Court Opinion

ID: 773708
Source: CourtListenerOpinion
Date Created: 2012-04-18 11:35:58+00
Date Added: 2024-06-11T09:33:34.178642
License: Public Domain

254 F.3d 289 (D.C. Cir. 2001)
Canadian Association of Petroleum Producers, Petitionerv.Federal Energy Regulatory Commission, RespondentInland Pacific Energy Services Corporation, et al., IntervenorsCanadian Association of Petroleum Producers, et al. Petitionersv.Federal Energy Regulatory Commission, RespondentNorthwest Pipeline Corporation, et al., Intervenors
No. 96-1336, 97-1343, 99-1488, 00-1019, 00-1391, and 00-1399
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 9, 2001Decided July 13, 2001

[Copyrighted Material Omitted]
On Petitions for Review of Orders of the Federal Energy Regulatory Commission
James H. Holt argued the cause for petitioner Canadian  Association of Petroleum Producers and supporting intervenors Northwest Natural Gas Company, et al. in No. 96-1336. With him on the briefs were Jill M. Barker, Robert A.  Nelson, Jr. and Paula E. Pyron. Sandra E. Rizzo and  Edward A. Finklea entered appearances.
Robert A. Nelson, Jr. argued the cause and filed the briefs  for petitioner Northwest Natural Gas Company in No.  97-1343.
Judith A. Albert, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent in Nos. 96-1336  and 97-1343.  With her on the brief were Jay L. Witkin,  Solicitor at the time the brief was filed, and Susan J. Court, Special Counsel. Janet K. Jones, Attorney, entered an appearance.
Alex A. Goldberg argued the cause for intervenor Northwest Pipeline Corporation in Nos. 96-1336 and 97-1343. With him on the brief was Steven W. Snarr.
Robert A. Nelson Jr. argued the cause for petitioners in  No. 99-1488 et al.  With him on the briefs were Edward A.  Finklea and James H. Holt.
Judith A. Albert, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent in No. 99-1488  et al.  With her on the brief was Dennis Lane, Solicitor.  Susan J. Court, Special Counsel, entered an appearance
Alex A. Goldberg argued the cause for intervenor Northwest Pipeline Corporation in No. 99-1488 et al.  With him on  the brief were Steven W. Snarr and Timothy Muller.
Before:  Williams, Ginsburg and Rogers, Circuit Judges.
Williams, Circuit Judge:

1
On October 1, 1992 Northwest  Pipeline Corporation ("Northwest") filed for a general rate  increase under 4 of the Natural Gas Act, 15 U.S.C. 717c,  to cover costs associated with a previously authorized expansion of its natural gas pipeline facilities.  The Federal Energy  Regulatory Commission rejected certain proposed tariffs, accepted and suspended other proposed tariffs subject to refund, and set an evidentiary hearing.  Almost a decade later,  in two different consolidated cases, petitioners are seeking  review of the relevant rate increase, which because of later  filings by Northwest was in effect only from April 1, 1993  through October 31, 1994.

2
One of the cases involves issues that were resolved before  we remanded to the Commission to consider the effect of a  Commission policy change, the other involves issues resolved  in the course of that remand.  The first, Nos. 96-1336 and  97-1343 concerns five orders, the last of which issued in  1997.1  The next year, in another proceeding, the Commission shifted positions on an important issue relating to the  equity rate of return.  See Transcontinental Gas Pipe Line  Corp., 84 FERC p 61,084 at 61,423 (1998), order on reh'g, 85  FERC p 61,323 (1998), aff'd sub nom. North Carolina Utilities Comm'n v. FERC, 203 F.3d 53 (D.C. Cir. 2000) (unpublished opinion).  Because of that shift, we remanded another  case to the Commission for consideration of its possible effect. Williston Basin Interstate Pipeline Co. v. FERC, 165 F.3d  54, 62-63 (D.C. Cir. 1999).  The Commission then sought a  remand in this case, which we granted.

