WISDOM, Circuit Judge:
Alabama-Tennessee Natural Gas Company, a federally regulated pipeline company, petitions the Court to review and set aside an about-face order of the Federal Power Commission.
Alabama-Tennessee makes two main points. First, the petitioner contends that the challenged order
* * *
Alabama-Tennessee is one of the smallest interstate gas pipeline companies subject to the Commission's jurisdiction. Its pipeline system extends 140 miles from an interconnection with its sole supplier, Tennessee Gas Transmission Company, at a point near Selmer, Tennessee to its terminus at Huntsville, Alabama. Alabama-Tennessee serves five direct sales customers and fifteen small resale customers; all but one are municipal distributors. As of December 31, 1959, the company's net plant in service had a value of about $5,000,000 and an accumulated reserve for deferred taxes of $100,000.
The proceedings originated in four rate increase filings between 1954 and 1959 under Section 4(d) of the Act. Each of the filings was suspended by the Commission under Section 4(e). After suspension for five months, each became effective, subject to refund, until superseded. The Commission consolidated the four cases for a hearing that commenced July 13, 1960. The Tennessee Valley Municipal Gas Association intervened in opposition to each of the four increased rates. The intervenor introduced evidence to show that the excess of normalized taxes over actual taxes constitutes tax savings and not merely tax deferrals. Alabama-Tennessee did not object to this evidence and offered no evidence in rebuttal. The Commission introduced no evidence on this point.
September 25, 1961, the Examiner issued his decision. He disallowed about $500,000 of $1,500,000 of proposed increases, but rejected the intervenor's contentions. He allowed normalization of income taxes and a 1.5 per cent return on the deferred tax reserve.
June 1, 1962, the Commission issued an order severing the issue of liberalized depreciation from other matters in the case and setting down that issue for special oral argument for July 10, 1962. The severance order provided, in part, that:
June 13, 1962, the Commission issued its order and Opinion No. 360, 27 F.P.C.
The petitioner did not seek court review of that order; the petitioner objected, in an "Application for Rehearing", to the severance and special argument of the liberalized depreciation issue that would affect rates from April 4, 1960. The petitioner points out that these proceedings began in 1954; that they were not heard until 1960 in spite of strenuous efforts to have its applications disposed of expeditiously; that the matters were submitted to the Commission in October 1961 and were not finally ruled upon until June 13, 1962; that since the Commission has decided the rate-increase case, petitioner no longer has any matter pending before the Commission. The petitioner contends that the Commission has "no authority to continue this proceeding in an open-ended manner as a vehicle for instituting what is tantamount to a rulemaking proceeding concerning an issue of widespread interest and importance to the entire gas and electric industry but having applicability to a single company — Alabama-Tennessee." The petitioner challenges the validity of the Commission orders, the fairness of its procedures, and the propriety of converting this minor rate case into a cause celebre in which "any person * * * having an interest" in the subject of the treatment of liberalized depreciation was "invited" into the proceeding. Without delay, the Commission denied the petition.
May 16, 1963, after several delays, Alabama-Tennessee, the intervenor, and thirty-four amici participated in the oral argument on the liberalized depreciation issue. February 3, 1964, the Commission, by a bare majority,
The Commission made the following findings. (1) The use of liberalized depreciation under Section 167 of the Internal Revenue Code results in a "permanent reduction" of federal income taxes by natural gas pipelines maintaining either "a growing or stable plant." Alabama-Tennessee will "maintain a growing or stable plant for the foreseeable
April 15, 1964, in Opinion 417-A, the Commission denied Alabama-Tennessee's application for rehearing and for a stay.
Large sums are involved and are mounting. In 1960 when the Commission held its first hearing on the issue, the aggregate total of the accumulated tax reserves of natural gas pipeline companies was about $106 million. December 31, 1963, it was $304 million. The petitioner's reserve at that time was $213,651.
I.
