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[Senate Report 115-278]
[From the U.S. Government Publishing Office]

                                                      Calendar No. 469
115th Congress      }                                   {       Report
                                 SENATE
 2d Session         }                                   {      115-278

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 FAIR RATEPAYER ACCOUNTABILITY, TRANSPARENCY, AND EFFICIENCY STANDARDS 
                                  ACT

                                _______
                                

                 June 18, 2018.--Ordered to be printed

                                _______
                                

            Ms. Murkowski, from the Committee on Energy and 
               Natural Resources, submitted the following

                              R E P O R T

                         [To accompany S. 186]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 186) to amend the Federal Power Act to 
provide that any inaction by the Federal Energy Regulatory 
Commission that allows a rate change to go into effect shall be 
treated as an order by the Commission for purposes of rehearing 
and court review, having considered the same, reports favorably 
thereon with an amendment, and recommends that the bill, as 
amended, do pass.
    The amendment is as follows:
    Strike all after the end of Section 1, the Short Title, and 
insert the following:

SEC. 2. AMENDMENT TO THE FEDERAL POWER ACT.

    Section 205 of the Federal Power Act (16 U.S.C. 824d) is amended by 
adding at the end the following:
    (g) Inaction of Commissioners.--
          (1) In general.--If the Commission permits the expiration of 
        the 60-day period established under the first sentence of 
        subsection (d) because the members of the Commission are 
        divided two against two as to the lawfulness of the change, as 
        a result of vacancy, incapacity, or recusal on the Commission--
                  (A) the failure to act by the Commission shall be 
                considered to be an order issued by the Commission 
                accepting the change for purposes of section 313(a); 
                and
                  (B) there shall be added to the record of the 
                proceeding of the Commission--
                          (i) the proposed order;
                          (ii) notice of the division of the 
                        Commissioners with respect to the proposed 
                        order; and
                          (iii) the written statement of each member of 
                        the Commission explaining the views of the 
                        Commissioner with respect to the proposed 
                        order.
          (2) Appeal.--If any party to a proceeding of the Commission 
        described in paragraph (1) seeks a rehearing under section 
        313(a) and the Commission fails to act on the merits of the 
        rehearing request by the date that is 30 days after the date of 
        the rehearing request because the members of the Commission are 
        divided two against two, as a result of vacancy, incapacity, or 
        recusal on the Commission, any party that sought the rehearing 
        may appeal under section 313(b).

                                Purpose

    The purpose of S. 186 is to amend the Federal Power Act 
(FPA) to provide that any inaction by the Federal Energy 
Regulatory Commission (FERC or Commission) that allows a rate 
change to go into effect shall be treated as an order by the 
Commission for purposes of rehearing and court review.

