Court Opinion

ID: 7854976
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:42:18.208794+00
Date Added: 2024-06-11T16:29:39.361351
License: Public Domain

WALD, Chief Judge,
with whom
Circuit Judge MIKVA joins:
I dissent from the en banc majority opinion because I find no bar, either in the text of the Natural Gas Act or in the overall structure of that Act, to the FERC’s attachment of a condition to a section 7 certificate for a new service which not only sets an interim rate for that service at a rough approximation of a just and reasonable rate, but which also adjusts rates for other services that have been affected by the interim rate for the new service, in order to keep those rates at a just and reasonable level as well. The Commission has imposed the revenue-crediting condition at issue as an exercise of its broad power under section 7(e) of the Natural Gas Act, 15 U.S.C. 717(e), “to attach ... such reasonable terms and conditions as the public convenience and necessity may require” to section 7 certificates. Under established principles of deference to agency statutory interpretations, we may not second-guess the Commission’s determination as to the conditions it may attach to a new service, unless we find that the statutory language or legislative history indicates a contrary congressional intent. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-45, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). The majority offers no plausible explanation for its departure from the dictates of Chevron.1 Instead, it engages in a lengthy discussion of section 4 and 5 and of the Supreme Court’s decision in CATCO, without ever revealing why, if the Commission can set an interim rate for a new service under section 7 until the company chooses to file for an increased rate under section 4, it cannot adjust rates already filed by the same company, which have prima facie been rendered unjust and unreasonable by the new rate. In this case, the Commission attached to the certificate of public convenience and necessity issued to Northern for *146its discount sales service a condition requiring Northern to credit all revenues from the new service which represented recovery of fixed costs to customers of its existing, non-discount sales service. The condition was aimed at achieving a fair division of the burden of fixed costs between discount and non-discount customers and preventing Northern from receiving an unjustified windfall through recovery of more than 100% of its fixed costs. See FERC Rehearing Brief at 13-14.
The only statutory support the majority offers for its decision are the three arguments set forth in Panhandle, which the majority simply quotes without elaboration.2 See maj. op. at 792. The majority first re-adopts the reasoning of Panhandle that permitting the Commission to use a section 7 condition to alter rates that have already been approved “would effectively' emasculate the role of section 5 in the ratemaking scheme.” Maj. op. at 792 (quoting Panhandle, 613 F.2d at 1129). Since Section 7 comes into play only when a company seeks to obtain a certificate of public convenience and necessity for a new service, there is in fact little danger that its excessive use could reduce section 5 to a “stopgap device”; proceedings under section 4 and section 5 will continue to govern the vast majority of rate determinations for which no new service is involved. Indeed, the use of section 7 conditions to establish interim rates for new services, approved by the Supreme Court, is itself also an exception to the usual section 4 and section 5 proceedings for setting rates. The narrow question here is whether this special section 7 power to set rates is limited to establishing the rate for a new service, or whether it extends to interim adjustments to compensate for the inequities the new rate may produce for old customers. The second Panhandle rationale, that rate stability will be destroyed if section 7 can be used to change existing rates, is similarly unconvincing since, as the majority repeatedly points out, the company can file under section 4 for a change in rates whenever it pleases. It is apparent that the majority’s interest in rate stability is a one-way street: the Commission cannot protect consumers from the unfairness caused by the company’s receiving a windfall from the new section 7 rate, so long as the company is satisfied with the status quo, but if the company thinks the rate set for the new service is too low, it can immediately file for an increase under section 4. The third Panhandle rationale, and the only one that seems at all thought-provoking to me, is that permitting the Commission to use section 7 to alter rates which have already been determined to be just and reasonable would circumvent the section 5 due process requirements of a hearing and a finding by the Commission that the previously approved rates have subsequently become unjust and unreasonable. Ultimately, however, I find that the majority’s highly formalistic approach to statutory construction has little to recommend it here either, since it is Northern’s own action in seeking certification for a new service under section 7 which has created the dilemma for the Commission, the potential unfairness to the old customers and a windfall for the company. In these circumstances, it is difficult to see how permitting the Commission to protect consumers by adjusting Northern’s rates on an interim basis disrupts the statutory scheme, especially since Northern can immediately file for a new rate under section 4 if it feels that the interim rate is too low or that the revenue-crediting condition is onerous or unfair.
