New York State Elec. & Gas Corp. v. F.E.R.C.
| Decision Date | 28 June 1983 |
| Docket Number | No. 1126,D,1126 |
| Citation | 712 F.2d 762 |
| Parties | NEW YORK STATE ELECTRIC & GAS CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Municipal Electric Utilities Association of New York State and Power Authority of the State of New York, Intervenors. ocket 83-4010. |
| Court | U.S. Court of Appeals — Second Circuit |
Frederic H. Lawrence, New York City (Kenneth M. Jasinski, and Huber Lawrence & Abell, New York City, on the brief), for petitioner New York State Elec. & Gas Corp.
Joshua Z. Rokach, Atty., Washington, D.C. (Charles A. Moore, Gen. Counsel, and Barbara J. Weller, Deputy Sol., Washington, D.C., on the brief), for respondent F.E.R.C.
John W. Griggs, Washington, D.C. (Wallace L. Duncan, J. Cathy Lichtenberg, and Duncan, Weinberg & Miller, Washington, D.C., on the brief), for intervenor Municipal Elec. Utilities Ass'n of New York State.
Stephen L. Baum, Gerald C. Goldstein, Wendy M. Lane, and Michele P. Stine, New York City, submitted a brief for intervenor Power Authority of the State of N.Y.
Before FEINBERG, Chief Judge, TIMBERS and MESKILL, Circuit Judges.
Petitioner New York State Electric & Gas Corporation (NYSEG) transmits electric energy to intervenor Power Authority of the State of New York (PASNY). PASNY, in turn, sells power to, among others, intervenor Municipal Electric Utilities Association of New York (MEUA). The present controversy arose when NYSEG filed a revised rate schedule with respondent Federal Energy Regulatory Commission (FERC) to reflect new tax normalization procedures required by FERC in its June 4, 1982 order, reported at 19 F.E.R.C. p 61,228 (1982). Intervenors challenged the new filing, claiming that NYSEG lacked the contractual power to charge a higher rate than that set by a prior contract between NYSEG and PASNY.
FERC upheld intervenors' objection to the compliance filing in an order dated September 30, 1982, reported at 20 F.E.R.C. p 61,411 (1982). It held that the NYSEG-PASNY agreement barred the rate increase even though NYSEG had filed the higher rate in response to a FERC order. In its September 30, 1982 order, FERC consequently modified its June 4, 1982 order, holding that NYSEG could not charge a higher rate to reflect the changes brought about by compliance with the new tax accounting procedures.
NYSEG petitions to set aside the September 30, 1982 order, asserting that the order contravened well established principles of contract interpretation and rate-making jurisprudence. We disagree. We deny the petition and enforce FERC's order.
The core of the dispute in this case is a letter agreement executed by NYSEG and PASNY dated February 3, 1982. According to that agreement, NYSEG agreed to provide electric transmission (wheeling) service for PASNY under the following rate guideline:
NYSEG filed the agreement with FERC on March 30, 1982, requesting an effective date of July 1, 1982 for collecting that rate from PASNY. In support of the $2.85 rate, NYSEG included a cost-of-service study as required by 18 C.F.R. § 35.13 (1982).
After FERC gave public notice of the filing, PASNY intervened in support of NYSEG's filing. MEUA, along with the New York State Rural Electric Cooperative Association, sought leave to intervene in order to challenge the proposed rate increase. 1 By an order dated June 4, 1982, FERC granted intervention, denied the motions to reject NYSEG's March 30, 1982 filing, accepted the proposed $2.85 rate for filing, and made the rate effective July 2, 1982. To determine the "reasonableness" of the filed rate, FERC ordered hearings to commence within the year, but, pursuant to 16 U.S.C. § 824e(a) (1976), it allowed the rate to be collected in the interim, subject to refund after the hearings. FERC also required NYSEG to revise its filing to reflect FERC's new tax accounting procedure under its recent Order No. 144-A, requiring normalization of tax timing differences for ratemaking. FERC Statutes and Regulations p 30,340. 2 Apparently the revised rate was to go into effect upon filing without any further review. In conformity with the FERC order, NYSEG on July 2, 1982 submitted new cost statements with a revised rate of $3.13 per kw per month.
