Jersey Central Power & Light Company v. Federal Energy Regulatory Commission, Allegheny Electric Cooperative, Inc., Intervenors

810 F.2d 1168, 258 U.S. App. D.C. 189, 1987 U.S. App. LEXIS 1635

• Court: Court of Appeals for the D.C. Circuit
• Decided: February 3, 1987
• Docket: 82-2004
• Status: Published

Opinions

BORK, Circuit Judge:

Jersey Central Power and Light Company petitions for review of Federal Energy Regulatory Commission orders modifying the electric utility’s proposed rate schedules and requiring the company to file reduced rates. Jersey Central charges that it alleged facts which, if proven, show that the reduced rates are confiscatory and violate its statutory and constitutional rights as defined by the Supreme Court in FPC v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944). Though it is probable that the facts alleged, if true, would establish an invasion of the company’s rights, the Commission refused the company a hearing and reduced its rates summarily.

Throughout the extensive proceedings before both the Commission and this court, the Commission has steadfastly maintained that its summary dismissal of Jersey Central’s filing was justified by prior Commission precedent. Faced with the claim that the rate order was inconsistent with the Commission’s statutory responsibility to provide just and reasonable rates and with the constitutional prohibition against uncompensated takings, the Commission briefs advance a legal theory which, if adopted by this court, would immunize virtually all rate orders from this type of challenge. The Commission’s theory flies in the face of every Supreme Court decision that addresses this subject, and we are bound to reject it.

The intervenors, customers of Jersey Central, advance a quite different rationale for affirming the Commission. They attempt to justify the denial of a hearing with the argument that Jersey Central followed the wrong procedures and therefore lost the opportunity to have its substantive claims heard. Thus, it is said, it was the company’s fault, not the Commission’s, that no hearing was held.

That reasoning provides no basis for affirming the Commission. It fails to come to grips with the character of the Commission decision we review. That decision does not rest on adjective law. The Commission in fact reached and peremptorily decided the merits of the utility's claim. The substantive Hope Natural Gas issue is, therefore, squarely before us and cannot be avoided by faulting the utility for employing defective tactics. The Commission ruled that Jersey Central’s allegations and proffered testimony would not support a higher rate. That substantive ruling means that a hearing would have been pointless. The ruling is inconsistent with Hope as well as with other controlling precedent of the Supreme Court and of this court. Reversal and remand for a hearing are thus required.

Though the fact that the Commission reached the merits renders irrelevant the intervenors’ procedural rationale, it should be noted that if procedural fault is to be assigned, it should be laid at the Commission’s doorstep. In dealing with Jersey Central’s rate filings, the Commission applied unclear rules arbitrarily. Moreover, the Commission made plain, contrary to the intervenors’ rationale, that no procedure could have been followed that would have guaranteed the hearing sought. The explanation for what has taken place in these convoluted proceedings appears to be less that Jersey Central followed incorrect procedures than that the Commission resists “end result” examination at the agency level, and is deeply antagonistic to court review of ratemaking under the guidelines laid down by Hope.

The decision of the Commission is vacated and the case remanded for a hearing at which Jersey Central may finally have its claim addressed.

I.

This case has already prompted two opinions from this court, both of which we have since vacated. See Jersey Central Power & Light Co. v. FERC, 730 F.2d 816 (D.C. Cir.1984) (“Jersey Central I”); Jersey Central Power & Light Co. v. FERC, 768 F.2d 1500 (D.C.Cir.1985) (“Jersey Central II”). The case has now been reheard en banc, and the court has had the benefit of supplemental briefing and oral argument from the parties, the intervenors, and several amici curiae.1

On March 31, 1982, Jersey Central filed proposed rate schedules with the Commission for wholesale service to six customers. Jersey Central divided its filing into two separate rate increases designated Phase A and Phase B. Phase A has gone into effect, and Phase B is the subject of this litigation.

At issue is the utility’s proposed treatment of the $397 million investment lost when it suspended construction of its nuclear generating station at Forked River, New Jersey. The Forked River project was initiated about a decade and a half ago, when federal and state agencies were encouraging utilities to commit substantial amounts of capital to nuclear generating plants that required lead times of eight to twelve years. The consensus prediction was of substantial and steady increases in the demand for electricity and substantial and continued increases in the price of oil due to the operation of an international oil cartel. Regulated public utilities are under statutory obligations to plan and build the facilities necessary to meet the projected needs of their customers. See, e.g., 16 U.S.C. § 824a(g) (1982); N.J.Stat.Ann. 48:3-3 (West 1969). If firms and households were not to face catastrophic energy prices in the future, it was thought essential that nuclear generating plants be built. All parties agree that Jersey Central’s investment at Forked River was prudent when made.

The forecasts of both demand and supply proved wrong. Due to conservation, demand did not rise nearly as much as expected, and, with the collapse of the international cartel, the oil market has experienced a world-wide glut and a dramatic decline in prices. Furthermore, the protracted litigation and political controversy which attended the construction of nuclear power projects resulted in extensive delays and dramatic increases in their ultimate cost. Thus, many investments which were prudent, indeed considered essential, when made, have now by necessity been can-celled. Forked River was one, and in 1980 Jersey Central abandoned it, having concluded “that it must devote whatever resources it had available to ... less capital intensive and more politically acceptable alternatives.” Testimony of Dennis Bal-dassari at 7, Joint Appendix (“J.A.”) at 34.

Jersey Central sought to recover the cost of the Forked River investment by amortizing the $397 million over a fifteen-year period, a proposal to which the Commission agreed. Jersey Central also requested, however, that the unamortized portions be included in the rate base, with a rate of return sufficient to cover the carrying charges on the debt and the preferred stock portions of that unamortized investment. Jersey Central expressly did not seek a return on that portion of the unam-ortized investment allocable to its common equity investors.

In support of its proposal, Jersey Central submitted to the Commission the testimony of Dennis Baldassari, its Vice-President and Treasurer. J.A. at 28-39. Baldassari sought to demonstrate that the financial problems faced by Jersey Central made necessary earnings and revenues at the level contemplated by its filing. Baldassari characterized the utility’s financial condition as “delicate.” Testimony of Dennis Baldassari at 9, J.A. at 36. Jersey Central was wholly dependent for short-term credit, he explained, on a Revolving Credit Agreement which was subject to termination at any time. The only long-term securities it was able to issue were themselves subject to mandatory repurchase by the utility should the short-term credit then available to it be for any reason terminated. Jersey Central’s credit standing was, therefore, predictably low. Standard & Poor’s Corporation rated its senior debt securities “BB-”, i.e., “regarded, on-balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation.” Moody’s Investors Service had also downgraded Jersey Central’s rating, classifying its securities “Ba”, i.e., “judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.” Id. at 4, J.A. at 31.

Jersey Central’s lack of access to long-term capital, and the precariousness of its short-term credit, placed it in serious financial difficulty. Baldassari described the rate increase requested as “the minimum amount necessary to restore the financial integrity of the Company thereby providing the means by which Jersey Central will be able to meet its obligation to provide safe and dependable service in the future.” Testimony of Dennis Baldassari at 12, J.A. at 39. The focus of his testimony, therefore, was on the overall rate necessary to preserve his company’s access to capital markets and its financial integrity.

