[00:00:00] Speaker 02: Case number 20-1024, Louisiana Public Service Commission Petitioner versus Federal Energy Regulatory Commission. [00:00:08] Speaker 02: Mr. Fontam for the petitioner, Ms. [00:00:10] Speaker 02: Barry for the respondents. [00:00:12] Speaker 02: Mr. Fontam, good morning. [00:00:15] Speaker 01: Good morning. [00:00:16] Speaker 01: Please proceed. [00:00:19] Speaker 01: May it please the court, my name is Mike Fontam, I represent the Louisiana Public Service Commission. [00:00:26] Speaker 01: In this case, [00:00:28] Speaker 01: relying on six words of a 2009 tariff amendment and applying it to a 2005 regulatory decision, excluded approximately $30 million of legitimate production costs paid by Louisiana ratepayers from the energy bandwidth tariff. [00:00:51] Speaker 01: I'm going to argue two points. [00:00:53] Speaker 01: The first point is that FERC [00:00:57] Speaker 01: incorrectly interpreted the tariff by relying on a single subordinate clause without considering or addressing the words of the entire tariff amendment or the settlement that the tariff amendment was filed in compliance with or the filing letter which said that the tariff amendment would only apply to deferrals going forward. [00:01:26] Speaker 01: And secondly, [00:01:28] Speaker 01: that FERC's action applying a 2009 amendment to the effects of a regulatory decision made when no one could ever possibly know that the amendment was going to be filed four years later is improper retroactive rate making. [00:01:46] Speaker 01: I would like to make three or four points about the facts and then I will address those two points of argument. [00:01:54] Speaker 01: First of all, I know the members of this court may not be familiar with the energy bandwidth tariff, but it was adopted in 2005 in order to eliminate undue discrimination on the energy system. [00:02:10] Speaker 01: The rough part of rough equalization is plus or minus 11%. [00:02:16] Speaker 01: Anything beyond plus or minus 11% is unduly discriminatory. [00:02:22] Speaker 01: The bandwidth tariff was adopted to rely on the books and records of the energy operating companies. [00:02:30] Speaker 01: In other words, what went onto the books went into the tariff. [00:02:34] Speaker 01: And FERC has always required that the accounting be consistent with FERC requirements. [00:02:41] Speaker 01: And on many occasions, FERC has overruled accounting errors made by energy. [00:02:47] Speaker 01: There was an accounting error in this case. [00:02:51] Speaker 01: It affects deferrals, which bring about credits and debits, which basically do this. [00:03:03] Speaker 01: A utility has a big cost. [00:03:05] Speaker 01: It wants to spread it out. [00:03:07] Speaker 01: So what happens is there will be a credit on the books in the year those big costs arrive at the utility. [00:03:16] Speaker 01: But the regulatory commission allows the utility to defer that. [00:03:21] Speaker 01: So the credit happens to take the cost off the books. [00:03:25] Speaker 01: Then those costs are charged to ratepayers later and amortized on the books later. [00:03:33] Speaker 01: So 100% are captured. [00:03:35] Speaker 01: They're just captured with different timing. [00:03:39] Speaker 01: The correct accounting for a deferral, as held by FERC in this case, is that you recognize the costs are deferred and take them off the books. [00:03:49] Speaker 01: That takes them off [00:03:50] Speaker 01: and out of the bandwidth. [00:03:53] Speaker 01: You then recognize later when the rate payers pay the costs, that the costs are being amortized, you add them to the expenses in the books, that puts them back into the bandwidth. [00:04:07] Speaker 01: In this case, because Energy was engaging, as I said, in improper accounting, and then changed the accounting, and there are five different operating companies [00:04:19] Speaker 01: there was concern about the consistency of the practices. [00:04:24] Speaker 01: So an amendment, a tariff amendment was adopted in 2009, four years after this deferral. [00:04:32] Speaker 01: And that tariff amendment said that it would exclude from the bandwidth what was on the accounting