                          Background and Need

    Section 205 of the FPA requires rates charged by electric 
utilities to be just and reasonable and declares rates that are 
not just and reasonable to be unlawful. To enable the 
Commission to determine if rates are just and reasonable, 
section 205 requires any public utility wishing to change its 
rates to notify the Commission and the public 60 days before 
the utility changes its rates. (16 U.S.C. 824d.) The 60-day 
notice period gives the Commission time to consider the 
lawfulness of the rate change and for the public to contest the 
change. The Commission normally issues an order during the 60-
day period, either (1) allowing the change to go into effect, 
(2) denying the change in its entirety, (3) denying the change 
until the electric utility submits other changes to its rates, 
or (4) suspending the change for up to 5 additional months to 
allow the Commission time to hold a hearing to consider the 
lawfulness of the change. If FERC fails to act within 60 days, 
then the changes will go into effect by operation of law 
without a Commission order.
    Section 313 of the FPA gives any person that is aggrieved 
by a Commission order approving or denying a rate change the 
opportunity to request a rehearing from the Commission. The 
Commission must act on the rehearing request within 30 days or 
the request is deemed denied. To the extent such rehearing 
request is denied, the aggrieved party can then ask the U.S. 
Courts of Appeals to review the Commission's rate change order. 
But the FPA does not grant the courts jurisdiction to review 
rate changes if the party has not requested rehearing or if the 
Commission has not issued an order, in cases where the rate 
change went into effect by operation of law without a 
Commission order.
    In only a very few instances has a rate change under 
section 205 gone into effect because the Commission failed to 
act within 60 days. In fact, on only six occasions since 1977 
when FERC was established has this occurred. On the most recent 
occasion, only four Commissioners were available to act on a 
rate submittal within the required time period. According to 
their public statements, the Commissioners were divided two 
against two as to the action they wanted to take on the rate 
filing. Because of that split, the Commission did not issue an 
order, the rates took effect, and the utility (in this case, 
ISO New England, the Regional Transmission Organization for New 
England, or ISO-NE) was therefore allowed to charge the rates 
that it had submitted (See, Notice of Filing Taking Effect by 
Operation of Law, FERC Docket ER14-1409 (September 16, 2014)).
    Public Citizen, Inc. and the State of Connecticut objected 
to ISO-NE's rate change and sought rehearing on the 
Commission's public notice, issued by the Commission's 
Secretary, that the change had taken effect by operation of 
law. Upon receipt of those rehearing requests, the Commission's 
Deputy Secretary issued a further public notice in the 
proceeding, acknowledging the requests for rehearing, and 
stating that the Secretary's earlier notice was not an order 
issued by the Commission, ``[r]ehearing therefore does not 
lie,'' and concluding that the submittals asking for rehearing 
``are therefore dismissed'' (Notice of Dismissal of Pleadings, 
FERC Docket ER14-1409 (October 24, 2014)). Public Citizen and 
Connecticut then sought review in the Court of Appeals, which 
held that it lacked jurisdiction since the Commission had not 
issued an order it could review. Public Citizen, Inc. v. FERC, 
839 F.3d 1165 (D.C. Cir. 2016). In dismissing the case, the 
court acknowledged that the FPA comports, ``with the ``almost 
universally accepted common-law rule' that only a ``majority of 
a collective body is empowered to act for the body.''' 839 F.3d 
1169, citing, Fed. Trade Comm'n v. Flotill Prods., Inc., 389 
U.S. 179, 183 (1967). The court said that ``whether analyzed 
under the statutorily-prescribed requirements for Commission 
action or under general institutional principles, we reach the 
same conclusion: FERC did not engage in collective, 
institutional action when it deadlocked.'' 839 F.3d 1170. 
Announcing its holding, the court said, ``Any unfairness 
associated with this outcome inheres in the very text of the 
FPA. Accordingly, it lies with Congress, not this Court, to 
provide the remedy.'' Id. at 1174.
    As the court observed, legislation could remedy this 
situation. The bill provides that where the Commission fails to 
act because it is divided two against two as to the lawfulness 
of that rate change, the absence of an order by the Commission 
shall itself be considered an order for purposes of rehearing 
and subsequent judicial review. It also seeks to ensure that in 
the rare, unusual, and disfavored situation where the 
Commissioners cannot come to a majority vote that there will be 
an adequate administrative record for the court to review. 
Finally, the bill requires each of the Commissioners to 
articulate formally and publish his or her views about the rate 
filing at issue. Having the benefit of these statements may 
discourage ties by highlighting more precisely the reasoning 
that leads each Commissioner to his or her views and, 
consequently, to enable the fashioning of an order that could 
attract a majority vote.

                          Legislative History

    S. 186 was introduced on January 23, 2017, by Senators 
Markey, Warren, Whitehouse, and Reed. The Senate Subcommittee 
on Energy held a hearing on S. 186 on October 3, 2017.
    The Committee on Energy and Natural Resources met in open 
business session on March 8, 2018, and ordered S. 186 favorably 
reported, as amended.

                        Committee Recommendation

    The Senate Committee on Energy and Natural Resources, in 
open business session on March 8, 2018, by a majority voice 
vote of a quorum present, recommends that the Senate pass S. 
186, if amended as described herein.

                          Committee Amendment

    During its consideration of S. 186, the Committee adopted 
an amendment to require the Commission to compile an adequate 
administrative record of the proceeding for a court to review 
and to adjust the scope of S. 186 to cover situations where a 
rate change takes effect at the end of the 60-day notice period 
by operation of law because the Commission is evenly divided 
two against two as to the lawfulness of the change, as a result 
of vacancy, incapacity, or recusal on the Commission rather 
than any inaction that allows a rate change to take effect. The 
amendment is further described in the section-by-section 
analysis.