The Commission responded by issuing an order summarily excluding the unamortized portion of the investment from the rate base. Order Accepting for Filing and Suspending Revised Rates, Granting Interventions, Granting in Part and Denying in Part Motions for Summary Disposition, and Establishing Procedures, 19 F.E.R.C. (CCH) ¶ 61,208 (May 28, 1982). No discussion or analysis accompanied this portion of the order. The Commission simply noted that “consistent with Commission precedent ... unamortized investment in can-celled plants must be excluded from rate base.” Id. at 61,403 (footnote omitted). The precedent to which the Commission referred was New England Power Co., 8 F.E.R.C. (CCH) ¶ 61,054 (July 19, 1979), aff'd sub nom. NEPCO Municipal Rate Comm. v. FERC, 668 F.2d 1327 (D.C.Cir. 1981), cert. denied sub nom. New England Power Co. v. FERC, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982) (“NEPCO”). The utility in NEPCO had been permitted to recover the costs of its failed investment by amortizing it over a five-year period, but was denied its request to include the unamortized portion in the rate base.

NEPCO’s proposal differed from that later made by Jersey Central in several respects. NEPCO’s requested amortization period was only one-third as long as that proposed by Jersey Central; NEPCO proposed a full return on the unamortized portion of the investment, including that allocable to common equity, as opposed to simply a return sufficient to cover the carrying charges on debt and preferred stock portions; and NEPCO never alleged that its financial integrity and its ability to maintain access to capital markets depended upon the rate it was requesting.

Upon receiving the Commission’s order, Jersey Central filed an Application for Rehearing, J.A. at 99-135, seeking a full evi-dentiary hearing in which its proposal, and the factual foundation supporting it, could be examined. Jersey Central argued that NEPCO did not control because the allocation of risk in Jersey Central’s proposal was different from, and more favorable to consumers than, the allocation proposed and rejected in NEPCO. Jersey Central argued as well that more recent Commission precedent on the treatment of abandoned investments in gas pipeline facilities provided support for its proposal. Finally, Jersey Central advanced a position that became the central issue briefed and argued in this appeal. It is axiomatic that the end result of Commission rate orders must be “just and reasonable” to both consumers and investors, and that, in achieving this balance, the Commission must consider the impact of its rate orders on the financial integrity of the utility. Jersey Central argued that, for these reasons, the Commission may not summarily exclude an investment from the rate base when the utility has alleged that its ability to attract capital will be seriously jeopardized as a result. Jersey Central contended that it was entitled to a hearing at which it would have the opportunity to prove its allegations and demonstrate that the end result of the Commission’s orders violated the applicable statutory and constitutional standards, a hearing that would create a record through which the Commission’s effort to balance the relevant consumer and investor interests would be subject to judicial review.

Alternatively, since Jersey Central’s concern was with the end result of the rate order, it requested an evidentiary hearing at which it could justify a rate of return higher than that included in its original filing to compensate for the rate base limitation that the agency claimed was necessi- ■ tated by Commission precedent. The rate allowed a utility is the sum of (1) its cost of service, and (2) its rate base multiplied by its rate of return. Since the Commission’s order had excluded Forked River from the rate base, Jersey Central suggested that the necessary rate could be achieved through raising the rate of return.

The Commission again refused to grant Jersey Central a hearing. The Commission explained, somewhat cryptically:

We recognize that, in accord with Hope Natural Gas Co., supra, it is the “end result” which must be just and reasonable. Nonetheless, the reasonableness of that end result cannot be evaluated without regard to the individual components which comprise a rate____

... JCP & L’s argument that our decision to exclude cancelled project costs from rate base is not mandated by Commission precedent is ... without merit. Furthermore, the argument that a hearing is required in order to implement this policy determination, is erroneous. Since Opinion No. 49, the Commission has consistently resolved this issue through summary disposition.

Order Granting in Part and Denying in Part Application for Rehearing, 20 F.E. R.C. (CCH) ¶ 61,083, at 61,181-82 (July 23, 1982) (footnote omitted). The Commission then denied the request for a hearing on the alternative proposal of a higher rate of return, on the grounds that modifying the filing at that stage would unfairly present the Commission and the intervenors with a “moving target,” and, further, that Jersey Central’s “case-in-chief contain[ed] no testimony or exhibits which would support a higher return.” Id. at 61,182. When the Commission denied Jersey Central’s Application for Rehearing and Reconsideration as well, this appeal was filed.

A unanimous panel of this court affirmed the Commission. The utility claimed that the Commission’s orders were not the product of reasoned decisionmaking because they were inconsistent with the gas pipeline cases and because application of the NEPCO precedent to the facts of this case was irrational. The utility also claimed that it was entitled to an evidentiary hearing in which it could justify its alternative request for a higher rate of return. All these claims were rejected. We then turned to Jersey Central’s contention that Hope Natural Gas required that there be a hearing to ensure that the “end result” of the rate order was “just and reasonable.” The path we took in resolving this issue was later challenged by both parties:

Jersey Central argues that, as a result of the Commission’s orders, its rate of return overall will be too low to be characterized as “just and reasonable.” In denying rehearing, however, the Commission responded that “the reasonableness of that end result cannot be evaluated without regard to the individual components which comprise a rate.” Commission Order at 61,181. This is a rather terse explanation and we wish that in the future the Commission would share its undoubted expertise with us a bit more generously. We understand the Commission to be saying, however, that the end result is to be judged by the rate of return allowed on items for which a rate of return is allowable, the Forked River expenditure is not such an item, and the rates are just and reasonable as to those cost items that are properly in the rate base. The dispute thus boils down to the question of whether the end result test is to be applied to a utility overall or only to those assets which valid Commission rules permit to be included in the rate base.

Jersey Central I, 730 F.2d at 823. Having thus defined the dispute, we accepted what we thought to be the Commission’s position and concluded that the end result test applied only “to those assets which valid Commission rules permit to be included in the rate base.”

In its petition for rehearing before this court, Jersey Central stated that we had mischaracterized the “end result” test by focusing not on the result of the rate order but on the determination of the rate base, which is only one component of that order. We asked the Commission for a response, and it provided one we found incomprehensible:

In the Commission’s view the Court characterized the “end result” test more narrowly than the Commission would have; and, accordingly, it believes it would be appropriate for the Court to amend this aspect of its opinion. Nevertheless, the Commission believes the Court properly affirmed the Commission’s orders in this case, since it is well-settled that the end-result test only has application to items which are legitimately included in the rate base as “used and useful.”

Response of Respondent FERC to Petition for Rehearing at 2. Since this response seemed both to reject and accept our reasoning, the Commission had still not offered us any guidance as to how it construed Hope’s “end result” test. Dissatisfied, the court entered a further order which read, in pertinent part:

[W]e direct the Commission to elaborate on its cryptic comment that, “[i]n the Commission’s view the Court characterized the ‘end result’ test more narrowly than the Commission would have; and, accordingly, it believes it would be appropriate for the Court to amend this aspect of its opinion.” Response at 2. This statement is unhelpful. The Commission should explain how and why it believes that the opinion should be amended. We therefore order that the Commission provide further explanation of its position in the brief we have today directed it to file. Throughout these proceedings the court has found the Commission’s submissions singularly terse and uninformative.

Order of July 16, 1984. The Commission filed a second response in which it now agreed with Jersey Central that the end result test does not only apply to those assets which valid Commission rules permit to be included in the rate base. Brief for Respondent FERC in Response to the Court’s Order of July 16, 1984, at 4. The second response described the “end result” test as “simply an expression for broadly gauging whether, based on all the facts before it, the Commission’s orders in a particular case produce a reasonable result.” Id. at 5. The Commission nevertheless suggested that the end result test was not a standard under which a court was authorized to set aside an unjust end result, but rather “was designed to accord the Commission broad discretion over all aspects of rate-making methodology.” Id. at 6.

