UNITED STATES v. CITY OF FULTON
In 1979, the Southwestern Power Administration, a federal regulatory body acting on behalf of the Secretary of Energy, increased the cost of electricity generated by federally owned dams under its control. The price hike was initially implemented on an interim basis, and three years later, after furher review, the new rates were made permanent. A group of cities that purchased power from the dams filed suit to recover the extra fees it had paid before the interim rates were made final, claiming that Section 5 of the Flood Control Act of 1944 prohibited the imposition of interim fees. The Act stated that new rates would "become effective upon confirmation and approval by the Secretary (of Energy)." The cities asserted that the rates, while in their interim phase, had not yet received "confirmation and approval" from the Secretary and could therefore not be legally implemented.
The Court of Claims sided with the cities, holding that the new rates could only be charged once they received final approval from the Secretary. The Court of Appeals for the Federal Circuit affirmed.
Can the Secretary of Energy or his delegates impose new hydro-electricity prices on an interim basis under Section 5 of the Flood Control Act of 1944?
Legal provision: 16 U.S.C. 825
Yes. In an opinion delivered by Justice Thurgood Marshall, the Supreme Court unanimously held that the Secretary of Energy could impose rate hikes on an interim basis without violating the Act. The Court found that the language of the Act and its legislative history did not conclusively show whether Congress intended the Secretary to impose rate hikes on an interim basis. The Secretary's decision, therefore, only needed to be a reasonable attempt to balance the competing interests in the act: preventing unnecessarily high charges to customers while still allowing the dams to be self-sufficient (and therefore not a burden on government resources). Justice Marshall wrote "Interim ratesetting appears well suited to accommodating that dual goal... [and therefore] the procedures established by the Secretary to exercise his powers under the Flood Control Act both are within his delegated authority and constitute a reasonable accommodation of the policies underlying that Act." The Court further found that the rate increases were consistent with the cities' electricity contracts, which were based largely on the language of the Act.
ORAL ARGUMENT OF ANDREW J. PINCUS, ESQ. ON BEHALF OF PETITIONER
Chief Justice Burger: The Court will hear arguments first this morning in United States v. the city of Fulton.
Mr. Pincus, you may proceed whenever you're ready.
Mr. Pincus: Thank you, Mr. Chief Justice, and may it please the Court:
The Federal government operates over 100 hydroelectric dams on the nation's waterways that generate electric power.
This case concerns the scope of the Secretary of Energy's authority to set the rates at which this power is sold to the public.
Specifically, the question presented here is whether the Secretary may place a rate increase into effect on an interim basis pending a final determination regarding the propriety of the new rate.
In April 1978, the Southwestern Power Administration, the entity whose rates are in dispute, issued a public notice of a proposed rate increase.
The notice stated that the SWPA was running a deficit of approximately $20 million and proposed a tentative 42 percent rate increase to enable the SWPA's revenues to cover its costs.
The notice solicited written comments and the SWPA subsequently held public meetings to inform interested parties about the proposed rate increase and to obtain oral comments concerning the proposal.
After considering the public comments, the SWPA reduced the rate increase to 33 percent and submitted it to the Assistant Secretary of Energy for his approval.
The Assistant Secretary reviewed the public comments and observed that this was the first rate increase in the SWPA's general rates in over 20 years.
He concluded that the rate increase satisfied the applicable statutory standard because it would generate revenues that would equal but not exceed the SWPA's costs of generating the power.
The Assistant Secretary therefore issued an order confirming and approving the rates and placing them into effect on an interim basis pending final action by the Federal Energy Regulatory Commission.
The Assistant Secretary's order specified that customers who paid the interim rates would receive a refund with interest if a lower rate eventually was placed into effect by the FERC.
The FERC again solicited public comments regarding the rates and at first issued a decision disapproving the rates because they were too low.
It founds that the rates in fact would not generate revenues equal to the SWPA's costs of producing the electricity.
