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Utility Rate Filings Owe No Explanation to Investors

Fortnightly Magazine - August 1996

The U.S. Court of Appeals for the Ninth Circuit has rejected claims that Washington Energy Co., corporate parent of Washington Gas Co., a local distribution company (LDC), committed securities fraud by failing to fully explain that its current application for a rate increase was based in part on expense requests and accounting methods rejected by state regulators in the past. (The LDC had asked the Washington UTC for a $41-million annual increase, but ultimately was directed to lower its rates by 5 percent.)

The court said that a public utility applying for a rate increase normally has no duty to inform the public of any facts or circumstances besides those set forth in its application. The court noted that the utility had warned investors that the ultimate decision lay in the hands of the regulators. Epstein v. Washington Energy Co., Nos. 94-35873, CV-94-00245-CRD, May 14, 1996 (9th Cir.).

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