3
The later consolidated case, No. 99-1488 et al., involves the  five orders issued after the remand.2  On July 14, 1999 the  Commission promulgated the first such order, finding that  Northwest was entitled to a re-weighting of the shortand  long-term growth rates in the equity return calculation.  88  FERC p 61,057 (1999) ("Initial Post Remand Order").  The  Commission ordered Northwest to file a recalculation of its  rates, a plan to impose surcharges to recover excess refunds  under the previous rates, and pro forma tariff sheets that  established the appropriate surcharges.  Id. at 61,146.  The  Commission denied requests for rehearing.  88 FERC  p 61,298 (1999) ("Initial Post Remand Order on Rehearing"). Northwest filed its tariff sheets in August 1999, using for its  rate of equity return the median rate of the proxy group.  On  February 11, 2000 the Commission rejected Northwest's compliance filing because it used the wrong long-term growth  rate, but approved its use of the median return on equity,  stating that current Commission policy required the Commission to select the median of the range of reasonable returns  on equity instead of the midpoint that had been used earlier  in the rate-making proceeding.  90 FERC p 61,146 at 61,468 69 (2000) ("Median Rate Order").  The parties then agreed to  a long-term growth rate.  The Commission denied rehearing  on the median rate issue.  92 FERC p 61,038 (2000) ("Median  Rate Order on Rehearing").

4
Two parties, Northwest Natural Gas Company ("Northwest  Natural"), a buyer of Northwest's gas, and the Canadian  Association of Petroleum Producers ("CAPP"), a representative of buyers, assert a variety of errors in the Commission's  decisions.  We review the Commission's determinations under  the Administrative Procedure Act's arbitrary and capricious  standard.  See Missouri Public Service Comm'n v. FERC,  215 F.3d 1, 3 (D.C. Cir. 2000);  5 U.S.C. 706(2)(A).  We  dismiss one claim for want of jurisdiction, we reverse and  remand with respect to another claim, and we affirm on the  remaining issues.  All of the petitioners' claims not addressed  here have been considered and rejected.

5
*  *  *

6
The "just and reasonable" rates calculated by the Commission under 15 U.S.C. 717c(a) are typically based on a  pipeline's costs.  Because several of the issues here revolve  around one component, the cost of equity capital, we pause  briefly to explain it.  Each year that a durable utility asset is  in use imposes on the utility the annual cost of the capital  used for its construction (net of amounts already recovered in  depreciation charges).  In order to attract capital, a utility  must offer a risk-adjusted expected rate of return sufficient  to attract investors.  This return to investors is the cost to  the utility of raising capital.  For the portion of capital  acquired through bonds, the cost is comparatively easy to  compute--the interest the company must pay its bondholders. Common equity is more complicated, for equity investors do  not have a legally fixed return.  To calculate the rate of  return necessary to attract them, the Commission measures  the return enjoyed by the company's equity investors by the  discounted cash flow ("DCF") model, which assumes that a  stock's price is equal to the present value of the infinite  stream of expected dividends discounted at a market rate

7
commensurate with the stock's risk.  With simplifying assumptions, this can be summarized by the formula

P = D/(r-g)

8
where P is the price of the stock at the relevant time, D is the  dividend to be paid at the end of the first year, r is the rate of  return and g is the expected growth rate of the firm.  See  Illinois Bell Telephone Co. v. FCC, 988 F.2d 1254, 1259 (D.C.  Cir. 1993);  see also A. Lawrence Kolbe et al., The Cost of  Capital:  Estimating the Rate of Return for Public Utilities  53-55 (1984).  Since r is what the Commission is seeking, the  equation is rearranged to the form

9
r = D/P + g

10
Illinois Bell, 988 F.2d at 1259.

11
For a company that is not publicly traded, marketdetermined figures for P and D will be missing, and the  Commission has recourse to calculating the implicit rate of  return on companies that are comparable (or at least companies whose business is predominately the operation of natural  gas pipelines) and publicly traded.  These companies are  called the "proxy group."  The Commission then makes adjustments for specific characteristics of the company whose  rates are in question.  Here, one of the issues involves a  contention that Northwest's business risk was comparatively  low (so that, petitioners argue, the Commission should have  chosen a rate at the low end of those of the proxy group). Another issue involves calculation of the expected growth  rates for the proxy group.  And a third, assuming that  Northwest belongs in the middle of the proxy group, involves  how to pick a number best representing the middle.

