Opinion ID: 2633766
Heading Depth: 3
Heading Rank: 8

Heading: Unitary TAPS Rate

Text: The Carriers are wholly owned subsidiaries of oil-producing companies. Each Carrier owns an undivided joint interest in the pipeline. The Carriers have jointly formed the Alyeska Pipeline Service Company (Alyeska) to manage, maintain and operate the pipeline. Each Carrier holds its own certificate of convenience to operate an oil pipeline. In-state consumers such as Tesoro and Williams contract with individual Carriers and are invoiced directly. In 1983, the Superior Court invalidated individual rates approved by APUC, finding TAPS to be a unity and not eight virtual pipelines. [37] At the request of the parties post-TAPS settlement, that decision was vacated. Thereafter, the Carriers filed rates not exceeding the TSM ceiling; per the settlement, those rates were immune from State challenge. The matter of individual rates became a regulatory non-issue. During the instant rate litigation, Carrier and shipper experts agreed RCA should impute to all Carriers identical capital structures with a deemed debt to equity, ratio, common interest rates for borrowed capital, and a collective rate of return. The Carriers opted to defend TSM, not with individualized cost data, but instead with an overarching benchmark economic model. RCA rejected the model, disagreeing with its inputs and assumptions. RCA set a date for the Carriers to file individual rates based on proof of prudent individual costs, but only so long as the total revenues from all individually and jointly-filed rates did not exceed RCA's revenue entitlement set forth in Order No. 151. On January 27, 2003, three Carriers filed individual rates for 1997-2000. The ensuing revenue total exceeded RCA's figure. The Carriers again declined to support their filings with individualized cost data. RCA rejected the individual rates, and made final the rates established in Order No. 151. The Carriers and the State appeal. The parties engage in statutory construction of the Pipeline Act to support their positions. For example, the Carriers discern a clarion legislative mandate that each may file its own rates to be scrutinized in isolation by RCA. [38] Tesoro discerns a clear discretionary authority to set a common rate. [39] The State finds it inescapable that the Pipeline Act requires individual rates. In Order No. 151, RCA concluded that AS 42.06.630(17) defines tariff to mean a rate for a pipeline facility for services furnished by the facility and not a rate for each individual owner of the pipeline facility. Further, from AS 42.06.370(a), All rates demanded or received by a pipeline carrier or by any two or more pipeline carriers jointly . . . shall be just and reasonable, RCA inferred authority for a single rate imposed on joint owners. Finally, RCA found that nothing in the Pipeline Act precluded it from setting a single rate upon rejection of filed individual rates as unjust and unreasonable. The parties cite no legislative history. The referenced statutes do not explicitly address the issue. The statutes to which the parties and RCA attribute controlling significance do not definitively reveal a plain meaning. RCA twice afforded the Carriers an opportunity to file rates supported by actual cost data. The Carriers persisted in their more theoretical rate defense. RCA rejected this approach. The Carriers have not shown that RCA's requirements were arbitrary or capricious. Irrespective of the validity of its decision to cap aggregate revenues from individual and joint rates, RCA had an adequate and independent basis to reject individual rate filings by three Carriers, for failure of proof. Absent a compliant defense of the filed rates, RCA can in a sense be viewed as setting individual rates for all Carriers; the individual rates are identical, because no carrier distinguished itself from the pack. The State argues that the Carriers have filed individual rates for years, and RCA has departed from precedent without adequate explanation. The State does not provide record cites proving prior price competition. Tesoro contends that, no TAPS Carrier has ever charged anything but the TSM ceiling, citing testimony to that effect. [40] RCA concluded that the record was insufficient to determine whether the TAPS Carriers ever engaged in price competition amongst themselves. Tesoro represents that the five Carriers have no employees. The pipeline itself is operated by Alyeska Pipeline Service Company, which presumably bills the Carriers based on their respective percentages of ownership. Significant items such as debt to equity ratio, cost of borrowed capital, risk factors, and rate of return are imputed to the Carriers in common; the Carriers fault the numbers but not the joint imputation. Individually incurred Carrier expenses may well be a microscopic factor in the rate equation, given that the parties jointly operate the pipeline through Alyeska on a shared-cost basis, and are otherwise imputed invariant capital structures, interest rates, risk factors, and rates of return. The parties do not discuss the extent of the administrative burden imposed on RCA by any statutory mandate to set individual rates. RCA's total revenue cap means that Carriers seeking leave to exceed the unitary rate initiate a zero-sum game; some other Carrier must elect to charge less, so that total revenue remains constant. The scenario is unrealistic. In practical effect, Order No. 151 establishes a unitary rate; its individual rate provision is illusory as to Carriers seeking a rate premium, given the cap. The court concludes that interpretation of RCA's enabling statutes to arrive at practical parameters requires administrative expertise. RCA's decision to set a unitary rate or highly conditioned individual rates for this jointly owned and operated pipeline applies agency expertise to a fundamental policy question. RCA's interpretation of the Pipeline Act is entitled to deference. RCA's conclusion regarding the statutory scope of its discretion is reasonable and must therefore be sustained by this court. [41] Its exercise of this discretion is supported by the record.
RCA ordered refunds to affected shippers. Alaska Statute 42.06.400(b) states that the difference between a temporary and permanent tariff, in favor of either a carrier or a shipper, shall bear interest at the rate set forth in AS 45.45.010(a), or 10.5%. RCA so ordered. The Carriers argue that AS 42.06.400(b) was at least impliedly repealed by the 1997 amendment to the Code of Civil Procedure at AS 09.30.070(a) which established the interest due on civil judgments [n]otwithstanding AS 45.45.010. The statute applies a floating interest rate based on the Federal Reserve discount rate to judgments in civil litigation filed in the superior or district court. The annual rate may be greater or lesser than the 10.5% legal rate of interest established in AS 45.45.010 for other purposes. For 2006, the floating rate for civil judgments is 8.25%. The amendment of AS 09.30.070 was a component of a comprehensive tort reform act. The legislature's intent to relieve society of perceived excesses or irrationalities in civil litigation was discussed in Evans ex rel. Kutch v. State: The legislative goals underlying the damages caps, as well as the rest of chapter 26, SLA 1997, are explicitly stated in chapter 26, section 1, SLA 1997. Specifically, section 1 states that the legislation was intended to (1) discourage frivolous litigation and decrease the costs of litigation; (2) stop excessive punitive damages awards in order to foster a positive business environment; (3) control the increase of liability insurance rates; (4) encourage self-reliance and independence by underscoring the need for personal responsibility; and (5) reduce the cost of malpractice insurance for professionals.[ [42] ] Nothing in the Tort Reform Act's stated rationale suggests a more general purpose to repeal the legal interest rate applicable outside the context of tort and contract cases. Had the legislature wished to repeal the interest provision of the Pipeline Act when it passed tort reform legislation in 1997, it would logically have done so expressly, and indicated why it was ranging so far a field from its statement of intent. Nothing in the Tort Reform Act evinces an intention to affect anything but tort and contract litigation. Alaska Statute 09.30.070(b) is specifically tailored to tort and contract claims, linking the initial interest accrual date to written notice of a claim; the provision makes little sense in RCA's sphere. RCA appropriately followed the mandate of the Pipeline Act to order interest at the legal rate set forth in AS 45.45.010.