Opinion ID: 513931
Heading Depth: 1
Heading Rank: 7

Heading: R.C. Sec. 15(a) (Supp. IV 1986).

Text: 4 Section 205(e) of the Federal Power Act, 16 U.S.C. Sec. 824d(e) (1982), permits the Commission to suspend the effective date of proposed rates for a period no longer than five months upon ... delivering to the public utility affected thereby a statement in writing of its reasons for such suspension.... Id. In the present case, FERC announced that it was imposing the maximum five-month suspension in consonance with its general policy of doing so where [the Commission's] preliminary examination indicates that the proposed rates may be unjust and unreasonable, and may be substantially excessive.... Carolina Power & Light Co., 38 F.E.R.C. p 61,338 at 62,062 (1987) (citing West Texas Util. Co., 18 F.E.R.C. p 61,189 (1982)). CP & L has not challenged the Commission's imposition of the maximum suspension 5 Intervenors the Cities of Bennettsville and Camden, South Carolina, French Broad Electric Membership Corporation, North Carolina Electric Membership Corporation, Brunswick Electric Membership Corporation, and the Public Works Commission of the City of Fayetteville, North Carolina (collectively, Intervenors) argued in the proceedings below, inter alia, that petitioner's use of the 39.95% blended tax rate was improper. After FERC denied CP & L's request for rehearing, CP & L and its wholesale customers, which include Intervenors, settled all outstanding matters in the ratemaking case except the issue of the appropriate corporate income tax rate, and this settlement was subsequently approved by the Commission. See Carolina Power & Light Co., 41 F.E.R.C. p 61,388 (letter order). Pursuant to the settlement, should CP & L ultimately succeed in gaining the Commission's approval of a 39.95% tax rate for calendar year 1987, the utility's wholesale customers will pay CP & L the marginal amount to which the utility would be entitled by use of the higher tax rate. Intervenors urge denial of CP & L's petition for review 6 Petitioner contends that its former rates were established by a settlement agreement that left many cost-of-service components unspecified, including the federal corporate income tax component 7 We say apparent because there is little guidance in FERC's regulations regarding the Commission's method of calculating refunds. True, 18 C.F.R. Sec. 35.19a(a) provides that utilities whose proposed increased rates or charges were suspended shall refund at such time in such amounts and in such manner as required by final order of the Commission the portion of any increased rates or charges found by the Commission in that suspension proceeding not to be justified.... 18 C.F.R. Sec. 35.19a(a)(1) (1988). But this language merely tracks similar language found in section 205(e) of the Federal Power Act. See 16 U.S.C. Sec. 824d(e) (1982). Of critical importance to the issue of whether the Commission would have directly ordered a refund in this case is whether FERC would have undertaken a comprehensive evaluation of petitioner's costs of service in 1987, or instead would have focused solely on changes in petitioner's tax liability. The Commission's regulations suggest, but do not confirm, that the Commission would have entertained the question as one of total revenues versus total costs. See 18 C.F.R. Sec. 35.19a(b) (1988) (requiring reports of total revenues and total costs from utilities whose rates have been placed into effect subject to refund). As with the spot adjustment issue, we express no view as to whether the Commission rationally could adopt a policy requiring refunds with respect to changes in tax liability on a dollar-for-dollar basis, irrespective of other cost-of-service changes. But we fail to discern such a policy in Commission cases. Cf. Central Illinois Light Co., 10 F.E.R.C. p 61,248 (1980), aff'd sub nom. Villages of Chatham v. FERC, 662 F.2d 23 (D.C.Cir.1981) (declining to order spot adjustment in light of changes in tax rates); Kansas Gas & Elec. Co., 10 F.E.R.C. p 61,243 (1980) (same); Public Serv. Co. of New Mexico, 10 F.E.R.C. p 61,053 (1980) (same) 8 We admit some doubt as to whether the Commission even had the authority under section 205 directly to order a refund or retroactive adjustment with respect to CP & L's former rates, since those rates were the product of settlement agreement approved by the Commission apparently without refund conditions. See Carolina Power & Light Co., 32 F.E.R.C. p 61,502 (1985). Without section 205 refund power, the Commission's authority with respect to those established rates might have been limited to determining the rate to be thereafter observed by CP & L under section 206 of the Federal Power Act, 16 U.S.C. Sec. 824e (1982) 9 Intervenors suggest that the Commission's action can be explained in terms of the administrative convenience intrinsic in selecting a single prospective tax rate and approving a single rate schedule in ratemaking proceedings, a practice that obviates the need for utilities to file, and for the Commission to approve, successive modifications to their schedules embodying future changes in tax liability. In this case, Intervenors argue, it was simply convenient, and thus rational, for the Commission to direct CP & L to reflect the otherwise inapplicable 34% corporate tax rate in its 1987 schedule and thereby avoid the tedium of reviewing a revised schedule on January 1, 1988, reflecting the change in tax rates at that time. We find nothing in the record to suggest that the Commission based its disposition in this case on grounds of administrative convenience and are therefore not empowered to ascribe this rationale to the Commission. See SEC v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943). Moreover, were we to discern this reasoning in the Commission's order, we would find it difficult once again to reconcile the case with West Texas, where the Commission found no administrative obstacle to allowing the utility to file separate interim and final rate schedules accurately reflecting the changes in tax rates. See West Texas Util. Co., 38 F.E.R.C. p 61,138 (1987) 10 In view of our disposition of this case, we need not reach petitioner's final argument that the orders under review contravene the Commission's uniform prohibition against annualization of changes in costs of service occurring during the test period. See Delmarva Power & Light Co., 36 F.E.R.C. p 61,098 (1987), reh'g denied, 43 F.E.R.C. p 61,520 (1988)