12
*  *  *

1. Inclusion of Over-Run Costs in Rate Base

13
In its expansion project Northwest added considerable  mainline pipeline and compressor facilities and services.  Its  original filing included $371.2 million in project costs but it  ultimately persuaded the Commission to include about $61  million more.  Because of decisions adverse to Northwest on

14
other issues, the rates approved were lower than those for  which it had originally filed.  See 71 FERC p 61,253 at  61,992-95 (1995)("Opinion No. 396"), reversed in part and  remanded, 76 FERC p 61,068 at 61,420-24 (1996) ("Opinion  No. 396-A").

15
Northwest Natural claims that Northwest should not be  permitted to incorporate into its rate base costs that were not  included in its original filing.  Its back-up position is that  even if consideration of those costs was proper, the Commission should have reopened proceedings to consider its claim  that about $48 million in costs was not actually paid within  the "test period" (twelve consecutive months used, with adjustments, in estimating a pipeline's costs) and should have  been excluded.

16
On the first claim, Northwest Natural argues that an  earlier Commission decision, Natural Gas Pipeline Co. of  America, 38 FPC 1136 (1967), governs how the Commission  must deal with cost figures that differ from those of the initial  filing.  It places special reliance on a phrase of that decision  saying that the regulations "bind Natural to its case-in-chief  as submitted."  Id. at 1148.  The phrase is indeed there, but  the Commission went on to make clear that there was no flat  rule against new data;  instead it performed a contextual  analysis.  There (1) the evidence did not fit the very limited  subject of the hearing;  (2) because of that disjuncture there  was a risk that other parties would reasonably assume that  the evidence would not be considered (and accordingly these  parties would lack effective notice);  and (3) the new cost  evidence in fact did not meet the Commission's requirement  that changes in costs after the test period be "known and  measurable."  Id. at 1148-50 (internal quotation omitted). None of these characteristics was present here.  The Commission found that because Northwest's revised costs were  disclosed prior to the filing of direct testimony in the hearing  before the Administrative Law Judge, that the parties had  ample notice of the cost claims, and that such claims, though  estimates, were known and measurable.  See Opinion No.  396-A, 76 FERC at 61,423-24.

17
In its second claim Northwest Natural argues that the  Commission unlawfully refused to reopen proceedings to hear  its claim that Northwest had not actually paid all of the  expansion costs within the test period.  The claim has two  strikes against it.  First, although Northwest Natural was  aware of the change in plant costs well before direct testimony was filed in the ALJ hearing, it failed to raise the issue  there, and did not do so until the record closed.  Id. at 61,420. Northwest Natural's justification for the delay, if any, is  obscure.  Second, Northwest Natural's position on the merits  depends on its effort to transform the Commission's general  practice of not including costs paid after the test period into  an absolute bar.  But the Commission has discretion to  consider costs outside of the test period.  See, e.g., Exxon  Corp. v. FERC, 114 F.3d 1252, 1263 (D.C. Cir. 1997).  Here it  is uncontested that Northwest placed the expansion facilities  in service before the end of the test period, i.e., just before  the start of the period for which the rates were charged. Payment in some cases occurred after the end of the test  period, but only because some bills had not been paid by that  day, some incurred costs had not been billed, and some sums  were withheld by Northwest pending final completion of the  work.  See Nos. 96-1336 and 97-1343, Joint Appendix  ("J.A.") at 390.

18
Northwest Natural also claims discriminatory treatment in  the Commission's reopening refusal, as the Commission did  reopen proceedings to consider the long-term growth projections.  But it did so exclusively in light of its own intervening  decision in Ozark Gas Transmission System, 68 FERC  p 61,032 at 61,105 (1994), announcing a new policy to include  such projections.  Such an effort by the Commission to  assure that it applies similar principles in simultaneously  pending cases may be obligatory.  See Williston Basin, 165  F.3d at 61-63.  It supplies, in any event, an ample basis for  the Commission's different treatment of the two requests for  reopening.  Cf. American Financial Services Ass'n v. FTC,  767 F.2d 957, 964-65 n.5 (D.C. Cir. 1985) (noting Commission  discretion to reject belated claims).

