Opinion ID: 2507678
Heading Depth: 3
Heading Rank: 2

Heading: The Commission Had a Reasonable Basis for Denying as Untimely the Shippers' Challenge of the 1986-1996 Rates.

Text: The Shippers also argue that the Commission erred by concluding in Order 68 that their 2003 petitions to intervene and protest the 1986-1996 rates were untimely. As described above, the Commission decided to adjudicate the justness and reasonableness of the rates established by TSM in response to a rate protest by Petro Star in 1986. After Petro Star settled, the Commission accepted the Intrastate Settlement in 1993, but continued to suspend the post-July 11, 1986 rates solely for the purpose of determining whether they were correctly calculated pursuant to TSM. It still had not made this determination by late 1996, when the Shippers protested the 1997 rates. The Commission did not reach the question of whether the 1986-1996 rates were correctly calculated under TSM for some time after that, in part because it was dealing with the 1997 rate protest. After the Commission had completed its investigation of the 1997-2000 rates and issued Order 151, it turned to the 1986-1996 rates and scheduled a prehearing conference to be held on March 7, 2003, to determine whether any party still believed it necessary to verify TSM calculations and inputs for 1986-1996. Shortly before this hearing took place, Tesoro filed a protest and a petition to intervene. Williams intervened a couple of days later. After receiving briefing by Shippers, the State, and the Carriers, the Commission issued Order 68 in 2003. In Order 68 the Commission noted that Tesoro and Williams wanted to expand the present scope of Docket P-86-2 to hold a hearing and rule on the justness and reasonableness of the 1986-1996 intrastate TAPS rates. The Commission decline[d] to expand the issues in [the] docket, because fairness, and the reasonable reliance of the TAPS Carriers on [Order 41] require that [it] follow that order's clear intent. In denying the Shippers' request, the Commission relied on its regulations regarding protests and petitions to intervene. [29] This court review[s] an agency's interpretation of its own regulations under the reasonable and not arbitrary standard. . . . [This] deferential standard of review properly recognizes that the agency is best able to discern its intent in promulgating the regulation at issue. [30] We will uphold the Commission's decision in Order 68 to deny the Shippers' challenge to the 1986-1996 rates as untimely if the Commission had a reasonable basis for making it. A reasonable basis is established if the Commission's decision is supported by the evidence in the record as a whole. [31] With respect to the petition to intervene, the Commission denied it on the basis of 3 AAC 48.110(b) and (d). Subsection (b) of AAC 48.110 states that [i]n passing on a petition to intervene the Commission should consider the extent to which participation of the petitioner will broaden the issue or delay the proceeding. [32] Subsection (d) of 3 AAC 48.110 states that a petition for permission to intervene must be filed with the commission before the first prehearing conference. . . . A petition for permission to intervene which is not timely filed will be dismissed unless the petitioner clearly shows good cause for failure to file that petition on time. With respect to the rate protests before it, the Commission relied on 3 AAC 48.290(a). This regulation states that [a]ny person desiring to submit a statement of interest in, or objection to, a tariff filing may be asked to do so not later than 20 days after the date of delivery to the commission unless a longer period, not in excess of 30 days, is granted by public notice or by notice in writing. In Order 68, the Commission found that the Shippers' petitions to intervene were untimely under 3 AAC 48.110(d) and also should be denied under 3 AAC 48.110(b) since, if granted, they would have improperly broadened the scope of the proceedings. The Commission also found that the Shippers protests were untimely under 3 AAC 48.290(a). As is discussed below, the Commission had a reasonable basis for these holdings.