A. Normalization/flow-through. In the FPC's "rate base-rate of return" system
Under the flow-through treatment of liberalized depreciation, the ratepayers reimburse the utility for federal income taxes the regulated utility actually pays. The utility does not accumulate capital funds that are, in effect, enforced contributions from consumers. Flow-through is in accord with the established principle the Commission has "consistently held that consumers should be charged for only the actual liability for Federal income taxes. * * *" United Fuel Gas Company, 12 F.P.C. 251, 264-65 (1953).
Under traditional regulatory concepts, utility company shareholders (investors), not the consumers, furnish the capital necessary for the operation of the business. Railroad Commission of Louisiana v. Cumberland Telegraph and Telephone Company, 1909, 212 U.S. 414, 424, 29 S.Ct. 357, 53 L.Ed. 577; Lindheimer v. Illinois Bell Telephone Company, 1934, 292 U.S. 151, 169, 54 S.Ct. 658, 78 L.Ed. 1182. The consumer pays
Lifetime depreciation on a single item of property is of course the same whether the utility elects straightline or accelerated depreciation. Under conventional accounting principles, therefore, the full amount of the value of the item less salvage would be a deductible expense. Conventional accounting, however, does not take into consideration the effect of applying liberalized depreciation to a utility's total assets which are, of course, subject to a continuing cycle of obsolescence and renewal. If the industry is stable or expanding, requiring the utility's continued reinvestment in plant equal to or in excess of plant retirement, a program of liberalized depreciation produces true tax savings because there is no reduction in the tax reserve fund.
B. Commission Policy and Judicial Review. Initially, the Commission adopted the normalization approach for Section 168 of the Internal Revenue Code, providing for rapid tax amortization of emergency facilities to aid in mobilization for the Korean War.
When these cases reached court review, the courts accepted the Commission's policy of allowing normalization as an informed judgment within the special competency of a regulatory agency. Without exception, however, the courts put the Commission and the natural gas industry on notice that for ratemaking purposes Section 167 was not a congressional mandate to regulatory agencies to approve normalization.
In El Paso Natural Gas Company v. Federal Power Commission, 5 Cir. 1960, 281 F.2d 567, cert. denied sub nom. State of California v. Federal Power Commission, 1961, 366 U.S. 912, 81 S.Ct. 1083, this Court affirmed the Commission's approval of normalization of taxes. But we rejected the notion that normalization is necessary to effectuate the congressional objective expressed in Section 167. Speaking for the court, Judge Tuttle said:
Continuing, this Court observed that "there is no statutory authority for the Commission to treat actual savings in taxes to which natural gas companies are entitled any differently from savings in any other cost of service. * * * Such savings as are effected are passed on to the consuming public". 281 F.2d at 573. In discussing the depletion allowance we made it clear that tax benefits need not be translated into additional profits over and above a reasonable return on the utility's investment. We emphasized that tax benefits "are available to the regulated companies to make it so much the easier for them, in competition with
Before this Court decided El Paso Natural Gas Company the Commission ruled on another Section 167 case, United Fuel Gas Company, 23 F.P.C. 127, 512 (1960). When this case reached the Fourth Circuit, as Cities of Lexington, etc. v. Federal Power Commission, 4 Cir. 1961, 295 F.2d 109, the Court noted that there were competing theories as to the rate treatment of liberalized depreciation at both federal and state levels. The Fourth Circuit, like the Fifth Circuit, affirmed the Commission's adoption of normalization, not as required by a congressional mandate but as a matter within the FPC's regulatory discretion under the Natural Gas Act:
The District of Columbia Court of Appeals agreed with the Fourth and Fifth Circuits. In Panhandle Eastern Pipe Line Company v. Federal Power Commission, 1963, 115 U.S.App.D.C. 8, 316 F.2d 659, cert. denied, 375 U.S. 881, 84 S.Ct. 147, 11 L.Ed.2d 111, the Court held that the rate of return permitted utilities on reserve funds accumulated under the prior rule of normalization was within the expert competence of the Commission, but made it quite clear that nothing in Section 167 dictated the regulatory treatment of liberalized depreciation.