After reviewing additional data that was subsequently submitted in support of the rates, the FERC reversed itself and approved the new rates in January 1982, 33 months after the rates had been placed into effect on an interim basis by the Assistant Secretary.
Respondents commenced this action in the Court of Claims seeking to recover the money paid pursuant to the rate increase.
They did not... do not challenge the amount of the rate increase.
They argue only that the Assistant Secretary cannot place rates into effect on an interim basis.
The Court of Claims held that the Secretary lacked the statutory authority to place interim rates into effect and that Respondents' contracts with the United States also barred the interim rate increase.
Following a remand to it for the calculation of damages, the Court of Appeals for the Federal Circuit reached the same conclusion.
Unidentified Justice: Mr. Pincus, what exactly do you mean by the term FERC?
Mr. Pincus: Yes, the rates... the rates are proposed by the SWPA or the other... any other power marketing administration.
They are examined by the Assistant Secretary who issues an order directing the customers to pay the rate increase, but providing that the rate, that those amounts are subject to refund if the [= FERC], which then considers the rate increase, determines that it is too high and substitutes a lower rate increase.
Unidentified Justice: What the Assistant Secretary was asking for is the pattern that was familiar with the Interstate Commerce Commission when tariffs were filed, was it not?
The tariff would take effect immediately until the Commission set it aside, but you say that's not permitted here?
Mr. Pincus: Well, this case, this case is... in the Interstate Commerce Commission example, and indeed, in private utility regulation, the utility typically files a rate which will take effect but is subject to suspension by the relevant regulatory body.
Unidentified Justice: Subject to refunds.
They segregate it, impound it?
Mr. Pincus: I don't believe that it's impounded.
I think that the utility is under, simply under an obligation to repay the money if it is eventually found that the rate increase is too high.
Here the rate before it is placed into effect is actually measured by the government, by the Assistant Secretary of Energy, against the applicable statutory standard here, the standard that rates should be set at a level that recoup revenues but don't provide any provide to the government.
So here customers are actually in a better position than they are in typical regulation because the rates already have been assessed for their propriety by the government.
So it is especially peculiar that in this context, where the rates already have been evaluated, even before they go into effect on an interim basis, the courts below found that the Secretary doesn't have this interim rate-setting authority.
Unidentified Justice: Mr. Pincus, do you think that the statute and the contract in question would permit a retroactive rate increase?
Has the government ever taken that position under the language of the contract?
Mr. Pincus: We haven't taken that position, and that question isn't presented in this case.
Unidentified Justice: I notice that, I notice that the language of the contract says that there can be a change in the rates to increase, decrease, modify or change them, and they will become effective on the date specified in the order, and I just wondered if the government had ever taken the position that that would permit a retroactive increase.
Mr. Pincus: Not to my knowledge, Your Honor, and that's not what we're contending here.
Here the date of the Assistant, that the Assistant Secretary issued his order in March 1979, and the interim rate took effect on April 1, 1979.
So we are not contending for any retroactive authority here.
The rates, the Respondents were permitted to comment on the rates before the Assistant Secretary reached his decision.
The Assistant Secretary reached his decision, and only then did the rates take effect.
So this case does not involve any retroactive rate increases.
Unidentified Justice: You say it took 33 months between the time of the promulgation of the tentative rate or the interim, and the final approval?
Mr. Pincus: Yes, Your Honor, and that long delay is the problem that the Secretary faces in trying to recoup the cost of electricity for that what Respondents... the result that for which Respondents contend would have deprived the government of the incremental revenue for that entire 33 month period and essentially given them a windfall of paying rates that had already been determined to be below cost for that entire period of time.
Unidentified Justice: Are delays of that length, is that the usual?
Mr. Pincus: I understand from the Department of Energy, Your Honor, that the process has been speeded up somewhat--
Unidentified Justice: To what?
Mr. Pincus: --since these early days.