After the State and the Carriers submitted the Intrastate Settlement to the Commission in 1986, the Commission issued Order 14. Order 14 approved the portion of the Settlement dealing with the time period prior to July 11, 1986. Since Petro Star protested the rates established by TSM as unjust and unreasonable on July 11, 1986, the Commission noted that there is no consent of the directly affected entities after that date. Order 14 therefore held that the Commission was required to determine just and reasonable rates for periods after that date. This rate investigation extended through 1991, at which time Petro Star and the Carriers submitted a settlement agreement for approval by the Commission. In 1993 the Commission issued Order 41, which accepted both the Petro Star Settlement and the Intrastate Settlement. [33] The Shippers did not petition to intervene in the Petro Star protest on the issue of whether the rates were just and reasonable until 2003. Under 3 AAC 48.110(d), the Shippers should have intervened before the first prehearing conference, which was held in January 1987. [34] The Shippers argue that it is unfair to require them to intervene in 1987 in order to have an opportunity to be heard on the TAPS Carriers' rate filings in 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, and 1996. This mischaracterizes the rule. The Shippers had to intervene before the January 27, 1987 prehearing conference in order to intervene in Petro Star's protest of the 1987 rates. Subsection (d) of 3 AAC 48.110 requires a showing of good cause if they were to protest after that date. Once the rate investigation continued past the first year, the Shippers might still have had good cause to intervene as to prospective years. Alternatively, the Shippers could have timely protested each temporary rate that was filed. The Commission suspended the rates filed every year between 1987 and 1993, noting that they were under investigation as just and reasonable, and if they were found to be appropriate, the Commission would determine if they were correctly calculated under TSM. These rate filings were published along with a deadline for filing protests. Nothing stopped the Shippers from timely protesting prospective rates as they were filed. The key point is that they did nothing. No petitions to intervene or protests were filed as to the justness and reasonableness of the rates until 2003. By failing to intervene in Petro Star's protest as to whether the rates from 1986-1993 were reasonable, the Shippers gained an advantage. They did not have to pay for costly rate litigation but would have nonetheless reaped the benefits of any success Petro Star may have had in lowering the rates. At the same time they ran a risk that Petro Star would settle. The interests of justice and fairness are not served by permitting the Shippers to wait on the sidelines for years and only attempt to intervene as to the past rates when Petro Star tried to settle. Had the Shippers filed a petition to intervene between 1991 and 1993 [35] with respect to the 1986-1993 rates, the Commission might very well have had a reasonable basis for denying the petition as untimely. [36] But the Shippers waited another ten years before trying to intervene. They have shown no good cause for waiting until 2003, [37] and we therefore uphold the Commission's determination that the petition to intervene was untimely under 3 AAC 48.110(d). [38] Subsection (b) of 3 AAC 48.110 provides a separate ground for denying the Shippers' petitions to intervene. It states that the Commission will consider the extent to which participation of the petitioner will broaden the issue. [39] As is discussed below, Order 41 accepted the Intrastate Settlement and continued to suspend the filed rates for the limited purpose of determining whether they were correctly calculated under TSM. If the Commission had accepted the petition to intervene as to the issue of whether the rates were just and reasonable, it would have significantly broadened the issues before it. Therefore the Commission had a reasonable basis for denying the petition based on 3 AAC 48.110(b) as well. In 2003 the Shippers also separately protested the 1986-1993 rates as unjust and unreasonable. This protest of the 1986-1993 rates was untimely under 3 AAC 48.290(a). The Commission published notice of temporary rates filed during that time and deadlines for objections. The Shippers did not protest any of the rates. The rates were suspended because of the pending rate investigation, but there is nothing in 3 AAC 48.290(a) to suggest that there is no deadline for protesting suspended rates. Subsection (a) of 3 AAC 48.290 states that the deadline applies to a tariff filing not just to permanent tariff filings. To find that the timeliness requirement did not apply to suspended rates would be problematic, since any time one entity protested rates in any way, another entity would be able to protest any facet of the rates at any time. The Shippers argue that 3 AAC 48.290(a) does not govern, and instead the Commission's regulations allow protests . . . to be filed at any time. They argue that 3 AAC 48.130(a)(4) only requires that a protest comply with 3 AAC 48.090-3 AAC 48.100. According to the Shippers, 3 AAC 48.290(a) only