United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 19, 1998 Decided January 22, 1999
No. 97-1644
Williston Basin Interstate Pipeline Company,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
Colorado Interstate Gas Company, et al.,
Intervenors
On Petition for Review of Orders of the Federal
Energy Regulatory Commission
Robert T. Hall, III argued the cause for petitioner. With
him on the briefs were John R. Schaefgen, Jr., and Paul K.
Sandness.
Susan J. Court, Special Counsel, Federal Energy Regula-
tory Commission, argued the cause for respondent. With her
on the brief was Jay L. Witkin, Solicitor. John H. Conway,
Deputy Solicitor, Larry D. Gasteiger and Patricia L. Weiss,
Attorneys, entered appearances.
Alan J. Roth was on the brief for intervenors Public
Utilities Commission of South Dakota, et al.
Before: Edwards, Chief Judge, Williams and Randolph,
Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Edwards, Chief Judge: Petitioner Williston Basin Inter-
state Pipeline Company ("Williston Basin") seeks review of
multiple orders of the Federal Energy Regulatory Commis-
sion ("FERC" or "Commission") in connection with a general
rate increase filed by Williston Basin under s 4 of the Natu-
ral Gas Act ("NGA" or "Act"), 15 U.S.C. s 717c. The Com-
mission found that Williston Basin had not satisfied its bur-
den of demonstrating that various components of its proposed
rate increase were lawful, and it therefore ordered certain
adjustments to Williston Basin's filing. In this petition for
review, Williston Basin takes issue with the Commission's
findings insofar as they concern the rate of return on common
equity, ad valorem tax expense, throughput projection, depre-
ciation allowance, and cost of long-term debt. The Public
Utilities Commission of South Dakota, Montana Consumer
Counsel, and Montana Public Service Commission ("State
Agencies") have intervened in support of the Commission's
position.
We find that Williston Basin's challenges to the Commis-
sion's depreciation and cost of long-term debt determinations
are plainly without merit, and, therefore, warrant no discus-
sion. The Commission's decisions require no amplification on
these two issues. However, for the reasons provided below,
we grant Williston Basin's petition for review and remand to
the Commission for further proceedings on the issues related
to the rate of return on common equity, ad valorem tax, and
throughput.
I. Background
A.Regulatory Framework
This case involves the Commission's authority, pursuant to
the NGA, to regulate "the transportation of natural gas in
interstate commerce." 15 U.S.C. s 717(b) (1994). Section
4(a) of the Act requires that rates charged by natural gas
pipelines within the Commission's jurisdiction be just and
reasonable. See id. s 717c(a). Consistent with this mandate,
pipelines must file all proposed rates with the Commission for
a determination as to their reasonableness. See id. s 717c(c).
The pipeline bears the burden of demonstrating that a pro-
posed rate change is reasonable. See id. s 717c(e). The
Commission may suspend the operation of a proposed new
rate for up to five months pending a reasonableness determi-
nation. See id. If the Commission fails to reach a determi-
nation before the end of the suspension period, it must allow
the filed rate to go into effect subject to an ultimate decision,
which may be made retroactive. See id.
B.Commission Rate-Setting Practices
The Commission sets pipeline rates by dividing revenue
requirements by projected demand to attain a dollar-per-unit-
of-service figure. To begin, the Commission sets a pipeline's
basic costs by totaling operation and maintenance expenses,
depreciation, and taxes, including ad valorem taxes. As it is
ordinarily impossible for a pipeline to know at the time of
filing what its actual costs will be during the effective period
of the filed rates, the Commission has adopted a "test period"
approach for this stage of rate making. Under this approach,
a pipeline submits data in support of its rate proposal that
reflects actual experience over the most recent twelve consec-
utive months (the "base period"), adjusted for changes that
are known and measurable with reasonable accuracy at the
time of filing, and that will become effective within nine
months after the last month of actual experience (the "adjust-
ment period"). See 18 C.F.R. s 154.303(a)(4) (1998). (Sepa-
rate test period regulations govern rate setting in the electric
utility context. See id. s 35.13.) Under certain circum-
stances, the Commission has discretion to make adjustments
in light of actual, post-test period data. See Exxon Corp. v.
FERC, 114 F.3d 1252, 1263 (D.C. Cir. 1997). For the most
part, however, the Commission develops rates using the
representative cost data available at the time of filing. The
test period underlying the rates in this case consisted of a
twelve-month base period ending January 31, 1992 and a
nine-month adjustment period ending October 31, 1992.
Next, the Commission adds to this basic cost of service
figure a reasonable profit, computed by multiplying the rate
base by the rate of return. See Boston Edison Co. v. FERC,
885 F.2d 962, 964 (1st Cir. 1989). The rate base, which is not
at issue in the present case, represents "total historical
investment minus total prior depreciation." Id. (internal
quotation omitted). The rate of return, which is very much at
issue in the present case, represents a weighted average of
the costs of the three elements comprising the pipeline's
capital structure: long-term debt, preferred stock, and com-
mon equity. See North Carolina Utils., Comm'n v. FERC, 42
F.3d 659, 661 (D.C. Cir. 1994). The cost of common equity is
frequently, as it is here, a point of contention in rate making.
Nepco Mun. Rate Comm. v. FERC, 668 F.2d 1327, 1335 (D.C.
Cir. 1981).
To calculate a pipeline's rate of return on common equity,
the Commission first develops a "zone of reasonableness,"
which gauges returns experienced in the industry, ordinarily
by reference to a proxy group of publicly-traded companies
for which market data is available. North Carolina, 42 F.3d
at 661-62. To arrive at this zone of reasonableness, the
Commission favors a discounted cash flow ("DCF") model,
which projects investor growth expectations over the long
term by adding average dividend yields to estimated constant
growth in dividends over the indefinite future. The premise
of the DCF model is that the price of a stock is equal to the
stream of expected dividends, discounted to their present
value. Once the Commission has defined a zone of reason-
ableness in this manner, it then assigns the pipeline a rate
within that range to reflect specific investment risks associat-
ed with that pipeline as compared to the proxy group compa-
nies. See id. at 661. This figure, combined with the long-
term debt and preferred stock figures, represents the overall
rate of return used to calculate the pipeline's profit allowance.
