LaRowe v. Kokomo Gas & Fuel Co.

Consequently, no reversible error has presented

bеen and the trial judg- court’s LaROWE, Dale Kennedy, John Robert ment must be affirmed. Massey, Appellants-Intervenors, HOFFMAN, J., concurs. KOKOMO GAS AND COMPANY, FUEL Appellee-Petitioner, SULLIVAN, J., concurs opinion. SULLIVAN, Judge, concurring. Corporation, Cabot Appellee-Intervenor. I opinion concur the substituted upon No. 2-476 A 155. Rehearing. I would additionally express Court of Appeals Indiana, view, that, my to the contrary position tak- Third District. upon rehearing, en stipula- State tion with which we are concerned is not one 16, March 1979. is, rather, law. The stipulation one with respect to the sole issue which was to be

litigated and which litigated. Stipula-

tions which limit the issues for trial are myriad

often entered into for tactical or

strategic reasons. It is for this reason that

I the stipulation binding upon find and it is for this join

State reason that I

majority holding pre- the State

served no reversible upon appeal. error mining Appellee shipped goods parties whether commerce is interstate or in other intrastate, regard states, must be had to its essential and the trial court held the tax on the billing, place character. Mere or the income from such transactions was a burden passes which title is not exempt determinative. If on interstate commerce and therefore power the actual gross movement is interstate the income tax. An order would be Congress attaches to it placed by shipment . .” Penn- an Indiana resident for sylvania Mining R. Co. v. Clark Bros. Coal goods party. to some out of state In each Co., 1915, 456, 896, 238 U.S. 35 S.Ct. 59 L.Ed. appellee guaranteed instance the arrival (Emphasis added.) condition, goods good and we do not find facts would cause us to hold 359-60, at 808. 90 N.E.2d

Id. at passed (Emphasis that title in Indiana. add- L. S. Tax Div. v. Income Gross ed.) (1954), 118 N.E.2d Ayres 233 Ind. Co.& Id. at 118 N.E.2d at following Supreme made Court Treasury Dept, See also v. Fairmount Glass bearing passage title as reference to Ind.App. Works 49 N.E.2d 1. taxation: issue of 966

Kokomo is a utility serving ap- 26,700 Cass, proximately customers in How- ard, Tipton and Miami Counties. Panhan- dle Pipe Eastern Line Company is Koko- mo’s sole supplier. contract Pan- handle and suppliers began other interstate proceedings with the Federal Power Com- mission to determine how supplies limited were to be view allocated in gas shortage. nationwide ap- The FPC proved plan Panhandle,1 a curtailment for Grills, for Indianapolis, appel- Nelson G. the result of which was a decrease of 30% lants. period off base volumes and 70% in the amount of had to supply contracted Osborn, Hunt, R. George Thomas Ki- P. Kokomo. Kokomo will receive Osborn, Kiley, Rogers, Harker Mari- ley, & enough gas for Cofield, Noland, residential cus- on, J. Jon D. Howard instances; Hickam, Boyd, tomers in Barnes, Indianap- Pantzer most & olis, curiae. issue largely for amicus here will be ‍‌​​​‌​​‌‌​​​​​​​​​​‌‌​‌​‌‌‌​​​‌​​‌‌‌​​​‌‌​‌​​​‌​‍consumption by other customers. Davis, Murrell, R.

