Court Opinion

ID: 9456369
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:50:41.992176+00
Date Added: 2024-06-11T17:34:57.063356
License: Public Domain

BAZELON, Chief Judge
(dissenting):
I would reverse Order No. 900 for at least two of the reasons advanced by Petitioner.1
I.
These proceedings were initiated by the Washington Metropolitan Area *182Transit Commission under Section 6(b) of its enabling Compact.2 There is serious question, however, whether the Commission may institute a proceeding for the purpose of raising tariff rates. Section 6(b) allows the Commission “upon complaint, or upon its own initiative,” to adjust fares in order to protect the public against an “unjust, unreasonable or unduly discriminatory” tariff. Section 5 of the Compact allows the carrier to seek rate increases to preserve its financial integrity.3
In F.P.C. v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956), the Power Commission had instituted proceedings under provisions similar to § 6(b) on the theory that the low rate of return being allowed “might impair the financial ability of the public utility to continue its service.” 350 U.S. at 355, 76 S.Ct. at 372. The Supreme Court held that “the purpose of the power given the Commission by [this section] is the protection of the public interest, as distinguished from the private interests of the utilities.” 4 Accordingly, the record in a § 6(b) proceeding must satisfy this “public interest” test.
Order No. 895, which instituted the present proceedings, merely directs that “an investigation be made of the fares of D.C. Transit System, Inc., to determine whether the existing fares are unjust and unreasonable, and, if so, what fares should be prescribed.” Clearly, the order invoked the language of Section 6(b) as the basis for the proceedings; yet equally clearly, it does nothing to explicate what “the public interest” in the proceedings might be.
Likewise Order No. 894, incorporated by reference into No. 895, contains no finding on this point. Referring to the “interim rates” established by Order No. 882,5 it concluded
The evidence of record, not objected to or supplemented in pertinent part by the company, provides an adequate basis for a conclusion that we have made sufficient adjustments for the company’s financial health.6
The subsequent assertion that there is a “very real prospect that the company would be unable to provide service at all” was based on allegations “not yet produced in a formal record.”
The “public interest” criterion is similarly inchoate in Order No. 900 which is on appeal here.7 The conclusion on which the fare increase turns is simply;
Hence, the existing fare structure is unjust and unreasonable in that it will not produce sufficient revenues to enable the company to cover its operating expenses and interest cost.8
In deciding to institute the fare increases immediately, however, the Commission did avert to the company’s “deteriorating” financial state. The Commission recited its “clear obligation to take immediate action to ensure the company’s continued ability to provide the transit service so vitally needed by the community.” 9 Yet more is needed than *183a conclusory statement. “Without any evidence on this essential issue, there is no basis for application of any standard and the judicial review authorized by the statute becomes a formal but futile gesture.” 10
The Commission’s authority to issue an order under § 6(b) depends on the demonstration of a necessary connection between the new rates it promulgates and “the public interest.” Failure to subject this issue to inquiry at the hearing and the consequent inadequacy of the record and the findings render the Commission’s conclusion * * * wholly ineffective for its purpose.”11 Moreover, the orders not only fail to locate the nexus between increased rates and “the public interest,” but they also fail to explore whether there were any alternatives to an immediate fare increase which would have better protected the riding public.12
II.
The most serious objection to the order on review is that the Commission did not consider the effect which a decline in the number of riders would have on the company’s expenses, and hence on its need for additional revenue. This failure to take account of variable costs cannot be squared with the fundamental rule that this court gives weight only to reasoned Commission findings supported by “substantial evidence” in the record.13
The emergency that the Commission believed it faced14 did not excuse the absence of, at least, some brief explanation of the considerations to be weighed regarding variable costs. Yet “at no time in this proceeding has the Commission made the investigations and the resolutions essential to a legitimate exercise of its authority to prescribe just and reasonable fares.”15 Not only did the Commission fail to examine the possible decrease in expenses which would follow from a decline in ridership, but the question was explicitly excluded from the proceedings and witnesses were not permitted to testify on this point.
This refusal to consider a potential reduction in expenses brought about by a decreased number of patrons flies in the face of the Commission’s previous reliance on variable cost theory. In Docket No. 186, riders’ representatives contended that Transit could meet its financial requirements by reducing its fare so as to increase its patronage. In Order No. 880, the Commission rejected this argument because it found that Transit’s expenses vary with ridership, especially if the change in demand affects “the period of peak demand, *184when the incremental cost of adding new riders is very high.”16 Here we are not advised why the Commission anticipated a decline in ridership without a decline in costs.17
As the expert testimony made clear, the question of cost reduction is a complicated one, the answer to which turns on both the actual causes lying behind a gross decline in ridership and the economic models employed by the fact-finder.18 Briefly put, the question becomes “Is the decline in ridership concentrated?” The Commission simply assumed that the variable costs would not be diminished because the ridership loss would not be concentrated. “Commission expertise alone cannot support so pivotal an assumption.”19
Moreover, the testimony most directly on point is contrary to the Commission’s conclusion. It suggests that the increase in fares would cause a “concencentrated” decline in patronage among rush-hour commuters, some of whom turn to car pools or other means of transportation when the bus fare reaches a certain level.20 The loss of their patronage does not force Transit to discontinue certain routes, but merely relieves the pressure to run extra buses on heavily-trafficked routes during rush-hour, which is a high cost operation.21
“The Commission’s action cannot be upheld merely because findings might have been made and considerations disclosed which would justify its order as an appropriate safeguard for the interests protected by the Act. There must be such a responsible finding.” S.E.C. v. Chenery Corp., 318 U.S. 80, 94, 63 S.Ct. 454, 462, 87 L.Ed. 626 (1943). Since such a finding, and a record to support it, are absent here, I would vacate the order and remit the cause to the Commission for a determination of the proper use of excess funds collected.22

. It is therefore not necessary for me to consider Petitioner’s two additional contentions : (1) that the notice and hearing for Order No. 900 were inadequate, and (2) that the Commission should have amortized the “riders’ fund” created under Williams v. WMATC, 134 U.S.App.D.C. 342, 415 F.2d 922 (1968), before imposing a fare increase on the public.