In the final rate-making step, the Commission divides the
total revenue requirement--cost of service plus reasonable
profit--by the total demand. Demand corresponds with
throughput volume on the pipeline system, which, like cost of
service, is computed by reference to a test period. See
Exxon Corp., 114 F.3d at 1263-64. This calculation yields the
per-unit price necessary to cover the pipeline's revenue re-
quirement, which, in turn, represents a reasonable price that
the Commission will permit the pipeline to recover. See
Boston Edison, 885 F.2d at 964.
C.Commission Proceedings
The procedural history of this case, which spanned more
than five years and spawned six Commission orders and two
administrative law judge ("ALJ") decisions, does not bear
exhaustive recitation here. To put the relevant issues into
context, we need only summarize the Commission's determi-
nations, as relevant to the rate of return on common equity,
ad valorem tax, and throughput issues.
Williston Basin is a natural gas company that operates a
pipeline system within the states of Montana, North Dakota,
South Dakota, and Wyoming. On April 30, 1992, Williston
Basin filed tariff sheets with the Commission in order to
implement a proposed general rate increase under s 4 of the
NGA, to be effective on June 1, 1992. On May 29, 1992, the
Commission accepted Williston Basin's filing, suspended the
rates until November 1, 1992, and made the increase subject
to refund, various conditions, and the outcome of a hearing on
cost-of-service and throughput issues. See Williston Basin
Interstate Pipeline Co., 59 F.E.R.C. p 61,237 (1992). Subse-
quently, on September 30, 1992, Williston Basin filed a su-
perceding rate increase to reflect firm service conversions,
from sales to transportation, on its system. Because this
filing relied on the same cost of service and allocations as the
earlier rate case, the two proposals raised several identical
issues. The Commission accepted the revised rates, suspend-
ed them until November 1, 1992, and consolidated the new
filing with the pending proceeding. See Williston Basin
Interstate Pipeline Co., 61 F.E.R.C. p 61,129 (1992). In the
meantime, Williston Basin filed revised tariff sheets in con-
nection with its restructuring pursuant to FERC Order No.
636. By order dated February 12, 1993, the Commission set
various issues in the restructuring proceeding for hearing, to
be addressed in the ongoing proceedings in the 1992 dockets.
See Williston Basin Interstate Pipeline Co., 62 F.E.R.C.
p 61,144 (1993). The Commission thereafter permitted Willi-
ston Basin to implement its restructuring as of November 1,
1993, subject to certain conditions. Consequently, the orders
under review affect Williston Basin's rates from June 1, 1992
through December 31, 1995, the effective date of its next rate
case.
On July 19, 1994, following an evidentiary hearing on the
matters raised by the Commission, the presiding ALJ issued
an initial decision in these proceedings, finding, with respect
to the issues relevant here, that Williston Basin had ade-
quately supported the ad valorem tax and throughput compo-
nents of its rate proposal, but had failed to justify the return
on common equity element. See Williston Basin Interstate
Pipeline Co., 68 F.E.R.C. p 63,007 (1994). On July 25, 1995,
the Commission issued an order affirming in part and revers-
ing in part the ALJ's decision. The Commission concluded
that Williston Basin had not met its burden as to any of these
issues. See Williston Basin Interstate Pipeline Co., 72
F.E.R.C. p 61,074 (1995) ("July 1995 Order").
With respect to the rate of return on common equity, the
Commission focused on the appropriate data to be used for
the dividend growth rate in the DCF model. In its filing,
Williston Basin had proposed a return on equity of 15 per-
cent, based on five-year earnings forecasts published by the
Institutional Brokers Estimate System ("IBES") for the rele-
vant proxy group companies. Rejecting this single-stage
approach to the dividend growth estimate, the Commission
relied instead on the two-stage approach articulated in sever-
al recent rate cases. See Williston Basin, 72 F.E.R.C. at
61,376. The Commission looked in particular to Ozark Gas
Transmission System, 68 F.E.R.C. p 61,032 (1994), where it
had recognized that exclusive reliance on short-term growth
projections is inconsistent with the DCF model, which as-
sumes dividend growth for an indefinite period of time. The
Commission concluded, therefore, that Williston Basin's divi-
dend growth projection must reflect estimates of both long-
and short-term growth. See Williston Basin, 72 F.E.R.C. at
61,376. Because the Commission found that the proposals
before it lacked sufficient evidence of long-term growth rates,
it took official notice of Data Resources, Inc./McGraw Hill
("DRI") projections for retail gas consumption and prices,
which had been used to represent long-term growth in Ozark,
and averaged those data with the IBES five-year projections.
See id. When added to the average dividend yields for the
proxy companies, these data produced a zone of reasonable-
ness for the rate of return on common equity of 10.97 to 13.43
percent, from which the Commission adopted the midpoint of
12.20 percent for Williston Basin. See id.
With respect to the ad valorem tax expense, the Commis-
sion found that test period principles precluded Williston
Basin's proposal to include in its cost estimate increased
amounts that it anticipated owing to Montana and South
Dakota in connection with various plant additions. See id. at
61,363. The Commission found that, although the plant addi-
tions occurred during the test period, the effect of these
additions "is not known and could not be measured with
reasonable accuracy during the test period." Id. The Com-
mission reasoned that, because "[t]he determination of the
exact ad valorem tax effect is a local matter involving local
valuation and tax assessment procedures," the projected ad-
justment to ad valorem tax liability was too speculative. Id.
The Commission also attempted to distinguish a previous
Williston Basin rate proceeding, on the ground that the
adjustment permitted there was not speculative. See id.
Finally, with respect to throughput, the Commission reject-
ed, also on test period principles, Williston Basin's proposal to
reduce the projected volume to reflect two major bypasses to
its pipeline system. See id. at 61,382-83. At the time of its
filing, Williston Basin had expected these bypasses to occur
during the nine month "adjustment" portion of the test
period; however, the bypasses in fact occurred during the
four months following the close of the test period. See id.
Thus, although Williston Basin's estimates were reasonable
when made, the Commission relied instead on the most
updated actual data for the test period that was available
before the rates took effect. See id. According to the
Commission, where the bypasses were known not to have
occurred during the test period, and where the actual time
that they would occur could not have been known then, the
fact that the bypasses did subsequently occur could not be
considered. See id.
Williston Basin sought rehearing as to each of these issues.
