Court Opinion

ID: 5836
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:10:13+00
Date Added: 2024-06-11T14:54:19.257540
License: Public Domain

UNITED STATES COURT OF APPEALS
                         FOR THE FIFTH CIRCUIT

                        _____________________

                             No. 92-4599
                        _____________________

                      GULF STATES UTILITIES CO.,

                                                       Petitioner,

                                VERSUS

              FEDERAL ENERGY REGULATORY COMMISSION,

                                                       Respondent.

      ____________________________________________________

               Petition for Review of Orders of the
              Federal Energy Regulatory Commission
      _____________________________________________________
                         (August 25, 1993)

Before REYNALDO G. GARZA, SMITH, and BARKSDALE, Circuit Judges.

BARKSDALE, Circuit Judge:

     Gulf States Utilities Company (GSU) challenges the Federal

Energy Regulatory Commission's denial of both its request to

correct, retroactively and prospectively, claimed billing errors,

and its application for a waiver of related filing requirements,

arising from its contract with Cajun Electric Power Cooperative,

involving GSU's high-voltage electricity transmission system, owned

in part by Cajun.    We REVERSE and REMAND.

                                  I.

     GSU is a utility company servicing customers in Louisiana and

Texas; and, under a Power Interconnection Agreement executed in

1978, it provides electricity transmission services to Cajun, a

government-funded rural electric cooperative in Louisiana. Because
Cajun's     cost    of   capital    is     less   than    GSU's,   due   to     Cajun's

government-funded status, GSU and Cajun executed Service Schedule

CTOC in 1980 (the CTOC agreement), which provided that the two

companies would establish a co-owned Integrated Transmission System

(ITS) comprised of qualified high-voltage transmission facilities

(QTFs).1     In exchange for its investment in the ITS, Cajun would

not be billed for its use of the ITS to the extent of that

investment.        In essence, the plan allowed Cajun to invest in the

ITS in lieu of paying a portion of the bill that would otherwise be

payable to GSU.

      The    CTOC    agreement     established      a     rather   complex      billing

mechanism with regard to the ITS.             In order to credit Cajun for its

investment, GSU was to deduct GSU's revenue requirements associated

with the ITS from Cajun's monthly general transmission charges, in

the   form    of    "CTOC   credits".         The   CTOC     credits     were    to   be

"determined on the basis of the methodology, procedures and data

used as      the    basis   for    GSU's    transmission      service     rates    most

recently approved or accepted for filing by FERC ...".

      Additionally, in the event that Cajun's investment in the ITS

was not proportionate to its relative use, an equalization charge

would be imposed.        The equalization charge was to be calculated by

multiplying the amount of Cajun's investment deficiency by a

percentage referred to as "Factor APM".                  Factor APM is computed by

dividing GSU's annual revenue requirement associated with the ITS

1
     If GSU provides service to Cajun over its entire system, part
is provided over the ITS (owned in part by Cajun), and the rest is
provided over GSU's low-voltage facilities.

                                         - 2 -
by its total investment in the ITS.                   For example, if GSU invested

a total of $100 million in the ITS, and its annual revenue

requirements for the ITS were $20 million, Factor APM would be 20%

for that year.       Accordingly, Cajun's yearly equalization charge

would be 20% of the amount of its investment deficiency.                      Because

the monthly equalization charges were to be based on estimates, the

CTOC agreement also provided for annual "true-ups" once the actual

figures became available.

       In early 1981, GSU submitted the CTOC agreement for FERC

approval.       In    response          to     FERC's    request     for   additional

information, GSU specified, inter alia, the Factor APM to be used

initially. FERC accepted the agreement for filing that August, but

advised GSU that "any changes in the applicable Equalizing Charge

resulting    from    the     use   of    a     Factor   APM   different    from   that

specified in your instant filing, must be timely filed ... as a

change in rate schedule in accordance with [regulations]".                        FERC

did not similarly direct GSU to file changes to the CTOC credits,

and the CTOC agreement did not specify how such changes were to be

initiated or implemented.            Accordingly, until GSU's filing in the

present proceeding, CTOC credits (as a component of the stated

rate) were never filed with FERC.