In short, as the Commission accurately stated in its brief: El Paso Natural Gas Company [and other cases] "purged [the Federal Power Commission] of the erroneous legal view which it had previously believed compelled a contrary result" and "freed the Commission's hand to make the instant reevaluation of the problem".
For purposes of this case, as we see it, the most important fact in the legislative history of Section 167 is the long reach of the Natural Gas Act. Congress might have reduced that reach through the expedient of a statutory direction requiring the regulatory agencies to allow taxpayers to retain all the economic benefits of liberalized depreciation. However, in view of the extensive regulatory scheme entrusted to the Federal Power Commission and to other federal regulatory agencies, one would expect Congress to speak out loud if it had intended Section 167 as a limitation on agency ratemaking powers. In the absence therefore of clear congressional directives with regard to ratemaking, the Commission was within the statutory purposes in giving effect to Section 167 only to the extent that is appropriate within the principles established in the Natural Gas Act.
The central principle in the regulation of the natural gas industry around which all ratemaking revolves is
This is the language of Section 7(c) of the Natural Gas Act as originally enacted in 1938. The provision was deleted when the subsection was amended in 1942 but, as the Supreme Court has held, the amendment was not intended to change the congressional purpose of the Act; the "primary aim of this legislation was to protect consumers against exploitation at the hands of natural gas companies." Federal Power Commission v. Hope Natural Gas Company, 1944, 320 U.S. 591, 611, 64 S.Ct. 281, 291, 88 L.Ed. 333. Again, as Justice Clark reiterated twenty-five years later: "The Act was so framed as to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges". Atlantic Refining Company v. Public Service Commission, 1959, 360 U.S. 378, 388, 79 S.Ct. 1246, 1253, 3 L.Ed. 2d 1312.
The fixing of "just and reasonable rates" is the heart of the regulatory system, including specifically the power to investigate and ascertain the "actual legitimate cost" of property. Natural Gas Act § 6(a), 15 U.S.C. § 717e (a); Federal Power Commission v. Hope Natural Gas Company, 320 U.S. at 601, n. 8, 64 S.Ct. 281. The Commission is not bound to use any single formula or combination of formulae in determining rates; its ratemaking function involves the making of "pragmatic adjustments". Federal Power Commission v. Natural Gas Pipeline Co., 1942, 315 U.S. 575, 586, 62 S.Ct. 736, 86 L.Ed. 1037, 1050. "If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end. The fact that the method employed to reach that result may contain infirmities is not then important. * * * It is the product of expert judgment which carries a presumption of validity." Federal Power Commission v. Hope Natural Gas Company, 320 U.S. at 602, 64 S.Ct. at 288. Since Congress has expressly delegated to the Commission discretionary power to regulate rates in the natural gas industry, Section 167 could operate as a limitation on the Commission only to the extent that exercise of the option to use liberalized depreciation does not interfere with the FPC's duty to fix "just and reasonable rates". It is at least a fair construction of the general statutory purposes and the legislative silence on the concrete situation before us that Congress did not intend to fetter administrative
There is no evidence that at the time Section 167 was enacted Congress even focused on the problem in terms of reducing the dimensions of the Federal Power Commission's regulatory responsibility to protect consumers from excessive rates.
There is nothing in any of the committee reports showing that Congress considered "the ultimate amount of depreciation deductions" with respect to the total depreciable property of a utility. And, although rapid depreciation increases available working capital in the business community generally, there is no evidence of a congressional purpose to override the Commission's ad hoc power to tailor a utility's return to the facts of the individual case, consistent with the capital costs and financial integrity of the enterprise. Congress made the tax benefit available; it is for the
Legislative silence is a Delphic divination. The petitioner argues that ever since the 1954 Revenue Code was adopted Congress has been well aware of the FPC's policy of allowing normalization and that its inaction indicates approval of that policy.
