City of Tacoma v. Federal Energy Regulatory Commission

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 15, 2002 Decided June 10, 2003

No. 01-1375

CITY OF TACOMA, WASHINGTON, ET AL.,

PETITIONERS

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

NORTHERN CALIFORNIA POWER AGENCY, ET AL.,

INTERVENORS

On Petition for Review of an Order of the

Federal Energy Regulatory Commission

Howard E. Shapiro argued the cause for the petitioners.

Gary D. Bachman, Michael A. Swiger and Charles R. Sensi-

ba were on brief. Susan A. Moore entered an appearance.

Frances E. Francis, Ben Finkelstein and Tracy E. Connor

were on brief for the intervenors.

Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

2

Richard B. Geltman and Donald H. Clarke were on brief

for amici curiae American Public Power Association and

National Hydropower Association.

Lona T. Perry, Attorney, Federal Energy Regulatory

Commission, argued the cause for the respondent. Cynthia

A. Marlette, General Counsel, and Dennis Lane, Solicitor,

Federal Energy Regulatory Commission, were on brief.

Before: SENTELLE and HENDERSON, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: The petition-

ers, a group of hydroelectric utilities licensed under the

Federal Power Act (FPA or Act), 16 U.S.C. § 791a et seq.,

seek review of three orders of the Federal Energy Regulato-

ry Commission (Commission or FERC) that denied them

refunds of annual charges that FERC imposed on them

pursuant to section 10 of the FPA. The charges should be

refunded, they contend, because FERC inadequately super-

vises the submission of cost reports by other federal agencies

(OFAs) upon which the annual charges are based. They also

argue that the charges should be refunded because they are

based on costs beyond the scope of those recoverable under

the Act.

FERC argues that the court lacks jurisdiction because the

orders under review are not final. We conclude that the

orders are final and we grant the petition because FERC’s

method of assessing the annual charges based on OFAs’ FPA

costs conflicts with its obligations under the Act.

I.

A.

When the Congress began to regulate the production of

hydroelectric power pursuant to the Federal Water Power

Act of 1920 (FWPA), it intended to pass the costs of adminis-

tration on to the regulated entities. To that end, in addition

to authorizing the Federal Power Commission (now FERC)

to charge utilities for the use of federal lands or property, the

3

FWPA (now the Federal Power Act)1 required that licensees

‘‘shall pay to the United States reasonable annual charges in

an amount to be fixed by the [C]ommission for the purpose of

reimbursing the United States for the costs of the administra-

tion of this Act.’’ Federal Water Power Act of 1920, ch. 285,

§ 10(e), 41 Stat. 1063, 1069 (codified as amended at 16 U.S.C.

§ 803(e)(1)).2 Pursuant to this statutory directive, codified in

section 10(e) of the FPA, the Commission issued regulations

to govern the computation and collection of the fixed charges.

18 C.F.R. pt. 11.

Until 1986, the Commission used this authority to impose

charges only to reimburse the Commission for its costs

incurred in administering the Act. City of Idaho Falls, 87

F.E.R.C. ¶ 61,114, 61,469 (1999), (Idaho Falls I). In that

year, however, the Inspector General of the United States

Department of Energy issued a report interpreting section

10(e) of the Act to authorize FERC, in imposing charges ‘‘for

the purpose of reimbursing the United States,’’ to impose

additional charges reflecting OFAs’ costs incurred in adminis-

tering the Act (emphasis added).3 That same year, the

1In 1935, most of the FWPA became Part I of the Federal Power

Act. Act of Aug. 26, 1935, ch. 687, §§ 212, 213, 49 Stat. 803, 847,

863.

2 The Act also requires a licensee to ‘‘recompense the Govern-

ment for the use, occupancy, and enjoyment of its lands or other

property’’ and to pay charges if the licensee uses ‘‘Government

dams or other structures owned by the United States.’’ 16 U.S.C.