       The CTOC agreement billing provisions took effect January 1,

1982, when Cajun acquired two high-voltage transmission lines --

QTFs -- from GSU.      At that time, GSU computed Cajun's CTOC credits

from   the   data    filed    with      FERC     in   GSU's   most   recent   general

                                             - 3 -
transmission rate filing, submitted in 1980. It used the specified

Factor APM (24.4047%), which was also based on that data.

     In July 1982, GSU submitted new general transmission rates for

filing. FERC approved a settlement in that case in June 1983, with

the new rates made effective July 1982.            See Gulf States Utils.

Co., 25 F.E.R.C. ¶ 61,131 (1983).

     GSU again submitted new general transmission rates in July

1985.   In January 1987, FERC approved a settlement of that case,

which provided for two new rates -- one effective July 1985, and a

superseding rate effective July 1986.       See Gulf States Utils. Co.,

38 F.E.R.C. ¶ 61,048 (1987). Cajun intervened in the second (1985)

rate case to protest GSU's designation of the QTFs under the CTOC

agreement   (QTF   dispute),2   but   the   1987    settlement   agreement

expressly excluded any resolution of that dispute.3

     As noted, in neither its 1982 nor its 1985 filing did GSU

separately designate revised CTOC credits or Factors APM. However,

upon each filing, it recalculated both, based on the new data

submitted, and billed Cajun accordingly.             FERC accepted GSU's

refund compliance filings for each case in May 1984 and September

1987, respectively.

2
     In sum, Cajun contended the GSU was not including QTFs owned
by Cajun, resulting in improper (excessive) equalization charges to
Cajun, and denying it proper access to the ITS.
3
     Because of the QTF dispute, Cajun had stopped paying the true-
ups, and GSU had stopped billing Cajun under the CTOC rate
procedures. The settlement agreement provided: "This agreement is
not intended to resolve an existing billing dispute between Cajun
and [GSU] under the CTOC service schedule .... [T]his Agreement is
made without prejudice to Cajun's and [GSU's] rights regarding such
dispute and its ultimate resolution".

                                 - 4 -
     In July 1987, Cajun renewed its claims with FERC regarding the

QTF dispute, among others.      GSU answered, and filed its own action

with FERC, proposing to cancel the CTOC agreement.            FERC denied

GSU's request to cancel, see Cajun Elec. Power Corp., Inc. v. Gulf

States Utils. Co., 41 F.E.R.C. ¶ 61,136 (1987), and affirmed the

denial on rehearing, see Gulf States Utils. Co., 42 F.E.R.C. ¶

61,163 (1988).

     Meanwhile, GSU allegedly discovered that it had erred all

along in calculating the CTOC credits. In November 1987, after the

denial of its request to cancel the CTOC agreement, GSU began

billing Cajun using revised (lowered) CTOC credits, resulting in an

annual increase in the billings to Cajun of approximately $4

million. Cajun has paid those increased charges. Additionally, as

noted, GSU had never filed, as directed, the changes to Factor APM

from the figure initially filed in 1981.       Accordingly, on June 20,

1988,   GSU   submitted   for   filing    retroactive   and   prospective

revisions to the CTOC credits and Factors APM, requesting a waiver

of the Factor APM filing requirement for good cause.

     In August 1988 (Initial Order), FERC rejected GSU's proposed

retroactive changes to the CTOC credits, holding that those credits

had been at issue in, and resolved by, the settlements of the 1982

and 1985 rate cases in 1983 and 1987, respectively.            See Cajun

Elec. Power Corp., Inc. v. Gulf States Utils. Co., 44 F.E.R.C. ¶

61,259, 61,972 (1988) [hereinafter 44 F.E.R.C. at ____].               In

addition, it denied GSU's request for a waiver of the Factor APM

filing requirement. Id. at 61,970-71. For prospective application

                                  - 5 -
only, FERC accepted GSU's proposed Factor APM, based on the 1986

rate, and set that matter for hearing.            Id.   Finally, for purposes

of hearing and decision, FERC consolidated GSU's proceeding with

Cajun's involving the QTFs.     Id. at 61,972.            With respect to the

CTOC credits, both GSU and Cajun requested clarification or, in the

alternative, rehearing.