addresses the manner in which a member of the public should respond to a public notice of a filing. This argument has no merit. Part 7 of Title 3 of the Alaska Administrative Code covers the Commission. Chapter 48 deals with the Commission's practices and procedures. Part 1 of Chapter 48, which contains 3 AAC 48.090-100 and 3 AAC 48.130, outlines practice before the Commission. These provisions are not limited to Pipeline proceedings and therefore cover procedural requirements for all of the entities regulated by the Commission. The provisions set out detailed technical requirements for formal complaints filed before the Commission. The Shippers argue that because Part 1 of Chapter 48 contains no timeliness requirement, none exists. However, as the Commission notes, [t]he requirement that a protest adhere to formal and technical pleading requirements does not support the conclusion that timeliness requirements . . . established in other relevant regulations do not apply. Part 2 of Chapter 48 expressly deals with Utility and Pipeline Tariffs. This part contains 3 AAC 48.290(a), which states that the Commission may impose deadlines for protests. The Commission's interpretation that this regulation covers protests by parties is reasonable and one to which we defer. In summary, the Commission's regulations provide it with a reasonable basis for denying as untimely the Shippers' petitions to intervene and protests of the 1986-1993 rates. The Shippers did not timely petition to intervene in Petro Star's protest. They did not protest any of the suspended rates filed during that time period. They did not petition to intervene as to the justness and reasonableness of the rates for any additional years after 1987. Order 41 clearly set out the need to protest and the fact that, absent a protest, the Commission was going to accept the Settlement and rates correctly calculated under TSM. When Order 41 came out in 1993 the Shippers still did not protest the 1986-1993 rates. Instead they waited almost a decade before they tried to challenge the rates based on justness and reasonableness. They have shown no good cause for such a delay. Accordingly, we uphold the Commission's finding.
Order 41 put the Shippers on notice that they needed to protest future rate filings in order to ensure that the rates would be investigated. Order 41 noted that Petro Star was the only economically impacted party which requested the establishment of just and reasonable rates and that after Petro Star withdrew from the docket due to its settlement there would no longer be an economically impacted party contesting the [Intrastate] settlement. It also noted that under 3 AAC 48.090(d)(2) the Commission could terminate the proceeding prior to issuing a final order if a stipulation is filed, which is agreed to by all parties of record provided the commission does not find that the public interest requires the proceeding to be continued. It relied on Order 14 to interpret[] the phrase `all parties of record' to include only economically impacted parties, and then held the following: Under the standard articulated in [Order 14] the directly affected entities (which were deemed by the Commission to be knowledgeable and sophisticated and in possession of sufficient resources to make their views known to the Commission and which had notice and an opportunity to be heard) must either actively support the settlement or be silent on the issue. TSM rates have been calculated and filed for six years since the Commission's acceptance of past rates in [Order 14]. In that time no economically impacted entity has protested those rates. . . . The Commission also noted that its own staff and the Alaska Public Interest Research Group still opposed the Settlement, but found the following: Those parties have not demonstrated any plausible reason why the Commission should mandate litigation of rates which are being charged by the Carriers without protest by any ratepayer or other economically impacted entity. Entities impacted by oil pipeline rates are sophisticated and capable financially and practically of protecting their own interests. Not one has come forward to contest the TAPS Settlement. Under these circumstances, the public interest does not require that this proceeding be continued. The TAPS Settlement should be accepted, subject to the condition that Petro Star file a notice of withdrawal in Docket P-86-2. Thus, based on the fact that there were no pending protests filed by economically impacted entities, Order 41 accepted the TAPS Settlement and specified that the TAPS Carriers were under an obligation to file TAPS rates no higher than the maximum tariffs calculated under TSM. The emphasis on the fact that the Commission only accepted the Settlement because no economically impacted entity contested it gave the Shippers notice that they had to protest a Settlement rate before it would be investigated. The complicating factor is that Order 41 held that the suspension of the TSM rates filed between 1986 and 1993 would not be vacated until the Commission determined that those filed rates were correctly calculated under TSM. [40] The Shippers argue that the rates for 1986-1996 were not final because they were still suspended. Therefore, according to the