Legal Document

411 U.S. 458 93 Supreme Court Reporter 1723 36 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 426 FEDERAL POWER COMMISSION, Petitioner,v.MEMPHIS LIGHT, GAS AND WATER DIVISION, et al. TEXAS TRANSMISSION CORPORATION, Petitioner, versus MEMPHIS Nos. 72—486, 72—488. Argued March 27, 1973. Decided May 7, Syllabus Section 441 of the Tax Reform Act 1969 does not deprive Federal Power Commission Authority to permit a utility that is subject its jurisdiction under Natural Gas change depreciation method it uses for purposes rate-making from accelerated with 'flow through' utility's tax savings customers normalization (where income expense allowed in cost service computed on straight-line basis) respect pre-1970 property as well replacement property. Pp. 465—474. 149 U.S.App.D.C. 238, 462 Reporter, 2nd 853 and 865, reversed remanded. 1 Samuel Huntington, Washington, D.C., F.P.C. 2 Christopher T. Boland, Texas Transmission Corporation 3 George E. Morrow Memphis, Tenn., Memphis Light, Water Div. 4 Richard Atlantic Solomon, Public Service Comm. New York. 5 Mr. Justice DOUGLAS delivered opinion Court. 6 We granted certiorari these cases determine whether § 1969, 26 Code KF62 167(l), circumscribes authority Act, 52 Statutes-at-Large 821, amended, 15 717 seq., regulated computing 'flow-through' 'normalization' acquired prior 1970 'replacement' 7 Since resolution this issue depends largely background history Commission's regulatory powers, brief review order at outset. 167 Internal Revenue authorized taxpayers, including utilities, use or liberalized calculating their federal taxes.1 The retained prescribe be used by utilities ratemaking purposes.2 Initially, required compute service, which includes taxes, if they were using depreciation. This method, referred 'normalization,' was designed avoid giving present benefits deferral attributable If determining actual liability, difference between taxes actually paid higher reflected placed deferred reserve account. See Amere Utilities Co., 760. 8 It soon became apparent practice resulted permanent savings. Because most had growing least stable plant investments, allowances additional equipment offset declining allowance existing Accordingly, same and, thus, any customers. Alabama-Tennessee 31 208, aff'd sub nom. Alabama Tennessee company FPC, 359 318 (CA5). Subsequently, decided would impute regardless taxes. Midwestern 61, 388 444 (CA7). 9 When House Senate considered reform legislation both concerned loss revenues stemmed combined effect (leading deductions) flow-through fixing rates lower thus gross revenues).3 added 167(l) Code, general 'freeze' practices.4 As passed House, have established three rules depreciable property:5 10 '(1) straight line presently being taken, then no faster permitted 11 '(2) taxpayer taking (normalizing' must go unless continues normalize 12 '(3) flowing through tax-payer continue do so, appropriate agency permits property.' 13 bill similar except given right elect within 180 days 'to shift without permission agency, . ..'6 election apply new In conference, however, agreed only after expand facilities.7 14 Thus, distinguishes two basic types 'public property':8 'pre-1970 property,' before January 1, (§ 167(l)(3) (B)), all other property, 'post-1969 property' (C)). A further distinction drawn post-1969 'which increases productive operational capacity taxpayer' (expansion property) merely replaces 167(l)(4)(A)). With may (1) depreciation, (2) August also employs normalization, (3) flow-through, but 167(l)(1)). 167(l)(2)). addition, 167(l)(4)(A), abandon expansion proceedings here involve Corp., operator major interstate pipeline system certificated Commission. Although utilized adoption filed proposed rate increase June based upon 'the discontinuance revision depreciation.' After enacted, advised intended exercise provided 167(l)(4)(A) sought property.9 assurance, made election, able or, preferably, 16 Commission, holding such diminished' purposes. Opinion Number 578, 43 824, 828, rehearing denied, 44 140.10 reasoned basis decisions longer applicable switch event, resulting permanent. Rather, faced steadily increasing necessitate repeated increases. Under circumstances, concluded: 'Texas correct contending faciities offers more hope stability assurance can earn fair return future Further are will improve company's coverage interest, thereby enhancing quality securities, help alleviate day cash shortages.' Id., 829—830. 17 Appeals, petitions review, order.11 853, id., 250, F.2d, 865. court recognized version supported order, held limited nature provision finally deprived reverse remand Appeals consistent opinion. 18 concern solely methods expenses 19 Congress dealt primarily revenue measure laws indirectly power Act. us numerous occasions arising early case FPC Hope 320 591, 64 281, 88 L.Ed. 333, we emphasized aspects fix 'just reasonable' 717. First, desire protect consumers against exploitation,' U.S., 610, S.Ct., 291, second, aim promote 'financial integrity' natural gas companies measured, sufficient recover operating capital costs, 603, 288, 'sufficient assure confidence financial integrity enterprise, so maintain credit attract capital.' Ibid. mention those matters because treatment bears there indication legislative desired modify, respects precise involved here, broad discretion delineated cases. 