Court Opinion

ID: 9475809
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:38:57.325742+00
Date Added: 2024-06-11T17:44:57.000127
License: Public Domain

MIKVA, Circuit Judge,
with whom Chief Judge WALD, and Circuit Judges SPOTTS-WOOD W. ROBINSON, III and HARRY T. EDWARDS join, dissenting:
After two prior opinions, confounded by the Commission’s ever-shifting position, it is small wonder that this court is having difficulty seeing the forest for the trees. In its attempt to beat a clear path to resolution of the issues, however, the majority treads with heavy foot over some well-held doctrines regarding takings, unreasonableness of return, and the obligation of the Federal Energy Regulatory Commission (the Commission or FERC) to guarantee the financial solvency of a utility. Perhaps the greatest damage is rendered by the implications of the majority opinion for the scope of judicial review of Commission ratemaking procedures. Although we believe the Commission has been less than forthright in defending its action, we cannot join in the havoc our colleagues have wreaked in order to slap its hands.
The ramifications of today’s decision are inescapably broad. Whenever a utility files a proposed rate schedule and alleges that the revenues and earnings contemplated produce the “minimum amount” necessary for it to have access to capital markets and to maintain its financial integrity, the Commission is constrained to take no interim rate-reducing action without first holding a hearing and making findings pursuant to the test formulated in Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944). The majority reads Hope as authorizing the court to direct FERC, when faced with such allegations, to abandon its otherwise permissible summary disposition procedures. This holding constitutes a blatant interference with the ratemaking procedures adopted by the Commission. Such intrusion into the Commission’s authority would have been deemed outrageous even in the days before Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978). We cannot believe that it is unobjectionable in this age of judicial deference. Therefore, we respectfully dissent.
I. Background
A full appreciation of the impact of today’s decision requires an understanding of the posture in which this case comes to us. At an intermediate stage of the rate-making proceeding, the Commission summarily rejected a non-conforming portion of Jersey Central’s filing pursuant to longstanding policy and procedure. Jersey Central loudly complained and refused to go further with the ratemaking process. In rushing headlong into the Hope issue, the majority loses sight of what we have here — Jersey Central is attempting to convert its rate case into a rulemaking proceeding. The majority allows the utility to succeed. It responds to Jersey Central’s complaints by directing FERC to abandon agency rules as applied to the utility and to implement the utility’s rates according to procedures the Commission would not normally follow.
On March 31,1982, Jersey Central Power and Light Company (Jersey Central) filed a proposed two-phase increase in its rate schedules for six wholesale customers. Phase A has gone into effect and is not at issue here. In Phase B, the utility proposed to amortize over 15 years a $397 *1195million investment lost when it abandoned construction of a nuclear power plant project at Forked River, New Jersey. That is, Jersey Central sought to recover the project expenditure from its ratepayers as costs over time. It also sought to include in its rate base the current carrying charges (computed at 5.2%) on the debt and on the preferred stock portions of the un-amortized investment in the plant. The total return a public utility captures is, simply put, the product of its permitted rate base and rate of return. Thus, the inclusion of the desired items in the rate base would generate a return on them over the amortization period; current ratepayers would bear the cost. The exclusion of these items from the rate base would require Jersey Central’s common equity investors to bear a financial burden; they would not obtain a return on the investment and would pay current charges.
Jersey Central’s wholesale customers protested the increased rates tendered for filing and petitioned the Commission to intervene in the ratemaking proceedings. Among other requests, the wholesalers moved for a partial rejection of the second phase of the rate filing. Adhering to its policy regarding abandoned investments, the Commission granted the wholesalers’ motion for summary disposition of the rate base inclusion of the unamortized investment in the cancelled plant. Under settled FERC policy, expenditure for an item may be included in a public utility’s rate base only when the item is “used and useful” in rendering service to the ratepayers. Accordingly, the Commission’s interim order allowed amortization of the Forked River investment as requested, but required Jersey Central to exclude the unamortized items from its rate base. 19 FERC (CCH) ¶ 61,208 (May 28, 1982).
In ordering this exclusion, FERC relied on New England Power Co., 8 FERC (CCH) ¶ 61,054 (July 19, 1979), aff'd sub nom. NEPCO Municipal Rate Committee v. Federal Energy Regulatory Commission, 668 F.2d 1327 (D.C.Cir.1981), cert. denied, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982) (“NEPCO ”). NEPCO held that utilities could amortize the full investment loss suffered from abandoned projects, but could not include the unamortized portion of these investments in the rate base because the abandoned projects were not “used or useful.” By following NEPCO, the Commission allowed Jersey Central to recover its total investment in the project to the point of cancellation, but denied the utility any return on the capital invested in the cancelled plant.
In concluding, the Commission ordered Jersey Central to file revised Phase B rates and cost support reflecting the summary disposition. The revision ordered would presumably be downward. Notably, because its preliminary review “indicate[d] that [the Phase B increase] may produce substantially excessive revenues,” the Commission suspended implementation of Phase B and ordered that a public hearing be held “concerning the justness and reasonableness of [Jersey Central’s] rates.” 19 FERC (CCH) 1161,208, at 61,404.
Jersey Central did not file the revised material ordered. Instead, on June 24, 1982, it applied for rehearing, requesting reconsideration of the summary disposition or, in the alternative, a higher rate of return than that originally proposed in order to compensate for its diminished rate base. The Commission denied rehearing as to exclusion of the investment in the cancelled nuclear facility from the rate base. It noted that its decisions since NEPCO had reaffirmed the exclusion of current charges on unamortized investments. Jersey Central Power & Light Co., 20 FERC (CCH) ¶ 61,083, at 61,181 (July 23, 1982). In rejecting Jersey Central’s alternative proposed approach, the Commission ruled that the company could not support its revenue request on rehearing simply “by inflating the rate of return to recover dollars equal to those attributable to its impermissible rate base inclusion.” Id. at 61,182. Pursuant to settled policy, the Commission refused to consider increasing the rate of return when that alternative was raised in the first instance on application for review without supporting documentation. See id.
*1196After the denial of rehearing, Jersey Central again failed to revise its filings. Had it done so, an Administrative Law Judge (AU) would have held a hearing, pursuant to the Commission’s initial order, on the “justness and reasonableness” of the rates. At this hearing, the wholesalers could have intervened and presented their arguments that the rates, although reduced from those originally proposed, were nonetheless excessive. See 19 FERC (CCH) 1161,208, at 61,404. Similarly, Jersey Central could have testified as to its belief that the reduced rates were too low.
Furthermore, the utility had two additional avenues open to it. First, Jersey Central could have refiled for a proposed rate increase after its application for rehearing was denied by operation of law. See 18 C.F.R. § 385.714(f) (1986). In pointing out the inadequacies of Jersey Central’s initial filing, the Commission clearly left the way open for a new rate proceeding that would include testimony and exhibits supporting a higher rate of return, as required by the Commission’s rules. See id. § 35.13 (1986). In such a request the utility could have proposed a shorter amortization period than that it had initially requested or offered evidence of cost of service elements justifying a higher overall return on the remaining assets in the rate base. Second, Jersey Central could have petitioned the Commission for a rulemak-ing concerning the continued validity of the “used and useful” principle when applied to cancelled plants generally. See generally Administrative Procedure Act, 5 U.S.C. § 553(e) (1982). At the proposed rulemak-ing proceeding, Jersey Central could have presented testimony in support of its position that the Commission’s present used and useful policy unnecessarily penalizes utility investors. See 18 C.F.R. § 385.505 (1986). Instead of pursuing either, or both, of these administrative alternatives, Jersey Central appealed to this court.
The majority seems to have lost sight of the juncture at which we stand in reviewing the Commission’s orders. It is too anxious to reach the end of the road. The majority contends that the Commission “reached” and “wrongly dispatched” Jersey Central’s Hope claim. Majority Opinion (Maj. Op.) at 1183; see also id. at 1170. Its reasoning runs as follows: “The Commission ruled that Jersey Central’s allegations and proffered testimony would not support a higher rate. That substantive ruling means that a hearing would have been pointless.” Id. at 1170. Although the Commission’s interim order has implications for the utility’s Hope claim, this construction is unfounded. Furthermore, it makes a mockery of the Commission’s order to hold a hearing on the very issue of the justness and reasonableness of the revised rates.
Contrary to the majority’s postulation, it is not the Commission’s position that it need not make an “end result” examination. See id. Throughout its briefings and arguments before this court, the Commission has allowed that it must construct a rate within the confines of the “zone of reasonableness” informed by Hope. Rather, the Commission maintains that it need not hold a hearing to make that inquiry before it excludes a non-conforming element from a proposed rate base — at least not on the facts alleged here. The “end result” inquiry is made at the end of the ratemaking process, not at an intermediate, summary disposition stage. Thus, a hearing on inclusion of the unamortized portion of the cancelled plant in the rate base would be “pointless.” A hearing on the resultant rates would not be. In fact, as counsel for FERC explained at oral argument, it was the post-appeal settlement adjusting Jersey Central’s rate of return that obviated the need for the rate hearing ordered by the Commission.
