervenor in No. 83-1632.
Earle H. O'Donnell, Washington, D.C., was on the brief for Occidental Chemical Corp., intervenor in No. 83-1810.
Charles F. Wheatley, Jr. and Don Charles Uthus, Washington, D.C., entered appearances for Cities of Conway and West Memphis, Arkansas, intervenor in Nos. 83-1632, 83-1772 and 83-1810.
Terence J. Collins, Houston, Tex., entered an appearance for Tennessee Gas Pipeline Co., intervenor in No. 83-1772.
James D. Pembroke, Washington, D.C., entered an appearance for Arkansas Public Service Com'n, intervenor in Nos. 83-1632 and 83-1810.
Rigdon H. Boykin, New York City, entered an appearance for Intern. Paper Co., intervenor in Nos. 83-1632, 83-1772, 83-1810 and 83-1811.
Zachary D. Wilson, North Little Rock, Ark., entered an appearance for Cities of Benton, et al., intervenors in No. 83-1632.
Before GINSBURG, BORK, and STARR, Circuit Judges.
Opinion for the Court filed by Circuit Judge BORK.
Middle South Energy, Inc. appeals the Federal Energy Regulatory Commission's orders suspending Middle South Energy's initial rate schedule for the sale of electricity. Middle South also appeals the Commission's orders announcing that the Commission now interprets its suspension authority under the Federal Power Act and the Natural Gas Act to include authority to suspend initial rates. Petitioner alleges that the statutory language, legislative history, previous Commission interpretation and judicial assumptions all weigh strongly against FERC's new view that it has the authority to suspend initial rate filings. FERC, on the other hand, maintains that the recent Supreme Court decision in Trans Alaska Pipeline Rate Cases, 436 U.S. 631, 98 S.Ct. 2053, 56 L.Ed.2d 591 (1978), construing parallel rate provisions in the Interstate Commerce Act, shows that the Commission's previous interpretation of its authority was unduly limited. Our analysis compels the conclusion that FERC lacks the authority to suspend initial rate filings.
The Federal Energy Regulatory Commission regulates rates for wholesale interstate sales of electricity pursuant to sections 205 and 206 of the Federal Power Act, 16 U.S.C. Secs. 824d and 824e (1982). Section 205(a) stipulates that all rates for jurisdictional sales of electricity shall be reasonable and just. Section 205(b) prohibits undue preferences and discrimination among customers. Section 205(c) mandates the filing of all rate schedules with the Commission. Section 205(d) requires that a utility give sixty days' notice to the Commission and the public by filing the changed schedule. The provision at issue here is section 205(e). It states that "[w]henever any such new schedule is filed," the Commission may set the proposal for hearing, may suspend the rates for up to five months, and may require refunds of any rates collected thereafter that the Commission ultimately finds unjust and unreasonable. Finally, according to section 206, the Commission may, sua sponte, investigate any jurisdictional rate that is in effect and, if it finds the rate unjust and unreasonable, establish a new rate for prospective effect only.
Traditionally, the Commission has interpreted its authority to suspend rates and require refunds under section 205(e) as limited to changes in rates filed under section 205(d). In 1978 the Supreme Court held that parallel rate provisions in the Interstate Commerce Act ("ICA") authorized the Interstate Commerce Commission to suspend rates and require refunds of initial rates filed by oil pipelines. See Trans Alaska Pipeline Rate Cases, 436 U.S. 631, 98 S.Ct. 2053, 56 L.Ed.2d 591 (1978). In the course of adjudicating the present controversy, the Commission has decided that its previous interpretation of its authority under section 205(e) is wrong, and it now claims suspension and refund powers over initial as well as changed rates.
Middle South Utilities, Inc. is a registered public utility holding company consisting of four operating companies: Arkansas Power & Light Company, Louisiana Power & Light Company, Mississippi Power & Light Company, and New Orleans Public Service, Inc. In 1974, Middle South Utilities created a wholly owned subsidiary, Middle South Energy, Inc. ("MSE"), to develop the Grand Gulf Nuclear Electric Station Project. On June 18, 1982, MSE submitted a rate schedule for filing to FERC. It described this as an initial rate schedule. The Commission accepted this rate schedule for filing but decided that the submission should be treated as a change in rate rather than an initial rate filing. The Commission found:
Although MSE has been interposed as a separate company, the transaction is wholly intra-corporate in nature with MSE acting for the sole purpose of operating a facility which would otherwise be controlled, like other system resources, by another MSU operating company; the total output of the facility available to MSE will, in turn, be sold to MSU subsidiaries.
Record on appeal ("R.") at 42. For these reasons, the Commission decided to construe MSE's rate filing "as a joint corporate submittal modifying or affecting the existing coordination arrangements among the MSU affiliates." Id. With respect to the substance of the rate schedule, the Commission found that the rates may be "unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful." Id. The Commission therefore suspended the operation of the proposed agreement. It authorized the agreement to take effect subject to refund when service began. The Commission further ordered that a public hearing be held on the subject of the justness and reasonableness of MSE's rates, pursuant to section 205 of the FPA. R. at 43.
MSE then sought rehearing of FERC's order on the ground that the agreement should be treated as an initial rate filing rather than a change in rate. After granting rehearing on May 24, 1983, the Commission concluded: "it is not appropriate to treat an initial rate of a new corporate entity as a change in rate simply because of its affiliated status." R. at 91. Nevertheless, the Commission stated that "the order of August 25, 1982, would remain unchanged with respect to MSE's rates." Id. at 98. As the new basis for its order the Commission presented its conclusion that, contrary to its previous interpretation, it did have authority under section 205 of the FPA to suspend initial rates. Id.
MSE petitioned for rehearing of this order on two grounds: (1) that the Commission lacked the authority to suspend or order refunds of initial rates, R. at 99-133; (2) that even if the Commission's interpretation of its authority were correct, it had violated its own rules and the Administrative Procedure Act by exercising that authority in MSE's case. Id. at 133-46. In denying rehearing on August 1, 1983, the Commission relied on the Supreme Court's analysis of the ICA in the Trans Alaska Pipeline Rate Cases. Regarding MSE's procedural allegations, the Commission stated that formal rulemaking is not required to effect a change in the Commission's interpretation of its own statutory authority.
On the same day that it issued the order on rehearing in the Middle South rate case, the Commission issued Order No. 303, amending the interpretation of its suspension authority set forth in its regulations under the FPA and under the parallel Natural Gas Act, 15 U.S.C. Secs. 717-717w (1982). 18 C.F.R. Secs. 2.4(d), 2.52 (1983). R. at 161-77. The Commission stated that it was amending its published interpretations to reflect its new construction of its authority to suspend initial rate schedules, establish interim rates during the suspension period, and establish contingent refund...
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