books. [00:04:40] Speaker 01: So effectively, the costs would count in 2009, and in later years, they would not count. [00:04:48] Speaker 01: With that change, [00:04:49] Speaker 01: was made, as I said, four years after 2005. [00:04:53] Speaker 01: The 2005 case, unfortunately, was delayed. [00:04:59] Speaker 01: The court overruled that delay. [00:05:02] Speaker 01: The case did not go to hearing until 2016, 11 years after the 2005 costs were incurred. [00:05:10] Speaker 01: And so FERC had a hearing and had to make a determination about a 2005 credit. [00:05:18] Speaker 01: and the debits associated with it. [00:05:21] Speaker 01: Burke decided, relying on six words in the tariff amendment, which said, or the amortization of previously deferred costs, that the tariff amendment could take out the debits even while it recognized the credit that had occurred in 2005. [00:05:42] Speaker 01: And that's what we're appealing. [00:05:46] Speaker 01: Our first point of argument is that the FERC arbitrarily interpreted the tariff amendment. [00:05:54] Speaker 01: The tariff amendment makes clear, we believe, that it could only apply to new deferrals and the effects of new deferrals going forward. [00:06:04] Speaker 01: The tariff amendment, which is quoted on page eight of our brief, says, excluding the effects, plural, debits and credits [00:06:16] Speaker 01: Plural, resulting from a regulatory decision, singular. [00:06:22] Speaker 01: A regulatory decision has two effects. [00:06:26] Speaker 01: First, there's a credit. [00:06:28] Speaker 01: A regulatory deferral decision has two effects. [00:06:31] Speaker 01: First, there's a deferral and a credit. [00:06:34] Speaker 01: And then there are amortizations and the costs are counted. [00:06:41] Speaker 01: Those are debits. [00:06:43] Speaker 01: And this says it's going to apply to the effects, both effects, of a regulatory decision. [00:06:51] Speaker 01: And then it says that causes the deferral of the recovery of current year costs, that's what happens first, or the amortization of previously deferred costs, that's what happens after that. [00:07:04] Speaker 01: And that's what happened in this case. [00:07:07] Speaker 01: You cannot simply focus [00:07:10] Speaker 00: The amendment seems key to the debits and the credits, though, not key to the prior regulatory decision. [00:07:26] Speaker 00: It says exclude from PERP, which is the relevant account here, debits and credits resulting from a prior decision. [00:07:37] Speaker 00: So if this were just [00:07:40] Speaker 00: If the construction of this clause were governed by ordinary principles of retroactivity law, it would cover future debits and credits resulting from a past decision because what's excluded are the debits and the credits. [00:08:01] Speaker 00: Why shouldn't we read it that way? [00:08:04] Speaker 01: Well, you shouldn't read it that way because it encompasses both. [00:08:09] Speaker 01: Burke applied it to encompass one. [00:08:12] Speaker 01: Burke applied it to encompass the amortization of previously deferred costs and not the credit, which occurred in 2005. [00:08:25] Speaker 01: And the only way, and this is what I've been was trying to get through is to encompass debits and credits, both, both. [00:08:36] Speaker 01: You have to only apply it going forward. [00:08:40] Speaker 01: Because the credit occurs first. [00:08:43] Speaker 01: OK, this credit had occurred in the past, just like you say. [00:08:47] Speaker 01: Applying normal principles of retroactivity, you can't apply this to the past. [00:08:54] Speaker 01: But that's what they did. [00:08:56] Speaker 01: Well, what they actually did is they didn't apply it to the past credit. [00:09:01] Speaker 01: They did apply it to the amortization starting in 2009 and going forward. [00:09:09] Speaker 01: So they separated it. [00:09:11] Speaker 01: And you cannot interpret the amendment to apply to half of something done previously and not apply to the rest of it. [00:09:21] Speaker 01: FERC said it would be retroactive rate making to apply it to the credit. [00:09:26] Speaker 01: And the debits are effects of that credit, that very same credit. [00:09:31] Speaker 