By order dated July 19, 1996, the Commission addressed
further, but declined to rehear, the ad valorem tax and
throughput issues. See Williston Basin Interstate Pipeline
Co., 76 F.E.R.C. p 61,066 (1996) ("July 1996 Order"). Howev-
er, the Commission granted rehearing on the issue of the
long-term growth factor to be used in calculating the rate of
return on common equity. Commenting that the data of
which it took official notice in the previous proceeding was not
widely available, the Commission concluded that:
[t]he parties need an opportunity to cross-examine the
proponents of using the DRI data, or any other long
term growth projection, to determine whether the projec-
tions are properly used. At an evidentiary hearing,
parties will have the opportunity both to present their
own testimony concerning the appropriate data to use in
projecting long term growth and to ascertain the basis of
any other party's reliance on the DRI or other data.
Williston Basin, 76 F.E.R.C. at 61,390 (footnote omitted).
Accordingly, the Commission ordered a hearing for "the sole
purpose of determining the appropriate long term growth
rate to be applied" in the two-stage DCF analysis approved
by the Commission in the July 1995 Order. Id. On October
8, 1996, following a hearing in which all parties presented
testimony on this issue, the ALJ rendered a decision, essen-
tially adopting the approach taken by the Commission in its
previous order--i.e., use of DRI data for the retail gas
commodity. See Williston Basin Interstate Pipeline Co., 77
F.E.R.C. p 63,001, at 65,006 (1996).
By order dated June 11, 1997, the Commission reversed the
ALJ, concluding "that a projection of long-term growth for
the specific pipeline companies in the proxy group or for the
pipeline industry as a whole cannot reasonably be developed
based on available data sources." Williston Basin Interstate
Pipeline Co., 79 F.E.R.C. p 61,311, at 62,388 (1997) ("June
1997 Order"). The Commission found that Williston Basin's
proposal, which advocated the sole use of IBES five-year
earnings forecasts in the DCF model, was at odds with the
two-stage DCF approach announced in Ozark, as well as the
approach to long-term growth used by large investment
brokerage houses. See id. at 62,388. Furthermore, it deter-
mined that the FERC staff's approach, which used DRI
projections of growth in retail gas consumption as its basis
for determining long-term growth in pipeline earnings, was
also deficient, for there was no reason to assume the neces-
sary correlation between gas commodity and gas transmission
revenues. See id.
Based on the evidence presented at the hearing, the Com-
mission abandoned the industry-specific approach to long-
term growth estimates and adopted, as an alternative, "the
long-term growth rate of the economy as a whole, as mea-
sured by the gross domestic product." Williston Basin, 79
F.E.R.C. at 62,387. The Commission provided four reasons
for its decision to use economy-wide growth estimates: first,
the record showed that, as companies reach maturity, their
growth rates approach that of the economy as a whole;
second, it is reasonable to predict that, in the long run, a
regulated firm will grow at the rate of an average firm in the
economy, because regulation will moderate profitability in
good and bad economic periods; third, whereas the record
did not show that investors rely on the approaches suggested
by the parties in determining long-term growth, there was
evidence that two large brokerage firms, Merrill Lynch and
Prudential-Bache, use the long-term growth of the economy
in conducting DCF analyses for investment purposes; and
fourth, the FERC staff witness in this case, and witnesses in
other cases, have used the long-term growth of the economy
to confirm the results of their analyses conducted using
industry- or firm-specific estimates of growth. See id. at
62,389-90.
After relying on investment houses to support its shift to
an economy-wide approach to long-term growth, the Commis-
sion declined to adopt the particular long-term growth models
used by Merrill Lynch or Prudential-Bache. The Commis-
sion acknowledged that the use of gross domestic product
("GDP") differed from the methodologies of the investment
houses, but explicitly made this choice, because it found that
the three-stage approaches used by these firms demanded
more "involved" calculations, which depended on "the exercise
of subjective judgment." Id. at 62,390. Although no party
had discussed or advocated GDP data at the hearing, an
exhibit to the FERC staff's testimony contained, as back-
ground, estimates of long-term GDP growth from both DRI
(5.37 percent) and Energy Information Administration
("EIA") (6.33 percent). The Commission averaged these
estimates to yield a long-term growth figure of 5.85 percent
and an adjusted zone of reasonableness of 10.5 to 12.96
percent. See id. Accordingly, the Commission ordered Willi-
ston Basin to use the midpoint of 11.73 percent--ironically, a
figure even lower than that reached in the July 1995 Order--
in its compliance filing. See id.
Williston Basin once again sought rehearing, reiterating its
opposition to the use of any long-term growth projections in
the DCF analysis, and challenging on multiple grounds the
Commission's adoption of the GDP as the long-term growth
factor. See Request for Rehearing of Williston Basin Inter-
state Pipeline Company ("Rehearing Request"), reprinted in
Joint Appendix ("J.A.") 201-27. On October 16, 1997, the
Commission rejected these challenges in the final order under
review, reaffirming the two-stage methodology underlying its
rate of return determination and defending its choice of GDP
as the long-term growth factor to be used in the DCF
analysis. See Williston Basin Interstate Pipeline Co., 81
F.E.R.C. p 61,033, at 61,174-77 (1997) ("October 1997 Order").
This petition for review followed.
II. Analysis
A.Standard of Review
We review FERC orders under the Administrative Proce-
dure Act's ("APA") arbitrary and capricious standard. See
Union Pac. Fuels, Inc. v. FERC, 129 F.3d 157, 161 (D.C. Cir.
1997); 5 U.S.C. s 706(2)(A) (1994). Our role in this context is
"limited to assuring that the Commission's decisionmaking is
reasoned, principled, and based upon the record." Pennsyl-
vania Office of Consumer Advocate v. FERC, 131 F.3d 182,
185 (D.C. Cir. 1997) (citations and internal quotation marks
omitted). To this end, we examine the orders on review to
ensure that the Commission has considered the relevant data
and "articulate[d] ... a rational connection between the facts
found and the choice made." Association of Oil Pipe Lines v.
FERC, 83 F.3d 1424, 1431 (D.C. Cir. 1996) (citations and
internal quotation marks omitted).
B.Rate of Return on Common Equity
We begin with the most vigorously contested issue in this
case: the rate of return on common equity. Although all
parties to the proceeding have embraced the DCF model for
calculating Williston Basin's return on equity, they dispute
the appropriate methodology and data sources for determin-
ing the dividend growth rate to be used in this analysis. In
the orders below, the Commission adopted a two-stage
growth factor, using IBES data for the short-term growth
rate and GDP data for the long-term growth rate. As we
view it, Williston Basin's litany of challenges to this determi-
nation boils down to two core arguments: (1) the Commission
erred in requiring the DCF analysis to include a long-term
growth factor at all; and, (2) even assuming that some long-
term growth factor was appropriate, the Commission improp-
erly adopted the two GDP figures that happened to be in the
record but were not discussed at the hearing.