     Pending    that   rehearing,    an     ALJ    held    a   hearing    on   the

consolidated matters, and issued a decision in May 1989.                 See Cajun

Elec. Power Corp., Inc. v. Gulf States Utils. Co., 47 F.E.R.C. ¶

63,024 (1989). The ALJ interpreted FERC's Initial Order to address

only pre-July 26, 1985, CTOC credits (the effective date of the

settled 1985 rate case).    Id. at 65,057. Accordingly, he proceeded

to address the post-July 26, 1985, CTOC credit dispute, and held in

GSU's favor on the alleged errors.          Id. at 65,057-58.       He stated:

"[W]ith the understanding that [GSU's] calculations have been

somewhat erroneous in the past, I conclude that the methodology and

figures computed by [GSU's witness] now accurately project the CTOC

credits ...".    Id.

     In April 1992, nearly four years after its Initial Order, FERC

again rejected the proposed retroactive CTOC credits and Factors

APM, and denied the requested waiver of the Factor APM filing

requirement (Rehearing Order).        See Cajun Elec. Power Corp., Inc.

v. Gulf States Utils. Co., 59 F.E.R.C. ¶ 61,041, 61,137-41, 61,143

(1992) [hereinafter 59 F.E.R.C. at ____].                 It upheld the ALJ's

determination regarding the Factor APM, based on the 1986 rates, to

be applied prospectively (from August 1988), id. at 61,143, but

                                    - 6 -
reversed his finding with regard to post-July 1985 CTOC credits,

holding that that dispute was not properly before the ALJ in light

of FERC's Initial Order, id. at 61,138.

     Reiterating that the CTOC credits for July 1985 forward had

been settled with the 1985 rate case, FERC ordered GSU to refund

amounts relating to revised CTOC credits which had been billed

since November 1987 using the allegedly correct method (as noted,

approximately $4 million annually). Id. at 61,141. Finally, "[t]o

reduce future confusion and uncertainty", FERC directed GSU in each

subsequent   general   transmission    rate   filing   to   delineate

specifically the CTOC credits.    Id. at 61,137.   GSU timely filed

its petition for review of the rulings on the CTOC credits and

Factors APM; the QTF dispute is not before us.

                                 II.

     GSU contends that FERC erred in (1) denying GSU a waiver of

the Factor APM filing requirement; (2) rejecting retroactive (pre-

August 21, 1988) changes to the CTOC credits; and (3) rejecting

CTOC credits for prospective effect (post-August 21, 1988).4

     We will reverse a FERC order "only if [its] decision is

arbitrary, capricious, or otherwise not in accordance with law".

Monsanto Co. v. FERC, 963 F.2d 827, 830 (5th Cir. 1992) (internal

quotation omitted). This includes a determination of "whether each

of the order's essential elements is supported by substantial

4
     Retroactive changes would apply to CTOC credits for the period
from initiation of the CTOC agreement until August 21, 1988 -- 60
days after GSU's filing of these proceedings, see FPA § 205(d), 16
U.S.C. § 824d(d), and imposition of a one day suspension, see 44
F.E.R.C. at 61,971.

                               - 7 -
evidence", and whether FERC "abused or exceeded its authority". In

re Permian Basin Area Rate Cases, 390 U.S. 747, 790, 792 (1968);

see also 5 U.S.C. § 706(2) (governing scope of judicial review of

agency decisions).     "The `ultimate issue in judicial review of

[FERC's]   determinations'     is    the   requirement   of   `reasoned

consideration'".    See Borden, Inc. v. FERC, 855 F.2d 254, 258-59

(5th Cir. 1988).    Furthermore, "[n]o objection to the order of the

Commission shall be considered by the court unless such objection

shall have been urged before the Commission in the application for

rehearing unless there is reasonable ground for failure so to do".

16 U.S.C. § 825l(b); see United Gas Pipe Line Co. v. FERC, 824 F.2d
417, 433-34 (5th Cir. 1987).

                                    A.