01: And the only way you can interpret that is, OK, it's going to apply to new deferrals. [00:09:37] Speaker 01: Now, the second point is we had a settlement agreement. [00:09:41] Speaker 01: And the settlement agreement, nobody contests this. [00:09:46] Speaker 01: The settlement agreement makes it absolutely clear that this is only going to apply to 2009 deferrals and going forward. [00:09:57] Speaker 01: No past deferrals. [00:09:58] Speaker 01: This is not contested in any of the briefs. [00:10:01] Speaker 01: They say, well, that's extrinsic evidence. [00:10:04] Speaker 01: But the settlement agreement was a contract among all the parties agreed to by all the parties [00:10:11] Speaker 01: filed with FERC and approved by FERC. [00:10:14] Speaker 01: And it is the agreement under which this tariff amendment was filed to comply with the settlement. [00:10:22] Speaker 04: Mr. Fonten, if amortization that typically follows a deferral is understood as part of the same regulatory decision as the deferral, I'm just wondering why the text of this amendment separately mentions the amortization. [00:10:41] Speaker 01: Because, Your Honor, if one is going to occur in one year and the other is going to occur in the other year. [00:10:49] Speaker 01: So you'll have a, like in this case, we had a deferral that had a credit in 2005. [00:10:57] Speaker 01: Now there were no amortizations in 2005. [00:11:00] Speaker 01: The amortizations occurred in the later years, 2006, seven, eight, and nine. [00:11:06] Speaker 01: And the way a regulatory decision works because of retroactive rate making [00:11:12] Speaker 01: You have to give them approval in advance to defer the cost and collect it later because the cost, you know, otherwise would have been recognized in 2005. [00:11:25] Speaker 01: So any decision that allows a deferral is effectively a guarantee of sorts that they're going to be able to collect it later. [00:11:34] Speaker 01: That's the only way they can book it. [00:11:37] Speaker 01: And so they are inextricably intertwined. [00:11:40] Speaker 04: And is that two separate regulatory decisions? [00:11:43] Speaker 04: It's typically one, no? [00:11:45] Speaker 04: Or it's two separate because the deferral decision is made at one time, and then as you're going forward and approving later rates, the amortization approval is granted? [00:11:58] Speaker 01: Well, the way it works, Your Honor, is that the single decision legitimizes both. [00:12:07] Speaker 01: Now, there might be a later rate base that simply applies [00:12:10] Speaker 01: prior deferral decision to say, okay, you can collect this. [00:12:15] Speaker 04: But it was approved as a deferral. [00:12:19] Speaker 04: So in your reading, the last dozen or so words are really unnecessary. [00:12:31] Speaker 04: effects debits and credits resulting from a regulatory decision period. [00:12:35] Speaker 04: I'm just, this is, I think along the same lines as Judge Katz's question, if the real sort of decisive point for purposes of prospectivity or retroactivity is the regulatory decision, then the separate reference to causing the deferral [00:12:59] Speaker 04: of the recovery of current year costs or the amortization of previously deferred costs, those aren't really two separate things in your view? [00:13:08] Speaker 04: Is that? [00:13:10] Speaker 01: Well, Your Honor, I think the way these things work, there's lots of things that can cause debits and credits from a regulatory decision. [00:13:20] Speaker 04: OK. [00:13:21] Speaker 01: This was making it clear that it was a deferral of costs. [00:13:26] Speaker 01: These were purchase power costs. [00:13:28] Speaker 01: Yeah. [00:13:29] Speaker 01: I just think it's being more complete. [00:13:32] Speaker 04: So are there situations as a practical matter in which a state regulatory agency issues a deferral without subsequent amortization or with only partial amortization in practice? [00:13:45] Speaker 01: Utility would never accept that because they may be stuck not recovering the costs. [00:13:52] Speaker 04: So as it works in practice, is it the case in your experience that deferrals and amortizations aren't