all challenges to index increases are governed by one regulation eight hundred see a far forth three four three point two see which provides an relevant part of protest or complaint filed against a great proposed pursuant to indexing must allege reasonable grounds for asserting that the rate increase is so substantially in excess of the actual costs increase incurred by the carrier that the rate is unjust an unreasonable based on the plain language and as writ regulation plainly focuses on the effect of the index increases under every challenge to an index increase so why isn't the regulation ambiguous in the science it says actual cost increases incurred clearly talking about past costs rather than future costs but exam big us on the question whether that means incurred at the time of the at the time the index rate is increased or incurred by the time the complaint is filed i would say that based on the commission's own precedent  as two different parts of your argument i want one is the unexplained change in position but i guess i'm just program right now whether the new interpretation is substantively on reasonable and i'm not sure i see it where just says costs incurred it doesn't say as of when as of what past time that regulation needs to be dealt with in the context of what the n you will index for a change actually is designed to do the annual index rate changes a very narrow and specific rate change methodology it's to dine specifically to allow the rate carrier a blowout carrier to increase its race for the specific cost inflationary cost in the time period over the previous year to include costs post index increase involves an irrelevant time period that has nothing to do with the pause the rate increases designed to compensate  when you increase when you do the index rate increase in price it's valid for all time going forward once you do what you can perform the index increase the pipeline will experience a number of of revenue increases and cost increases a decrease and for any number of reasons that may be unrelated to the index increase in those two sure and that could be true in want one year or it could be true over three years that's correct but when that pipeline experiences those cost increases the really the the mechanism to address the cost increases or decreases is one of the other methodology that the commission has set out for instance if you want to post in that increased basis the pipeline experience higher cost lower revenues the result or the  response should be the carry should evaluate another whether it needs to file a rate increase to adjust its rate if want to pose an index basis the carriers reporting increasing over recoveries then the shipper is entitled to look and see whether we should file a complaint to reset that rate but at that i mean we're in this sort of odd intermediate process right the simple quick and dirty rule would be you can just increase up to the ceiling and not adjust for p p i and if you want to look at anything else go do a full blown cost of service proceeding i'm not sure i have the correct thing the terminology right here they say we we will create a limited further inquiry to account for situations  where the costs look like they're getting out of whack or the profit margins look like they're getting out of whack but we won't let that expand into the cost of service proceeding years ear zero in the past or up to the point of the complaint it just doesn't seem huge leap different in kind whether you whether you cut off the inquiry at the time of the raid index in or the time of the filing of the complaint i believe it's a huge difference roger because the fact of the banner is that the index was designed to recover particular cause and once you start incorporating cost post index  it would lead you to the logical and reasonable real results for example if two thousand and twelve cos are the foundation for a two thousand and twelve index and the two thousand and twelve costs are also the foundation for a few thousand and thirteen and there you have to increases based off of the same part of costs you immediately start to double recover the cost that you are intending or that were supposed to be recovered there's no preceden you get away from you don't you don't want into those a logical and under reasonable situation and in fact in a series of orders the commission has already identified that looking at both index post two thousand and eleven costs and revenue down the same exact type of cost revenue that are that we're talking about market should be used to evaluate the index because they said it showed they were unable to recover their costs on a post in basis and therefore on a pre indexed basis the index increase did not exceed cost look at that and said no we're not going to go there that is it's found they found it completely irrelevant and in fact they said the only relevant evidence in indexing cases is the change in the pipelines cost the service in the two years preceding the index in that's an order deny motion to reopen the record they specifically found that even if i just did seem like the the strongest the strongest statement of the rule your defending that the later arising changes are just simply irrelevant that i could find was in this two thousand and twelve seven p p decision which as as which work has at least plausibly distinguished as a protest case where all of that later or post complain post protests filing well i would say this your honor it's three orders for preferment on every step of the way and what i'm saying is that for actually said that if you accept the two thousand and eleven post index data that s f p p was saying was accurate even if you assume that it's accurate for everything that it said it would not change anything and it would be not relevant to the evaluation of the index the opinion number five twenty seven reaffirm that and in reaffirming that they explained that should that it's present should be understood as reflecting the commission policy that index rate proceedings are to be conducted on a streamlined basis without regard to the pipeline and subsequent financial data and then five twenty seven a if we reaffirm the exclusion of that data ten and you're going to apply an index rate increase based on measurement of costs from two thousand and eight two thousand and nine it was two years of data they're supposed to capture the inflation measure and you apply it here twenty ten r is the theory that i use it as retrospective as a theory that by doing so the twenty ten rate is kept catching up for any inflation costs that they were not able to get with the two thousand and nine rate inflationary costs change that occurred between two thousand and eight and two thousand and nine there would be a challenge in the two thousand and nine rate correct price so it's always better in all of the cases that for has dealt with it's always right is your best authority for them explaining that that is the inflation