Pennsylvania Electric Co v. FERC : Metropolitan Edison Co v. FERC
| Decision Date | 03 May 1979 |
| Docket Number | 78-1329 and 78-1330,Nos. 77-1592,77-2004,77-2005,s. 77-1592 |
| Citation | 600 F.2d 944,195 U.S. App. D.C. 130 |
| Parties | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, New Hampshire Electric Cooperative, Inc., Towns of Ashland and Wolfeboro, New Hampshire Village Precinct of New Hampton, New Hampshire, Intervenors. APPALACHIAN POWER COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. APPALACHIAN POWER COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Cities of Bedford et al., Intervenors. PENNSYLVANIA ELECTRIC COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Allegheny Electric Cooperative, Inc., Intervenor. METROPOLITAN EDISON COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Pennsylvania Public Utility Commission, Boroughs of Kutztown, Goldsboro & Lewisberry, Pennsylvania, Allegheny Electric Cooperative, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
George F. Bruder, Washington, D. C., with whom Albert R. Simonds, Jr., Washington, D. C., was on the brief, for petitioner in No. 77-1592.
Leonard W. Belter, Washington, D. C., with whom James B. Liberman and Donald K. Dankner, Washington, D. C., were on the brief, for petitioner in Nos. 78-1329 and 78-1330.
Edward J. Brady, New York City, with whom Edward A. Caine and Alfred Charles Koeppe, New York City, were on the brief, for petitioner in Nos. 77-2004 and 77-2005.
Lynn N. Hargis, Atty., Federal Energy Regulatory Commission, Washington, D. C., with whom Howard E. Shapiro, Sol., Federal Energy Regulatory Commission, Washington, D. C., was on the brief, for respondent.
Robert C. McDiarmid, Washington, D. C., with whom Robert H. Bear, Washington, D. C., was on the brief, for intervenor, New Hampshire Elec. Cooperative, Inc., et al. in No. 77-1592.
William C. Wise and Robert Weinberg, Washington, D. C., were on the brief, for intervenor, Allegheny Elec. Cooperative, Inc. and Boroughs in Nos. 78-1329 and 78-1330.
Gordon P. MacDougall, Washington, D. C., was on the brief, for intervenor, Pennsylvania Public Utility Commission in No. 78-1330.
Ronald D. Eastman and Jeffrey D. Komarow, Washington, D. C., were on the brief, for intervenor, the Boroughs of Kutztown, Goldsboro and Lewisberry, Pennsylvania in No. 78-1330.
Northcutt Ely and Frederick H. Ritts, Washington, D. C., were on the brief, for intervenors, Cities of Bedford et al. in No. 77-2005.
Joseph G. Stiles, John J. Lahey and Philip R. Telleen, Attys., Federal Energy Regulatory Commission, Washington, D. C., entered appearances, for respondent.
Before TAMM and MacKINNON, Circuit Judges, and JOHN H. PRATT, * United States District Judge for the United States District Court for the District of Columbia.
Opinion for the Court filed by Circuit Judge MacKINNON.
Petitioner electric companies 1 seek review of ten orders of the Federal Power Commission (hereinafter "Commission"). 2 In the challenged orders, the Commission refused to allow the electric companies to impose rate surcharges to compensate for alleged uncompensated fuel costs to which they allege they became entitled when they filed new rates based on fuel costs incurred in the billing month rather than for some prior period. The Commission held that the proposed surcharges amount to retroactive ratemaking, which is prohibited by the Federal Power Act. Petitioners counter that the surcharges are necessary because of changes in the companies' rate structure, and that they are not retroactive ratemaking.
The First, Third and Fourth Circuits have already ruled on this issue. The First Circuit 3 largely agreed with the position taken by the petitioners here. The Third 4 and Fourth 5 Circuits, on the other hand, held that it was proper for the Commission to reject the surcharges as prohibited retroactive ratemaking. We agree with the decisions by the Third and Fourth Circuits and affirm the Commission's orders, except those involving petitioner Appalachian Power Company.
Approved rates for electric service usually have two components. The "demand charge" covers the utility's fixed (capacity related) costs. The "energy charge" is designed to recover variable costs, primarily the cost of fuel, which recently has been increasing.
The energy charge also has two elements. The first element is the "basic energy rate." It recovers the "base cost" of fuel, which is an estimate of what fuel will cost. The basic energy rate must be approved in advance by the Commission. The second element is the "fuel adjustment" charge. This charge is based on a formula designed to recover the difference between the base cost of fuel and the actual cost of fuel. A utility's fuel adjustment formula must be approved by the Commission, for it is considered part of the utility's filed rate. The monthly charge calculated under the fuel adjustment formula, however, is not subject to Commission approval. Thus, fuel adjustment clauses enable utilities to keep their rates in line with the current cost of their fuel without continually having to file for rate increases and decreases.