. Compact, Art. XII, § 6(b), incorporated into Pub.L. 86-794, 74 Stat. 1031 (1960), and set forth following D.C.Code § 1-1410 (1967).

. And Section 5 has not gone unused. We have previously concluded that the provision has been employed to allow “Transit to earn extraordinarily high returns on its investment.” Williams, supra note 1, 134 U.S.App.D.C. at 356, 415 F.2d at 936. Cf. F.P.C. v. Interstate Gas Co., 336 U.S. 577, 582, 69 S.Ct. 775, 93 L.Ed. 895 (1949).

. 350 U.S. at 355, 76 S.Ct. at 372. A regulated rate, as Mr. Justice Harlan wrote for the Sierra Court, “may not be said to be either ‘unjust’ or ‘unreasonable’ simply because it is unprofitable to the public utility.” Id.

. Order No. 882 was designed to increase D. C. Transit’s annual revenues $1,-700,000 by raising cash fares from 27$ to 30$ and the price of four tokens from $1.00 to $1.05 (Sept. 29, 1968).

. Order No. 894 at 7.

. Order No. 900 was designed to increase D. C. Transit’s annual revenues $2,-250,000. Petitioner objects only to the portion of the Order which increased the price of four tokens from $1.05 to $1.20, accounting for a projected revenue increase of $1,900,000 (Dec. 23, 1968).

. Order No. 900 at 5.

. Id. at 6.

. Washington Gas Light Co. v. Baker, 88 U.S.App.D.C. 115, 121, 188 F.2d 11, 17, cert. denied, 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686 (1951).

. Id.

. Plainly, the substantive aspects of the Commission's action under review go far beyond the question of “an exaltation of form over substance.” Majority opinion, supra at 9. In any event, an agency must adhere to the procedures established by Congress and is without authority “to replace the statutory scheme with a * * procedure of its own invention.” NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764, 89 S.Ct. 1426, 1429, 22 L.Ed.2d 709 (1969) (per Fortas, J.).

. Compact, Art. XII, § 17. See Williams, supra note 1, 134 U.S.App.D.C. at 362-363, 415 F.2d at 942-943; Baker, supra note 10, 88 U.S.App.D.C. at 119, 188 F.2d at 15, and cases cited.

. The basis for this belief is not apparent from the record. For example, at the time the Commission issued Order No. 896 (accelerating the hearing date on an “emergency” basis), the carrier’s records showed that (1) in the week of November 23, 1968, it had experienced an increase in ridership of 20.8% over the corresponding week of the previous year, which more than offset the declines of 12.2% and 1.8% for the weeks of November 30 and December 7, respectively; and (2) the carrier had not been late by so much as a day in meeting its payroll since the October 19, 1968, pay period.

. Williams, supra note 1, 134 U.S.App.D.C. at 359, 415 F.2d at 939.

. Order No. 880 at 15. It is misleading to characterize this order as a “discussion of price elasticity,” supra, at 16. The Commission discussed variable costs based on a supposition about price elasticity. The Commission is not bound by the exact figures used in its previous findings (or suppositions) on the extent to which D.C. Transit’s costs vary with changes in ridership, but these findings do create, at the least, the rebuttable presumption that a decrease in ridership would lead to some reduction in operating expenses.

. Testimony of Philip D. Paterson, Jr., WMATC Docket No. 186, transcript at 729-48, August 28, 1968.

. See Marine Space Enclosures, Inc. v. F.M.C., 137 U.S.App.D.C. 9, 17, 420 F.2d 577, 585 (1969) : “the confidence of a reviewing court that these adjustments [in past policies and announcements], are made in accordance with the requirements of law is not enhanced when the prior precedents are not discussed, the swerves and reversal are not identified, and the entire matter is brushed off once over lightly.”

. Baker, supra note 10, 88 U.S.App.D.C. at 120-121, 188 F.2d at 16-17. Similarly, the majority merely asserts, without support in the record, that “the real question” of cost reduction involves only whether de-dining ridership justified Transit’s abandonment of certain services.
Although D. O. Transit claimed that its financial collapse was imminent, it did not file requests with the Commission to abandon any, or all, of its services, as required by law. Compact, Art. XII, § 4 (i). D. C. Transit also did not appeal from any of the orders entered in Docket No. 186. For example, the Commission issued Order No. 894 on December 13, 1968, concluding that it had granted “sufficient” fare increases. Three days later, D. C. Transit alleged that these rates left it in a “precarious” financial condition, yet it never sought review of Order No. 894.

. Testimony of D. C. Transit Vice-President J. Godfrey Butler, WMATC Docket No. 186, transcript at 432, August 27, 1968.

. Subsequent data lend support to Petitioner’s variable cost point. Order No. 984, issued October 24, 1969, reveals that Transit’s operating expenses were actually $1,800,000 below the figure projected in Order No. 900.

. The Commission’s subsequent orders further increasing D. C. Transit’s rates render a remand of this cause for a redeter-mination of the rate under Order No. 900 “futile.” Williams, supra note 1, 134 U.S.App.D.C. at 360-362, 415 F.2d at 940-942.