Full opinion text
TABLE OF CONTENTS I. Background........ 1490 II. TheFERC Opinion........ 1492 A. The Congressional Purpose in Mandating "Just and Reasonable” Oil Pipeline Rates________________________ 1492 B. The Economic Context _____________ 1493 C. Rate Base________________________ 1495 D. Rate of Return___________________ 1496 E. Other Matters____________________1497 III. The Standard op Review_________ 1498 IV. FERC’s Action Contravenes the Statutory Directive to Determine Whether Rates are “Just and Reasonable” ________________ 1500 V. FERC's Decision Lacks a Reasoned Basis 1510 A. Rate Base _______________________ 1511 1. Original Cost Rate Base_________ 1511 1513a. Parent Guarantees and Capital Structure _________________ b. Comparable Risk Analyses____ 1515 c. The “Front-End Load” Problem ______________1516 d. The Social Costs and Benefits of Transition to a New Rate Base Formula__________________ 1517 2. The Association of Oil Pipelines’ Recommendations______________ 1518 B. Rate of Return ___________________ 1521 1. Risk and Allowance Rate of Return _________________________ 1523 2. The “Inflation Adjustment” and. the “Double Counting” Problem 1523 3. FERC’s “Equity Component” Has No Meaningful Relation to the Rates of Return on Book Equity -- 1525 Miscellaneous Issues__________________ VI. 1527 A. Purchase Price of Williams’ Assets---1527 B. Systemwide vs. Point-to-Point Rate Regulation_______________________ 1528 C. Tax Normalization_________________ 1529 VII. Conclusion .......... 1530 Before WALD, EDWARDS and STARR, Circuit Judges. Opinion for the Court filed by Circuit Judge WALD. WALD, Circuit Judge: Petitioners, along with the Department of Justice and the Williams Pipe Line Company, challenge an order of the Federal Energy Regulatory Commission (FERC) on a wide variety of grounds. The FERC order in question specified the generic rate-making methodology to be applied to all oil pipelines pursuant to the Interstate Commerce Act. In its order, the Commission articulated for the first time its belief that oil pipeline rate regulation should serve only as a cap on egregious price exploitation by the regulated pipelines, and that competitive market forces should be relied upon in the main to assure proper rate levels. Furthermore, in devising a specific ratemaking methodology in accordance with these beliefs, FERC retained the rate base formula used in the past in oil pipeline ratemaking, even though this formula had met with severe criticism from this court in Farmers Union Central Exchange v. FERC, 584 F.2d 408 (D.C.Cir.1978), cert. denied sub nom. Williams Pipe Line Co. v. FERC, 439 U.S. 995, 99 S.Ct. 596, 58 L.Ed.2d 669 (1978). At the same time, the Commission revised its rate of return methodology so that the resulting rate levels would represent ceilings seldom reached in actual practice. For the reasons set forth below, we find that the Commission’s order contravenes its statutory responsibility to ensure that oil pipeline rates are “just and reasonable.” In addition, we hold that FERC failed both to give due consideration to responsible alternative ratemaking methodologies proposed during its administrative proceedings, and to offer a reasoned explanation in support of its own chosen ratemaking methodology, and that therefore the FERC order constitutes impermissible “arbitrary and capricious” agency action. Accordingly, we remand this case for further proceedings consistent with this opinion. I. Background Williams Pipe Line Company (Williams), an independent common carrier, operates oil pipelines over a large territory in the midwestern United States. Williams entered the pipeline business in 1966, when it purchased its operating assets from the Great Lakes Pipe Line Company. In late 1971 and early 1972, Williams increased its local rates and initiated new joint rates with another pipeline company. Those rates are still at issue today. Petitioners, various oil producers and refiners that ship their products through Williams’ pipeline, challenged the lawfulness of these rates before the Interstate Commerce Commission (ICC) in 1972. After evidentiary hearings, the presiding administrative law judge concluded that the Williams rates were “just and reasonable” within the meaning of the Interstate Commerce Act, 49 U.S.C. § 1(5), and a three-commissioner division of the ICC subsequently adopted in full the administrative law judge’s findings. See 355 I.C.C. 102 (1975). The full ICC then reopened the proceedings for reconsideration “because of the relative dearth of precedent concerning petroleum pipeline rates, and in view of the substantial sums of money at issue.” 355 I.C.C. 479, 481 (1976). Upon reconsideration, the full ICC affirmed the division’s decision, ruling that “[cjonsiderations of consistency and fairness require that we adhere to our previously recognized criteria in investigating the rates of particular pipelines,” 355 I.C.C. at 484, and that a pending rulemaking was “the [proper] proceeding for considering a change” in the methods for valuating the rate base and for determining the proper rates of return for oil pipelines. See 355 I.C.C. at 485, 487. Petitioners then sought judicial review in this court. In 1977, during the pendency of the appeal, Congress transferred regulatory authority over oil pipelines to the newly created Federal Energy Regulatory Commission (FERC). In 1978, this court remanded the case to FERC for reconsideration, in order “to avail ourselves of some additional expertise before we plunge into this new and difficult area [of oil pipeline regulation], and to allow [FERC] to attempt for itself to build a viable modern precedent for use in future cases that not only reaches the right result, but does so by way of ratemaking criteria free of the problems that appear to exist in the ICC’s approach.” Farmers Union Central Exchange v. FERC, 584 F.2d at 421 (Farmers Union I). While at that time this court expressed “unease with the ICC’s findings regarding rate base, rate of return, and depreciation costs,” id., based as they were upon “weak and outmoded ... products of a bygone era of ratemaking,” id. at 418, “[w]hat clinch[ed] our decision to remand [was] the fact that the agency now charged with [ratemaking] responsibility, FERC, ha[d] requested a remand so that it may begin its regulatory duties in this area with a clean slate,” id. at 421. Accordingly, we remanded so that FERC could conduct a fresh and searching inquiry into the proper ratemaking methods to be applied to oil pipelines. In February 1979, after Williams had filed other new rate changes, FERC reopened the remanded case, and assigned an administrative law judge (ALJ) to hold hearings on the consolidated cases. At the prehearing conference, the ALJ bifurcated the proceedings. Phase I was to devise generic principles for the setting of just and reasonable oil pipeline rates. Phase II would apply those principles to the Williams case in particular. After seventy-six days of hearings in Phase I, FERC directed the ALJ to omit an initial decision and to certify the record directly to the Commission, and instructed the parties to submit briefs directly to the Commission. FERC heard oral argument on June 30, 1980. Almost a year then passed without a FERC decision. Accordingly, Farmers Union Central Exchange (Farmers Union) filed a motion in this court to compel agency action, which we dismissed