2. Assessment of Northwest's Business Risk

19
As part of its process to determine Northwest's rate, the  Commission assessed Northwest's costs of capital.  This estimation required, under the DCF method that the Commission  used, calculating the implicit equity rate of return for a proxy  group of supposedly similar corporations, and then determining where Northwest belonged within that group, in large  part on the basis of Northwest's business risk.  CAPP complains that the Commission didn't adequately consider evidence suggesting that Northwest's business risk was in fact  lower than the average of the proxy group, so that it erred in  assigning Northwest a rate based on the middle of the proxy  group range.  CAPP's theory was that Northwest was more  like the "pure" pipeline companies within the proxy group,  which had lower rates of return, than like the companies with  more diversified operations.  We do not review the merits of  CAPP's petition because it is procedurally barred.

20
Four of the Commission's orders prior to our remand are  relevant.  We start with a very simple summary of each  relevant order, what it did, and the nature of CAPP's petition  for rehearing in the instances where it filed one.

21
Opinion No. 396.  The Commission rejected CAPP's contention that Northwest's business risk was below the average of the proxy group.  71 FERC p 61,253 at 61,992 (1995).  CAPP petitioned for rehearing, raising the issue of business risk.

22
Opinion No. 396-A. The Commission remanded the matter to the ALJ for development of a record on longterm growth rates.  76 FERC p 61,068 at 61,419 (1996). It said nothing at all about the business-risk issue. CAPP did not seek rehearing, but petitioned for review in this court of both Opinion No. 396 and Opinion No. 396-A.

23
Opinion No. 396-B. Following the proceedings before the ALJ, the Commission identified a new range of rates for the proxy companies and selected the mid-point of that range as appropriate for Northwest.  79 FERC p 61,309 at 62,384-86 (1997).  Northwest sought rehear ing in a petition that did not mention the business risk issue.

24
Opinion No. 396-C. The Commission disposed of the petitions for rehearing.  81 FERC p 61,036 (1997). Northwest petitioned for review here.

25
The Commission argues that neither of the first two opinions, No. 396 or No. 396-A, was final, which is a prerequisite  to our review.  See Transwestern Pipeline Co. v. FERC, 59  F.3d 222, 226 (D.C. Cir. 1995).  That seems obvious for  Opinion No. 396-A, as it remanded the matter to an ALJ. See id. ("An order is considered final when it imposes an  obligation, denies a right, or fixes some legal relationship,  usually at the consummation of an administrative process.")  (internal quotation omitted).  Opinion No. 396 was presumably a final decision when issued, but when CAPP sought  rehearing under 19(a) of the Natural Gas Act, 15 U.S.C.  717r(a) (as it was required to do if it wished to preserve its  right to appeal, see 19(b), 15 U.S.C. 717r(b)), its petition  suspended the finality of Opinion No. 396 as applied to CAPP  and precluded appeal until the Commission fully resolved the  rehearing request by way of another final order.  See Tennessee Gas Pipeline Co. v. FERC, 9 F.3d 980, 980-81 (D.C.  Cir. 1993).  Cf. Bellsouth Corp. v. FCC, 17 F.3d 1487, 1489-90  (D.C. Cir. 1994). Because Opinion No. 396-A itself was nonfinal, CAPP's petition for review of both decisions was jurisdictionally defective.