                      Section-by-Section Analysis

Section 1. Short title

    Section 1 contains the short title.

Section 2. Amendment to the Federal Power Act

    Section 2 amends section 205 of the FPA (the Act of June 
10, 1920, Chapter 285, as amended)) by adding at the end a new 
subsection (g), entitled Inaction of Commissioners.
    The new subsection 205(g)(1) provides that if the 
Commission permits the expiration of the 60-day period for 
action because the members of the Commission are divided two 
against two as to the lawfulness of the change, then the 
failure to act by the Commission shall be considered to be an 
order issued by the Commission accepting the change for 
purposes of section 313(a) of the Federal Power Act. Further, 
that then there shall be added to the record of the proceeding 
of the Commission: (i) the proposed order; (ii) notice of the 
division of the Commissioners with respect to the proposed 
order; and (iii) the written statement of each member of the 
Commission explaining the views of the Commissioner with 
respect to the proposed order.
    The new subsection (g)(2) provides for appeal under certain 
conditions. Specifically, if any party to a proceeding of the 
Commission described above seeks a rehearing under section 
313(a) of the FPA and the Commission fails to act on the merits 
of the rehearing request by the date that is 30 days after the 
date of the rehearing request, any party that sought the 
rehearing may appeal under section 313(b) of the FPA.

                   Cost and Budgetary Considerations

    The following estimate of the costs of this measure has 
been provided by the Congressional Budget Office:
    Under the Federal Power Act (FPA), the Federal Energy 
Regulatory Commission (FERC) is responsible for ensuring that 
rates, terms, and conditions set by public utilities related to 
interstate transmission and sales of electricity are just and 
reasonable. Section 205 of that act requires public utilities 
to notify FERC of any changes to such rates, terms and 
conditions. Under current law, FERC has 60 days to review 
proposed changes and issue an order determining whether such 
changes can take effect. Affected parties can seek a rehearing 
of FERC's decision and a subsequent review by an appellate 
court. If, however, FERC fails to issue an order within 60 
days, any proposed changes take effect automatically. In the 
absence of an official decision by FERC, affected parties 
cannot request a rehearing.
    S. 186 would amend section 205 of the FPA to specify 
circumstances under which a failure by FERC to issue an order 
related to a proposed change in rates or other terms would be 
considered an order to allow such changes. Thus, under the 
bill, affected parties could seek rehearing and appellate 
review.
    By expanding the number of cases in which proposed rate 
changes could result in rehearings, S. 186 could increase 
FERC's workload. However, using information from FERC about the 
small number of cases that would be affected by the proposed 
change, CBO estimates that any increased administrative costs 
to the agency would be insignificant in any given year. 
Furthermore, because FERC recovers 100 percent of its costs 
through user fees, any change in its costs (which are 
controlled through annual appropriation acts) would be offset 
by an equal change in fees, resulting in no net change in 
federal spending.
    Enacting S. 186 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting S. 186 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2028.
    S. 186 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Megan Carroll. 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                      Regulatory Impact Evaluation

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 186. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant economic responsibilities on private individuals 
and businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 186, as ordered reported.

                   Congressionally Directed Spending

    S. 186, as ordered reported, does not contain any 
congressionally directed spending items, limited tax benefits, 
or limited tariff benefits as defined in rule XLIV of the 
Standing Rules of the Senate.

                        Executive Communications

    The testimony provided by the Federal Energy and Regulatory 
Commission at the October 3, 2017, hearing on S. 186 follows:

 Testimony of James Danly, General Counsel, Federal Energy Regulatory 
  Commission, Before the United States Senate Committee on Energy and 
                Natural Resources Subcommittee on Energy

    s. 186 (the ``fair ratepayer accountability, transparency, and 
           efficiency standards act'' or ``fair rates act'')

