Court Opinion

ID: 7279153
Source: CourtListenerOpinion
Date Created: 2022-07-25 20:04:36.095305+00
Date Added: 2024-06-11T14:37:21.508427
License: Public Domain

TAMM, Circuit Judge
(concurring in part, dissenting in part):
I concur in petition No. 21,767 of the Tribes.
With respect to petition No. 21,904, 1 concur in Judge Fahy’s analysis of all the issues (including retroactivity) except those discussed hereinafter from which I respectfully dissent.
I.
Section 10(e) of the Federal Power Act1 provides that rentals fixed at the beginning of the license term may be “readjusted” at the end of twenty years. The Commission’s view of this provision, approved by the majority, is that the entire analysis of annual charges may be made de novo. I cannot agree.
“Readjustment” is not a synonym for “fix anew.” The term contemplates adjustment of an annual charge once reasonable, but now found unreasonable. It requires a finding that the former charge is unreasonable,2 a statement of reasons for the finding and a modification guided by those reasons to accommodate the changed circumstances. See California Oregon Power Co. v. FPC, 99 U.S.App.D.C. 263, 239 F.2d 426 (1956). This is the only plausible interpretation of the statute. When a company has entered into a fifty ye*ar contract with substantial investment of capital, it does not, and should not, expect the slate to be wiped clean.
The legislative history of the Act clearly rejects the Protean approach adopted by the Commission. The purpose of the Federal Water Power Act3 was to provide a “method by which the water [power] of the country. . . *86[could] be developed by public or private agencies under conditions which [would] give the necessary security to the capital invested and at the same time protect [the] public interest.” (Emphasis supplied.) H.R.Rep. No. 61, 66th Cong., 1st Sess. 5 (1919). The Federal Water Power Act was passed to replace the ineffective General Dam Acts4 which “provide[d] for and authorize[d] conditions upon which the [license] may be granted that render the terms of the investment so uncertain and so defeasible that those having capital cannot safely and will not make investments under them.” S.Rep. No. 179, 65th Cong., 2nd Sess. 3 (1917). The majority’s acceptance of de novo readjustment flies in the face of Congress’ attempt to create investment security. Contractual evanescence without regard to precedent or practice discourages investment which in turn harms the public whom the Commission is charged with protecting.
The evil of readjusting annual charges de novo is pointedly illustrated by the Commission’s treatment of the valuation problem. Although the parties expressly rejected the “profitability" method in their negotiations, (J.A. 183-4) the Commission nonetheless resurrected it.5 I respectfully suggest6 that a matter as fundamental as profit sharing should not be imposed retrospectively on the Company absent clear guidance from Congress.7
This court has once before significantly altered the original contract between the parties in Montana Power Co. v. FPC, 144 U.S.App.D.C. 263, 445 F.2d 739 (1970) (en banc). While I am bound by that decision, I note with dismay that this court has again taken its cutting shears to the contract. This court would do well to recall that we are dealing here with a contract, not thistledown or a transient cloud spun on gossamer. Contracts should provide constancy, not ephemerality. The past should be prologue, not postscript. By ignoring historical antecedents the Commission seriously impinges upon the traditional respect the law has accorded contracts. I would require consideration of the circumstances, commitments and arrangements that were a part of the original agreement as well as a statement of reasons for a finding of unreasonableness which would then serve as a guide for the readjusted charges.
II.
I also take exception to, and dissent from, the percentage of value assigned to the tribal lands.
In arriving at the tribal share the Commission considered three sources of power in the Kerr Project — natural stream flow, Flathead reservoir and *87Hungry Horse releases. The land underlying the first is wholly owned by the Tribes. The second is equally divided between the Tribes and the Company. The third is owned by neither the Tribes nor the Company.
The Commission determined that the total power generation of the Kerr Project was 1194 Megawatt months (MW). Of this total 161 MW were assigned to the natural stream flow, 376 MW to the Flathead reservoir and 657 MW to Hungry Horse.
The Commission then proceeded to arrive at the sharing formula of 42.13% in two steps. First, the Commission divided the units of production on the basis of 50% for development and 50% for ownership. Then, the Commission again divided the ownership shares so that the water power generated refracted the land interests.8 The initial split is not in controversy. The latter is however.
Taking the three sources of power and the total generation seriatim, the Commission calculated the tribal share as follows. The Flathead reservoir, which was assigned 376 MW, was divided in the first step on a 50/50 basis resulting in a tribal ownership share of 188 MW. This ownership share was again divided by half since the Tribes owned 50% of the reservoir land, to arrive at a total of 94.0 MW. The stream flow, which was assigned 161 MW, was divided in the first step by half resulting in a tribal share of 80.5 M.W. Since the Tribes owned all the land underlying the stream flow, they were assigned all of the 80.5 MW in step two. Hungry Horse which was assigned 657 MW was also divided in the initial step by a half thereby creating a tribal share of 328.5 MW. However, in the second step the Commission suddenly departed from its formula by assigning to the Tribes all of the 328.-5 MW despite the fact that neither the Tribes nor the Company owned the land from which the Hungry Horse releases originated.9 It is this calculation from which I must dissent.10 I concur in the Commission’s observation that the value of a “parcel of realty depends not only on its intrinsic worth, but also upon its location relative to other realty.” J.A. 373. However, the Hungry Horse releases flow not only over the tribal lands, but also over that of the Company. Furthermore, the reservoir, partially owned by the Company, makes possible the full use of Hungry Horse and it is the Company’s system as a whole which through the Pacific Northwest Coordination Agreement makes possible the realization of much of the value of the project’s generation. There was no justification for assigning all of the value of Hungry Horse to the Tribes.
*88Cognizant of the heavy burden petitioner must bear in seeking to reverse a Federal Power Commission decision, and of the importance of the end result, Montana Power Co. v. FPC, 112 U.S.App.D.C. 7, 298 F.2d 335 (1962), I am nonetheless forced to conclude that the Commission’s action is unreasonable and not supported by substantial evidence. Cf. Mississippi River Fuel Corp. v. FPC, 82 U.S.App.D.C. 208, 163 F.2d 433 (1947). Although my analysis may seem laborious, it is necessary, for it illustrates that a small miscalculation can create substantially different results. For example, if the Company were assigned half the value of Hungry Horse in the second step,11 the tribal share would have been reduced to 28% with an annual charge of approximately $631,000 as opposed to the $950,000 the Commission granted.12
While I wholeheartedly agree that the Tribes are entitled to an increase in the annual charge, that increase should be fair and reasonable. We must never lose sight of the fundamental truth that the ultimate burden of increased annual charges must be borne not by the Company, but the consumer.

