Opinion ID: 422019
Heading Depth: 2
Heading Rank: 1

Heading: The FERC's Authority

Text: 15 As we noted above, the district court held that Triton was not subject to refund obligations under Opinions No. 598 and 598-A because (1) prior to the issuance of those opinions, Triton had collected rates pursuant to permanent certificates of public convenience and necessity not subject to refund conditions, and (2) the Commission can order refunds only when the producer has been collecting payments for gas subject to such refund conditions. J.A. at 151. The Commission contends that this ruling is erroneous and must be reversed because both the Fifth Circuit Court of Appeals in SoLa I, 428 F.2d 407, and SoLa II, 483 F.2d 880, and the Supreme Court in Mobil Oil Corp. v. FPC, 417 U.S. 283, 94 S.Ct. 2328, 41 L.Ed.2d 72, held that the Commission had clear authority to prescribe a rate schedule for the Southern Louisiana area different from those rates found to be just and reasonable in Opinions No. 546 and 546-A. The Commission also argues that these decisions held that it could make the new rate scheme effective as of October 1, 1968, the date Opinion No. 546 was originally scheduled to become effective. 16 Triton does not contest the validity of Opinions No. 598 and 598-A. Instead, it contends that the Commission lacks the power to order it to pay refunds for the period October 1, 1968, to January 1, 1971, because (1) Opinion No. 598 has an effective date of August 1, 1971, rather than October 1, 1968, when Opinion No. 546 was scheduled to become effective, and therefore producers operating under permanent certificates are only bound to operate under new rates from 1971; (2) the Commission does not have retroactive ratemaking authority and cannot impose refunds of rates collected by producers pursuant to final, unconditioned, permanent certificates; (3) the Fifth Circuit's mandate went only to the Commission's power to reopen and, if necessary, set aside the rates and refunds set out in Opinions No. 546 and 546-A but not to its power to impose refund obligations retroactively on all Southern Louisiana area producers; and (4) Opinions No. 598 and 598-A resulted from a settlement proposal to which Triton was not a party, which it did not support, and to which it therefore cannot be subject. Brief of Appellee at 21-30. 17 [229 U.S.App.D.C. 424] We agree with the Commission that the Fifth Circuit's opinions in SoLa I and II and the Supreme Court's affirmance of SoLa II in Mobil Oil Corp. v. FPC recognize that the Commission has the power in this case to order retroactive rate changes. Those decisions permit the Commission to require all producers of natural gas in the Southern Louisiana area who sold their gas at rates above those found to be just and reasonable in Opinions No. 598 and 598-A to make downward rate adjustments from the time of Opinion No. 546's effective date, October 1, 1968, and to refund any monies collected since that date at rates above those set out in the refund provisions of the 1971 opinions. In SoLa I, the Fifth Circuit, while sustaining Opinions No. 546 and 546-A in full, stated that the mandate of this Court should not, however, be interpreted to interfere with Commission action that would change the rates we have approved here. 428 F.2d at 444-45. Following this decision, various petitions for rehearing were filed. As we noted above, while the Fifth Circuit was considering these petitions, the Commission advised the court that it did not have the authority to prescribe retroactive rate changes unless the court directed otherwise. Opinion No. 598, 46 F.P.C. at 99-100. In its decision denying rehearing, the Fifth Circuit explicitly informed the parties that it was directing otherwise: 18 Our affirmance of the Commission's orders is structured so as to allow the Commission great flexibility.... To this end, we indicated that the Commission had authority under section 16 of the Natural Gas Act to stay, modify or rescind any part of its order, notwithstanding our affirmance, if circumstances appearing since the issuance of the orders make a change advisable. Petitioners on rehearing, however, have argued to this Court that the Commission may exercise this power prospectively only; that is, petitioners argue that affirmance by this Court would preclude the Commission from reexamining revenues from gas that has already been delivered. We wish to make crystal clear the authority of the Commission in this case to reopen any part of its order that circumstances require be reopened. Under section 19(b) of the Natural Gas Act, this Court has the broad remedial powers that inhere in a court of equity, and pursuant to our equitable powers we make it part of the remedy in this case that the authority of the Commission to reopen any part of its orders, including those affecting revenues from gas already delivered, is left intact. The Commission can make retrospective as well as prospective adjustments in this case if it finds that it is in the public interest to do so. 19 At the same time, we emphasize that our judgment is an affirmance and not a remand. The appropriate place for originally considering what parts of the orders must be reopened in light of new evidence is before the Commission. 