26
CAPP did, however, seek review of Opinion No. 396-C,  thereby bringing up issues properly preserved from Opinion  No. 396-B. But was the business risk issue, raised only on  rehearing of Opinion No. 396, preserved?  Section 19(b)'s  rehearing requirement itself applies "not to the issue involved, but to the order that comes before us for review." Kansas Cities v. FERC, 723 F.2d 82, 85 (D.C. Cir. 1983)  (construing materially identical language in 313(a) of the  Federal Power Act);  see also Arkansas Louisiana Gas Co. v.  Hall, 453 U.S. 571, 577 n.7 (1981) (discussing established  practice of citing interchangeably provisions of the Natural  Gas Act and the Federal Power Act that are substantially identical in all material respects).  As our review applies only  to final orders, all appealable claims must generally be set  forth in a petition for review of the final order itself.  Of  course, a party that has petitioned for rehearing and seen its  petition denied without significant modification to the order  may then proceed directly to court without filing a new  petition for rehearing of the denial;  imposing an additional  rehearing requirement in this situation would lead to infinite  regress and serve no useful end.  See Town of Norwood v.  FERC, 906 F.2d 772, 775 (D.C. Cir. 1990);  Southern Natural  Gas Co. v. FERC, 877 F.2d 1066, 1072-73 (D.C. Cir. 1989); see also Kansas Cities, 723 F.2d at 86.  Similarly, if a party  properly seeks rehearing and secures modification of some  parts of an order, it may go directly to court on the issues as  to which there was no modification without seeking rehearing  again on those issues;  only on matters where the rehearing  order introduces a new source of complaint need the party  file another rehearing petition.  Norwood, 906 F.2d at 775; Tennessee Gas Pipeline Co. v. FERC, 871 F.2d 1099, 1109-10  (D.C. Cir. 1989).  And we will assume without deciding that if  a party does raise such new issues on rehearing it need not  include its old complaints about the unmodified parts.

27
In the present case, however, several stages of agency  review and modification separate Opinion No. 396-B from  CAPP's petition for rehearing of Opinion No. 396--proceedings before the ALJ on the long-term/short-term weighting  issue, followed by Commission resolution of that issue and its  selection of a new equity rate of return for Northwest. Enforcement of the rehearing requirement in this context  serves not merely to inform the Commission of issues that  may be appealed, but ensures certainty in the dispute process, apprising potentially settling parties of what issues  remain contested.  See ASARCO, Inc. v. FERC, 777 F.2d  764, 773-74 (D.C. Cir. 1985).  We note, moreover, that CAPP  does not argue, nor do we see any basis for finding, that its  failure to preserve its right to appeal was justified under the  "reasonable ground" exception to Section 19(b)'s rehearing  requirement.  Accordingly, CAPP's petition is dismissed for  lack of jurisdiction.

28
3. Weighting of Shortand Long-Term Growth Rates.

29
On remand, the Commission changed the weighting of  shortand long-term growth rates, now giving short-term  rates twice the weight of long-term ones, rather than weighting them equally as before.  The petitioners claim that the  Commission failed to explain its decision generally or to  distinguish Ozark Gas Transmission System, 68 FERC  p 61,032 (1994), where the Commission approved an equal  weighting of all years of an 18-year period.  Id. at 61,107  n.46.  To explain its decision, the Commission quoted its  reasoning in Transcontinental Gas Pipe Line Corp., 84  FERC p 61,084 at 61,423 (1998):

30
[W]hile determining the cost of equity nevertheless requires that a long-term evaluation be taken into account, long-term projections are inherently more difficult to make, and thus less reliable, than short-term projections. Over a longer period, there is a greater likelihood for unanticipated developments to occur affecting the projection.  Given the greater reliability of the short-term projection, we believe it is appropriate to give it greater weight.  However, continuing to give some effect to the long-term growth projection will aid in normalizing any distortions that might be reflected in short-term data limited to a narrow segment of the economy.

31
Initial Post Remand Order, 88 FERC at 61,144;  see also  Initial Post Remand Order on Rehearing, 88 FERC at 61,910. The Commission was obviously aware that the apparent  relative reliability of short-term growth projections (due to  temporal proximity) was to some degree offset by variability; it decided to use the long-term projections to "normaliz[e] any  distortions" in the short-term expectations.  In an exercise so  hard to limit by strict rules, it would likely be difficult to show  that the Commission abused its discretion in the weighting  choice.  Certainly petitioners offer no reason for us to find  that it has done so here.  Its reason for giving extra weight  to the short-term estimates implicitly justified its change  from Ozark.

