The Rate Case

Question 1

Federal Power Act § 205

Answer 1

(a) Rates & stuff that effects rates shall be just and reasonable. If they are not, they are hereby declared to be unlawful.

(b) Meta non-discrimination principle

(c) Must file publicly, rate schedule & contracts that effect or relate to rates & “classifications, practices, and regulation”

(d) Notice required

Question 2

Federal Power Act § 206

Answer 2

(a) Unjust or preferential rates – complaint or motion from the commission may cause an investigation, and if rate is unfair, then the commission may set the appropriate rate.

(b) Refund Effective Date – if rate is found unreasonable, FERC may set new rate and offer refunds.

• Allows FERC to amend rates that are unjust, unreasonable, unduly discriminatory or preferential – Memorize UUUP

Question 3

Hope Natural Gas

Answer 3

Rule: End Results Test If the end result is just and reasonable, then our analysis is done.

• We are not going to get into the process of determining how the agency came about the ratemaking.
• We want to get out of this business, otherwise there might be a taking by FERC. Similar to Nebbia

Question 4

Dueling Approaches to Determining Rate Base

Answer 4

(1) Fair value test – what it is worth going forward – forward looking.
* Brandeis Critique: Well, these are monopolies so we can’t consider what the monopolies think, we have to trust the regulator.

(2) Actual legitimate cost – what you have already paid – backward looking

(3) Book Cost - what you actually paid. vs. “estimated reproduction cost” – how much it would cost to rebuild the exact same plant.

Question 5

Filed Rate Doctrine

Answer 5

Forbids a regulated entity to charge rates for its service other than those properly filed with the appropriate federal regulatory authority.

Purpose is to assure effective Commission oversight of the rates at which power is sold.

Girard: The regulated entity and the customer are both bound by the terms of a filed rate until the regulatory authority approves a change.

Question 6

Mobile-Sierra Doctrine

Answer 6

Permits a modification of rates charged by an electricity supplier under a contract if a modification is in the public interest because the rates are found to be unjust, unreasonable, or unduly discriminatory.

• Very High Standard

Question 7

Potomac Elec. Power

Answer 7

A mere rate disparity or benefit to the purchasing utility or its customers from a rate modification does not suffice, without more, to satisfy the MSD public interest standard.

Question 8

NRG Power

Answer 8

Can non-contract parties challenge rates?

Yes, the Mobile-Sienna Standard applies to nonparties who which to challenge a contract as contrary to the public interest.

Question 9

How do you compute “fair value”?

Answer 9

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