Opinion ID: 461203
Heading Depth: 2
Heading Rank: 2

Heading: Rational Basis for Action

Text: 22 Panhandle argues that the Commission's decision to disallow twenty-seven months of interest was arbitrary because the exact number bore no rational relationship to any explicit finding about the amount of unrecovered costs attributable to imprudence. We do not agree. 23 At the outset, we note that Panhandle's argument proceeds from the mistaken assumption that the agency's action in this order is in the nature of a penalty for past misconduct and so must bear an exact relationship to the degree of that misconduct. See Brief for Petitioner at 44-48. FERC has no authority to impose penalties. See Southern Union Gas Co. v. FERC, 725 F.2d 99, 102 (10th Cir.1984). While the Commission is not in the business of fitting the punishment to the crime, FERC does have large authority to take action necessary to promote the purposes of the Act, including fairness to the company, protection of consumers from unreasonable rates, and promotion of adequate and efficient service. See 15 U.S.C. Sec. 717c (1982). Considerations thus mixed are likely to generate, not an exact dollar figure, but a broad zone of reasonableness into which the Commission's rate decisions must fall. As a result, the breadth of agency discretion is, if anything, at [its] zenith when the action assailed relates primarily not to the issue of ascertaining whether conduct violates the statute, or regulations, but rather to the fashioning of policies, remedies and sanctions ... in order to arrive at maximum effectuation of Congressional objectives. Columbia Gas Transmission Corp. v. FERC, 750 F.2d 105, 109 (D.C.Cir.1984) (quoting Niagara Mohawk Power Corp. v. FPC, 379 F.2d 153, 159 (D.C.Cir.1967)). 24 Our task in this case is therefore a confined one: [C]ourts are without authority to set aside any rate adopted by the Commission which is within a 'zone of reasonableness.'  FERC v. Pennzoil Producing Co., 439 U.S. 508, 517, 99 S.Ct. 765, 771, 58 L.Ed.2d 773 (1979). In this area, if the Commission's order 'produces no arbitrary result' our inquiry is at an end. Public Systems v. FERC, 709 F.2d 73, 79 (D.C.Cir.) (quoting FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942)). Although the Commission's order was somewhat inartfully drawn, we can without substantial difficulty reconstruct the reasoning by which the agency derived its zone of reasonableness in this case, and we can determine that the exact number FERC chose fell comfortably within that zone. See, e.g., National Association of Broadcasters v. Copyright Royalty Tribunal, 772 F.2d 922 (D.C.Cir.1985) (upholding royalty rate as within zone of reasonableness derivable from agency's explanation); Recording Industry Association of America v. Copyright Royalty Tribunal, 662 F.2d 1, 10 (D.C.Cir.1981) (same). 25 The Commission explicitly recognized its statutory responsibility to balance the interests of consumers and pipelines. See June Order, 27 F.E.R.C. at 61,674. It further observed that in this balance, Panhandle had no right to recover imprudently incurred costs. As we have shown, FERC reasonably found Panhandle's failure to change its PGA format to be imprudent and the primary cause of the huge deferred balance. Id. (emphasis added). In other words, Panhandle's customers could not be required to pay--and so Panhandle could not recover--more than half of the proposed carrying charges, or 19 1/2 months worth. The Commission thus indicated with sufficient clarity that the lower bracket of its zone of reasonableness was a disallowance of 19 1/2 months of carrying charges. 26 The Commission also recognized that other factors--the Btu and subaccounting orders, see supra note 10--contributed to the deferred account balance. Id. FERC did not indicate exactly how much it believed these orders contributed, apparently because it considered that even if it attributed to them the full amount Panhandle suggested, the number it had selected would still be reasonable. 13 The Commission was correct in this judgment: even if we attributed to the Commission's orders the full amount of 66.6 million dollars, we could derive an upper bracket for the zone of reasonableness of about twenty-nine months of disallowed carrying charges. 14 27 The Commission thus explained the derivation of its zone of reasonableness with adequate clarity. The exact number FERC picked--twenty-seven months--falls well within this zone. The Commission's path in this case may reasonably be discerned. Bowman Transportation, Inc. v. Arkansas-Best Freight System, 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974). We therefore uphold as rationally related to the Commission's fully-substantiated findings FERC's comprehensible attempt to stem the flood of Panhandle's rising surcharge.