reliant on six words of a two thousand and nine tariff amendment and applying it to it two thousand and five regular tory decision excluded approximately thirty million dollars  legitimate production costs hit by louisiana rate payers from the energy band with tear i'm going to argue to co writes the st point is that for incorrectly interpreted the tariff by relying on a single subordinate clause without considering or addressing the words of the entire  settlement that the tariff amendment was filed in compliance with or the filing letter which said that the tariff amendment would only apply to deferrals going forward and secondly that for its action applying a two thousand and nine amendment to the effects of a regulatory decision made when no one could ever possibly know that the i'm in what was going to be filed fo years later is improper retroactive rate make i would most like to make three or four points about the facts and then i will address those two points of argument first of all i know the members of this court may not be familiar with the inner tube in with terror but it was adopted in two thousand and five in order to eliminate undue discrimination on the energy system the rough part of rough equalization is plus or minus eleven percent anything beyond plus or minus eleven percent is unduly discriminatory them with tariff was adopted to rely on the books and records of the energy operating companies in other words what went on to the books went into the tech and ferk has always required that the accounting be and be consistent with fur requirements in on many occasions has overruled accounting errors made by energy it was an accounting error in this case furrow which bring about credits and debits which basically do this a utility has a big cost it wants to spread it out so what happens is there will be a credit on the books in the year those big costs arrive at the utility but the regulatory commission allows the utility to defer that so that credit happens to take the cost off the books then those costs are charged to rate payers later and amortized on the books later so one hundred percent are captured they're just captured with different timing the correct accounting for a deferral as held by for in this chaos is that you recognize that costs are differed in take them off the books that takes them off and out of the band you then recognize later there when the rate payers pay the cost that the costs are being amortized you add them to the expenses in the books that puts them back into the band which in this because interview was engaging as i said in improper accounting and then change the accounting and therefore different or five different operating companies there was concern about the consistency of the band with what was on the accounting books so effectively the costs would count in two thousand and nine and in later years they would not count with that change was made as i said two thousand and five costs were incurred and so for had a hearing and had to make a determination about a two thousand and five credit and the debits associated with  relying on six words in the tariff amendment which said or the amortization of previously deferred costs that the tariff a mimic could take out the debit even while it recognized the credit that had occurred in two thousand and five and that's what we're appealing first point of argument is that the firk arbitrarily and then it says that causes that for all of the recovery of current year cost that's what happens st or the amortization of previously deferred costs that's what happens after that and that's what happened in this decision so if this were as this were just if if the construction of this clause were governed by ordinary principles of retroactivity  and not the the credit which occurred in two thousand and five and the only way and this is what on been was trying to get through is to encompass debits and credits of you have to only apply it going forward because the credit occurs st ok this credit had occurred in the past just like you say applying normal principles of retro activity you can apply this to the pats but that's what they did well that what they actually did is they didn't apply it to the pass credit they didn't apply it to the  amortization starting in two thousand and nine and going forward so they separated and you cannot interpret the amendment to apply to half of something done previously and not apply to the rest of it works and it would be retroactive rate making to apply it to the credit and they dip debits are effects of that credit that very same credit and the only way you can  ok it's going to apply to new deferrals now the nd point is we had a salomon agreement and the settlement agreement nobody nobody contests this the settlement agreement makes it absolutely clear that this is only going to apply to two thousand and nine deferrals and going forward no past of for us this is not contested in any of the breeze they say well that's extreme to but the settlement agreement was a contract among all the parties agreed to by all the party he's filed with burke and approved by for and it is the agreement under which this you'll have it like in this case we had it a deferral that had a credit in two thousand and five now there were no amortizations in two thousand and five the amortizations occurred in the later years two thousand  an eight and nine and the way a regulatory decision works because of ritzer try to break making you you have to give them approval in advance to defer the cost and collect it later because the cost you know otherwise would have been recognized in two thousand so any decision that allows a deferral is effectively a guarantee of sorts that they're going to be able to collect it later decision is made at one time and then as you're going forward in approving later rates the m r does ation approval just granted well the way it works your honor is that the the single if the if the real sort of decisive point for purposes of prospectivity or retroactively is the regulatory decision then ations are really distinct regulatory decisions or actions whether they come from the same decision and so they're not distinct in that sense because it's one package of cost but clearly one dollar is a credit one is a debit and it's going to add to the cost in one year and it's you know going to take off of the cost and in the st year right but that's what it sounds like that the under the settlement agreement and that that just it bisects these things that actually go together that's that's exactly right you know if they have a pair of shoes and can't wear either one of them because they're no longer available in the same world that's true i think that's the only way you can interpret this amendment but i do want to emphasize the settlement agreement is just as much a contract defect in rates as the tariff is it energy fall of the settlement agreement to pull out the words in the formula and take it away from the the contract they call for the words in the formula in the settlement agreement everybody no one no one what what what you say makes a lot of intuitive sense but i assume it must be fairly common in situations where when you're accounting for these capital expenses or prepaid costs whatever it is you have to account for a transaction that takes place over many accounting periods and the outing rules change in the middle of fact timestream i can i assume it's fair fairly common but the change can be applied to the the remaining part of that transaction i mean you  you you make a capital expense when you encourage you buy equipment when the law says you can depreciate it over thirty years and then ten years later the rules change and you