32
4. Choice of the Median Rate of Return on Equity.

33
On remand the Commission also changed its method of  selecting an equity rate of return from the array of rates of  the proxy group.  Before the remand it had chosen the  "midpoint" rate of the group--the average of the single  lowest and single highest rates.  See Tennessee Gas Pipeline  Co. v. FERC, 926 F.2d 1206, 1213 (D.C. Cir. 1991) (stating  that the midpoint is a "starting place").  When Northwest  submitted its pro forma tariff sheets as mandated by the  Commission's July 14, 1999 order, however, it recalculated its  rates using the median of the proxy group (the middle rate  out of the five), which the Commission approved.  See Median Rate Order, 90 FERC at 61,468.  When the shortand  long-term growth rates had been equally weighted, the midpoint rate was higher than the median rate, leading to a  higher overall pipeline rate.  With the change in weighting,  the reverse was true.  See Median Rate Order on Rehearing,  92 FERC at 61,095, 61,101.  Petitioners estimate that the  difference between the midpoint (13.33%) and median  (13.67%) spells $3.2 million in added charges.  They raise two  objections.  First, they claim that the Commission had no  authority to reconsider how it selected a rate from the proxy  group under the scope of our remand.  Second, they argue  that the Commission's choice of the median was unreasonable.

34
We remanded to the Commission to enable it "to reconsider  its decisions in light of Williston Basin v. FERC, 165 F.3d 54  (D.C. Cir. 1999)."  See Canadian Ass'n of Petroleum Producers v. FERC, No. 96-1336 (D.C. Cir. Mar. 26, 1999) (order  remanding case), Petitioners' Br. at Addendum B.  This  prescribed affirmatively what the Commission was required  to do--reconsider the weighting issue that was directly affected by Williston.  But under our cases such a remand restores  jurisdiction to the Commission and "discretion to reconsider  the whole of its original decision."  Southeastern Michigan  Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir. 1998).  Because  the Commission was within its authority to reconsider which  rate of return to use, we reach the question whether the Commission provided a reasoned explanation for choosing the  median over the midpoint or alternatively the mean.

35
The Commission's orders and brief speak only to the choice  between median and midpoint.  Its orders pointed to the  Transcontinental decision, where, besides changing the  weighting of shortand long-term growth factors, it also  selected the median instead of the midpoint.  But it supplied  only the most limited reasoning there.  See Transcontinental  Gas Pipe Line Corp., 84 FERC at 61,427-5.  The Commission essentially reiterated its Transcontinental reasoning in  this case:

36
[U]se of the median gives consideration to more of the proxy company numbers.  The median is the point at which half of the numbers are higher and half are lower. The midpoint, on the other hand, merely represents an average of the highest and lowest of the numbers and completely disregards the middle three numbers.

37
Median Rate Order on Rehearing, 92 FERC at 61,095.

38
To a large extent this "explanation" merely describes the  differences in calculating the median and the midpoint.  Insofar as it seeks to justify on the basis of the number of  numbers considered, it is not wholly accurate.  The midpoint  doesn't "completely disregard[ ] the middle three numbers"; the highest and lowest numbers achieve their status by  reference to all five numbers.  But even if acceptable as an  explanation for choosing the median over the midpoint, it fails  as an explanation for rejecting petitioners' proposal that the  Commission use the simple arithmetic mean (either of all five,  or of the middle three companies of the proxy group).  See  No. 99-1488 et al., J.A. at 105, 171, 192-93. The mean of the  five, after all, rather directly "uses" all the numbers and  weights them all equally, as petitioners pointed out.  Id. at  192-93.