On August 2, 1982--31 days later--MEUA, a customer of PASNY, filed a motion to reject the revised $3.13 rate. It predicated its challenge on the Mobile-Sierra doctrine 3 which provides that a utility may not avoid a rate set by private contract through filing a rate hike with the Commission. In the absence of such a contractual bar, a utility under § 205 of the Federal Power Act, 16 U.S.C. § 824d (1976 & Supp. III 1979), 4 may file for a unilateral rate increase. The increase takes effect by operation of law after thirty days' notice to the Commission and the public, pending a full hearing on the lawfulness of the rate. The Commission may suspend the filed rate for a maximum five-month period after it otherwise would have become effective. Even in that situation, however, the suspension period may well expire before the end of the rate investigation, thus allowing the higher rate to be charged on an interim basis. 5 But under the Mobile-Sierra doctrine, a utility is bound by rates set by agreement with its customers; it cannot increase rates unilaterally, even in response to unforeseen economic developments, unless the Commission has concluded that the old rate is unjust and unreasonable. Thus, MEUA argued that the February 3, 1982 PASNY-NYSEG agreement precluded collection of the $3.13 rate until the increase received ultimate approval from FERC.
On August 17, 1982, PASNY joined MEUA's motion, asserting that NYSEG was barred from filing any rate higher than the original $2.85 rate under the terms of the February 3, 1982 agreement. NYSEG opposed the motion of PASNY and MEUA on the procedural ground that the motion should be dismissed as untimely and on the substantive ground that the intervenors misconstrued the relevance of the Mobile-Sierra doctrine as applied to the February 3 agreement.
After ruling that the motion to reject the filing was not untimely, FERC held that the February 3 letter agreement barred NYSEG from collecting the increased rate. It reinstated the $2.85 rate and ordered NYSEG to make refunds. NYSEG thereupon filed the instant petition to review.
NYSEG argues as a procedural matter that MEUA and PASNY failed to file their objections to the new rate on time. It relies on 16 U.S.C. § 825 l(a) (1976) which provides that any party "aggrieved by an order issued by the Commission in a proceeding under this chapter ... may apply for a rehearing within thirty days after the issuance of such order." NYSEG asserts that, since FERC's order requiring it to file a revised rate was issued on June 4, 1982, MEUA's motion filed August 2, 1982 to reject the rate should be dismissed as untimely, since it was filed 29 days after the statutory deadline.
This argument, however, misconstrues the substance of the objections of MEUA and PASNY. Their motion to reject the revised rate did not stem from dissatisfaction with FERC's order of June 4 requiring utilization of certain tax accounting procedures, but rather from dissatisfaction with the increased rate filed July 2, approximately one month later. At the time of the June 4 order, MEUA, PASNY, and apparently FERC itself did not realize that incorporating the tax normalization procedures would result in a higher rate. We do not understand NYSEG to suggest otherwise. MEUA therefore could object to the June 4 order only when it discovered its actual effect, namely, the increased rate. As the Court of Appeals for the District of Columbia Circuit recently stated in rejecting an argument similar to that urged by NYSEG, Alabama Electric Cooperative, Inc. v. FERC, 684 F.2d 20, 25 (D.C.Cir.1982) (emphasis in original). The timeliness of MEUA's objections therefore must be assessed from the date it discovered the rate increase. Id. at 26 () (emphasis in original).
In response, NYSEG urges that the objection still was untimely because 31 days, or one more than the statutory limit, elapsed between its July 2 filing and MEUA's motion to reject. We disagree. While NYSEG filed its revised rate on Friday, July 2, MEUA first received notice of the filing after the July 4 weekend, on July 6. Its motion to reject the revised wheeling rate was filed within the ensuing thirty day period. We hold that it was filed on time. 6 Accordingly, we turn to the merits of FERC's disposition of the MEUA motion.
NYSEG characterizes FERC's September 30 order, prohibiting NYSEG from charging higher than the agreed upon $2.85 rate, as totally without basis in law. NYSEG claims, first, that FERC ignored the plain language of the February 3 letter agreement; second, that, even under FERC's reading of the contract, the rate increase should have been permitted because FERC had approved the revised rate; and, third, that the Mobile-Sierra doctrine applies only to unilateral rate...
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