Philadelphia Gas Works v. Federal Energy Regulatory Commission

RANDOLPH, Circuit Judge,

dissenting:

Unlike my colleagues I have no difficulty discerning FERC’s path of decision, its reasons for reaching its result, or the rule of law FERC laid down. Remanding this case for a more thorough opinion is, to my mind, a waste of time for all concerned, an exercise in formalism unsupportable by logic or law. The opinion writers at FERC often can improve their products. So can the courts, particularly when judges seek to explain away precedents. The process of distinguishing one case from another involves finding legally relevant differences between the two. Stare decisis itself demands analogical reasoning. To describe differences between the cases as a ground of decision is therefore to state a rule of law. That is the course FERC followed, and I see no legal basis for a reviewing court’s demanding more of the agency.

As FERC cases go, this one is refreshingly simple. In 1984, at the end of a short two-paragraph opinion, FERC stated: “Late payment costs, or penalty fees, are not gas costs and are not to be passed to [the pipeline’s] customers through the PGA mechanism.” North Penn Gas Co., 29 F.E.R.C. ¶ 61,275 (1984). Little care went into the drafting. The words “penalty fees” seem to be modified by “late,” but this is not entirely clear. Furthermore, FERC supported the quoted sentence with a footnote citing “18 U.S.C. § 154.38(d)(4),” an obvious error when one realizes that 18 U.S.C. contains the federal criminal code. The substance of the decision was, in any event, scarcely earth-shaking. North Penn had failed to pay its suppliers on time, its suppliers imposed “late payment penalties,” and FERC decided that the pipeline’s customers did not have to foot the bill, at least not through the purchased gas adjustment (PGA), for what was the equivalent of interest on outstanding debt.

*380 FERC never cited North Penn again, until its initial decision in this case rejecting Texas Eastern Transmission Corporation’s attempt to use the PGA to pass on to its customers $8.2 million in “penalties” resulting from excess gas purchases during a very cold December. Texas Eastern Transmission Corp., 54 F.E.R.C. ¶ 61,078 (Jan. 31, 1991). When FERC discovered that Texas Eastern had incurred these charges, not out of imprudence, but in order to avoid paying out $26.2 million to nominate additional supplies of gas for the entire winter, the agency reversed itself. Texas Eastern Transmission Corp., 55 F.E.R.C. ¶ 61,353, at 62,047 (June 3, 1991). Texas Eastern’s customers were “better off” getting gas with the penalties added than without them; the company’s other options were to incur much larger costs by nominating additional volumes of gas in advance or to curtail gas supplies during the winter. Id. Citing these “unique facts and circumstances,” FERC allowed the charges to be passed through to the customers. Id. at 62,048.

If, as FERC said, the facts in Texas Eastern were “unique,” it necessarily follows that the same facts did not exist in North Penn. Those facts therefore enable one to discern the ratio decidendi of Texas Eastern. The legal rule is easily formulated: when a pipeline incurs charges designated as “penalties” in order to supply its customers with needed gas at a cheaper price than if the penalties were not incurred, those charges reflect the cost of gas to the pipeline and therefore can be passed on to the pipeline’s customers through the PGA. That strikes me as a rational decision, beneficial to customers, well within FERC’s discretion, and a sufficient distinction of North Penn. It may not be a very broad rule of decision. It may be site-specific. It may not solve all or many future cases. But none of that is of any moment. There is nothing wrong with agencies confining their adjudicative decision to the case before them. Dicta in agency decision-making is as problematical as dicta in judicial opinions.

The majority thinks that if the case is not sent back it would run afoul of Chenery I. See SEC v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943). The Chenery doctrine comes into play when an agency relies on the wrong reason for its result. Even by the majority’s lights, that is not this case. The point of contention is in applying the principle “that a reviewing court may reverse'and remand if an agency has not adequately explained the reasons for its conclusions,” a principle “sometimes misconstrued as included within the ‘Chenery doctrine,’ ” but one that actually stems from another source. Henry J. Friendly, Chenery Revisited: Reflections on Reversal and Remand of Administrative Orders, 1969 Duke L.J. 199, 206. First fully articulated in Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 61 S.Ct. 845, 85 L.Ed. 1271 (1941), the principle is now embodied in the Administrative Procedure Act, 5 U.S.C. § 557(c), which requires agencies to state their “findings and conclusions, and the reasons or basis therefor____” An agency satisfies this requirement if its decisional “path may reasonably be discerned,” Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286, 95 S.Ct. 438, 442, 42 L.Ed.2d 447 (1974). FERC’s route in Texas Eastern is already reasonably, indeed readily, discernible. Yet the majority orders a remand so that FERC can draw us a map. I respectfully dissent.