Joseph H. Lawrence Kokomo, Murrell, Fell, George & P. Davis The FPC curtailments were made on the Osborn, Hunt, Osborn, Kiley, R. Thomas basis of the supplier’s gas. “end-use” Marion, Rogers, Kiley, appel- Harker & is, That the FPC determined that certain lees. uses of by natural its ultimate consum- ers are higher uses, of a priority than other GARRARD, Judge. using and those the gas higher for the Appellants, ap- residential customers of priority purposes should last be the to be pellee, Company Kokomo Gas and Fuel curtailed. Allocations were made to dis- (Kokomo), challenge two orders Pub- tributors on that basis. Under (PSC). lic The orders Service Commission priority system, residential customers have (Cause 34570) approved peti- and Nos. 34471 highest e., priority; i. they are the last seeking permission Kokomo by tions filed customers to be curtailed in the event of gas from a source other natural supply. insufficient A somewhat similar supplier than in order to make its contract plan, curtailment established Kokomo up in the deficiencies amount availa- PSC, approved by and provides that supplier, ble and to assess the costs from its residential customers will be the last to be purchase among all classes of cus- curtailed the supply from available equally. Appellants tomers do not chal- to Kokomo. lenge purchases; challenge To necessity avoid the to invoke curtail- they require orders insofar residen- ments, has at Kokomo several points peti- cost. tial customers share in the (substi- to purchase tioned the propane Company Indiana Gas and industries gas) tute and latter served Kokomo have filed amicus briefs orders; gas purchased natural industry filed an out-of- brief. state supplier intervenor at a cost not regulated by the Opinion (Feb. 71-119 No. Docket No. RP found that some the distinctions created 27, 1976) Rep., para- unjust unreasonable, L. found in CCH Utilities Order were 467-B 11,779, p. 13,580. (found graph policy originally but did FPC Order not deviate from the [1974], expressed in Pacific & Electric Co. v. FPC Gas in Order 467 and its amendment of 51) U.S.App.D.C. according highest pri- 506 F.2d 33 set forth the residential class the general policy according ority. This is the critical factor in our refer- Opinion classes of and was amended Or- ences herein to 467-B No. 467-B, (1973). Opinion der 49 FPC 583 No. among FPC.2 Both substitute and rata basis all customers. How- ever, expensive “pipeline” gas practical as a gas are more matter residential and (FPC regulated gas supplied under the con small commercial customers cannot be re- quired Panhandle). At to install alternate systems tract with time fuel reduce their hearings, daily monthly was about usage these substitute 2lh ato specified percentage expensive of historical usage. times more Rather, which, turn, required curtailment by was about twice as must necessity upon fall pipeline gas. larger as Kokomo had al volume expensive сommercial and industrial customers who ready approval purchase received PSC must bear the expense of providing alter- gas when the opportunity substitute arose energy nate capability and regulate their purchase supplemental gas at a consider gas usage within necessary limitations savings. gas rates are able Because set imposed. It is pragmatic this situation reflect, part, and the cost of PSC which is the basis of Petitioner’s curtail- gas, petition Kokomo had to ment tariffs. The customer who is sub- purchase in order to make the and to ject to curtailment is already bearing the supplemen recover the difference between costs of alternate fuel capability and fac- pipeline gas costs from its custom tal and ing operating schedules, reduced Partly of its storage ers. because limited could cause hardship economic and result- facilities,3 Kokomo has make had to several employment. loss of The residential petitions purchase specified amounts and small commercial customers are be- specified periods over time at various ing benefited protected by curtail- Kokomo to make prices. intends future ment of these other customers. We find requests of a similar nature. it would be inequitable and discriminato- Appellants petitions intervened in 3 of 4 ry impose the total additional cost of purchase supplemental gas; supplemental supplies gas solely upon appeal from 2. Because the issues in both the very class of customers who are al- identical, nearly cases have been ready bearing the economic burden of on appeal. consolidated Although curtailments. not specifically discussed, stated or this same issue has Review of PSC Orders been inherent in all proceedings concern- findings Three of the two orders are chal- ing supplemental gas and the allocation lenged. They are: thereof, of the cost and in pro- all such Finding Cause No. 34471 ceedings we have followed the same ra- gas, including emergen- “All sources of expressed tionale as above. To take an cy purchases supplemental gas, should inconsistant position in this case [sic] meet, equal available on an basis to would not be irreconcileable [sic] possible, existing the extent demands with previous findings our sup- All of all firm customers. sources of plemental gas proceedings, would set but particular commingled and no source precedent very we could well live to is dedicated to customer or regret in the future. There have been no If, present class customers. as in the distinguishing features in this case which Petitioner, there is an insuffi- situation departure would warrant a pre- from our gas to supply cient total meet all such policy regard vious to this issue or to existing equitable the most demands warrant of dangerous establishment proa precedent.” method of curtailment would be on only “jurisdictional regulates pipe- consumption intrastate, wholly 2. The FPC “end-use” or authority jurisdiction the FPC lines.” FPC does not extend to the has no over the sale. product of an interstate sale which is consumed addition, approving 717(c). 3. In entirely the PSC orders each within one state. 15 U.S.C. § required petition parties Kokomo to made both of the While much is again buy supple- FPC, should it wish additional jurisdiction agree mental first, tomers is based the impracticali- Finding Cause No. 34750 ty of curtailing residential projected monthly gas upon “Based approved by figures furnished to this volume Commission on pipe supplier, line there that basis Petitioner because of any deter- gas supply natural will not be sufficient mination that residential customers have for Petitioner to meet the to Petitioner inherent, prior right to existing gas of its firm customers dur- requirements supplies, either under Order 467-B for coming months. We ing the find from any other reason. Moreover as a result evidence heard in cause al- curtailments, large it is the industrial though yet servicе has not customer already who is bearing the eco- result of been curtailed the inade- nomic costs of the shortage av and is quate gas, of natural supply without the receiving less reliable service. Accord- supple- substitute availability of and/or ingly, we find that it inequita- would be gas, would not be sufficient mental there discriminatory ble and impose the total gas peak day to serve the demand of additional of supplemental cost supplies customers.” solely upon that class of customer.” Finding 14, Cause No. 34750 error, In their assignments of their briefs approved “In our orders on November reply briefs, and appellants put forth a vari- # 34303 March 1975in Cause and ety challenges, centering of on the suffi- in Cause # the Commission ciency of the evidence to the find- supplemental pur- determined that ings their constitutionality. and The thrust adjustment gas factor should be chased challenges these stems from appellants’ service under applied to all each such while, contention that by and large, the on the evidence schedule. Based intro- findings accurately depict past policy and proceeding, again duced in this we find practice, priority plans have mandated a equitable it and is fair that Petition- complete Therefore, turnabout. the find- pur- excess cost er’s ings supported by evidencе, cannot be all gas be borne chased Petitioner’s resulting the rates from them are un- it be will so ordered. just, unreasonable, and thus unconstitution- Throughout history operations, its Appellants al. maintain that the priority gas supply, none of Petitioner’s whether system has dictated the abandonment gas, it be manufactured native Indiana past policy required which granting all firm gas, gas, propane-air gas interstate equal customers entitlement to all sources gas, such as involved here- gas Instead, available to Kokomo. in, particular has ever dedicated to a been priority system has created dedication of