Opinion ID: 359629
Heading Depth: 1
Heading Rank: 2

Heading: the commission's power to promulgate the policy

Text: FORGIVING PAST FAILURES TO FILE 16 We must emphasize the context in which this case is being litigated. The Commission, as a result of the Colton decision, for the first time exercised jurisdiction over a large number of intra-state sales of power that had previously been subject only to state regulation. As a practical matter, the Commission was just beginning to regulate these transactions. In theory, however, these sales were always subject to the Commission's jurisdiction. The Commission thus was forced to formulate a policy regarding past as well as future sales. This policy was announced in Order No. 282. Essentially the Commission announced that it would excuse prior failures to file as long as current rates were promptly filed. The Commission, of course, did not foreclose the possibility that some third parties may be entitled to relief as a result of the past failures to file. 17 The issues confronting us here are whether it is within the Commission's power to promulgate the above policy and, if so, whether that policy may be applied to the sales in question here. 18 The Commission has promulgated similar policies when it began to exercise jurisdiction over other new categories of transactions. The most closely analogous situation occurred when the Commission first exercised jurisdiction, pursuant to the Supreme Court's decision in California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965), over sales of any natural gas actually commingled with gas to be resold in interstate commerce. 19 Although the Commission issued no general order on the subject, the Commission made clear its policy to forgive any failures to file prior to the Commission's own 1961 decision in Lo-Vaca. 3 The Commission approved settlements in the Despot proceedings that provided for no refunds for the period prior to 1961. See 38 F.P.C. 1041 (1967); 39 F.P.C. 232, 472, 555 (1968). In Hugoton Production Co., 41 F.P.C. 490 (1969), the Commission refused to order refunds for pre-1961 sales stating: 20 During the first period, before the issuance of Lo-Vaca, we are of the opinion that the doctrine of that case may not have been predictable by many producers. Under the doctrine we determined that sales of gas to a pipeline where the gas sold is commingled with the inter-state stream is jurisdictional, although by contract the producer and pipeline agree that the gas is to be used in the same state or used for compressor fuel and not resold. The Producers might have felt, with some reason, that gas could have been isolated from the jurisdictional gas by contractual means. Therefore, we think as a matter of equity Hugoton should not be required to make a refund for this period. 21 41 F.P.C. at 497. The Commission also declined to order refunds for pre-1961 transactions in Plaquemines Oil and Gas Co., 43 F.P.C. 620 (1970), Rev'd in part on other grounds and remanded sub nom., Plaquemines Oil and Gas Co. v. F. P. C., 146 U.S.App.D.C. 287, 450 F.2d 1334 (1971). Unfortunately the District of Columbia Circuit's opinion in Plaquemines, although noting that the pre-1961 failure to file was excused, had no occasion to review the propriety of that action. 22 Another similar situation arose when the Supreme Court held, in Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954), that producers and gatherers of natural gas who also transport or sell gas in interstate commerce for resale are subject to the requirements of the Natural Gas Act. In response, the Commission promulgated Order No. 174, 13 F.P.C. 1195 (1954), which was in turn modified by Order No. 174A, 13 F.P.C. 1410 (1954). The Commission explained the reason for promulgating the order in this way:Those producers and gatherers which come within the class found by the United States Supreme Court in the Phillips case to be subject to the Commission's jurisdiction should be afforded a reasonable opportunity to comply with the requirements of the Act to the end that the regulatory objectives of Congress may be achieved within the shortest feasible time. Also, in the interest of consumers, natural-gas companies and the public generally, practical considerations require us to deal with current problems which confront us as a consequence of the Court's decision and a reasonable cut-off date should be fixed in order to avoid confusion in attempting to readjust past transactions. 23 13 F.P.C. 1195. As a result of 174 and 174A, producers and gatherers were considered subject to the filing requirements of the Natural Gas Act only after June 7, 1954, the date of the Supreme Court decision in Phillips. In Cities Service Gas Producing Co. v. F. P. C., 233 F.2d 726 (10th Cir. 1956), the court agreed with the Commission that an unfiled rate change made after June 7, 1954 by a company that had recently filed pursuant to Order No. 174A was ineffective. Thus, although the court did not specifically discuss whether the Commission could excuse pre-June 7 failures to file, it did emphasize that the attempted increase there was made after June 7. Cities Service, supra, at 730. 24 A third analogous situation arose involving the requirement of Section 23(b) of the Federal Power Act 4 that licenses be obtained to construct, operate or maintain power projects on navigable water. In the Androscoggin case, Public Service Co. of New Hampshire, 27 F.P.C. 830 (1962), the Commission predated licenses to begin to run from 1943, the date of earlier Commission decisions that made it clear that a stream usable for log transport was considered navigable. The significance of the effective date is that 20 years after the effective date each licensee must establish amortization reserves reflecting excess profits. These reserves may be used to reduce the amount which the U.S. must pay to take over the project after the license expires. Thus, the earlier the effective date, the worse for the company involved. By setting an effective date of 1943, the Commission, in effect, excused prior failures to apply for a license. Thereafter, the Commission established a policy of assigning 1962, the date of the Androscoggin decision, as the effective date for licenses sought under similar circumstances. 5 In Niagara Mohawk Power Corp. v. F. P. C., 126 U.S.App.D.C. 376, 379 F.2d 153 (1967), the court affirmed the Commission's order pre-dating the effective date of such a license to 1962. 25 In all three situations described above, the Commission formulated policies for commencing the exercise of jurisdiction over previously unregulated transactions. In all three situations, the Commission, as part of its policy, decided to, in effect, excuse non-compliance with the regulatory scheme prior to a certain date. Unfortunately, the validity of this aspect of the Commission's policies has not been subjected to appellate review. In Plaquemines, Cities Service and Niagara & Mohawk, companies, who were essentially in the position of Penn Power here, claimed that the Commission had treated them too harshly. In those cases no one complained, as Ellwood does here, that the Commission was unlawfully lenient. 26 We conclude, however, that the Commission did act lawfully here. No statutory language prescribed the proper treatment for those who have in good faith failed to file. 6 Excusing the past failures to file here is justified by several factors. Most significant is that the past failures to file were the result of a widespread misapprehension of the extent of the Commission's jurisdiction. Even the Court of Appeals in Colton shared this misapprehension. The failures to file were thus clearly in good faith. Since the companies were not culpable, they should not be punished for technical non-compliance. 27 Excusing past failures is also an incentive to present compliance. Finally, considerations of administrative practicality preclude requiring the Commission to search decades into the past in order to enforce every failure to comply with the regulatory scheme. 28 The Supreme Court has instructed us that the Commission must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests. In re Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 312 (1958). Under these circumstances, we conclude that it was within the Commission's discretion, as part of its method of beginning to regulate the category of transactions in question here, to excuse past failures to file. 29