     For use with the rates that became effective in 1982, 1985,

and 1986, GSU requested approval of Factors APM different from that

approved in 1981.    Prior to 1988, as a result of using Factors APM

different from that approved in 1981, GSU collected approximately

$3.8 million more than it would have using the approved factor.     It

has been ordered to refund that amount to Cajun.     GSU contends that

"[w]ithout any explanation, [FERC] ignored [GSU's] showing of good

cause" for the waiver of the requirement that Factor APM changes be

filed as rate changes.     Section 205(d) of the Federal Power Act

(FPA), 16 U.S.C. § 824d(d) provides:

           Unless the Commission otherwise orders, no change
           shall be made by any public utility in any [rates
           subject to FERC's jurisdiction] except after sixty
           days' notice to the Commission ....             The
           Commission, for good cause shown, may allow changes

                                 - 8 -
              to take effect without requiring the sixty days'
              notice ....

Because the waiver provisions are committed to FERC's discretion,

GSU must show an abuse of that discretion.                  Hall v. FERC, 691 F.2d
1184, 1191 (5th Cir. 1982), cert. denied, Arkla, Inc. v. Hall, 464
U.S. 822 (1983).

       In the Initial Order denying the waiver, FERC explained that

(1) GSU's failure to comply with the filing requirements was not

excused by the ongoing billing dispute with Cajun, because that

dispute    involved     the    QTFs,     not    Factor      APM;    (2)    contractual

provisions     that    fairly      implied      "some      waiver    of    the     notice

requirements" by Cajun did not contemplate GSU's lengthy delay in

filing the changes; and (3) GSU had been directed to file any

changes to Factor APM.             See 44 F.E.R.C. at 61,970-71.                  In its

Rehearing Order, FERC noted GSU's contentions that denial of a

waiver    would   produce      a     windfall    to     Cajun,      contrary      to   the

contractually established rates, and that Cajun, in the CTOC

agreement, impliedly waived any notice requirements.                              See 59

F.E.R.C. at 61,142. FERC summarily concluded, however, that it did

"not   find    good    cause    to    grant     [GSU's]     request       for    waiver",

explaining      only   that     GSU    "failed        to   abide     by    the     notice

requirement" of which it had been expressly advised.                              Id. at

61,143.

       GSU disputes FERC's determination, and contends that FERC

wholly failed to address its good cause arguments; particularly,

that Cajun had notice of increases and, without protest, paid the

bills containing those increases.                Additionally, GSU emphasizes

                                        - 9 -
that the CTOC agreement provided for the increases and for some

waiver    of   the    notice       requirements   (which,    as    noted,    was

acknowledged by FERC), and that FERC already had approved the

general transmission rates upon which the Factor APM changes were

directly based.

     FERC is vested with discretion in deciding whether to grant

the requested waiver; to find an abuse of that discretion requires

most substantial justification.           We find it here.        GSU has shown

good cause for the waiver, and FERC's summary discussion of the

reasons for its denial does not "set out clearly the ground that

forms the basis for the denial of discretionary relief", Columbia

Gas Dev. Corp. v. FERC, 651 F.2d 1146, 1160 n.18 (5th Cir. 1981),

such that we can determine whether it gave reasoned consideration

to GSU's assertions of good cause.

     A principle purpose of the filing provisions of the FPA is "to

give advance notice of proposed rate changes" to the customer.

Union Texas Prods. Corp. v. FERC, 899 F.2d 432, 433 (5th Cir. 1990)

(reversing the denial of a waiver where, inter alia, the needed

information appeared elsewhere in the general transmission rate

filings).      It does not appear that FERC gave consideration to

whether that purpose was satisfied here.            Not only did Cajun have

actual notice of increases in Factor APM, but there appears to be

no dispute that the proposed changes are provided for by the CTOC

agreement.     Therefore, the emphasis by FERC on GSU's delay of

several   years      in   filing    for   a   different   factor    is   greatly

                                      - 10 -
ameliorated.       In short, the filing could not have come as a

surprise to Cajun.

     In the final analysis, FERC's principal reason for denying the

waiver appears to be the fact that GSU failed to make the required

filings.       But, needless to say, if this were the criteria for

denying    a    filing     waiver,   waiver    would   never    be   granted.