really distinct regulatory decisions or actions? [00:14:03] Speaker 01: Well, they come from the same decision. [00:14:07] Speaker 01: And so they're not distinct in that sense, because it's one package of costs. [00:14:12] Speaker 01: But clearly, one is a credit, one is a debit. [00:14:16] Speaker 01: and it's gonna add to the costs in one year and it's gonna take off of the costs in the first year. [00:14:23] Speaker 04: Right, but it sounds like the gravamen of your position is that [00:14:27] Speaker 04: So goes the one, also goes the other. [00:14:31] Speaker 04: And that what's happened here is there's been, you know, the credit was treated under the pre-settlement agreement regime and then the amortizations under the settlement agreement. [00:14:43] Speaker 04: And that that just, it bisects these things that actually go together. [00:14:49] Speaker 01: That's exactly right, Your Honor. [00:14:50] Speaker 04: So you have a pair of shoes and you can't wear either one of them because they're no longer available in the same world. [00:14:57] Speaker 01: That's true. [00:14:58] Speaker 01: I think that's the only way you can interpret this amendment. [00:15:01] Speaker 01: But I do want to emphasize the settlement agreement is just as much a contract affecting rates as the tariff is. [00:15:09] Speaker 01: Energy followed the settlement agreement to apply the other provisions of the tariff. [00:15:16] Speaker 01: It was approved by FERC. [00:15:17] Speaker 01: It's a contract. [00:15:18] Speaker 01: And the ruling of principle in Boston Edison makes it absolutely clear [00:15:26] Speaker 01: that you can't pull out the words in the formula and take it away from the contract that called for the words in the formula. [00:15:38] Speaker 01: And the settlement agreement, everybody, no one disagrees. [00:15:43] Speaker 01: The settlement agreement only deferrals going forward as the filing letter said. [00:15:48] Speaker 01: The filing letter, whoops, am I? [00:15:52] Speaker 00: Sorry, can I ask one more question, which is, [00:15:57] Speaker 00: What you say makes a lot of intuitive sense, but I assume it must be fairly common in situations when you're accounting for these capital expenses or prepaid costs, whatever it is, you have to account for a transaction that takes place over many accounting periods. [00:16:23] Speaker 00: and the accounting rules change in the middle of that time stream, I assume it's fairly common that the change can be applied to [00:16:38] Speaker 00: the remaining part of that transaction. [00:16:41] Speaker 00: You make a capital expense when you buy equipment when the law says you can depreciate it over 30 years and then 10 years later the rules change and [00:17:00] Speaker 00: You know, you have to depreciate it over 40 years or whatever, and that change applies to that transaction, even though on the front end it was made under different rules. [00:17:12] Speaker 00: So isn't this just a variation on that? [00:17:18] Speaker 01: No, Your Honor, it's not, because you're right about the accounting rules changing. [00:17:25] Speaker 01: with this wasn't a change in the accounting rules. [00:17:27] Speaker 01: The accounting rules are still the same that they were in day one. [00:17:32] Speaker 01: And one thing about a deferral. [00:17:35] Speaker 00: Sorry, it's a contractual equivalent of that, because the parties under the filed rate doctrine can make these decisions for themselves. [00:17:45] Speaker 00: And they're saying they want this transition to work in that way. [00:17:52] Speaker 01: Yes, to new deferrals. [00:17:54] Speaker 01: That's what they said. [00:17:55] Speaker 01: That's what they agreed on. [00:17:56] Speaker 01: That's what the settlement said. [00:17:58] Speaker 01: And that's what the filing letter said. [00:18:01] Speaker 01: And that's really what the tariff amendment itself says. [00:18:05] Speaker 01: But this was a change to the tariff and what would go into the bandwidth. [00:18:11] Speaker 01: The accounting never changed. [00:18:12] Speaker 01: All these costs were being paid by Louisiana ratepayers. [00:18:16] Speaker 01: And if you're talking about a deferral, you