Opinion ID: 2615008
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Heading: The Filed Rate Doctrine Issue

Text: MDU's initial position is that in a pass-on hearing PSC may neither revise the refund apportionment submitted by a utility nor reduce the non-gas component of the rate. Either action by PSC, MDU claims, would violate the so-called filed rate doctrine. We disagree. In pertinent part, the filed rate doctrine holds that interstate power rates filed with FERC or fixed by FERC must be given binding effect by state utility commissions determining intrastate rates. Nantahala, 476 U.S. at 962, 106 S.Ct. at 2354, 90 L.Ed.2d at 951. As explained in Nantahala, the doctrine originated in Montana-Dakota Utilities Co. v. Northwestern Pub. Serv. Co., 341 U.S. 246, 251-52, 71 S.Ct. 692, 695, 95 L.Ed. 912, 918-19 (1951), in which a federal court had been asked to review a rate which FERC's predecessor, the Federal Power Commission, had determined as reasonable. In dismissing the claim the Court held that the complaining utility can claim no rate as a legal right that is other than the filed rate, whether fixed or merely accepted by the [Federal Power] Commission, and not even a court can authorize commerce in the commodity on other terms. Montana-Dakota Utilities, 341 U.S. at 251-52, 71 S.Ct. at 695, 95 L.Ed. at 919. The doctrine applies to federal and state courts alike. Nantahala, 476 U.S. at 963, 106 S.Ct. at 2355, 90 L.Ed.2d at 952. As explained in Nantahala, [i]n this application, the doctrine is not a rule of administrative law designed to ensure that federal courts respect the decisions of federal administrative agencies, but a matter of enforcing the Supremacy Clause. Id. See e.g., Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981). Even before Nantahala, the Wyoming Supreme Court recognized the principle supporting the doctrine. We said: The PSC is preempted by the federal government from reviewing the reasonableness of the components of the [commodity marketing agency] wholesale electric rate increase. The result must be that the PSC can accept the federally approved wholesale rate as given and decline to require Wyoming distribution utilities to prove that such wholesale rates are just and reasonable under Wyoming rate making law and standards. Once the FERC proceedings are complete, the PSC is required to accept those rates as reasonable, and the PSC can do nothing but accept those rates as given. Spence v. Smyth, 686 P.2d 597, 600 (Wyo.1984). MDU contends that PSC's actions violate the doctrine because they, in end-result, reduced the amount of MDU's request. Instead of receiving the requested increase of $0.438 per dekatherm, MDU received an increase of only $0.266 per dekatherm. MDU argues that the effect of PSC's order is to trap costs or not compensate MDU for certain federally mandated expenses which will never be recovered. Responding to MDU's contention, PSC asserts, of course, that its actions do not violate the doctrine. With reference to its refund apportionment action, PSC explains that while FERC ordered the $18 million plus refund, it did not specify any particular apportionment among the utilities' customers. That apportionment decision was MDU's to make, subject to PSC's oversight in the interests of the public to the extent that the utility's decision affected customers within PSC's jurisdiction. In that regard, PSC contends, it has jurisdiction to review and revise any MDU apportionment decision if it determines customers are not being treated fairly under the decision made. With reference to its non-gas component adjustment action, PSC explains that the cost increase of the wholesale natural gas has survived intact and is being passed on in full to MDU's customers. It is only the non-gas component of MDU's retail rate, which is well within PSC's jurisdiction, that PSC has reduced. In support of its position, PSC points to passages in Nantahala, Narragansett Elec. Co. v. Burke, 119 R.I. 559, 381 A.2d 1358 (1977), cert. denied, 435 U.S. 972, 98 S.Ct. 1614, 56 L.Ed.2d 63 (1978), and Pub. Serv. Co. of Colorado v. Pub. Utilities Comm'n, 644 P.2d 933 (Colo. 1982), which state that an increase in FERC-approved wholesale rates need not lead to an increase in retail rates. Nantahala, 476 U.S. at 967, 106 S.Ct. at 2357, 90 L.Ed.2d at 955. Thus, under the authority of these decisions, the retail rate need not automatically head in the same direction as the wholesale rate if costs other than [the FERC-regulated wholesale gas costs] were to decrease. Id. Addressing those other non-gas costs, these decisions state that the regulatory commission may treat the wholesale gas cost increase filing, the pass-on application filing, as it treats other filings for proposed rate increase, a general rate filing, and investigate whether the utility has experienced savings in other areas which might offset the increased price for natural gas to customers. Nantahala, 476 U.S. at 967-68, 106 S.Ct. at 2357, 90 L.Ed.2d at 955. The Nantahala court found that [t]his qualification is perfectly sensible. If, for example, the FERC-approved price of wholesale power rises slightly but a retailer's costs of transformation and transmission significantly decline, the retailer's overall costs might well decrease. A decrease in its retail rates might therefore be appropriate even though the cost of purchasing FERC-regulated power had increased. Nantahala, 476 U.S. at 968, 106 S.Ct. at 2357, 90 L.Ed.2d at 955. Having considered the parties' arguments, we reject MDU's contention that PSC's actions of revising the refund apportionment and adjusting the non-gas component of the retail rate violate the filed rate doctrine. We agree with PSC's explanation and the legal authority upon which it relies to support its position. FERC did not order a particular refund apportionment; it left that decision to be made by the utility. WBI, for whatever reason, did not make that decision. That left it for MDU to apportion the refund. In MDU's original application filed with PSC, MDU apportioned the refund in a way that benefitted all classes of its customers. In its revised application, it apportioned the refund in a way that excluded the industrial user class from the benefits of the refund. Under these circumstances, it is within PSC's jurisdiction to determine whether the refund apportionment treats Wyoming customers fairly. PSC did not reduce the amount of the FERC-approved wholesale gas cost increase. Rather, it focused its attention on other, non-FERC regulated areas of MDU's operations under its retail rates jurisdiction to determine if MDU had experienced savings in one or more of those areas which might offset the increased price for gas. Without considering, at this point, whether PSC's procedures were correct or whether the appropriate evidentiary conditions were satisfied, as we shall do that later in this opinion, we hold that the filed rate doctrine does not bar PSC from treating the pass-on filing as a general rate filing and taking such action as is appropriate within its jurisdiction. Having resolved MDU's threshold issue, we still must review the actions taken by PSC to determine whether those actions were lawful. With respect to the refund apportionment action, MDU claims that action was not based on substantial evidence. With respect to the non-gas component reduction action, MDU claims that action suffers from several deficiencies. In particular, MDU asserts that PSC's Section 249(b) does not expressly authorize such reduction action; that although general statutory authority may permit such action if proper notice is given and if evidentiary conditions are satisfied, in this instance neither was proper notice given nor evidentiary conditions satisfied. We address these issues now.