upon receiving assurances from FERC counsel that a decision was forthcoming imminently. Three months later, however, in October 1981, FERC ordered a reargument by the parties on November 19, 1981. Eight months after reargument, FERC had still failed to issue a decision. Upon petition from Farmers Union, the district court, finding that FERC had abrogated its statutory responsibilities under both the Interstate Commerce Act and the Administrative Procedure Act, ordered FERC to issue a decision within sixty days. This court then stayed the district court’s order so that FERC would be allowed until November 30, 1982 to issue its decision. On November 30, FERC issued Opinion No. 154, the subject of this appeal. See 21 FERC (CCH) ¶ 61,260 (Nov. 30, 1982). The Department of Justice, representing the United States as statutory respondent under 28 U.S.C. §§ 2344, 2348, joined petitioners in seeking reversal of the FERC opinion. II. The FERC Opinion FERC heralded its Opinion No. 154 (the Williams opinion) as “the longest and most elaborate” decision it had ever issued. The Williams opinion announces FERC’s intended approach to future oil pipeline ratemaking; thus it is of great importance to oil producers, refiners, and pipeline owners. FERC’s essential conclusion in Williams is that ratemaking for oil pipelines should serve only “to restrain gross overreaching and unconscionable gouging” in order to keep rates within the zone of “commercial reasonableness,” not “public utility reasonableness.” As FERC said in a related order issued the same day as Williams: Williams says that oil pipeline rate regulation should be relatively unobtrusive. It finds competition (both actual and potential) a far more potent force in this industry than in the others we regulate. Accordingly, it proposes to rely in the main on market forces. It views oil pipeline rate regulation as a modest supplement to rather than a pervasive substitute for the market. The supplement, Williams tells us, is in the nature of a check on gross abuse. Trans Alaska Pipeline System, 21 FERC (CCH) ¶ 61,092, at 61,285 (Nov. 30, 1982). The following summary describes how FERC reached that conclusion, and how it translated that conclusion into a particular ratemaking methodology. A. The Congressional Purpose in Mandating “Just and Reasonable” Oil Pipeline Rates In 1906, Congress adopted the Lodge Amendment to the Hepburn Act, which extended the definition of common carrier in the Interstate Commerce Act to encompass interstate oil pipelines, and, as a consequence, required pipeline rates to be “just and reasonable.” In Williams, FERC embarked on a close study of “the climate of opinion” that existed when Congress passed the Lodge Amendment. In doing so, FERC primarily examined the works of Ida Tarbell, a progressivist of the turn of the century, who has been credited with “inflampng] the public’s long-standing hostility to the [Standard Oil] combination as nothing before had.” FERC concluded that the Lodge Amendment was motivated by the desire to bust the Standard Oil trust. FERC also found that in the early twentieth century the Standard Oil Company maintained its dominance over the entire American oil business by setting its pipeline rates at such extraordinarily high levels that access to the pipelines (and hence to important downstream markets) was cut off. See 21 FERC at 61,597. From this observation, FERC concluded that the Congress, in mandating that oil pipeline rates be “just and reasonable,” intended to outlaw only outrageously high rates: “Prohibitive rates were a means to that end [of dominating American oil markets]. Congress wanted to forbid both the use of the means and the attainment of the end. The policy at which it fired was a policy of ‘prohibitive’ pricing.” Id. In the belief that “[t]he phrase in question, ‘just and reasonable,’ is a high-level abstraction^] ... a mere vessel into which meaning must be poured,” id. at 61,594, and considering numerous differences in the reasons for the establishment of a regulatory scheme over “public utilities,” such as electric companies, as opposed to “transportation companies,” such as oil pipelines, id. at 61,591-96, FERC determined that: the authors of the Hepburn Act’s oil pipeline provisions did not use the words “just and reasonable” in the sense in which public utility lawyers have used them since the 1940’s. We think that what was meant was not “public utility reasonableness,” but ordinary commercial “reasonableness.” To be specific, we discern no intent to limit these carriers’ rates to barebones cost. What we perceive is an effort to restrain gross overreaching and unconscionable gouging. Id. at 61,597. Thus, on the basis of this historical survey, FERC interpreted the statutory mandate that oil pipeline rates be “just and reasonable” to require only the most lighthanded regulation, with no necessary connection between revenue recoveries and the cost of service. B. The Economic Context FERC next surveyed the changes since 1906 in the economics of the oil pipeline industry, and determined that the modern economic environment does not manifest the same threat of monopolistic practices that bedeviled Congress in 1906. Comparing the dollars spent in 1981 in America for petroleum products to the dollars spent in the same year for oil pipeline transportation, FERC found that pipeline costs are “not very much when viewed in relation to the nation’s total oil bill.” Further, FERC found that any savings created by lower pipeline charges would not necessarily — or even likely — be passed on to consumers. See 21 FERC at 61,601-02. FERC therefore concluded that “[f]rom the consumer’s perspective, oil pipeline rate regulation is akin to efforts to do something about the high price of shoes by controlling the pricing of shoe laces [or] to contain the price .of food by seeing to it that the price-of spice is always ‘just and reasonable.’ ” Id. at 61,601. FERC also found that, from Congress’ perspective in 1906, oil pipeline rates did in fact make a difference to the oil consuming public. Reviewing cost and revenue trends, FERC showed that in the past pipeline charges comprised as much as sixty-eight percent of what the oil producer received for crude oil. Thus, FERC concluded that although Congress may in 1906 have reasonably been concerned about oil pipeline prices, today “[prohibitive oil pipeline rate structures are now a problem for the economic historian,” and the “oil pipeline rate reform crusade is anachronistic ... overtaken by events so that the combatants’ rhetoric is no longer in touch with reality.” Id. at 61,606-07. Finally, FERC found that the economic market for oil pipelines has become competitive since 1906. In contrast to the industry during the early part of this century, today “[p]rohibitive pricing has become uneconomic” and “[n]o oil company (not even the largest) is wholly self-sufficient.” Also, FERC appeared to conclude that the significant decline in the price of pipeline transportation from 1931-1969 manifests the existence of competition in the pipeline transportation market. In light of all the foregoing considerations, FERC expressed its belief that the consumer’s interest in low pipeline rates is “submicroscopic” while the real threat to the public is underinvestment in needed oil pipelines. Accordingly, FERC set down as a guiding principle of oil pipeline rate-making that it is “best to err on the side of liberality” because “the dangers of giving too little vastly outweigh those of giving too much.” Id. at 61,613. FERC then turned to apply this general principle to formulate a ratemaking methodology for oil pipelines. C. Rate Base Under the old ICC method, an arcane formula, comprised chiefly of a weighted average of original cost and cost of reproduction new, was used to calculate the pipelines’ “valuation rate base.” While admitting that “[w]ere we beginning afresh on a clean slate we might be inclined to use something different” because the ICC formula contains “anomalies and inconsistencies” that result in an inaccurate picture of the pipelines’ cost of service, id. at 61,616, FERC nevertheless concluded that the costs of adopting another rate base formula outweighed the benefits of such a shift. It therefore chose to “adhere to the formula [it] inherited from the Interstate Commerce Commission.” Id. at 61,632. In doing so, FERC expressly rejected two proposed alternatives to the ICC rate-making formula. First, the Commission eschewed original cost ratemaking in the belief that the chief advantage of such an approach — the facilitation of comparable earnings analysis — was of little use in the oil pipeline context, and that the switch to original cost alternative would create unnecessary regulatory burdens and social costs. See infra at 1511-18. Second, FERC rejected specific alterations to the ICC rate base formula proposed by the Association of Oil Pipe Lines because, in FERCs view, only “relatively insubstantial” amounts of money would be affected, and, in any event, the ICC’s methodological errors tend to compensate roughly for one another. See infra at 1518-21. Thus FERC reaffirmed the ICC rate base method, admitting it to be “much too blunt or too clumsy for close work,” but still finding it “pragmatic” and “usable.” 21 FERC at 61,616. D. Rate of Return Quoting at length from this court’s opinion in Farmers Union I, FERC launched its inquiry into rate of return methods from the premise that “[t]he need for reform is plain.” Finding “the parties’ arguments ... so unhelpful and the applicable historical tradition ... so palpably deficient,” FERC felt “left to [its] own devices” to fashion a new rate of return methodology. It held that a proper rate of return for oil pipelines should be comprised of three elements: (1) debt service, (2) a “full compensatory suretyship premium,” and (3) the “ ‘real ’ entrepreneurial rate of return on the equity component of the valuation rate base.” See 21 FERC at 61,644 (emphasis in original). The first component, debt service, represents the amount needed to pay interest on the debt the pipeline has accumulated. The second component, the suretyship premium, represents the additional amount that would have been needed above actual debt service in the absence of a debt guarantee from the oil pipeline company’s parent. The third component, the “entrepreneurial” rate of return, according to FERC, “follows logically from [the] basic concept that what the historical background and contemporary public policy needs call for here is a cap on gross abuse.” Id. at 61,645. Accordingly, FERC offered eight different measures for the “entrepreneurial” rate of return. The measures included the nominal rates of return on book equity realized over the most recent one- or five-year period for (1) the oil industry generally, (2) American industry generally, or (3) the parent company or companies, excluding pipeline operations. The remaining two measures of an entrepreneurial rate of return took the total returns (dividends plus capital gains) on a “diversified common stock portfolio” over (1) the past five years or (2) “the long run — 25 years, 50 years, or more.” Id. Under FERC’s method, the pipeline would normally be permitted to choose the applicable rate of return from among these indices. Once this rate of return is selected, it is adjusted downward “[t]o avoid overcompensation for inflation.” Id. at 61,646. FERC’s methodology subtracts from the selected rate of return the percentage by which the valuation rate base has increased during “the time period that was looked to in order to derive the appropriate nominal rate of return.” This adjusted rate of return is applied not to book equity, nor to the percentage of the valuation rate base represented by the proportion of equity relative to debt in the oil pipeline’s overall capitalization structure. Rather, this rate is the allowed return on what FERC considers to be the “equity component of the valuation rate base” — the entire valuation rate base, less the face amount of debt. See id. at 61,647-48. This method, FERC concedes, would result in “handsome rate base writeups,” followed by “creamy returns on book equity.” Id. at 61,650. FERC, however, believed that such high returns comported with its general ratemaking principles for oil pipelines: “Here we are setting ceilings that will seldom be reached in actual practice.” Moreover, the Commission allowed generous returns in the belief that oil pipeline equityholders were entitled to the full benefit of appreciation in their leveraged assets, id. at 61,649, and that the more “austere standard of fairness applied in the utility field cannot be divorced from the stringent regulatory controls on abandonment” which, FERC ruled, do not apply to oil pipelines, id. at 61,650. E. Other Matters FERC made three other rulings in Williams that are challenged in this appeal. FERC held that (1) the original cost of transferred pipeline plant — and not its purchase price — should be used in ratemaking, (2) oil pipeline rate regulation should generally take place on a systemwide, rather than point-to-point, basis and (3) the “tax normalization” method of accounting may be employed by the oil pipeline companies if they so wish. First, FERC set down as a general rule that the “purchase price [for pipeline plant] is not entitled to any recognition at all for any ratemaking purpose.” There are two ways in which purchase price might have been used in oil pipeline ratemaking: (1) as a substitute for original cost in the rate base, and (2) in calculating the basis for depreciation expenses. FERC rejected the first use of purchase price because to do so would create a systemic incentive for the sale of pipeline plant and the consequent upward push on rates. See id. at 61,634-35. Further, to use purchase price in the rate base would contravene the principle that “a mere change in ownership should not result in an increase in the rate charged for a service if the basic service rendered itself remains unchanged.” FERC similarly rejected the use of purchase price as the basis from which depreciation would be computed, citing this court’s disapproval in Farmers Union I of the practice, and finding no valid justification for what it called “this nonchalant, half a loaf, split the difference” policy of using original cost in the rate base, while calculating depreciation by reference to purchase prices. Id. at 61,635. Second, FERC decided to regulate oil pipeline rates on a systemwide basis. FERC maintained that the alternative — ruling on the reasonableness of particular rates on specific routes — would require cost allocation inquiries that would be “metaphysical inconclusive, and barren.” Id. at 61,651. Also, FERC believed that systemwide regulation would give freer play to