measure that the index is intended to capture i would go back to the first example when in the b p west proceeding where they established the substantially exacerbate this they specifically point out in that case that into performing the analysis you look and i believe that one was a two thousand seven complaint dealing with the two thousand five index increase that you specifically look at the include at least for purposes of this substantial exacerbation tass cost changes they happen in two thousand and ten up to the time of complaint filing twenty thirteen so you would have a double recovery across in that context what you start to include post index cost and revenue data thank you but in these three commission decisions  a motion to to consider the we didn't even know i was in the in the consideration of leader data i was talking about the s and p p decisions dealing with its two thousand and cases it was not directly tied up your answer to question lurking in the record so to the extent your challenging the adequa firsts explanation and whether they adequately distinguished past precedents those really aren't adverse precedents on the question before us right now this is a question of first impression ferk could have addressed this issue in those cases but it did i would i would to two responses to your question there one given the fact that has never dealt with post index increased post cost and revenue data to evaluate an index increase since the beginning of the regulation tells you that from that standpoint purpose not consider material now with respect to your other question dealing with the protesters as a complaint the protest the five twenty seven proceedings i would say are about ninety nine point nine percent on point with the complaint and that is because those are the it's protest cases right it started five twenty seven started as a protest but it just gives they specifically bad but the later in the protest case will be post filing and burke has maintained maintain the bright line rule that they will consider new job o sought to limit the issues that can be considered at the preliminary screening stage when the commission of limited time to analyze statutory timeframes once the commission determines to set the matter for hearing some factors can be considered from an evidentiary standpoint the these complaints right here or on all fours with the five twenty seven case where they have the data and they said even if we accept it even if we accept they're inconsistency is reasonable or not that while that set of words did involve an attempt by asset p p to reopen the record that that set of orders involve protest filed immediately after the rate increases in question the orders here distinguished that set of orders because here's a different situation where the data is available to the commission at the start of the proceedings and so the commission pointed out that typically does not allow parties to reopen or add new data to a record once and that once a proceeding has started now there's a that's a fair that seems like it's a it at least a plausible distinction but all you did in your explanation was say oh there's this one other case you think it's two thousand think it's two which you're changing course and swimming upstream right because it wasn't just that there's one protest case out there and complaints are different from protests there were other complaint cases where admittedly without a lot of thought you looked only to look backwards from the time of the rate increase and there are other statements in the original regulation and in love proposed new regulation that was cited just seems like that's how the commission had always done things and i think the commission acknowledged that  orders here i don't think it was attempting to say well other orders were just about protests and this is a complaint that's different i think what the commission was trying to say was that in other orders it has looked at the two years of data perceiving the rating greece but this i don't believe so i think that's part of the reason the commission said it was a new circumstance i know that there is i could answer there's a couple of orders that your honour's talked about with my friend of the other side where there was a similar situation i think this is that seven set of orders where there was a number of complaints and some of them were filed a couple of years after there was after arising that there was no data available but i think you cannot discuss this in that in that said waters the question signs it is using the two year or two previous years to determine and then tax rate to capture inflation losses the way to keep the rate as accurate as possible given the consequences of the risk of inflation so explain to me like if you if the commission believes that the point of this is to sort of keep a running we're not going to just stop those two years but we're going to keep going past those two years and has the filing of the raid itself to evaluate the inflation risk and whether the change in the rate was commensurate with filed late and we have the data but we're not going to do it for other people who file just as late we're not going to ask you about the data i mean index the commission tell us what the index is measuring and doing and that's what seems to me to be the flat you consistency here but maybe maybe they had a view of what the index is doing and maybe the commission has a different yeah and i think there's a this distinction here between the purpose of indexing which the commission has the finds are consistently in broadly for since increase your rate in twenty ten based on measurements that come from two thousand and two thousand and nine is that increase meant to capture whatever loss she would have had from your locked in rate didn't adjust for inflation in two thousand and nine or is the goal to do up until the last possible minute and get the twenty eight hundred as close as possible to all up to that time up to date inflation information i think the goal is to make sure that future rates reflect costs that were incurred and so that i'm not sure that means the costs that were in recovering cost increases hasn't been defined so clearly as it's always supposed to be what happens before and i don't understand how that challenge the index rate increase what's considered there can be divorced from what the point of the index rate increase is meant to accomplish well because i think that the commission has sort of defined how it what complaint parties have to prove in order to prevail on a complaint and in the regulations three forty three to see one  and the regulation they have to has been stated broadly and that refers to the actual costs incurred by the pipeline there is no dispute here that all of the data including the post rate increase state of the commission consider is actual costs incurred by the pipeline now in practice even once you start using data that goes beyond