United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 16, 2006 Decided January 16, 2007
No. 05-1193
WESTAR ENERGY, INC. AND
KANSAS GAS AND ELECTRIC COMPANY,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
On Petition for Review of an Order of the
Federal Energy Regulatory Commission
Martin J. Bregman argued the cause and filed the briefs for
petitioners.
Judith A. Albert, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief were John S. Moot, General Counsel, and Robert H.
Solomon, Solicitor.
Before: GINSBURG, Chief Judge, and TATEL and BROWN,
Circuit Judges.
Opinion for the Court filed by Chief Judge GINSBURG.
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GINSBURG, Chief Judge: Westar Energy, Inc. and its
subsidiary Kansas Gas and Electric Company (collectively
Westar) sought permission from the Federal Energy Regulatory
Commission to file corrected transmission data for 2001 after
the December 31, 2002 deadline for doing so. The Commission
denied the request, even though it had accepted another utility’s
similarly corrected filing after the deadline. Westar petitions for
review, contending the Commission could not permissibly deny
its request for a waiver of the deadline after it had allowed the
other company to file late. Because the Commission did not
meaningfully distinguish the prior case, we grant the petition for
review and remand this matter for the Commission’s further
consideration.
I. Background
The Commission is required by law to charge regulated
entities an annual fee calculated to recoup its cost of regulating
them. 42 U.S.C. § 7178. The fee charged a public utility is
based upon its share of the megawatt-hours transmitted in
interstate commerce by all public utilities. 18 C.F.R.
§ 382.201(a)-(b). The Commission requires each public utility
to file a Form 582 by April 30 reporting the number of
megawatt-hours it transmitted in interstate commerce in the
preceding year and permits the utility to correct its report until
the end of the calendar year in which the report was filed. Id.
§ 382.201(c).
On November 21, 2002 the Commission notified Kansas
City Power and Light Company (KCPL) it had been selected for
examination as part of an industry-wide audit of the annual fees
assessed by the Commission. On August 14, 2003 the
Commission issued its final report on the KCPL audit, which
concluded the utility had overstated its transmission volume for
2001. The auditors recommended, and the Commission
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accordingly ordered, that KCPL file a corrected Form 582 for
2001. The audit report also included a July 7, 2003 letter from
KCPL noting it had reviewed a draft of the report, agreed with
its findings and recommendations, and had submitted on March
3, 2003 — more than two months after the filing deadline and
five months before the audit was completed — a Form 582
corrected “in accordance with the findings and
recommendations outlined in the ... audit.”
After learning about KCPL’s erroneous filing and its
belated correction, Westar reviewed its own filings and
discovered that, because of errors similar to those made by
KCPL, it too had overstated its transmission volumes. On
December 18, 2003 Westar filed revised Forms 582 for both
2001 and 2002 and requested a waiver of the December 31,
2002 deadline for correcting the 2001 data. The Commission
accepted the revised 2002 report but refused to accept the
revised 2001 report because it was filed after the deadline.
Westar sought rehearing, which the Commission denied, and
then petitioned this court for review.
II. Analysis
We will set aside a final decision of the Commission only
if it is “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A). The
Commission’s insistence upon strict adherence to its rules is,
therefore, permissible unless its reason for refusing to waive a
rule is arbitrary, capricious, or “so insubstantial as to render that
denial an abuse of discretion.” Mountain Solutions, Ltd. v. FCC,
197 F.3d 512, 517 (D.C. Cir. 1999) (quoting Green Country
Mobilephone, Inc. v. FCC, 765 F.2d 235, 238 (D.C. Cir. 1985)).
A fundamental norm of administrative procedure requires
an agency to treat like cases alike. If the agency makes an
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exception in one case, then it must either make an exception in
a similar case or point to a relevant distinction between the two
cases. Green Country, 765 F.2d at 237-38; NLRB v. Washington
Star Co., 732 F.2d 974, 977 (D.C. Cir. 1984); cf. Colo. Interstate
Gas Co. v. FERC, 850 F.2d 769, 774 (D.C. Cir. 1988) (“[T]he
Commission’s dissimilar treatment of evidently identical cases
... seems the quintessence of arbitrariness and caprice”).
When the Commission denied Westar’s request for a
waiver, it made four points: First, “the Commission’s
regulations expressly provide that corrections of the information
filed on Form No. 582 must be made promptly, by the end of the
calendar year in which the information was originally filed.”
Second, waiving the deadline would “require the recalculation
and re-billing of annual charges” and “prompt other utilities to
take the same action,” thereby “undermin[ing] the certainty ...
that annual charges would not be indefinitely subject to change.”
Third, Westar overreads a statement the Commission made in
the course of denying a petition for rulemaking, Midwest Indep.
Transmission Sys. Operator, Inc., 103 F.E.R.C. ¶ 61,048, at
61,180 (2003) (“Should an audit reveal errors ... or should public
utilities provide corrected data, the Commission adjusts the
annual charges in the next fiscal year up or down, as
appropriate”); the Commission never suggested it would “ignore
the deadline expressly spelled out in its regulations.” Finally,
and most important for the present proceeding, the Commission
said denying Westar a waiver was not inconsistent with its
allowing KCPL to make a late filing, reasoning as follows:
[T]he Commission’s auditors delayed KCPL’s filing
because of their ongoing investigation. In those very
different circumstances, where the Commission itself
caused the late filing, it would have been inequitable to
penalize the company. Westar, however, was subject
to no such delay.
