*1 limiting interested ruling an Commission’s to cross-examine or of- opportunity
person’s precluded dis- “has rebuttal submissions
fer . disputed material facts
closure by the fair determination
necessary for Thus rulemaking.”55 congressional intent evinces a
section 18 in those circum- intervention
stay judicial proceeding has ter- agency
stances until appellants are afforded Because
minated. time, remedy at that we find adequate
an presently be unsuitable
their claim
judicial review.56
III. CONCLUSION conclusion, judgment of the dis-
In
trict court is
Affirmed. EASTERN PIPE LINE
PANHANDLE
COMPANY, Petitioner,
v.
FEDERAL ENERGY REGULATORY
COMMISSION, Respondent, cases).
(three 78-1356,
Nos. 78-1630 and 78-1960. Appeals,
United States Court of of Columbia Circuit.
District
Argued April
Decided 20 Dec. 1979.
Gardner,
“Rulemaking
Id.
record” is defined as “the
56. See Abbott Laboratories
v.
rule,
136, 148-49,
purpose,
its statement of basis and
U.S.
87 S.Ct.
Raymond Shibley, D. N. O’Neill, Washington, whom Brian D. C., brief, petitioner. was for D. on Energy Federal Nygaard, Atty., Kristina Commission, C., Washington, Regulatory D. Sol., Shapiro, respondent; Howard E. for Commission, Regulatory Energy Federal Weller, J. A. and Barbara Taube Steven Energy Regulatory Com- Attys., Federal C., mission, were Washington, D. brief. WILKEY, WRIGHT, requires which in turn Judge, special transporta- Chief
Before *, arrangements bring tion in order to Judge and LARSON United those Circuit supplies systems. into their A second con- Judge for the District Senior District States sequence shortage resulting cur- of Minnesota. pipelines
tailment has been that have sub- Opinion filed Circuit Court capacity stantial excess which could be *3 Judge used, alia, WILKEY. transport inter to gas natural pipeline users. petitions other The instant Opinion concurring part dissenting attempts by involve Panhandle and the part by Judge J. filed Chief SKELLY grapple problems Commission to with aris- WRIGHT. changed from these conditions.
WILKEY, Judge: Circuit A. No. 78-1356 petitions, In these consolidated On 30 June 1977 Panhandle and its whol- Company (Panhandle) Pipe Eastern Line subsidiary, ly Compa- owned Trunkline Gas challenges orders issued the Federal En- ny, joint application pursuant filed a to ergy Regulatory (FERC). Commission Two 7(c) of the section Natural Gas Act3 for a petitions1 challenge of these FERC orders public certificate convenience and neces- requiring through Panhandle to flow 1,800 sity transport up to to Mcf of natural transportation 1,200 gas gas revenues to its resale on a firm basis and Mcf on a best purchased redelivery customers via its unrecovered efforts basis for eventual to Lib- by-Owens-Ford Company (LOF). gas (PGA), account while The term prohibiting the transportation agreement of the eight was flow-through transportation of new costs. years. proposed by The rate Panhandle and challenges petition third the Commis- Trunkline for the transportation service sion’s requirement selective waiver of its $7,650 month, per subject adjust- was tracking authority allowing Panhandle to ment. charged track it by decreased rates other pipelines, permitting pass but not it to granting The Commission issued its order charged
increased rates Panhandle. For requested certificates of conve- discussed, the reasons to be we set aside the necessity transportation nience and for the 78-1356, order part in No. set aside in services on 16 December 1977. The certifi- 78-1630, part affirm in the order in No. granted two-year period cates were for a affirm the order in No. 78-1960. only.4 The approved Panhan-
dle’s and proposed transporta- Trunkline’s charges, adjustment. tion after a minor I. BACKGROUND order, Commencing In the shortages around 1971 de- same the Commission stat- veloped supplies ed: gas of natural avail-
able to
pipelines, resulting
interstate
in cur-
The rates in Docket No. RP 75-102 [Pan-
tailment of deliveries to their customers.
handle’s 1975
provide
for the
case]
As a consequence
pipe-
of the reduction in
recovery
justifiable
of all
gas
costs for
gas supplies,
users,
line
gas
natural
includ-
transported
be sold or
but do not include
ing pipelines
Panhandle,
such as
have had
transportation
gas
proposed
to seek
supplies
more distant
gas,
of natural
herein. Since Panhandle will recover its
* Sitting by designation pursuant
transportation
by jurisdictional
pipelines
to 28 U.S.C.