§ 803(e)(1). Thus, the Commission imposes three types of annual

charges on regulated hydroelectric utilities: first, the charges at

issue here, which are intended to reimburse the government for

administering Part I of the Act; second, charges for the use of

public land; and third, charges for the use of dams or other

structures owned by the United States. Id.; 18 C.F.R. §§ 11.1–.4;

City of Vanceburg, Ky. v. FERC, 571 F.2d 630, 634 (D.C. Cir. 1977).

3Idaho Falls I, 87 F.E.R.C. at 61,469 n.6 (quoting Report on

Accounts Receivable, Billings and Collections of the Federal Ener-

gy Regulatory Commission, U.S. Department of Energy, Office of

the Inspector General, Report No. DOE/IE–0224 (Feb. 3, 1986));

Revision of the Billing Procedures for Annual Charges for Adminis-

4

Congress enacted the Omnibus Budget Reconciliation Act

(OBRA). Omnibus Budget Reconciliation Act, Pub. L. No.

99–509, § 3401, 100 Stat. 1874, 1890–91 (1986) (codified at 42

U.S.C. § 7178). That legislation directed that ‘‘[FERC] shall,

using the provisions of this subtitle and authority provided by

other laws, assess and collect fees and annual charges in any

fiscal year in amounts equal to all of the costs incurred by the

Commission in that fiscal year’’ and that the ‘‘fees or annual

charges assessed shall be computed on the basis of methods

that the Commission determines, by rule, to be fair and

equitable.’’ Id. Accordingly, FERC began to pass the addi-

tional costs on to the hydroelectric licensees. Idaho Falls I,

87 F.E.R.C. at 61,469. FERC has continued to assess

charges for OFAs’ FPA-related costs ever since.

In the early 1990s, several hydroelectric licenses were due

for relicensing and FERC anticipated a heavy strain on

federal and state wildlife agency budgets to complete re-

quired studies as part of the relicensing process. H.R. Rep.

No. 102–474(I), at 222 (1992), reprinted in 1992 U.S.C.C.A.N.

1954, 2045. The Congress responded to FERC’s concern by

amending section 10(e)(1) as part of the 1992 Energy Policy

Act (EPAct) to provide that federal and state agencies were

to be reimbursed for their work. Id. Section 1701 of the

EPAct made the costs recoverable and authorized annual

appropriations to cover some of the agencies’ costs.4

tering Part I of the Federal Power Act, 52 Fed. Reg. 18,201, 18,207

(May 14, 1987).

4 Section 1701(a)(1) amended section 10(e) to read:

the licensee shall pay to the United States reasonable

annual charges in an amount to be fixed by the Commis-

sion for the purpose of reimbursing the United States for

the costs of the administration of this subchapter, includ-

ing any reasonable and necessary costs incurred by Fed-

eral and State fish and wildlife agencies and other natu-

ral and cultural resource agencies in connection with

studies or other reviews carried out by such agencies for

purposes of administering their responsibilities under

this subchapterTTTT

5

The Commission has established a relatively simple system

to assess charges for FPA administrative costs. For each

fiscal year, the Commission solicits from the eight OFAs5 cost

reports of their FPA-related administrative costs for the

previous fiscal year. 18 C.F.R. § 11.1(g)(1); City of Idaho

Falls 93 F.E.R.C. ¶ 61,145, 61,453 (2000), (Idaho Falls II).

The Commission adds these figures to its own costs6 and

assesses the licensees according to a weighted formula that

considers the type of licensee (municipal, state or other) and

the kind of hydroelectric project (conventional, pure pumped

storage or mixed).7 18 C.F.R. § 11.1(c)–(h).

Energy Policy Act of 1992, Pub. L. No. 102–486, § 1701(a), 106 Stat.

2776, 3008 (codified at 16 U.S.C. § 803(e)(1)) (amendment empha-

sized). Section 1701(a)(2) added this proviso:

Provided, That, subject to annual appropriations acts, the

portion of such annual charges imposed by the Commission

under this subsection to cover the reasonable and neces-

sary costs of such agencies shall be available to such

agencies (in addition to other funds appropriated for such

purposes) solely for carrying out such studies and reviews

and shall remain available until expendedTTTT

Id.