Unidentified Justice: How much have they cut it back?
Mr. Pincus: I don't have the specific amount of time, but I gather that it no longer takes approximately three years to place rates into effect, but the delay still can be substantial, and there's no reason why interim rates can't be placed in effect since Respondents essentially suffer no harm because if the rate is subsequently found to be too high, they are entitled to a refund.
Since interim rates are such a typical feature of conventional ratemaking, there's no reason for the Secretary to be deprived of that authority here.
Unidentified Justice: Well of course, if you are right on your interpretation of the Energy Act, in that the Secretary has... in that you claim the Act gives the Secretary complete ratemaking power.
Mr. Pincus: Yes, Your Honor, we contend--
Unidentified Justice: And he's created his own problem by giving final approval to the FERC.
Mr. Pincus: --Well, Your Honor, we don't think it's a problem because we don't think that--
Unidentified Justice: Well, it is, it is if, it is if you say that, if there's a long delay.
The Secretary doesn't need to delay anything.
Mr. Pincus: --Well, that's true, Your Honor, but what the additional review does is impose safeguards for taxpayers' rights to revenues that recoup costs and also safeguards respondents' rights by giving them an additional review to ensure that rates aren't too high.
So we don't... there's no prejudice to anyone here.
Unidentified Justice: And here the FERC raised the rates, didn't it?
Mr. Pincus: The FERC at first thought that the Assistant Secretary was wrong and that the rates were too low, and it subsequently was convinced, upon getting some more information, that the rates were appropriate.
Unidentified Justice: Is there any doubt about the FERC's authority to raise as well as to lower the proposed rate?
Mr. Pincus: Your Honor, the FERC cannot... can only approve or disapprove a rate.
It cannot change the rate under the... under the scheme that the Secretary has set up in the delegation order.
What would happen if the FERC in this case, for example, had adhered to its view that the rate was too low, that it would send the matter back the the Assistant Secretary who would then have to devise another rate that met the FERC's objection.
Unidentified Justice: The... do you contend that the language of the contract goes no further than the language of the statute itself?
Mr. Pincus: Exactly, Your Honor.
We think that the contract provisions simply say that the Secretary may exercise the full extent of his statutory ratemaking authority.
Unidentified Justice: Because the language is a bit different.
The statute says the rate schedules to become effective upon confirmation and approval by the Federal Power Commission.
Now, do you interpret the statute after the new creation of the Department of Energy as substituting the Secretary of Energy for the Federal Power Commission, or do you conceive that FERC stands in the shoes of the Federal Power Commission under that language?
Mr. Pincus: Of the contracts, Your Honor?
Unidentified Justice: No, of the statute which I read to you.
Mr. Pincus: We believe, we believe that the Secretary of Energy is substituted for the Federal Power Commission in the statute, that the Department of Energy Organization Act provides that except for authority, that with respect to authority previously possessed by the Federal Power Commission, it's basically divided into two parts.
The Act specifically designates certain authority that is transferred to the FERC, and it provides that all the rest of the Federal Power Commission's authority shall be transferred to the Secretary, and since this authority under Section 5 of the Flood Control Act is not specifically set forth in the Department of Energy Organization Act as one of those bits of authority that is transferred to the FERC, it clearly is transferred to the Secretary of Energy by that statute, and that is set out in our brief and also in the Fifth Circuit's opinion in the Tex-La case, and we think the Court of Claims simply made a mistake in reading the statute to transfer that authority to the FERC.
Unidentified Justice: And the FERC's in the Act at all, you claim, just by the will of the Secretary.
Mr. Pincus: Exactly, Your Honor, and I should point out that Respondents in their brief do not take a different position.
They agree that the Secretary could change the delegation order and provide that he alone exercises authority to confirm and approve rates and eliminate the FERC completely from the process, and that would be permissible under the statute.
Unidentified Justice: I gather the Fifth Circuit agreed with your position, did it not?