20 4(a) 717c(a), charges reasonable.' 4(e), 717c(e), sets forth procedures whereby schedule lawful, 5, 717d, gives certain powers charges. Finally, 9(a), 717h(a), 'require natural-gas carry proper adequate amortization accounts accordance rules, regulations, forms account prescribe.' Pipe Line 386 237, 243, 87 1003, 1007, 18, stated: 21 'One (the Commission's) statutory duties just reasonable costs investment. Cost therefore focus inquiry. Normally included determination allowance, proposition, obviously Commission.' 22 courts See, e.g., 318; 444. 23 sure, leave untouched. For example, straightline could nor 167(l)(1). But face preclude exercising flow-through. 167(l)(1)(B) provides '(i)n public 1968 (i) accounting' 1969. (Emphasis added.) 24 found error action detailed analysis 167(l). concluded final limits applicability (non-replacement) alone.' U.S.App.D.C., 246, 861 (emphasis original). follows. At stage been justified because, already noted, Report stated:12 25 'Your committee's that, following apply: 'normalizing' 27 28 word 'existing' mind Appeals. 29 bill13 either approval normalization. 247, 862. 30 restricted while conference relied four paragraphs Conference Report.14 'The listed industries furnishing sale local distribution system, transportation pipeline) 'normalizes' current reduction 32 'This rule earnings allowable books Also, now 33 amendment makes changes bill: (d) an date enactment come .. 34 substitute (sec. sec. code) follows special (e) above stricken 180-day (item (d), above) modified 35 Even over flowthrough available extent company.' From second paragraph prohibits abandoning only. 37 paragraph, read it, when words rule' refers, bill, initial bill. That summarized Report, noted,15 somewhat different provisions first quotation our view House's rule. therefore, refer rule.16 Only third excerpt reached Senate. fourth resolved differences bills. There nothing indicate limit replace House-proposed rule17 authorizing precisely what case. context state lacks states remain limitation requirement wants entirely structure 38 Nor extension limiting factor. 'reasonable' 167(l)(2) subparagraph (C) if, (or similar) kind recently accounting July period.' where period, (2)(C) shall constitutes represent capacity.' 39 recognizes ways cannot own; overriding staff Joint Committee Taxation prepared General Explanation measure18 40 'If (except procedure discussed below), 41 document goes state19 'unless below applies).' 42 compelling contemporary abandonment even though comments House20 Senate21 practices relating especially flourishing industries.'22 Reports, purpose forestall switches guard widespread increases, putting some competitive disadvantage. put absolute terms. Shifts outlawed, shifts find trace suggestion denied particular facts parameter interest envisaged might rates. certainly cover slower permit. 45 sustained Gas, nonexpansion did reach validity assuming reading think was. did, 'should construed prevent' finding 'extraordinary circumstances' consumer interests 'would furthered permitting flow-through.' added: 'It clear, circumstances presented bar.' petition connection main question raised argue, granted, decision merits respects. And urges decide merits. statute23 tribunal sought; note closing, judgment toto. Its short application standard review. protected health economic remains strong. 46 Reversed 167(a) '(t)here deduction exhaustion, wear tear (including obsolescence)' qualified 167(b) defines 'reasonable allowance' include balance sum-of-the-years-digits method. declining-balance commonly methods, years than decrease useful life asset. asset equal life. properly cost-of-service regulation sales seq. 18. H.R.Rep.No.91—413, pt. Pages 131—132; S.Rep.No.91 552, Page 172, U.S.Code Cong. & Admin.News 1645. 132—133; 172. 133, 1783. S.Rep.No.91—552, 173, 2206. H.R.Conf.Rep.No.91—782, 313. 167(l)(3)(A) provides: term means predominantly trade business of— '(i) electrical energy, water, sewage disposal services, '(ii) steam '(iii) telephone communication services furnished sold Communications Satellite 1962 (47 (s) 701), '(iv) pipeline, sale, be, approved State political subdivision thereof, instrumentality States, commission body thereof.' Order 404, 740, 16, announced policy making affirmed order. part court's us. reads: '(A) computation Income purposes, amended Such applies constructed 1970, capacity. reflect rates, election. balances Account 282 (deferred account) should deducted base.' 831. Division, municipally owned distributor city-gate customer York petitioned 578. Each 578—A. Both (in 72—486) 72—488) writ certiorari. 173—174, (Senate) committee amendments, provisions, differ one principal area. amendments covered (that is, bill). (unless later normalize), 312—313, 2427. Amin.News rule, provided, requalatory H.R. 13270, 91st Cong., 151. 132—133. 19(b) 717r(b), 'Any party proceeding chapter aggrieved issued obtain appeals circuit wherein relates located has place business, District Columbia (Circuit) ..'

Classification Label: 7