20 Southern Louisiana Area Rate Cases, 444 F.2d at 126-27 (emphasis in last part of first paragraph added). 21 The Fifth Circuit reiterated this position in SoLa II, noting that it had already stated in SoLa I that we took careful pains, especially in the opinion on rehearing, to make sure that our affirmance of the Op: 546 rate structure would not impair FPC's authority to formulate a more flexible plan if the need arose.... [W]e categorically rejected the notion that the label 'affirmance' could possibly impair FPC's ability to alter or modify any of the provisions, particularly the refund provisions, of its SoLa I rate scheme if it believed that the exigencies of the gas industry required more effective remedial measures. 483 F.2d at 888, 904. 22 SoLa II was then appealed to the Supreme Court. Two of the petitioners--groups representing major consumer interests--again argued that the Commission had no authority to change rates and refund obligations fixed in Opinion No. 546 after that opinion was affirmed in SoLa I. The Court rejected that argument, stating that the Fifth Circuit did not exceed its powers under § 19(b) 'to affirm, modify, or set aside [an] order in whole or in part'  when it held that the Commission was fully [229 U.S.App.D.C. 425] authorized to reopen any part of Opinions No. 546 and 546-A that seemed appropriate and necessary in light of new evidence as to a future natural-gas supply problem. Mobil Oil Corp. v. FPC, 417 U.S. at 311, 94 S.Ct. at 2347. Section 19(b), the Court wrote, provides that the Court of Appeals may authorize the Commission in proper cases to take new evidence, upon which the Commission may modify its findings of fact and make recommendations concerning the disposition of its original order. Under the Court of Appeals disposition, the 1968 order was therefore not final and thus it was within the power of the Commission to reconsider and change it. Id. at 311-12, 94 S.Ct. at 2347-48. 23 Opinions No. 546 and 546-A, as we pointed out above, were subject to several judicial and administrative stays and never took effect. In at least one of those stays, the Commission stated that [e]ach respondent to these proceedings shall, upon order of the Commission after any dissolution of this stay or any extension thereof, be obligated to pay or cause to be paid to the persons adjudged to be entitled thereto the amounts representing the aggregate reduction in rates and charges which would result from making the prescribed area rates effective as of October 1, 1968. Area Rate Proceeding, Order Staying Rate Reductions, 41 F.P.C. at 676. Thus, the rates set by Opinions No. 546 and 546-A, which had already been judicially affirmed in SoLa I, were merely held in abeyance while the Commission decided whether or not to modify them. Had it decided not to modify those rates, the rates would have been effective as of October 1, 1968. Triton would then clearly have been required to adjust its rates downward and make refunds from that date. See SoLa I, 428 F.2d 421 n. 27 ([t]he maximum rates that the Commission has set [in Opinions No. 546 and 546-A] ... are to remain in effect throughout the new proceeding, which may last for years). Instead, the Commission did modify the rates upward in its Opinions No. 598 and 598-A, as both the Fifth Circuit and the Supreme Court explicitly allowed it to do. As a consequence of the refund provisions of Opinions No. 598 and 598-A, producers of natural gas in the Southern Louisiana area will receive greater revenues for the period from October 1, 1968, to January 1, 1971, than if Opinions No. 546 and 546-A had actually been put into effect. We see nothing inequitable in this case in asking those producers, who have been on notice since 1968 that their rates could be readjusted downward to the rates set in Opinions No. 546 and 546-A as of October 1, 1968, to pay refunds on the revenues received by charging higher rates. This is particularly true since they clearly benefited from the reconsideration. Any other conclusion would mean that no Commission-approved rate formula could have been implemented as of 1968, even if the Commission had finally determined not to revise the rates set out in Opinions No. 546 and 546-A. We are convinced that that result could not