No one disputes Jersey Central’s right to have the end result of the ratemaking proceeding subjected to a Hope inquiry. The issue is one of timing. FERC provided for a hearing on the adequacy of the rates allowed Jersey Central after the Commission’s reduction. The final rate order that emanated from that hearing would in any event be subject to judicial review. See Hope, supra. Jersey Central demands a *1197hearing before the reduction — now, not at the end. No wonder the majority and separate opinions complain of not having a record through which to examine the Commission’s effort to balance the relevant interests. Maj.Op. at 1172, 1178; Separate Opinion (Sep.Op.) at 1188-89. Jersey Central elected to forego a hearing on the reduced rates and instead chose to clamor to this court for review of the Commission’s actions taken before the final balancing was performed. It is an interim rate-reducing order of which Jersey Central seeks review, not a final rate-setting order. The majority’s decision to yield to Jersey Central’s demands directly implicates the Commission’s ratemaking authority and its capacity to exercise its valid, established procedures free of judicial improvements.
The question this court addresses is the question that Jersey Central reserved its right to appeal under the settlement agreement: whether the Commission acted properly in limiting the rate base to used and useful property. As the majority recounts, Maj.Op. at 1173, Jersey Central’s challenge to the Commission’s orders takes three principal tacks. The utility first claims that the Commission has not established a used and useful rule applicable to its proposed filing. Second, the utility claims that, even if there were such a rule, application of the doctrine under the circumstances would lead to unconstitutionally confiscatory rates; therefore, it contends, the Commission cannot summarily apply the rule and must provide an evidentiary hearing. Finally, Jersey Central complains that, in the alternative, it is entitled to a hearing on an increased rate of return on its initial filing.
The majority finds that there is no ironclad rule regarding rate base treatment of cancelled electric utility plants and holds that Jersey Central is automatically entitled to a hearing on its proposed filing. Our inquiry leads us to the firm conclusion that the Commission acted reasonably and that Jersey Central is not entitled to a hearing on rate base treatment of the un-amortized cost items of its rate schedule or on an inflated rate of return. The Commission followed established agency rules and procedures and Jersey Central cannot complain. There may be times when FERC is not free to summarily apply settled doctrine during the ratemaking process, but Jersey Central has not presented such a case.
II. The Commission’s Application of the Used and Useful Rule
At the heart of Jersey Central’s complaint is its dislike of the used and useful principle, especially as elaborated in NEP-CO, supra. In its attempt to have the Commission reconsider the doctrine, Jersey Central argues that the precedent does not, or should not, apply to it. Unlike the majority, we find that, in NEPCO and subsequent cases, the Commission firmly established a valid rule for the calculation of rate base in electric utilities’ rate filings. Unmoved by Jersey Central’s endeavors to distinguish itself, we conclude that the Commission’s summary rejection in this case precisely follows that precedent.
It is, of course, widely accepted that the Commission may develop principles in one proceeding and then attach precedential or even controlling weight to them in later proceedings. See, e.g., Michigan Wisconsin Pipe Line Co. v. Federal Power Commission, 520 F.2d 84, 89 (D.C.Cir.1975). And the Commission can properly implement that policy, in order to protect consumers, at the summary judgment stage of its proceedings. See Municipal Light Boards v. Federal Power Commission, 450 F.2d 1341 (D.C.Cir.1971), cert. denied, 405 U.S. 989, 92 S.Ct. 1251, 31 L.Ed.2d 455 (1972). The majority seems to have no quarrel with this premise. Like Jersey Central, however, it disputes that the Commission had developed a principle or rule against including the unamortized portion of an abandoned investment in the rate base. Although not the ground on which it remands the proceeding, the majority implies that the application of the used and useful doctrine to Jersey Central’s rate *1198schedule was inconsistent with any practice established by the Commission. See Maj.Op. at 1185-86. The majority’s reasoning distorts the NEPCO precedent established by the Commission, contradicts this court’s interpretation of the doctrine, and manipulates inapposite Commission decisions.
A. The NEPCO Approach
The majority asserts that rather than establishing a general policy in NEPCO, the Commission was engaging in a case-specific balancing of interests. Id. at 1183. The majority thus conceives the crucial factor underlying NEPCO as the reasonable balance that was struck by the Commission’s compromise between the NEPCO rate-payers and investors. In its view, the NEPCO decision was as much dependent on the length of the amortization period, the percentage of costs the utility would be permitted to amortize, and the size of the investment as it was on the question of whether the unamortized portion of those costs should be included in the rate base. Id. Therefore, because Jersey Central proposed a different amortization period, presented a much larger investment and faced financial distress, a fact not alleged in NEPCO, the utility had substantially distinguished itself from NEPCO. Id. at 1184. Under the majority’s interpretation, the Commission must strike a new reasonable balance between ratepayers and investors in this case and cannot do so through summary adjudication. The majority’s interpretation jibes with neither the Commission’s nor this court’s decision. Moreover, it virtually destroys any usefulness of NEPCO as a substantive rule of policy.
NEPCO concerned the used and useful principle in general, not just as applied to one cancelled plant. In NEPCO, we approved the Commission’s policy against permitting a utility to reap a return on the unamortized portion of its investment in an abandoned generating station. This policy is based on a principle of ratemaking upheld long ago by the Supreme Court: a utility may not include in its rate base properties that are not “used and useful” in serving its ratepayers. See Denver Union Stock Yard Co. v. United States, 304 U.S. 470, 475, 58 S.Ct. 990, 994, 82 L.Ed. 1469 (1938). Thus, in NEPCO the Commission allowed the utility to recover the money it owed on a partially constructed and then cancelled generating plant, but not to receive a return on that investment over the amortization period. Abandoned projects are neither used nor useful and therefore properly can be excluded from the rate base. Only as a result of that standard did the Commission note that a reasonable balance had been attained.
The AU’s decision and the Commission’s adoption of it were based clearly — and exclusively — on the used and useful principle. In selectively cribbing from the Commission’s quote of the AU opinion, the majority strives to create the impression that the decision was fact-based. See Maj.Op. at 1184. Nothing could be farther from the truth. In reaching his conclusion, the AU indicated that “[t]he equitable method of handling this issue requires a balancing of the interest of ratepayers and security holders.” J.A. in NEPCO, 668 F.2d at 1332. In balancing these interests, the AU made no mention of the amortization period, or the size of the investment, or any other specific fact. Nor did the Commission make mention of such facts in adopting the AU’s findings. In rejecting NEP-CO’s argument that ratepayers should be required to pay a return on the expenditure related to an aborted project, the Commission simply quoted from (and thereby indicated its agreement with) the AU’s determinations:
Ratepayers are not required to insure that a utility receive a return on all monies invested in the enterprise; ratepayers are required to pay a return on only those investments in properties that are used and useful in the public service. The argument that the security holders should be fully insulated from all risk in this matter is rejected. While a regulated utility may have a lesser degree of risk than unregulated companies that *1199must compete for their markets, this is not to say that it is in the public interest to shield utility security holders from all risks, including the risk that management may initiate projects that do not become productive. This is a risk of any business.
While it is clear that investors in utilities would prefer to have ratepayers absorb losses resulting from aborted projects, such preference does not constitute justification for casting the entire burden of such losses upon ratepayers.
NEP’s proposal to afford rate base treatment for the unrecovered portion of this expenditure is rejected.
NEPCO, 8 FERC (CCH) 1Í 61.054, at 61,-175-76. Nothing in the NEPCO decision indicates that the Commission would act differently in a factually different case.
Similarly, this court’s decision in NEPCO gave Jersey Central no reason to question the veracity of the Commission’s NEPCO decision as establishing a substantive rule of ratemaking. The only question before us was “whether FERC’s refusal to include project expenditures in the rate base, while allowing their recovery as costs over time, is a valid approach to allocating the risks of project cancellation.” 668 F.2d at 1333. NEPCO complained that “[t]he sole ground for [the Commission’s NEPCO] decision was that the expenditures for those facilities did not result in the operation of any used and useful plant.” NEPCO Brief at 7. The Commission in turn defended its ruling in a justification of the used and useful rule. FERC Brief in NEPCO at 13-20. We held that FERC’s approach was valid, without reference to the specific facts of the case, based solely on the Commission’s consistent application of the used and useful doctrine. 668 F.2d at 1333-35. In rejecting NEPCO’s Hope and takings arguments and upholding the Commission’s treatment, we held that current ratepayers should bear only the legitimate costs of providing service to them; items not “used and useful” could not be included in the utility’s rate base. Id. at 1333. Nothing in our opinion could lead Jersey Central to believe we would have found differently had its factual situation been before us.
Significantly, at one time Jersey Central conceded this very point. In appealing the decision of the New Jersey Board of Public Utilities (BPU) to disallow recovery of the carrying charges on the Forked River investment, Jersey Central acknowledged that the BPU decision was consistent with this court’s decision in NEPCO. Excerpts from Brief on Behalf of Appellant Jersey Central Power and Light Company, before the Superior Court of New Jersey, Appellate Division, J.A. at 22 [hereinafter Excerpts from Jersey Central Brief]. In that proceeding, Jersey Central expended its energies in attacking the reasoning of our decision and in attempting to convince the court that it should encourage the BPU to employ the “prudent investment” rate base formulation. Jersey Central was motivated by its belief that, unlike the used and useful formulation, the prudent investment approach would afford it the recovery it sought. Id., J.A. at 22-26. Unsuccessful in its undertaking before the state court, Jersey Central apparently rethought the application of our NEPCO decision to its case. Its reconstruction does not hold up.
