Court Opinion

ID: 9457108
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:12:34.660906+00
Date Added: 2024-06-11T17:35:13.168988
License: Public Domain

J. SKELLY WRIGHT, Circuit Judge
(dissenting):
In this rate proceeding the Federal Power Commission, in agreement with its hearing examiner, determined that a rate of return of 7 per cent should be allowed Florida Gas Transmission Company1 for a locked-in period from No*773vember 1, 1965 to June 9, 1968. In effect, as the majority opinion makes clear, the Commission was really deciding whether Sun Oil Company was entitled to a refund from Florida Gas of over $1,000,000 on gas purchased during the locked-in period.2 In the proceedings before the examiner and the Commission, Sun Oil took the position that Florida Gas was legally estopped3 from claiming a rate of return greater than 6.5 per cent, which rate would have netted Sun Oil the $1,000,000 refund. Sun Oil refused to cross-examine the rate of return evidence put in the record by Florida Gas or put in an answering case or evidence of its own. Even after the hearing examiner announced that Florida Gas had made out a prima facie case for a 6.98 per cent rate of return and gave Sun Oil 30 additional days to present evidence, no evidence was forthcoming.
Obviously Sun Oil could neither successfully challenge the evidence of Florida Gas nor produce adequate evidence of its own. Otherwise it certainly would have done so. For a party in a rate case to rest on a legal point alone when it had substantive evidence on the merits would be the height of folly, and a responsible company like Sun Oil does not usually hire foolish lawyers. Moreover, Sun Oil’s legal point was so weak it was abandoned in this court. Yet the majority here holds, in line with Sun Oil’s new tactic, that the Commission failed to make adequate findings in a case uneon-tested on the merits. The court then remands the case, not just for findings, but to reopen the record to allow Sun Oil to put in rate evidence. Ordering the Commission to reopen the record to allow Sun Oil to put in rate evidence is particularly remarkable because Sun Oil does not even ask for this relief or even suggest it now has rate evidence to put in. Thus this age-old administrative proceeding is started all over again to give Sun Oil a third bite at the apple, it having refused the first two in a tactical ploy born of desperation.
The rate of return allowed by the Commission should cover imbedded debt costs and provide the equity holders with an adequate return on their investment in the pipeline. F.P.C. v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944). Here one of the two components of the rate of return is known and undisputed: the actual cost of debt during the locked-in period was 5.66 per cent. Thus the only determination to be made by the Commission in this case and reviewed by this court is a fair return on equity. The Commission found that fair return to be 9.36 per cent which, together with the undisputed imbedded costs, resulted in a rate of rethrn of 6.98 per cent, rounded off at 7 per cent.
The classic statement of the standard to be applied in determining a fair return on equity is found in Hope Natural Gas, supra, 320 U.S. at 603, 64 S.Ct. at 288: “* * * [T]he return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks. That return, moreover, should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital.” That standard has, of course, been followed by this court. Williams v. Washington Metropolitan Area Transit Com’n., 134 U.S.App.D.C. 342, 353-354, 415 F.2d 922, 933-934 (1968). Because of the amorphous character of the area in which it applies, the standard is of necessity a generalized one, allowing great discretion to the Commission in its ef*774fort to weigh the competing subtle and technical considerations in determining a fair return on equity. Consequently, in this area judicial review “is necessarily narrow. These matters are properly for the Commission, and its determination is to be disturbed for only the most basic forms of abuse.” Battle Creek Gas Co. v. F.P.C., 108 U.S.App.D. C. 209, 213, 281 F.2d 42, 46 (1960). I find no such abuse here.
In making its judgment as to fair return on equity here, the Commission explicitly applied the Hope Natural Gas standard and made the necessary findings. Of course, the findings could have been more detailed. But as the majority indicates, the Commission docket on which this appeal is based was a relatively small part of a much larger and more traditional rate making proceeding involving these same parties. The Commission’s decision and order covered the entire proceeding. Moreover, as already indicated, the issue on review here was not even contested on the merits before the Commission. While it is true that in fixing rates the Commission must comply with the statute whether the proceeding is an adversary one or not, where the rate fixing is unopposed on the merits the need for the same punctilious regard for the procedural requirements is not as apparent. Certainly it does not come in good grace from a party who has not contested the merits to shift gears on judicial review and complain that the Commission has not dotted all the required i’s and crossed all the required t’s. Administrative proceedings, like court trials, are not games for lawyers. The pursuit of truth and fairness in either forum is not advanced by craftsmanship unrelated to the ends of justice.
In this connection it is interesting to note that in the other two parts of the Commission’s order not on review the Commission fixed a return on equity for Florida Gas at 9.9 per cent as compared to the 9.36 per cent here. As to those dockets the Commission relied on similar data and made similar findings, yet Sun Oil does not challenge the rate set or the return on equity. If the Commission’s action in those dockets satisfies the Hope Natural Gas standard, it is difficult, at least for me, to understand why the Commission’s action in the docket in suit does not. If the Commission’s procedures there pass muster, I am at a loss as to what the application for review here is all about.
In any event, the record here fully supports the Commission’s findings which, though lacking in detail, are completely adequate when taken with those of the examiner adopted by the Commission. In allowing Florida Gas 9.36 per cent return on equity, the Commission followed the same pattern of decision as in all its pipeline rate of return cases since 1960. As the Commission indicated, in about three fourths of the contested cases during that time, the equity return allowed was 9.5 per cent or more.4 The Commission issued three rate of return decisions within the year prior to the issuance of its opinion on review and one within six months thereafter.5 All of these decisions are completely consistent with the one here, not only as to rate of return on equity, but on the type of evidence produced and the findings *775made. In fact, in all of them the allowance for equity holders was in excess of 9.36 per cent.
The Commission also found that 9.36 per cent equity return is consistent, not only with the return allowed other pipelines, but with the return allowed electric utilities and the Bell System.6 The record before the Commission also included complete equity return data on six principal industry groups 7 outlined and explained as it relates to this case by a witness admittedly expert in the field. Thus the record as a whole completely supports the Commission’s findings and decision. Fortified with the pertinent economic and financial facts bearing on equity return on investments in similar enterprises having corresponding risks and guided by the Hope Natural Gas standards, the Commission has made its findings and rendered its decision in this case. An agency’s findings need not be in separate numbered paragraphs. Even under Rule 52, Fed. R.Civ.P., District Court findings may be in the narrative form of “an opinion or memorandum of decision.” No reason appears why agency findings should be more formalized. Since the agency findings here are clearly discernible from the Commission’s decision, and since those findings adequately set out the basis for the Commission’s order, in my judgment the law requires that we let that order stand.
We should remember the basic teaching of Hope Natural Gas:
“* * * 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 fact that the method employed to reach that result may contain infirmities is not then important. Moreover, the Commission’s order does not become suspect by reason of the fact that it is challenged. It is the product of expert judgment which carries a presumption of validity. And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences. * * *”
320 U.S. at 602, 64 S.Ct. at 288. Sending this case back to the Commission, in my opinion, is an exercise in wheel-spinning. There is no real possibility that Sun Oil will get the $1,000,000 it claims. The record in this case and the result in almost every other pipeline case before the Commission support the Commission’s order under review. Moreover, on remand the Commission in good conscience could not set a return on equity lower than the 9.36 per cent in this case when in the same proceeding between the same parties, involving the same gas, albeit for a slightly later period, the Commission has set a return on equity of 9.9 per cent which is not even contested on review.
I respectfully dissent.