292(d).
gas
producers
natural
sold
certain
from the
onshore domain and the offshore nonfederal
1. Nos. 78-1356 and 78-1960.
domain to nonresale industrial and commercial
high priority
customers for
uses. See FPC Or-
2. No. 78-1630.
RM75-25, aff’d,
der No.
Docket No.
Amer-
717f(c) (1976).
3. 15 U.S.C.
FERC,
U.S.App.D.C.
ican Pub. Gas Ass’n v.
(D.C.Cir.1978).
Tuscola,
pipelines,
Two other
Tar-
Illinois.
each Mcf of sales included fixed
to
Co. and Tennessee Gas
pon Transmission
gas
the extent
sold more
Panhandle
than
Co., were also involved in the
Pipeline
contemplated
original
when the
rates were
arrangement.
Panhandle
filed, the additional fixed costs recovered
$81,800
pay
per
was to
month for the trans-
would offset
the additional
plus
proportionate
share
portation service
costs.
payment
Tarpon
for off-
Trunkline’s
rehearing
May
Panhandle filed for
on 16
transportation.
shore
Total cost to Panhan-
In
Panhandle strenu
application
1978.13
new
service is
dle for the
ously objected
crediting requirement
per
claimed
from
million
to be
$1.5
$2
previously imposed upon
pro
it in the LOF
year.
ceedings.
company argued
that disal
previously
Because the
had
lowing flow-through of
Trunk-
required
transpor-
to credit new
Panhandle
proceeding
requiring crediting
line
while
pur-
tation revenues
its unrecovered
proceeding
revenues in the LOF
was incon
account,
petitioned
chased
sistent,
penalty
and constituted a double
proceeding
sought
intervene in the
argued
Panhandle.
the Commis
have Trunkline’s certificate conditioned so
sion’s reliance
recently
on Panhandle’s most
permit
transporta-
as to
approved
misplaced,
rate case was
because
tion costs to be included as
years
provide[d]
it was “several
old and
no
costs recoverable
its PGA clause.11
justification
assumption
for the
that Pan
*5
April
On 17
1978 the Commission issued
paying
handle’s customers are
for
costs
granting
its order
Trunkline’s certificate
presently being
company
incurred.” The
denying
request.12
Panhandle’s
then requested
hearing
a
to show
it
that
explained
crediting
that the
was not recovering its costs of service and
transportation
applied
revenues was
to
adequate
argued
an
return.
transportation arrangements
short term
to
that it was inconsistent for the Commission
pipelines’
“assure
customers share
require
provision
to
a “tracking”
pass
in the revenues received from such trans-
costs,
transportation
increased
but not to
service,
portation
since the rates that
pass on
company
increased revenues. The
pay
customers
are based on costs and reve-
objected
also
the requirement
that it file
nues
pipelines’
established in the
most
a
proceeding
section 4 rate
in order to re
approved
recent
rate case.” The Commis-
costs,
transportation
cover its increased
sion then
recovery
reasoned that
of trans-
cited two recent Commission cases where
portation
through
purchased
gas
pipelines were allowed to track incremental
adjustment provisions
permitted
is not
un-
filing
costs without
a
4 rate in
section
pipeline’s
less the
tariff includes a “track-
crease.
It also made reference
to this
ing” provision. Panhandle’s tariff does not
court’s
Light
decision in Richmond Power &
provision.
include such a
Because the
FERC,14
v.
affirming a Commission order
proceeding
Trunkline
long
concerned a
term
require
that did not
downstream electric
transportation
(ten years),
service
the Com-
utilities to absorb additional
transmission
mission determined that “if the cost to Pan-
Finally,
costs.
handle
Panhandle maintained that
for the
per-
service
by
speculating
formed
the Commission erred in
precludes
Trunkline
earning a
return,
reasonable
Panhandle’s increased costs could be recov
Panhandle should con-
sales,
submitting
general
sider
change
fil-
ered
its increased
since the
4(e)
under
gas
the Act.” The
transpor
cost
Panhandle for the
Intervention,
reprinted
Application
reprinted
11.