Mr. Pincus: Yes, the Fifth Circuit--
Unidentified Justice: And expressly disagreed with the Court of Claims' holding in this case.
Mr. Pincus: --Yes, Justice Brennan.
The Fifth Circuit said, in fact, that in its view the Court of Claims had simply misread the statute, and it pointed out the reasons that it was clear from the statute that the Federal Power Commission's authority had been transferred to the Secretary of Energy.
The Court of Claims invalidated the rest of its decision invalidating the rates on three bases, most of which we've talked about.
First, it found that the interim rate increases were barred under the contracts, but as I've discussed, the contract provisions simply provide that the Secretary of Energy may exercise his full statutory authority.
So really there is no separate contract question in this case.
The contract question is the same as the statutory question, whether the Secretary has the statutory authority to impose interim rates.
The second ground relied upon by the Court of Claims is its view that Congress did not transfer the Federal Power Commission's authority to the FERC.
However, as the Fifth Circuit pointed out and as we demonstrate in our briefs, it's quite clear that the Department of Energy Organization Act expressly transfers that authority to the Secretary of Energy, and that the FERC's involvement in this process is solely by virtue of the fact that the Secretary determined that review by the FERC was appropriate in his delegation order.
So the only issue really in this case is whether the Secretary has the authority to place rates into effect on an interim basis, and we think that that authority is supported on two separate grounds: first of all, on the basis of Section 5 of the Flood Control Act which broadly empowered the Secretary of the Interior to sell electricity at the lowest possible rates to consumers, consistent with sound business principles, and in using such a general term to describe the scope of the Secretary's authority, Congress plainly intended to give the Secretary substantial leeway in selecting the manner in which to administer this program.
Basically Congress... this is a proprietary program selling Federal property, and Congress has directed the Secretary to dispose of it in whatever manner he thought appropriate consistent with the way a business would dispose of a similar asset.
And Respondents have presented no reason that interim rate increases should be excluded from this broad grant of authority.
And in fact, interim rate increases are a typical conventional ratemaking procedure, and rate regulation schemes governing private utilities typically provide that rates may be placed into effect on an interim basis pending the final regulatory determination.
And the reason for that rule is very simple.
The judgment has been made that the regulated utilities should not be required to bear the burden of financial... of the loss of revenues due to regulatory delay.
And interim rates allow the utility to obtain the revenue that it needs and at the same time safeguard the customer's rights because the customer is entitled generally to a refund with interest if the regulatory body later finds that a lower rate is appropriate.
The Federal Power Act, for example, permits private utilities to file their rates and permits the rates to go into effect on an interim basis, subject to a refund if the lower rate is adopted by the FERC.
We think it would be anomalous to construe Section 5 in a manner that deprived the Federal Government of this ratesetting technique.
Unidentified Justice: Mr. Pincus, what evidence is there that under the old scheme, before there was a Department of Energy, that the Federal Power Authority interpreted the Act as giving it the power to set interim rates?
Mr. Pincus: Your Honor, there are three examples, three cases in which the Federal Power Commission did set rates into effect on an interim basis, one example under this statute, one example under the very similar language of the statutes governing the Bonneville power projects.
I think that those interpretations of the statute by the administrative entity that administered it are entitled to deference and show that the position for which we contend is the appropriate interpretation of the statute.
And Respondents make much of the fact that those are the only examples, but this Court has held several time that the mere fact that an agency has not exercised its power does not mean that the power doesn't exist, and we think that is all that is true of the situation cited by Respondents here.
Respondents' basic argument that Section 5 does not confer interim rate authority is their claim that the statutory provision, the statute bars the rates by providing that rate schedules become effective upon confirmation and approval by the Federal Power Commission, but we think this language simply has nothing to do with any prohibition of interim rates.
All the statute... the statute does not require complete administrative action before the rates are placed into effect.