require- class of customer. The total gas to the residential class. Since Panhan- always been ments of all customers supply dle can a sufficient volume of supply met from the total availa- demand, meet residential is dedicat- regardless of policy, ble its source. This ed to that Therefore, class alone. residen- firmly we believe should contin- be tial pay customers should pipeline gas prices ued, reliability increases of service to whatever actually all customers. receive. Be- any cause supplemental gas purchases are 467-B, PPC Order No. which accords made to avoid curtailing priority lower residential and small commercial service classes, only those who would be curtailed highest does not priority, alter purchases the absence of such pay should principle. above That Order is directed Appellants them. continue that these the allocation of interstate solely does for the companies and not control benefit of lower priority customers, the actual use of which is specifically end industry, subject regulation. for state commission benefit that residential customers might Petitioner’s plan, curtailment which cur- receive merely the result of Koko- large tails industrial and commercial cus- mo’s correction under-supply by allowing Additionally, may lower utility prior itself created noted that a order, to draw on ear- No. priority customers Cause was admitted into objection. use in violation of for residential evidence without marked That order policies. and FPC contained language both PSC identical to the lan- guage complained of here and was chal- considering arguments, ap- these Before lenged appellants’ brief filed before the challenge which make an additional pellants Thus, basic concepts PSC. of notice and disposed of. should be hearing implicit in IC 4-22-2-3 have been bymet admission of the order without ob- Policy Past Reliance on jection and the appellants’ consideration of appeals, appellants challenge the In both brief before the Commission. past practice on their reliance PSC’s “rolling in” the excess costs “tracking” or Sufficiency of Gas Available from Pan- purchases. supplemental gas These handle allocating refer the cost to all terms Turning case, to the main issues in rather than to the class for primarily the PSC found that there was whose benefit insufficient clearly pipeline gas made. While not articulated to serve residential customers “past reference to this Finding peak days. Appellants argue direct seems, Finding supply made in 15 and policy” was from Panhandle is more than ade- well, implicit quate to be in the later order. to meet residential peak demand on stated: or Finding days. They point the Commission to the facts 8,889,631 that Kokomo will receive Mcf of “Although specifically stated or dis- gas 1976-77, from Panhandle for and that cussed, this same issue has been inherent in 1975 Kokomo’s sales to residential cus- concerning supplemen- proceedings in all 4,000,000 tomers totaled approximately allocation of the cost gas tal and the Mcf4 to show that more enough than pipe- thereof, proceedings in all such we gas line will be available to for have followed the same rationale . . However, simply residential needs. com- distinguishing There have been no fea- paring gross figures does not take into tures in this case which would warrant account the full circumstances or practi- departure previous policy from our or to problems cal confronting Kokomo. dangerous warrant the establishment of precedent.” First, question accuracy there is a of the “previous policy” projections contend that of Panhandle’s Appellants sup- available ply consumption patterns within the definition of “rule” under and the of Koko- comes statute, governs That mo’s customers. Panhandle’s estimates IC 4-22-2-3. adjudica- rule-making proceedings, ability supply excludes its Kokomo’s customers are petitions by appellee past usage figures provided filed based on tions. The requesting permission buy period other utilities .to Kokomo. base used to deter- gas and to track its cost to all mine demand was 1969 to 1971. Panhan- therefore, hearings projections, resulted in or “contro- dle’s assume future past in which the had demand will be no than proceedings” versial de- Thus, fact-finding body.” mand. if Kokomo took impartial to act as “an no new resi- illuminating that basis for dential customers from 1972-76 and the old IC 8-1-1-5. decision, properly usage, re- customers did not increase their the Commission prior gas to its resolution of similar is- there would be sufficient for them. ferred course, not mean that an Kokomo receives notice of curtailment one sues. Of this does presented beyond month in advance of the date Panhandle thereby issue of law begins cutting Accordingly, back. there is judicial review. 4,000,000 misleadingly predicting April figure low die was 1976 that it could 4. The gas gas sold less in 1975 than it did deliver sufficient to meet residential de- since Kokomo Nonetheless, preceding Panhan- mand for 1976-77. in the decade. begin charge, little time for Kokomo to either charge lead is a for the actual- negotiations ly for or pays curtailments taken. Kokomo charge the demand gas. Although actually manufacture of other Pan- whether takes the or not. In addition, historically, it quarterly handle does out has been send statements common practice to pipeline maximize use of of available for its estimates Before gas shortage, industries were period, coming month the estimates can encouraged to some extent to use dur- vary quarters. insti- between Curtailments ing periods of excess supply so that early tuted Kokomo the basis of an utility would not have to leave the projection be ineffective to preserve could on the pipeline. This increases the utility’s pipeline gas residents if early and, therefore, revenues reduces the costs projection substantially greater to individual expense customers because the supply. the later actual Or the reverse of purchasing gas, as well as maintaining is, supply might could occur. That actual system, spread entire over more cus- early projections. At the time exceed these tomers. filed, had suits were Kokomo instituted only during firm customer curtailments two It is clear from the record that residential months. Had Kokomo instituted curtail- customers cannot peak served on days if upon of the receipt supplemental gas ments initial Panhandle purchased is not injec- notice, tion storage non-residential customers into unless industry would is curtailed year around. What is paid have more for more not clear is whether needed; provided Panhandle would have enough gas than was their curtailment would Kokomo and, the time of therefore, the winter heat- unnecessary argu- been ing season to effect the storage. needed ably arbitrary. We given figures have not been showing important accuracy More than the monthly volumes taken by residential users projections question is the of whether Ko- storage capacity to us enable komo could and should make all of the make that determination. prac- Kokomo’s curtailed available to one class cus- tice of letting all firm customers draw on daily supplies tomers. Kokomo receives pipeline gas certainly appears to have creat- gas from Panhandle. It does not receive its ed the situation that more gas is needed for entire Its storage allotment once. facili- injection storage into in order peak to serve begin ties do accommodate its allot- day loads residential customers. On the ment. During some months Kokomo re- hand, when asked if the utility could gas ceives more from Panhandle that it can fill storage from pipeline gas by forcing its purposes. use for residential utility five largest industrial customers to provide then has two choices. It can draw on the fuel, for their own representative Kokomo’s supply only to extent that stated utility that did not have the customers’ needs are met in of use terms capacity to store the seven million feet of storage, customers, curtail all other gas that ‍‌​​​‌​​‌‌​​​​​​​​​​‌‌​‌​‌‌‌​​​‌​​‌‌‌​​​‌‌​‌​​​‌​‍comes over the pipeline day. each let pass the rest of its allotment on down Regardless of occurred, how the deficit it pipeline to other Panhandle customers. exists and the purchases without ques- The alternative on pipeline draw tion, curtailment up will have to move up to the limit of its and use allotment that the residential customer peak level on days. all for customers. Kokomo has chosen appellants While object can to the reasons to do the latter. This allows it to take all for finding, is supported by it the evi- it is entitled from Panhandle and question dence. The next is whether the provide all its customers with lower cost pipeline gas has or should have been dedi- gas. cated to residential customers virtue plans. curtailment