know you have to depreciate it over forty years or whatever and that change applies to that transaction even though on the front end it was made under different rules so isn't this just a variation on that act no your honor it's not because you're right about the accounting rules changing with this was in a change in the accounting rules  generals are still the same that they were you know in day one and one thing about it it's one thing they've got a different story it's a contractual equivalent of the fact that the parties under the filed rate doctrine can make these decisions for themselves and they're saying if they're saying they want this transition to the work in that way yes to new deferrals that's what they set that's what they agreed on that's what the changed all these costs were being paid by louisiana and if you're talking about a deferral you can change the timing you cannot change the fact that the costs do get recovered no matter what you do with it seems like your reading really is is viewing it as an ad and no it's really well not that's not our are reading your own are our reading is that it says or because only one of the two things will occur in any particular year ok all right we'll now hear from this perry may it please the court letter perry for the commission did commissioned interpreted being the perp variable in the bandwidth tariff concluded that there was no other way to read that per variable and then she read it as excluding from the bandwidth tear up as a two thousand and nine and the amortization of previously for cos either one of those are excluded there doesn't both of them don't have to be excluded either one of those are excluded and here we have a current amortization of previously for costs and the commissions are no other way the relevant retroactivity event is the regulatory decision the amendment covers future regulatory decisions and in suing de because your honor the provision excludes the effects their result from a regulatory decision and the effects are debits and credits such that it causes either the there be a similar interpretive principle to construe tariff amendments if at all possible to be consistent with ordinary accounting i understand that but and clearly you have a you have a clause simple if not very strong textual argument which you've laid out quite capab but it does produce very strange accounting right i mean suppose take this out of the bandwidth context and just imagine that you all are regulating  w an electric company can recover its capital costs and it would be irrational to say when an investment is made the cost can be immediately recovered because it has to be spread out over time and then in the middle of that time to say  well you know what we're changing the rule we now think that the cost can be recovered right away but we're not going to let you recover the outstanding amount of that investment i mean i can't think of any reason why a regulator would ever do that for a category of expenses here that everyone concedes or which it meant and then in the abstract the company should be able to recover  for me why would anyone ever do it that way your honor nobody is suggesting that it was done that way on purpose with regard to this particular deferral because this particular deferral was not an issue at the time that this  arises because someone says paid event occurs and the tariff language applies in some way that wasn't expected but it nevertheless is the filed rate and it has to be in force as it is written and it can to determine whether it's in permissibly retroactive or not is it the regulatory determination or in your view it's the i because the amortization is booked in the current year and the year excluding the cost that is being booked into courier so it's not rushed the band with calculation than that so it became effective in two thousand and nine and it applied to the two thousand and eight bandwidth calculation and in your view that's not retroactive because it's just referring to cost data and not charging happily the the band when it every year applies to the prior year costs right and nobody has ever found that to be retroactive rate making and i would make the point in that order the commission expressly grants it introduce request that the amendment be effective may st two thousand and not and so that it would apply to the bandwidth calculations of two thousand and nine which are based on t eight cost so it has been and that is part of the file rate here and that is settled into two thousand and nine order that is a final order that was never appealed to the contrary is the commission pointed out louisiana supported the filing and supported the issuance of this order accepting introduce terrifying says the fact that it applies appropriately to the two thousand and eight cost has been decided of the disputed language and they rely pretty substantially on debits and credits which would seem to pair the two and your response to that is no ambiguity deferred costs and to provision separates two if it causes either one or the other recognizing that they happen in different years but a regulatory decision is the is the i mean if  that has both debits and credits why is the clearest reading of the language not that it either applies to the debits and credits or doesn't apply to either your honor is as mr f do you really agree on the or about the question then is what is this language meant in terms of the first application to sever the one half of a regulatory effect from the other your honor which seems like there's a i don't know as a matter of just sort of background accounting and and for practice i haven't seen a case i mean i understand that there are ano as you were pointing out from you know weather conditions or things that make a rate disadvantageous once it is ultimately paid but i haven't seen another situation ation decisions were severed in this way is that something that is more familiar to you than i'm aware of what i am not aware that  comes up very often the bandwidth tariff because it compares production cost has many aspects to it at our peak in the world of tariffs this isn't a common situation that you would be in the position of trying to decide what goes into a tariff that compares production and it's not that nobody is suggesting that at the time they wrote this language they had this situation in minds but the problem is that now that we are here the commission could not see a way that the amortization of previously deferred costs would not exclude be amortization of the previously deferred costs from two thousand and five because that seems to be exactly seems to be exactly address the situation even though it wasn't probably in anybody's mind at the time it was the but the way it is written it seems to directly address the situation tried to change the rules in the middle of the stream during the amortizations that would be unlawful retroactive rate maybe it does not happen you have granted it for all in which the implicit rule is you're going to be able to collect it over next number of years that's required by the accounting rules and that's basically in the deferrals we granted we have to specify how they're going to be collected you try to change the rules it's retroactive rate making and that goes digits pillers coins the focus is on the decision it has to be on the decision because th decision is what creates two things a credit and subsequent debits or deferral and subsequent amortizations you can't focus on one without covering the only to apply to deferrals going forward and their effects everybody agrees with that now they say well the language did say that but that is what everyone agrees every witness at the hearing