Federal Power Commission v. Sierra Pacific Power Company

PETITIONER: Federal Power Commission
RESPONDENT: Sierra Pacific Power Company

DECIDED BY: Warren Court (1955-1956)
LOWER COURT: United States Court of Appeals for the District of Columbia Circuit

ARGUED: Nov 08, 1955
DECIDED: Feb 27, 1956

Facts of the case


Media for Federal Power Commission v. Sierra Pacific Power Company

Audio Transcription for Oral Argument - November 08, 1955 (Part 1) in Federal Power Commission v. Sierra Pacific Power Company

Audio Transcription for Oral Argument - November 08, 1955 (Part 2) in Federal Power Commission v. Sierra Pacific Power Company

Earl Warren:

You may proceed.

F. T. Searls:

Just before the recess, I was stating that the Commission itself recognized there's no area of concept and it's our determination of the just and reasonable standard.

And I referred to a recent decision of the Commission which I mentioned on page 3 of our reply brief where the Commission refused to accept an examiner's holding that there was a zone of reasonableness of -- and the examiner had decided that a 6.1% return could be accepted on a filing because the Commission had previously held that a 6% return was reasonable for that company.

The Commission said that the one-tenth of 1% return doesn't in itself measure the difference between a fair and unfair return, but it said that we must fix the return in accordance with our own best judgment.

Accordingly, the Commission reduced the file rate there from a 6.1% return to a 6% return.

Contrast here, the zone of reasonableness that would have to exist if Sierra's position were correct comparing a 2.6% return with the 4.75% return compare the rate which is filed with -- by the PG&E with the old contract rate which yielded only 78% of the revenue yielded by the new rate.

That is no -- certainly, a zone that we could hardly expect a court to recognize.

Further examination of what the Commission does will show that the Commission doesn't engage in a two-step procedure, either under Section 205 (e) or under 206 (a) or the corresponding provisions of the Natural Gas Act.

The Commission proceeds to determine on the basis of the available evidence from all of the figures and data, what it believes is the reasonable rate for the servicing question, and if the filed rate is different then the Commission orders the rate changed accordingly.

And it follows that process under a -- 206 (a) proceeding just as clearly as it does under a -- 205 (e) proceeding.

The record in the Hope Natural Gas case will show that that is exactly what the Commission did there and that was a 5 (a) proceeding.

The provision of Section 206 (a) and the corresponding one of Section 5 (a) of the Gas Act, doesn't say that the Commission shall first find that the existing rate is unreasonable and then, if it does so, proceed to a determination of the reasonable rate.

It says that whenever the Commission finds that the existing rate is unreasonable, then it shall determine the just and reasonable rate.

And the process which the Commission follows as I say is not a two-step procedure.If to proceeds that wants to decide for itself what is the reasonable rate and then proceeds accordingly to adjust the existing rate if necessary.

And that is exactly what happens under the other proceedings or the utility files at proposed rate.

The Commission doesn't take the proposed rate and determine whether it is reasonable and if it finds it unreasonable then by a separate step decide what is the reasonable rate, it proceeds to determine what in its own mind is the reasonable rate, and fixes the rate accordingly.

It is apparent that the requirement of 206 (a) for a finding that the existing rate be reasonable is in essence a burden of proof or failure of proof requirement, if you like.

It says in effect what shall happen if the -- if there is a failure of proof, then the Commission being unable to find the existing rate unreasonable or any other rate reasonable must lead the existing rate in effect.

And similarly, under Section 205 (e), the burden of proof is expressly placed upon the utility to sustain an increase.

If it fails to sustain its burden of proof, the existing rate remains in effect.

The -- if we are -- if this principle be accepted then that there is one just and reasonable rate to be established by the Commission in its own best judgment using its expert knowledge, its experience, and all of the material which is available to it in a form of regular filings by the utility and the general economic knowledge which it has on the industry then, we submit, there is no difficulty in interpreting the Federal Power Act as setting up two procedures for changes in rates.

One, the Section 205 procedure is -- for a use by the utility where it proposes a change in the rate, contract rate or otherwise and 206 (a) is for the Commission or a complaining party to use.

Now, the procedural difference is that under Section 205, the utility must not only ask for a change, it must say, "We want to change -- we want this rate changed to a particular rate and must file that rate."

And it has a burden of proof of establishing that rate and that is quite reasonable in view of the utility's knowledge of its own affairs.

Under 206 (a), neither the Commission or a complaining party is obliged to propose a substitute rate of -- the filing --

Felix Frankfurter:

What do you mean with the --

F. T. Searls:

Excuse me.

Felix Frankfurter:

-- there might be a difference if in asking for an increase necessarily impliedly and they say (Inaudible)

F. T. Searls:

That is --

Felix Frankfurter:

-- if you pull that out -- if you pull that out, if you go ahead and establish what you just said.