While a utility's fuel adjustment clause must fall within certain boundaries, much of the design is left to the utility. Basically, utilities have used one of two types of fuel adjustment formula. "Cost of service" tariffs are designed to reimburse the utility for its actual fuel expenditures. These tariffs have the advantage of being accurate, but the inclusion of current costs in the monthly billings must be deferred while the utility collects and assimilates current data. "Fixed rate" tariffs incorporate a charge of a "predetermined price per unit based on costs incurred during a past test period, subject to some adjustments." 6 Fixed rate tariffs are less accurate than cost of service tariffs, but monthly billings need not be postponed until information on fuel costs is tabulated. Each type of fuel adjustment formula has its advantages and disadvantages, and the Commission allows a utility to use either one.
Until late 1975, the fuel adjustment clauses employed by the petitioners used fuel costs from up to six months earlier to compute current fuel adjustment charges. 7 For example, Public Service's January billing incorporated a fuel adjustment charge which reflected the difference between the base cost and the actual cost of fuel in the preceding November. Petitioners term this a "billing lag."
Petitioners were forced to amend their filed rates in late 1975 because of a change in Commission regulations. 8 Some of the petitioners chose this occasion to eliminate the "billing lag" in their fuel adjustment charges. That is, rather than computing current fuel adjustment charges on the basis of costs in a period prior to the billing period, the utilities switched to formulas that incorporated the actual cost of the fuel in the billing month. Thus, where under Public Service's old formula the January fuel adjustment charge was based on the cost of fuel in the preceding November, under the new formula, the January charge is computed on the basis of the actual January cost.
In addition to the changes just mentioned, petitioners requested approval for temporary rate surcharges. The surcharges are designed to recover "deferred charges" related to the "lag period" which petitioners allege are still owed by customers under the old (superseded) fuel adjustment clauses. Petitioners maintain that adoption of the new (non "billing lag") fuel adjustment clauses wiped out the "deferred charges" and made them uncollectable.
Public Service's experience illustrates how elimination of the "billing lag" arguably makes "deferred charges" unrecoverable. Public Service's superseded fuel adjustment formula was based on the cost of Public Service's new fuel adjustment clause, which eliminated the "billing lag," became effective on January 1, 1976. Under the new "cost of service" clause the cost of fuel in January is accounted for in the January charge. The January charge no longer reflects the difference between the actual and estimated costs in November. Thus, the "deferred charge" from November, 1975, and December as well, became uncollectable under the new fuel adjustment formula. (Instead the higher January cost was collected). Petitioners argue that the surcharges are necessary to recoup costs for such periods, which were never included in any billings. 11
fuel in "the second preceding month." 9 The January fuel adjustment charge reflected the cost of fuel in the preceding November. Therefore, recovery of the difference between the basic energy charge and November costs was "deferred" until the following January. 10
The Commission refused to approve the surcharges. It held that (1) the proposed surcharges would be retroactive rate increases, and (2) the Federal Power Act prohibits retroactive ratemaking. 12
The primary issue in this case is whether imposition of the proposed surcharges would be retroactive ratemaking. Petitioners argue that the surcharges are not retroactive rate increases. They contend that the fuel adjustment clauses which were superseded were Cost of service tariffs with deferred billing and therefore that they (petitioners) were entitled under the superseded clauses to be compensated for all incurred fuel costs; 13 and that since the surcharges merely enable petitioners to recover costs to which they were already entitled, but for which billing had been deferred, imposition of the surcharges would not constitute retroactive ratemaking.
The Commission disagrees with petitioners' characterization of the superseded fuel adjustment clauses. It contends that the old clauses were Fixed rate rather than cost of service tariffs. That is, the superseded clauses established a "formula, based on...
To continue reading
Request your trial
-
Batterton v. Marshall
...Property, Loans, Grants, Benefits, or Contracts, 118 U.Pa.L.Rev. 540 (1970) (range of agency activities); Public Service Co. of New Hampshire v. FERC, 600 F.2d 944 (D.C. Cir. 1979) (Federal Power Commission disapproves electric companies' proposed rate surcharges).43 See Pickus v. United St......
-
Centerpoint Energy Entex v. Railroad Com'n, 03-04-00731-CV.
...having to file for rate increases (or decreases) and ameliorate the regulatory lag problem. See Public Serv. Co. of N.H. v. Federal Energy Regulatory Comm'n, 600 F.2d 944, 947 (D.C.Cir.1979); Gulf Power Co. v. Florida Public Serv. Comm'n, 487 So.2d 1036, 1037 (Fla.1986). Generally, implemen......
-
Towns of Concord, Norwood, and Wellesley, Mass. v. F.E.R.C.
...of fuel [or purchased economic power] rises." Anaheim v. FERC, 669 F.2d 799, 806 (D.C.Cir.1981); accord Public Serv. Comm'n of New Hampshire v. FERC, 600 F.2d 944, 947 (D.C.Cir.), cert. denied, 444 U.S. 990, 100 S.Ct. 520, 62 L.Ed.2d 419 (1979). As its name suggests, such a clause adjusts t......
-
Democratic Cent. Committee of District of Columbia v. Washington Metropolitan Area Transit Com'n
...past excessive earnings belong to the Company just as past losses must be borne by it.") (emphasis added); Public Service Comm'n of New Hampshire v. FERC, 600 F.2d 944 (D.C.Cir.1979) (barring FPC from approving retroactive rate increases); Goodman v. Public Service Comm'n, 467 F.2d 375 (D.C......