926 F.3d 851
D.C. Cir.2019Background
- FERC uses an annual indexing method (based on PPI-FG) to permit oil pipelines to raise rates without full cost-of-service review; shippers may challenge index-based increases as excessive.
- Indexing historically compares pipeline cost-of-service data from the two calendar years immediately preceding an index year (Form No. 6, "page 700" data).
- In 2014 several shippers filed timely complaints alleging SFPP’s 2012 and 2013 index increases "substantially exacerbat[ed]" existing over-recoveries under the Commission’s substantially exacerbate test.
- FERC dismissed the complaints in 2016 and denied rehearing in 2018 after relying on post-rate-increase financial data (data produced after the challenged increases went into effect) to conclude the increases did not substantially exacerbate over-recovery.
- The court found FERC’s dismissal departed from its longstanding, consistently backward-looking practice without an adequate explanation for the change in methodology and remanded for FERC to explain or reconsider.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC may rely on post-rate-increase (post-filing) Page 700 data when adjudicating index-based complaints | Shippers: FERC must use only the two prior calendar years’ data (pre-rate-increase) because indexing measures prior-year cost changes; post-increase data are irrelevant. | FERC: When shippers delay filing, the Commission may consider more recent, representative data available at complaint time to evaluate claims. | Court: FERC materially changed its prior, consistently backward-looking practice by using post-increase data and must adequately acknowledge and justify that departure; remand required. |
| Whether FERC provided adequate reasoned explanation for departing from prior practice | Shippers: FERC failed to acknowledge or explain its inconsistent precedents and reinterpretation of "actual cost increases incurred". | FERC: Consideration of available evidence is efficient and equitable; later data undermines claim and is therefore appropriate to consider. | Court: FERC’s lone rationale (efficiency/equity of considering available evidence) did not address whether post-increase data are relevant to an indexing scheme and failed to distinguish or explain prior decisions; agency action vacated and remanded. |
Key Cases Cited
- Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29 (agency must examine relevant data and provide a satisfactory explanation for its actions)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (agency may change policy but must acknowledge and justify the change)
- Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U.S. 800 (agency’s settled course of conduct embodies informed judgment and guides future action)
- Tennessee Gas Pipeline Co. v. FERC, 867 F.2d 688 (D.C. Cir.) (agency must acknowledge and explain departures from precedent)