5 The eight agencies are the Bureau of Indian Affairs, the Bureau

of Land Management, the Bureau of Reclamation, the U.S. Fish

and Wildlife Service, the Army Corps of Engineers, the U.S. Forest

Service, the National Oceanographic and Atmospheric Administra-

tion and the Environmental Protection Agency. City of Idaho

Falls, 93 F.E.R.C. ¶ 61,145, 61,453 (2000). To date the EPA has not

submitted reports to FERC. Id. at 61,453 n.6.

6 The charges attributed to the Commission’s administrative costs

reflect anticipated costs for the current fiscal year. 18 C.F.R.

§ 11.1(g)(1). At the end of the year, the Commission compares the

estimated costs with its actual costs and in the subsequent fiscal

year’s bill, includes a ‘‘true-up’’ of charges due. Id.

7 Utilities that operate small conduit hydroelectric facilities and

small hydroelectric projects that have more than 1.5 megawatts of

installed capacity, both of which are exempt from the license

requirements of the Act, 18 C.F.R. §§ 4.90–.96; 18 C.F.R.

6

Since the Commission began imposing charges for OFA

costs, the charges have sharply increased. In FY 1992, for

example, OFAs reported costs totaling $3,858,192; by FY

1999, the total rose to $14,866,849. Brief for Petitioner at 40.

Contributing to the escalation has been the OFAs’ expansion

of costs sought to be recovered, including overhead, prepara-

tion of comments on FERC rulemakings, training and attend-

ance at conferences—as well as costs attendant to certain

OFAs’ block grants to Indian tribes to oppose hydroelectric

licenses, legal fees and litigation expenses. In 1997, hydro-

electric licensees brought a challenge before the Commission

on the OFA cost-related charges, complaining that (1) the

costs were not based on substantial evidence; (2) there was

no mechanism in place to review agency cost submissions to

determine whether those costs are reasonable, necessary and

within the scope of section 10(e)(1) of the Act; and (3) the

Commission impermissibly broadened the scope of costs be-

yond those for the FPA ‘‘studies and reviews’’ specified in

section 10(e)(1) of the FPA as amended by the EPAct. Idaho

Falls I, 87 F.E.R.C. at 61,470.

B.

The petitioners’ initial challenge appealed fiscal year (FY)

1996 OFA costs included in the FY 1997 annual charges

before the Commission’s Chief Financial Officer (CFO). Id.

Their objections were in the main rejected by the CFO. Id.

FERC postponed review of the CFO’s decision until an

administrative law judge (ALJ) concluded his fact-finding

regarding the FY 1996 OFA costs. Id. at 61,471. In the

meantime, however, the petitioners had filed similar objec-

tions to the FY 1997 OFA costs. The Commission then

consolidated the two appeals and ordered the ALJ to include

in his fact-finding both the FY 1996 and FY 1997 OFA costs.

Id. The parties opted to settle the disputed costs before the

ALJ. Idaho Falls II, 93 F.E.R.C. at 61,452. On review,

FERC declined to approve the settlement, uncertain that the

§§ 4.101–.108, also pay a share of FPA administrative costs. 18

C.F.R. § 11.1(c)–(h).

7

figures contained in the agreement had an adequate factual

basis. Id. at 61,455. The Commission did, however, consider

the petitioners’ legal issues.

First, the Commission rejected their claim that recoverable

costs under the FPA are limited to those specified in the 1992

amendment. Id. at 61,456. Notwithstanding the amend-

ment’s addition of the language ‘‘including any reasonable and

necessary costs incurred by Federal and State fish and

wildlife agencies and other natural and cultural resource

agencies in connection with studies or other reviews’’ to

section 10(e)(1), FERC concluded that recoverable costs were

not limited to fish, wildlife and other natural and cultural

resource agencies nor to costs related to studies and reviews.