Reflected in is the this choice fact that pay charges Kokomo must two pipeline for Curtailment Plans gas: charge charge a demand is a for it is entitled to take under its challenge While made to the finding Panhandle, contract with commodity and a of inadequate supply for residential users is evidence, appel- that it do so. This reflects Kokomo’sduty sufficiency one of public utility will as a service they is not whether to all objection real lants’ its firm customers. As a utility but that must it non-pipeline gas, receive arbitrarily. cost of non- cannot refuse service To refuse of the increased portion pay present group service to one of firm cus- gas. arguing that pipeline ground on the that future industry, they shortages concede tomers chargeable gas is impair sequestered may ability for to serve another pipeline gas cannot that argu- group arbitrary would be unless the future The crux of their use alone. their shortage the source of the were definite. FPC v. Transconti- that whatever ment is them, Pipeline Corp. if the nental ultimately delivered to Gas U.S. that is 46 L.Ed.2d 533. More- available from Panhandle S.Ct. volume annual over, regulation pro- demand states meet residential sufficient to utility may begin curtailment when pay only vol- those customers should jections, insufficient; umes of makes no rates, regardless of whether pipeline particular being reference to sources insuf- day. any given pipeline gas is sufficient shortage pipeline ficient. That there is a argue that if they would also Presumably petitions is definite. for could be met portion of their demand only a supplemental gas show that a pay should pipeline supplies, shortage utility in total available to the again prices portion, is not present definite at the time. Accord- gas. that or other they receive whether ingly, position begin Kokomo’s it will they point to argument, To appears curtailment when it that all sources approved by regulation the curtailment are insufficient to meet the needs of all and the FPC curtailment for Kokomo that, only and within when all policies They argue that the regulations. sources are insufficient to meet the needs of regulations are contra- in the embodied residential customers will it consider the high priority users by requiring vened gas from all sources dedicated to available costs of Stated pay the residential use. This can be seen in its first, argument is that Koko- simply, their priority system require does not full required curtailment regulation mo’s category institut- curtailment before and, apparent there- shortage as a soon ing partial higher category. fore, higher priority it was intended that re- policy Further evidence of PSC in this type for the pay only should in the fact that until 1975 gard is reflected to as- regulation attempted gas which the purchased supplemental gas, Panhandle had supplied to them. would be sure to all its the costs of which Kokomotracked customers, just pro- as Kokomo’s costs Plan Kokomo’s approval been tracked with pane have PSC-approved Looking first to Kokomo’s Thus, neither the costs to all customers. it can be seen that regulation, curtailment gases nor the uses for these other have been mandatory curtailment not envision it does by customer class virtue of dedicated to one Before shortage apparent. soon as a regulations. Finally, we the curtailment regulation states: the listing priorities, system priorities note that Kokomo’s of volumes of are sufficient “When curtailing of impracticality based on the to meet all Company to the not available and was unrelated to the residential users de- reasonably anticipated existing and charged. replenish and its protect and to mands FPC Plan reserves, Company the shall gas storage restrict, limit or curtail right to have the background, jurisdiction the By way any of the in accordance service encompassed in the Natural Gas the FPC this rule.” provisions of agency: Act which created the things only Congress “Three and three right gives Kokomo regulation regulatory power, curtailments; drew within its own require it does not institute by agent, beyond jurisdiction. Act to its sumers are our delegated These cooperation Power Commission. were: those instances we solicit the Federal (1) transportation implementa- natural of State authorities to aid commerce; (2) program.” sale in tion this inter- Pacific Gas interstate & resale; (3) Electric Co. v. FPC U.S.App. -for and natu- state commerce 371, 389, D.C. 506 F.2d 51. gas companies engaged ral in such trans- portation or sale.” Panhandle Eastern Opinion true It is require did Pipe Co. v. Public Service Commis- Line priority reassessment of 467-B accorded 507, 516, (1947), 332 sion of Indiana U.S. commercial customers who had alternate 190, 195, 92 L.Ed. S.Ct. fuel sources order to avoid contravention goal regulation sales and of its of preserving gas highest Increased state priority goal was a Natural Gas customers. The distributions FPC ordered the Act; though thus resalеs and direct sales are reevaluation even the actual use of permit gas may the Act in their partially covered order resulted from regulations. regulation by Nevertheless, the states. Panhandle East local in reject- ern, ing at supra plan’s prohibition curtailment the interim against plans (which bearing taking category do have a on direct for a curtailed Pan- handle, resales) jurisdic persuasive sales and within FPC Commission found regulate transporta arguments against tion because such control: gas, tion not its FPC v. Louisiana sale. “This condition would require distribu- Light (1972), 406 Power and Co. U.S. tor priorities adherence to the in this 369; 32 L.Ed.2d Panhan S.Ct. plan reselling curtailment when Panhan- Eastern, supra, dle at 523. Curtailment gas, dle despite contrary provisions in gas, deals shall receive how much with who plans local curtailment under which the is to sold. price be operate distributors generally, or in the (both utili While sales to direct customers plans curtailment suppliers. non-utilities) by pipelines Therefore, ties and interstate Panhandle and the Ohio Com- plan, can it is be curtailed under an suggest mission that this Commission will regulatory set agency left to the state unnecessarily be enbroiled in local curtail- Similarly, any problems those sales. rates for ment whose require solutions a plans intrastate curtailment left detailed awareness of loсal issues and fac- regulation. argues, They state As Kokomo tual situations. also contend that jurisdiction premised upon limited is evidenced solution is a [the interim] uniformity an cur nonexistent rejection part among pipeline FPC’s interim local plans, upon prohibiting suppliers tailment sales to assumption would, fact, that we are in posi- when use a better the end tion direct local regu- affairs than local applied priority be to lowest needs. The latory bodies . . . . gas compa- plan reasoned such [one ny] suggests that the end-use limitation would affect intrastate distribution will force ignore pub- distributors to their might contrary to state curtailment obligations, lic interest as distinct Commission, plans. in consider While utility systems serve their customers plan, it “reserved interim stated fully judgment”5 authority on its institute curtailment, plan it that affected intrastate It concluded: 467, is at the Order clear that time requirements “The end-use of ultimate initially priority system, created the was consumers are examined to determine the promulgated, the FPC did believe its distributors’ volumetric entitlements un- so authority was extensive: der the pipeline plan; but with full “Our decision made knowl- the reallocation of that to volume the edge that certain sales