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New York State Electric & Gas Corp. v. Federal Energy Regulatory Commission

June 28, 1983


Petition by the New York State Electric & Gas Corporation to review an order of the Federal Energy Regulatory Commission which granted the motion of intervenors, Municipal Electric Utilities Association of New York and Power Authority of the State of New York, to reject the utility's revised rate filing. Petition denied; order enforced.

Feinberg, Timbers and Meskill, Circuit Judges.

Author: Timbers

TIMBERS, Circuit Judge:

Petitioner New York State Electric & Gas Corporation (NYSEG) transmits electric energy to intervenor Power Authority of the State of New York (PASNY). PASNY, in turn, sells power to, among others, intervenor Municipal Electric Utilities Association of New York (MEUA). The present controversy arose when NYSEG filed a revised rate schedule with respondent Federal Energy Regulatory Commission (FERC) to reflect new tax normalization procedures required by FERC in its June 4, 1982 order, reported at 19 F.E.R.C. Para. 61,228 (1982). Intervenors challenged the new filing, claiming that NYSEG lacked the contractual power to charge a higher rate than that set by a prior contract between NYSEG and PASNY.

FERC upheld intervenors' objection to the compliance filing in an order dated September 30, 1982, reported at 20 F.E.R.C. Para. 61,411 (1982). It held that the NYSEG-PASNY agreement barred the rate increase even though NYSEG had filed the higher rate in response to a FERC order. In its September 30, 1982 order, FERC consequently modified its June 4, 1982 order, holding that NYSEG could not charge a higher rate to reflect the changes brought about by compliance with the new tax accounting procedures.

NYSEG petitions to set aside the September 30, 1982 order, asserting that the order contravened well established principles of contract interpretation and ratemaking jurisprudence. We disagree. We deny the petition and enforce FERC's order.


The core of the dispute in this case is a letter agreement executed by NYSEG and PASNY dated February 3, 1982. According to that agreement, NYSEG agreed to provide electric transmission (wheeling) service for PASNY under the following rate guideline:

"Power Authority shall compensate NYSEG for the use of NYSEG's transmission facilities to effect the transmission and delivery of electric power and energy as provided hereunder at such rates as shall be approved by FERC. The rates initially filed or to be filed by NYSEG with FERC shall be $2.85 per month per kilowatt of billing demand of the Power Authority's customers for deliveries beginning July 1, 1982. All billing demands shall be measured at such customers' point or points of delivery."

NYSEG filed the agreement with FERC on March 30, 1982, requesting an effective date of July 1, 1982 for collecting that rate from PASNY. In support of the $2.85 rate, NYSEG included a cost-of-service study as required by 18 C.F.R. § 35.13 (1982).

After FERC gave public notice of the filing, PASNY intervened in support of NYSEG's filing. MEUA, along with the New York State Rural Electric Cooperative Association, sought leave to intervene in order to challenge the proposed rate increase.*fn1 By an order dated June 4, 1982, FERC granted intervention, denied the motions to reject NYSEG's March 30, 1982 filing, accepted the proposed $2.85 rate for filing, and made the rate effective July 2, 1982. To determine the "reasonableness" of the filed rate, FERC ordered hearings to commence within the year, but, pursuant to 16 U.S.C. § 824e(a) (1976), it allowed the rate to be collected in the interim, subject to refund after the hearings. FERC also required NYSEG to revise its filing to reflect FERC's new tax accounting procedure under its recent Order No. 144-A, requiring normalization of tax timing differences for ratemaking. FERC Statutes and Regulations Para. 30,340.*fn2 Apparently the revised rate was to go into effect upon filing without any further review. In conformity with the FERC order, NYSEG submitted new cost statements with a revised rate of $3.13 per kw per month on July 2, 1982.

On August 2, 1982 -- 31 days later -- MEUA, a customer of PASNY, filed a motion to reject the revised $3.13 rate. It predicated its challenge on the Mobile-Sierra doctrine*fn3 which provides that a utility may not avoid a rate set by private contract through filing a rate hike with the Commission. In the absence of such a contractual bar, a utility under § 205 of the Federal Power Act, 16 U.S.C. § 824d (1976 & Supp. III 1979),*fn4 may file for a unilateral rate increase. The increase takes effect by operation of law after thirty days' notice to the Commission and the public, pending a full hearing on the lawfulness of the rate. The Commission may suspend the filed rate for a maximum five-month period after it otherwise would have become effective. Even in that situation, however, the suspension period may well expire before the end of the rate investigation, thus allowing the higher rate to be charged on an interim basis.*fn5 But under the Mobile-Sierra doctrine, a utility is bound by rates set by agreement with its customers; it cannot increase rates unilaterally, even in response to unforeseen economic developments, unless the Commission has concluded that the old rate is unjust and unreasonable. Thus, MEUA argued that the February 3, 1982 PASNY-NYSEG agreement precluded collection of the $3.13 rate until the increase received ultimate approval from FERC.

On August 17, 1982, PASNY joined MEUA's motion, asserting that NYSEG was barred from filing any rate higher than the original $2.85 rate under the terms of the February 3, 1982 agreement. NYSEG opposed the motion of PASNY and MEUA on the procedural ground that the motion should be dismissed as untimely and on the substantive ground that the intervenors misconstrued the relevance of the Mobile-Sierra doctrine as applied to the February 3 agreement.

After ruling that the motion to reject the filing was not untimely, FERC held that the February 3 letter agreement barred NYSEG from collecting the increased rate. It reinstated the $2.85 rate and ordered NYSEG to make ...

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