can change the timing. [00:18:21] Speaker 01: You cannot change the fact that the costs do get recovered, no matter what you do with the accounting rules. [00:18:28] Speaker 01: That's just part of the ability of the utility to book it in the first place. [00:18:37] Speaker 01: So I see my times run out. [00:18:39] Speaker 01: I hope I get one minute or something for rebuttal. [00:18:43] Speaker 01: Sure, if there are no more questions. [00:18:45] Speaker 04: Let me just ask you one more question, Mr. Fontum. [00:18:48] Speaker 04: What do you make of the or? [00:18:50] Speaker 04: It seems in the text, or the recovery of current year costs or the amortization, it seems like your reading really is viewing that as an and. [00:19:06] Speaker 01: No, well, that's not our reading, Your Honor. [00:19:10] Speaker 01: Our reading is that it says or because only one of the two things will occur in any particular year. [00:19:17] Speaker 01: Okay. [00:19:21] Speaker 02: All right. [00:19:22] Speaker 02: We'll now hear from Ms. [00:19:23] Speaker 02: Perry. [00:19:29] Speaker 03: May it please the court, Lona Perry for the commission. [00:19:33] Speaker 03: The commission [00:19:35] Speaker 03: in interpreting the perp variable in the bandwidth tariff concluded that there was no other way to read that perp variable other than to read it as excluding from the bandwidth tariff as of 2009 at the amortization of previously deferred costs. [00:19:59] Speaker 03: And the Louisiana's position that it only applies to the deferral of the recovery of current year costs completely excludes everything following the or which in because this was enacted in 2009 and was effective as of the calculations for the bandwidth tariff in 2009 that phrase necessarily excluded [00:20:25] Speaker 03: and current amortizations booked in 2008 and part of the 2009 calculations that resulted from the 2005 deferral costs. [00:20:37] Speaker 04: It isn't the strong background rule and assumption and in myriad contexts and that [00:20:46] Speaker 04: a credit goes together with the amortization, that the deferral, these are really two steps of one process. [00:20:55] Speaker 04: And in fact, I mean, it seems like there's no argument that this isn't quite disadvantageous to LPSC. [00:21:08] Speaker 03: It does, Your Honor, result in the exclusion of those amortizations, those amortization debits from the bandwidth tariff. [00:21:18] Speaker 03: But there is no other way to read that language. [00:21:23] Speaker 03: That language specifically separates the deferral of the recovery of current year costs and the amortization of previously deferred costs. [00:21:33] Speaker 03: And if either [00:21:34] Speaker 04: I'm sorry, go ahead. [00:21:36] Speaker 03: I'm just saying with the or in the section, what the section says, if either one of those are excluded, there doesn't, both of them don't have to be excluded. [00:21:49] Speaker 03: Either one of those are excluded. [00:21:52] Speaker 03: And here we had current amortization of previously deferred costs and the commission saw no other way to read that. [00:22:00] Speaker 03: provision, other than to require the exclusion of those costs. [00:22:09] Speaker 00: Why not read it so that the relevant retroactivity event is the regulatory decision? [00:22:21] Speaker 00: The amendment covers future regulatory decisions and ensuing debits, credits, deferrals, amortizations. [00:22:34] Speaker 03: Because, Your Honor, the provision excludes the effects that result from a regulatory decision, and the effects are debits and credits. [00:22:45] Speaker 03: such that it causes either the deferral of the recovery of current year costs or the amortization of previously deferred costs. [00:22:55] Speaker 03: And here we had the effect of the 2005 regulatory decision that caused the amortization of previously deferred costs in 2009. [00:23:06] Speaker 00: I assume there's some interpretive principle that you construe tariff amendments if at all possible to be consistent with energy law. [00:23:19] Speaker 00: Shouldn't there be a similar interpretive principle to construe tariff amendments if at all possible to be consistent with [00:23:32] Speaker 00: ordinary accounting rules and understandings? [00:23:38] Speaker 03: Your honor, the commission did not find this provision to be susceptible of the contrary interpretation. [00:23:46] Speaker 03: And in the filed rate context, the filed rate is paramount. [00:23:53] Speaker 03: And you can see this in all of the prior bandwidth proceedings. [00:23:58] Speaker 03: In every case, Louisiana has had a problem with [00:24:02] Speaker 03: the function of one of the provisions in the bandwidth tariff. [00:24:06] Speaker 03: And in every case, this court or the Fifth Circuit has said the filed rate is the filed rate. [00:24:12] Speaker 03: And if it is inequitable, it's a function of the filed rate doctrine. [00:24:18] Speaker 00: I understand that. [00:24:19] Speaker 00: And clearly, you have a plausible, if not very strong textual argument which you've laid out. [00:24:31] Speaker 00: quite capably, but it does produce very strange accounting, right? [00:24:38] Speaker 00: I mean, suppose take this out of the bandwidth context and just imagine that you all are regulating how an electric company can recover its capital costs. [00:24:56] Speaker 00: And it would be [00:24:58] Speaker 00: irrational to say when an investment is made, the cost can't be immediately recovered because it has to be spread out over time. [00:25:12] Speaker 00: And then in the middle of that time to say, well, you know what, we're changing the rule. [00:25:19] Speaker 00: We now think that the cost can be recovered right away, but we're not gonna let you recover [00:25:27] Speaker 00: the outstanding amount of that investment. [00:25:30] Speaker 00: I mean, I can't think of any reason why a regulator would ever do that for a category of expenses here that everyone concedes are legitimate and in the abstract, the company should be able to recover for. [00:25:46] Speaker 00: I mean, why would anyone ever do it that way? [00:25:50] Speaker 03: Your honor, nobody is suggesting that it was done that way on purpose with regard to this particular deferral because this particular deferral was not an issue at the time that this. [00:26:02] Speaker 03: contract that this tariff provision was entered into, but the thing you have to remember is that unanticipated consequences. [00:26:12] Speaker 03: often arise in filed rate doctrine cases. [00:26:15] Speaker 03: There are often, it usually arises because some unanticipated event occurs and the tariff language applies in some way that wasn't expected, but it nevertheless is the file rate and it has to be enforced as it is written. [00:26:32] Speaker 03: And it can be changed in advance, prospectively, either by the utility filing under 205 or by somebody filing [00:26:42] Speaker 03: under 206. [00:26:44] Speaker 03: But this court has been very clear that once it is the file rate, and this has been the file rate in a final approved order since 2009, that it cannot be changed. [00:26:55] Speaker 03: It cannot be changed for equitable reasons. [00:26:58] Speaker 03: And this is what the court said in Old Dominion, that even though there they had unanticipated consequences from the polar vortex that resulted in generators having to pay, take great losses to generate power, it was nevertheless, there was a rate cap and it was the filed rate and there was nothing that could be done about that. [00:27:17] Speaker 04: Ms. [00:27:18] Speaker 04: Perry, you've taken the position, I think, quite clearly in the brief and also today that FERC believes that the challenge orders are unambiguous. [00:27:29] Speaker 04: And so if we were to find any ambiguity, then we would have to remand, right? [00:27:34] Speaker 03: I believe that's right, Your Honor. [00:27:36] Speaker 03: I believe the law is that the commission must then be given an opportunity to interpret the ambiguity if the court finds there is an ambiguity. [00:27:44] Speaker 04: And in terms of what we look to to determine whether it's impermissibly retroactive or not, is it the regulatory determination? [00:27:56] Speaker 04: Or in your view, it's the amortization itself? [00:28:03] Speaker 03: It is the effect. [00:28:05] Speaker 03: What is excluded