to ultimate con- may proceed ultimate consumer in a dif- 754, 13,689. supra, 11,779, p. L.Rep., Opinion paragraph Utilities No. CCH regula- ing difficulty of equating priorities to local the according fashion with ferent 754, rates, supra, the court Opinion determined that tory requirements.” FPC 11, 779, jurisdiction L.Rep. paragraph did have to consider Utilities whether CCH high users priority compensate must those p. 13690. priorities with lower for the added costs to interfere unwillingness the FPC The by securing incurred latter in alternate regulations plain. with local fuels necessitated curtailment. These Nonetheless, priori- appellants argue that payments compensatory were held not to be hand, pointing hand to go rates ties and rates, surcharges but rather to to be assure prices given problem to the consideration program equitable. that the curtailment times of inflation consumers philosophy language behind that is not R-476. Opinion No. Docket FPC in unlike the PSC’s statements considered in- here add to residential Since the among fra about relative burdens cus- steep in- already have incurred rates which caused by priority system. tomer classes that are con- creases, urged it is the orders See also Elizabethtown Gas Co. v. Federal correctly Appellants FPC intent. trary to Energy Regulatory concerned with that assert U.S.App.D.C. 575 F.2d 885. No. Opinion consumers in costs to say appellants That is not to that cannot ceilings rate set area and nationwide Opinion find Ordеr 467-B or in gas and allowed the costs of wellhead No. 754. The intent the orders is newly-dis- prices for “old” versus different adequate supplies assure for human and 467-B gas. Order covered purposes, and needs to the extent curtailed accomplished pur- different No. 749 Opinion spir- is diverted from purposes, those situations. poses and dealt different appears it to be contravened. managing was concerned with Order 467-B set new Opinion No. 749 supplies; limited Appellants are assured of sufficient encourage exploration more prices to They enough gas, insist that addition be supply so could production of that they pipeline gas are entitled the lower latter given in the The concern increased. priori- highest rates because have the trying mean the FPC was does not short, their ty. argument In is that lower rates; trying to rather it was dictate local high priorities two sides of incentives high enough set a rate same coin. That cannot conclusion burdening unduly without exploration either drawn from Kokomo’s curtailment industri- (whether consumers nor FPC as it is regulation policy reflected recognize increases at al). did that It 467-B or 754 or 749. Opinions in Order at the result in increases wellhead would rates at which curtailed sold are level, lim- it establish but did not consumer jurisdic- of FPC clearly beyond scope might be. those increases to what its as Although may the FPC au- tion. costs is the only reference to 467-B’s Order indirectly thority to influence those rates cog- “. . that the FPC is statement pipe- controlling intrastate distribution will impacts that the economic nizant of has gas, attempted line exercise listing . .” priorities flow from authority regulations in the considered so. even program implement must but here. Moreover, impacts” seem the “economic will have Burden of Curtailment impacts program to the refer priority. low given on those object also to the PSC’s find- Appellants Furthermore, jurisdiction priority low status results less even if FPC industries, forcing suggest, reliable service to them appellants to extend were expensive more expect. to switch alternate and might not be effect fuels, schedules, 1975), operating or reduce their (5th v. FPC Cir. Mississippi PSC unemployment in turn causes 97 S.Ct. which cert. den. 429 U.S. F.2d finding, appel- loss. (1976), illustrat- other economic Such a case 50 L.Ed.2d ignores equitable argue, considera- gas pay lants of FPC to help position as tions in of their well as purchases gas just and reasonable. priority systems. They purposes Appellants contend that the orders vio- fuels are claim alternate available late the 14th Amendment to the U.S. Con- industry, costs of which are tax deducti- I, stitution and Article 12 and 21 §§ on to passed industry’s prod- ble and can be Indianа They Constitution. maintain that There was testimony uct consumers. by charging the of supplemental gas costs There support those claims. was also testi- to all benefitting PSC is mony converting costs of that the from industrial at expense customers of resi- high; alternate fuels are that alternate dential customers because the costs of this are unusable or substantially fuels either solely serving attributable to indus- inferior to natural some manufactur- try. They urge the orders constitute a ing processes; and that there point comes a “taking” from one group to benefit another increasing price products re- where aby public authority. Appellants also beyond pricing competitive sults in them maintain that the orders violate IC 8-1-2-4 noteworthy levels. It is that neither side in that are unjust and unreasonable carried observe that product this further to virtue of discriminating between price spread increases the burden of classes of community, customers. parties across the to those the briefs the make rely do Appellants who not on all. no distinction between the statutory stan- by using argue further the curtailment of “just dard and reasonable” and the Con- program to show one class of customer stitutional limitations on rate-making, and another, bears a burden Koko- agree we that the incorporates statute and the аre making mo industrial customers parallels the Constitutions’ standards.6 program. a collateral attack on the How- Rates among and classifications ever, appellants ways. cannot have it both cannot be arbitrary nor discriminatory in They the program cannot assert entitles the sense of imposing a creating burden or charges lower pay them and at a class in a manner not rationally related to prohibit the same time other customers purposes regulations. showing they are burdened program. same Analysis Traditional Although priorities are rates and not in- appellants As issue, frame the the costs terchangeable, charged the rates to each supplemental gas should be rolled in relationship class must bear some to a bene- because Therefore, solely attributable fit received. it is to serv- necessary ing industry. Whether determine whether residents this is do receive true is in here, issue purchases. benefit from these but it must be remembered that per cost service se not the issue in this Making Bate Context case. Kokomo’srates were constructed the assumption that historic volumes parties argue All issues within pipeline gas would be available at By historic making doing rate context. so even price though levels even recognize knew of the appellants taсitly that Kokomo is shortage and curtailment safety plan. At ignoring the risk residential users. of oversimplification, it taking steps may Kokomo is to assure that be said their Kokomo’s heating cooking rates are needs will satisfied based on the cost of by requesting serving permission to make these each class. The sup- substitute and purchases. requiring plemental The issue whether top costs come on of or anas the class delivery which forms basis for addition to cost of service in its basic mean- 6. The has Natural Gas Act the same standard dards.” In re Permian Basin Area Rate Cases (“just reasonable”) 747, 770, 1344, 1361, which the United 390 U.S. 88 S.Ct. Supreme States Court found “. ‘coin- 20 L.Ed.2d reh. den. 392 U.S. 88 S.Ct. applicable cides’ with the constitutional stan- 20 L.Ed.2d 1379.