Additionally, GSU's failure to follow FERC's express instructions

to file Factor APM changes does not justify the $3.8 million

penalty which FERC, in effect, seeks to impose for the error.               In

Union Texas, our court stated that "the Commission's punctilious

insistence that the failure to follow its directions in the minor

respect here involved should result in such a disproportionately

heavy   penalty    [$1.8    million]   works    a   manifest   injustice   and

constitutes an abuse of discretion". 899 F.2d at 437.      Although,

arguably, the error involved in Union Texas was more minor than

GSU's, the forfeiture still is not justified.

     Accordingly, we reverse the denial of the waiver.                Because

FERC has not passed on the correct Factor APM to be used in

relation to the 1982 and 1985 rates, we remand for such further

proceedings as it deems appropriate in this regard.

                                       B.

     GSU claims that it discovered that past bills had overstated

the CTOC credits.        As noted, in November 1987, GSU began billing

Cajun using revised (lower) CTOC credits, resulting in Cajun being

charged annually approximately $4 million more; and Cajun has paid

those increased billings to date.             In June 1988, GSU filed the

                                     - 11 -
corrected credits in this proceeding.              At issue are both the pre-

August     21,   1988,   billings     (retroactive)       and    those   billings

subsequent to then (prospective).

                                       1.

      With respect to GSU's proposed retroactive changes to the CTOC

credits, we also reverse.         The dispute appears to involve highly

technical    questions    regarding        the   method   of    calculating   CTOC

credits; the parties do not explain the details in their briefs.

In   its    Rehearing    Order,     FERC    characterized       the   dispute   as

reflecting "substantive questions with respect to the operation of

Service Schedule CTOC", rather than simple "billing errors".                    59

F.E.R.C. at 61,137.       With the exception of the ALJ's hearing in

late 1988, GSU has not been heard on the merits of these questions.

      As noted, FERC's rejection of the proposed changes rests

solely on its determination that the CTOC credits were settled with

the respective general transmission rate cases.                  Initially, FERC

determined that the express exclusion of the "existing billing

dispute" in the 1987 settlement did not refer to the present

dispute.    Id. at 61,138.    It then reasoned (1) that Cajun may have

reasonably expected the methodology for calculating CTOC credits to

remain the same in the 1985 filing as in the 1982 filing; (2) that

Cajun may have reasonably anticipated the approximate revenue

impact of the settlements, including the CTOC credits; (3) that the

magnitude of the proposed revisions would "completely undo[] the

balancing of interests" that underlay FERC's approval of the

settlements as fair and reasonable and in the public's interest;

                                     - 12 -
and (4) that particular CTOC credits were included in the general

transmission rate filings as components of the "CTOC Adjustment" in

the cost of service used to determine GSU's basic rates to all of

its transmission customers.               Id. at 61,140-41 & n.74.

       GSU    contends    that       the    express      exclusion     in     the   1987

settlement, see supra note 3, did reference the present dispute.

It further contends that the record is devoid of evidence that the

settlements included any mention of particular CTOC credits or that

they   were    based     on   any    assumptions         about   the   CTOC    credits.

Finally,      GSU   asserts     that       the   filed    rate   doctrine      mandates

correction of the alleged errors.5

       As an initial matter, we find substantial evidence to support

FERC's conclusion that the present dispute was not expressly

excluded by the 1987 settlement. In making its determination, FERC

closely examined the relevant evidence, including Cajun's protest

to GSU's refund compliance report in the 1985 rate case, FERC's

letter   order      rejecting       the    initial    refund     compliance     report,

Cajun's complaint in the QTF dispute, and GSU's answer in that

dispute.      We need not restate FERC's reasoning with respect to

each; it thoroughly considered and discussed the evidence, and we

find its conclusions reasonable.                 Perhaps most persuasive is the

fact that GSU's claimed errors were assertedly not even discovered

until after execution of the settlement in 1986, approved by FERC

5
     FERC contends that because GSU failed to specify the filed
rate doctrine as a basis for its position on rehearing, it is
jurisdictionally barred from raising it here. We need not address
this contention, because we do not rely on that doctrine as a basis
for our holding.

                                           - 13 -
in January 1987.     (As noted, GSU did not begin billing with the

revised CTOC credits until November 1987.)