Shippers, they were not required to object to the rates in a timely manner. This argument is unpersuasive. Order 41 is clear that it accepted the Settlement and only suspended the rates for the limited purpose of determining whether they were calculated correctly under the TSM methodology established by the Settlement. Order 41 also makes it clear that the Shippers would have to protest future rates in a timely manner in order to obtain an adjudication of the question of whether the rates were just and reasonable, as opposed to the question of whether they were correctly calculated under TSM. It states that [e]ach new rate filed by the TAPS Carriers under the Intrastate Settlement Agreement is considered a revised tariff filing under AS 42.06.400. Alaska Statute 42.06.400(a) governs the suspension of tariff filings. It states that [w]hen a tariff filing is made containing an initial or revised rate . . . the commission may, either upon written complaint or upon its own motion, after reasonable notice, conduct a hearing to determine the reasonableness and propriety of the filing. (Emphasis added.) Subsection .400(a) then goes on to discuss the process for suspending the operation of a tariff [p]ending a hearing. By referring to this statute, Order 41 put the Shippers on notice that they must protest a rate to ensure an adjudication of its reasonableness. Order 41 also stated that each new rate filed by the Shippers is subject to the same standards and procedures to which it would have been subject if the Intrastate Settlement Agreement had not been accepted. As discussed above, one of the regulations governing the filing of a new rate is 3 AAC 48.290(a), which enables the Commission to set a deadline for objecting to rates. The Commission provided public notice and notice to the Shippers of the Carriers' rate filings for 1994, 1995, and 1996, and this notice included a deadline for objections. Therefore, even though the Commission stated that it was going to suspend the rates in order to review them for compliance with the Settlement, Order 41 gave clear notice that this review would not include a determination of whether the rates were just and reasonable. The Shippers were informed that each rate filing after 1993 would be considered a revised tariff filing under AS 42.06.400, which would enable them to object to it. They were also told that each filing would be subject to any standards and procedures that it would have been subject to if the Settlement had not been approved. This information put them on notice that the Commission could set a deadline for protests under 3 AAC 48.290(a). Then, as required by 3 AAC 48.290(a), each time the Carriers filed a rate the Commission gave the Shippers notice of the rate and specified a deadline for comments and petitions. It is highly unlikely that the Shippers could have misunderstood the requirement that they object to the rates in a timely manner in order to ensure that the Commission would adjudicate the question of whether the rates were just and reasonable. In fact, in 1996 they did timely protest that the 1997 rates were unjust and unreasonable. As the Commission points out, Tesoro's timely protest of the 1997 rates confirms that Tesoro was fully aware of the requirement of filing a timely protest in order to challenge TSM rates on grounds other than whether they were correctly calculated under TSM. We agree, and thus uphold the Commission's decision that the Shippers' challenge to the 1994-1996 rates was untimely.
In Order 68, the Commission found that: [Order 41] is not a procedural order. In that order [the Commission] found that TSM was an acceptable method to calculate intrastate rates for 1986 to 1996. It accepted the filed rates subject to verification that they were correctly calculated. Shippers had the right to challenge any rate calculated under TSM. The particular shippers who now challenge the rates have had full knowledge of TSM, the methodology used to calculate their rates, and all its provisions, during the entire period at issue. . . . Fairness and confidence in the regulatory process both require that we not disturb [Order 41] without good cause. This reasoning alludes to prudential concerns. In its brief, the Commission points to the rationale underlying the rule against retroactive ratemaking as support for its finding. As we pointed out in Matanuska Electric Ass'n v. Chugach Electric Ass'n, [a] fundamental rule of ratemaking is that rates are exclusively prospective in nature. [41] This rule is critical for a utility to plan its finances. Other purposes for prohibiting retroactive rates include investor confidence, utility credit rating, and the integrity of service. And retroactivity, even where permissible, is not favored, except upon the clearest mandate. [42] These concerns provide policy support for Order 68. The Commission's regulations and orders clearly communicated the need to protest rates and the deadlines for protests and petitions to intervene. The Shippers have provided no good reason for why they waited until 2003 to protest the rates. Based on the analysis above, the Commission had a reasonable basis for denying the Shippers' protests and petitions to intervene between 1986 and 1996. [43] We therefore uphold Order 68.