1.Use of a Two-Stage Dividend Growth Factor in the
DCF Model
One of Williston Basin's principal concerns is the Commis-
sion's decision to follow Ozark and other Commission prece-
dent and include a two-stage growth factor in its DCF model.
Williston Basin suggests that the applicability of the DCF
methodology is unjustified for lack of clarity in FERC prece-
dent. We have a very different view of the matter. The
Commission squarely addressed the application of its new
policy to the particular context of Williston Basin's ongoing
proceeding: following a hearing devoted expressly to long-
term growth issues, the Commission entertained and rejected
Williston Basin's arguments on this point, explaining in full its
decision to require a long-term growth estimate in conformity
with the Ozark methodology. See Williston Basin, 77
F.E.R.C. at 65,005; Williston Basin, 79 F.E.R.C. at 62,388;
Williston Basin, 81 F.E.R.C. at 61,173-76. In short, whatev-
er questions Williston Basin had regarding the use of some
two-stage growth factor in the DCF model were answered by
FERC.
Williston Basin, for its part, was intractable in its position
that the Commission should rely exclusively on the short-
term IBES forecasts in projecting dividend growth. Indeed,
when the Commission established a hearing for the sole
purpose of determining the appropriate long-term growth
rate, Williston Basin proposed no objective measure of long-
term growth, arguing instead that long-term growth was
irrelevant, and that, even if it was relevant, IBES five-year
data was the best estimate thereof. See Rehearing Request
at 21-22, reprinted in J.A. 221-22. This tactic proved to be
fruitless, for the Commission reasonably decided to adhere to
its two-stage DCF model after concluding that it properly
applied in this context. See Michigan Wis. Pipe Line Co. v.
FPC, 520 F.2d 84, 89 (D.C. Cir. 1975) ("There is no question
that the Commission may attach precedential, and even con-
trolling weight to principles developed in one proceeding and
then apply them under appropriate circumstances in a stare
decisis manner."). Thus, to the extent that Williston Basin's
arguments on this score reflected efforts to skirt or modify,
rather than comply with, the Commission's preferred DCF
policy, the Commission acted reasonably in rejecting them.
In summary, we find that the question of whether the DCF
model must incorporate some long-term growth factor was
clearly raised, considered, and resolved by the Commission.
We conclude, therefore, that Williston Basin is not entitled to
yet another opportunity to oppose the application of that
policy to this rate case.
Our inquiry does not end here, however, for a critical issue
remains with regard to the Commission's implementation of
its two-stage growth projection--specifically, the appropriate
weight to be given to the short- and long-term data in this
model. In performing the DCF analysis in this case, the
Commission averaged these data, relying on the general
approach used in prior proceedings. The Commission sup-
ported this method by explaining that it lacked the informa-
tion necessary to predict the duration of the short and long
terms, as well as the rate at which growth would transition to
maturity. See Williston Basin, 81 F.E.R.C. at 61,176. As a
result, the Commission decided "to give [these periods] equal
weight" in applying the "well-accepted constant growth model
... to determine an average constant growth over time." Id.
During the pendency of this appeal, however, the Commis-
sion shifted course, finding in the context of a different
proceeding that short-term growth projections should receive
a two-thirds, rather than one-half, weighting in this analysis.
See Transcontinental Gas Pipe Line Corp., 84 F.E.R.C.
p 61,084, at 61,423 (1998). The Commission concluded that:
While determining the cost of equity nevertheless re-
quires that a long-term evaluation be taken into account,
long-term projections are inherently more difficult to
make, and thus less reliable, than short-term projections.
Over a longer period, there is a greater likelihood for
unanticipated developments to occur affecting the projec-
tion. Given the greater reliability of the short-term
projection, we believe it is appropriate to give it greater
weight. However, continuing to give some effect to the
long-term growth projection will aid in normalizing any
distortions that might be reflected in short-term data
limited to a narrow segment of the economy.
Id. In other words, the Commission essentially found that
the method of averaging short- and long-term projections
used in this case gave undue weight to the long-term data.
Because Transcontinental appears to reflect a significant
shift in Commission policy with regard to the DCF analysis,
we conclude that the Commission is obligated to reconsider
the application of that policy to Williston Basin. See Panhan-
dle E. Pipe Line Co. v. FERC, 890 F.2d 435, 438-39 (D.C. Cir.
1989). In Panhandle, the Commission had rejected the pipe-
line's tariff sheets, based in part on the agency's policy
against "capacity brokering." While the matter was on ap-
peal to this court, the agency revised its policy, determining
that capacity brokering should be considered on a case-by-
case basis. See id. at 438. We held that "[w]hen an agency
changes a policy or rule underlying a decision pending review,
the agency should immediately inform the court and should
either move on its own for a remand or explain how its
decision can be sustained independently of the policy in
question." Id. at 439 (citation omitted).
Notwithstanding the admonishment in Panhandle, Com-
mission counsel contended at oral argument that Transconti-
nental does not require a remand in the present case. Rath-
er, according to counsel, Transcontinental has no bearing on
this case, because Williston Basin never discussed how the
growth factors should be weighted in the DCF model. We
reject this view as too simplistic. While preserving the basic
two-stage approach of Ozark, the Commission in Transconti-
nental explicitly determined that long-term growth projec-
tions can be unreliable and therefore should be given a lesser
weight in the DCF model. See Transcontinental, 84
F.E.R.C. at 61,423. Similarly, Williston Basin, although it did
not propose a re-weighting of the growth projections per se,
relied in large part on the shortcomings of long-term data in
advocating sole reliance on the IBES data. See Rehearing
Request at 13, reprinted in J.A. 213. Clearly subsumed
within the argument that the long-term data should receive
no weight is the argument that the long-term data should
receive a lesser weight.