     That the present dispute was not expressly excluded by the

1987 settlement, however, does not resolve whether the CTOC credits

were settled (fixed) by either the 1983 or 1987 settlements.            In

its Rehearing Order, FERC acknowledged that "[GSU] has never been

required by the terms of Service Schedule CTOC or by the Commission

to explicitly file the CTOC credits", 59 F.E.R.C. at 61,136, and

that "until the filing in this proceeding CTOC credits have never

been explicitly filed with the Commission as a numerical component

of the stated rate", id. at 61,135.           It would seem unlikely,

therefore, that either settlement would include reference, either

express or implied, to the CTOC credits in issue.

     FERC's first three reasons for holding that the CTOC credits

were included in the settlements constitute mere speculation.

First, FERC's conclusion that "it is not unreasonable to conclude"

that the CTOC credits would be calculated under the 1985 rates

using the same method that was used to calculate them under the

1982 rates, 59 F.E.R.C. at 61,140, does not address whether Cajun

actually made   or   relied   upon   any   such   conclusion   during   the

settlement negotiations.      Moreover, this logic merely bootstraps

onto an assumption that changes based on the 1982 rates should be

rejected.   Second, FERC's determination that "it is reasonable to

assume" that Cajun, in entering into the settlements, "anticipated

the approximate revenue impact, after netting of the CTOC credits",

id., similarly constitutes speculation in the absence of evidence

                                 - 14 -
that any such anticipation occurred or was relied upon.         Finally,

the bare statement that the magnitude of the proposed changes

renders    them   inconsistent   with     FERC's   acceptance      of   the

settlements, id. at 61,141, is unsupported by any evidence that

assumptions regarding the amount of the CTOC credits somehow

underlay the settlements, and is most questionable in light of

FERC's own explanation that CTOC credits can be determined only

after the general transmission rates are fixed (settled).6         We find

no evidence, and FERC points to none, that any of these assumptions

were actually made or relied upon.

     The only concrete basis for FERC's determination that the CTOC

credits were settled with the rate cases is its conclusion that

they were included in the settled rates as components of the CTOC

Adjustment, which comprises part of GSU's general transmission

rates.    In its Initial Order, FERC noted that although GSU was not

6
     In its Rehearing Order, FERC         explained   the   CTOC    credit
calculation process as follows:

            [E]ach time a change in the basic transmission rate
            is accepted or approved, under Service Schedule
            CTOC an associated CTOC credit should be derived
            based upon the cost assumptions used to develop the
            basic transmission rate. If [GSU's] proposed basic
            transmission rate is contested and subsequently
            modified (for example, pursuant to a settlement
            agreement), under Service Schedule CTOC the CTOC
            credit should likewise be modified. Although ...
            CTOC credits are a stated amount on each month's
            transmission bill sent to Cajun, until the filing
            in this proceeding CTOC credits have never been
            explicitly filed with the Commission as a numerical
            component of the stated rate.

59 F.E.R.C. at 61,135 (emphasis added). Thus, no CTOC credit can
be determined until after the general transmission rates are fixed.

                                 - 15 -
required to file the CTOC credits, the data it submitted in support

of its proposed general transmission rates incorporated "a Cajun

rate reflecting only low voltage facilities" (i.e., the general

transmission rate less the CTOC credits).               44 F.E.R.C. at 61,972.

In its Rehearing Order, FERC explained that "[p]articular CTOC

credits were incorporated within the cost of service associated

with the proposed [general transmission] rates", in that "the CTOC

credits are a component of a `CTOC Adjustment' in the cost of

service used to determine [GSU's] basic rates to all of its

transmission customers".          59 F.E.R.C. at 61,140 & n.74 (emphasis

added).

       GSU asserts that only the formula for determining the CTOC

Adjustment is stated.          FERC explained that the CTOC Adjustment is

"the     difference     between     Cajun's      CTOC    credits     and    Cajun's

equalization payments" -- in other words, the net credit given

Cajun for its ITS investment.              Id. at 61,140 n.74.        GSU asserts

that application of this formula in turn necessarily requires

calculation     of    actual    CTOC   credits    (which,     as   noted,    can   be

determined only after the general transmission rates are fixed) and

actual equalization charges (which, as noted, are determined only

after    each   year-end       true-up).      Thus,     GSU   argues,      the   CTOC

Adjustment is by definition an estimate, in that both the CTOC

credits and the equalization charges are determined through formula

rates.