975 urged ap- up charge residents argument newly for of a devel- ing.7 of gas represents cost oped substantially that area that was in pellants, excess industry, points up underlying serving paid by of the charge residents served in an Thus, they object to establish- issue. older The new area. sewer line had cost without reference the costs of rates ment therefore, more to and the charge, build gas. The and substitute supplemental of reasonably' was related Similarly, to cost. as setting was done for reason in v. (1900), Roundenbush Mitchell 154 Ind. for clear. Prices seems 616, 510, 57 N.E. land which had not been fact, time. In gas fluctuate over substitute assessed for the construction of a drain in issue are for the two prices because it was not immediately benefitted Prices for substitute are far different. was properly construction assessed gas. for Had than for the drain’s maintenance because it did making up on predicated rates been and would in the future ‍‌​​​‌​​‌‌​​​​​​​​​​‌‌​‌​‌‌‌​​​‌​​‌‌‌​​​‌‌​‌​​​‌​‍derive a benefit gas only, substitute deficit from Panhandle from the existence of the drain. excessive in view of would have been jurisdictions Cases from other in- directly buy supple- arose to opportunity which volving identify the issue rolled-in costs Moreover, the amounts of gas. mental the concept of benefit clearly. more For up the and available to make deficit needed example, in Battle Creek Gas Co. v. FPC in precisely known advance. cannot be (1960), 209, 42, U.S.App.D.C. 281 F.2d a at Thus, possible was not time pipeline petitioned the permission FPC for accurately rates to determine setting base expand capacity get gas in order to gas purchases. non-pipeline add for what to one new customer and allocate the entire upon “hypotheses;” cannot be based Rates expansion costs of the to that customer. facts in existence. they must be based on expansion permitted The was but the (1956), Ind. City Indianapolis v. ordered the cost be that tracked to all the 70, 91, 131 N.E.2d 308. pipeline Appeals customers. Court of Rates, as technically whether viewed agreed, noting gas for this one here, or, as an on cost service based commingled pipe- customer was with other service, cost of must reflect a addition addition, line the expansion provid- provided a benefit relationship to service or ed for year non-exclusive use for a two to be or to dis- not unreasonable period during which the would be unduly among classes. Rolled criminate able to other cheaper expansions make may that while each customer rates assume of all benefit customers. The court identical.benefits, each receives receive pointed pricing that use of out rolled-in a being part of the some benefits from disadvantageous somewhat to other older However, when it is clear system. entire customers since must share the cost of benefits, group group equipment for newer customers and receive bear the cost and the rates alone should in return “little visible increase in service.” “incremental” rather rolled must be However, rolling recognizes pipe- that a are no that cost. There cases reflect just line “. a collection of Indiana, analogies can be point but parts, integrated discrete pieces but involving other utilities drawn to situations system serving all its customers.” v. City services. In Brandel Co., 47, supra, 230 Battle Gas Lawrenceburg (1967), U.S.App. 249 Ind. Creek 213, distinguished a sewer hook- D.C. at 46. court upheld the court N.E.2d assessing predo- serving method of rates has been the each class varies because The cost See, g., Principals Bonright, e. as a minate one. J. classes. Residents of differences across Rates, Utility University expensive to serve because their Public Columbia are more class Press, meters, London, 1960; require equipment, large York & see FPC more New numbers calls, repair billings, Power Co. U.S. etc. The revenue Sierra Pacific service enough generated class should total to reim- 76 S.Ct. 100 L.Ed. discus- utility costs and sion rates. for its of reasonable burse for its investors. This reasonable rate return (1952), Co. tional made, The Montana Power 11 FPC 1 had not been indus- to solely a had be built .where new trial customers would have been curtailed. gas more for one customer. In to Residential customers would necessarily case, though fed even the new line into have been curtailed in the pur- absence of was, gas existing pipeline and the there- the gas. chases additional residen- fore, commingled, placed the cost was en- tial customers do receive benefits from the tirely on the one customer because the purchases. appаrent It is that without the gas permitted that customer was amount of storage opportunity provided by pur- the expressly limited to take was the FPC chases, it would have necessary been to foreign regulating government curtail peak days. residential use on More- supplier. over, peak days result largely from “heat- spreading costs across concern sensitive” residential customers who need keep prices as low customers as more fuel on cold days do on possible and reflect benefit all warm ones.9 Industrial on the in terms of more reliable customers service hand, have a fairly consistent demand all are available to all if sources year-round as their use of is not limited can be seen other contexts. In generation comfort, heat for but is Area Rate the Permian Basin Cases used primarily the manufacturing proc- 747, 1344, 312, 20 390 U.S. 88 S.Ct. L.Ed.2d ess. reh. den. U.S. S.Ct. Further, as is contended appellee, prices producers L.Ed.2d could when Kokomo received Panhandle’s curtail- charge gas were based not on their for notice, ment it had two buy choices: costs, upon individual but area-wide deter more or to increase its rates.10 As Following minations. Permian the Su above, stated rates are based on revenue preme Corp. in Mobil Oil Court needed to cover costs. If Kokomo were (1974), 417 94 S.Ct. U.S. provide only the quantity smaller of gas 72, affirmed the Fifth L.Ed.2d Circuit’s8 Panhandle, available it from that smaller strike an refusal down FPC order which quantity original sold at rate would companies allowed had collected exces provide insufficient revenue to meet if they to avoid refunds sive rates used the Therefore, costs. it would have had to peti- exploration pro excess for and increased tion for a rate increase which can Companies already duction. which had assumed to have had a substantial and ad- objected made refunds the order un verse upon effect all residential customers. against In justly sup discriminated them. course, Of election of that option would FPC, stated, porting the Fifth Circuit neglected needs Kokomo’s in- reject “We will not administrative deci dustrial customers and the impact of the merely cake producer’s sion because on community. iced and another’s is not. The crucial fac get tor is that both some cake.” It must also be remembered that if the FPC, at supra Placid Oil Co. v. supplemental gas had not purchased, been That here. The supplemental case Kokomo would have used substitute a purchased primarily the benefit cost 2V2 times than supplemental customers; of non-residential if the addi- The substitute costs would have (5th 1973), undoubtedly 8. Placid Co. v. FPC 483 F.2d Oil Cir. 10.While this is one of the ironies public regulation, the fact remains that utility is entitled recover costs and fair re- upon provides. Thus, party turn the service it 9. Neither makes reference to the fact that greatly service is curtailed the remain- Panhandle’s curtailments based on histori- recognize customers wi'l be Unusually increased to cal volume demands. cold winters spreading the narrower base for just past, might fixed costs require such as the one use of is, therefore, real, very fair return. There supplemental gas for residents even if all other indirect, though benefit to residential categories custom- were curtailed. maintaining ers in a broad customer base. customers; thus, regulation Because to all of individual produc- been tracked cumbersome, particular sup- proved ers appeals began terms of these the FPC very sub- regulating results in a an area-wide basis in plemental cases, savings to residential users. ad- The area stantial rate of which Per- 1960’s.. mian, dition, purchas- supra, typical, these gas, had Panhandle made set two rates for to all es, higher would have been tracked one for newly the costs discovered require encourage result as exploration. However, To different order to customers. gas law when Kokomo makes the demand for lower-priced a matter of encour- incon- dirеct sales incongruous aged unregulated would be and which are by the FPC. The sistent. result of Permian was that may have intend- “[WJhile is, to all there- Tracking costs price gas of new ed to be set at market- fore, bene- reasonable because all customers levels, clearing the methods it used for set- not purchase. The orders are fit from gas new area ting prices made it highly of either the 14th Amendment violation likely significant a gas shortage would the Indiana Constitution. or Art. I of by arise virtue of gas price the new —the “high” price being long-term set below the Analysis Conservation — gas production.13 costs of natural allocating costs all customers While to impact shortage this has been may plentiful in times of be reasonable greatest residential, on the industri- argument increasingly made supply, the al customer. Less than half of the volume and dwindling supply, costs in times of new developed reserves after 1965 analyzed should be from their allocation regulated by pipelines.14 was received Be- point. The current different reference 1962 and tween 1968 total industrial con- from part natural results in shortage of sumption unregulated from intra- was to policy. policy FPC That previous 43.5%; pipelines state increased intrastate monopolistic pric- protect consumers pipelines increased by their industrial sales аnti-competitive practices by ing Because by 62%.15 were not burdened to regulating pipeline distributors unreasonably price ceilings, unregulat- low Phillips keep Petroleum Co. prices down. pipelines easily juris- could ed outbid (1954),347 U.S. S.Ct. Wisconsin pipelines for new reserves. dictional While jurisdiction to 1035 extended FPC L.Ed. residential customers have benefitted in one By as producers as well distributors. by paying very prices past, in the sense low industry was al- time, as a whole losing have suffered virtue “fu- competitive; reg- therefore intensely ready producers ture” reserves intrastate who pushed below producers prices ulation supply industry. turn, That, de- levels.11 competitive factors explore pro- pushed for and These “future” stroyed incentives fact, present . gas. feeling In “. . contracts into the and all users duce new throughout were the effects of shortfalls in availability. reserves written new States, through agencies, regulatory entire their much of the decade [1960’s] eye changed reviewing had since rate with an conditions structures economic part policy ascertaining re- how rates can reasonable be late 1950’s.”12 encourage time pass savings consumption on to con- which in a a desire flected shortage. Language to the profits than allow windfall similar follow- sumers rather might appearing grеater frequency producers be able to who agency competitive prices. court and decisions: at lower MacAvoy, Natural Gas Id. at 961. Breyer 13. 11. Regulation Shortage of Natural Gas and the Producers, (1973). 86 Harv.L.Rev. 941 Id. at 977. 14. Id. at 958.