competitive forces in the oil pipeline industry. FERC restricted its ruling to pipeline systems, in contrast to pipeline companies. The rates of wholly noncontiguous pipeline systems, therefore, would not be computed by averaging company-wide costs. FERC further cautioned that a showing that systemwide rates discriminated against nonowners of the pipeline would trigger “strict regulatory scrutiny.” Id. Third, FERC permitted, but did not require, oil pipeline companies to “normalize” their accounts that reflect accelerated depreciation on equipment for tax purposes. FERC permitted the use of the tax normalization method because “normalization facilitates the comparable earnings analyses basic to the determination of appropriate rates of return on oil pipeline equity investments.” Id. at 61,656. However, because “[cjompetitive considerations may lead some pipelines to prefer lower rates .... now in return for more later,” FERC made the use of the method elective rather than compulsory. Id. Finally, FERC prohibited pipelines that choose tax normalization from including the resulting tax reserve accounts in their rate bases. Otherwise, “the rate payer who has paid higher taxes reflecting normalization accounting would be paying the carriers for earnings on the tax differential even though it was the rate payer who contributed the differential in the first place.” Id. at 61,657 (quoting San Antonio v. United States, 631 F.2d 831, 847 (D.C.Cir.1980)). III. The Standard of Review The-FERC order before us today is an exercise of its general ratemaking authority under 49 U.S.C. § 15(1). As such, the Williams proceeding constitutes a rule-making under the Administrative Procedure Act. See 5 U.S.C. § 551(4) (defining “rule” to include “the approval or prescription for the future of rates”). Although section 15(1) provides that the determination as to the reasonableness of rates shall be made “after full hearing,” the resulting decision apparently need not be “on the. record,” 5 U.S.C. § 553(c), and therefore the standards for formal rulemaking do not apply. See United States v. Florida East Coast Railway Co., 410 U.S. 224, 93 S.Ct. 810, 35 L.Ed.2d 223 (1973). Accordingly, we review whether FERC’s order in Williams was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). Under the “arbitrary and capricious” standard, a reviewing court must conduct a “searching and careful” inquiry into the record in order to assure itself that the agency has examined the relevant data and articulated a reasoned explanation for its action including a “rational connection between the facts found and the choice made.” Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 246, 9 L.Ed.2d 207 (1962). As the Supreme Court recently elaborated: Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Motor Vehicles Manufacturers Association v. State Farm Mutual Automobile Insurance Co., — U.S. -, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983). Most fundamentally, our task is “to ensure that the [agency] engaged in reasoned decision-making.” International Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795, 815 (D.C.Cir.1983); see American Gas Association v. FPC, 567 F.2d 1016, 1029-30 (D.C.Cir.1977), cert. denied, 435 U.S. 907, 98 S.Ct. 1457, 55 L.Ed.2d 499 (1978). Agency decisionmaking, of course, must be more than “reasoned” in light of the record. It must also be true to the congressional mandate from which it derives authority. Therefore, a reviewing court must be satisfied that the agency’s reasons and actions “do not deviate from or ignore the ascertainable legislative intent.” Ethyl Corp. v. EPA, 541 F.2d 1, 36 (D.C.Cir.) (en banc) (quoting Greater Boston Television Corp. v. FCC, 444 F.2d 841 (D.C.Cir.1970)), cert. denied sub nom. E.I. Du Pont de Nemours & Co. v. EPA, 426 U.S. 941, 96 S.Ct. 2662, 49 L.Ed.2d 394 (1976); see 5 U.S.C. § 706(2)(C) (“The reviewing court shall ... hold unlawful and set aside agency action ... in excess of statutory jurisdiction, authority, or limitations.”). Beyond that, however, we are not at liberty to substitute our own judgment in the place of the agency’s. In this sense, the “arbitrary and capricious” standard is narrow and restricted. See Small Refiner Lead Phase-Down Task Force, 705 F.2d at 520-21. The “arbitrary and capricious” standard demands that an agency give a reasoned justification for its decision to alter an existing regulatory scheme. See Motor Vehicle Manufacturers Association, 103 S.Ct. at 2866. We are well aware that changed circumstances may justify the revision of regulatory standards over time. Indeed, our initial remand in Farmers Union I was impelled by our suspicion that prior ICC methods might no longer be useful. See 584 F.2d at 412-20. To acknowledge that circumstances have changed, however, is not to eliminate the burden upon the agency to set forth a reasoned analysis in support of the particular changes finally adopted. Furthermore, in light of the purpose of the remand in Farmers Union I — “to build a viable modern precedent for use in future cases that not only reaches the right result, but does so by way of ratemaking criteria free of the problems that appear to exist in the ICC’s approach” — we believe that FERC’s adherence to the old ICC rate base method also demands a reasoned justification. Cf. Food Marketing Institute v. ICC, 587 F.2d 1285, 1290 (D.C.Cir.1978) (courts reviewing agency action after remand should ensure that “genuine reconsideration of the issues” took place). Thus we take up the task of reviewing the Williams opinion with two objectives in mind. First, we will examine whether FERC’s actions and supporting rationale comport with its delegated authority to set oil pipeline rates at a “just and reasonable” level. Second, we then will scrutinize the Williams opinion to see whether FERC considered all relevant factors and demonstrated a reasonable basis for its decision. See Sierra Club v. Costle, 657 F.2d 298, 323 (D.C.Cir.1981). IV. FERC’s Action Contravenes the Statutory Directive to Determine Whether Rates Are “Just and Reasonable” Under section 1(5) of the Interstate Commerce Act, all rates charged for oil pipeline transportation “shall be just and reasonable.” Similarly, under section 15(1), Congress authorized FERC “to determine and prescribe what will be the just and reasonable” rate for such transportation services. We find that FERC in the Williams decision failed to satisfy that statutory mandate. We also find unconvincing FERC’s attempts at justifying its novel interpretation of “just and reasonable” rates. First, FERC sought to establish maximum rate ceilings at a level far above the “zone of reasonableness” required by the statute. Second, FERC failed to specify in any detail how “non-cost” factors, such as the need to stimulate additional pipeline capacity, might justify its decision to set maximum rates at such high levels. Third, the legislative history of the Hepburn Act betrays FERC’s belief that the “climate of opinion” in 1906 shaped a congressional purpose to impose only very lighthanded rate regulation on the oil pipelines. Finally, FERC’s reliance on its findings that oil pipeline rate regulation is (1) unimportant to consumers at large, and (2) best left to “regulation” by market forces in most eases, constitutes an improper departure from the basic congressional mandate to ensure that oil pipeline charges are “just and reasonable.” Congress delegated ratemaking authority to FERC in broad terms. Accordingly, “the breadth and complexity of the Commission’s responsibilities demand that it be given every reasonable opportunity to formulate methods of regulation appropriate for the solution of its intensely practical difficulties.” Permian Basin Area Rate Cases, 390 U.S. 747, 790, 88 S.Ct. 1344, 1372, 20 L.Ed.2d 312 (1968). In arriving at a just and reasonable rate, “no single method need be followed.” Wisconsin v. FPC, 373 U.S. 294, 309, 83 S.Ct. 1266, 1274, 10 L.Ed.2d 357 (1963). Indeed, and more specifically, FERC is not required “to adhere ‘rigidly to a cost-based determination of rates, much less to one that base[s] each producer’s rates on his own costs.’ ” FERC v. Pennzoil Producing Co., 439 U.S. 508, 517, 99 S.Ct. 765, 771, 58 L.Ed.2d 773 (1979) (quoting Mobil Oil Corp. v. FPC, 417 U.S. 283, 308, 94 S.Ct. 2328, 2346, 41 L.Ed.2d 72 (1974)). On the other hand, the delegation of the power to prescribe rates is accompanied by standards to which FERC, as delegate, must conform. As Judge Leventhal observed, “Congress has been willing to delegate its legislative powers broadly — and courts have upheld such delegation — because there is court review to assure that the agency exercises the delegated power within statutory limits....” Ethyl Corp. v. EPA, 541 F.2d at 68 (Leventhal, J., concurring). Surely, FERC enjoys substantial discretion in its ratemaking determinations; but, by the same token, this discretion must be bridled in accordance with the statutory mandate that the resulting rates be “just and reasonable.” See FPC v. Texaco, Inc., 417 U.S. 380, 394, 94 S.Ct. 2315, 2324, 41 L.Ed.2d 141 (1974); Atchison, Topeka & Sante Fe Railway Co. v. Wichita Board of Trade, 412 U.S. 800, 806, 93 S.Ct. 2367, 2374, 37 L.Ed.2d 350 (1973). The “just and reasonable” statutory standard is, of course, not very precise, and does not unduly confine FERC’s ratemaking authority. As this court once explained, “[t]he necessity for an anchor to ‘hold the terms “just and reasonable” to some recognizable meaning’ is plain, for the words themselves have no intrinsic meaning applicable alike to all situations.” City of Chicago v. FPC, 458 F.2d 731, 750 (D.C.Cir.1971) (quoting City of Detroit v. FPC, 230 F.2d 810, 815 (D.C.Cir.1955)), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972). We therefore seek guidance from basic principles developed by the judiciary in furtherance of its task of assuring that ratemaking agencies conform to their duty to prescribe just and reasonable rates. We begin from this basic principle, well established by decades of judicial review of agency determinations of “just and reasonable” rates: an agency may issue, and courts are without authority to invalidate, rate orders that fall within a “zone of reasonableness,” where rates are neither “less than compensatory” nor “excessive.” See, e.g., FERC v. Pennzoil Producing Co., 439 U.S. at 517, 99 S.Ct. at 771; Permian Basin Area Rate Cases, 390 U.S. at 797, 88 S.Ct. at 1375. When the inquiry is on whether the rate is reasonable to a producer, the underlying focus of concern is on the question of whether it is high enough to both maintain the producer’s credit and attract capital. To do this, it must, inter alia, yield to equity owners a return “commensurate with returns on investments in other enterprises having corresponding risks,” as well as cover the cost of debt and other expenses.... [W]hen the inquiry is whether a given rate is just and reasonable to the consumer, the underlying concern is whether it is low enough so that exploitation by the [regulated business] is prevented. City of Chicago, 458 F.2d at 750-51 (emphasis in original). The “zone of reasonableness” is delineated by striking a fair balance between the financial interests of the regulated company and “the relevant public interests, both existing and foreseeable.” Permian Basin Area Rate Cases, 390 U.S. at 792, 88 S.Ct. at 1373; see, e.g., FERC v. Pennzoil Products Co., 439 U.S. at 519, 99 S.Ct. at 772; Trans Alaska Pipeline Rate Cases, 436 U.S. 631, 653, 98 S.Ct. 2053, 2066, 56 L.Ed.2d 591 (1978). The delineation of the “zone of reasonableness” in a particular case may, of course, involve a complex inquiry into a myriad of factors. Because the relevant costs, including the cost of capital, often offer the principal points of reference for whether the resulting rate is “less than compensatory” or “excessive,” the most useful and reliable starting point for rate regulation is an inquiry into costs. See, e.g., Mobil Oil Corp. v. FPC, 417 U.S. at 305-06, 316, 94 S.Ct. at 2344-45, 2349; FPC v. Hope Natural Gas Co., 320 U.S. at 602-03, 64 S.Ct. at 287-88. At the same time, non-cost factors may legitimate a departure from a rigid cost-based approach. See, e.g., Pennzoil Products, 439 U.S. at 518, 99 S.Ct. at 771; Mobil Oil, 417 U.S. at 308, 94 S.Ct. at 2345. The mere invocation of a non-cost factor, however, does not alleviate a reviewing court of its duty to assure itself that the Commission has given reasoned consideration to each of the pertinent factors. On the contrary, “each deviation from cost-based pricing [must be] found not to be unreasonable and to be consistent with the Commission’s [statutory] responsibility.” Mobil Oil, 417 U.S. at 308, 94 S.Ct. at 2346; see Pennzoil Products, 439 U.S. at 518, 99 S.Ct. at 772. Thus, when FERC chooses to refer to non-cost factors in ratesetting, it must specify the nature of the relevant non-cost factor and offer a reasoned explanation of how the factor justifies the resulting rates. In Williams, FERC departed from these established ratemaking principles. At the outset, we cannot square FERC’s statutory responsibilities with its own, quite novel principle that oil pipeline rate-making should protect against only “egregious exploitation and gross abuse,” 21 FERC at 61,649 (emphasis added), “gross overreaching and unconscionable gouging,” id. at 61,597 (emphasis added). Rates that permit exploitation, abuse, overreaching or gouging are by themselves not “just and reasonable.” FERC itself overreaches the bounds of its statutory authority when it permits such oil pipeline rates, so long as they are not “egregious,” “gross” or “unconscionable.” Ratemaking principles that permit “profits too huge to be reconcilable with the legislative command” cannot produce just and reasonable rates. Public Service Commission v. FERC, 589 F.2d 542, 550 (D.C.Cir.1978). We recognize, of course, that “non-cost” factors may play a legitimate role in the setting of just and reasonable rates. In Williams, FERC invoked the need to stimulate additional oil pipeline capacity as one reason for setting maximum rates at such high levels. See supra at 1494-95. As this court has observed before, “[r]eliance on non-cost factors has been endorsed by the courts primarily in recognition of the need to stimulate new supplies.” Consumers Union v. FPC, 510 F.2d 656, 660 (D.C.Cir.1974) (footnote omitted) (discussing Permian and Mobil Oil). However, in this case FERC failed to forecast or otherwise estimate the dimensions of the need for additional capacity, and did not even attempt to calibrate the relationship between increased rates and the attraction of new capital. See supra note 27. In the absence of such a reasoned inquiry, we cannot countenance FERC’s approval of oil pipeline rates which, by FERC’s