Opinion ID: 572124
Heading Depth: 2
Heading Rank: 3

Heading: Mileage-Sensitive Aspect of the T-1 Schedule

Text: 46 To explain its order abolishing the distance-sensitive design of the T-1 rate, the Commission noted that Algonquin does not offer its other transportation customers distance-sensitive rates and that the pipeline has no zones. 47 FERC at 61,151-52; 49 FERC at 61,112 (rehearing order). In light of these facts, the Commission decided the distance-sensitive aspect of the T-1 rate renders it unduly discriminatory under NGA section 5. To provide a just and reasonable rate, the Commission ordered Algonquin to increase the T-1 rate to reflect a full allocation of costs, 47 FERC at 61,152, rather than the reduced fraction of the pipeline's facilities costs this rate previously reflected. 47 The Commission's regulations provide that a pipeline's rates must reasonably reflect any material variation in the cost of providing the service due to ... [t]he distance over which the transportation is provided. 18 C.F.R. § 284.7(d)(3). In ordering the full allocation of facilities costs under the T-1 schedule, the Commission acted directly contrary to its own regulations. The Commission's order offers no justification for its departure from the announced policy in favor of distance-sensitive rates. Instead, it relies on the bald assertion that the ordered change in the rate has become necessary to avoid discrimination among transportation customers. 47 FERC at 61,152. 48 It is axiomatic that an agency is legally bound to respect its own regulations and commits procedural error it if fails to abide them. Esch v. Yeutter, 876 F.2d 976, 991 (D.C.Cir.1989). Of course, an agency is not forever foreclosed from revisit[ing] existing interpretations of statutes that the [292 U.S.App.D.C. 208] agency is called on to administer. Hall v. Baker, 867 F.2d 693, 696 (D.C.Cir.1989). What is required, however, is that in changing its course of policy, an agency [must] indicate that prior policies are being expressly changed and not casually ignored. Thomas Radio Co. v. FCC, 716 F.2d 921, 924 (D.C.Cir.1983). Here, the Commission has offered no principled explanation, see National Black Media Coalition v. FCC, 775 F.2d 342, 355 (D.C.Cir.1985), for its abandonment of the preference for distance-sensitive rates, choosing instead to play fast and loose with its own regulations. Panhandle Eastern Pipe Line Co. v. FERC, 613 F.2d 1120, 1135 (D.C.Cir.1979), cert. denied, 449 U.S. 889, 101 S.Ct. 247, 66 L.Ed.2d 115 (1980). In the absence of such an explanation for the ruling, we are constrained to reverse that portion of the Commission's order allocating a full portion of Algonquin's facilities costs to the T-1 subscribers. 49 In this court, for the first time, the Commission points to record evidence that, it asserts, supports its ruling. We decline to rely on this evidence as a ground for affirming the order. First, we note that this evidence was nowhere considered in either of the Commission's orders below. It is well established that courts may not accept appellate counsel's post hoc rationalizations for agency action. See, e.g., Motor Vehicle Mfrs.' Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50, 103 S.Ct. 2856, 2870, 77 L.Ed.2d 443 (1983). [A]n agency's action must be upheld, if at all, on the basis articulated by the agency itself. Id.; see also SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947). The evidence on which the Commission now relies does not provide a proper basis for upholding the order under review. 50 On remand, the Commission will be free to consider evidence of the T-1 schedule's discrimination. We remind the Commission, however, that discrimination among different pipeline customers does not alone cause a rate schedule to violate section 5 of the NGA. By the terms of the statute, a pipeline's rate must be unduly discriminatory before the Commission may alter it. 15 U.S.C. § 717d(a) (emphasis added). Only when a pipeline's rate schedule creates a preference without a reasonable basis does it offend section 5. Sebring Utilities Comm'n v. FERC, 591 F.2d 1003, 1010 n. 28 (5th Cir.), cert. denied, 444 U.S. 879, 100 S.Ct. 167, 62 L.Ed.2d 109 (1979); see also Cities of Bethany, Bushnell, etc. v. FERC, 727 F.2d 1131, 1139 (D.C.Cir.) (under similar statute, Federal Power Act § 205(b), 16 U.S.C. § 824d(b), mere fact of a rate disparity ... does not establish unlawful rate discrimination), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d 229 (1984).