12. Id. making, of rate

“The old notions available for use energy production.17 crisis, prevailed sought energy before the possessing Industries not capability energy encourage sales and maximize switch to given higher alternate fuels are energy consumption. even Now priority. Whether or not an industry can upon us, energy that a true crisis is we switch to another fuel is not determined surprised would find this continues so, the costs doing but rather whether . goal. be a [Conditions capable a substitute fuel is of serving the longer fa- might necessarily no exist purpose same as natural voring large users with low rates.” Al- Cost, therefore, becoming a subsidiary Corp. v. Georgia lied Chemical Power Co. energy issue to gas’ conservation —or intrin- Ga. S.E.2d sic determining value —in the reasonable- and: ness of rates. Corp., In Allied Chemical rising rapidly “In a time of natural supra, Georgia Supreme Court upheld prices increasingly severe national- new rates which increased the contribution shortages, proposed wide rate utility from industrial to utility’s users rate of not supported which is ac- schedule return only 40% but increased residential ceptable justification cost or other de- contributions 20%. The rational basis to it rates were upheld monstrable for ground should be discarded a rate schedule on the that shortage re- practicable as is nearly which is as to an quired a retreat from rates large that favor equal charge by volume for each volume CutBank, Similarly, consumers. supra, re- category usage within or between each jected percentage across board increases Re. The class of customers.” CutBank in rates because that would bring about (Ohio 1975), 12 Gas P.U.R. 4th 106. Co. “flattening” necessary promote con- result, setting proceedings in rate As servation. Application In of Arkansas Lou- (the “declining tail block” rate more con- Co., 19, isiana supra, Gas n. at a rate sumed, per charge the lower the unit of increase which largest was borne in part by abandoned, gas) has been if not least industry upheld was because the in increase impact. diminished in effect allocated volumes “. present As is the case with Kokomo’s rate dwindling of a resource to ‘human needs’ structure, bringing “flattening” rates to thereby uses . . discouraging ineffi- large line volume users in with residential cient and wasteful consumption over of nat- upheld jurisdic- users has in been various ural reserves where alternative fuels tions “. .to reflect the societal costs can be (Emphasis substituted.” added) utility as well as the costs of waste.”16 Michigan The approved separate actions, setting rate well These as as distinctly higher rates for geographically 467, recognize setting FPC’s Order low diverse customers with one distributor encourages rates for over-consumption Michigan Re. (1975), Power 12 4th P.U.R. a finite resource which is available now 139. grounding While its decision ever-decreasing quantity. Order 467 and facts that geographic each area received clearly its amendments indicate that waste different from different pipeline suppli- Thus, gas is to be avoided. which is to have ers which could be used by its residents end as a use fuel boilers and that cost actual from one generate energy given other forms among supplier’s pipeline higher be- was priority lowest firm customers other, other, expensive, cause albeit are pointed more fuels the Commission out: Application 16. CutBank at 109. See also The occurring same trend seems to be rates; (Okl.1976), Smith, Arkansas Louisiana Gas Co. Developing see 558 Di- electric Corp. Georgia 376; Structures, Allied Chemical v. rection of Electric Rate P.2d 98 Pub.Util. (1976), 396; (1976). Power Co. Ga. 224 Fort. 28 236 S.E.2d Application of Arkansas Louisiana Gas Co. (Okl.1976), Sun Oil Co. P.2d groups, obviously, customers in These con- potential residential “[Additionally, be made portion gas regardless should sumers who must purchase the eastern through price mechanism —of price fuels beyond because alternate aware — them, service providing true cost of their reach.19 industrial custom- economically which are that decisions so Therefore, ers can convert other fuels. 4th made.” 12 P.U.R. can be rational is most reasonable to set rates that are 139, 153. highest largest volume consumers. being defined The intrinsic value In The Institute of Edible Shortening and it to equal providing the cost of Oils v. Illinois Commerce Commission as its worth consumer but ultimate Ill.App.3d Ill.Dec. unit costs of “per energy to the compared designed N.E.2d a rate increase Acceptance alternative fuels.”18 interruptible large force users turn to adjustment is reflected “fuel concept so potential alternate fuels pass utilities to which allow electric clauses” adequate gas customers would be assured of costs the utili- consumers the on to ultimate supplies upheld. volume large obtaining fuel with alternate ty incurs interruptible users were here customers generate electricity. who priority. had lowest curtailment jurisdictions gone beyond Several interruptible than cut off Rather flattening in efforts to conserve rate entirely, the Commission created a new (Cal. Co. California Gas Re. Southern class could into elect entry (SoCаl) 1976), 14 4th 498 P.U.R. the.Cali- willing pay higher were much rates. indicated fornia Public Service The Commission reasoned those inter- structure as an inverted rate approval an ruptibles pass up it who could afford would system, high- a goal. Under such ultimate this to fuel. In option convert another rates; lowest pay priority est decision, the finding this to be a reasonable priority customers must conversely lowest court stated: highest oper- In gas at the rates. buy their a class of users can be denied “If course, this, completely contrary ation poli- to serve completely a rate-making philosophies. traditional to cy making available to another Further, has man- legislature the California , unjust, . un- . . it is neither class to establish “lifeline” the Commission dated discriminatory reasonable nor to those volumes; is, to determine “mini- their priority class to raise lowest average energy residen- needs mum point who can rates to those SoCal, supra, Two at 503. user.” tial so, easily do will convert to another most set; lifeline volume be will then Ill.App.3d fuel.” 45 3 Ill.Dec. form of higher for all other volumes. a rate 821, 826, 359 N.E.2d 236. 502, the deter- at Commission In SoCal vein, incre- ordered similar incremental rolled-in nor that neither mined cer- mental at the level for pricing costs as neither asks the true pricing reflect tain to be used lowest imported classes “Which сustomer question: proper 622-A, Opinion priority customers.20 No. response to likely to conserve most Although adoption of (1972). 48 FPC 723 eco- Borrowing from theoretical prices?” was without system the incremental nomics, reasoned the Commission dissent, urged the costs majority that if demand would least elastic groups with the in, priority would high were rolled users purchasing practices. to alter least able 20.However, requir- FPC, supra, FPC reversed itself on Mississippi at 1347. pricing the distributors incremental in ad- their customers because difficulties implicit appears in these as- to be There ministering The decision such a rate schedule. judgment sumptions as to the same value price pipelines require incremen- inherently of natural desirable characteristics (the distributors) tally their customers cost) (other uses. upheld. subsidizing priority up passed end low users be- to industry’s product consumers and imported gas, priori- cause without the low taxes, thereby deducted from lessening the ty users would have been curtailed. The real options cost conversion. Those . added that “. . it is not unavailable to residential who economically product sell rational to over therefore expected cannot be to conserve in period of time for less than extended its the sense abandoning gas as a fuel. necessarily To so full costs. do results in a They required can be only up conserve . . jus- demand than can be required the level for minimum protec- in terms of the tified resources tion —the so-called lifeline levels discussed available, expended making and a SoCal, supra. greater demand than would exist if the Seen in light, it is unreasonable not product priced were to cover full costs.” charge primary beneficiary supple- 48 FPC at 736. gas purchases mental with their costs. To If the issue of who should bear the cost of do signals large otherwise consumers to supplemental gas purchases were ana- present continue exceed their consump- lyzed not in terms whether custom- patterns. tion tangential ers receive some benefit purchase, perspec- but rather from the conservation, tive of the issue should be CONCLUSION of appellants.21 Any resolved in favor oth- All the cases in support cited of the “con- encourages large er decision users to contin- analysis” servation are either commission ue their traditional dependence be- opinions or court decisions upholding com- cause no sufficient incentive to conserve is appeal. latter, missions on In the given. Industrial customers will see no courts merely had to find that the opinions need to switch alternative fuels were not unreasonаble because the commis- can continue to natural sions had related the issues to a different unrealistically low levels. In fact in the context —conservation rather than costs and present testimony eases there was that one benefits. The PSC has worked within the industry large capac- which had created the traditional in arriving context at its deci- ity switch to other relying fuels has been sion. It is not for this court to set aside a years. on gas in recent In the absence of ruling commission simply because it disa- necessity, no expect there is reason to any- grees with the by method which the com- pressure to conserve. Economic should mission arrived at its “. decision: . .it have an on small as effect users well. As is result reached and not the method prices go up, likely residents ‍‌​​​‌​​‌‌​​​​​​​​​​‌‌​‌​‌‌‌​​​‌​​‌‌‌​​​‌‌​‌​​​‌​‍will be more to employed controlling. which is It is not the conserve. there comes point theory but impact of the rate order less; which can use no minimal con- which counts.” FPC v. Natural Gas Pipe- sumption is essential for home and health line Co. 575, America 315 U.S. protection.22 Industry can be forced to 736, Or, S.Ct. L.Ed. 1037. by stated L. raising prices switch alternate fuels 86. Ayres S. & Co. v. Indianapolis point cheaper to the it Power where is Light (1976), Ind.App., Co. gas. abandon reliance on There may be N.E.2d rate-making assistance to cushion the costs of decisions are by conversion intended stat- funding the form of ute to through the sale of be within the commission’s special Further, development expertise. tax free bonds.23 it review, standard of there- possible is that the added fuel costs could be fore theory 23.See, g., Such a resolution does not rest on a seq. e. IC 18-6-4.5-1 et Kokomo according ability pay, of cost allocation Development has an Economic Commission. theory appellees appellants. attribute to part pur-