Id. The only effect of the amendment, the Commission said,

was to broaden the scope of recoverable costs from OFAs’

FPA-related administrative costs to ‘‘qualifying administra-

tive and study costs of qualifying state resource agencies,

whose costs had never before been the subject of Section

10(e).’’ Id. at 61,456 (emphasis added). Furthermore, the

Commission ruled, there was no merit to the petitioners’

claim that section 10(e)(1)’s limit of recoverable costs to those

incurred under ‘‘FPA Part I’’ made OFA overhead and litiga-

tion costs unrecoverable. Id. at 61,457. According to the

Commission, the recovery of those costs was justified because

‘‘the administration of FPA Part I TTT is inextricably inter-

woven with the administration of other federal statutes ad-

dressing important national resources, statutes that may be

triggered by hydroelectric licensing or other action under

Part I of the FPA.’’ Id.

Next, the Commission rejected the petitioners’ argument

that the section 10(e)(1) requirement (also found in OBRA

§ 3401) that annual charges be ‘‘reasonable’’ and ‘‘fair and

equitable’’ meant the Commission was obligated to provide a

mechanism to review the OFAs’ cost reports for reasonable-

ness and consistency with recoverable costs under the Act.

Id. at 61,455. Instead, the Commission said, the language

addressed the Commission’s ‘‘rate design’’ responsibility only.

Id. at 61,455–56. In fact, FERC said that it ‘‘[did] not

consider it to be in the ambit of this Commission’s authority

8

to purport to tell another agency what studies or other

reviews it should or should not undertake in the exercise of

its statutory obligations.’’ Id. at 61,458. It did announce,

however, that thenceforth OFAs were required to certify as

true and accurate their cost reports according to federal cost

accounting rules. Id. at 61,456, 61,458. Future cost reports,

the Commission said, must comply with the Office of Manage-

ment and Budget’s Circular A–25—User Charges and the

Federal Accounting Standards Advisory Board’s Material

Cost Accounting Concepts and Standards for the Federal

Government: Statement of Federal Financial Accounting

Standard Number 4. Id. at 61,456–57. If OFA cost reports

were so certified, the Commission then considered them

based on substantial evidence and recoverable under section

10(e)(1). Id. at 61,456–58. In the future, challenges to

recoverable OFA costs were to be made directly to the

agency involved. Id. The Commission also required a com-

plaining hydroelectric utility to lodge a placeholder appeal

with the Commission CFO while pursuing its challenge before

the agency. Id. Once the agency resolved the challenge, it

was to submit a revised cost sheet to the Commission which

would make an adjustment (if necessary) in the next annual

charge total. Id. at 61,458. If the administrative process did

not resolve the matter, the agency was required to file its cost

documentation with the Commission for the record on appeal.

Id. at 61,458 & n.44.

FERC, however, did not apply its new ‘‘certification’’ rule

retroactively to the FY 1996 and FY 1997 OFA charges that

were under challenge. Because those costs had been only

partially certified, it again remanded to the ALJ for him to

determine which FY 1996 and FY 1997 costs were substanti-

ated. Id. at 61,458–59. While the Idaho Falls II matter was

pending, two more years’ worth of charges were assessed

against, and paid by, the petitioners and they again chal-

lenged the OFA costs, this time for FY 1998 and FY 1999.

In its Idaho Falls II order, FERC decided to apply its

certification requirement to those appeals and ordered the

OFAs to review their submissions for FY 1998 and FY 1999

to ensure that the costs were appropriately certified. It also

9

announced that cost submissions had to be certified within

ninety days of the order. Id. at 61,458.

Thus, following Idaho Falls II, the petitioners’ challenges

to OFA costs in four fiscal years were pending: The FY 1996

and FY 1997 cost challenges were pending before the ALJ

and the FY 1998 and FY 1999 cost challenges were pending

FERC’s approval of costs certified in accord with the Idaho

Falls II order. The parties again settled the FY 1996 and

FY 1997 costs, the ALJ again certified the settlement and the

petitioners again sought FERC approval. City of Idaho

Falls, 95 F.E.R.C. ¶ 61,126, 61,396 (2001), (Idaho Falls III).

This time the Commission gave its approval, noting at the

same time that the settlement ‘‘does not affect or preclude

any parties’ appeals, on legal grounds that are the same as or

similar to legal arguments made in this proceeding, of any

other pending or future OFA cost submittals.’’ Id. Although

Idaho Falls III is entitled ‘‘Order Approving Settlement

Agreement,’’ id. at 61,395, the Commission went beyond the

settlement and ruled on the FY 1998 and FY 1999 appeals.

