Court Opinion

ID: 7279154
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:04:36.098616+00
Date Added: 2024-06-11T14:37:21.974962
License: Public Domain

LEVENTHAL, Circuit Judge
(concurring in part, dissenting in part).
While I concur in most of Judge Fahy’s opinion for the court, I conclude that the adjustment in rentals wrought by the Commission’s order may properly be effective as of the date of its notice of hearing, but I do not think a basis has been laid for making it retroactive to the expiration of the 20-year term.
My reasoning begins with the observation that this is a lease, with provision for an independent determination of rentals if the parties cannot agree. To me, this calls for the premise that the rentals should be known. Since the lease does not specifically provide for retro-activity of adjustment, there is merit in the approach that the lessee should know what the adjustment in rental is going to be so that he can decide whether he will occupy the premises. This is theoretical, to be sure, since obviously Montana Power will not quit the premises, but it provides a starting point. And I think it is a different starting point from the familiar situation where the power company is the applicant, for a specified power rate increase put into effect, possibly after a suspension period, subject to recapture.
Even so, retroactivity is permissible for good reason. The FPC gave a reason (JA 365) — that retroactivity is necessary to avoid a premium on litigating delay. However, retroactivity to the date of notice of hearing (1965) also avoids that result.
I see no reason for additional retro-activity to 1959, on the basis of implication, except for an increase to “reflect known changes" — calculated by Mr. Seymour to result in $270,000 (see JA 363). Any additional retroactivity to 1959 means that the Company is exposed both to the possibility of a new rental-determining method, which in and of itself I think is unobjectionable, and to its retroactive application, which I think raises problems at least so far as any theory of implication and intent of the parties is involved.
The FPC also said (JA 357) the Company could have avoided injury by maintaining a reserve account. The Company’s application for rehearing says (JA 398-399), there was no justification for setting up a contingent reserve prior to the filing of the testimony in October 1965, and that in a rate proceeding neither the Montana Commission nor the FPC would have allowed such a contingent reserve, since the contingency could not be readily calculated. I’m inclined to think the Company has the best *89of this argument. If it is true that the Company could not have used a contingency reserve in a rate case — and I think it likely — it does seem to me to present at least a general basis for assuming no retroactivity — unless the FPC makes a showing as to why retroactivity prior to the date of the notice of hearing is fair.
The Examiner says (JA 321) that the Company in fact earned enough to absorb the increase in annual rental. But it is for the Montana Commission to say what revenue is appropriate, considering this expense. I don’t think the rental for this site should be increased because of what the state commission allows on other properties.
Reverting to the FPC’s judgment of full retroactivity for its $950,000, I am also troubled by a legal assumption of the FPC which said (JA 357) that the Act "contemplates that any readjustment ultimately determined becomes effective upon the date which marks the completion of the first twenty years after the project is available for service.” This outlines in effect a legal requirement of retroactivity. I think this is an incorrect legal assumption.
The FPC’s legal assumption of retro-activity, set out above, is strangely at odds with its conclusion (JA 361)— “that a prescribed charge will continue as the lawful charge under Section 10(e) until demonstrated to be inappropriate.” This was said to make clear the FPC would not make a new adjustment effective May 20, 1969, as § 10(e) permits. But the language is evocative of the familiar doctrine that a rate continues until it is set aside as unreasonable. I think that is the “common law” or “common lore” of the regulatory approach that should be followed unless a basis is set forth for reaching a contrary result.
In saying that no basis has been put forward for full retroactivity for 1959-65, I am aware that there was litigation during this period over the third unit. The FPC did not refer to this as a reason for Montana Power’s liability for retroactive adjustment, and I think wisely so. Certainly Montana Power is not responsible for the delay between September 18, 1959, when the FPC fixed an added $50,000 rental, and January 30, 1961, when the FPC raised this to $63,375, due to the objections of the Secretary of Interior and a reopened proceeding. The one year’s delay before this court affirmed on January 25, 1962,1 was not only modest in duration, but provided the only opportunity for court consideration of prickly points. The Commission waited until 1965, to begin a hearing on overall rental adjustment. Perhaps this was due to a conclusion like that reached in Opinion No. 529, Oct. 4, 1967, when it stated that no readjustment would be made as of May 20, 1969, unless a showing were first made that the charge was inadequate (JA 361).
Perhaps this was due to its own needs, for allocating staff to energy projects it considered of higher priority. But this was a tribunal not selected by the Company but imposed upon it. In the absence of a showing that the Company is somehow implicated in the Commission’s delay in noticing the docket for hearing, I do not think the Company should be under an obligation to pay an increase in rental for that period except as to known changes.
* * *
While I concur in the affirmance of the FPC’s allocation as to the Hungry Horse releases of water, I would like to add to what is in Judge Fahy’s opinion. First, any discussion of Hungry Horse must be taken in the context of the Company’s real claim before the FPC — that Hungry Horse should be excluded entirely. The FPC rejected that, and we think this is sound. The issue is as to the value of the land, and its place utility in terms of the river, in the light of current conditions as to the river.
The secondary question is, assuming account is taken for the increase in production at the Kerr Hydro-Electric *90Development from the releases of the upstream Hungry Horse waters, how shall this be allocated as between the Kerr basic plant and the Kerr storage reservoir. The need for allocation rises from the fact that at the basic plant the Tribes have a 50% interest, reflecting their ownership of the land, with the Company getting 50% credit for capital invested. At the Kerr reservoir storage, where the Tribes own only y2 the land, the Tribes’ percentage is only 25%.
The FPC apparently followed the approach of Mr. Sporseen, witness for the Tribes, who testified that he had followed the method of the Columbia River Coordinating Committee.
His allocation approach began with the energy quantities for Kerr basic plant without storage (161 MW months), and Kerr reservoir storage (251 MW months). In apportioning the 657 MW months for Hungry Horse release, he began with a credit to Kerr reservoir storage of 125 MW months bringing Kerr reservoir storage up from 251 to 376 MW months (1.5 x 251).
The remainder, and bulk, of energy from Hungry Horse waters (532 MW months) was credited to Kerr basic plant. Mr. Sporseen’s analysis, simplified, is as follows (JA 12): A plant can be built without any reservoir, using the natural stream flow. If this basic plant gets the use of a reservoir, it makes payment for the assist to its production. We also make a calculation of the assist given to the production of power at the plant from the water released upstream.
I don’t think the reservoir is entitled to a credit merely because the new waters are “flowing through” the reservoir. Let me illustrate: Suppose a power plant is given a boost in production when a dam (A) is constructed 20 miles up river. Suppose later a new dam (B) is constructed 30 miles up river. Would dam A be entitled to credit for all the releases from dam B because they pass dam A on the way down to the usage point? I think not.
A final point, concerning a problem that occurs to me as a result of recent litigation on another waterway, see Alabama Power Company v. FPC, 146 U.S.App.D.C. 255, 450 F.2d 716 (1971). My thought is that neither party to the lease should be able to claim that the use of the Kerr storage should be reduced because there is now available a more efficient means of assisting power production in the form of the Hungry Horse waters. However I don’t believe this to be a problem in the record before us, as Mr. Sporseen’s use of data of “critical period of energy” (JA 11) presumably assumes full use of the Kerr reservoir in addition to the contribution of the Hungry Horse water.

. Montana Power Co. v. FPC, 112 U.S.App.D.C. 7, 298 F.2d 335 (1962).