It simply requires a decision by the Federal Power Commission or the entity that exercises the Federal Power Commission's confirmation and approval authority here, the Assistant Secretary, and here the Assistant Secretary did specifically that.
Before the interim rates went into effect, he issued an order discussing whether the rates met the statutory standard and expressly confirming and approving the rates on an interim basis, and we think that is all that the statute requires.
There simply is no requirement that all administrative action be completed before the rates are placed into effect.
In addition, it's clear that Congress' purpose in requiring the Federal Power Commission to act is not at all furthered by requiring final approval of rates.
All that Congress wanted was the Federal Power Commission to apply its expertise in evaluating a rate before the rate was placed into effect, and that's exactly what happens under our interpretation of the statute.
Before an interim rate is placed into effect the rate is evaluated under the statutory standard by the government entity that possesses that authority.
I would also like to briefly address our second argument, that independent of Section 5 of the Flood Control Act, the Secretary's now plenary authority over the rates under the Department of Energy Organization Act also permits the Secretary to use interim rates.
We think that this Court has recognized that this type of plenary authority carries with it the authority place rates into effect on an interim basis when that is necessary to serve the public interest, and we think that that is the situation here.
Interim rates serve the public interest, especially in this case where the SWPA's revenues had fallen so far behind in recouping its costs, and do not harm consumers because the consumers, first of all, have the right to comment on the rates before they go into effect, have the review of the rates by the Assistant Secretary, again before the rates go into effect, and have the final level of review by the Federal Energy Regulatory Commission and a refund if the FERC decides that the interim rate was too high.
In that situation, we think there's simply no reason to deprive the government of the right to place interim rates into effect.
Unless the Court has any questions, I'd like to reserve the balance of my time.
Unidentified Justice: Very well.
ORAL ARGUMENT OF CHARLES F. WHEATLEY, JR., ESQ. ON BEHALF OF RESPONDENTS
Mr. Wheatley: Thank you, Mr. Chief Justice, and may it please the Court:
In view of the argument that the government has made, we think there are three main issues that are before this Court relating to the question of whether or not the Department of Energy could impose an interim rate structure on the rates.
The first question is whether or not the contacts the government entered with these three cities, by their terms, do not allow an interim rate but require the final rate, approved by the Federal Energy Regulatory Commission.
Unidentified Justice: Mr. Wheatley--
Mr. Wheatley: Yes.
Unidentified Justice: --do you think the contract provisions have independent significance apart from the statute, or does the contract permit what the statute permits?
Mr. Wheatley: Justice O'Connor, I believe that the contracts have independent validity because when you read the language of those contracts, they are more explicit and more definitive than in fact the language of the statute.
Unidentified Justice: Well, as I read the contract, it would even allow a retroactive increase.
Mr. Wheatley: Well, the language of the--
Unidentified Justice: So the language of the contract, if that's what you are relying on, may be more generous than the government even urges.
Mr. Wheatley: --Well, I don't see how the language of the contract could reach a retroactive result because it says the new rates shall thereupon become effective in accordance with and on the effective--
Unidentified Justice: On the effective date specified.
Mr. Wheatley: --date specified in the order.
Now, it says "thereupon".
In other words, the FERC and its predecessor the Federal Power Commission, would have to confirm and approve the increase, and they cannot approve the increase and confirm it until they do that in a final order.
Now, the words FPC, that refers to the final approval process, so that you need... the Commission would have to be making its final approval.
A case directly in point on that is New York State Electric & Gas v. FERC at 712 F. 2d 762 or 768.
The FRC... neither the FPC nor the FERC nor anyone involved in these rates since they have been in effect have ever sought to put them into effect on a retroactive basis, and I think it comes from the language in the contract and also from the language of the Flood Control Act which says that the rate increases cannot be put into effect until a confirmation and approval, which by the legislative history of the statute means final approval.
So the Commission could not after final approval attempt to backdate the contract.
