Cite as: 535 U. S. 467 (2002)
Opinion of the Court
of "cost" as generous as the incumbents seem to claim.17
"Cost" as used in calculating the rate base under the traditional cost-of-service method did not stand for all past capital expenditures, but at most for those that were prudent, while prudent investment itself could be denied recovery when unexpected events rendered investment useless, Duquesne Light Co. v. Barasch, 488 U. S., at 312. And even when investment was wholly includable in the rate base, ratemakers often rejected the utilities' "embedded costs," their own book-value estimates, which typically were geared to maximize the rate base with high statements of past expenditures and working capital, combined with unduly low rates of depreciation. See, e. g., Hope Natural Gas, 320 U. S., at 597- 598. It would also be a mistake to forget that "cost" was a term in value-based ratemaking and has figured in contemporary state and federal ratemaking untethered to historical valuation.18
What is equally important is that the incumbents' plain-meaning argument ignores the statutory setting in which the mandate to use "cost" in valuing network elements occurs. First, the Act uses "cost" as an intermediate term
17 Nor is it possible to argue that "cost" would have to mean past incurred cost if the technical context were economics. See D. Carlton & J. Perloff, Modern Industrial Organization 50-74 (2d ed. 1994) (hereinafter Carlton & Perloff). "Sunk costs" are unrecoverable past costs; practically every other sort of economic "cost" is forward looking, or can be either historical or forward looking. "Opportunity cost," for example, is "the value of the best forgone alternative use of the resources employed," id., at 56, and as such is always forward looking. See Sidak & Spulber, Tragedy of the Telecommons: Government Pricing of Unbundled Network Elements Under the Telecommunications Act of 1996, 97 Colum. L. Rev. 1081, 1093 (1997) (hereinafter Sidak & Spulber, Telecommons) ("Opportunity costs are . . . by definition forward-looking").
18 See, e. g., Mobil Oil Exploration & Producing Southeast, Inc. v. United Distribution Cos., 498 U. S. 211, 224-225 (1991); Potomac Elec. Power Co. v. ICC, 744 F. 2d 185, 193-194 (CADC 1984); Alabama Elec. Coop., Inc. v. FERC, 684 F. 2d 20, 27 (CADC 1982). Cf. National Assn. of Greeting Card Publishers v. Postal Service, 462 U. S. 810, 832 (1983).
499
Page: Index Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: October 4, 2007