under the PERC variable is it excludes the effect, which is either the deferral or the amortization. [00:28:14] Speaker 03: And the amortization is not retroactive because the amortization is booked in the current year. [00:28:21] Speaker 03: And so we are excluding a cost that is being booked in the current year. [00:28:26] Speaker 04: So it's not a retroactive- But the bandwidth calculation, so it became effective in 2009 and it applied to the 2008 bandwidth calculation. [00:28:36] Speaker 04: And in your view, that's not retroactive because it's just referring to cost data and not charging retrospectively? [00:28:52] Speaker 03: Your Honor, the bandwidth [00:28:54] Speaker 03: Every year applies to the prior year costs right and nobody has ever found that to be retroactive rate making. [00:29:02] Speaker 03: And I would make the point also that the fact that this 2009 Tara was going to apply to the 2008 cost was decided back in the tariff order. [00:29:13] Speaker 03: which is at the joint appendix 1357 to 1358. [00:29:17] Speaker 03: In that order, the commission expressly granted introduce request that the amendment be effective May 31, 2009, so that it would apply [00:29:28] Speaker 03: to the bandwidth calculations in 2009, which are based on 2008 costs. [00:29:34] Speaker 03: So it has been, that is part of the filed rate here, and that is settled in a 2009 order that is a final order that was never appealed. [00:29:44] Speaker 03: To the contrary, as the commission pointed out, Louisiana supported the filing and supported the issuance of this order, accepting InterG's tariff filing. [00:29:56] Speaker 03: So the fact that it applies appropriately to the 2008 cost has been decided since 2009, and that's not before the court now. [00:30:07] Speaker 03: That is no longer an issue. [00:30:11] Speaker 04: So the question of how petitioners, you know, you rely heavily on the last part of the [00:30:18] Speaker 04: of the disputed language and they rely pretty substantially on debits and credits, which would seem to pair the two. [00:30:27] Speaker 04: And your response to that is no ambiguity because. [00:30:34] Speaker 03: Because debits and credits, [00:30:40] Speaker 03: defines what effects means. [00:30:43] Speaker 03: Effects are debits and credits. [00:30:45] Speaker 03: But what the provision goes on to say is that it excludes the effects, debits and credits resulting from a regulatory decision that causes either the deferral of the recovery of current year costs [00:31:00] Speaker 03: or the amortization of previously deferred costs. [00:31:03] Speaker 03: And the provision separates the two if it causes either one or the other, recognizing that they happen in different years. [00:31:11] Speaker 04: But a regulatory decision is the, is the, I mean, if it, and this is, you know, again, Judge Katz's first question to Mr. Fontham, if the, if the, [00:31:25] Speaker 04: focus for purposes of prospectivity is a regulatory decision, then if the regulatory decision has only debits and no credits or only credits and no debits, fine, then you have the or in the last part of the language decoupling them. [00:31:45] Speaker 04: But where you have one regulatory decision that has both debits and credits, [00:31:50] Speaker 04: why is the clearest reading of the language not that it either applies to the debits and credits or it doesn't apply to either? [00:32:00] Speaker 03: Your honor, as Mr. Fonten was explaining earlier, the debits and credits for these deferrals, you have to have both because one takes away and one gives back. [00:32:12] Speaker 03: They happen in different years. [00:32:14] Speaker 03: And that is why there's an or is because in any given year, it'll be one or the other, but it won't be both. [00:32:22] Speaker 03: And so in any given year, you're applying either the new deferral [00:32:27] Speaker 03: or you're looking at the amortization of previously deferred costs, but not both, but not both. [00:32:33] Speaker 04: And so that's why there's- So you and me agree on the or, but the question then is, was this language meant in terms of the first application to sever the one half of a regulatory