22. The dilemma occurs in because the pose fully is to deter waste but to nevertheless utilize the resource. Accordingly, the sub- Commission’s actions does authorize . . on matters were judicial judgment not unreasonable. decisions are stitution discretion nor to Commission affirmed. committed reviewing that tribu- require it

does ROBERTSON, J., concurs. or correctness in the wisdom nal concur decision. Our func- the Commission’s Dissenting Opinion STATON, J., a determina- ... is limited to tion follow. choice made that the actual tion STATON, Judge, dissenting. consideration was based on a Commission reasonably the relevant factor and I policy adopted by dissent. The rate discharge statutory of its related supported by Commission is not sufficient duty.” 351 N.E.2d just evidence to establish a and reasonable rate. the Commission Although regret we detail the conservation consider in

did policy question The rate before the Com- supplemental and the allocation analysis tracking or “rolling-in” mission is whether perspective of best from the gas costs supplement just cost of maintains a of gas promote conservation designed and reasonable rate for all classes of Koko- least able to use well-being of those mo ratepayers. policy question This rate fuels, the Commission the decision of to the public so crucial interest arguments stand. Confronted must acknowledged its hoc na- Commission ad an FPC deci- wisdom of the economic over ture: sion, Supreme Court de- the United States Future Pur- Supplemental “14. Gas murred: This Commission stated in its chases. its role step outside “For the Court 26, 1975, entered Order November Gas construing this statute [Natural Cause # and reiterates in this itself the debate on Act], and insert into finding, this has been interest, would and the economics aware for some time of the na- acutely leg- into the unwarranted intrusion be an shortage of natural in rela- tionwide FPC Texa- forum . islative gas. During the demand for such tion to co, (1974), 417 U.S. S.Ct. Inc. period shortage, Petitioner should 2315, 2328, L.Ed.2d 141. best utilization of its possible make source It should also be historical found, the Commission As possibilities of to the alert used resi- commingled; will be gas futuro, appearing, sources of serve Its essential dents. such advantage to take prepared days. This peak end, sources. Towards this whenever expensive more merely replaces much served, public interest shall be this Com- would have propane, the costs give ready approval stands mission basis users on the of tracked to all been in such matters. sup- unchallenged order. earlier interest, public “We think that supplemental gas of substitute planting however, would best be served in residential cus- benefit real produces treat- quantity of forseeable future individual the same providing tomers supplementary of each such future price than would at a much lower purchases, purchases future be- indeed Had Panhandle pay. had otherwise have By come available. individual treatment would have purchase, costs made customary proceed- formal Finally, pur- we mean to all customers. tracked been alia, include, hear- ings public inter gas enabled Ko- supplemental of the chase evidence, ing, cross-exami- submission of curtailments which would to avoid komo by the of the Public Coun- charges to resi- nation Office in increased have resulted any intervening parties, and plus selor and the cost re- through dential consumers right any member statutes. of the rate turn mandates testimony large give present for the record. were added to the industrial rate. Therefоre, applicable herein is our Order Finding “15” the Commission recites that only proceedings instant and is not ratepayer industrial “who subject is and should be construed intended curtailment is already bearing the costs of purchases of any authorization for future capability facing alternate fuel reduced Order of the Public supplemental gas.” operating schedules, which could cause eco- Commission, Cause No. Service nomic hardship and resulting loss of em- 24, 1976. Approved March ployment . We find it would be inequitable discriminatory to impose to the ad hoc nature of the rate In addition the total supplemental additional cost of be made in each policy decision to supplies gas solely upon very class of gas, the Com- supplemental of additional already customers who are bearing the unusual the eco- mission concedes circumstances nomic shortage burden of gas.” However, of natural curtailments.” of a “nationwide very there is little Yet, does not the deci- evidence in the evidence record that usual reflects the sion of the Commission methods extent this burden so that it recovering supple- equated equitable the additional cost of could be terms. purchases should be used. mental There not sufficient evidence to sup- The evidence does show that Kokomo has port the conclusion the Commission that supply of low-cost pipeline sufficient just and reasonable rates have been estab- ratepayers except on a serve residential by using lished “tracking” or “rolling- days. primary pur- few need to peak particular in” method in this purchase of expensive supplemental gas is to chase supplemental gas by Kokomo I Gas. would service to in- avoid reverse and remand for hearings. further ratepayers. ratepayers Residential dustrial gas supply use of Kokomo’s while the 38.2% ratepayers

industrial use 46.8% Kokomo’s supply. percentage of ratepayers

total revenue from residential per- ratepayers while the industrial

46.9%

centage of total revenue is 37.8%. given by the

One reason Commission for “tracking” adopting the usual method of Kline, Adrian KLINE and Reta recovering cost is Appellants-Defendants, commingled with the How- evidence, ever, there is no rates are Kramer, F. Richard KRAMER and June impossible adjust gases when different Appellees-Plaintiffs. commingled. There is no evidence ‍‌​​​‌​​‌‌​​​​​​​​​​‌‌​‌​‌‌‌​​​‌​​‌‌‌​​​‌‌​‌​​​‌​‍that which is incurred reliable service cost No. 3-877 A 197. shortages gas supply substantial could Court Appeals Indiana, adjusted among not be translated into Third District. Here, ratepayers. classes of the additional being made March primarily reliable service to one gas shortage class while a “nationwide” ex- class,

ists. This the industrial ratepay-

er, supply uses almost half of the total utility,

distributed Kokomo Gas. given by

Another reason “tracking” adopting method is the placed

additional burden that would be

upon the ratepayer industrial the cost

Case Details

Case Name: LaRowe v. Kokomo Gas & Fuel Co.

Court Name: Indiana Court of Appeals

Date Published: Mar 16, 1979

Citation: 386 N.E.2d 965

Docket Number: 2-476 A 155

Court Abbreviation: Ind. Ct. App.