UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


WILLISTON BASIN

v.

FERC


97-1644a

D.C. Cir. 1999


*	*	*


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


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


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,


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


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


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


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 


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


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


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 


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


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-


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,


(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


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


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


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


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


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


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 


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


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


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


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


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


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


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


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.