Court Opinion

ID: 7846231
Source: CourtListenerOpinion
Date Created: 2022-09-08 17:11:05.874761+00
Date Added: 2024-06-11T16:21:36.918956
License: Public Domain

WALD, Circuit Judge,
concurring:
I concur in the decision to remand the rate on both grounds cited in Judge Robinson’s opinion but, in view of Judge MacKinnon’s dissent on the e & d incentive ground, I wish to make a few additional observations. I agree with the two FERC Commissioners who dissented from the Commission’s approval of the failure to pass through the consolidated income tax savings here on the basis that
[ajfter seven years, it would seem reasonable not merely to say, ‘gas is short,’ but to seek and utilize some evidence that the specific tax treatment given is having the effect desired.1
That evidence is not to be found in this record, and contrary to the dissent, I do not think a purely theoretical incentive, the effectiveness of which is belied by the facts in the specific case, is sufficient to justify a deviation from normal ratemaking practices. See Maj.Op. at n.45. Though this court in the past has approved agency use of predictive economic models in place of actual costs in ratesetting cases, we have always stressed that the agency must make *43“a conscientious effort to take into account what is known as to past experience and what is reasonably predictable about the future” to monitor whether the model’s assumptions work in practice.2 In this case, the agency has made no attempt at all to verify the accuracy of its prediction that granting pipeline affiliated producers tax incentives will spur increased investment in research and development of natural gas supplies, although according to its own estimate, it has either followed or advocated following the challenged method of tax allocation for seven years. In a specific case such as this, where evidence showing how the tax savings have or will affect e & d activities should be readily at hand, I can find no excuse for not requiring substantiation of FERC’s predictions. Without such evidence, judicial review of agency decision-making amounts to nothing more than unquestioning judicial acceptance of unproven agency assumptions.
Candidly, my review of the agency’s intricate rationale for upholding the failure to pass through the tax savings due to the e & d losses leads me to question whether FERC itself fully understands what policies it is following or why. In both Opinion No. 47 3 and its brief,4 FERC refers to the “fact” that a failure to retain the consolidated tax savings in the parent company would frustrate implementation of the national gas rate established in Opinion No. 770 and approved by this court in American Public Gas.5 FERC seems to be arguing that consumers of the regulated pipelines already receive the tax benefits they are clamoring for here in the form of a lower price for new natural gas, which is factored into the pipeline’s overall cost, and thus to grant them the additional benefit of a pass through of tax savings in this proceeding would be to compensate them twice. But, in addition to failing to explain or substantiate this claim in the face of petitioner’s denial that the e & d companies here do (or are expected to) produce gas that will be sold at this national rate,6 FERC also fails to explain why, having decided to pass through a substantial portion of tax deductions attributable to pre-production e & d expenses to consumers through the national rate for new gas, it does not feel any comparable need to pass through the tax savings generated through use of a consolidated return by research and development companies handling gas not covered in these national rates. The Commission never discusses this seeming contradiction.
In sum, the Commission has quite confused me by presenting multiple and seemingly contradictory reasons for allowing the parent company to retain all the consolidated tax benefits despite the absence of proof that the e & d activities will benefit thereby. I cannot fathom whether this is an error of substance or presentation. However, I urgé the Commission on remand to attempt a clearer articulation and reconciliation of its national rate, e & d incentive, and parity theories as they apply to the record in this proceeding.

. Dissenting Opinion, Columbia Gas Transmission Company, Docket Nos. RP75 -105-06, Dec. 26, 1979, at 11, J.A. 359.

. American Public Gas Assoc. v. FPC, 567 F.2d 1016, 1037 (D.C.Cir.1977).

. Opinion No. 47, Columbia Gas Transmission Company Opinion Determining Proper Cost of Service Treatment of Tax Liability Arising From the Filing of Consolidated Income Tax Return, July 2, 1979, at 13, J.A. 275.

. Br. for Respondent at 42-45.

. See note 2 supra.

.Reply Br. of Petitioner at 4-5.