that two year period which is what happened here then you're no longer just capturing the inflation is measured by those two years you're bringing your you're making it a three year or a two and a half years depending on the time of the the filing two and a half to three year measure of inflation are you not isn't that what they did in this case i think that the the th should they be focused on the same question because because what they're doing is they're not challenging the rate in twenty eleven they're saying in twenty ten t the change in the question in the middle of the proceeding when you start expanding the data they comes in and then you're starting to say well was it substantially excessive at the time the complaint was filed in that a different question well i think that i think the commission was trying to articulate a way forward in a new circumstance i think you to find the you know prior cases where complaints were filed a year a year and a half out or after if you thought the point of this index proceeding was to allow this sort of moving target analysis of whether it was commensurate with cost changes over a broader than two year period then you would have done that in the other cases the commission would have done that on its own if that's how i view the point of this filed not at the time the tariff was filed then you by definition would have had to demand that information right by not if i don't think you i don't understand why it matters whether they increases be addressed by the subsequent indices that would be adjusted for that inflation the problem is that i think the commission is trying to implement what was trying to apply a broadly worded regulation that doesn't define whether we're looking at going to do that and the only really the only explanation again was you all filed later within your perfectly lawful limitations period that seems to be an entirely arbitrary basis or tell me why it's not an entirely arbitrary basis on which to change the nature of the question that the commission is asking well to be clear i think that the commission in all of these orders has never tried to pin down exactly what the i mean other than the broad statement that i g considered said well it's the we look at the cost for already chris now here we have a different set of circumstances that the commission acknowledge so it's either in a point where it wasn't mine you hadn't had before yet this is something that's never been question that's going on here is it was is my initial framing right is this really about the question whether the phrasing the regulation is whether the rate increase substantially exceeds actual cost increases incurred that's right and what it seems you're doing is everyone from the beginning of time has assume that that means incurred at the time of the filing of the rate increase and you have now changed your interpretation of that regulation to mean incurred at the time of the filing of the complaint is that a fair characterization that that and that matches with what judge millette saying that what what you're honing in on is now different well i think that that's correct but i would add to that it's not just the fact that before it was it was looking just that one rate increases while but in almost every instance the rate increases filed and the complaint of protests was filed immediately on top of that such that we don't have data stating the ra go further than what the parties us but for whatever reason the commission didn't take that approach in the doesn't twelve orders here there was an actual dispute at the time the complaints were filed which is two years after the reading creases so then we're in a position where we have to either ignore more the commission could have said other than that this is the first time someone's tried to this is the first time we've had to deal with a dispute about whether we should look at this edition data or not it is a middle we have new area  for the commission ok just one more which is putting aside the explanation issue your new interpretation might seem reasonable on the face of that regulation but in the larger context of indexing these are proceeding that are designed to be adjustments to identify circumstances when the ceiling doesn't work right and the ceiling is firmly defined to focus on what happens at the time july two thousand and twelve the ceiling for the index year that begins on july two thousand and twelve is assessed by comparing calendar year two thousand and ten to calendar year two thousand and eleven right p p i plus something that's right and if that's the focus for the overarching ceiling why should that be the focus for these proceedings that are designed to address a fairly narrow question of when when ceiling work for summer reason well i think that we're in the world we're looking at a challenge soon to an index r the focus of the rule i mean i think part of this though is that the whole point of indexing and i think your honor said cover this ground but the whole point is to make it a separate sort of alternative to the more burdensome cost of service rate making and so  ability to make adjustments without having to go to the commission every time now if a party wants to make a talents to an index or if there's a limited means of doing that it hasn't come off that many instances and when it has come up as a practical matter before the complaint is filed like you for that pipeline finances change just enough to interest them under the line two years later and the commission you're telling me is it deciding whether the wait was sap substantially excessive when adopted or substantially excessive when the complaint was filed it sounds to me like you must be doing the latter as a result of the orders  saying yes i'm now looking at this additional cost information two years more cost information and when i look at that i hold it is not substantially excessive as of the time the complaint time of the complaint it was it seems like excess but at the time the rate was filed it was perfectly legitimate for that pipeline to have increased its rate exactly as it did they did exactly what would be expected given that index in the circumstances at the time will it then still be held to be substantially excessive it's the exact same if there is more cost it available at the time to complete a style that is if there's  increase still it is a lawful increase in the sense that it's if it's under the rate ceiling they're entitled to take that that adjustment now party disagrees or think it's thinks it's actually an unjust an unreasonable increase they have to go through the complaint process but if a timely complaint is filed two years later whether or not that rate increases up held will depend on facts that were on  to the pipeline at the time they sought the increase as well i suppose i'm no bolt to anyone but at the same time i mean this is always a data driven inquiry it's what's happening with phone numbers so the