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Westar correctly notes the Commission’s first three points
apply with equal force to Westar and to KCPL — indeed to all
utilities regulated by the Commission. Any one of the three
might, and the three taken together certainly would, explain a
Commission policy never to accept a corrected Form 582 after
the deadline specified by regulation; neither singly nor in the
aggregate, however, do they explain why the Commission
allowed KCPL but not Westar to make a late filing.
At oral argument, Commission counsel offered (for the first
time) that the Commission’s interest in finality was not
adversely affected by KCPL’s late filing because the
Commission does not actually issue a bill, reflecting appropriate
debits and credits associated with any corrected filings, until the
summer — that is, until after it had received KCPL’s revised
filing but before it received Westar’s. This explanation not only
comes too late to save the Order denying Westar’s late filing; it
undercuts that Order insofar as the Order is based upon the
Commission’s purportedly strong interest in adhering to the end-
of-year deadline enshrined in its regulation. If counsel is
correct, then the Commission may have no sound objection to
accepting corrections at least until the summer of the year after
the initial filing was due — a matter of perhaps no small interest
to the regulated industry.
Turning to the Commission’s fourth and final point, Westar
argues the record simply does not support the claim that the
agency “itself caused [KCPL’s] late filing.” We agree; the
Commission adduces not a shred of evidence to that effect.
Indeed, the record suggests the opposite. KCPL noted that its
revised Form 582 was “prepared in accordance with the findings
and recommendations outlined in the ... audit,” implying that
KCPL would not have known of the error but for the audit,
which — unless the audit was completed in relevant part and the
results disclosed to KCPL between November 21, 2002 (when
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KCPL was advised there would be an audit) and the December
31, 2002 deadline — suggests KCPL did not discover the error
until after the deadline. Indeed, if it had discovered the error
before the deadline, then presumably it also would have filed its
revised Form 582 before the deadline rather than some two
months later, on March 3, 2003 — unless, of course, the auditors
told KCPL not to file until then, as the Commission’s fourth
point seems to claim.
In lieu of evidence to that effect in the record, however, we
have only counsel’s brief for the proposition that as the target of
an audit KCPL “was subject to Commission internal scheduling
and deadlines.” Perhaps so — we do not know what they
require because they are not in the record — but that hardly
explains how “the Commission itself caused the late filing,”
which would require a showing that KCPL discovered or was
made aware of its error before the deadline but was prevented by
the audit process from submitting a revised Form 582 until after
the deadline (though still months before the final report of
audit).
At oral argument Commission counsel further suggested
that an “audit situation by its very nature tolls” the deadline and
that the Order implies as much; but we see no such indication in
the Order and the record provides no other support for the
assertion. Nor is it a logical necessity, for an audit need not
culminate in requiring the target to file a retroactive correction;
it could recommend only a prospective change in the company’s
controls or procedures in order to avoid a repetition of the error.
Cf. OMB Circular No. A-133, Audits of States, Local
Governments, and Non-Profit Organizations, 62 Fed. Reg.
35,278, 35,300 (June 30, 1997) (audit findings required to
include “[r]ecommendations to prevent future occurrences of the
deficiency identified in the audit finding”). This seems
particularly plausible when retroactive correction would
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compromise the Commission’s apparent interest in finality. Cf.
7 C.F.R. § 210.8(b)(4) (upward adjustment of reimbursement
claims for school lunch program resulting from audit authorized
at discretion of overseeing State agency while downward
adjustment “shall always be made ... regardless of when it is
determined”). The Commission may, of course, allow an audit
target to file a corrected report out of time and deny the same
privilege to another company that made the same error but was
not subject to an audit if it provides a meaningful distinction
between the two situations, but it cannot justify doing so by
claiming, as counsel does here, that extending a deadline is
somehow inherent in the audit process. Another rationale is
needed, and none is provided in the Order, even as glossed by
Commission counsel.
Commission counsel also notes that KCPL was “ordered”
(albeit only retroactively as far as the record reveals) to file a
corrected Form 582 whereas Westar, not being subject to an
audit, was not so ordered. We do not understand how this
argument relates to the Commission’s assertion that the relevant
distinction between the companies is that “the Commission’s
auditors delayed KCPL’s filing because of their ongoing
investigation.” In any event, insofar as this is a new argument
crafted by counsel, we cannot consider it. Motor Vehicle Mfrs.
Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983)
(“[C]ourts may not accept appellate counsel's post hoc
rationalizations for agency action”).
III. Conclusion
The Order under review is arbitrary and capricious in that
it provides no basis in fact or in logic for the Commission’s
refusal to treat Westar as it had treated KCPL. Accordingly, the
Order is vacated and this matter is remanded to the Commission
for further proceedings consistent herewith.
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So ordered.