Rehearing,
Petition for
for
in J.A.
S.ee
J.A. at 114-18.
at 127-32.
(17
U.S.App.D.C.
12. Trunkline Gas
Docket
No. CP78-43
While by Stingray transported was Louisiana pur- increases in the case of tracking rate (Stingray), Pipe- Natural Gas Pipeline Co. No. . Trunkline, chased costs Order (Natural), America line Co. of elements, did not extend to other cost redelivery for eventual and Panhandle costs, including transportation such as are of the location of deliv- Northern. Because Although it sought here Panhandle.” gas, there is ery redelivery points passing on of prohibited by Panhandle and actual no im- the Commission did not feel it its serv- charge no additional therefore require flow-through of revenues Rate proper to to Panhandle’s FERC ices. Pursuant prevent T-18, account “to Panhandle a pays via PGA Northern Schedule being unjustly expense representing enriched at the the total monthly charge from *6 event, Stingray, Natu- charges customers.” In of transportation of Commis- ral, pays in turn objections sion stated that Panhandle’s to and Trunkline. Panhandle amount, pursuant crediting provision should not be to Trunkline the identical pur- T-20. FERC Rate collaterally proceeding, “in to Trunkline’s Schedule sued where Thus, payable transportation charges peripheral only.” as to are of interest Northern, be sim- by appears Panhandle distinguished the two Commission Trunk- ply a between Northern and conduit by that were in- cases cited Panhandle as line. consistent with the Commission’srefusal to company to track its increased allow a February On 6 1978 Panhandle filed transportation costs. Those two cases in- proposed change In its rate for Northern.18 tracking storage, letter, volved and were only cover Panhandle referenced unique to be limited to their facts. The decrease in Trunkline’s distinguished rates, then Commission Richmond but the attached worksheet made grounds: (1) negoti- on two it was proposed Power clear that the change reflected a settlement, (2) significant ated it “involved a coor- charge increase in the to North- by many response spe- dinated utilities to a ern higher paid Sting- based on a rate to be emergency cial situation at the behest of a ray. Co., (25
15. Trunkline Gas 17. Northern Natural Gas Docket No. CP78-43 Docket No. 1978), reprinted reprinted (30 Sept. 1977), in J.A. at 135-39. Sept. in J.A. at CP77—450 72-76. Id. at 136. Reprinted in J.A. at 79-83. Docketed at No. RP78-39. filing,19 February changes certificate to track second submitted 9 approved rates, involved a acceptance in its and that service Trunkline and related rate Trunkline’s decrease did not Panhandle for Central Illinois Public Ser- automatically entitle Panhandle to an in- (CIPSCO).20 vice Co. Panhandle’s cover let- change, Trunkline’s rate crease. in accord- ter general referenced Trunkline’s rate de- regulations, supported by ance with was crease, only and the tariff sheets reflected evidence, while cost-of-service Panhandle’s that rate decrease. was not. That the increased charge approved to Panhandle had been
On 10 March 1978 the Commission the Commissiondid not entitle the accepted proposed company letter order rate de- CIPSCO, rejected pass crease as to but the in- on the increases the absence of an crease as to Northern.21 The Commission approved tracker or a eost-of-service show- explained that Panhandle have did not ing. The held had dis- tracking authority to reflect the rate accept voluntarily cretion to filed rate changes, adjustment but the CIPSCO consumers, reject decrease to benefit and to accepted anyway, proposed since the simultaneously a rate increase. It stated equal was to or lower currently than effec- requirements appropri- that waiver of its tive rates. The increased rate for Northern shown, good ate for cause but that Panhan- rejected was tracking authority. for lack of showing dle had not made such a in this applied case. rehearing for a on 10 April 1978.22 It contended petition Panhandle filed its for review as charges contained the revised tariff July to these orders on 6 sheets were obligatory under Panhandle’s T-18, Rate approved by pri- Schedule were II. THE MERITS order, or Commission and therefore not sub- ject agreeing It is hard to resist with Panhan- partial approval partial rejection basis, dle that any evidentiary appear without the orders under review hearings, procedural safeguards, ways put squeeze various finding support- on the ing such pipeline argued pipeline, action. The although that it to be sure the existence improvident was