In the Revenue Acts of 1962 and 1964 Congress demonstrated that when it desires a tax statute to restrict the ratemaking authority of federal regulatory agencies it does so in precise language. In the text of the 1964 Revenue Act Congress expressly provided that federal regulatory agencies shall not use the taxpayer's investment credit under Section 38 of the Internal Revenue Code for a given year to reduce the federal income tax component of cost of service, as had been proposed by the Federal Power Commission.
The petitioner underscores the fact that the Commission itself alerted Congress to the problem. Thus the Commission transmitted the Amere decision to Congress and pointedly noted its regulatory interpretation and practice in its annual reports to Congress;
Occam's razor slices through the arguments based on legislative history and congressional intent. Either Congress did not consider the concrete problem this case presents or, if it did, Congress decided to Iet sleeping dogs lie. In these circumstances, we turn to Judge Learned Hand's resolute advice. "Flinch as we may, what we do, and must do, is to project ourselves, as best we can, into the position of those who uttered the words, and to impute to them how they would have dealt with the concrete occasion." United States v. Klinger, 2 Cir., 1952, 199 F.2d 645.
Given the long reach of the Natural Gas Act, as liberally interpreted by the Supreme Court, and weighing the consumer-oriented objectives of that Act against the Section 167 objective of promoting plant expansion by postponing the timing of tax payments, we conclude: It is unlikely to suppose that Congress amended the Natural Gas Act by a reference in the Internal Revenue Code; it is unreasonable to read Section 167 as a mandate reducing the Commission's responsibility to fix fair rates according to its usual ratemaking policies in favor of the consumer. At bottom, the question before us was and is one for Congress to decide. Assuming that Congress considered the effect of Section 167 on ratemaking at the time of enactment or later, we infer that its decision not to disturb, in terms, the status quo of ratemaking indicates a congressional intent that each federal regulatory agency should continue to exercise an informed discretionary authority in accordance with the agency's usual standards in the light of the needs peculiar to the particular industry subject to rate regulation.
A regulated utility, therefore, will never be required to pay higher income taxes because of its election to claim liberalized depreciation unless its gross plant declines in dollar value as a result of lower demand or lower plant construction cost. Normalization during a period of growth or stability would force the ratepayers to provide funds for a hypothetical tax liability that might never become payable or, at the very least, to provide funds many years in advance of the time they are needed. The Commission's records show that the deferred tax accounts of Alabama-Tennessee and other pipeline companies have increased substantially since the accelerated depreciation election became available.
Petitioner argues that under Section 167, liberalized depreciation is applied to facilities constructed during the period covered by the tax return and it is necessary that the taxpayer maintain the identity of individual units of property in order to know what deductions may be made each year for depreciation. Moreover, the Commission's Uniform System of Accounts requires this. That the reserve for deferred taxes may continue to increase for an indefinite period the petitioner deems of no consequence. The petitioner would hold the Commission in its ratemaking process to the same computation of depreciation on specific assets as required by the Internal Revenue Service under Section 167 for tax accounting. It would have the Commission disregard the cumulative reserve for accelerated depreciation for the utility's total assets. The Commission's error, according to petitioner, is that it refuses to recognize the mechanics of determining the taxes to be paid. The short answer is that accounting for tax purposes and even the Commission's present Uniform System of Accounts may be valuable tools, but they cannot dictate ratemaking policies. Cf. American Tel. & Tel. Co. v. United States, 1936, 299 U.S. 232, 57 S.Ct. 170, 81 L.Ed. 142.
To support its ruling that the level of future expenditures for Alabama-Tennessee's operating plant will continue to increase or at least remain stable in the foreseeable future, the Commission relied
Alabama-Tennessee and amici supporting the petitioner argue persuasively that the Commission fails to give adequate consideration to future risks.