B. The Commission’s Generalization of the NEPCO Rule
As the majority admits, at least four subsequent decisions laid down the same rule before Jersey Central filed its rates. Maj.Op. at 1184. In NEPCO’s second attempt “to include in rate base the unamortized investment in abandoned generating projects,” the Commission admonished that it had previously “clearly stated” that such inclusions were “improper.” New England Power Co., 16 FERC (CCH) 1161,249, at 61,538 (Sept. 29, 1981) (citing NEPCO and summarily disposing of nonconforming portion of filing). In Northern States Power Co., 17 FERC (CCH) 1161,196 (Dec. 3, 1981), aff'd sub nom. South Dakota Public Utilities Commission v. Federal Energy Regulatory Commission, 690 F.2d 674 (8th Cir.1982), the Commission again held that the utility could not obtain a return on its lost investment. The case left *1200no room for ambiguity; Jersey Central itself conceded that in Northern States, “FERC made clear that its intention was that the investors receive back their entire investment but be denied all return on that investment during the amortization period.” Initial Brief of Jersey Central at 19. The Commission applied the NEPCO rule summarily, rejecting tariff filings that sought a return on investments not “used and useful.” In both Ohio Edison Co., 18 FERC (CCH) 1116,010 (Jan. 8, 1982), and Central Maine Power Co., 18 FERC (CCH) H 61,126 (Feb. 12, 1982), the agency cited NEPCO as its authority for the summary dispositions. These decisions thus clearly established a general rule of summary denial of non-conforming filings by the time Jersey Central made its initial filing in March 1982. See Black Hills Power and Light Co., 19 FERC (CCH) 1161,302, at 61,592 (June 24, 1982) (referring to rate base treatment of cancelled plants as “contrary to well-established precedent”); see also Violet v. FERC, 800 F.2d 280, 281 n. 2 (1st Cir.1986) (referring to NEPCO’s 1982 agreement not to request reimbursement of the unamortized portion of its cancelled plant as “consistent with Commission policy”) (citing NEPCO).
The majority belittles the import of these cases by brushing them off as “routine” and comparing them to Jersey Central’s filing, which the majority characterizes as “anything but routine.” Maj.Op. at 1184. This supposed distinction misses the mark. The Commission had established firm rate-making procedure — summary disposal of unamortized costs of cancelled plants included in electric utilities’ rate base filings. The procedure did not vary with “factual differences,” no matter how substantial. As to the critical fact, Jersey Central stood in exactly the same position as each other utility — it wanted rate base treatment of its abandoned investment. Jersey Central had no reason to think it would not receive identical treatment — summary refusal..
C. The Natural Gas Pipeline Cases
In a laborious attempt to show that the Commission had begun to waiver in its policy, or indeed was inviting a utility to request the treatment that Jersey Central in fact sought, Jersey Central cites several gas pipeline cases. The utility maintains that it reasonably read the cases as suggesting a shift by the Commission away from the NEPCO rule. The majority agrees. Despite such distinguished ratification of Jersey Central’s misreading of Commission precedents regarding gas pipelines, we find nothing in those cases to indicate any waivering by the Commission in its long-standing policy toward the can-celled construction projects of electric utilities.
Trailblazer Pipeline Company, 18 FERC (CCH) If 61,244 (Mar. 12, 1982), the case upon which Jersey Central relies heavily and the majority relies exclusively, fails to validate Jersey Central's non-conforming rate filing. Trailblazer involved not a rate filing, but a preconstruction proceeding brought to obtain Commission certification of the appropriateness of the pipeline’s financing. The Commission allowed the pipeline to recover debt service on an abandoned project because it was paid for through project financing, in which the stream of income generated by the project was the primary security for the loan. See also Ozark Gas Transmission System, 16 FERC (CCH) 1116,099 (July 28, 1981) (approving recovery of actual debt interest for project paid for by project financing). It conditioned approval of inclusion of debt service in rate base “on applicants’ waiver of their right to apply for the recovery of their equity investment in this project should it fail.” 18 FERC 11 61,244, at 61,503.
The majority declares that Trailblazer “presented Jersey Central with some additional grounds for believing that the Commission would take a more flexible approach” in its case because the Commission had signalled its frustration with the disparate treatment given gas and electric companies. Maj.Op. at 1184. Yet the majority fails to substantiate the grounds for this belief. In its many permutations, the majority opinion has been unable to come *1201up with an interpretation of Trailblazer that both supports Jersey Central’s position and withstands scrutiny.
Trailblazer does not even announce a blanket rule allowing recovery of debt service and a return of, but not on, an investment by a natural gas company. It certainly does not hold that such a rule should or could be extended to electric utilities. More important, even if Trailblazer were read to control Jersey Central’s filing, the utility would not recover the relief it seeks. In fact, the disparity between treatment of gas and electric cases identified in Trailblazer is that treatment of cancelled electric plants was more generous than treatment of cancelled gas facilities. The majority admits as much. Id. at 1185.
As was pointed out in the panel’s first opinion in this case, the rule for gas companies would not permit Jersey Central to recover its equity investment, the debt, the carrying charges on the debt, and the preferred stock costs, all of which it attempted to do by including the Forked River investment in its rate base. Arguing that this understanding of Trailblazer is erroneous, the majority maintains that the Commission “suggest[ed]” that conventionally-financed pipelines would not have to waive their right to recover the equity investment in order to recover a return. Id. at 1185 n. 6. We cannot locate any such suggestion in anything the Commission said. Indeed, any suggestion to be found is quite to the contrary.
In dicta, Trailblazer discussed the tariff that the Commission would consider if the pipeline opted for conventional rather than project financing. The Commission indicated that it would permit the applicant to “apply for recovery o/the total investment in the project should it fail.” 18 FERC (CCH) II 61,244, at 61,504 (emphasis added). The Commission observed that the policy consideration of encouraging investment in prudent yet possibly risky projects pointed “in the direction of a consistent and more liberal allowance of abandoned plant costs in cost of service.” Id. at 61,502 (referring to amortization of abandoned projects) (emphasis added). This observation, however, had no bearing on the Commission’s policy of excluding a current return on an abandoned plant from the. rate base. There is no suggestion that any utility should in addition receive a return on the equity portion of the investment. See id. at 61,-503 & n. 17. Indeed, the Commission expressed concern that even allowing a return o/that investment creates too great an incentive for imprudent investments. See id. at 61,503 (stating that FERC’s rate-making procedures should “not promote investment in projects undertaken simply because the bill can be passed on to the ratepayers”).
The majority misunderstands the ramifications of the Commission’s assertion that there “is no obvious reason why the treatment of abandoned plant costs as between gas and electric companies should differ,” id. at 61,511 n. 15. It was saying that in an appropriate natural gas case, one not paid for by project financing, amortization of abandoned plant costs should be allowed because it was already allowed in the electric company context. See id. (citing NEP-CO, supra, and Northern States Power Company, supra); cf. Natural Gas Pipeline Co. v. Federal Energy Regulatory Commission, 765 F.2d 1155 (D.C.Cir.1985) (establishing on its facts that a pipeline was not entitled to amortize its out-of-pocket expenses, to say nothing of its debt or carrying charges, for abandoned projects), cert.denied, — U.S.-, 106 S.Ct. 794, 88 L.Ed.2d 771 (1968). Jersey Central has already benefited from this investment-fostering liberal approach. Unlike gas companies, Jersey Central was allowed to recover the expenditure made on its failed construction project.
The majority inexplicably seems to elevate Jersey Central’s reliance on Trailblazer’s supposed indication of the Commission’s “flexibility” to a point of independent legal significance. See Maj.Op. at 1185 & n. 7. Regardless of the reasonableness of the company’s expectation, one must query just how much Jersey Central “relied” upon Trailblazer in making its filing. In *1202its initial brief to this court for review, the utility cited Trailblazer as additional support for its argument that the Commission should permit full amortization and a return on the debt and preferred portions of the unamortized amount. Initial Brief of Jersey Central at 20. However, it characterized the Trailblazer opinion as having been issued “shortly after Jersey’s Central filing,” id. at 8 (emphasis added), even though, as the majority notes, the opinion was published two weeks before the filing, Maj.Op. at 1185.
Whatever Jersey Central’s intent, belief, or expectation, Trailblazer cannot carry the utility where it desperately wants to go, and where the majority is all too willing to usher it. Trailblazer never questions the continuing validity of the used and useful principle, which it would have to do to raise a reasonable doubt in Jersey Central’s mind that the continuing validity of NEPCO was open to question. We therefore conclude that summary disposition of Jersey Central’s initial rate filing was appropriate under settled NEPCO used and useful doctrine. See 18 C.F.R. § 385.217 (1986) (summary disposition procedure). At the time Jersey Central filed its proposed rate revision, the requirement that the rate base exclude certain unallowable items had been upheld by this court; the Commission had stated its practice of applying this requirement; and the agency had not deviated from this position. Under these circumstances, the Commission properly rejected the non-conforming portion of Jersey Central’s filing pursuant to its standard policy.