Commission counsel also attempted to distinguish Panhan-
dle by characterizing that case as involving a "reversal,"
rather than a mere "revision," of Commission policy. We find
this argument equally unavailing. For one thing, in Panhan-
dle, we referred to the intervening policy change as a "revi-
sion," see 890 F.2d at 439, which belies the suggestion that
the relevance of that case is limited to instances in which an
agency makes an about-face. Moreover, the instant case
itself implicates important policy matters that have concerned
the Commission in multiple rate adjudications over the course
of the past half decade. See, e.g., Northwest Pipeline Corp.,
79 F.E.R.C. p 61,309 (1997); Williams Natural Gas Co., 77
F.E.R.C. p 61,277 (1996); Panhandle E. Pipe Line Corp., 71
F.E.R.C. p 61,228 (1995); Ozark Gas Transmission Sys., 68
F.E.R.C. p 61,032 (1994). While the Commission's paramount
change in policy was its incorporation of a two-stage growth
rate in the DCF model, its determination of the appropriate
weights to be assigned the various growth projections is
central to any application of this policy. On this score, even
the Commission conceded that a re-weighting of the short-
and long-term growth factors would have a substantial im-
pact, in dollar terms, on Williston Basin's rates.
Thus, we find that, in light of the Commission's recent
refinement of its two-stage DCF model, Williston Basin may
be entitled to a re-calculation of its rate of return on common
equity. Accordingly, we remand this matter to the Commis-
sion so that the agency can reconsider whether the IBES
five-year projections advocated by Williston Basin should
receive a greater weighting in the DCF analysis, and, if so, to
implement this change. Cf. NLRB v. Food Store Employees
Union, Local 347, 417 U.S. 1, 10 n.10 (1974) ("[A] court
reviewing an agency decision following an intervening change
of policy by the agency should remand to permit the agency
to decide in the first instance whether giving the change
retrospective effect will best effectuate the policies underlying
the agency's governing act."); National Fuel Gas Supply
Corp. v. FERC, 899 F.2d 1244, 1249-50 (D.C. Cir. 1990)
(referring, in another context, to the "general principle that
an agency should be afforded the first word on how an
intervening change in law affects an agency decision pending
review").
2.Adoption of GDP as the Long-Term Growth Factor
Bearing in mind our earlier conclusion that the Commission
properly required Williston Basin's rate of return on common
equity to reflect long-term, as well as short-term, growth
expectations, we turn now to the Commission's particular
selection of the GDP for that purpose. According to Williston
Basin, the Commission's July 1997 Order adopting GDP as its
measure of long-term growth was a "bolt from the blue"--an
unexpected outcome that was untested at the hearing and
unsupported by the record. Thus, Williston Basin's conten-
tions reduce essentially to a claim of inadequate notice con-
cerning the possibility that the Commission would reach the
result that it did, as well as several subsidiary claims chal-
lenging the result itself.
In its July 1996 Order, the Commission established a
hearing for the purpose of determining the appropriate long-
term growth factor to be used in the DCF model. See
Williston Basin, 76 F.E.R.C. at 61,390. In particular, the
Commission found that the parties "need[ed] an opportunity
to cross-examine the proponents of using the DRI data, or
any other long term growth projection, to determine whether
the projections are properly used." Id. (footnote omitted).
Following this hearing, however, the Commission shifted tack.
Notwithstanding the fact that it had summarily adopted the
DRI data in its July 1995 Order, that the ALJ had accepted
the DRI data after considering the parties' positions at the
hearing, and that the DRI data had been used in Ozark, the
Commission determined to use instead an economy-wide pro-
jection based on GDP data. Moreover, notwithstanding its
earlier position that a hearing was needed concerning the
suitability of DRI data for the two-stage DCF model, the
Commission refused Williston Basin's request for such a
hearing on the use of GDP data.
It is well-established that "[a] party is entitled ... to know
the issues on which decision will turn and to be apprised of
the factual material on which the agency relies for decision so
that he may rebut it. Indeed, the Due Process Clause forbids
an agency to use evidence in a way that forecloses an
opportunity to offer a contrary presentation." Bowman
Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S.
281, 288 n.4 (1974); see also Hatch v. FERC, 654 F.2d 825,
835 (D.C. Cir. 1981) (same); United Gas Pipe Line Co. v.
FERC, 597 F.2d 581, 586-87 (5th Cir. 1979) ("The law will not
tolerate ... after-the-fact, in fact retroactive, imposition of
standards," especially where there is "no evidence either to
support or justify" the new standard.). Our present concern
centers, then, on whether the Commission's order setting the
long-term growth matter for hearing provided Williston Basin
with adequate notice of the issues that would be considered,
and ultimately resolved, at that hearing. In particular, we
question whether Williston Basin had reason to know that an
economy-wide projection based on GDP data was at issue
and, also, whether the Commission's judgment on this score
followed logically from the testimony and other evidence
adduced at the hearing. In addition, we question whether
substantial record evidence supports the actual GDP figure
adopted by the Commission for use in calculating Williston
Basin's rate of return on common equity.
As we perceive it, the Commission's decision progressed in
two relatively distinct steps: first, the Commission expanded
the scope of its long-term growth factor from the natural gas
industry to the economy as a whole, as reflected in the GDP;
and second, the Commission adopted the average of two GDP
estimates contained in a record exhibit as the long-term
growth factor to be used for the newly-defined DCF model in
this case. The Commission's first step--its decision to adopt
an economy-wide approach--reflected a well-reasoned and
supported outgrowth of the matter under consideration,
namely, the appropriate long-term growth factor to be used in
the DCF analysis. The Commission established the hearing
in broad terms, inviting the parties both to advocate the
appropriate data to be used in general, and to challenge the
use of DRI data in particular. See Williston Basin, 76
F.E.R.C. at 61,390. Moreover, the testimony adduced at the
hearing demonstrated that major investment houses used an
economy-wide approach to projecting long-term growth, that
such an approach was supported by practical economic con-
siderations, and that existing industry-specific approaches
imperfectly reflected investor expectations and made un-
founded economic assumptions. See Williston Basin, 79
F.E.R.C. at 62,388-90. Finally, whether or not it is true, as
Commission counsel now suggests, "that GDP [is] virtually
synonymous with the economy as a whole," Brief for Respon-
dent at 42, we have little doubt that GDP is among the most
commonly used and widely available measures of economy-
wide growth. In short, we are convinced that FERC's deci-
sion to expand the scope of its long-term analysis reflected a
reasoned progression from the issues set for hearing, and
that the data informing that decision was in the record and
discussed at the hearing.