39
The Commission simply dismissed the alternative proposal  in conclusory terms.  See Median Rate Order, 90 FERC at  61,468;  Median Rate Order on Rehearing, 92 FERC at  61,094.  Counsel for Northwest suggested at oral argument that there was Commission precedent for the view that the  median is to be preferred to the average "as a [measure] of  central tendency in cases in which the distribution is highly  skewed."  See No. 99-1488 et al., Oral Arg. Tr. at 22.  But  the Commission never offered such an explanation, and counsel did not offer an analysis of Commission precedents from  which we could infer that the "skewing" here was such that  choice of the median was foreordained.  See SEC v. Chenery  Corp., 332 U.S. 194, 196 (1947);  cf. Health & Medicine Policy  Research Group v. FCC, 807 F.2d 1038, 1045 (D.C. Cir. 1986).

40
The Commission's failure to respond meaningfully to calls  for using an average rate of all or of three of the proxy group  companies renders its decision to use the median rate arbitrary and capricious.  See City of Brookings Municipal  Telephone Co. v. FCC, 822 F.2d 1153, 1169 (D.C. Cir. 1987). Unless the Commission answers objections that on their face  seem legitimate, its decision can hardly be classified as reasoned.  See International Harvester Co. v. Ruckelshaus, 478  F.2d 615, 648 (D.C. Cir. 1973);  see also Tesoro Alaska  Petroleum Co. v. FERC, 234 F.3d 1286, 1294 (D.C. Cir. 2000). We thus reverse and remand the case to the Commission for  reconsideration of its choice of the proxy group's median rate.

5. Imposition of Surcharges

41
The Commission determined on remand that it had improperly reduced Northwest's rates in its first series of orders and  consequently ordered Northwest to impose surcharges to  recover those excess refunds from its shippers.  Petitioners  claim that the surcharges violated the filed rate doctrine,  "which forbids a regulated entity to charge rates for its  services other than those properly filed with the appropriate  federal regulatory authority," Arkansas Louisiana Gas Co.,  453 U.S. at 577, and are thus unauthorized.  Petitioners make  no claim that the ultimately effective rate (net of refunds and  surcharges) exceeded that of Northwest's original filing.

42
Petitioners rely on Natural Gas Clearinghouse v. FERC,  965 F.2d 1066 (D.C. Cir. 1992), to argue that Northwest could  not collect surcharges unless it had explicitly reserved its right to impose surcharges under the tariffs that produced  the refunds.  But petitioners read too much into Clearinghouse.  Although the pipeline in that case had specifically  reserved the right to impose surcharges when it was ordered  to file a new, lower tariff, we did not hold that such a  reservation was necessary.  So long as the parties had adequate notice that surcharges might be imposed in the future,  imposition of surcharges does not violate the filed rate doctrine.  "The filed rate doctrine simply does not extend to  cases in which buyers are on adequate notice that resolution  of some specific issue may cause a later adjustment to the  rate being collected at the time of service."  Id. at 1075.  (It  is not even clear that the refunds were paid during the period  service was actually being provided under the "locked-in" rate  at issue here.  But petitioners lose whether they were or  were not.)  The Commission reasonably concluded that  Northwest's initial rate filing--combined with the ongoing  litigation and absence of a final, non-appealable order--provided the necessary notice to the shippers that they might  have to pay rates up to the level originally filed.  See Western  Resources, Inc. v. FERC, 72 F.3d 147, 151 (D.C. Cir. 1995).

43
*  *  *

44
CAPP's petition for review is dismissed for want of jurisdiction on the business-risk issue.  The case is reversed and  remanded to the Commission for further consideration of the  selection of the median rate of return on equity from the  proxy group.  Otherwise, the petitions are denied.

45
So ordered.

Notes:

1
  The five are:  Opinion No. 396, 71 FERC p 61,253 (1995); Opinion No. 396-A, 76 FERC p 61,068 (1996);  78 FERC p 61,289  (1997);  Opinion No. 396-B, 79 FERC p 61,309 (1997);  Opinion No.  396-C, 81 FERC p 61,036 (1997).  Unless stated otherwise, all  FERC orders cited in this decision have the title "Northwest  Pipeline Corporation."

2
  88 FERC p 61,057 (1999);  88 FERC p 61,298 (1999);  89  FERC p 61,238 (1999);  90 FERC p 61,146 (2000);  92 FERC  p 61,038 (2000).