Petitioner stated at oral argument that in its proceeding before the Commission it set out to test the NEPCO doctrine. Everyone can appreciate Jersey Central’s frustration with what it believed to be an unwise and ill-conceived rule. But the proper forum for challenging an agency rule is in a regulatory rulemaking proceeding, not in a ratemaking proceeding. See generally 1 K. Davis, Administrative Law Treatise, § 6:1 et seq. (1978). FERC is now, pursuant to a Notice of Inquiry, re-evaluating its entire approach to the regulation of wholesale electric requirements service. The agency intends to focus, in particular, on “the pricing and risk allocation policies,” including its cancelled plant policy. See 31 FERC (CCH) H 61,376 (June 28,1985); Regulation of Electricity Sales-for-Resale and Transmission Service, 50 Fed.Reg. 27,604, at 67,612-14. (July 5, 1985). That is where Jersey Central should make its stand. The utility should not be allowed to convert a rate case into an involuntary rulemaking and manipulate this court into approving procedures FERC has rejected.
The majority puts this Notice of Inquiry to preposterous use. Although it buries its point in a footnote, the majority makes the remarkable assertion that the fact that the Commission has initiated this rulemaking proceeding “indicate[s]” that the agency had no “genuine rule with respect to the treatment of cancelled plants.” Maj.Op. at 1185 n. 7. The fact that the Commission’s regulatory policy with regard to electric utilities is evolving lends absolutely no support to the majority’s and Jersey Central’s contention that the agency had not established a firm rule in NEPCO and its progeny. An agency has every right, and indeed the responsibility, to reconsider and restructure its rules and policies when the circumstances warrant change. Regulatory policies are always in “a state of flux.” See id. This evolution does not render the rules promulgated any less authoritative. Indeed, Congress has chosen to regulate through agencies in order to avoid the cumbersome, legislative process and to take advantage of agencies’ ability to respond to everchanging industry practices and economic environments.
The Notice of Inquiry issued by the Commission cannot excuse the majority’s willingness to second-guess the agency’s policies. Courts have no place substituting themselves for agencies. Had Congress intended the courts to act as the supreme regulatory bodies, they would have made us subject to strictures, beyond Article III, that would preclude the freewheeling approach taken by the majority in its opinion today.
*1203D. The Inappropriateness of Using Rate Base Calculation to Address Utilities’ Financial Concerns
The infirmity of the majority’s decision extends beyond its disregard for NEPCO as a rule of policy regarding rate base calculation. Ratemaking is a complex process involving consideration of a myriad of factors. See generally Regulation of Electricity Sales-for-Resale and Transmission Service, 50 Fed.Reg. 27,604 (July 5, 1985) (discussing pricing and risk allocation policies toward electric utility requirements service). The more systematic the practice, the easier and more efficient the process can be for both the Commission and the individual utility. See, e.g., 18 C.F.R. §§ 35 and 290 et seq. (1986) (outlining rules and procedures for filing of rate schedules and collection of cost of service information). If the majority’s rationale is followed, items such as cancelled nuclear power plants will be included or excluded from utility rate bases dependent on the financial condition of the utility. Ad hoc rules for rate base composition invite a chaotic state of the law in a regulatory arena where certainty and predictability help ensure that just and reasonable rates are established.
Furthermore, rate base calculation is much too clumsy a tool for adjusting total return to accommodate the state of the utility’s finances. Generally, the rate base is comprised of total capital invested in facilities minus depreciation plus cash working capital. The rate of return, on the other hand, is a weighted average of different rates applied to debt, preferred stock and common stock. Thus, the rate of return is the normal and most suitable vehicle for taking account of a given utility’s fluctuating financial needs. Not surprisingly, as the Commission explained at oral argument, it is here that FERC does most of its “tinkering.” See Maj.Op. at 1186-87. Indeed, it was through adjusting rate of return that FERC and Jersey Central settled their differences in this rate filing.
In addition, the majority’s approach creates disincentives for a utility to operate efficiently. As the Commission observed, “[a] firm is more likely to work to minimize its costs if its financial health is at stake____ Thus, firms that bear significant business risk are more likely to produce efficiently than those [who] are sheltered from this risk.” 50 Fed.Reg. at 27,-612. Yet, under the majority’s rationale not only are producers able to shift the risk of loss onto their ratepayers, but they are more likely to be able to do so if the loss is great and they are otherwise under financial strain. A healthy utility does not get its prudently incurred but cancelled expenditure included in its rate base, but a sickly utility does.
The Commission has expressed its concern that allowing recovery of the expenditure through amortization may reduce incentives for utilities to “avoid embarking upon questionable construction projects, or to stop work on partially constructed ones after their economic value has become unclear,” or “to minimize construction costs.” 50 Fed.Reg. at 27,614. If the company is more likely to recover not only its out-of-pocket costs but also a return on those costs if it is in financial decline, then the incentives for efficient production are reduced even further. And, as the concurrence points out, we are not dealing with small change. See Sep.Op. at 1188. The disincentives are large ones. Thus, the majority’s method of treating rate base calculation frustrates the Commission’s goal of “achiev[ing] the most efficient allocation of resources possible.” See Northern Natural Gas Co. v. FPC, 399 F.2d 953, 959 (D.C.Cir.1968).
The majority asserts that it is not insisting that Jersey Central receive the financial relief it seeks through a rate base adjustment. See Maj.Op. at 1182 n. 5. The majority protests too much. Rate base treatment of Jersey Central’s cancelled plant is, of course, the very thing at issue. The utility, as stated in its filing and as credited by the majority, has presented the rate package that it alleges will provide the minimum amount necessary to avoid non-*1204confiscatory rates; each element of the proposed rate structure is essential. Indeed, the majority argues, in response to our point that Jersey Central had other forms of relief open to it (other than inclusion of its cancelled plant in the rate base), that other alternatives would not meet the utility’s specific financial needs. See Maj.Op. at 1186-87. The majority cannot have it both ways, and its refusal to accept the ramifications of its opinion in this regard reveals the extent to which it is blind to Jersey Central’s real motivation— nullification of the NEPCO doctrine.
III. The Utility’s Right to an Evidentiary Hearing
There may be times when the Commission cannot issue an interim summary disposition order even when based on a long-established settled rule. Jersey Central argues that this is such a time. It claims that the substantive policies and procedural filing requirements that the Commission established for recovery of abandoned power projects, whatever their merit for utilities facing less dire financial straits, were invalid as applied to Jersey Central’s particular rate filing. The utility contends that the Commission’s rate base requirements so jeopardized Jersey Central’s financial integrity and long-term ability to attract capital that the Commission’s order threatened to confiscate the capital that its owners had invested, in contravention of the Hope end result test. Accordingly, it asserts that the Commission cannot summarily apply its NEPCO rule; rather, it must hold an evi-dentiary hearing concerning proper treatment of the utility’s proposed rate base items. While acknowledging the electric utility industry’s need to attract investors, we find that Jersey Central presents no valid reason why these concerns justify exemption from the Commission’s clear requirements. The majority obviously disagrees. It is here that the majority opinion may cause the most confusion and caprice.
Ratemaking calls for “pragmatic adjustments” clearly within the province of the Commission, which “must be free ... to devise methods of regulation capable of equitably reconciling diverse and conflicting interests.” Mobil Oil Corp. v. FPC, 417 U.S. 283, 331, 94 S.Ct. 2328, 2356, 41 L.Ed.2d 72 (1974) (quoting Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 312 (1968)). The broad discretion the Commission enjoys in its ratemaking determinations, however, must be bridled in accordance with the statutory mandate that the resulting rates be “just and reasonable.” In Hope, the Supreme Court articulated the standard by which a reviewing court examines a challenged rate. “Under the statutory standard of ‘just and reasonable’ it is the result reached not the method employed which is controlling____ 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.” 320 U.S. at 602, 64 S.Ct. at 288 (citations omitted). Thus, Hope is a limit on judicial scrutiny, not a probing device for courts restless to enter the fray between utilities and the Commission on the actual rates to be approved.
Remarkably, the majority invokes Hope to direct the methods the Commission may employ in fashioning Jersey Central’s rates. Our colleagues accept Jersey Central’s contention that “the Commission may not summarily exclude an investment from the rate base when the utility has alleged that its ability to attract capital will be seriously jeopardized as a result.” Maj.Op. at 1172. They therefore conclude that the company is entitled to a hearing in order to have the opportunity to prove its allegations and demonstrate that the end result of the Commission’s order — were it carried out — would violate the Hope standards. Regardless of the propriety of the Commission’s used and useful policy, the majority holds that, given Jersey Central’s allegations regarding its financial status, a hearing is required in order to implement this policy. To the contrary, we find nothing in Jersey Central’s initial filing and its application for rehearing that demonstrates a need for a hearing at this stage of the proceeding.