    As discussed above, when a public utility seeks to change 
its rates or other provisions of its tariff, FPA Section 205 
requires the utility to file the proposed change with the 
Commission sixty days in advance of when the change is to take 
effect. The Commission then provides the public the opportunity 
to intervene in the proceeding and to comment on the proposed 
change. Prior to expiration of the statutory, sixty-day notice 
period, the Commission will take action on the proposed rate or 
tariff provision, typically by issuing a Commission order. 
Under Section 313 of the FPA, any party aggrieved by a 
Commission order may seek rehearing of that order. Once the 
Commission acts on the request for rehearing (or fails to act 
within 30 days), review is available in the United States 
Courts of Appeals. A request for rehearing, though, is a 
prerequisite for appellate review. Under Section 313, parties 
may not seek review from the Court of Appeals if they did not 
seek rehearing.
    In exceedingly rare cases, a public utility's filing under 
Section 205 has taken effect by operation of law without a 
Commission order. I am familiar with only six occasions where 
this outcome has occurred under either the FPA or under the 
comparable provisions of the Natural Gas Act. One such 
occurrence was in September 2014, when capacity auction results 
filed by ISO New England (ISO-NE) became effective by operation 
of law. At the time, the Commission had only four sitting 
Commissioners. Public statements issued by the Commissioners 
after ISO-NE's filing took effect revealed a 2-2 split on the 
question of whether to accept the auction results, which was 
why the Commission never issued an order regarding the filing.
    When filings have taken effect under Section 205 without a 
Commission order, parties have occasionally sought rehearing. 
The Commission has dismissed those rehearing requests on the 
grounds that rehearing was not available because the Commission 
did not issue an order. The Commission followed that approach 
with respect to rehearing requests filed in the ISO-NE case, 
and, when challenged on appeal, the Commission's approach was 
affirmed by the United States Court of Appeals for the District 
of Columbia Circuit. The Court agreed with the Commission that, 
consistent with the current statutory language and relevant 
precedent, where there is no Commission order in a Section 205 
proceeding, rehearing and appellate review are precluded.
    S. 186 could partially change that outcome. Under the bill, 
absence of Commission action resulting in a filing taking 
effect by operation of law would constitute an order accepting 
the filing for purposes of rehearing and appeal under Section 
313 of the FPA. As a result, the proposed legislation would 
permit any party aggrieved by the filing to seek rehearing. If 
the Commission acts on that request for rehearing, the 
aggrieved party could seek review in the Court of Appeals.
    The proposed legislation offers the possibility for 
aggrieved parties to pursue further administrative and judicial 
process when a disputed rate goes into effect even though half 
of the seated Commission would not have accepted the rate in an 
order. Oddly, under the current statutory framework, a party 
who manages to persuade only one of four Commissioners, and 
loses on a 3-1 vote, may request rehearing at the Commission 
and seek redress at a Court of Appeals. However, a party that 
is perhaps more persuasive and manages to convince two of four 
Commissioners, resulting in a 2-2 split--and thus no Commission 
order--is currently barred from seeking rehearing and appellate 
review.
    This bill potentially represents a step toward correcting 
this exceedingly rare, but not unimportant, problem. However, 
it is only a partial measure, and there are several issues that 
I would like to bring to the Subcommittee's attention as it 
considers this legislation.
    First, the mere fact that aggrieved parties are foreclosed 
from requesting rehearing and subsequent appellate review does 
not mean that they are without means of redress under the 
current formulation of the FPA. Should a public utility's 
filing take effect by operation of law, and the aggrieved party 
believes those rates to be unjust and unreasonable or unduly 
discriminatory, they may avail themselves of the procedures 
afforded under section 206. They can file a complaint in a 
separate action and, if they meet their burden, they will be 
able to have the rates altered. While this option increases the 
cost to litigants and shifts the burden to the party filing the 
complaint, any amendment to the FPA should be adopted knowing 
that this alternative route to redress already exists.
    Second, the bill may not afford the relief anticipated by 
the Subcommittee. Should the Commission's inaction be the 
result, as in the ISO-NE case, of a 2-2 split, a similar result 
could obtain for a later order on rehearing. In that case, 
there would be another 2-2 split and no order on rehearing 
would issue. In such a case, it would be exceedingly unlikely 
that a Court of Appeals would entertain a petition for review. 
Moreover, even if a Court of Appeals accepted the petition, the 
Court would almost certainly remand the case back to the 
Commission for further adjudication. When sitting in review of 
agency action, Courts of Appeals review the evidentiary record 
compiled below and the reasoning the agency employed--as 
reflected in its orders--to support its decision based on that 
record. In the case of a serial 2-2 split, no orders would 
issue and such a review would be impossible. Remand would 
appear to be the Court's only option.
    Finally, the proposed language might be overbroad. As 
drafted, the bill's effects are not restricted to the occasion, 
like that presented in the ISO-NE case, of a deadlocked 
Commission, but instead apply to ``[a]ny absence of action'' by 
the Commission that allow rates to go into effect by operation 
of law. If the Subcommittee's primary objective is to provide 
remedy following inaction by a deadlocked Commission, it might 
consider narrowing the circumstances under which the bill's 
provisions would apply in order to limit unintended 
consequences.
    In summary, while the Subcommittee may ultimately decide 
that this change to 205 is necessary, it is my view that it 
only partially advances the interests of an exceedingly narrow 
category of aggrieved parties in very rare occasions of 
Commission inaction. Given that the right to seek rehearing 
under such circumstances does not, as a practical matter, 
guarantee a rehearing order or appellate review, and given the 
fact that parties can always challenge rates under section 206, 
I would counsel discretion in your deliberations on whether to 
alter the central provision of the Federal Power Act. Unlike S. 
1860, which seeks to ameliorate a serious problem that affects 
the whole of the regulated community and represents an 
administrative burden on the Commission, this bill, while 
perhaps defensible, is not required to ensure the success of 
the Commission's role regulating the wholesale power markets, 
nor to guarantee the rights of aggrieved parties.