. Florida Gas Transmission Company is a pipeline which transports gas to Florida Power Corporation and Florida Light & Power Company from producing areas in Texas and Louisiana.

. Sun Oil’s interest in the proceeding stems from the fact that under the terms of its gas sales contracts Sun Oil is required to absorb portions of increases in transportation charges made by Florida Gas, those charges being subject to Commission approval.

. The legal estoppel argument was based on Snn Oil’s allegation that the Commission was bound by the 6.5% rate of return figure used in the Florida Gas application for a rate increase. The Commission rejected this argument, and it is not made here.

. See Tennessee Gas Transmission Co., 24 FPC 204, 209 (1960) (10.12%) ; United Gas Pipe Line Co., 25 FPC 26, 32, 116 (1961) (10.3%) ; Northern Natural Gas Co., 25 FPC 431, 441-442 (1961) (10.5%) ; Kansas-Nebraska Natural Gas Co., 25 FPC 448, 452 (1961) (10.8%) ; Panhandle Eastern Pipe Line Co., 25 FPC 550, 551 (1961) (10.47%) ; Alabama-Tennessee Natural Gas Co., 27 FPC 1180, 1189-1190 (1962) (7.5%) ; American Louisiana Pipe Line Co., 28 FPC 482, 485 (1962) (9.57%) ; Natural Gas Pipeline Co. of America, 40 FPC 81, 93 (1968) (9.52%) ; Panhandle Eastern Pipe Line Co., 40 FPC 98, 111 (1968) (11.18%).

. See Natural Gas Pipeline Co., of America, supra Note 4; Panhandle Eastern Pipe Line Co., supra Note 4; Cities Service Gas Co., 40 FPC 1033 (1968) ; Algonquin Gas Transmission Co., 43 FPC (issued January 19, 1970).

. The Commission in Paragraph 29 of its opinion and order stated:
“The evidence reveals that selected electric utilities during the four years preceding the locked-in period involved herein earned overall rates of return averaging slightly over 7 percent. The exhibit also reveals that the Bell System in 1965 had an overall return of approximately 7.66 percent, allowing equity a return of 9.37 percent. Earnings of selected natural gas distribution companies in 1965 averaged 7.64 percent overall with earned equity return averaging 13.48 percent. The data regarding selected natural gas transmission companies shows that for the year 1965 the average earned rate of return was 7.59 percent with equity earning an average of 14.69 percent.”

. Moody’s 24 Electric Utilities, Class A and B Electric Utilities, Bell System (AT&T), Moody’s 125 Industrials, Moody’s 10 Natural Gas Distribution Companies, and Moody’s 10 Natural Gas Transmission Companies.