That issue hasn't come up, but the language certainly is clear regardless of the question of retroactivity, that the language of the contract is more explicit and more detailed than the language of the statute.
Unidentified Justice: But you take the position that in any event, it wouldn't be allowed under the statute either, is that right?
Mr. Wheatley: We say that, first, if you read the contracts, the plain language of the contracts and the consistent practice under those contracts, and up to this case as well as the interpretation of the words in the contract by other courts and by the Federal Power Commission, those kinds of words in the whole group of Sierra-Mobile cases, if you take that whole--
Unidentified Justice: But what if all you had was the language of the statute and the history of its application by the Federal Power Commission?
Could it establish interim rates?
Mr. Wheatley: --If you put... no, clearly not.
If you put aside the clear language of the contracts which go beyond the language of the statutory in being explicit that you need a final order and that interim rates are not permitted, you still have the language of the Flood Control Act which, as it was construed in the legislative history, required a final order by the FPC, and under the administrative practice, consistent administrative practice under the Flood Control Act up until this case, that Act was consistently construed as requiring the final approval by the Federal Power Commission, and even as we read... every court that considered this, it was three district courts and the Court of Claims, the Federal Circuit Court and the Fifth Circuit, all six of those courts, to our opinion, in construing Section 5 of the Flood Control Act, have construed that that act required a final decision by the Federal Power Commission or the Federal Energy Regulatory Commission.
The Fifth Circuit opinion--
Unidentified Justice: Well, that is certainly true, but your question is whether, whether you needed a final order before any rates could go into effect.
Mr. Wheatley: --That's correct.
That's what we think the Section 5 of the Flood Control Act, Justice White, requires, and the Fifth Circuit in its construction of Section 5 of the Flood Control Act, if you read the opinion closely, seemed to reach the same conclusion.
They got a different result, not under Section 5 of the Flood Control Act but saying the Department of Energy Act modified and amended Section 5 of the Flood Control Act.
So it is the Fifth Circuit which alone of all the courts that considered this, have said interim rates are possible, has reached that result on the basis of the decision of Congress in their minds in the DOE Act, but when you track through the exact provisions of the DOE Act, an it was only a transfer, the legislative history was quite clear that it was not to be an amendment of the prior laws, the prior statutes, and each of the exact provisions of the DOE Act, we think that the Federal Circuit reached a better opinion.
Unidentified Justice: Do you think the FERC inherited power to approve rates directly from the FPC?
Mr. Wheatley: No.
I think what happened was that--
Unidentified Justice: You think that FERC derives its power from a delegation of the Secretary.
Mr. Wheatley: --I think it does arise from a delegation.
Unidentified Justice: And the Secretary would have had the... could have kept the entire power himself.
Mr. Wheatley: He could have kept that power, but he could have kept only the power that was granted by Section 5 of the Flood Control Act, and that power was limited by Congress.
When you read the legislative history of Section 5, they did not intend to give plenary authority to the Federal Power Commission in the approval of rates.
It was a very limited authority.
It could only be directed to approve or confirm the rates.
Unidentified Justice: With the Secretary proposing them.
Mr. Wheatley: --Yes, what they propose.
It could either act... veto it... just, Mr. Ickes in his appearance before the Committee when the Section 5 was being debated in its predecessor Act, the Bonneville Act, said quite expressly that it was a veto power.
It required final action by the Federal Power Commission, but it was a limited authority to affirm.
It was not a plenary grant of authority like the Interstate Commerce Commission has or like the Federal Power Commission has under their express statutes.
Now, had Congress in 1944 in passing Section 5 of the Flood Control Act intended to grant the power to either the Secretary or to the Federal Power Commission to grant interim rates, it could have used the language that it had before it in the earlier Natural Gas Act of 1938 or the Federal Power Act of 1935, also the Interstate Commerce Act had express provisions in it that allow for interim rates and authorize interim rates.