However, we find that the Commission's second step, by
which it reached the precise long-term growth estimate of
5.85 percent, lacked adequate support in the record. As
discussed above, we do not take issue with the Commission's
decision, on a general level, to use GDP data in estimating
long-term growth. The problem, in our view, is that there
are conceivably a number of estimates of GDP created by
different entities and based on different economic assump-
tions. Yet, FERC, after substantially modifying the scope of
its long-term analysis, and without forewarning to the parties,
simply teased two GDP figures from the background
section to a single exhibit to reach the result here at issue.
See J.A. 315; Williston Basin, 79 F.E.R.C. at
62,390. This was a bizarre conclusion to the hearing. It is
undisputed that the record in the hearing had been created
largely in response to a specific concern over the suitability of
industry-specific DRI data for use in the DCF model. No
party at the hearing had presented, advocated, or even men-
tioned the use of GDP data. In light of these circumstances,
we find that the Commission neither explained nor supported
its choice of the DRI and EIA estimates of GDP contained in
the existing record. Accordingly, we remand to the Commis-
sion for further proceedings on this issue.
C.Ad Valorem Taxes
Next, we address Williston Basin's proposed ad valorem tax
expense, which the Commission rejected as inconsistent with
test period principles. In its filing, Williston Basin sought to
recover the additional ad valorem taxes associated with plant
increases during the test period by applying the effective tax
rate for the 1991 year in each state in which it owned
property to its total capital investment in those states, as
adjusted for additions during the test period. Williston Basin
contended that this represented a proper adjustment to re-
flect changes that were "known and measurable" within the
meaning of the Commission's regulations. See 18 C.F.R.
s 154.303(a)(4). The plant additions occurring during the
test year will, it argued, produce higher tax assessments by
the relevant states for the effective period of the rates.
The Commission refused to approve this approach, howev-
er, requiring instead that Williston Basin support its filing
with the actual ad valorem tax liability incurred during the
test period. See Williston Basin, 76 F.E.R.C. at 61,384. In
reversing the ALJ on this point, the Commission explained
that Williston Basin's proposed tax liability was too specula-
tive:
While the plant additions occurred within the test period,
the effect on [Williston Basin's] ad valorem taxes of the
installation of those facilities is not known and could not
be measured with reasonable accuracy during the test
period in this case. The determination of the exact ad
valorem tax effect is a local matter involving local valua-
tion and tax assessment procedures. Further, because
of depreciation, existing facilities may generate lower ad
valorem tax liability than as reflected in the test period
data, thereby offsetting in some unknown way the poten-
tial ad valorem tax liability.
Williston Basin, 72 F.E.R.C. at 61,363. According to the
Commission, "the actual costs for any expense or tax during
the test period generally reflects the best evidence of what
the company can expect to incur in the future." Williston
Basin, 76 F.E.R.C. at 61,384.
The Commission's ruling on this issue reduces to its basic
position that Williston Basin's proposed calculation was "con-
jecture," because "too many variables" could influence Willi-
ston Basin's actual tax liability during the effective period of
the rates. Id. Williston Basin counters that it obviated these
concerns by assuming the tax rate in effect during the test
period and adjusting only that variable--plant balance--for
which changes were known and measurable at the time of
filing. According to Williston Basin, this approach is consis-
tent with the methodology approved by the Commission in a
prior Williston Basin proceeding, Williston Basin Interstate
Pipeline Co., 56 F.E.R.C. p 61,104 (1991) ("1991 Order").
In the prior proceeding on which Williston Basin relies,
Montana had significantly increased the allocation of Williston
Basin's pipeline property to that state, but had allowed a
phase-in of the higher allocation percentage over a three-year
period, from 1986 through 1988. The Commission apparently
found that this phase-in produced known and measurable
increases in the allocation on which the taxes that Williston
Basin owed Montana were based. On this ground, the Com-
mission approved a methodology reflecting the increases that
occurred during the applicable test period, which ended Janu-
ary 31, 1988. This approach involved two steps: first, the
1987 ad valorem taxes paid were divided by the 1986 year-end
plant balance to determine the relevant tax rate; and second,
that rate was applied to a tax base representing the plant
balance as of December 31, 1987. See Williston Basin, 56
F.E.R.C. at 61,382-83. As we see it, the new plant capital at
issue in this case is analytically equivalent to the phase-in of
property allocation permitted in the earlier Williston Basin
proceeding. Therefore, the upward adjustment allowed by
the Commission in the 1991 Order to reflect increases in plant
balance during the test year is apparently of the same variety
proposed by Williston Basin in the present case.
Although the Commission was not strictly bound to follow
the methodology approved in the prior Williston Basin pro-
ceeding, it was obligated to articulate a principled rationale
for departing from that methodology. See Gilbert v. NLRB,
56 F.3d 1438, 1445 (D.C. Cir. 1995) ("It is ... elementary that
an agency must conform to its prior decisions or explain the
reason for its departure from such precedent."); National
Conservative Political Action Comm. v. FEC, 626 F.2d 953,
959 (D.C. Cir. 1980) (same). In other words, "[r]easoned
decisionmaking requires treating like cases alike." Hall v.
McLaughlin, 864 F.2d 868, 872 (D.C. Cir. 1989). The Com-
mission's task on this score was not unduly onerous, for we
have held that "[w]here the reviewing court can ascertain that
the agency has not in fact diverged from past decisions, the
need for a comprehensive and explicit statement of its current
rationale is less pressing." Id. Thus, an agency's findings
will be upheld, "though of less than ideal clarity, if the
agency's path may reasonably be discerned." Greater Boston
Television Corp. v. FCC, 444 F.2d 841, 851 (D.C. Cir. 1970).
In this case, the Commission failed to satisfy even this
relatively forgiving standard.
The Commission purported to distinguish the prior Willi-
ston Basin proceeding, holding that
the salient finding by the Commission was that the State
of Montana had prescribed higher tax rates and that it
had allowed a phase-in of those rates. Therefore, there
was ample rationale for finding there that the expenses
claimed by [Williston Basin] were based on adjustments
for known and measurable changes that would occur
during the period the rates were to be in effect. Here,
this is simply not the case. While the plant additions
occurred within the test period, the effect on [Williston
Basin's] ad valorem taxes ... is not known and could not
be measured with reasonable accuracy during the test
period.