own admission, ensure “creamy returns” to the carriers, 21 FERC at 61,650, and are “far more generous than those [rates] that [FERC] or other regulators give elsewhere,” id. at 61,646. In a similar context, this court explained: If the Commission contemplates increasing rates for the purpose of encouraging exploration and development ... it must see to it that the increase is in fact needed, and is no more than is needed, for the purpose. Further than this we think the Commission cannot go without additional authority from Congress. City of Detroit v. FPC, 230 F.2d 810, 817 (D.C.Cir.1955), cert. denied sub nom. Panhandle Eastern Pipe Line Co. v. City of Detroit, 352 U.S. 829, 77 S.Ct. 34, 1 L.Ed.2d 48 (1956); see San Antonio v. United States, 631 F.2d 831, 851-52 (D.C.Cir.1980) (ICC action, adding seven percent above costs in setting rates, is arbitrary and capricious because it lacks “adequate justification for [the] choice of a particular increment above fully allocated costs”), rev’d on other grounds sub nom. Burlington Northern, Inc. v. United States, 459 U.S. 1229, 103 S.Ct. 1238, 75 L.Ed.2d 471 (1983); Public Service Commission v. FERC, 589 F.2d at 553-54 (citing cases). In the Williams proceeding, FERC “made no attempt at all to verify the accuracy of its prediction that granting pipeline [rate] incentives will spur increased investment.” City of Charlottesville v. FERC, 661 F.2d 945, 955 (D.C.Cir.1981) (Wald, J., concurring). Indeed, FERC here failed to make its prediction with any specificity beyond the bald statement that “[everybody agrees that the nation needs and will need more pipeline plant.” 21 FERC at 61,614. FERC also found another basis for its new and liberal interpretation of “just and reasonable” rates in what it labeled the “climate of opinion,” prevalent in the early twentieth century, in favor of dismantling the Standard Oil trust. FERC believed that Congress initiated rate regulation of the oil pipelines out of a desire to eliminate prohibitive pricing practices by the Standard Oil Company, and from this belief concluded that the “just and reasonable” standard requires far less stringent rate regulation than the same statutory standard requires for other regulated industries, including those industries once regulated under the very same section of the Interstate Commerce Act. See supra at 1492-93; 21 FERC at 61,578-99; FERC Brief at 29-44. Accordingly, FERC felt that the Interstate Commerce Act permitted ratesetting at levels so high that they would “seldom be reached in actual practice.” 21 FERC at 61,649. We cannot endorse this interpretation of FERC’s statutory duties. In some circumstances, the contrasting or changing characteristics of regulated industries may justify the agency’s decision to take a new approach to the determination of “just and reasonable” rates. See, e.g., Permian Basin Area Rate Cases, supra. We find, however, that in this case FERC has not merely developed a new method for determining whether a rate is “just and reasonable”; rather, it has abdicated its statutory responsibilities in favor of a method that, by its own description, guards against only grossly exploitative pricing practices. See supra at 1502. FERC wrongly assumed that the statutory phrase “ ‘just and reasonable’ ... is a mere vessel into which meaning must be poured.” 21 FERC at 61,594. While we agree that the statutory phrase sets down a flexible standard, an agency may not supersede well established judicial interpretation that structures administrative discretion under the statute. An agency may not “pour any meaning” it desires into the statute. To accept FERC’s view of its own latitude would be tantamount to holding that no standards accompany the delegation of ratemaking authority to FERC, and we think such a delegation would be impermissible. From the outset, however, we noted that the statute prohibits more than grossly abusive rates. Furthermore, an examination of the relevant legislative history reveals that Congress intended to subject oil pipelines to the same general ratemaking principles that applied to other common carriers. The Hepburn Act of 1906 was enacted primarily to remedy defects in the original Interstate Commerce Act of 1887. Although the Act as passed in 1887 provided that “[a]ll charges made for any service rendered in the transportation of passengers or property ... shall be reasonable and just; and every unjust and unreasonable charge for such service is prohibited and declared to be unlawful,” 24 Stat. 379, the Supreme Court ten years later held that the ICC lacked authority to prescribe rates, but instead could only declare whether charges set by the carriers were unreasonable or unjust in the context of granting reparations to injured shippers. ICC v. Cincinnati, New Orleans & Texas Pacific Railway Co., 167 U.S. 479, 17 S.Ct. 896, 42 L.Ed. 243 (1897) (the Maximum Rate Case); see Trans Alaska Pipeline Rate Cases, 436 U.S. at 639, 98 S.Ct. at 2059. The Hepburn Act remedied this shortcoming by granting to the ICC express authority to set maximum rates to be observed by carriers prospectively. See 49 U.S.C. § 15. In this context, the Congress, by amendment originating in the Senate, adopted the Lodge Amendment, which conferred common carrier status upon oil pipelines, thus subjecting oil pipelines to the ratemaking jurisdiction of the ICC. It appears evident from the floor debates that oil pipelines were intended to be treated in the same fashion as other common carriers under the Interstate Commerce Act. “It appears to me,” Senator Lodge said in support of his amendment, “that it is a plain injustice to the railroads of this country to put them all under the Interstate Commerce Commission, to make the most drastic regulations to control and supervise them, and leave out one of the greatest article of interstate commerce [i.e., oil transported through pipelines].” 40 Cong.Rec. 6365 (1906). “This amendment,” he said a few days later, “makes the pipelines and the oil companies subject to all the provisions to the bill.” Id. at 7009. Thus Congress chose consciously to regulate oil pipeline rates in accordance with the same principles devised contemporaneously in other provisions of the Hepburn Act, which, as we noted above, augmented the ICC’s authority over all common carriers. The legislative history furthermore evidences that the “just and reasonable” rates prescribed by the Congress in 1906 meant more than a ban on prohibitive pricing. Congress primarily wanted to authorize the ICC to set enforceable rates that would permit the carriers to earn a fair return, while protecting the shippers and the public from economic harm. As Senator Elkins put it: [T]he present laws are executed and they are being enforced vigorously; but this, as I have said before, is no reason why there should not be the strictest regulation against excessive rates and abuses of every kind .... The aim of wise statesmanship should be to so adjust matters by proper legislation that the shipper and producer can make a fair profit on their products, the [carrier] a fair return for the service rendered, and the consumer get what he buys at a fair price. Legislative History at 879. Discussions of what constituted a just and reasonable rate focused not upon prohibitive pricing practices, but instead on setting a fair price that would be neither excessive to the shipper nor threatening to the financial integrity of the carrier. See, e.g., id. at 854 (remarks of Senator Clay) (Under the “just and reasonable” standard, ICC must determine “whether or not the rate so fixed is confiscatory or not compensatory for the services performed.”); id. at 859 (remarks of Senator Clay) (“Can the [ICC’s] power be exercised either to oppress the roads or the shippers? Can this power be exercised either to wrong or injure the carrier or the shipper? .... Can the Commission fix a rate that would prevent the railroads from making operating expenses and denying to them just compensation for the services performed? I answer, ‘No.’ ... The object and purpose of this legislation is to make [carriers] do right and to make shippers do right."); id. at 880 (remarks of Senator Culberson) (“[T]he Supreme Court has held that the words ‘just and reasonable’ have relation both to the rights of the public and of the companies, and that the rate must be fixed with reference to the rights of each.”). Additional evidence of congressional intent can be found by examining the decision to delete from the original Hepburn bill the requirement that rates be “fairly remunerative” in addition to “just and reasonable.” After quoting the definition of “remunerative” found in a contemporary Standard Dictionary — “Affording, or tending to afford, ample remuneration; giving good or sufficient return; paying; profitable” — Senator Culberson questioned whether the additional phrase served any useful purpose, and worried whether the phrase might “have exclusive reference to the interests of the companies,” thus “liberalizing the rule [of ‘just and reasonable’ rates] rather than narrowing it or keeping it where it is under the common law and under the decisions of the Supreme Court.” See id. at 880-81. As Senator LaFollette later elaborated; The phrase “just and reasonable” has a clear and well defined meaning in the law. It measures what the public must pay. It measures all that the carrier is entitled to receive.... The words “fairly remunerative” are added. What office are they to serve? For what purpose are they introduced? Are they to add something to the rate? If that is the purpose, they should be stricken from the bill. The carrier is entitled to nothing more than a just and reasonable rate. If the words “and fairly remunerative” are not designed to increase the rate, then they serve no purpose and should go out. Id. at 906. Eventually, the phrase was deleted from the bill, in part because the “fairly remunerative” ' standard was thought to add nothing to the already established “just and reasonable” standard, and in part out of a fear that the courts might wrongly interpret the phrase to permit higher rates. If the Congress believed that “fairly remunerative” rates were at best the same as “just and reasonable” rates, and if there was a prevalent concern that “fairly remunerative” rates could exceed the proper ratemaking standard applicable to common carriers, we then find it highly unlikely that Congress aimed its ratemaking provisions solely toward preventing extraordinary exploitation or prohibitive pricing practices. After all, no “fairly remunerative” rate would rise to the level of egregious exploitation. How, then, could a Congress, worried that the “fairly remunerative” standard might permit excessive rates, at the same time be willing to permit rates at any level so long as they are not grossly abusive? We are convinced that the Congress did not intend such a result. While we recognize that the legislative history of the Lodge Amendment contains a number of references to the Standard Oil Company, we do not believe that those references somehow alter the meaning of the language in the ratemaking provisions of the Interstate Commerce Act as applied to oil pipelines. First, the nature of the industry to be regulated is a natural topic for discussion during debate, and at that time Standard Oil dominated the industry. Second, there is nothing else in the legislative history to suggest that the Congress intended the meaning of “just and reasonable” to be transfigured when applied to oil pipelines. To rely too heavily on the popular “climate of opinion” in 1906 as evidence of the congressional intent underlying the Interstate Commerce Act would be unwise. See generally Dickerson, Statutory Interpretation: Dipping into Legislative History, 11 Hofstra L.Rev. 1125 (1983). Indeed, the motives of legislators are uniformly disregarded in the pursuit for statutory meaning; it is the purpose or intent behind the statutory provision itself that is relevant. See 2A Sutherland’s Statutes and Statutory Construction § 48 (C. Sands 4th ed. 1973 & 1983 Supp.). Thus, even assuming arguendo that it was the popular spirit of trust busting that aroused the 1906 Congress, it does not follow that Congress devised a response directed solely and narrowly toward prohibitive pricing. Congress provided that oil pipelines, as common carriers, could lawfully charge only “just and reasonable” rates; it did not enact a special antitrust or prohibitive pricing provision for oil pipelines. Whatever the historical context of the Hepburn Act, we think that FERC’s statutory interpretation overlooks the broad terms of the principal source of legislative intent, the statute itself. Even if the problem Congress addressed was prohibitive pricing, the solution ultimately devised requires that oil pipeline rates be just and reasonable. Finally, FERC believed that the changes since 1906 in the economics of oil pipelines also justified its novel interpretation of its statutory responsibilities under the Interstate Commerce Act. FERC determined that the cost of pipeline transportation, relative to the price of oil, had become so insignificant that close regulation was not required. See supra at 1493-95. In addition, FERC found that competition in the oil pipeline business had served to keep prices down. See supra at 1494. FERC therefore concluded that oil pipeline rate-making “can and should rely far more heavily on the market” and that rate regulation should be “peripheral to the pricing process.” 21 FERC at 61,649. Accordingly, in FERC’s opinion, oil pipeline ratemaking should merely set “ceilings that ... will seldom be reached in actual practice.” We believe that this apologia for virtual deregulation of oil pipeline rates oversteps the proper bounds of agency discretion under the “just and reasonable” standard. First, the fact that oil prices have skyrocketed does not repeal the statutory requirement that oil pipeline rates must be just and reasonable. Whether the purpose of oil pipeline rate regulation is “consumer protection” or “producer protection,” the statute requires meaningful rate regulation. As the ICC acknowledged, the statutory command controls, despite any dilution in direct impact on the consuming public: In determination of the question whether rates are lawful, we cannot attach any controlling weight to the fact that [the pipeline] or their beneficial owners [the parent companies] have seen fit to pay charges from one pocket to the other or to operate their common-carrier and industrial property in such a manner that the carrier system is virtually a plant facility of the larger producing, manufacturing, and selling industry. These facts, if they be facts, are immaterial ... whatever the relations between the pipelines and the oil companies which beneficially own them, Congress requires all rates tendered to the public by these common carriers to be just and reasonable, and no more. Reduced Pipe Line Rates and Gathering Charges, 243 I.C.C. 115, 141 (1940). Despite recent legislative proposals to deregulate the oil pipeline industry, Congress has not as yet altered its command to FERC. Accordingly, the fact that the price of oil to the ultimate consumer dwarfs the price of oil pipeline transportation “does not excuse deviation from the just and reasonable standard, for not even ‘a little unlawfulness is permitted.’ ” Consumers Federation of America, 515 F.2d at 358 n. 64 (quoting FPC v. Texaco Inc., 417 U.S. 380, 399, 94 S.Ct. 2315, 2327, 41 L.Ed.2d 141 (1974)). Second, we find FERC’s largely undocumented reliance on market forces as the principal means of rate regulation to be similarly misplaced. It is of course elementary that market failure and the control of monopoly power are central rationales for the imposition of rate regulation. See S. Breyer, Regulation and Its Reform 15-16 (1982). As Representative Knapp expounded in 1906: It has been stated that rate making is the most complicated and difficult work connected with transportation. Doubtless that has been correctly stated, but whether so or not, it certainly is one of the most important. The contention that competition is a regulator of freight rates is not, in the main, tenable. That, by reason of combinations, has gradually ceased to be a controlling factor, and can not now, except in limited and exceptional cases, be depended upon, as controlling in regulating rates. Legislative History at 677. The courts have echoed this observation, noting that “[i]n subjecting producers to regulation because of anti-competitive conditions in the industry, Congress could not have assumed that ‘just and reasonable’ rates could conclusively be determined by reference to market price.” FPC v. Texaco, 417 U.S. at 399, 94 S.Ct. at 2327; see, e.g., Tennessee Gas Pipeline v. FERC, 606 F.2d at 1114. We recognize that the market price of oil could, “in an individual case, coincide with just and reasonable rates” and may “be a relevant consideration in the setting of area rates; it may certainly be taken into account along with other factors.” FPC v. Texaco, 417 U.S. at 399, 94 S.Ct. at 2327 (citations omitted). The Williams opinion, however, goes far beyond what we regard as rational or permissible assumptions about the relationship between “just and reasonable” rates and the market price. FERC’s methodology, by its own admission, merely sets “ceilings seldom reached in actual practice,” and permits “creamy returns” to oil pipelines. As we have explained above, such ratemaking does not comport with FERC’s statutory responsibilities. FERC’s methodology, therefore, exposes a range of permissible prices that would exceed the “zone of reasonableness” by definition, unless competition in the oil pipeline market drives the actual prices back down into the zone. But nothing in the regulatory scheme itself acts as a monitor to see if this occurs or to check rates if it does not. That is the fundamental flaw in the Commission’s scheme. See Texaco, Inc. v. FPC, 474 F.2d 416, 422 (D.C.Cir.1972), approved in relevant part and vacated on other grounds, 417 U.S. 380, 94 S.Ct. 2315, 41 L.Ed.2d 141 (1974). Congress may indeed have imposed the requirement that rates be “just and reasonable” in order to restore the “true” market price — the price that would result through the mechanism of a truly competitive market — for purchasers of the regulated service or goods. See, e.g., FPC v. Texaco, 417 U.S. at 397-98, 94 S.Ct. at 2326-27; FPC v. Sunray DX Oil Co., 391 U.S. 9, 25, 88 S.Ct. 1526, 1535, 20 L.Ed.2d 388 (1968). In setting extraordinarily high price ceilings as a substitute for close regulation, FERC assumed that, with the wide exposed zone between the ceiling and the “true” market rate, existing competition would ensure that the actual price is just and reasonable. Without empirical proof that it would, this regulatory scheme, however, runs counter to the basic assumption of statutory regulation, that “Congress rejected the identity between the ‘true’ and the ‘actual’ market price.” FPC v. Texaco, 417 U.S. at 399, 94 S.Ct. at 2327. In fact, FERC’s “ ‘regulation’ by such novel ‘standards’ is worse than an exemption simpliciter. Such an approach retains the false illusion that a government agency is keeping watch over rates, pursuant to the statute’s mandate, when it is in fact doing no such thing.” Texaco v. FPC, 474 F.2d at 422. Moving from heavy to lighthanded regulation within the boundaries set by an unchanged statute can, of course, be justified by a showing that under current circumstances the goals and purposes of the statute will be accomplished through substantially less regulatory oversight. See Black Citizens for a Fair Media v. FCC, 719 F.2d 407, 413 (D.C.Cir.1983). We recognize that this court has sanctioned dramatic reductions in regulatory oversight under, for example, the FCC and ICC licensing provisions, both of which require that the licensee operate in accordance with the “public interest.” See id.; National Tours Brokers Association v. ICC, 671 F.2d 528, 531-32 (D.C.Cir.1982). In both cases, this court found that the agency adequately assured meaningful enforcement of the public interest standard. See Black Citizens, 719 F.2d at 413-14; National Tours, 671 F.2d at 533. In other cases, this court has refused to sanction administrative attempts to reduce regulation in the absence of a showing that the goals and dictates of statutes were not being honored. See International Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795 (D.C.Cir.1983); Action on Smoking and Health v. CAB, 699 F.2d 1209 (D.C.Cir.), supplemented, 713 F.2d 795 (D.C.Cir.1983). In this case, FERC failed to show that the rates resulting from its newly articulated ratemaking principles would necessarily satisfy the “just and reasonable” standard. FERC set rate ceilings which, if reached in practice, would admittedly be egregiously extortionate and then failed to demonstrate that market forces could be relied upon to keep prices at reasonable levels throughout the oil pipeline industry. As a result, we find that FERC’s action contravenes its statutory responsibilities under the Interstate Commerce Act. V. FERC’s Decision Lacks a Reasoned Basis In the foregoing analysis, we found the general ratemaking principles that guided FERC in the Williams opinion to be “in excess of statutory jurisdiction, authority, or limitations,” 5 U.S.C. § 706(2)(C), and “not in accordance with law,” id. § 706(2)(A). Because “an agency’s action must be upheld, if at all, on the basis articulated by the agency itself,” we would remand this case to FERC on the basis of the foregoing considerations alone. Motor Vehicle Manufacturers Association, 103 S.Ct. at 2870; see SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947). As independent grounds for our decision today, however, and in light of the apparent need for judicial guidance in this case, we further hold that the Williams opinion was not “the product of reasoned thought and based upon a consideration of relevant factors.” Specialty Equipment Market Association v. Ruckelshaus, 720 F.2d 124, 132 (D.C.Cir.1983). Accordingly, we now turn to examine the particulars of FERC’s oil pipeline ratemaking formula. A. Rate