Id. at 61,397. With little discussion other than to state that

the new certification requirement was applicable ‘‘starting

with the OFAs’ costs for FY 1998 and FY 1999,’’ id. at 61,396,

the Commission ‘‘granted and denied to the extent discussed

in the text of this order’’ the FY 1998 and FY 1999 cost

appeals, id. at 61,397.

Because the FY 1998 and FY 1999 challenges had not been

consolidated with the FY 1996/FY 1997 appeals that were the

subject of the settlement, and because the Idaho Falls III

order failed to indicate which FY 1998/FY 1999 costs were

allowed (and disallowed) consistent with the certification re-

quirements of Idaho Falls II, the petitioners sought clarifica-

tion from the Commission and, in the alternative, requested

rehearing. Motion for Clarification or, in the Alternative,

Request for Rehearing Regarding Appeals of FY 1999 Annual

Charges Bills, at 7, 15, City of Tacoma, 95 F.E.R.C. ¶ 61,465

(2001) (Idaho Falls III Motion for Clarification).8 In their

8The petitioners focused on the FY 1998 costs at issue here, but

they also requested that their motion be considered with other

10

motion, the petitioners indicated they had obtained through

Freedom of Information Act requests correspondence be-

tween the agencies and the Commission regarding the FY

1998/FY 1999 OFA cost recertifications that FERC in Idaho

Falls II had ordered to be performed. Id. at 6 & n.18.

Based on the correspondence, they contemplated refunds

because many of the OFA submissions did not conform to the

Idaho Falls II standard. Id. Because the Idaho Falls III

order was silent as to which certifications had been allowed,

the petitioners inquired whether the Commission intended to

deduct the nonconforming costs from the charges. Id. at 6,

10 n.25, 11 n.32, 11 n.35, 12 n.40.

In City of Tacoma, the Commission clarified its Idaho

Falls III order, declaring that it did indeed intend in Idaho

Falls III to resolve the appeals of the FY 1998 and FY 1999

OFA costs. City of Tacoma, 95 F.E.R.C. ¶ 61,465, 62,672

(2001). The Commission further explained that the petition-

ers and others that had appealed FY 1998/FY 1999 costs

would receive credit in FY 2001 assessments consistent with

the deficiencies they had identified in their clarification mo-

tion. Id. at 62,672. The Commission rejected the petitioners’

assertion that upward adjustments made by some OFAs were

impermissible, concluding instead that, because the charges

had been appealed, they were not final and thus subject to

change. Id. at 62,673. The Commission further provided

that the petitioners could again ‘‘obtain Commission review of

any legal, policy, and factual arguments they wish to make

with respect to the rulings in [the Idaho Falls II] and [Idaho

Falls III] Orders regarding the OFA FY 1998 costs’’ should

they appeal the FY 2001 assessments. Id. at 62,672.

The petitioners filed the instant petition on August 27,

2001, seeking review of the Commission’s orders in Idaho

Falls II, Idaho Falls III and City of Tacoma and raising the

same legal issues they raised in Idaho Falls II & III as well

as additional issues ruled upon by the Commission in City of

Tacoma. At the same time, the petitioners have separately

petitioners’ appeals of both FY 1998 and FY 1999 OFA costs.

Idaho Falls III Motion for Clarification, at 7–8.

11

appealed the Commission’s decision regarding FY 1998 and

FY 1999 credits reflected in FY 2001 assessments following

City of Tacoma—although in that appeal (which is not before

us) they simply make four challenges specific to the FY 1998

and FY 1999 credits.9

II.

A.

The Commission first challenges our jurisdiction to consid-

er the petition. In doing so, it places great significance on

the fact that it specifically provided in City of Tacoma that

‘‘Licensees that appealed the OFA FY 1998/FY 1999 costs

submittals, may have the opportunity to obtain commission

review of any legal, policy, and factual arguments they wish

to make with respect to the rulings in [the Idaho Falls II]

and [Idaho Falls III] Orders regarding the OFA FY 1998

costs, TTT within the appeal time periods that will pertain for

the FY 2001 bills.’’ City of Tacoma, 95 F.E.R.C. at 62,672.