possibly have been the Fifth Circuit's intent in SoLa I and II or the Supreme Court's in Mobil Oil Corp. v. FPC. 24 This situation is far different from one in which the Commission reopens and changes retroactively the rates set in a permanent certificate. See, e.g., FPC v. Sunray DX Oil Co., 391 U.S. 9, 24, 88 S.Ct. 1526, 1534, 20 L.Ed.2d 388 (1968) ([i]t seems incontestable that if a producer consistently sells gas at the price specified in a final, permanent certificate, and does not attempt to increase its price, the Commission may not order it to make refunds simply because the just and reasonable rate for its area turns out to be below the in-line price). Opinions No. 546 and 546-A, rather than issuing permanent certificates, set rates that applied to all producers of natural gas in the Southern Louisiana area, regardless of the type of certificate under which they were operating. Despite the stay of those opinions, they were affirmed in SoLa I, and the producers were liable for those rates as of October 1, 1968. 25 Neither do we agree with Triton's argument that it cannot be forced to pay refunds for 1968-71 because it was not a party to the settlement agreement adopted in Opinions No. 598 and 598-A. Both the [229 U.S.App.D.C. 426] Fifth Circuit in SoLa II, 483 F.2d at 893, and the Supreme Court in Mobil Oil Corp. v. FPC, 417 U.S. at 312-14, 94 S.Ct. at 2347-49, have foreclosed this argument, holding that the Commission was entitled to adopt the terms of the proposed settlement as a decision on the merits because it made an independent finding supported by substantial evidence on the record as a whole that the proposal would establish just and reasonable rates for the area. Regarding this issue, the Supreme Court wrote: 26 The Commission clearly had the power to admit the agreement into the record--indeed, it was obliged to consider it. That it was admitted for the record did not, of course, establish without more the justness and reasonableness of its terms. But the Commission did not treat it as such. As we have noted, the Commission weighed its terms by reference to the entire record in the Southern Louisiana area proceedings since 1961, and further supplemented that record with extensive testimony and exhibits directed at the proposal's terms. We think that the Court of Appeals correctly analyzed the situation and stated the correct legal principles: 27 No one seriously doubts the power--indeed, the duty--of FPC to consider the terms of a proposed settlement which fails to receive unanimous support as a decision on the merits. We agree with the D.C. Circuit that even 'assuming that under the Commission's rules [a party's] rejection of the settlement rendered the proposal ineffective as a settlement, it could not, and we believe should not, have precluded the Commission from considering the proposal on its merits.'... 28 As it should FPC is employing its settlement power under the APA, 5 U.S.C.A. § 554(c), and its own rules 18 C.F.R. § 1.18(a), to further the resolution of area rate proceedings. If a proposal enjoys unanimous support from all of the immediate parties, it could certainly be adopted as a settlement agreement if approved in the general interest of the public. But even if there is a lack of unanimity, it may be adopted as a resolution on the merits, if FPC makes an independent finding supported by 'substantial evidence on the record as a whole' that the proposal will establish 'just and reasonable' rates for the area. 483 F.2d at 893. (Emphasis in original.) 29 The choice of an appropriate structure for the rate order is a matter of Commission discretion, to be tested by its effects. The choice is not the less appropriate because the Commission did not conceive of the structure independently. 30 Mobil Oil Corp. v. FPC, 417 U.S. at 312-14, 94 S.Ct. at 2347-49. See also Pennsylvania Gas & Water Co. v. FPC, 463 F.2d 1242, 1246 (D.C.Cir.1972) (in agency proceedings, settlements are frequently suggested by some, but not necessarily all, of the parties; if on examination they are found equitable by the regulatory agency, then the terms of the settlement form the substance of an order binding on all the parties, even though not all are in accord as to the result). Thus, the Fifth Circuit and the Supreme Court concluded that all producers of natural gas in the Southern Louisiana area were bound by the settlement agreement adopted in Opinions No. 598 and 598-A. 9 31 In sum, we are convinced that the Commission had the authority to order natural gas producers in the Southern Louisiana area to make refunds for the years 1968-71. The question remains whether it exercised [229 U.S.App.D.C. 427] that authority and, accordingly, whether Triton has refund obligations under Opinions No. 598 and 598-A.