This response meant that the “end result” test applied to the overall situation produced by the Commission’s action but that the Commission not only refused to hold a hearing on that subject but also believed its refusal to be virtually immune from judicial review. Finding no support for the arresting proposition that the Commission was immune from challenges in court over rate orders alleged to violate statutory and constitutional guarantees explicated by the Supreme Court, the panel— now divided — vacated its prior decision. Jersey Central had alleged that “for four years [it] had been unable to pay any dividends on its common stock”; that in part as a consequence of the Commission’s orders it had been “repeatedly on the edge of being forced into bankruptcy”; and that since 1979 it

has had no access to the long-term capital markets and has been wholly dependent upon a short-term revolving credit agreement which was subject to termination at a moment’s notice. [The company] has been allowed sufficient cash flow to enable [it] to avoid bankruptcy (but not to provide earnings [sufficient] to enable [it] to attract capital or maintain credit).

Petition for Rehearing and Suggestion for Hearing En Banc at 14. Since the Commission had never held a hearing, there was no way of knowing whether these allegations were true, but we noted that if they were, it “would suggest that FERC’s actions were illegal under the end result test of Hope Natural Gas,” Jersey Central II, 768 F.2d at 1502, because the Commission might well have failed to achieve “a reasonable balancing of investor and consumer interests in keeping with the requirement that rates be ‘reasonable, just, and non-discriminatory.’ ” Id. at 1503. We therefore remanded the case to the Commission for a hearing at which Jersey Central would have the opportunity to present its evidence on the inadequacy of the rates allowed it. Jersey Central II was vacated when a majority of the court voted to rehear this case en banc.

II.

A.

The parties offer radically differing views of the Commission’s obligations under Hope Natural Gas, a decision in which the Supreme Court set forth the applicable standard of judicial review when rates ordered by an agency are challenged in court as failing to meet the statutory requirement that they be “just and reasonable.” The Hope Court was construing the Natural Gas Act of 1938, §§ 4(a), 5(a), 52 Stat. 821, 822, 823-24 (codified as amended at 15 U.S.C. §§ 717c(a), 717d(a) (1982)). The Federal Power Act, 16 U.S.C. § 824d(a) (1982), the source of the claim in this case, also requires that rates be “just and reasonable,” and courts rely interchangeably on cases construing each of these Acts when interpreting the other. Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577 n. 7, 101 S.Ct. 2925, 2930 n. 7, 69 L.Ed.2d 856 (1981). Since the Court had previously indicated that “the Congressional standard prescribed by this statute coincides with that of the Constitution,” FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S.Ct. 736, 743, 86 L.Ed. 1037 (1942), the Hope test defines the point at which a rate becomes unconstitutionally confiscatory as well.

In these proceedings the Commission itself has never stated what the “end result” test of Hope Natural Gas requires of it or of a reviewing court. In Jersey Central I and II, the Commission’s appellate counsel offered us only the vague statements of the Commission’s duties already quoted. As to the reviewing court’s power under Hope, counsel told the panel in those proceedings essentially that the reviewing court had little, if any, function to perform. However, at oral argument before the court en banc, counsel finally advanced the novel proposition that the “end result” test empowers a court to set aside a rate order on the utility’s petition only if the order would put the utility into bankruptcy. In order to show how dramatically at odds with the law that position is, we review the history of the doctrine at issue.

Hope Natural Gas reaffirmed a doctrinal shift, begun in FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942), away from the more exacting and detailed standard of judicial review exemplified by Smyth v. Ames, 169 U.S. 466, 185 S.Ct. 418, 42 L.Ed. 819 (1898). Under Smyth v. Ames, courts had meticulously scrutinized rate orders to ensure that investors received the “fair value” of the property dedicated to public use. The “fair value” standard required courts to estimate the current market value of the property, and rates that provided anything less were deemed confiscatory. The governing theory required that consumers pay the market value of the property they were using because the property was regarded as having been taken. Recovery was therefore required only on property “used and useful” to the public, for property that was not being used could not be considered to have been taken. The Supreme Court cases of the 1940’s eliminated the requirement that the market value of the property be recovered, and regulated industries now collect rates calculated to generate a reasonable return on the original cost of the investment. The companies are still generally permitted to include in the rate base only property considered used and useful, but with the demise of “fair value,” “used and useful” ceased to have any constitutional significance, and the Commission has at times departed from this standard. It is now simply one of several permissible tools of ratemaking, one that need not be, and is not, employed in every instance. See Washington Gas Light Co. v. Baker, 188 F.2d 11 (D.C.Cir.1950), cert. denied, 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686 (1951).

In setting aside the rigorous judicial scrutiny that had previously characterized review of rate orders, the Supreme Court substituted a far more deferential standard of review:

Once a fair hearing has been given, proper findings made and other statutory requirements satisfied, the courts cannot intervene in the absence of a clear showing that the limits of due process have been overstepped. If the Commission’s order, as applied to the facts before it and reviewed in its entirety, produces no arbitrary result, our inquiry is at an end.

FPC v. Natural Gas Pipeline Co., 315 U.S. at 586, 62 S.Ct. at 743. This new emphasis — on whether the order “viewed in its entirety” was the product of “proper findings” and was not “arbitrary” — evolved two years later into the “end result” test of Hope Natural Gas.

The Hope Court made clear that when a rate was claimed to be beyond “just and reasonable” boundaries, the focus of analysis was to be the end result of that order:

[I]t is the result reached not the method employed which is controlling____ It is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end____ And he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.

320 U.S. at 602, 64 S.Ct. at 287 (citations omitted). Judging a rate order’s consequences, the Court held, necessarily required a “balancing of the investor and the consumer interests.” Id. at 603, 645 S.Ct. at 288. The legitimate investor interest, which is the interest Jersey Central claims received inadequate attention in the proceedings before the Commission, was defined in Hope to include:

the financial integrity of the company whose rates are being regulated. From the investor or company point of view it is important that there be enough revenue not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock.

Id. The return, therefore, “should be sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital.” Id.

Thus, in reviewing the rate order challenged in Hope, the Court considered the detailed findings made by the Commission concerning the financial condition of Hope Natural Gas Company. 320 U.S. at 603-05, 64 S.Ct. 288-89. After examining all of the relevant figures, the Commission had concluded that “[t]he company’s efficient management, established markets, financial record, affiliations, and its prospective business place it in a strong position to attract capital upon favorable terms when it is required.” 44 P.U.R. (N.S.) 1, 33 (1942), quoted in Hope, 320 U.S. at 605, 64 S.Ct. at 289. After summarizing the Commission’s findings and conclusions concerning the company’s financial health, the Court held:

In view of these various considerations we cannot say that an annual return of $2,191,314 is not “just and reasonable” within the meaning of the Act. Rates which enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed certainly cannot be condemned as invalid, even though they might produce only a meager return on the so-called “fair value” rate base.