Section 5 of the Flood Control Act did not intend to do that, and I think the reasons for it are set forth in the analysis that the Fifth Circuit made of Section 5 wherein I think the Fifth Circuit came up with the conclusion that there wasn't any authority in the Flood Control Act of 1944 to permit interim rates.
Unidentified Justice: It is rather extraordinary, though, isn't it, Mr. Wheatley, for a utility, public or private, not to have any ability to set new rates in force short of a 33 month delay.
Mr. Wheatley: Well, I think that the delay, Mr. Rehnquist, was a result of procedures which the Secretary of Energy and the [= FERC], he could have increased, shortened that time considerably, and they have shortened it since that time.
Furthermore, in the long history after the Flood Control Act was enacted, in '44, in all of the dealings with the cities under the SWPA, over that entire period of time up to the instance in this case, at no time did SWPA ever sought to issue an interim rate.
That's up to '79.
After the Court of Claims decision in this case in '82, SWPA went back to its old practice of not issuing interim rates, and in 1983 they issued a rate that was not an interim rate, and if the Court can take judicial notice of SWPA's annual report for 1984, they have done very well indeed since they've been following the practice.
The report states... this is the annual report for '84... I'm pleased to report the Southwestern Power Administration was financially healthy when the books were closed at the end of fiscal 1984.
We received record revenues of $100.5 million, of which $93.2 million was deposited with the U.S. Treasury, assisting in reduction of the federal deficit.
This may be compared to the $52 million in funds appropriated by Congress for operation of the Southwestern Power system.
Of this revenue, $21.8 million was available for debt retirement, which also, is also a record.
Our previous accumulated debt retirement was $39.9 million.
These records were achieved in a year of slightly less than average electric energy generation.
So I think this report which was based on rates that were issued without violating the express language of the contracts of the cities, shows that SWPA through the Department of Energy and utilizing a procedure without interim rates, can operate to keep its books in balance and to do well.
Now, the question of the contract itself, this case is one of the first cases to reach this Court from the new Federal Circuit, and Congress has set up that Court to have expertise in matters such as this dealing with the meaning of federal contracts.
We have the result of both the Court of Claims before it was abolished and the Federal Circuit Court of appeals construing the language of the contract in this case as on its claimed language precluding a rate increase to these cities until such time as there have been a final confirmation and approval by the FERC.
Now, that contract construction where the Court subsequently went into the course of conduct between the parties over the long period of time that the contracts had been in effect I think is entitled to great deference.
The findings that both the Court of Claims and the Federal Circuit reached on the meaning of these contracts and the plain language and the course of conduct is within their scope of expertise to review and consider federal contracts.
The Fifth Circuit in its opinion really didn't analyze the contracts.
It really simply analyzed the statutory, and just assumed that the contracts would follow its construction of the subsequent statutes.
We think that the Fifth Circuit was in error.
There was a long pattern of conduct that started after the Flood Control Act was issued, where no interim rates were issued by SWPA.
We have listed the cases at pages 36 and 37 from 1947 on up to the '70s.
Throughout all of those cases until the present case, SWPA never sought an interim rate.
Unidentified Justice: Of course, an interim rate isn't so important unless you've go a period of heavy inflation.
Mr. Wheatley: Well, the interim rate is I think a question of what... it could be important in an inflationary period, yes, but on the other hand, the contracts by their express language and their course of conduct, there was never any permission of an interim rate under that scheme.
Unidentified Justice: Well, all I'm suggesting--
Mr. Wheatley: Yes.
Unidentified Justice: --is, you know, this doesn't affect the argument based on the language of the contract or the language of the statute, but when you are arguing past practice, it may be that the regulators saw a need for an interim rate only in a time of heavy inflation.
Mr. Wheatley: Well, it could be that is so, but certainly when the Power Act and the Gas Act were enacted in 1935, Congress put in express interim rate authority, and it seems strange that in 1944, which is a few years after that, they didn't put the same authority in there if they thought it was important and necessary.