       FERC does not respond to this contention, nor does it cite any

record support in its brief.            The Rehearing Order cited only the

                                       - 16 -
testimony of GSU witness James E. Striedel, see 59 F.E.R.C. at

61,140 n.74, which establishes only the formula described above.

At the December 1988 hearing before the ALJ, Striedel was asked,

"How are the CTOC credits reflected in ... the cost of service of

GSU's ... customers?"        He explained the formula and replied, "That

net credit or what is called the CTOC adjustment is allocated as a

part of the cost of service to all customers ...".

      In his prepared testimony submitted to FERC, Striedel again

was   asked:     "How   does     [GSU]   reflect    the   CTOC    credits   and

equalization charge payments in determining the rates to its other

customers?"      He replied: "The net credit received by Cajun is a

transmission service cost and is included in [GSU's] cost of

service studies and allocated to all jurisdictions which utilize

the integrated transmission system. This net credit given to Cajun

is called the CTOC Adjustment in [GSU's] cost of service."             He also

explained that, in addition to removing GSU's revenue requirements

for the ITS, the CTOC credits "should further act to remove the

CTOC Adjustment" from Cajun's bills.                As GSU points out, the

testimony makes no reference to what was actually filed with FERC

or included in the settlement agreements. Furthermore, no specific

CTOC credits nor any methodology for determining them is mentioned.

      FERC     failed   to     support   with     substantial    evidence   its

determination that the CTOC credits in issue were included in any

way in the respective settlements.              Accordingly, we reverse.     On

remand, GSU must be accorded a determination on the merits of the

"substantive questions with respect to Service Schedule CTOC"

                                     - 17 -
presented by its allegations that the CTOC credits were calculated

erroneously       prior    to     November    1987.        The     result    of     that

determination should then be applied retroactively to January 1,

1982, when the CTOC agreement first took effect.

                                         2.

      Our reasons for reversal with respect to retroactive changes

to the CTOC credits apply with equal force to prospective (post-

August 21, 1988) changes, but additional factors weigh heavily in

favor of GSU on this issue.            Foremost is FERC's nearly four-year

delay    in   resolving     this    dispute,    which      would    have     cost    GSU

approximately $16 million.7           Although FERC's instruction to GSU to

file CTOC credit changes with its general transmission rate filings

will avoid future disputes, that instruction was not in place in

1988.    Moreover, the errors GSU seeks to correct allegedly are

independent of the "methodology, procedures and data" used as the

basis for the rates on file, such that a new general transmission

rate filing would be unnecessary to correct them.

      Previously, GSU had not been obligated to file CTOC credits

either    under    the    CTOC     agreement    or    by    FERC.         Substantial

disagreement was ongoing with respect to related aspects of the

agreement; specifically, the QTF dispute.                  Finally, the ALJ had

handed down a favorable ruling on the merits of the billing dispute

in   1989.     Under      these    circumstances,     GSU    had     no     reason    to

7
     As noted, the amount in controversy with respect to the
alleged billing errors for CTOC credits is approximately $4 million
annually. As also noted, since November 1987, Cajun has paid the
revised CTOC credits.

                                       - 18 -
anticipate that a new filing of its general transmission rates

would be required in order to resolve the present dispute.     For

these reasons, we reverse FERC's refusal to consider the changes

prospectively.

                                III.

     In sum, we hold that FERC reversibly erred in denying GSU a

waiver of the filing requirement with respect to the pre-1988

Factor APM changes, and in refusing to consider GSU's requested

changes, both retroactive and prospective, to the CTOC credits.

The correctness of the proposed CTOC credit changes under the

contract and of the proposed Factors APM in relation to the 1982

and 1985 filed rates are issues to be resolved on remand.

     For the foregoing reasons, FERC's orders are REVERSED, and the

case is REMANDED for further proceedings consistent with this

opinion.

                 REVERSED and REMANDED.

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