320 U.S. at 605, 64 S.Ct. at 289.

In Hope Natural Gas, the rate was challenged as too low to account adequately for the legitimate interests of the investor. In Washington Gas Light Co. v. Baker, 188 F.2d 11 (D.C.Cir.1950), cert. denied, 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686 (1951), this court heard a challenge by a consumer who claimed that a rate increase approved by the Public Utilities Commission of the District of Columbia was too high to account adequately for the legitimate interests of the purchaser. The court applied the same analytical framework. Because the local public utilities commission was governed by the same standard as the Federal Power Commission, 188 F.2d at 14, Judge Bazelon’s opinion examined the rate order under the rule set forth in Hope Natural Gas:

So long as the public interest — i.e., that of investors and consumers — is safeguarded, it seems that the Commission may formulate its own standards. But there are limits inherent in the statutory mandate that rates be “reasonable, just, and nondiseriminatory.” Among those limits are the minimal requirements for protection of investors outlined in the Hope case. And from the earliest cases, the end of public utility regulation has been recognized to be protection of consumers from exorbitant rates. Thus, there is a zone of reasonableness within which rates may properly fall. It is bounded at one end by the investor interest against confiscation and at the other by the consumer interest against exorbitant rates.

Id. at 15 (footnotes omitted). The court then set aside the rate order and remanded for further proceedings, on the ground that the Commission had not made sufficiently detailed findings of fact concerning the financial health of the company involved to support the reasonableness of its rate increase. “Despite the broad limits allowed the Commission, it remains imperative that its findings, under whatever formula adopted, be based upon substantial evidence in the record.” Id. (footnote omitted). In that case, this court also indicated that the Commission was not obligated to exclude from the rate base all property not presently “used and useful,” but was free to include prudent but cancelled investments. Id. at 19.

The Supreme Court has repeatedly reaffirmed the “end result” standard of Hope Natural Gas. See, e.g., FPC v. Memphis Light, Gas & Water Division, 411 U.S. 458, 474, 93 S.Ct. 1723, 1732, 36 L.Ed.2d 426 (1973) (“under Hope Natural Gas rates are ‘just and reasonable’ only if consumer interests are protected and if the financial health of the pipeline in our economic system remains strong”); Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 605, 65 S.Ct. 829, 840, 89 L.Ed. 1206 (1945) (“end result” test “is not a standard so vague and devoid of meaning as to render judicial review a perfunctory process. It is a standard of finance resting on stubborn facts.”). In Permian Basin Area Rate Cases, 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968), the Court reviewed Commission orders setting area-wide rates for gas producers. Writing for the majority, Justice Harlan stated that a court reviewing rate orders must assure itself both that “each of the order’s essential elements is supported by substantial evidence” and that “the order may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection to the relevant public interests, both existing and foreseeable.” Id. at 792, 88 S.Ct. at 1373. In examining the end result of the rate order, he made clear, a court cannot affirm simply because each of the component decisions of that order, taken in isolation, was permissible; it must be the case “that they do not together produce arbitrary or unreasonable consequences.” Id. at 800, 88 S.Ct. at 1377 (emphasis added). The Court in Permian Basin emphasized the necessity for Commission findings, the existence of which is a necessary predicate to judicial deference:

The court’s responsibility is not to supplant the Commission’s balance of these interests with one more nearly to its liking, but instead to assure itself that the Commission has given reasoned consideration to each of the pertinent factors. Judicial review of the Commission’s orders will therefore function accurately and efficaciously only if the Commission indicates fully and carefully the methods by which, and the purposes for which, it has chosen to act, as well as its assessment of the consequences of its orders for the character and future development of the industry.

Id. at 792, 88 S.Ct. at 1373. And the Court once again reviewed the findings below and affirmed upon concluding that “the record before the Commission contained evidence sufficient to establish that these rates, as adjusted, will maintain the industry’s credit and continue to attract capital.” Id, at 812, 88 S.Ct. at 1383.

The teaching of these cases is straightforward. In reviewing a rate order courts must determine whether or not the end result of that order constitutes a reasonable balancing, based on factual findings, of the investor interest in maintaining financial integrity and access to capital markets and the consumer interest in being charged non-exploitative rates. Moreover, an order cannot be justified simply by a showing that each of the choices underlying it was reasonable; those choices must still add up to a reasonable result. Because the language of these cases is so plain, and the standard applied in each is the same, the preceding lengthy account may have appeared unduly repetitious. We have set out guiding precedent comprehensively, however, because the legal position taken by the Commission is at odds with every one of the requirements specified by these decisions.

In the face of a serious Hope challenge, the Commission made no findings, performed no balancing, offered no reasoned consideration of Jersey Central’s allegations and proffered testimony, misstated the law by saying that the reasonableness of the end result cannot be evaluated without regard to the individual components that go into a rate, and, most recently, claimed that our reviewing function was ended if the rate order did not cast Jersey Central into bankruptcy.

This performance alone would justify reversal and a remand for a Hope hearing. But there was more: the Commission reached the merits and ruled that Jersey Central’s allegations and testimony did not even raise a Hope issue. That was plain legal error.

B.

The allegations made by Jersey Central and the testimony it offered track the standards of Hope and Permian Basin exactly. The Hope Court stated that the return ought to be “sufficient to ensure confidence in the financial integrity of the enterprise, so as to maintain its credit and to attract capital,” and that “it is important that there be enough revenue not only for operating expenses but also for the capital costs of the business. These include service on the debt and dividends on the stock.” 320 U.S. at 603, 64 S.Ct. at 288. Permian Basin reaffirmed that the reviewing court “must determine” whether the Commission’s rate order may reasonably be expected to “maintain financial integrity” and “attract necessary capital.” 390 U.S. at 792, 88 S.Ct. at 1373. Jersey Central alleged that it had paid no dividends on its common stock for four years and faced a further prolonged inability to pay such dividends. Baldassari’s testimony explained that the company was unable to sell senior securities; that its only source of external capital was the Revolving Credit Agreement, which was subject to termination and which placed the outstanding bank loans the company was allowed to maintain below the level necessary for the upcoming year; that the need to pay interest on the company’s debt and dividends on its preferred stock meant that common equity investors not only were earning a zero return, but were also forced to pay these interest costs and dividends and that “continued confiscation of earnings from the common equity holder ... will prolong the Company’s inability to restore itself to a recognized level of credit worthiness”; that its “inability to realize fully its operating and capital costs so as to provide a fair rate of return on its invested capital has pushed its financial capability to the limits”; that “[ajdequate and prompt relief is necessary in order to maintain the past high quality of service”; and that the rate increase requested was “the minimum necessary to restore the financial integrity of the Company.” Testimony of Dennis Baldassari at 5-6, 7, 10, 12, J.A. at 32-33, 34, 37, 39.

Inexplicably, the Commission ruled that Jersey Central’s showing did not require a hearing because there were “no testimony or exhibits which would support a higher return.” That ruling is flatly at odds with Hope and Permian Basin. Moreover, the Commission, having held no hearing, made no findings in support of its ruling and gave not a single reason for it. If the Commission and this court are bound by Supreme Court precedent, and we are, the Commission’s ukase cannot stand.

C.

The Commission’s apparent understanding of Hope Natural Gas, adopted by the dissent in Jersey Central II, is that the “end result” test acts only as a limitation of, and not at all as an authorization for, judicial review of rate orders. While the Commission “may also look to the criteria of Hope in determining whether its rate order is just and reasonable and may make pragmatic adjustments based on the perceived need to balance investor and consumer interests,” Brief on Rehearing En Banc for Respondent FERC at 16 (emphasis added), it apparently considers a decision whether or not to do so completely within its discretion. While the Commission’s briefs have never explicitly claimed that courts are without authority to set aside rate orders deemed unjust and unreasonable in their consequences, or based upon insufficient findings, at no point in response to our numerous requests for briefing has the Commission indicated any role it believes proper for courts to play in reviewing the reasonableness of rate orders, save that of passively affirming them. Only at oral argument before the en banc court did Commission counsel concede that a court might set aside a rate order under Hope if the order would drive the company into bankruptcy, but that was the limit of the judicial power acknowledged.