Because it permitted the petitioners to resurrect their chal-

lenges to OFA costs in any FY 2001 appeal, the Commission

says, its rulings on issues regarding the FY 1998 costs are not

‘‘final’’ for the purpose of judicial review. Furthermore, the

Commission insists, because the petitioners have in fact ap-

pealed the FY 1998 costs adjustments included in the FY

2001 assessments, their petition is incurably premature be-

9 That appeal maintains that (1) the FERC accounting staff failed

to execute the City of Tacoma order because it allowed costs the

Commission indicated were not recoverable; (2) the FERC staff

failed to issue a refund to a licensee that, they allege, timely

appealed FY 1998/FY 1999 costs; (3) credit is due them for two

OFAs’ cost reports because the OFAs failed to provide documenta-

tion supporting the submitted costs; and (4) credit is due them for

costs the OFAs did not properly attribute to municipal and non-

municipal projects as required by FERC rule. See generally

Appeal of Credits Contained in FY 2001 Annual Charges Bills

Attributable to Other Federal Agencies’ FY 1998 and FY 1999

Costs and Motion for Waiver of Regulations and for Expedited

Action, FERC Proj. No. 4881, Sept. 4, 2001 (petitioners’ FY 2001

Charges Appeal).

12

cause they cannot simultaneously seek both agency reconsid-

eration and judicial review of the same FERC order. See

Tenn. Gas Pipeline Co. v. FERC, 9 F.3d 980, 980 (D.C. Cir.

1993).

We reject the Commission’s challenge to this court’s juris-

diction. See 5 U.S.C. § 704; 16 U.S.C. § 825l(b); Papago

Tribal Util. Auth. v. FERC, 628 F.2d 235, 238–39 (D.C. Cir.),

cert. denied, 449 U.S. 1061 (1980). As the Commission would

have it, so long as it permits the petitioners to ‘‘raise all legal,

factual or policy issues regarding 1998 costs’’ in challenges to

subsequent annual charges, its action is not final because it

has not finally ‘‘ ‘impose[d] an obligation, denie[d] a right, or

fixe[d] some legal relationship as a consummation of the

administrative process,’ ’’ and therefore the orders are not

final. Ala. Power Co. v. FERC, 993 F.2d 1557, 1566 (D.C.

Cir. 1993) (quoting Papago Tribal Util. Auth., 628 F.2d at

239). The Commission’s willingness to reconsider the peti-

tioners’ legal arguments originally made and ruled on in

Idaho Falls II & III and City of Tacoma in a later proceed-

ing notwithstanding, the Commission’s decisions manifest that

its position with respect to the issues raised in the petition is

unchanged. The Commission does not deny that its orders

firmly establish its position on the issues under review,

namely the OFA cost submission and reimbursement scheme

and the scope of section 10(e)(1) of the FPA. Indeed, the

Commission does not suggest that it intends to shift its

position on these issues nor does it indicate that it could alter

its decision denying the petitioners’ challenge to the increased

FY 1998/FY 1999 costs resulting from the recertifications

following the Commission’s Idaho Falls II order. ‘‘[N]ormal-

ly, where an agency has stated that the action in question

governs and will continue to govern its decisions, such action

must be viewed as final.’’ Miss. Valley Gas Co. v. FERC, 68

F.3d 503, 508 (D.C. Cir. 1995) (internal quotations omitted)

(emphasis removed). As a practical matter, the Commission’s

rulings in the orders represent a ‘‘definitive [position that]

has a direct and immediate TTT effect on the day-to-day

business of the parties challenging the action,’’ manifesting

that the orders are sufficiently final for judicial review. Ciba-

13

Geigy Corp. v. EPA, 801 F.2d 430, 436 (D.C. Cir. 1986)

(internal quotations omitted); see Fourth Branch Assocs.

(Mechanicville) v. FERC, 253 F.3d 741, 746–47 (D.C. Cir.

