Opinion ID: 413378
Heading Depth: 3
Heading Rank: 1

Heading: Rate of Return on Equity and Industry Averages

Text: 164 Faced with the question whether a source's past investment performance or the current investment opportunities available to the industry as a whole would better predict future returns on investment, EPA opted for the industry-wide averages, see 45 Fed.Reg. 50,137-39 (1980), despite the fact that it requires source-specific data for the marginal income tax rate and the debt-equity ratio. EPA's choice requires sources to pay the same penalty regardless of recent investment history. Petitioners argue that it is unreasonable to assume that the investment opportunities available to the industry as a whole represent the opportunity available to a particular source. EPA argues, however, that the past performance of an individual firm may have been influenced by non-recurring factors and that the industry-wide averages can be verified far more easily. We are unable to say that EPA's choice was arbitrary or capricious and thus affirm the use of industry-wide rather than company-specific data for the rate of return on equity.