Court Opinion

ID: 8918146
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:58:33.22661+00
Date Added: 2024-06-11T17:09:11.207782
License: Public Domain

REINHARDT, Circuit Judge,
concurring:
I concur in the majority opinion, except for the portion contained in footnote 3. In that footnote the majority summarily dismisses a question raised by the cities that deserves our consideration. The cities challenge the West Texas policy on its merits, contending that the policy is contrary to consumers’ interests and therefore contrary to the Federal Power Act itself.
There is some merit to petitioners’ argument. The suspension policy set forth in West Texas permits rate increases that preliminary studies show to be excessive by up to ten percent to go into effect before FERC determines their lawfulness.1 Because agency evaluation is often protracted, the final determination of the validity of an increase may not issue for several years. As petitioners point out, in the event that a rate increase is later determined to be excessive, customers will, in effect, have been lending money to the utilities. Although section 205(a) of the Federal Power Act, 16 U.S.C. section 824d(a) provides that refunds with interest may be ordered for rate increases subsequently found to be unreasonable, because of the time lapse between a rate increase and a refund there is no guarantee that all of the original lenders, i.e., those who paid the excessive rates, will be among the actual recipients of the subsequent refund. Moreover, the cities note with justification that they are in no position, in these times of tight fiscal budgeting, to advance funds to utilities, funds that could better be used for much needed public services.
The cities also contend that the ten percent margin of error rule encourages utilities to file two-step or phased-in rate increases to circumvent the maximum suspension period by keeping the initial partial rate increase at or just below the ten percent figure.
It is FERC’s contention that in its West Texas policy, it has attempted to strike a balance between the consumers’ interest in not advancing funds for excessive rates and the utilities’ interest in implementing cost-justified rate increases which can never be recouped after a suspension.
*663The Commission also contends that the West Texas policy benefits the consumer by providing an incentive for utilities to file lower rates which can be cost justified. It is the Commission’s view that a flexible suspension policy with the prospect of one day suspensions for increases which exceed preliminary estimates of appropriate rates by ten percent or less encourages utilities to follow closely Commission rate-making precedents and to request only those rate increases that can be cost-justified.
Congress’ primary purpose in enacting the Federal Power Act was protection of consumers from excessive rates and inadequate service. Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348, 355, 76 S.Ct. 368, 372, 100 L.Ed. 388 (1956) (“That the purpose of the power given the Commission by section 206(a) is the protection of the public interest, as distinguished from the private interests of the utilities, is evidenced by the recital in section 201 of the Act that the scheme of regulation imposed is ‘necessary in the public interest.’ ”); Maine Public Service Company v. Federal Power Commission, 579 F.2d 659, 664 (1st Cir.1978) (“The primary purpose of this mechanism is to protect consumers from excessive rates and charges — any protection received by a utility is incidental.”); Municipal Light Boards v. Federal Power Commission, 450 F.2d 1341, 1348 (D.C.Cir.1971); Towns of Alexandria Minnesota v. Federal Power Commission 555 F.2d 1020, 1028 (D.C.Cir.1977); see also, Atlantic Refining Co. v. Public Service Commission, 360 U.S. 378, 388, 79 S.Ct. 1246, 1253, 3 L.Ed.2d 1312 (1959). Bearing this objective in mind, I have some doubts as to whether FERC should balance the interests of consumers and utilities and permit the implementation of rate increases that preliminary study suggests exceed the rate justified by the underlying costs. Furthermore, it is unclear why the rate is not reduced to the level that appears to be appropriate under FERC’s preliminary cost estimates instead of permitting a rate that may be up to ten percent higher to become effective.
The issue before us, however, is not whether other policies might be preferable, but simply whether the Commission has abused its discretion in adopting the West Texas policy. The scope of our review is very limited; we apply an abuse of discretion standard in determining whether the policy is consistent with FERC’s statutory mandate. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 413-14, 91 S.Ct. 814, 822, 28 L.Ed.2d 136 (1971). Despite my reservations concerning the part of the justification for the policy that involves balancing the interests, in the absence of data documenting the impact of West Texas on rates, or persuasive evidence that the policy will not accomplish the pro-consumer purpose suggested by FERC, I believe we must defer to FERC’s technical expertise in ratemaking and accept its analysis that, by providing an incentive for utilities to file rates which are closely aligned with costs, the West Texas policy benefits consumers. See Kester v. Campbell, 652 F.2d 13, 15 (9th Cir.1981). Accordingly, I conclude that the adoption of the West Texas policy was within the discretion of the Commission.

. The West Texas approach involves a preliminary analysis of a proposed rate increase. Where it appears that the increase is more than ten percent in excess of costs plus the permissible rate of return, the rate increase is suspended for the full five-month statutory maximum period and the utilities must bear the risk of error. In cases where preliminary analysis suggests that the rate is no more than ten percent above actual costs plus the permissible rate of return, the rate is suspended pro forma for one day before being implemented and the risk, though a lesser one, shifts to consumers.