Opinion ID: 560450
Heading Depth: 2
Heading Rank: 2

Heading: Used and Useful Challenges

Text: 16 The programmers argue, further, that the FCC departed from established Commission precedent when it permitted Americom to include in its rate base the construction costs of satellites launched more than twelve months after Americom filed its 1981 tariff. We note at the outset that the Commission enjoys broad discretion in deciding whether to include plant under construction (PUC) in the current rate base. [S]uch inter-temporal distributional decisions are for the agency to make, we have held, and so long as it shows that it knows what it is doing, and gives a rational reason for doing it, we will not interfere with the result. Illinois Bell Tel. Co. v. FCC, 911 F.2d 776, 782 (D.C.Cir.1990). We have further recognized that any of a large number of rate base theories are acceptable, and require[ ] only that the chosen theory be consistently applied, and result in a reasonable rate of return. Communications Satellite Corp. v. FCC, 611 F.2d 883, 890-91 (D.C.Cir.1977). With these principles in full view, we turn to the cable programmers' two particular challenges. 17 First, the programmers renew their contention that two of Americom's satellites--SATCOM I-R and II-R, both scheduled for launch in 1983--were, from the start, dedicated to services other than cable programming, and therefore were not useful to the programmers. Furthermore, they assert, Americom later expressly limited access to SATCOM IV by 1988 fixed-term customers and sold space on its ground spare satellite on a non-common carrier basis. Accordingly, the cable programmers maintain, the Commission should have required Americom to exclude altogether the construction costs of SATCOM I-R and II-R from the rate base, and it should have required Americom to allocate the costs of the other two satellites (SATCOM IV and the ground spare) among the discrete services that used them. Brief for Petitioners Showtime et al. at 34 & n. 46. 18 Americom, in contrast, described its satellites as fungible. Each was capable of carrying all of the various types of C-band transponder service. Americom therefore tariffed its C-band services on a system-wide rather than a satellite-specific basis. 10 The Commission recognized that Americom has the right to move its customers to another satellite if it sees fit, 1987 Order, 2 FCC Rcd at 2368, and it further accepted Americom's contention that the four satellites benefit[ ] all users of [Americom's] satellite system by providing redundant and replacement capacity. Id. at 2369. Accordingly, the Commission concluded, Americom's system-wide method of rate-base calculation was appropriate, and Americom had properly included the costs of the four newer satellites in the rate base for the cable programmers' service. Recalling our prior rulings that the widest latitude is to be permitted public regulatory commissions in their determination of a rate base, Communications Satellite Corp., 611 F.2d at 890, we cannot say that either the Commission's resolution of the conflict between the programmers' and Americom's claims as to the satellites' usefulness, or the FCC's ultimate conclusion as to the propriety of rate-base treatment, is unreasonable. 11 19 The programmers contend, alternately, that even if it was proper to include, after launch, the costs of the four satellites on which the programmers did not ordinarily receive service, the FCC erred in giving these satellites rate-base treatment as of 1981. The Commission, they argue, should have required Americom to defer inclusion until the satellites were fully operational--in 1983, for SATCOM I-R and II-R, and 1984, for the ground spare. According to the cable programmers, the Commission has traditionally disallowed inclusion of long-term PUC in regulated rate bases, Brief for Petitioners Showtime et al. at 28; in the present case, according to the programmers,, the Commission departed from that policy without explanation. 20 The FCC correctly observes, however, that the programmers too readily identify the used and useful principle with exclusion of PUC. As the programmers admit, the Commission has not always required the investment to be used and useful immediately; rather, it has allow[ed] carriers to include in their rate bases ... property that is 'used and useful' in providing service to ratepayers either presently or within a reasonable period of time. Id. at 28 (emphasis added); see also American Tel. & Tel. Co., Phase II Final Decision & Order, 64 F.C.C.2d 1, 47 (1977) (same). And [t]he question of what length of time constitutes 'the near future' has no strict, economically sound answer. It is thus subject to Commission judgment and discretion, and depends upon the particular circumstances of each case. Id. In determining what constitutes a reasonable period of time, the Commission has explained, it is guided by the principle that ratepayers must not be forced to pay a return on investment which may not be used for a considerable length of time or is not needed to serve as a reserve for currently used investment. Id. (emphasis added). 21 In the present case, the Commission found that the four newer satellites were useful to Americom's subscribers, even before launch, as ground spares that assure[d] system reliability and provide[d] redundant or replacement capacity in the event of a malfunction of on-line equipment. 1987 Order, 2 FCC Rcd at 2369. Given this finding, the Commission rationally could rank their construction costs as property needed to serve as a reserve for currently used investment. 22 The FCC's resolution of this issue is consistent with its ultimate disposition of the Comsat litigation--apparently the only other Commission case raising PUC rate-base issues in the satellite context. In that case, the FCC approved as just and reasonable a settlement agreement that allowed the carrier to include satellite construction costs in the current rate base. See Communications Satellite Corp., 68 F.C.C.2d 941, 948-49 (1978). The Commission noted that, compared with terrestrial facilities, satellites have much shorter useful lives and thus require more frequent replacement. Accordingly, the Commission reasoned, satellite construction is necessary just to maintain current levels of service for existing customers. Id. at 949. The Commission has found that the four newer satellites performed the same function in the present case. 12 The FCC's approval of PUC inclusion, we therefore conclude, is both reasonable and consistent with Commission precedent. 23