BOSTON EDISON CO. V. FERC
885 F.2d 962 (1st Cir.1989)
NATURE OF THE CASE: This was a dispute over the use of Treasury bond data and adjustments
in rates of return for changes in interest rates.
FACTS: The Commission made an adjustment in rates because interest rates had fallen and
stock prices had risen. They took the interest rate in 10-year T-bills and used it to
calculate the rate of return. It also took bond yields from a recent yield period and
subtracted their rates from the base T-bill rate and got a rate spread which in turn was
subtracted from the rate of return that they had calculated in 1985. This presumed that the
returns utility investors would insist upon declined just as did Treasury bond returns.
Thus, the cost of utility equity capital would have also declined by this same amount of
points. The Commission then made a further determination that this new rate was lower than
it should be and thus it jacked up the rate. Boston appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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