2001). Accordingly, we conclude that the Commission’s or-

ders challenged by the petitioners constitute final agency

actions that this court has the power to review.10

B.

The petitioners argue that the Commission has miscon-

strued the scope of recoverable costs under section 10(e)(1)

because both the structure and the text of section 1701(a)

manifest that the only recoverable OFA costs thereunder are

those ‘‘reasonable and necessary’’ costs for ‘‘studies and other

reviews’’ by OFAs. They contend that the Commission

wrongly relies on section 3401 of OBRA to broaden the scope

of recoverable costs under the FPA and challenge the Com-

mission’s denial of FY 1998 OFA cost refunds based only on

OFAs’ certifications. They also complain that the Commis-

sion erroneously denied them refunds from the costs the

OFAs added upon recertification following Idaho Falls II.

Because we grant the petitioners’ petition on another ground,

however, we leave the resolution of those claims to the

Commission on remand.11

10 We also reject the Commission’s contention that the FY 2001

appeal now before the Commission is a request for a rehearing of

City of Tacoma or the other two orders under review and therefore

is premature. That appeal challenges FY 2001 assessments, supra

n.9, and, although they contain FY 1998 OFA cost adjustments, the

appeal does not relate to the orders considered by the Commission

in Idaho Falls II & III and City of Tacoma—those orders involved

FY 1999/FY 2000 assessments (FY 1998/FY 1999 OFA costs).

11 We note, however, our skepticism of the petitioners’ assertion

that the Congress, when it amended section 10(e) to add ‘‘including

any reasonable and necessary costs incurred by Federal and State

fish and wildlife agencies and other natural and cultural resource

agencies in connection with studies or other reviews carried out by

such agencies,’’ intended to limit recoverable costs to those related

only to ‘‘studies and other reviews.’’ The use of the word ‘‘includ-

ing’’ itself indicates that the enumerated costs are not the sole

14

The petitioners’ primary argument is that FERC failed to

meet the mandate of section 10(e)(1) of the FPA in not

determining whether the OFAs’ reported costs were reason-

able and necessary within the scope of section 10(e)(1). To

determine whether FERC has acted, as the petitioners con-

tend, contrary to law ‘‘we look first to determine whether

Congress has delegated to the agency the legal authority to

take the action that is under dispute.’’ Atlantic City Elec.

Co. v. FERC, 295 F.3d 1, 8 (D.C. Cir. 2002) (internal quota-

tions omitted). To answer that question, we turn to the two-

step approach of Chevron U.S.A. Inc. v. Natural Res. Def.

Council, Inc., 467 U.S. 837 (1984). Transmission Access

Policy Study Group v. FERC, 225 F.3d 667, 687 (D.C. Cir.

2000); S. Cal. Edison Co. v. FERC, 195 F.3d 17, 22–23 (D.C.

Cir. 1999). Under that approach the court first asks if

‘‘Congress has directly spoken to the precise question at

issue’’—here whether the Commission may delegate to other

federal agencies the task of reviewing the reasonableness of

reported FPA costs. Chevron, 467 U.S. at 842–43 (Chevron

step one). We use the traditional tools of statutory construc-

tion, beginning with ‘‘the most traditional tool of statutory

construction, [reading] the text itself.’’ S. Cal. Edison, 195

F.3d at 22–23 (citing Halverson v. Slater, 129 F.3d 180, 184

(D.C. Cir. 1997)). And to decide whether the plain meaning

of the text resolves the issue, the court considers ‘‘the partic-

ular statutory language at issue, as well as the language and

design of the statute as a whole.’’ Halverson, 129 F.3d at 184

(internal quotations omitted) (emphasis removed). Because

the Congress has directly spoken in section 10(e)(1), directing

that FERC is to review FPA-related costs upon which assess-

recoverable costs. Phelps Dodge Corp. v. NLRB, 313 U.S. 177,

188–89 (1941) (holding that National Labor Relations Act provision

authorizing NLRB to take ‘‘affirmative action, including reinstate-

ment of employees’’ did not limit Board’s remedies to reinstatement

only) (‘‘To attribute such a function to the participial phrase intro-

duced by ‘including’ is to shrivel a versatile principle to an illustra-

tive application. We find no justification whatever for attributing to

Congress such a casuistic withdrawal of the authority which, but for

the illustration, it clearly has given the Board.’’).