*1205Section 205 of the Federal Power Act, 16 U.S.C. § 824d(e) (1982), provides that “the Commission shall have authority ... to enter upon a hearing” on the legality of a rate increase. This provision authorizes, but does not require, the Commission to conduct full-scale evidentiary hearings; the Commission may dispose of issues summarily if there is no need for a hearing. See Cities of Batavia v. Federal Energy Regulatory Commission, 672 F.2d 64, 91 (D.C. Cir.1982). In particular, a utility is not entitled to a hearing before the non-conforming portion of its rate filing is rejected, see Southern California Edison Co. v. Federal Energy Regulatory Commission, 686 F.2d 43, 47 (D.C.Cir.1982), or when it challenges an established policy. See Papayo Tribal Utility Authority v. Federal Energy Regulatory Commission, 628 F.2d 235, 242 (D.C.Cir.), cert. denied, 449 U.S. 1061, 101 S.Ct. 784, 66 L.Ed.2d 604 (1980); Municipal Light Boards v. FPC, 450 F.2d 1341, 1345-46 (D.C.Cir.1971); see also 3 K. Davis, Administrative Law Treatise § 14.5 at 26-27 (1980) (“When a utility’s entire filing consists of a legal challenge to well-entrenched policy, there is no need for the Commission to grant the challenger a hearing.”). The Commission is under an obligation to grant a hearing only if the utility raises an “issue of adjudicative fact.” See United States v. Storer Broadcasting Co., 351 U.S. 192, 205, 76 S.Ct. 763, 771, 100 L.Ed. 1081 (1956); Citizens for Allegan County, Inc. v. FPC, 414 F.2d 1125 (D.C.Cir.1969).
Had Jersey Central raised a “serious Hope challenge,” as the majority believes it did, Maj.Op. at 1178, there would be an issue of adjudicative fact which necessitates a hearing rather than summary disposition. The issue would be whether any action taken by the Commission to reduce the rates permitted Jersey Central would produce an unjust and unreasonable end result; that is, whether Jersey Central had. proposed the “minimum” non-confiscatory rates possible. In summarily excluding the non-conforming costs from the rate base, the Commission impliedly determined that the utility had raised no issue of fact. Based on Jersey Central’s allegations and the evidence before the Commission, we find this conclusion reasonable.
A. The Showing Necessary to Obtain a Hope Hearing
In order for Jersey Central to raise a serious Hope challenge, its allegations, if true, must suggest that the Commission’s interim order — the exclusion of unam-ortized abandoned plant costs from the rate base — would result in unjust and unreasonable rates. According to the majority, Jersey Central has made the showing necessary to obtain a Hope hearing. Maj.Op. at 1169. The majority is convinced by the utility’s allegation that “the company has been shut off from long-term capital, is wholly dependent for short-term capital on a revolving credit arrangement that can be cancelled at any time, and has been unable to pay dividends for four years.” Id. at 1181. This proffer simply echoes the investor interest described in Hope. See 320 U.S. at 603,64 S.Ct. at 288, Maj.Op. at 1171-72. A utility must do more than recite the frustration of its stockholders’ interests in order to obtain a Hope hearing. Thus, we cannot agree with the majority that “[t]he allegations made by Jersey Central and the testimony it offered track the standards of Hope and Permian Basin exactly.” See Maj.Op. at 1178.
We need not adopt what the majority relentlessly maintains is FERC’s interpretation of the required showing — “the order would put the utility into bankruptcy” — in order to reject the showing presented by Jersey Central. See id. at 1175,1177,1179, 1180. Nor need we decide what precise allegations and evidence would ultimately comprise the necessary showing. The court need only find, as we do, that Jersey Central’s showing does not suffice. There are at least three types of showings which, in our view, are crucial to any attempt to obtain a Hope hearing at this intermediate stage of the rate proceeding and which are largely overlooked in the majority’s opinion and absent from Jersey Central’s filing.
*12061. The Nexus Between the Rate Order and the Utility’s Financial Plight
It is axiomatic that FERC is not a guarantor of Jersey Central’s financial health and that a utility may even go bankrupt for reasons beyond the regulator’s control. See, e.g., Hope, 320 U.S. at 603, 64 S.Ct. at 288. The Act and its constitutional limits ensure that the governmental ratemaking process does not “produce arbitrary or unreasonable consequences.” Permian Basin, 390 U.S. at 800, 88 S.Ct. at 1377. They do not protect the utility from market forces. Market Street Railway Co. v. Railroad Commission of California, 324 U.S. 548, 567, 65 S.Ct. 770, 779, 89 L.Ed. 1171 (1945). Establishing a link between a utility’s bad health and the actions of the regulator is thus essential to raising a viable Hope claim.
Jersey Central has not established this critical nexus. It simply complains that the government’s ratemaking actions are the source of its problems; our colleagues never question this assumed causal connection. An examination of the evidence laid before FERC, however, leads us to doubt the validity of this assumption.
In its present financial circumstances, Jersey Central bears greater resemblance to the failing Market Street Railway Company than it does to the Hope Natural Gas Company, “which had advantage of an economic position which promised to yield what was held to be an excessive return on its investment and on its securities.” Market Street, 324 U.S. at 566, 65 S.Ct. at 779 (finding investor considerations advanced in Hope “inapplicable to a company whose financial integrity already is hopelessly undermined”). Jersey Central had not been able to pay dividends for the four years prior to its filing; its access to capital had been hampered for about as long. Essentially, the utility is asking the Commission to relieve its economic miseries by approving dramatically increased rates. See Testimony of Dennis Baldassari, J.A. at 34 (testifying that the continuation of the present rate “will prolong the Company’s inability to restore itself to a recognized level of credit worthiness”); compare Permian Basin, 390 U.S. at 812, 88 S.Ct. at 1384 (noting that the rates proposed would “maintain the industry’s credit and continue to attract capital”) (emphasis added). Jersey Central’s problems appear to stem largely from the operations of the free market, perhaps exacerbated by the actions of other regulators. FERC cannot be made responsible for curing those ills.
The Supreme Court has enunciated this principle quite frankly:
The due process clause has been applied to prevent governmental destruction of existing economic values. It has not and cannot be applied to insure values or to restore values that have been lost by the operation of economic forces.
Market Street, 324 U.S. at 567, 65 S.Ct. at 780.
The entire electric utility industry faces a “financial crisis.” See Excerpts from Jersey Central Brief, J.A. at 26 n. 19. As Baldassari remarked, the October 1973 oil embargo and the impact of inflation are problems generic to the industry. Testimony of Dennis Baldassari, J.A. at 33. Those utilities that invested heavily in nuclear facilities were particularly hard hit, not in the least by adverse public and political attitudes to nuclear power and its attendant dangers. See id. at 33-34. Any fair reading of Baldassari’s testimony before FERC leads to the conclusion that economic forces, rather than any action on the part of FERC, have strapped Jersey Central into the financial straightjacket.
It should be noted that Jersey Central’s investment portfolio places it in a uniquely tight predicament. Jersey Central is a subsidiary of the General Public Utilities Corporation, the electric utility that has among its “prudent” investments the Metropolitan Edison Company and the infamous Three Mile Island (TMI) nuclear generating plant. Jersey Central intimates that the horrendous financial burden caused by the TMI-2 accident was the pivotal force in suspending construction of Forked River. See id. Presumably it also landed a heavy blow to *1207Jersey Central’s credit worthiness and financial integrity.
The market is not the only force potentially at work against Jersey Central. Many regulatory bodies have influence over Jersey Central’s economic destiny; therefore, the utility must effectively link its financial distress to FERC. This showing is particularly important, since the federal government is responsible — on the whole — for the value of only about ten percent of electricity sales in the United States. The states regulate the major part of the utility business. As noted earlier, the New Jersey BPU has historically refused Jersey Central a return on unproductive facilities. See Excerpts from Jersey Central Brief, J.A. at 17 (blaming the company’s financial woes on BPU’s lack of rate relief). In addition, there are other federal agencies who share regulatory control with FERC. The Nuclear Regulatory Commission, for example, prohibited the company from starting up the unharmed TMI-1 generator, thereby severing the company’s access to its prime source of desperately needed service and revenues.
If Jersey Central’s problems derive from economic forces or from the actions of other regulatory bodies, then even FERC’s full rate base treatment of the amounts at issue will not alter the company’s inability to pay dividends or obtain long-term credit. At a minimum, a company claiming an unconstitutional taking should have to show that FERC’s actions caused or substantially contributed to the conditions alleged to be the result of the taking. Jersey Central has made no such showing. In fact, it appears as if the Commission’s interim rate-reducing order is a small factor in the forces contributing to the utility’s financial dilemma.
The majority takes the remarkable position that the Commission must alter its ratemaking procedures even if the utility can only show that the Commission’s action only affects “a minor portion of Jersey Central’s business.” Maj.Op. at 1182 n. 5. Such a position is untenable. From this perspective, the agency would be obliged to abandon its ratemaking procedures in every industry which experienced financial hardship, regardless of the principal causes of those conditions. Neither Hope nor the due process clause requires as much. See Market Street, 324 U.S. at 567, 65 S.Ct. at 779.