The rationale for the Commission’s position is difficult to discern, for, as noted in Section IIA, supra, that position can derive no support from the case law it purports to embody. The Commission, it appears, rests its theory in part on the fact that Hope Natural Gas represented a shift from strict to deferential judicial review, and, in the historical context in which it was decided, constituted a limitation on judicial review when compared to the standard it was replacing. But judicial review, while limited, was not eliminated, and the “end result” standard — like any standard of judicial review — confines judicial power not by eliminating review but by defining its reach. The delineation marked by the “end result” test thus simultaneously authorizes and constrains the courts that apply it. This is elementary jurisprudence.

The Commission also apparently locates support in language set forth in Hope: “If the total effect of the rate order cannot be said to be unjust and unreasonable, judicial inquiry under the Act is at an end.” Hope, 320 U.S. at 602, 64 S.Ct. at 288. See also Jersey Central II, 768 F.2d at 1511 (Mikva, J., dissenting). The Commission’s litigating stance appears to interpret the Court’s statement as if it were but one half of a larger proposition the Court meant to enunciate: judicial review is at an end if either the end result is just and reasonable or if it is not. Had he meant any such thing, Justice Douglas would simply have said that there is no more judicial review. Instead, he said that “he who would upset the rate order under the Act carries the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.” Hope, 320 U.S. at 602, 64 S.Ct. at 288 (emphasis added). He then went on to review the financial situation of the company, an exercise that would have been wholly superfluous if he had just announced the demise of judicial review. If the contrary view apparently embraced by the Commission were adopted, the end result standard would become “so vague and devoid of meaning as to render judicial review a perfunctory process.” Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 605, 65 S.Ct. 829, 840, 89 L.Ed. 1206 (1945).

The Commission maintains that because excluding the unamortized portion of a can-celled plant investment from the rate base had previously been upheld as permissible, any rate order that rests on such a decision is unimpeachable. But that would turn our focus from the end result to the methodology, and evade the question whether the component decisions together produce just and reasonable consequences. We would be back with the assertion made in Jersey Central I that “the end result test is to be applied ... only to those assets which valid Commission rules permit to be included in the rate base.” 730 F.2d at 823. That statement was one which neither party endorsed. It was incorrect. The fact that a particular ratemaking standard is generally permissible does not per se legitimate the end result of the rate orders it produces. Justice Harlan said just that in Permian Basin.

The position presented on behalf of the Commission, as we earlier observed, shifted to a minor extent during the course of these proceedings. At oral argument before the en banc court, counsel for the Commission indicated that the “end result” test did allow a court to set aside a rate order when the company would otherwise go bankrupt and the Commission had refused to take that into account. The source of this constricted standard is elusive, not to say invisible. Hope Natural Gas talks not of an interest in avoiding bankruptcy, but an interest in maintaining access to capital markets, the ability to pay dividends, and general financial integrity. While companies about to go bankrupt would certainly see such interests threatened, companies less imminently imperiled will sometimes be able to make that claim as well. Jersey Central alleges that it is such a company. The contention that no company that is not clearly headed for bankruptcy has a judicially enforceable right to have its financial status considered when its rates are determined must be rejected.

The dissent agrees with the Commission that Hope stands generally for a restriction on judicial review of a rate order, but erects its own constricted standard to determine when a company may obtain consideration of its financial status in review of a rate order. According to the dissent, Jersey Central could get a Hope hearing only by first making a sufficient showing on three critical points: that a “critical nexus” exists between the rate order and the utility’s financial plight; that the proposed rate filing would not lead to the exploitation of consumers; and that the overall return allowed on this project is not reasonable, and thus puts the company in need of protection at this phase of the ratemaking process. Dissent at 1205-09. It is remarkable that the dissent would affirm the Commission on a legal theory that neither the Commission nor its counsel ever advanced. The Commission offered no legal theory and counsel offered the unique bankruptcy-only theory. It is impossible to affirm on the basis of the Commission’s silence or counsel’s rationale. It should be equally impossible to suggest affirmance on the basis of a legal theory never surfaced until today. Indeed, the only correspondence between the three different positions taken by the Commission, its counsel, and the dissent, aside from their common hostility to Hope, is that none of them has any basis in any decision of any previous court. The dissent's new three-part barrier flatly ignores the factors that, according to the Supreme Court’s controlling opinion in Hope, would necessitate an “end result” hearing into whether any revision of a rate order is necessary in light of a company’s financial plight. Since Jersey Central submitted figures and testimony to support its claim that the rate order caused its financial distress, that its proposed rates would not exploit consumers, and that the overall rate of return allowed is not just and reasonable, one can only suppose that the dissent demands proof beyond doubt of its three criteria before the hearing is even held. That, most certainly, is not what Hope requires. The dissent thus joins the Commission in rejecting the Supreme Court’s law.

In addition to prohibiting rates so low as to be confiscatory, the holding of Hope Natural Gas makes clear that exploitative rates are illegal as well. If the inclusion of property not currently used and useful in the rate base automatically constituted exploitation of consumers, as one of the amici maintains, then the Commission would be justified in excluding such property summarily even in cases where the utility pleads acute financial distress. A regulated utility has no constitutional right to a profit, see FPC v. Natural Gas Pipeline Co., 315 U.S. at 590, 62 S.Ct. at 745, and a company that is unable to survive without charging exploitative rates has no entitlement to such rates. Market Street Ry. v. Railroad Comm’n of Cal., 324 U.S. 548, 65 S.Ct. 770, 89 L.Ed. 1171 (1945). But we have already held that including prudent investments in the rate base is not in and of itself exploitative, Washington Gas Light Co. v. Baker, and no party has denied that the Forked River investment was prudent. Indeed, when the regulated company is permitted to earn a return not on the market value of the property used by the public, see Smyth v. Ames, but rather on the original cost of the investment, placing prudent investments in the rate base would seem a more sensible policy than a strict application of “used and useful,” for under this approach it is the investment, and not the property used, which is viewed as having been taken by the public. The investor interest described in Hope, after all, is an interest in return on investment. Hope, 320 U.S. at 603, 64 S.Ct. at 288.²

The central point, however, is this: it is impossible for us to say at this juncture whether including the unamortized portion of Forked River in the rate base would exploit consumers in this case, or whether its exclusion, on the facts of this case, constitutes confiscation, for no findings of fact have been made concerning the consequences of the rate order.³ Nor, for the same reason, can we make a judgment about the higher rate of return the utility sought as an alternative to inclusion in the rate base of its unamortized investment. Jersey Central has presented allegations which, if true, suggest that the rate order almost certainly does not meet the requirements of Hope Natural Gas, for the company has been shut off from long-term capital, is wholly dependent for short-term capital on a revolving credit arrangement that can be cancelled at any time, and has been unable to pay dividends for four years. In addition, Jersey Central points out that the rates proposed in its filing would remain lower than those of neighboring utilities, see, e.g., Petition for Rehearing and Suggestion for Hearing En Banc at 8, which at least suggests, though it does not demonstrate, that the proposed rates would not exploit consumers. The Commission treated those allegations as irrelevant and hence has presented us with no basis on which to affirm its rate order. The necessary findings are simply not there for us to review. When the Commission conducts the requisite balancing of consumer and investor interests, based upon factual findings, that balancing will be judicially reviewable and will be affirmed if supported by substantial evidence. That is the point at which deference to agency expertise will be appropriate and necessary. But where, as here, the Commission has reached its determination by flatly refusing to consider a factor to which it is undeniably required to give some weight, its decision cannot stand. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971).⁴ The case should therefore be remanded to the Commission for a hearing at which the Commission can determine whether the rate order it issued constituted a reasonable balancing of the interests the Supreme Court has designated as relevant to the setting of a just and reasonable rate.⁵

III.