And I think the reason they thought it wasn't necessary was... goes back to Secretary Ickes' concept in his sponsorship of the bill.
He wanted a bifurcated system to review, but he wanted the Federal Power Commission review to be quite limited, and they would only have the limited function of approving, and they did not have any broad plenary functions like the Federal Power Commission would have or the Interstate Commerce Commission would have.
And he wanted them also... he was very explicit about this, that they had to have the final say, that the rate could not go into effect, and we've cited his comments on this in our brief, until there was a final order by the Federal Power Commission, and that one ingredient is missing here even after the DOE Act.
The Secretary of Energy, in his wisdom, decided that the wanted to delegate the function of confirmation and approval back to the FERC which was the successor agency to the Federal Power Commission.
So he delegated that in his order, and at that point you come back to the express language of the contracts and the Flood Control Act.
Unidentified Justice: But you take the position that even had there been no delegation to FERC, no interim rate would be possible, is that right?
Mr. Wheatley: I think that that is true because the Department of Energy Act, when it was enacted, simply transferred the situation as it existed under Section 5 of the Flood Control Act, to the Secretary of the Energy, and it's true that at that point the Secretary of the Energy had the power, the limited review and confirmation power of the FPC plus the power that the Secretary of Interior had under the Flood Control Act.
He had both those powers, but those powers were never plenary under the Flood Control Act.
The power to confirm rates was not changed substantively, and all Congress did in the DOE Act was transfer.
They simply transferred what existed previously and didn't augment and increase it.
And the Court reports and the Chairman of the bill, when it was enacted, made it quite clear they were not creating any new substantive power and authority in the Secretary of Energy.
Well, the further sections relating to the DOE Act is 301(b) and 302(a)(1), both of those simply transferred functions, and as the Federal Circuit recognized, the meaning of the word "transfer" is clear, and it does not permit a definition that permits the augmentation of the prior powers.
Now, nothing in the transfer gave any additional authority in addition to the Section 5 language, and also, there was a Section 501(a) of the DOE Act which expressly provided that any procedural requirements under any prior law that were transferred that were in addition to that which the DOE had itself were to remain intact and in place.
This clearly brought with it the limitations that were implied or were expressed in the 1944 Act requiring final confirmation and approval by the Secretary or... and his delegee, the Federal Energy Regulatory Commission.
I mentioned earlier the legislative history of the DOE Act also where Chairman Brooks, who was the floor manager, said the Secretary would not have any powers not already created by Congress, and that's cited at page 40 of our brief.
And Chairman Dunham of the Federal Power Commission in the Senate hearings relating to the DOE Act said he could separate reorganization from substantive authority and he looked and construed the DOE Act as simply a reorganization act and not as an act investing the DOE with any additional authorities other than that which it had under the transferred acts.
Now, the government's position that the consolidation of the Flood Control Act and the DOE Act gives plenary authority over rate increases and interim rate authority we think is patently wrong.
And the decision by the Federal Circuit below adopted a District Court opinion in the Sam Rayburn Dam case, where that issue was gone over very carefully and clearly shows and demonstrates that the DOE Act did not intend to augment any powers that were previously involved.
But regardless of the legislative history, I think there's one bottom line that comes out.
That is that when the Secretary delegated his authority for the final approval and confirmation, he was at that point, to the FERC, at that point until that final approval and confirmation took place, there was no completion of the exact event which the statutory language in the Flood Control Act, which is still valid, had taken, had occurred, it would take place.
Well, I think that that completes my argument.
Unless there are further questions, I will just relinquish the rest of my time.
Chief Justice Burger: Thank you, Counsel.
Do you have anything further, Mr. Pincus?
Mr. Pincus: Not unless the Court has any questions, Your Honor.
Chief Justice Burger: Apparently none.
Thank you, gentlemen.
The case is submitted.