15

ments are made, we reject FERC’s differing interpretation as

impermissible under the statute.

As we have previously held, the authority to assess charges

under section 10(e)(1) of the FPA is FERC’s exclusive re-

sponsibility. E. Columbia Basin Irrigation Dist. v. FERC,

946 F.2d 1550, 1557–58 (D.C. Cir. 1991). Section 10(e)(1)

provides that it is the Commission that is to fix the amount of

‘‘reasonable annual charges’’ under the Act. In doing so, it is

the Commission that must ‘‘seek to avoid increasing the price

to the consumers of power by such charges.’’ 16 U.S.C.

§ 803(e)(1). By delegating to other federal agencies the

responsibility of ensuring that their cost reports are reason-

able and within the scope of the Act, the Commission fails to

discharge both duties. Its delegation of its responsibility

means that the OFAs, not the Commission, ‘‘fix’’ the amounts

of annual charges. Id. And by not meeting its obligation to

review OFA costs, the Commission cannot act to ‘‘avoid

increasing the price to consumers of power by such charges’’

as it is required to do. Id. Given ‘‘the particular statutory

language at issue, as well as the language and design of the

statute as a whole,’’ Halverson, 129 F.3d at 184 (internal

quotations omitted) (emphasis removed), we conclude that

FERC’s interpretation invalidly strays from the plain text of

the Act.

Although the Commission responds that the ‘‘reasonable-

ness’’ command of section 10(e)(1) references only its ‘‘rate

design’’ responsibility, i.e., the statute requires the Commis-

sion to ensure only that a reasonable methodology to assess

annual charges is established, FERC fails to explain its

rationale for interpreting section 10(e)(1) to mean that it has

no duty to review the costs themselves. Its failure is under-

standable given that its construction of section 10(e)(1) con-

flicts with its construction of other provisions of the Act. For

example, section 30(e) of the FPA, which relates to fish and

wildlife agencies’ cost recovery incurred in connection with

hydroelectric exemption applications for small conduit facili-

ties, directs that the ‘‘Commission TTT shall establish fees TTT

adequate to reimburse the fish and wildlife agencies TTT for

any reasonable costs incurred in connection with any studies

16

or other reviews carried out by such agencies for purposes of

compliance with this section.’’ 16 U.S.C. § 823a(e) (emphasis

added). Notwithstanding, the Commission interprets the lan-

guage differently:

Since the Commission is responsible for establishing

fees to reimburse ‘‘reasonable costs,’’ it necessarily

has the authority to determine whether the costs

submitted by agencies are reasonable. The Com-

mission has a statutory obligation TTT to ensure that

agencies are not unreasonable in making their cost

statements and study requirements under FPA sec-

tion 30(c).

Fees for Hydroelectric Project Applications to Reimburse

Fish and Wildlife Agencies, 52 Fed. Reg. 48,398, 48,402 (Dec.

22, 1987). The Commission’s failure to interpret consistently

two statutory provisions that are in pari materia manifests

that it has not correctly read ‘‘the language and design of the

statute as a whole.’’ Halverson, 129 F.3d at 184 (internal

quotations omitted) (emphasis removed). Because section

10(e) plainly commands the Commission to assess annual

charges under the FPA, including a review of OFA cost

reports on which the charges are based, we conclude that the

Commission, by failing to conduct that review, has acted

contrary to ‘‘the unambiguously expressed intent of Con-

gress’’ and therefore contrary to law.

For the foregoing reasons, we vacate the orders under

review, namely, Idaho Falls II, 93 F.E.R.C. ¶ 61,145 (2000),

Idaho Falls III, 95 F.E.R.C. ¶ 61,126 (2001), and City of

Tacoma, 95 F.E.R.C. ¶ 61,465 (2001), and remand to FERC

for further proceedings consistent with this opinion.

So ordered.