2. The Effect on Consumers
The burden is ultimately on Jersey Central to establish that the return allowed by FERC is constitutionally inadequate; part of the showing necessary to raise an issue of fact must include attention to the consumer interests which form an important part of the Hope balancing test. Under Hope, a taking occurs only when the agency has misbalaneed the interests of investors and consumers. As the Court stated in Permian Basin,
[t]he Commission cannot confine its inquiries [to the Hope investor criteria]; it is instead obliged at each step of its regulatory process to assess the requirements of the broad public interests entrusted to its protection by Congress. Accordingly, the “end result” of the Commission’s orders must be measured as much by the success with which they protect those interests as by the effectiveness with which they “maintain ... credit and ... attract capital.”
390 U.S. at 791, 88 S.Ct. at 1372.
The consumer interest essential to the just and reasonable balance is that of not being subjected to exploitative rates. The Commission stands as the watchdog providing “a complete, permanent and effective bond of protection from excessive rates and charges.” Id. at 795, 88 S.Ct. at 1374 (quoting Atlantic Refining Co. v. Public Service Commission, 360 U.S. 378, 388, 79 S.Ct. 1246, 1253, 3 L.Ed.2d 1312 (1959)). Thus, this court has described utility consumers as the agency’s “prime constituency.” See Maryland People’s Counsel v. FERC, 761 F.2d 780, 781 (D.C.Cir.1985) (citing Hope, 320 U.S. at 620, 64 S.Ct. at 296). The exact boundaries of an exorbitant rate are indeterminate. Ultimately, however, they must relate to the cost of service, see *1208Farmers Union Central Exchange, Inc. v. FERC, 734 F.2d 1486, 1502 (D.C.Cir.) (citing Hope, 320 U.S. at 602-03, 64 S.Ct. at 287-88), cert. denied sub nom., Williams Pipe Line Co. v. Farmers Union Central Exchange, Inc., 469 U.S. 1034, 105 S.Ct. 507, 83 L.Ed.2d 298 (1984), and the distribution of associated risk, see Washington Gas Light Co. v. Baker, 188 F.2d 11, 20 (D.C.Cir.1950).
Jersey Central argues that the agency has discriminated against its investors’ interests, but it does not address how the Commission’s balance weighed the consumer interests. More significantly, it does not show that paying more attention to its investors’ interests would not exploit the consumer. See 18 C.F.R. § 35.13(e)(3)(1986) (stating that the utility has the burden of “establishing that the rate increase is just and reasonable and not unduly discriminatory or preferential”).
The majority is in seeming confusion as to the showing the company made with regard to protection of consumer interests. It states, without support, that “Jersey Central submitted figures and testimony to support its claim that ... its proposed rates would not exploit consumers,” Maj.Op. at 1180. Yet, in fact, Jersey Central itself never made this “claim”; it never broached the issue. The majority resurrects an unpersuasive argument in support of its contention — namely, that “the rates proposed in its filing would remain lower than those of neighboring utilities.” Id. at 1181; see Jersey Central Power & Light Co. v. FERC, 768 F.2d 1500, 1502 (D.C.Cir.1985). Perhaps this point would lend support to the majority’s assertion were there a competitive market for electricity service. But of course there is no competition in this market; electric utilities are natural monopolies subject to rate regulation. “What rates are ‘just and reasonable’ will in general depend on a utility’s legitimate costs, and those costs can of course vary widely even among neighboring utilities____ That some utilities with monopoly markets adjacent to Jersey Central’s are allowed to charge more than Jersey Central thus presumably signifies nothing more than that Jersey Central has access to cheaper sources of power, or for some other reasons has fewer legitimate costs.” 768 F.2d at 1512 (Mikva, J., dissenting). It certainly does not show that Jersey Central’s proposed rates would not exploit its customers.
The majority admits that “it is impossible for us to say at this juncture whether including the unamortized portion of Forked River in the rate base would exploit consumers in this case.” Maj.Op. at 1181. Since Jersey Central alleges that its proposed rate schedule would yield the lowest nonconfiscatory rate possible, how can the majority then say that the company has made a Hope showing? Without a showing that its filing would not exploit consumers, Jersey Central has not presented allegations suggesting that the rate order does not meet the requirements of Hope. Contra id. at 1181. Absent such allegations, the utility is not entitled to a Hope hearing.
3. The Reasonableness of the Overall Return Allowed on the Forked River Project
Regardless of the formulation employed, the rates fixed by the Commission may not shift the risk of loss onto the consumer and then exact the practice of the loss from him in the event it occurs. Such a double taxing “would clearly violate the consumer interest against ‘exorbitant’ rates.” Washington Gas Light, 188 F.2d at 20. Before questioning the application of the used and useful rule, therefore, it is important to discover if the investors in Forked River have already been compensated for the risk that the project would be cancelled before the investment in it was entirely recovered. See id. at 19-20.
The total return received by a utility is a function of both the rate base and the rate of return, and the total return on any given investment is a function of the allowable return over a period of time. Jersey Central has focused only on the “used and useful” method of rate base calculation *1209with no attention to the rate of return, especially to the manner in which that return may arguably have already compensated its investors for the exclusion of the cancelled investment from the rate base. Without an explanation of the company’s historic allowed return, it is impossible to judge the reasonableness of the Commission’s treatment of the Forked River plant.
In Washington Gas Light, the case so heavily relied upon by the majority, this court upheld a departure from the “used and useful” method of rate base calculation to the “prudent investment” approach. However, before approving the application of that formulation to the abandoned plant in that case, we remanded for further proceedings by the Commission. Contrary to the majority’s explanation, we did not require findings concerning the “financial health” of the company. See Maj.Op. at 1177. A remand was necessary because Judge Bazelon realized that it was possible that the investors had already been compensated for the risk that the plant at issue would be abandoned. As Judge Bazelon observed, “[i]t seems likely ..., in view of the prevalence in the past of the doctrine that abandoned property would not be included in the rate base (regardless of whether [rate orders] had resulted in complete recovery to the investor), that investors had been compensated for the risk of obsolescence.” 188 F.2d at 20. Thus, it was possible that the rate of return allowed the company in earlier years — if properly calculated to reflect the risks of the utility business — would have compensated the company in advance for the risk that it would not obtain full rate base treatment of its investment later on. If the rate of return had served that risk compensation function, allowing additional recovery by switching rate base formulations midstream would overcompensate the utility and exploit the consumers. Id. at 19-20.
Jersey Central has made no allegations regarding the prior treatment of the Forked River plant in its approved rate of return. Compare Testimony of Dennis Baldassari, J.A. at 35 (“[T]he rates of return allowed in previous regulatory proceedings were never intended to compensate the investor for the risk of exposure to the costs of decontaminating TMI-2.”). If Jersey Central has been compensated for the plant all along because its rate of return has historically been set in a world where one of the risks of being a utility is having an investment declared not to be “used and useful,” then FERC has probably fulfilled its obligations under Hope.
In sum, in order to obtain a Hope hearing, Jersey Central must show that, due to the Commission’s actions, it is in need of protection at this phase of the ratemaking process. That showing is conspicuously missing. Without it, the court has no business calling upon the Commission to alter its ratemaking procedures and provide a hearing at this interim stage. Once again, a protective device — the Hope end result test — is being used as a first strike weapon.
B. Limits of a “Just and Reasonable” Rate
In that Jersey Central is not entitled to a Hope hearing, it would normally be thought unnecessary to consider what the utility would have to prove, were it granted a hearing, in order to establish that the Commission’s rates are confiscatory. The concurrence’s attempt to analyze the evidence presented, while thoughtful, is premature. Because of breadth of the majority’s opinion today, however, we are compelled to discuss the issue.
The real mischief of today’s decision lies not in the majority’s belief that the utility has raised an issue of fact necessitating a hearing, but in its determination that Jersey Central has actually made out a case of constitutional confiscation. As Justice Douglas remarked, “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.” Hope, 320 U.S. at 602, 64 S.Ct. at 288. The majority believes that Jersey Central can meet this burden. We simply cannot swal*1210low the majority’s assertion that “it is probable that the facts alleged [by Jersey Central], if true, would establish an invasion of the company's rights.” See Maj.Op. at 1169. In our view, it is beyond cavil that Jersey Central has not presented allegations which, if true, would establish that the Commission’s orders result in unjust and unreasonable rates.
Despite the majority’s seeming confidence, the precise contours of this required showing are unclear. The just and reasonable statutory standard is imprecise. As this court once explained, “the words themselves have no intrinsic meaning applicable alike to all situations.” City of Chicago v. FPC, 458 F.2d 731, 750 (D.C.Cir.1971) (quoting City of Detroit v. FPC, 230 F.2d 810, 815 (D.C.Cir.1955)), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972). Congress itself has provided no formula for determining an unjust and unreasonable rate. Hope, 320 U.S. at 600, 64 S.Ct. at 286. Cases subsequent to Hope have loosely defined this “deliberately broad” standard as drawing a “zone of reasonableness in which rates may properly fall. It is bounded at one end by the investor interest against confiscation and at the other by the consumer interest against exorbitant rates.” See, e.g., Washington Gas Light, 188 F.2d at 15. Thus, the only way that a rate may fall outside the zone of reasonableness, from the utility’s point of view, is if it is so low that it amounts to a unconstitutional taking under the fifth amendment. See FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942).