The intervenors, Allegheny Electric Cooperative and four boroughs of New Jersey, all purchasers of energy from Jersey Central, present an argument different from that advanced by the Commission. Intervenors urge that we affirm the Commission on the sole ground that Jersey Central made the wrong filing. The dissent agrees.

The argument made by the dissent and the intervenors is purely procedural. They assert that the Commission has a “rule” against including the unamortized portion of an abandoned investment in the rate base; that Jersey Central “ignored” this “rule” when it made its filing; that Jersey Central could have “received what it wanted” — i.e., a hearing before the Commission on its Hope claim — had it filed instead a request for a higher rate of return or a shorter amortization period; that those filings, in contrast to the filing actually made, would have been consistent with Commission rules; and that Jersey Central has therefore forfeited whatever claim it might have had to a higher rate, and, accordingly, that the summary dismissal ought to be affirmed. Supplementary Brief Submitted by Intervenors at 9-11, 14-15.

This procedural rationale, it is worth noting, was never advanced by the Commission: not in the orders under review, not at the original hearing before a panel of this court, not in its first response to the petition for rehearing, not in its second response, and not in its submission to the en banc court. Moreover, the point that the intervenors and the dissent seek to make the pivot of this case was not perceived by the panel in its unanimous first decision or by either the majority or the dissent in the panel’s second decision. The point was not the reason we granted rehearing en banc. That was done entirely to rehear the Hope “end result” issue. The procedural argument was raised only at the en banc stage.

But the oddest aspect of this entire history is that the Commission has never said what the intervenors and the dissent say: that Jersey Central could have had a hearing on the Hope “end result” test if only it had followed some other procedure. The fact that the Commission never relied on this argument might be reason enough to reject it. And, in any event, because the Commission did rule that Jersey Central’s proffer was inadequate, and thus committed legal error under Hope, it is not strictly necessary that we discuss the procedural point. The merits were reached and the claims were wrongly dispatched without any provision of the “end result” hearing required by Hope. Nonetheless, even though it makes no difference to the ultimate resolution of this case, we think it well to show this procedural contention is wrong. The intervenors’ characterization of the utility's filing and its interpretation of the available Commission procedures do not withstand analysis.

The intervenors and the dissent assert that in requesting rate-base treatment for the unamortized portion of the costs of the cancelled plant, Jersey Central violated the “rule” established by the Commission in NEPCO. There was, however, no suggestion in that case that the Commission was establishing any ironclad rule. The subject of that proceeding was the proper treatment of a cancelled generating unit at NEPCO’s Salem Harbor facility. The Commission was faced with a number of issues, such as the length of the amortization period and the percentage of costs the utility would be permitted to amortize. It was also faced with the question of whether the unamortized portion of those costs should be included in the rate base. The Commission resolved that question by simply quoting from, and indicating its agreement with, the findings of the Administrative Law Judge, who had concluded that “[tjhere is no precedent, or reasonable justification in the record of this proceeding, to require ratepayers to pay a return on an expenditure that has not resulted in productive plant that is used or useful in the public service.” NEPCO, 8 F.E.R.C. (CCH) at 61,175 (emphasis added). The Commission had decided that application of the used and useful principle in that case, on the basis of the facts presented, would yield a reasonable balancing of the competing interests. It was not, as the inter-venors suggest and the dissent states, establishing a rigid rule.

When NEPCO challenged the Commission’s decision before this court, it was unsuccessful. NEPCO Municipal Rate Comm. v. FERC, 668 F.2d 1327 (D.C.Cir. 1981), cert. denied sub nom. New England Power Co. v. FERC, 457 U.S. 1117, 102 S.Ct. 2928, 73 L.Ed.2d 1329 (1982). NEP-CO argued that any application of the used and useful principle that led to the denial of a return on prudently-invested capital was unconstitutionally confiscatory. We rejected that argument, and accepted that advanced by the Commission in its brief: “In The Circumstances Of This Case, The Commission Correctly Allowed The Utility To Recover Costs (But No Profit) For Can-celled Facilities,” Brief for Respondent FERC at 18 (Argument Subheading I.B. 2) (emphasis added). We did not hold that the balance struck in NEPCO would be upheld in any future proceeding to which it was applied, regardless of the facts involved. Instead, we simply declined to hold, as urged by the utility, that failure to allow a return on prudently-invested capital was per se unconstitutional, and we affirmed the Commission’s decision to employ the “used and useful” principle, finding that NEPCO had “set forth no compelling reason for departing from that approach in this case." NEPCO, 668 F.2d at 1335 (emphasis added).

In at least four subsequent proceedings, the Commission relied on NEPCO in summarily excluding the unamortized costs of cancelled plants from the rate base. While the intervenors overstate the matter by referring to the NEPCO precedent as a rule, it is fair to say that application of the precedent to routine cases like those was becoming a practice. Jersey Central’s filing, however, was anything but routine. It presented allegations suggesting material differences between its situation and those presented in the NEPCO line of cases. First, the amount of the loss was on an entirely different scale. The Commission had never applied NEPCO to a loss at the order of magnitude of nearly $400 million. (Ohio Edison Co., 18 F.E.R.C. (CCH) 1161,010 (Jan. 8, 1982), for example, involved a loss of $773,146.) Second, in none of the previous cases had the petitioner suggested that it was facing financial distress of the sort threatening Jersey Central. Third, Jersey Central’s filing proposed an amortization period three times longer than that established in NEPCO. A longer amortization period strikes a balance more favorable to ratepayers, and Jersey Central was apparently willing to accept lower revenues in exchange for the higher recorded earnings which would have accompanied rate-base treatment of the cancelled plant, since it needed to record earnings in order to regain its access to the capital markets.

These factual differences distinguishing NEPCO from the case before us are substantial. In Michigan Wisconsin Pipe Line Co. v. FPC, 520 F.2d 84 (D.C.Cir. 1975), we explained that “the Commission may attach precedential, and even controlling weight to principles developed in one proceeding and then apply them under appropriate circumstances in a stare decisis manner.” Id. at 89. In that case, however, the Commission’s decision to attach such weight to a prior proceeding was remanded, because

a rudimentary prerequisite to such an application is that the factual composition of the case to which the principle is being applied bear something more than a modicum of similarity to the case from which the principle derives. This is not to say that factual patterns must be virtually identical for a principle to control, but rather that there is a point where the patterns are so diverse that a per se application of the principle, without at least recognition and accommodation of the factual distinctions, brings into question the rationality of the application.

Id. Given the importance of a utility’s financial condition to the balancing required of the Commission, and Jersey Central’s willingness to accept smaller revenues in order to record higher earnings so as to maintain that integrity, Jersey Central must have thought, as we do, that it had presented allegations that required reasoned examination, not summary dismissal in reliance on a precedent dealing with vastly different facts.