It is true that the Commission's decision rests on its reading of the future. But clairvoyance is part of the daily grind of a regulatory agency. Whether flow-through or normalization is the rule, the agency must base the rule on some projection into the future. As we see it, the case for normalization requires more speculation than the case for flow-through. And it is at the expense of consumers.
On the record before us and the facts outside of the record which the Commission properly notices, the Commission's ruling is based on substantial evidence of present conditions and a fair guess as to future conditions in the pipeline industry. If the Commission is wrong, the pipelines will still have paid only actual taxes; these will be recouped in full as part of the cost of service. Besides, as a hedge against the risk of a "payback", the Commission has allowed Alabama-Tennessee to retain tax reserves accumulated since 1954.
In final analysis, putting to one side the issue of congressional intent, the petitioner's challenge to the FPC order addresses itself to the competency of the Commission to choose between competing accounting theories and competing economic guesses. We see nothing irrational in the Commission's choice.
E. Miscellaneous Attack on Order. Petitioner attacks the Commission's finding that flow-through will stimulate investment. The Commission believes that lower rates will tend to generate a higher volume of sales and thus ultimately require expansion of gas transmission facilities. The Commission found that in the past two decades pipelines have financed a tremendous expansion, at a cost of over $9 billion, and there is no indication that they will have any problem financing the more moderate expansion expected in the near future. As for Alabama-Tennessee the Commission found that the petitioner has achieved a "favorable position in the eye of the investor" and an "ability to finance successfully."
The amicus brief of Arthur Andersen & Co. attempts to show that if normalization is followed and no return is allowed that consumers would pay one tenth of one per cent lower rates than if flow-through is required. This contention,
Alabama-Tennessee states that to minimize the risk of future contingent liability for taxes it will be forced to give up the use of liberalized depreciation. May 5, 1964, Alabama-Tennessee advised the Commission of this intention. The Commission indicated its approval of petitioner's accounting entries to reflect the election to use straight-line depreciation after January 1, 1963, but stated that this approval "should not, however, be deemed as any prejudgment of the rate treatment to be given such action."
The petitioner asserts that the Commission erred in denying any return upon tax deferrals already accrued, by including them at zero cost in computing Alabama-Tennessee's overall rate of return.
The petitioner sets forth the same arguments against denial of return on the accrued funds as against denial of normalization. We find that the Commission's decision not to allow a return on accumulated deferred tax balances is supported by essentially the same evidence as its decision to adopt flow-through. It is improbable, so the Commission found, that these accumulated tax balances will be needed for future tax liability. They have become consumer-contributed capital without specific purpose. The consumer already suffers the loss of interest on these funds. This being the case, it would be further anomaly for the
We have considered all of the contentions of the petitioner and the amici and have carefully considered certain contentions not discussed in depth in this opinion. We find substantial evidence and fair inferences supporting the Commission's finding that there is no justification, on the facts here presented, for including in the petitioner's cost of service an allowance for taxes in excess of the petitioner's actual tax liability.
II.
We must say, as an initial reaction, that it strikes us as singularly eccentric that a matter as important to the natural gas industry as the Commission's about-face on liberalized depreciation should be resolved in an Alabama-Tennessee rate increase proceeding. Or that the only pertinent testimony came from one witness. And that this lone witness was the intervenor's, not the Commission's witness.
A. Alabama-Tennessee contends that the question of liberalized depreciation was not properly in issue. Neither the Commission's staff nor the petitioner expressly raised it and neither presented evidence with respect to it at the original hearing. However, the intervenor, Tennessee Valley Municipal Gas Association, whose members account for over 80 per cent of Alabama-Tennessee's natural gas sales subject to FPC jurisdiction, raised the point and produced an expert to testify on the issue.
The liberalized depreciation issue may be considered as much a part of the rate hearings as any other element of expense. As the petitioner itself observes, since 1954 that question has been raised continually in rate proceedings.
