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Union Electric Co. v. Federal Energy Regulatory Commission

United States Court of Appeals for the District of Columbia Circuit
890 F.2d 1193 (1989)


Facts

The Federal Energy Regulatory Commission (FERC) (defendant) opened a proceeding to adjust the rate of return for Union Electric Company’s (Union) (plaintiff) electric rates. The administrative record was closed on August 15, 1985. Based on this record, the administrative law judge (ALJ) made a recommendation for a rate of return. FERC issued an order on July 20, 1987, with a lower rate of return than the ALJ recommended. FERC based the reduced rate of return on the decrease in the U.S. Treasury’s bond interest rates between the closure of the record and the issuance of the order. Because the record had been closed, the bond interest rates that FERC used were not in the administrative record. Union filed a petition for rehearing, arguing that the Treasury’s bond interest rates were not relevant to an electric company’s costs of common equity capital. Accordingly, Union argued, FERC’s reliance on the interest rates was improper. FERC rejected Union’s argument out of hand, stating that Union should have been aware of FERC precedent that supported the order. FERC did, however, at Union’s behest, consider the increase in the Treasury’s bond interest rates in the two months after FERC issued its order, and FERC increased Union’s rate of return accordingly. The ordered rate of return was still significantly lower than the rate recommend by the ALJ. Union brought suit challenging FERC’s order on the ground that it violated the Administrative Procedure Act (APA) by not affording Union a fair opportunity to respond to FERC’s reliance on the Treasury’s bond interest rates.

Rule of Law

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Issue

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Holding and Reasoning (Williams, J.)

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  • A “yes” or “no” answer to the question framed in the issue section;
  • A summary of the majority or plurality opinion, using the CREAC method; and
  • The procedural disposition (e.g. reversed and remanded, affirmed, etc.).

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