. 16 U.S.C. § 791 et seq. (1964).

. The Commission did implicitly find the annual charges unreasonable sans reasons for the finding. J.A. 330, 374.

.Federal Water Power Act of 1920, ch. 285, 41 Stat. 1063.

. Act of June 21, 1906, ch. 3508, 34 Stat. 386; Act of Jury; 23, 1910, ch. 360, 36 Stat. 593.

. The Examiner rejected the profitability method because inter alia the parties themselves had rejected it. J.A. 330, 334. The Commission, however, disagreed with the Examiner’s finding, and instead relied upon the word “profitable” in a clause of the original contract referring to “the most profitable purpose for which [the land is] suitable, including power development,” for the conclusion that “a form of profit sharing was indeed contemplated.” J.A. 366-367. It is folly to contend that the phrase is intended to do anything but protect against an argument that the annual charges should be determined according to the value of the land for such purposes as farming.

. Although I disapprove of the use of the profitability method, the error does not appear critical since according to the Commission the next most reasonable net benefits approach would have produced approximately the same value for the Kerr Project. J.A. 367.

. The net benefit method, approved by this court impliedly in the Third Unit case and by the Commission explicitly on several past occasions was cast aside by the Commission without adequate explanation. It is an elementary tenet of administrative law that an agency must either conform to its own precedents or adequately explain its departure from them. See, e. g„ C.B.S. v. FCC, 147 U.S.App.D.C. 175, 454 F.2d 1018 (1971).

.The Commission adopted the method of witness Stanley E. Sporseen which is explained at J.A. 20-21, 26.

.Hungry Horse, upstream from Kerr, is a development owned by the government which substantially increases the power generation capacity of Kerr.

.Graphically, the Commission's 42.13% tribal share Is derived as follows:

. The Company owned approximately half the land in the Kerr Project.

. On the assumption that the damsite is more valuable than the other land in the project, if the Commission assigned the Company % of the value of Hungry Horse in the second step, the tribal share would be approximately 35% with an annual charge of approximately $786,000.