At the time of the hearing it was reasonable for the petitioner to rely on the Commission's then well-established policy of allowing normalization. It was not unreasonable for the petitioner to assume that the Commission's failure to offer witnesses on flow-through normalization indicated that the Commission had no intention of reversing itself. But when the Commission issued its order severing depreciation from other issues that action should have put the petitioner on guard and provoked prompt defensive measures. Instead, the petitioner made no effort to introduce rebuttal evidence by reopening the record as provided in
B. The petitioner charges the Commission with an abuse of discretion in severing the liberalized depreciation issue and in deciding it in a ratemaking proceeding under Section 4 of the Natural Gas Act rather than a rate investigation under Section 5(a) of the Act. The difference is significant, petitioner argues, because the burden of proof shifts to the Commission in a rate investigation. In addition, the petitioner asserts, the effect of the approach the FPC used was to deprive other interested parties in the natural gas industry who would have made extensive evidentiary presentations in the original proceedings. The petitioner takes the position that Opinion No. 360 disposing of all the other issues in the case in effect terminated the ratemaking proceeding, and later oral argument on the liberalized depreciation issue was the equivalent of a new rate investigation by the Commission.
According to the Commission, severance of the flow-through/normalization issue expedited disposition of Alabama-Tennessee rate increase cases. This explanation is somewhat less than obvious: the hearing commenced July 13, 1960; the examiner gave his decision September 25, 1961; the Commission issued its severance order June 1, 1962; Opinion No. 360 came down June 13, 1962; the oral argument was held May 16, 1963; the Commission did not issue Opinion 417 until February 3, 1964 and its final order (Opinion 417-A) until April 15, 1964. Since the Commission's recantation affects only the fourth case, it can be said that the three earlier cases were expedited.
We have already decided that liberalized depreciation was properly in issue in the ratemaking proceedings. Accordingly, we find that the Commission's action in reserving decision and ordering additional argument on the liberalized depreciation issue was not an abuse of its discretion. See Federal Power Commission v. Tennessee Gas Transmission Company, 1962, 371 U.S. 145, 154-155, 83 S.Ct. 211, 9 L.Ed.2d 199, 206, holding that the issuance of an interim order making a partial reduction in a proposed increased rate on the basis of decision of one issue, and deferring decision on the remaining questions was "an appropriate exercise of the power granted the Commission by the Act".
We do not say that the Commission chose the best procedure for changing a longstanding policy. As long, however, as the Commission stays within constitutional and statutory limits, it is competent to determine whether to deal with a policy problem in an adjudicatory proceeding, a rulemaking proceeding, or a special proceeding of the type employed in this case. Securities and Exchange Commission v. Chenery Corp., supra, 332 U.S. at 203, 67 S.Ct. at 1580, 91 L.Ed. at 2003. The order under review here leaves any pipeline company not a party to this proceeding free to introduce evidence demonstrating the inapplicability of the Alabama-Tennessee ruling to its individual
Petition denied.
FootNotes
From the standpoint of customers of Alabama-Tennessee, the allowing of that company to retain the benefits of the liberalized depreciation which it is permitted to take under Section 167 of the Internal Revenue Code raises only one question and that is whether certain costs should be paid now by present rate payers or passed on to future rate payers when it becomes necessary for Alabama-Tennessee to meet the postponed liability incurred by it under the Federal Income Tax statutes. It appears equitable that these costs should be paid by the present rate payers rather than by some future generation of rate payers, at a time when gas rates will probably be much higher than they are now. It is therefore found that the retention by Alabama-Tennessee of the temporary benefits due to accelerated depreciation, as provided for in the Internal Revenue Code, is in the over-all public interest and should be permitted in these rate determinations."
"The extraordinary ability and willingness of natural gas companies, including petitioners, to attract capital and construct new facilities causes us to question whether the incentive provided by section 167 of the Internal Revenue Code is necessary or desirable for this industry or will, in the long run, be as beneficial to the public interest as is the present, traditional method of treating depreciation expense.