Trailblazer Pipeline Co., 18 F.E.R.C. (CCH) 1161,244 (Mar. 12, 1982), presented Jersey Central with some additional grounds for believing that the Commission would take a more flexible approach. While the procedural posture was different — this was not a rate filing, but a proceeding brought to obtain Commission certification to construct and operate a gas pipeline — the Commission discussed in its opinion what rate treatment would be accorded gas projects in the event of abandonment. When prudent, conventionally-financed projects were cancelled, the Commission indicated that the company would be able to recover debt service and a return of, but not on, the equity portion of the investment. Id. at 61,502-03. The Commission explained in a footnote:

The rationale is that while companies should be able to recover the amount of their investment in failed projects, they should not be allowed to profit from their failures. Correlatively, loss of the time value of their equity in failed projects represents a reasonable sharing with ratepayers of the losses of a failed project.

Id. at 61,511 n. 17. The application of these principles to electric utilities was suggested by the Commission’s statement that “[tjhere is no obvious reason why the treatment of abandoned plant costs as between gas and electric companies should differ.” Id. at 61,511 n. 15. And though this statement was made in a context where electric companies are treated more generously than gas companies, see id. at 61,511 & n. 15, the clear implication was that treatment of the two should in every sense be the same. Given Trailblazer’s holding that gas companies would be able to recover debt service and a return of, but not on, the equity portion of the investment, id. at 61,502-03, this statement strongly suggests that the Commission would also consider extending the same treatment to electric companies.⁶

The proposed pipeline in Trailblazer was financed through project financing. The discussion of conventionally-financed projects was not, however, dicta. The Commission was presenting Trailblazer Co. with a choice between conventional and project financing, and explaining the consequences of each alternative. The Commission was offering to be bound by the rule it laid down for conventional financing if Trailblazer elected to proceed in that fashion. Trailblazer’s discussion of “Commission policy with respect to abandoned plant,” 18 F.E.R.C. (CCH) at 61,501, plausibly led Jersey Central to believe that what the intervenors and the dissent characterize as a well-established rule in fact was open to further evolution. Indeed, the Commission’s discussion of the question (published two weeks before Jersey Central made its filing) was prompted by its recognition that “Commission treatment of the issue of abandoned plant in rate proceedings has been uncertain. In fact, it has been characterized by a somewhat distressing degree of inconsistency. That inconsistency is important because it tends to leave both lenders and equity investors with a sense of uncertainty____” Id.7

The intervenors’ and the dissent’s characterization of Jersey Central’s filing as an intentional deviation from the Commission’s “rules” is an unreasonable one. There was no reason for the company to adopt a suicidal course and it is wrong to impute an intent for which there is no evidence. This characterization is particularly unfair since, under that analysis, one must read into the filing an implied waiver of statutory and constitutional rights. Jersey Central was not mounting a frontal assault on a firm rule. To the contrary, it argued throughout the proceedings below that the cases in which the practice had developed were not similar enough to what was now at issue to warrant their application as dispositive precedent, and that recently articulated Commission policy and the threat in Jersey Central’s situation to the investor interests that the Supreme Court had deemed protected required some consideration more detailed than that given by summary dismissal.⁸

Essential to the intervenors’ and the dissent’s analysis is the assertion that Jersey Central had other means of getting the hearing it sought. It is only by positing alternative filings through which Jersey Central would have received a hearing on financial integrity that the intervenors and the dissent are able to place the responsibility for what occurred on the utility. Quite clearly, the Commission may not maintain a system of rules that provides no opportunity at all for Hope allegations to be raised, heard, considered, and made the subject of findings. Yet that opportunity is precisely what the Commission tells us it routinely denies. For this reason, too, the inter-venors’ and the dissent’s argument fails.

As noted earlier, supra p. 1179, the Commission in its brief will say only that it “may also look to the criteria of Hope in determining whether its rate order is just and reasonable.” There is in that no promise of a Hope hearing under any circumstances; only a declaration that one is not required.

The following exchange from the en banc oral argument further illuminates the Commission’s belief that it owes no one a hearing on Hope issues:

COURT: Suppose everything else in this case were the same, you would apply the NEPCO rule, et cetera, but the utility came in with even stronger showing and they came in and showed that if this rate went into effect, by God, they would be the first utility in the history of American utilities to go into actual bankruptcy or—

COUNSEL: I think there is no—

COURT: Let me finish the question.

COUNSEL: All right.

COURT: If that kind of showing were made, do you think that the Commission under Hope Natural Gas had a responsibility to, despite the fact that it applied some general rules, to look at the situation and say, gee, the end results are pretty scary and maybe we had better do some fooling around with—

COUNSEL: I think the answer is yes, Your Honor, and it reminds us of the—

COURT: Well, my second question then is do you, and, if so, how? In most cases that are close, a little closer than that, do you do anything comparable at the end of the day after you have applied the NEPCO and other rules, to look back over your shoulder and say this is the situation, we ought to do some tinkering around and, if so, do you make any such findings?

COUNSEL: The answer to the question is yes, we do tinker around after we pursue these normal ratemaking policies. And the tinkering around or making those pragmatic adjustments, the nice adjustments is the way the Commission has in the past viewed its responsibility under the end result test—

COURT: Do we ever know, do we—

COUNSEL: No, you don’t. As long—

COURT: We don’t know whether you did that or not?

COUNSEL: It essentially turns on the rate of return, the tinkering with the rate of return.

Tr. at 28-30 (emphasis added). The Commission’s apparent practice of taking these issues into account by “tinkering” and without making open, factual findings follows quite naturally from its mistaken premise that meaningful judicial review of these decisions is never, or almost never, in order. For us to hold now that Jersey Central could have had its Hope claim considered had it made a different filing would be to rest upon a theory that the Commission has never put forward, indeed, a theory the Commission apparently has rejected.

The only constant in these proceedings has been the Commission’s manifest hostility to serious “end result” examination under Hope. That alone can account for the Commission’s peremptory ruling on the merits. That hostility, and not the Commission’s desire, made clear only in this proceeding, to elevate its used-and-useful principle to the status of an impregnable barrier, appears to underlie the Commission’s abrupt and uninformative procedural rulings. At the time of Jersey Central’s filing, counsel could well have concluded that used-and-useful was a rule of thumb that would be modified when circumstances warranted. But if the Commission wished to eliminate its previous circumstance-bound enunciation of the rule and to make it universal and unyielding, it should have allowed Jersey Central to get to the merits of its Hope “end result” claim in some other way. Instead, it met each of Jersey Central’s renewed efforts with a fresh procedural rebuff and never once gave the slightest indication of how Jersey Central could get the hearing it sought.

The intervenors and the dissent suggest that Jersey Central could have requested a shorter amortization period, perhaps the period allowed in NEPCO, and received higher rates through that method. That technique would have been of little help, however, for while it would have led to quicker, higher revenues, Jersey Central needed to record earnings in order to lay a foundation for the issuance of securities and regain access to the capital markets. That could not be done through faster recovery of costs.

The intervenors and the dissent also state that Jersey Central could have requested a higher rate of return, and, had it done so, would have received the Hope hearing it wanted. Given the excerpt we have quoted from oral argument, it is impossible to know why they believe that to be true. Nothing the Commission has said provides any such assurance. To the contrary, when Jersey Central suggested a higher rate of return in its petition for rehearing, the Commission dismissed the request as presenting a “moving target.” That maneuver was particularly pointless since it would merely have required the company to come back with a new filing requesting the same higher rate of return based upon the same data. The Commission thus saved no effort of its own but cost the company the higher return in the interval. (Of course, in the same order the Commission made it clear that a fresh filing would be futile.) The Commission could have entertained the company’s request for a higher rate of return. Given the very unusual circumstances here, which may have amounted to a denial of constitutional rights, that course would not have jeopardized deployment of the “moving target” doctrine in the ordinary case.