over recovery if you want to call it that was roughly thirteen percent thousand and eleven down to ten percent the next year and under nine percent the year after those numbers haven't been disputed just one quick thing if on this tax court yet here but but at the same time that proceeding at least one of the proceedings they cited is still ongoing so that certainly will have an impact on the answer when your honour's may please the court charles caldwell appearing on behalf of us at p p l interview her supporters on this i'd like to dive right into some of the questions that have been raised i think there are a number of factors here that are important in dealing with some of the questions that judge millette that you have and also detaches one of your questions one is that in the complaint setting the commission is articulated over the course of his orders i mean th standard substantial exacerbation was articulated about eleven years ago the universe of index complaint orders at the commission is quite limited we're not looking at lots and lots of orders as you may have noticed but the commission has articulated an approach to those instances where the percentage comparison test which is the plight of the protests and complaints that the rates the index ra looking more deeply we can in the complaint setting one of the reasons we can is because the interstate commerce act affords more time for the commission to do with complaints than it can with protests protest has to be a pay seven hundred snapshot evaluation in the east line there was an index protest past that hurdle complaint filed and there were large capital investments that occurred and the argument was that page seven hundred was worked by those capital  costs and that the commission granted a complaint permitted investigation that isolate that data cold be the parties involved and told us that the you can go beyond pay seven hundred sort out that capital cost and determine whether or not the indexed rates for the other lines not these lines still passed the test or not so i'm sorry that's in a protest an index that was a complete case in the i'm sorry index complaint that was a complaint and it is not on correct for them to adopt will be financially irresponsible for them not to adopt the rate increase but you can't tell on this test that this law that's not what don't we know what we don't know well i'm i'm i'm adopting judgment that's hypothetical and what i would say is that we don't know is if they said a shippers or a shipper decided to wait and see that even though i've advised my client based on the data that we have for the two prior years it appears that you should be ok i will say your honor just a quibble because that's what we lawyers do i would not advise them whether it's lawful or not that be and that would be a finding that only the commission can issue that a rate is just in reasonable index and it's important to recognize this indexing is not a method to derive just in recent rates this is not an adjudication you represent people in this industry more generally is there any other if there's lots of great making areas that for governments or any other that you're aware of where the commission and reasonableness of a rate based on its time a complaint is filed rather than a time at the time the rate is fi well your honor i can only speak with and it will pipeline arena and in that arena if a complete is filed there is no value as can be based on the data as of the time of the complaint nobody knows what client has to be assessed as to whether or not it's going the commission is going to permit the complaint i'm talking in a general generalized base rate complaint outside the realm of indexing the complaint would be filed the complaint would rely a challenge that base rate to challenge the base rate your honor and they would look at the data available which would be generally paid seven hundred data that the pipeline provided i think that your auditors and points that you're raising about this looking forward in time and you're capturing costs later here it's important to go back to the basic principle what was the commission attempting to do with these wider range of factors and specifically your way oh i'm sorry john because i think you're insubstantial exacerbat that's an elaboration where the commission's looking at the data available and sees on the face of page seven hundred a potentially substantial over recovery of costs by the race and in that instance the commissions as let's look at see the were added with that substantially exacerbate the existing over recovery that's the very so it inherently looks forward in time there's no way an index adjustment changes a cost over recovery in the past happen in the future it doesn't do anything your honor to change the indexing that's been applied that is untouched it's only an inquiry as to whether or not that index adjustment was reasonable and sort of thank you original case where it set up this a financial exacerbation test where you had a complaint filed in two thousand and seven versus the two thousand and five index adjustment when they measured whether there was some type of a substantial exacerbation they looked at the index or they looked at the overall recovery for two thousand and four and projected the in the increased revenue on that and said that would create a heal that would cause a problem they did not look for his never look forward in any type of than analysis they've always defined it and kept it with the with the original purpose of the annual index is to keep it tied to the specific period because it's an annual item it's an annual increase every year so that you look backwards so that means that you focus that narrow test on that specific time period in cost can i take you back to judge millette square station so suppose we're outside this corky world of complaints challenging index increases were just during cost of service rate making law no one either setting the initial rate of an oil pipeline or i don't know maybe a natural gas facts and costs that happened before the rate was sat and were therefore knowable to the pipeline when they set the rate or is it done after the fact the proceeding is litigated two or three years later and the committee and the commission will look at everything that's happened in the interim that we both this is the closest analogy that i can give you right is that when a pipeline files its own right like it did here when they initiated index increases they can initiate their own generate case so when they make that file and they put that rate into effect and it's challenged it's subject to refund as of that day not a future day because it could be challenged in the out for a long period of time they would have a test period saying we anticipate all of these future changes in cost so that would be evaluated but for the most part the is that if they file the rate that's challenge it's  that day not a future day thank you thank you