"We are calling this situation to the attention of the Congress by transmitting copies of the presiding examiner's decision, our opinion herein, and the dissenting opinion attached hereto, to the chairman of the Finance Committee of the Senate and the chairman of the Ways and Means Committee of the House." (15 F.P.C. at 782; emphasis supplied.)
Different treatment of the investment credit and rapid depreciation seems justified by the nature of the two types of tax benefits. The Senate Report on the Revenue Act of 1962 distinguishes liberalized depreciation from the investment credit:
The Committee added that the credit was preferable to the alternative of higher depreciation charges because, "the latter tend to distort income accounting and produce higher costs for book purposes". Id. at 12.
Gas Utility Plant1
Alabama-Tennessee Natural
Gas Company
Reserve for
Year Gross Depreciation Net Plant
1949 $1,898,997 $ 2,353 $1,896,643
1950 3,315,222 77,792 3,237,429
1951 3,902,816 189,409 3,713,406
1952 4,059,345 318,936 3,740,408
1953 4,336,119 460,426 3,875,692
1954 4,655,459 586,198 4,069,260
1955 5,329,314 667,222 4,662,091
1956 5,423,710 815,325 4,608,384
1957 5,822,075 994,438 4,827,636
1958 6,226,161 1,186,563 5,039,597
1959 6,591,323 1,376,576 5,214,746
1960 7,151,489 1,590,767 5,560,722
1961 7,439,954 1,773,348 5,666,606
1962 8,031,865 1,912,515 6,119,349
1963 9,017,273 2,144,175 6,873,099
Gas Utility Plant1
Natural Gas Pipeline Companies
In Thousands
Reserve for
Year Gross Plant Depreciation Net Plant
1954 $ 5,220,166 $1,003,082 $4,217,084
1955 5,692,265 1,161,629 4,530,636
1956 6,303,435 3,284,953 5,018,482
1957 7,359,854 1,491,217 5,868,637
1958 8,034,344 1,688,157 6,346,187
1959 8,973,860 1,973,078 7,000,782
1960 9,938,047 2,259,407 7,678,640
19612 10,196,307 2,528,045 7,668,262
1962 10,963,623 2,839,385 8,124,238
1963 11,336,764 3,105,929 8,230,835
The Report of the National Fuels and Energy Study Group, upon which the Commission placed reliance, concluded with respect to future gas consumption (p. 37):
The forecast by the Bureau of Statistics of the American Gas Association estimated that gross plant for the gas utility and pipeline industry will increase from 24.7 billion dollars in 1962 to 42.5 billion dollars in 1972. These forecasts were based on estimates submitted by individual gas companies.
If we could see clearly into the future and say with certainty that continuing expansion was certain, and countervailing considerations were nonexistent, we would hold that the Commission may not permit current charges for a liability that will never arise. Predictions of future developments, however, are unsure estimates at best. The problem is a new one; that factual and policy considerations that bear upon its solution have not as yet been fully developed. Even the future of accelerated depreciation in the Federal tax structure is not entirely settled. If for any reason continued investment in utility plant at current levels should cease, or accelerated depreciation be denied, the financial stability of utilities might be jeopardized if some provision had not been made for the increased taxes that would result. Rate regulation is a continuing process; greater experience may bring greater wisdom in dealing with these problems. At this time, we think it permissible for the Commission to safeguard the financial integrity of utilities by recognizing as present expenses those tax liabilities which are deferred by use of accelerated depreciation for Federal tax purposes." City of Alton v. Commerce Commission, 1960, 19 Ill.2d 76, 165 N.E.2d 513, 521-522.
The Commission has instituted a proceeding under Section 5 of the Natural Gas Act "for the purpose of implementing the regulatory policies determined and established" in the opinions under review here. FPC Docket No. R-264, July 7, 1964, 29 Fed.Reg. 9723.
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