The Commission has yet to articulate anything approaching a coherent conception of what Hope requires, when hearings and findings are necessary, which facts are relevant, or how judicial review of rate orders should proceed. It is clear that the Commission would not have granted Jersey Central a Hope hearing if the company had somehow anticipated and followed every one of the dissent’s freshly-invented prescriptions. The Commission below and its counsel here have said as much. It is, therefore, preposterous to contend that the Commission’s multiple failures with respect to the “end result” test were caused, and hence excused, by Jersey Central’s alleged procedural intransigence.

IV.

The Commission is not precluded from employing “used and useful,” or any other specific rate-setting formula. It must ensure, however, that the resulting rate is just and reasonable. A remand will afford the Commission the opportunity to find the facts necessary to a determination of whether the rate order meets the requirements of Hope Natural Gas, and, if it finds that it does not, the Commission has the flexibility to determine how the rate order should be modified — whether through enlarging the rate base, increasing the rate of return, or a combination of both. That will fulfill its obligations under the law.

So Ordered.

1 . Supplemental briefs were filed by petitioner Jersey Central Power and Light Company, by respondent FERC, by intervenors Allegheny Electric Cooperative, Inc. and the New Jersey Boroughs of Butler, Lavallette, Pemberton, and Seaside Heights, and by four amici: the Pennsylvania Public Utility Commission, the National Association of Regulatory Commissioners (“NARUC”), the Pennsylvania Office of Consumer Advocate, and the National Association of State Utility Consumer Advocates. Oral argument was presented by the parties and inter-venors, and by NARUC.

2 . We have been reminded by the Commission and several of the amici that utilities ought not be immunized from the free play of market forces. Their application of this principle is peculiarly selective. Had the international oil cartel not collapsed, and had Forked River provided unusually inexpensive energy in a time of scarcity and high demand, Jersey Central would have received no windfall, but simply the standard return on its original investment. It seems odd, therefore, that it must bear so disproportionate a share of the loss when the prudent investment it made pursuant to its statutory obligations fails.

3 . We emphasize that we do not hold that a taking occurs every time a prudent investment is made but not included in the rate base. We thus explicitly reject the dissent’s contention that under our holding “the investor is guaranteed a return on his investment, if prudent when made." Dissent at 1212. Whether or not such an approach might be desired as a matter of policy, our holding simply follows Hope. Under Hope, as we have stated repeatedly, the only circumstance under which there is a possibility of a taking of investors’ property by virtue of rate regulation is when a utility is in the sort of financial difficulty described in Justice Douglas’ opinion. If a utility is in that state, the Commission must inquire whether a reasonable return — on investment, not on facilities — has been afforded to investors, taking into account whether any higher return would amount to exploitation of consumers. Under those circumstances, it may be permissible or even proper to grant the utility a greater return on its prudent investments than it otherwise would have received. But absent the sort of deep financial hardship described in Hope, there is no taking, and hence no obligation to compensate, just because a prudent investment has failed and produced no return. And even where the sort of deep financial hardship described in Hope is present, the utility is entitled only to an "end result” hearing, and is not entitled to any greater return on its investments unless it shows at the hearing both that the rate was unreasonable and that a higher return would not exploit consumers.

4 . This case thus raises completely different issues from those decided in Pennsylvania Elec. Co. v. Pennsylvania Pub. Util. Comm’n, 509 Pa. 324, 502 A.2d 130 (1985). The appeal from that decision was dismissed for want of a substantial federal question. In Pennsylvania Elec. Co., as in this case, a public utility commission ordered the costs associated with an abandoned nuclear plant excluded from the participating companies’ rate bases. However, when those companies filed complaints alleging that the rates were not just and reasonable and tariffs seeking rate increases, they were given a hearing and a rate increase — although not as large a one as they had requested.

They therefore appealed. The Pennsylvania Supreme Court affirmed, holding that Hope Natural Gas did not require that rates be set at levels sufficient to guarantee the financial integrity of a utility "irrespective of countervailing consumer interests,” and that the investor interests are "factors to be weighed in the balancing analysis under Hope, but they are not, in themselves, controlling, for other factors must be taken into account.” Pennsylvania Elec. Co., 502 A.2d at 132, 134. Jersey Central has been afforded no hearing, unlike Metropolitan Edison, and the Commission in this case has ignored, rather than balanced, the factors that the Pennsylvania court has said ought to be weighed.

5 . The dissent argues that it is inappropriate to use calculations involving the rate base to address the financial problems suffered by utilities. Dissent at 1203-1204. But we do not hold that the Commission must adjust the rate base or that it must make any specific form of adjustment, or even any adjustment at all. It is only required to hold the "end result" hearing discussed in Hope. After the hearing it may be determined that adjustments need to be made to the Jersey Central rate order, but we express no view as to the precise manner in which any such adjustments would have to be made, so long as whatever is done is satisfactory. On a different front, the dissent speculates that the Commission’s actions may only affect a minor portion of Jersey Central’s business, and that it would be wrong for the Commission to grant full relief for all of the utility’s financial problems. Dissent at 1206-07. We of course do not require the Commission to take such broad steps; we only require it to hold the hearing mandated in Hope and to consider whether any adjustments, even perhaps partial adjustments, should be made in light of the factors discussed in Hope.

6 . In our discussion of Trailblazer in Jersey Central I, 730 F.2d at 820, we stated that "the treatment accorded the pipelines, if applied here, would not permit Jersey Central to recover its equity investment, the debt, the carrying charges on the debt, and the preferred stock costs.” We were in error. While project-financed pipelines were to waive their right to recover the equity investments, the Commission expressly distinguished conventionally-financed pipelines in its discussion on the ground that conventionally-financed pipelines involve a higher risk of shareholder exposure to loss, thus suggesting that the latter will not be required to waive their right to recover the equity investments. 18 F.E.R.C. (CCH) at 61,503-04. And recovery of the remaining costs would be allowed on the theory that the loss of a return on (not of) common equity would constitute the company's share of the burden imposed by the cancellation.

7 . This lingering uncertainty about what the in-tervenors and the dissent so confidently label a "rule" is indicated also by the fact that the Commission’s policy, which as we have shown has never been clear or settled, is still in a state of flux. The Commission has now initiated a rulemaking proceeding in order to consider the establishment, for the first time, of a genuine rule with respect to the treatment of cancelled plants. See 31 F.E.R.C. (CCH) (f 61,376 (June 28, 1985); Regulation of Electricity Sales-for-Resale and Transmission Service, 50 Fed.Reg. 27,-604, 27,612-14 (1985).

8 . As the dissent notes, it is clear that Jersey Central did not structure its filing to conform to Trailblazer. Dissent at 1201. Yet it did rely heavily on Trailblazer in its argument for rehearing before the Commission, as well as in its arguments before the first panel, second panel, and en banc panel of this court. See, e.g., Initial Brief of Jersey Central passim. In any event, the more important point is simply that Trailblazer offers further evidence of the uncertainty that surrounds this issue and belies any characterization of the Commission’s practice as a rigid rule.