Williston Basin, 72 F.E.R.C. at 61,363. The Commission
elaborated on rehearing that "there was nothing speculative
in the increase because the same valuation of the properties
was used and only the percentage allocation to Montana was
changed. That type of change is different than an increase in
the value of the property which [Williston Basin] claims in
this proceeding." Williston Basin, 76 F.E.R.C. at 61,384.
The 1991 Order may indeed be distinguishable on the basis
of property valuation, which is a critical step in assessing ad
valorem tax liability. Property valuation is performed by
individual states in accordance with local practice and, often,
the discretion of individual assessors. FERC may be right
that valuation was speculative in the present case, because
the new plant additions had not yet been assessed by the
relevant states. In fact, Williston Basin proposed to rely
solely on its own investment in plant facilities, even though
the valuation process almost certainly includes consideration
of other factors. Thus, the impact of the plant increases here
may not have been "known and measurable," as required by
the test period regulations. By contrast, at least as we see it,
the "plant addition" at issue in the 1991 Order resulted
simply from the phased-in allocation of existing plant, which
had presumably already been valued. In that case, then,
there was nothing uncertain: the Commission took the known
Montana tax rate during the test period and applied that
rate to the known tax base--a higher percentage of the
previously-assessed value of Williston Basin's property--dur-
ing the test period.
Assuming the facts as we do, and assuming that our
reasoning mirrors the Commission's intended reasoning, we
think that this distinction may be compelling. The sticking
point for us, then, is the extent to which the Commission's
orders compel us to make such assumptions. In other words,
we are simply unable, on the record as it now exists, to assure
ourselves either that this distinction holds water, or that this
analysis does, in fact, capture the Commission's reasoning.
For example, the Commission described the 1991 Order
variably as involving a phase-in of tax rates and a phase-in of
property allocation. Yet, tax rates are not at issue here,
because Williston Basin voluntarily assumed the tax rate in
effect during the test period.
Moreover, even assuming that we have correctly identified
the distinction upon which the Commission relied, we are not
confident that the record supports this distinction. Our
uncertainty derives principally from the lack of clarity in the
1991 Order, and the Commission's failure to explain that
order here. Specifically, because we do not know the precise
calculations and dollar amounts involved in the prior case, we
are not sure that the Commission's prior ruling was based
solely upon the phase-in of plant allocation. Indeed, our own
rough calculations suggest that approximately $67,000 in dis-
puted ad valorem tax expenses is not explained by the phase-
in. The logic of the Commission's holding in the 1991 Order,
particularly as it is couched in broad language, might support
the inference that this discrepancy reflects additional plant
increases of the nature involved in this case. If that is the
case, the supposed distinction, based on the uniquely known
and measurable character of the phased-in plant allocation,
rings hollow.
On its face, the 1991 Order refutes the broad principle on
which the Commission relied in rejecting Williston Basin's ad
valorem tax expense in this case--namely, that a pipeline may
only use taxes actually paid during the test period to support
its estimate of taxes in its compliance filing. Particularly in
light of this contradiction, we believe that the Commission
failed to provide a clear and well-supported explanation of
why the methodology used in the 1991 proceeding was not
appropriate here. We recognize that the Commission may, in
fact, have a persuasive ground for distinguishing this case
from the 1991 Order. On remand, then, FERC will have an
opportunity to offer a coherent rationale to support its judg-
ment and, also, to show that the cited rationale is supported
by the record.
D.Throughput
Finally, we turn to the Commission's decision to reject
Williston Basin's proposed throughput volume. In its filing,
Williston Basin sought to adjust its base period data to
account for decreases in throughput resulting primarily from
bypasses of its transmission system by two major suppliers.
At the time of filing, Williston Basin expected these bypasses
to occur before the adjustment period ended on October 31,
1992. Thus, it argued that they represented "known and
measurable" changes to its actual experience during the test
period, which could properly be reflected in its rate filing.
See 18 C.F.R. s 154.303(a)(4).
The source of contention here arises from the fact that the
bypasses did not actually occur until after the test period had
ended. In other words, due to the timing of these rate
proceedings, actual adjustment and post-test period data was
available by the time the Commission considered the matter.
This data showed that the bypasses were not completed
during the test period, but were completed very shortly
thereafter. Thus, if Williston Basin was permitted to include
this adjustment, it would over-recover for three or four
months of the rate period commencing November 1, 1992.
However, if Williston Basin was not permitted to include this
adjustment, it would under-recover for eight or nine months
of that rate period (assuming, that is, that it did not file a new
rate case to cover that period).
The crux of Williston Basin's position is that the Commis-
sion should accept its throughput projection, because the
estimate was reasonable when made. The ALJ agreed, con-
cluding that "under established Commission precedent, a test
year projection may be set aside only if its is shown to have
been unreasonable when made." Williston Basin, 68
F.E.R.C. at 65,069. Both Williston Basin and the ALJ relied
chiefly upon Public Service Co. of Indiana, 7 F.E.R.C. p 61,-
319 (1979), aff'd sub nom. Indiana Municipal Electric Ass'n
v. FERC, 629 F.2d 480 (7th Cir. 1980), a proceeding in which
the Commission accepted an electric utility's test period cost-
of-service estimate--even though a particular component of
its projection ultimately proved exaggerated--because the
estimate was reasonable when made and did not yield unrea-
sonable results. See Public Service, 7 F.E.R.C. at 61,701-02.
The Commission, however, rejected this view in the orders
below, holding that whether or not Williston Basin's projec-
tion was reasonable when made, "where the pipeline ...
projects an event to occur before the end of the test period,
but in fact that event does not become effective within the
required time period, the Commission generally requires that
event not be reflected in the pipeline's rates." Williston
Basin, 72 F.E.R.C. at 61,382. In the Commission's view, the
alleged reasonableness of Williston Basin's estimate went
only to its compliance with filing requirements under 18
C.F.R. s 154.303. See id. It did not "preclude the Commis-
sion from considering updated data in deciding the ultimate
question of what rates should be found just and reasonable
for the relevant periods," id.; nor did it "endow [the bypas-
ses] with the required characteristics to be allowed as an
adjustment." Williston Basin, 76 F.E.R.C. at 61,388. Thus,
the Commission refused the proposed adjustment, adopting
instead the FERC staff's proposal, which based throughput
levels on actual data for the twelve months immediately
preceding the effective date of the rates. See Williston
Basin, 72 F.E.R.C. at 61,382.