The majority attempts to rely on the Supreme Court’s decision in Atlantic Refining Co. v. Public Service Commission, 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d 1312 (1959) (CATCO), to bolster its conclusion that FERC transcended its statutory authority in imposing this condition on a section 7 certificate. The majority, however, in discussing CATCO acts as if the issue in this case turned on whether the Supreme *147Court in that case had specifically authorized the Commission to impose this revenue-crediting condition. See maj. op. at 788-792. Of course it did not, since this case was not before it. The majority’s analysis misses the real question raised by CATCO: why, when section 7 authorizes the Commission to impose conditions on the certificate issued for a new service, and the Supreme Court held in CATCO that those conditions may include setting an interim rate for that service, may the Commission not require adjustments in rates for the same company’s other services that are affected by the new rate? The critical point is this: Nothing in CATCO remotely suggests that the power to set rates under 7 is limited to rates for the services being certificated. As Judge (now Justice) Scalia noted in his opinion for the panel in this case,
Once it is acknowledged that the Commission has authority to fix some rates under Section 7, see [CATCO], one is merely arguing over how much Section 7 will be permitted to override the purposes of Section 4 and 5. Drawing the line at rates for the very services sought in the Section 7 proceeding is not inevitable ____
780 F.2d at 62 (emphasis in original). Chevron counsels us that in the absence of any statutory language or legislative history to support the distinction between setting rates for new services under section 7 and adjusting rates for existing services under that section, the decision as to “how much” must be left to the Commission.
The majority never really distinguishes the revenue-crediting condition involved in this case from the price condition approved in CATCO in any terms that are meaningful under Chevron. As the majority notes, one reason CATCO allowed the use of interim price conditions was the delay involved in section 5 proceedings. See maj. op. at 798. The majority’s decision in this case forces the Commission to initiate a lengthy and cumbersome section 5 proceeding to deal with the inequities created by the new rate; in the meantime, the company can continue to collect excessive, non-refundable rates. Like the price condition in CATCO, the rate imposed here is effective only until the company files for an increased rate under section 4. Thus, the rate here is just as much an interim measure as the one approved in CATCO. The majority appears to place great weight on the idea that the condition in CATCO only acted to “hold the line” pending proceedings under sections 4 and 5, while here the Commission is altering a rate that has been set in an earlier proceeding. See maj. op. at 791. If there is a difference, it seems largely a semantic one based upon how one defines “holding the line” and whose line is to be held — the customers’ or the company’s. The Commission in this case decided to hold the line for the old customers by ensuring that the rates they paid would continue to be just and reasonable, pending a proceeding under section 4 or section 5 in which the rates for both the old and new services could be reviewed. There is certainly nothing in the Act or in CATCO that confines the Commission’s section 7 authority to the precise kind of line-holding involved in that case.
The effect of the majority’s decision here is to give the company a windfall by permitting it to recover more than 100% of its fixed costs, while forcing consumers of the existing services to “bear all of the pipeline’s fixed costs, even if these customers are barred from using the new service.” FERC Rehearing Brief at 13-14. I am unpersuaded by the majority’s glib response that “the Commission has ample authority, apart from the revenue-crediting condition, to ensure that an operator would only earn ‘just and reasonable’ rates on its existing and proposed services.” Maj. op. at 792. The suggestion that the FERC’s authority to initiate a proceeding under section 5 is an adequate remedy can be quickly rejected, since it was precisely the practical problems inherent in such proceedings (significant delay and the absence of any requirement that the pipeline refund excessive rates collected while the section 5 proceeding is pending) that led the Supreme Court to approve the price condition at issue in CATCO. It also seems highly improbable that a company which is receiv*148ing a windfall by collecting more than 100% of its fixed costs will have any incentive to apply for a new rate under section 4. The majority opinion, by denying the Commission any power under section 7 to break this logjam, immunizes the company from any just reapportionment of its fixed costs, and leaves the Commission powerless, unless it is willing to undertake the cumbersome and time-consuming section 5 proceeding, the avoidance of which, the majority asserts, was the justification for allowing the establishment of interim rates under section 7 for new services. Without a scintilla let alone a clear indication of congressional intent that section 7 power was to be so circumscribed, I cannot join the majority in holding that the FERC is effectively precluded from preventing Northern from reaping a windfall at the expense of its customers.
I respectfully dissent.

. There is no indication in Panhandle, which was decided before Chevron, that the court defined the issue before it as whether the Commission’s interpretation was a "permissible construction of the statute.” Chevron, 467 U.S. at 843, 104 S.Ct. at 2782. Rather, the Panhandle court, after noting that the validity of the revenue-crediting condition was "a rather close question,” 613 F.2d at 1126, appears to have simply substituted its own interpretation of the Natural Gas Act for that of the Commission.

. Rehearing en banc was granted in this case to decide whether Panhandle should be overruled. See 780 F.2d at 64. The Panhandle decision therefore has no more presumed validity than any other panel opinion undergoing en banc reconsideration, the majority's extensive citation of that decision notwithstanding.