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the original bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                           FEDERAL POWER ACT

The Act of June 10, 1920, Chapter 285, as Amended

           *       *       *       *       *       *       *

PART II--REGULATION OF ELECTRIC UTILITY COMPANIES ENGAGED IN INTERSTATE 
COMMERCE

           *       *       *       *       *       *       *

          Rate and Charges; Schedules; Suspension of New Rates

    Sec. 205. (a) All rates and charges made, demanded, or 
received by any public utility for or in connection with the 
transmission or sale of electric energy subject to the 
jurisdiction of the Commission, and all rules and regulations 
affecting or pertaining to such rates or charges shall be just 
and reasonable, and any such rate or charge that is not just 
and reasonable is hereby declared to be unlawful.

           *       *       *       *       *       *       *

    (d) Unless the Commission otherwise orders, no change shall 
be made by any public utility in any rates, charges, 
classification, or service, or in any rule, regulation, or 
contract relating thereto, except after sixty days' notice to 
the Commission and to the public. Such notice shall be given by 
filing with the Commission and keeping open for public 
inspection new schedules stating plainly the change or changes 
to be made in the schedule or schedules then in force and the 
time when the change or changes will go into effect. The 
Commission, for good cause shown, may allow changes to take 
effect without requiring the sixty days' notice herein provided 
for by an order specifying the changes so to be made and the 
time when they shall take effect and the manner in which they 
shall be filed and published.

           *       *       *       *       *       *       *

    (g) Inaction of Commissioners.--
          (1) In general.--If the Commission permits the 
        expiration of the 60-day period established under the 
        first sentence of subsection (d) because the members of 
        the Commission are divided two against two as to the 
        lawfulness of the change, as a result of vacancy, 
        incapacity, or recusal on the Commission--
                  (A) the failure to act by the Commission 
                shall be considered to be an order issued by 
                the Commission accepting the change for 
                purposes of section 313(a); and
                  (B) there shall be added to the record of the 
                proceeding of the Commission--
                          (i) the proposed order;
                          (ii) notice of the division of the 
                        Commissioners with respect to the 
                        proposed order; and
                          (iii) the written statement of each 
                        member of the Commission explaining the 
                        views of the Commissioner with respect 
                        to the proposed order.
          (2) Appeal.--If any party to a proceeding of the 
        Commission described in paragraph (1) seeks a rehearing 
        under section 313(a) and the Commission fails to act on 
        the merits of the rehearing request by the date that is 
        30 days after the date of the rehearing request because 
        the members of the Commission are divided two against 
        two, as a result of vacancy, incapacity, or recusal on 
        the Commission, any party that sought the rehearing may 
        appeal under section 313(b).

           *       *       *       *       *       *       *

                                  [all]
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