Ascertaining what constitutes a taking in the rate regulatory context is difficult, in part because there is no deprivation of typical property interests, the conceptual cornerstone of takings law. The Supreme Court has repeatedly stressed that price fixing does not effect an uncompensated taking merely because investors are denied their expected return. Indeed, even in traditionally competitive industries, “loss of future profits — unaccompanied by any physical property restrictions — provides a slender reed upon which to rest a takings claim.” Andrus v. Allard, 444 U.S. 51, 66, 100 S.Ct. 318, 327, 62 L.Ed.2d 210 (1979).
In Permian Basin, the Court restated the Hope doctrine as follows:
Price control is “unconstitutional ... if arbitrary, discriminatory, or demonstrably irrelevant to the policy the legislature is free to adopt____” Nonetheless, the just and reasonable standard of the Natural Gas Act “coincides” with the applicable constitutional standards, and any rate selected by the Commission from the broad zone of reasonableness cannot be attacked as confiscatory.
Accordingly, there can be no constitutional objection if the Commission, in its calculation of rates, takes fully into account the various interests which Congress has required it to reconcile.
390 U.S. at 769-70, 88 S.Ct. at 1361 (citations omitted).
Permian Basin teaches that if the Commission reasonably balances consumer and investor interests, then the resulting rate is not confiscatory. Id. at 770, 88 S.Ct. 1361. The separate opinion ably translates this into a working definition of a confiscatory rate: it exists when “an unreasonable balance has been struck in the regulation process so as unreasonably to favor ratepayer interests at the substantial expense of investor interests.” Sep.Op. at 1189. The majority appears to agree with the teaching of Permian Basin. See Maj.Op. at 1177-78. The lesson it gleans, however, is incongruous. According to the majority, balancing competing interests is not enough; a rate is confiscatory if it does not satisfy the “legitimate investor interest” outlined by the Court in Hope. Maj.Op. at 1177-78, 1180, 1181 n. 3, 1181-82 (insisting that the factors outlined in Hope describe a taking). This interpretation of Hope and Permian Basin is implausible.
The majority’s assessment of Jersey Central’s showing evinces a fundamental misunderstanding of the context in which the Hope Court discussed investor interests. It specified the interests at issue but did not require that rates fulfill them in order *1211to be non-confiscatory. In Hope, the Court faced an assertion by the utility that the rates fixed by the Commission were so low as to be unjust and unreasonable. In testing this challenge, the Court essentially questioned whether the utility’s shareholders had anything to complain about. The Court examined what was “important” “from the investor or company point of view” and found that the rate at issue fully satisfied any legitimate investor interest. 320 U.S. at 603, 64 S.Ct. at 288. Accordingly, the Court held that the rate could not be condemned from the investor viewpoint. Id. at 64 S.Ct. at 288, 289. One year later, Justice Jackson, speaking for a unanimous Court, refuted the majority’s interpretation of the Court’s holding in Hope: “All that was held was that a company could not complain if the return which was allowed made it possible for the company to operate successfully.” Market Street, 324 U.S. at 566, 65 S.Ct. at 779. The Hope Court did not define “unjust or unreasonable”; nor did it articulate when a rate would be confiscatory. It certainly did not hold that the end result could be condemned if the investor criteria defined in the case were not fulfilled. Indeed, it expressly noted that its holding made no suggestion that more or less might not be allowed. 320 U.S. at 603, 64 S.Ct. at 288; see Market Street, 324 U.S. at 566, 65 S.Ct. at 779.
This understanding of Hope is the only way to reconcile the Court’s recitation of investor interests with its avowal that “regulation does not insure that the business shall produce net revenues.” See Hope, 320 U.S. at 603, 64 S.Ct. at 288 (quoting Natural Gas Pipeline, 315 U.S. at 590, 62 S.Ct. at 745). Investor interests are only one factor in the assessment of constitutionally reasonable, therefore non-confiscatory, rates. Permian Basin, 390 U.S. at 769, 88 S.Ct. at 1361. In any instance, the rate must also “provide appropriate protection to the relevant public interests, both existing and foreseeable.” Id. at 792, 88 S.Ct. at 1373. A just and reasonable rate which results from balancing these conflicting interests might not provide “enough revenue not only for operating expenses but also for the capital costs of the business ... includpng] service on the debt and dividends on the stock.” See Hope, 320 U.S. at 603, 64 S.Ct. at 288.
The Court made this abundantly clear in Market Street. The Commission rate order in Market Street was claimed to be confiscatory. 324 U.S. at 562, 65 S.Ct. at 777. Like Jersey Central, the complaining company asserted that Hope “entitled [it] to a return ‘sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital’ and to ‘enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed.’ ” Id. at 566, 65 S.Ct. at 779 (quoting Hope, 320 U.S. at 603, 605, 64 S.Ct. at 288, 289). The Court dismissed the argument out of hand. In approving a rate that concededly consigned the company to operating at a loss, the Court made clear that a just and reasonable rate might not satisfy the investor “considerations” expounded in Hope. At the very least, the Court revealed that the Hope test does not guarantee rates that are fixed to provide a return “on an investment after it has vanished, even if once prudently made, or to maintain the credit of a concern whose securities already are impaired.” Id. at 567, 65 S.Ct. at 780.
Neither the regulatory process nor the fifth amendment shelter a utility from market forces. See id. Thus, contrary to the majority’s intimations, rates do not fall outside the zone of reasonableness merely because they do not enable the company to operate at a profit or do not permit investors to recover all their losses.
The zone of reasonableness can be viewed as circumscribing the appropriate allocation of costs and benefits in the regulatory context. In an unregulated environment, the customer would not be deemed a risk-taker. He invests no capital in the enterprise and therefore bears neither the upside nor the downside risk. The investors are the risk-takers. Under price regulations, which affords the utility a “natural monopoly” on service, some of the risk at *1212either end of the spectrum is shifted onto the ratepayer. The transfer, however, is not so dramatic as to relieve the stockholder of the entire risk of loss.
Application of this principle is readily apparent in the Commission’s current treatment of electric utility plants, investments prudent when made but sometimes frustrated in fruition. If the investment is successful, the customer benefits from controlled rates for the service provided. But the ratepayer also shares the costs if the investment fails; he must pay for the expenditure made on an unproductive facility from which he obtains no service. From the investor’s viewpoint, price regulation cabins both his upside and downside risk. He cannot collect the windfall benefits if the project is a boon; he does not bear all costs if the project is a bust. Electric utility stockholders do not lose equity in the non-serviceable facility, as they might in the marketplace. They simply do not procure a return on the investment.
The majority quibbles with this risk allocation; it would prefer a world in which the investor is guaranteed a return on his investment, if prudent when made. See Maj.Op. at 1180-81 & n. 2. Its resultant holding today is directly at odds with fundamental principles laid out in Hope and its progeny. Adherence to the majority’s in-sistance on the inclusion of prudent investments in the rate base would virtually insulate investors in public utilities from the risks involved in free market business. See Sep.Op. at 1190. This would drastically diminish protection of the public interest by thrusting the entire risk of a failed investment onto the ratepayers. See id. at 1190. Jersey Central and the majority would convert utility stockholders from risk-takers into annuity holders. See Excerpts from Jersey Central Brief, J.A. at 18 (analogizing its suggested “cost-sharing” to a levelized mortgage or annuity). Neither Hope nor the fifth amendment takings clause sanctions such radical results. Cf. Hope, 320 U.S. at 603, 64 S.Ct. at 288 (stating that the “return to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks”).
In any event, this court should not ordain the drastic risk shifting that Jersey Central advocates in its filing. The proper allocation of risk between shareholders and ratepayers is a serious ongoing question. See supra page 1202. It raises cross-cutting issues too broad to be ventilated in a single rate proceeding. “The importance of this issue ... transcends the impact on a single jurisdictional utility.” New England Power Co., 32 FERC (CCH) 11 61,453, at 62,042 (Sept. 30, 1985). The majority’s conclusion that the allocation reached by the Commission may be unconstitutional on the facts alleged has serious and troubling implications, especially for the twenty-five states that currently exclude cancelled facility expenses from a utility’s rate base.
IV. Hearing on the Altered Rate Filing
As we have indicated, the Commission reasonably applied its settled rate base filing rule to Jersey Central according to its established summary disposition procedures. Nothing in Jersey Central’s allegations automatically entitled it to a hearing. The utility was entitled to, and was afforded, a hearing on its proposed rate of return on the conforming items in its rate base. Jersey Central nevertheless makes one additional complaint against the Commission. In its final challenge, Jersey Central objects to the Commission’s refusal to entertain the utility’s attempt to inflate the rate of return proffered in its initial filing. This is yet another move by Jersey Central designed to convince this court to endorse its skirting of valid agency procedures.
In rejecting Jersey Central’s plea, the Commission invoked its long-standing rule that “utilities may not present a ‘moving target’ by offering alternative justifications for previously filed rates.” 20 FERC (CCH) 1161,108, at 61,182. As this court noted in its original opinion, this rule is not arbitrary. It is justified by the “administrative necessity of closing the books at a time certain,” as well as the need for a “mechanism to prevent utilities from delay*1213ing refund orders by offering alternative justifications for the rate increases [they have] filed. FPC staff and intervenors cannot be expected to follow a moving target.” New England Power Co. v. FPC, No. 75-1379, slip op. at 3 (1st Cir. Nov. 13, 1975), cited in 20 FERC (CCH) 11 61,108, at 61,182.
