Court Opinion

ID: 7850804
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:25:15.465064+00
Date Added: 2024-06-11T16:29:05.770043
License: Public Domain

MacKINNON, Senior Circuit Judge,
concurring in part and dissenting in part:
I concur in the majority’s determination that the Federal Energy Regulatory Commission (the “Commission”) is not required to order joint wheeling rates among interconnected utilities. I disagree, however, with the majority’s decision that the Commission failed to provide sufficient explanation for its decision to allocate some demand costs to wheeling services.
It must be noted first that in passing upon the reasonableness of rates, the Commission is entitled to a great deal of discretion. The Supreme Court, in the analogous natural gas situation, has admonished us that
Congress has entrusted the regulation of the natural gas industry to the informed judgment of the Commission, and not to the preferences of reviewing courts. A presumption of validity therefore attaches to each exercise of the Commission’s expertise, and those who would overturn the Commission’s judgment undertake “the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.” ... We are not obliged to examine each detail of the Commission’s decision; if the “total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end.”
[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.
Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 312 (1968) (quoting FPC v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 287, 88 L.Ed. 333 (1944)).1 The Commission enjoys similar discretion when the issue is how costs should be allocated among various customer classes in determining rates. : Consolidated Gas Supply Corp. v. FPC, 520 F.2d 1176, 1184 (D.C.Cir.1975) (quoting Permian Basin). See also Louisiana Public Service Commission v. FERC, 688 F.2d 357, 359-60 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 343 (1983); Alabama Electric Cooperative v. FERC, 684 F.2d 20, 27 (D.C. Cir.1982).
The Commission in this case found as a matter of fact that essentially non-interruptible service for a particular contract period was not “firm.” But it also found that it was not typical interruptible service such as that involved in Kentucky Utilities Co., 15 FERC ¶ 61,002 (1981), rehearing denied, 15 FERC ¶ 61,222 (1981). The Commission concluded that it was equitable to allocate demand costs to such quasi-firm service.
The Commission, both before and after Kentucky Utilities, has consistently approved allocation of demand costs to wheeling transactions. See New England Power Pool Participants, 52 F.P.C. 410 (1974), aff'd sub nom. Richmond Power & Light v. FERC, 574 F.2d 610 (D.C.Cir.1978); Indiana & Michigan Electric Co., 10 FERC ¶ 61,295 (1980); Cleveland Electric Illuminating Co., 11 FERC ¶ 61,114 (1980); Public Service Co. of New Hampshire, 24 FERC 11 61,007 (1983). This court approved *28of the practice in Richmond Power & Light v. FERC, 574 F.2d 610, 621-22 (D.C.Cir.1978), noting that the Commission properly could conclude that wheeling services “should not be given a ‘free ride.’ ” Id. at 622.2 The Cities point to no case in which wheeling transactions or fixed-term contract service have been treated by the Commission as ordinary interruptible service.
Kentucky Utilities involved service interruptible at will. This case involves service that is essentially noninterruptible for the length of the contract period — whether one hour or three years.3 In view of the Commission’s considerable discretion — to which the majority shows little deference on this issue — I cannot say that allocation of demand costs to the latter category is plainly unreasonable. I would affirm this portion of the Commission’s decision as well. In my opinion my colleagues exceed their authority in remanding the wheeling phase of the case.

. Although Permian Basin is a natural gas case, the same standard of discretion "appl[ies] to ... review of an electric rate proceeding under the Federal Power Act.” Ohio Power Co. v. FERC, 668 F.2d 880, 886 (6th Cir.1982).

. The court cited with approval, 574 F.2d at 621 n. 44, such cases as FPC v. Texaco Inc., 417 U.S. 380, 387, 94 S.Ct. 2315, 2321, 41 L.Ed.2d 141 (1974) (“[t]hat every rate of every natural gas company must be just and reasonable does not require that the cost of each company be ascertained and its rates fixed with respect to its own costs"); Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 615, 65 S.Ct. 829, 845, 89 L.Ed. 1206 (1945) (Jackson, J., concurring) ("I do not think it can be accepted as a principle of public regulation that industrial gas may have a free ride because the pipe line and compressor have to operate anyway"); Consolidated Gas Supply Corp. v. FPC, 520 F.2d 1176, 1185-86 (D.C.Cir. 1975) (actual costs are not the sole valid considerations in setting rates); and State Corporation Commission v. FPC, 206 F.2d 690, 709-10 (8th Cir.1953) (same), cert. denied, 346 U.S. 922, 74 S.Ct. 307, 98 L.Ed. 416 (1954).

. To the majority’s assertion that there is little practical difference between a one-hour contract and purely interruptible service, I would answer that any line between firm and nonfirm service is likely to be fine. The Staff, for example, advocated using one week as the minimum period that would justify allocation of demand costs. But there seems to me to be little difference between service for 7 days, which the Staff would treat as firm, and service for 6 days, 23 hours, which the Staff would treat as nonfirm. Would allocating capacity costs to 7-day service agreements therefore be unreasonable? Line-drawing of this type is best left to the Commission.