effect from the other? [00:32:52] Speaker 03: Your Honor. [00:32:53] Speaker 04: Which seems like there's a, I don't know, as a matter of just sort of background accounting and FERC practice, I haven't seen a case. [00:33:01] Speaker 04: I mean, I understand that there are anomalies as you were pointing out from, you know, weather conditions or things that make a rate disadvantageous once it is ultimately paid. [00:33:16] Speaker 04: But I haven't seen another situation in which deferral and amortization decisions [00:33:22] Speaker 04: were severed in this way. [00:33:25] Speaker 04: Is that something that is more familiar to you than I'm aware of? [00:33:30] Speaker 03: Well, I'm not aware that this comes up very often. [00:33:35] Speaker 03: The bandwidth tariff, because it compares production costs, has many aspects to it that are unique. [00:33:42] Speaker 03: in the world of tariffs. [00:33:44] Speaker 03: This isn't a common situation that you would be in the position of trying to decide what goes into a tariff that compares production costs. [00:33:54] Speaker 03: And it's not that nobody is suggesting that at the time they wrote this language, they had this situation in mind. [00:34:02] Speaker 03: But the problem is that now that we are here, the commission could not see a way that the amortization of previously deferred costs would not exclude the amortization of the previously deferred costs from 2005, because that seems to be exactly, it seems to exactly address the situation, even though it wasn't, [00:34:24] Speaker 03: probably in anybody's mind at the time it was, but the way it is written, it seems to directly address the situation. [00:34:36] Speaker 03: I see I am out of time. [00:34:38] Speaker 03: If there are no further questions. [00:34:40] Speaker 02: All right. [00:34:41] Speaker 02: Do my colleagues have any more questions? [00:34:44] Speaker 02: No, thank you. [00:34:45] Speaker 02: Okay. [00:34:46] Speaker 02: Thank you. [00:34:48] Speaker 02: Mr. Fondland, why don't you take two minutes? [00:34:53] Speaker 01: Thank you, your honor. [00:34:54] Speaker 01: I'd like to address the question Judge Katz has raised. [00:34:57] Speaker 01: And I think it also goes to what Judge Pillard asked about. [00:35:02] Speaker 01: Your honor, if a utility got a deferral and the commission tried to change the rules in the middle of the stream during the amortizations, that would be unlawful retroactive rate making. [00:35:18] Speaker 01: It does not happen. [00:35:20] Speaker 01: You have granted a deferral. [00:35:22] Speaker 01: in which the implicit rule is you're going to be able to collect it over X number of years. [00:35:29] Speaker 01: That's required by the accounting rules. [00:35:32] Speaker 01: And that's basically in the deferrals we've granted, we have to specify how they're going to be collected. [00:35:39] Speaker 01: You try to change the rules, it's retroactive rate making. [00:35:44] Speaker 01: And that goes to Judge Pillard's point. [00:35:46] Speaker 01: The focus is on the decision. [00:35:48] Speaker 01: It has to be on the decision because the decision [00:35:52] Speaker 01: is what creates two things, a credit and subsequent debits, a deferral and subsequent amortizations. [00:36:01] Speaker 01: You can't focus on one without covering the other, which means it has to be a going forward amendment applicable to new deferrals and subsequent amortizations. [00:36:14] Speaker 01: And thirdly, everybody agrees that the intent of this amendment [00:36:21] Speaker 01: was only to apply to deferrals going forward and their effects. [00:36:26] Speaker 01: Everybody agrees with that. [00:36:28] Speaker 01: Now they say, well, the language doesn't say that. [00:36:32] Speaker 01: But that is what everyone agrees, every witness at the hearing, the settlement, the filing letter, energy proposes that this applied to deferrals going forward in 2009. [00:36:44] Speaker 01: They constructed this to evade that. [00:36:51] Speaker 01: So that's my argument and appreciate the rebuttal time. [00:36:56] Speaker 02: All right. [00:36:56] Speaker 02: Thank you, counsel. [00:36:57] Speaker 02: Your case is submitted.