The majority never questions the Commission’s authority to implement this rule. Rather, it questions the appropriateness of its application in Jersey Central’s case. The majority seems to believe that the Commission’s refusal to grant a hearing on the higher rate of return stripped petitioner of any chance to plead its case and obtain the rates it desired. Despite the majority’s protestations to the contrary, Jersey Central had sufficient opportunities to seek the revenues it requested. We are therefore unpersuaded by the utility’s contention that it was denied a fair hearing.
As noted at the outset, the utility had at least two separate opportunities to raise its concerns and to request the full rate increase anticipated by its rejected filing. Either approach would have raised an issue of fact, precluding summary disposition. First, Jersey Central could have filed initially for a higher rate of return on its used and useful property, or for a shorter amortization period on its Forked River investment. Because a shorter amortization period would allow the utility to recover its investment sooner, it would have had the same effect of increasing total return as did Jersey Central’s attempt, flatly contradicted by the clear precedent in NEPCO and later cases, to increase the size of the rate base. Indeed, Jersey Central concedes this point. If the utility had followed NEP-CO, and supported its proposed rate increase by filing for amortization of its investment in cancelled projects over five years instead of fifteen, rates higher than those it initially proposed would have been justified.
Second, Jersey Central could have made the same requests by refiling its rates, using a proper rate base. This new filing, of course, could not have stood alone without supporting exhibits and affidavits. As the Commission observed, “the company’s [initial] case-in-chief did not include testimony seeking to support a return other than 19% based on any alternative scenario of events, including summary disposition of rate base items.” 20 FERC (CCH) 1161,-108, at 61,182. In order to recover a higher return, petitioner would be required to offer cost and market data at the time of their filing that would support that rate of return. See 18 C.F.R. § 35.13(e) (1986) (testimony and exhibits supporting filing of changes in rate schedules).
Where the majority reads “in the [rehearing denial] order [that] the Commission made it clear a fresh filing would be futile” escapes comprehension. See Maj.Op. at 1187. The utility certainly did not get that message. The following exchange from en banc oral argument amplifies Jersey Central’s recognition that it was free to submit a new rate filing and thereby obtain a hearing:
COURT: But you could have put in a new filing, couldn’t you?
COUNSEL: We could have, sir, but
COURT: At any time, even now?
COUNSEL: [W]e could but we believed then and we believe today that that precedent was wrong and we would not have had an opportunity to—
COURT: That is really what I wanted to clear up. Your concern really( is you strongly disagree with the NEPCO precedent—
COUNSEL: Yes, we do, sir.
COURT: —I understand that, but as far as you are concerned the use of the useful rule as applied in NEPCO is a bad idea and you would like this Court to change its mind.
COUNSEL: Yes, sir, no question about it.
Tr. at 8.
As an alternative to submitting a different rate filing, Jersey Central could have asked for an individualized exemption from the NEPCO rule. The Commission’s filing requirements provide that “[i]f any filing does not comply with any applicable stat*1214ute, rule, or order, the filing may be rejected, unless the filing is accompanied by a motion requesting a waiver of the applicable requirement of a rule or order and the motion is granted.” 18 C.F.R. § 385.-2001(b)(1) (1986). By providing this waiver process, the Commission exercises its inherent power to relax, modify, or waive its filing requirements. See Papago Tribal Utility Authority, 628 F.2d at 247; Municipal Electric Utility Association v. Federal Power Commission, 485 F.2d 967, 975 n. 28 (D.C.Cir.1973). Jersey Central did not move for such an exemption.
As its responses at oral argument illustrate, Jersey Central declined these multiple opportunities because it wanted to challenge the NEPCO rule directly, and none of the permissible options allowed it to do so. The hearing it would have obtained had it made a new filing would not have enabled it to address the NEPCO doctrine; nor would the filing of a complying tariff in the first instance have provided that vantage. Similarly, merely asking for an exemption would in no way threaten the viability of the doctrine. The majority demonstrates that such a “characterization” of the utility’s filings would be “an unreasonable one,” Maj.Op. at 1185, but no characterization is necessary. Jersey Central plainly stated its purpose and acted upon it.
Jersey Central could have sought review of what it perceives as an unsound rule without trampling on the Commission’s filing policies and procedures and without asking this court to become involved. It could have petitioned the Commission for a rulemaking. NEPCO took this approach in its 1985 submission for filing of a proposed rate increase. See New England Power Co., 32 FERC (CCH) ¶ 61,454 (Sept. 30, 1985) (Phase II). NEPCO “requested] that the Commission reexamine its policy regarding the treatment of the costs of cancelled plant.” Id. at 62,042 (citing NEPCO). Unlike Jersey Central, however, NEPCO did not factor its suggested treatment of abandoned plants into the rates it proposed; rather, it sought only a prospective change in the policy. Id. at 62,043 n. 5. In this way, the Commission was able to begin reexamining NEPCO “as well as the economic and legal underpinnings for a cancelled plant policy” in the rulemaking context. Id. at 62,042; see also Pennsylvania Electric Co., 34 FERC (CCH) ¶ 61,141, 61,244 n. 8 (Feb. 4, 1986) (“[A]ny change in Commission policy would be prospective only, and utilities are required to adhere to the precedent established in [.NEPCO ] pending reconsideration of our policy.”); New England Power Co., 35 FERC (CCH) 1161,353 (June 18, 1986) (denying motion to limit generic scope of NEPCO Phase II hearing).
In light of these opportunities, deliberately avoided, we cannot question the reasonableness of the Commission’s application of its rule against presenting a “moving target.” Of course, we do not suggest that an agency may implement any policy through any procedure, no matter how unreasonable, and compel the applicant to adhere to them in order to preserve its right to seek relief from the agency. We find only that the Commission acted validly in requiring Jersey Central to follow reasonable policy and filing requirements. The measure of their reasonableness is that they afforded Jersey Central ample opportunity to contend that, taking its balance sheet and troubled history of investments into account, the total return it requested was just and reasonable. They also provided the company with a platform for advocating the discontinued application of the used and useful doctrine to cancelled electric utility facilities. Given these opportunities, Jersey Central cannot seek from this court the relief and the individualized attention to its financial plight that it could have obtained from the Commission.
Conclusion
This is a case of modest proportions about one segment of the sweeping rate-making responsibilities that Congress has entrusted to the Commission. Like all arms of the government, the agency must abide by its statutes and by the constitutional prohibition against taking property *1215without due process of law. But the due process claims of a regulated utility are not coupons which can be exchanged for a hearing at a time, place, and manner of the utility’s choosing. Such an approach would wreak havoc with the agency’s ability to administer a complex rate regulation system that must assess many rate filings annually.
There may indeed be times when the Commission is not free to employ the used and useful principle in a summary fashion. However, Jersey Central has not made the case for its exception. Its allegations do not raise a question of fact sufficient to trigger a Hope hearing before application of well-settled, court-approved ratemaking procedure and policy. The concerns about financial integrity and investor return that Jersey Central held in reserve for a hearing challenging the NEPCO rule should have been raised by following the Commission’s established rules and procedures. We express no view on substantive rate-base requirements that may come before this court in another case; we find only that on these facts the Commission was not obligated to hold a hearing before entering its interim rate-reducing order. The Commission’s administrative processes offered ample opportunities for Jersey Central to request and present supporting evidence for whichever rate of return and amortization period the utility deemed necessary to preserve its financial integrity, and to seek review of the NEPCO doctrine. Jersey Central chose not to avail itself of these opportunities, and now cries foul.
There is, in the end, only one reason that Jersey Central wants its hearing before the unamortized portion of its unproductive investment is excluded from the rate base. That timing is the only means it perceives as enabling it both to launch its frontal attack on the Commission’s NEPCO doctrine and to immediately reap the rewards of any victory in the battle. The majority’s sympathy for Jersey Central appears driven by its agreement that the used and useful doctrine is outdated and should be replaced with a pure prudent investment approach. See Maj.Op. at 1175, 1180-81 & n. 2. By granting a hearing to Jersey Central at this stage of the long and complex ratemaking process, the majority provides the utility a forum in which to argue its causes. But it also interferes with the Commission’s discretion in implementing ratemaking policies and procedures. It thereby threatens the well-held maxim that the Commission is “not bound to use any single formula or combination of formulae in determining rates.” See Hope, 320 U.S. at 602, 64 S.Ct. at 287.
In an era of heightened deference to administrative decisions and procedures, this court especially ought to be sensitive to the line between legitimate judicial review and judicial substitutions for agency processes. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984); Vermont Yankee, supra. The majority has reordered the very filing procedures that FERC may prescribe, has redirected the kinds of hearings in which FERC may consider changes in its policies and, worst of all, has thrust the courts back into the very complicated forest of making the rates that regulated industries may charge. We ignore at our peril the hard-learned lessons of restraint expressed by the Supreme Court in Natural Gas Pipeline and Hope. The majority would have us relive that painful period.