We begin our analysis of this issue by recognizing a point
that, while seemingly semantic, may bear on the relative
merit of the parties' arguments--that is, who sought the
"adjustment" in this case? On the one hand, from the
Commission's standpoint, Williston Basin asked for an adjust-
ment to its base period data to reflect a decline in throughput
that was projected to, but did not, occur during the applicable
"adjustment period." Under this view, the Commission's
decision was apparently consistent with the test period regu-
lations governing pipelines, which on their face allow only
adjustments for changes that will occur before the end of the
test period. See 18 C.F.R. s 154.303(a)(4). Not only is it
undisputed that the changes in this case did not occur during
the test period, but the Commission actually noted that,
"[h]ad the bypasses taken place in the test period, ... the
adjustment would have been permitted." Williston Basin, 76
F.E.R.C. at 61,388. However, the Commission found that,
because the bypasses did not occur during the test period,
and because it could not be known during the test period
exactly when they would occur, the use of post-test period
data showing that they did occur shortly after that time
expired was "too much in the nature of hindsight." Williston
Basin, 72 F.E.R.C. at 61,383. Moreover, it determined that
the position advocated by Williston Basin would give pipelines
an incentive to selectively project only adjustments that
would prove favorable to them if they actually occurred--i.e.,
increases in costs and decreases in throughput, see Williston
Basin, 76 F.E.R.C. at 61,388--which is, in fact, what Williston
Basin appears to have done in this case.
On the other hand, however, Williston Basin labels the
Commission as the party that sought an adjustment, because
Williston Basin wanted to use the estimate it made upon filing
this rate case, while the Commission wanted to adjust that
estimate to account for actual data during the adjustment
portion of the test period. Under this view, the Commission's
ruling appears less reasonable, for Williston Basin is quite
correct in observing that the Commission in the past has
declined to disturb test period estimates that were proven
inaccurate in light of later data if those estimates were
reasonable when made and did not produce unreasonable
consequences. See, e.g., Indiana & Mich. Mun. Distribs.
Ass'n v. FERC, 659 F.2d 1193, 1198-99 (D.C. Cir. 1981);
Public Service, 7 F.E.R.C. at 61,701. In this case, the
Commission conceded that Williston Basin's throughput pro-
jection was reasonable when made, and did not even attempt
to explain why the projection, although it in fact occurred
within a short time after the test period, was so erroneous as
to yield unreasonable results. Yet, it refused to let Williston
Basin's projection stand. Thus, instead of analyzing Williston
Basin's claim under the framework of the above cases, the
Commission simply ignored them, citing them only insofar as
it summarized the parties' arguments, and leaving us to guess
as to why they should not apply here.
As with the ad valorem tax issue, we once again find
ourselves able to surmise a solid basis for distinction. Here,
it is the simple fact that the vast majority of cases espousing
the principle of "reasonable when made" involved electric
utilities, rather than natural gas pipelines. See, e.g., Public
Service, 7 F.E.R.C. p 61,319. Although the Commission em-
ploys a test period methodology for setting rates in both
contexts, the applicable regulations differ considerably in
their treatment of estimates. As noted, the rates for pipe-
lines are based on actual data for a one-year period, as
adjusted to reflect known and measurable changes that will
occur over the following nine months. See 18 C.F.R.
s 154.303. These pipeline regulations do not appear to make
use of estimates at all; indeed, they require test period
projections to be updated with actual data for the adjustment
period as it becomes available. See id. s 154.311(a), (b). By
contrast, the rates for utilities are derived from two distinct
periods: actual data for the year known as "Period I" and
estimated data for the year known as "Period II." See id.
s 35.13(d)(1), (2). These utility regulations do not explicitly
require that Period II estimates are known and measurable,
or that they will in fact occur during the test year. See id.
s 35.13(d)(2)(i).
As we interpret them, then, the regulations applying to
utilities vest far greater weight in estimates than do the
regulations governing pipelines. It is plainly rational to infer
from these differences in regulatory context that the "reason-
able when made" formulation applies only to a utility's Period
II estimates and not to a pipeline's projected adjustments.
In short, applying the rule of Public Service comports with
the plain language of the utility regulations, but would re-
quire the Commission to recognize an exception to the pipe-
line regulations. The Commission may therefore reasonably
have determined that Public Service was inapposite in this
context.
This explanation for the Commission's decision would be
satisfactory but for two shortcomings. First, although this
distinction may seem fairly obvious once recognized, the fact
remains that the Commission itself did not articulate, or even
allude to, it in the orders below. See American Pub. Transit
Ass'n v. Lewis, 655 F.2d 1272, 1278 (D.C. Cir. 1981) (citing
SEC v. Chenery Corp., 332 U.S. 194, 196 (1947)). Second,
both the Commission and courts have, in the past, essentially
ignored this issue, citing test period precedent inter-
changeably in utility and pipeline cases. See, e.g., Exxon, 114
F.3d at 1263 & n.23; Distrigas of Mass. Corp. v. FERC, 737
F.2d 1208, 1220 (1st Cir. 1984); National Fuel Gas Supply
Corp., 51 F.E.R.C. p 61,122, at 61,334 & n.53 (1990). Thus,
we have no way of knowing whether the Commission's de-
sired approach is to recognize this broad distinction between
the regulations, or to intentionally skate over the differences
in the terms of the regulations, intending instead that the test
period concept operate identically in the utility and pipeline
contexts.
By failing to distinguish the authority on which Williston
Basin relied in support of its position, and which at least
superficially contravened the Commission's ruling, the agency
appeared to "gloss[ ] over or swerve[ ] from prior precedents
without discussion," Greater Boston, 444 F.2d at 852, thereby
foregoing reasoned decision making. It may well be that the
Commission had in mind this, or another, rational explanation
for its ruling. But as we have noted in the past, "[w]ithout
any explicit recognition by the Commission that the standard
has been changed, or any attempt to forthrightly distinguish
or outrightly reject apparently inconsistent precedent, we are
left with no guideposts for determining the consistency of
administrative action in similar cases, or for accurately pre-
dicting future action by the Commission." Hatch, 654 F.2d at
834-35 (footnote omitted). As such, we must remand to the
Commission on this issue as well.
III. Conclusion
For the foregoing reasons, Williston Basin's petition for
review is granted in part and denied in part, and the matter
is remanded to the Commission for further proceedings.
So ordered.