deny and erroneous to degree any pinch depends on which proposed increase when the actually several states of the world ex- approved Commissionhad appli- Trunkline’s general, ists. In the Commission appears to cation for the identical amount. Panhandle quite take a liberal view of its own authori- submitted that it was error for the Commis- ty require flow-through revenues, requirement sion to waive tracking imposing vigorous while rather procedural permit filing of rate reduc- standards on Panhandle in its effort to re- tions, and at the same time refuse to waive cover its additional costs. Whether the var- *7 them as to rate increases. point- Panhandle procedures ious were valid or fair is a rath- ed out that it would significant suffer a er question. Nevertheless, close we think out-of-pocket permitted loss unless it were that the crediting requirement revenue in pass through charges. the increased No. 78-1356 must be set aside as unauthor- 7,
The ized section application denied the violative of Commission for rehearing May explained regulations, premised on 9 1978.23It on solidly based that record, Panhandle had no under its findings in the and unreasonable. Reprinted Application in Docketed J.A. at 84-90. at No. for Reconsideration and Rehear- ing, reprinted RP78-40. in J.A. at 93-97. Co., Pipe 20. Panhandle Docket No E. Line Co., Pipe 23. Panhandle E. Line Docket No. (19 1977). Aug. CP77-47 . (9 May 1978), reprinted RP78-39 et al. in J.A. at 99-103. Co., Pipe 21. Line Docket No. E. (10 1978), reprinted CP77-39 et al. Mar. J.A. at 91-92.
H27 power does not objections adjustment to the Com- authorize the Since largely 78-1960 relate order in No. charged mission’s customers not receiving the the revenue credit- inconsistency with to its services to be certificated. We also find great arguments ing policy, that the order violates the Commission’s disposition of No. measure defused our accounting regulations, does not rest on claim- To the extent Panhandle is 78-1356. soundly findings based in the record and is to recover increased ing to be entitled unreasonable. Since we reverse on these 191, via Account even transportation costs grounds we do not find necessary crediting, we" in the absence of reach Panhandle’s contention that the order refusal. As to No. affirm the Commission’s discriminatory was prece- contravened 78-1630, that when a we think dent. charges merely accounting an conduit for pipelines, proper other case for made 7 Authority Section therefore set aside presented. waiver is We disallowing Pan- portion that of the order (a) Ratemaking Under the Natural cost, right to track its increased handle the Gas Act affirming portion approving that while purpose of the Natural Gas Act was rates. filing of decreased just to “underwrite and reasonable rates to A. No. 78-1356 the consumers gas.”24 of natural It was Panhandle contends No. 78-1356 complete, framed “to afford consumers transpor- requirement that it credit its permanent protection and effective bond of 191, especially tation revenues to Account charges,”25 from excessive rates and and at prohibited charging from when time, the same to ensure that rates set be (1) similarly, violates “consistent with the maintenance of ade- Act, (2) roughshod runs section quate public service in the interest.”26 regulations concern- over the Commission’s Three interrelated sections constitute the clause, (3) is in various the PGA “comprehensive and effective regulatory unfair, discriminatory, contrary ways 27Congress regard scheme” created with precedent. to most Commission coun- ratemaking. provides ters that it is authorized under section 7 to that to un- certificates, impose such conditions on “transportation dertake the or sale of natu- necessary prevent over- the condition was gas,” entity ral an must first obtain “a fixed by Panhandle of collection public certificate of convenience and neces- violated neither Commission the order sity by the In issu- issued Commission.” regulations precedent. nor certificates, ing such the Commission has “the to attach . . . such rea- Although objective of the Com conditions as the sonable terms and fashioning crediting mission in the revenue necessity may require.” convenience laudable, requirement may be the order 7, a Once rates are authorized under section we conclude that must be set aside because conditioning gas company may section 7 natural file for an in- the Commission’s Comm, Comm’n, 5249, Foreign v. Public Serv. on H.R. 77th 24. Atlantic Ref. Co. Commerce 388, 1246, 1253, 378, Cong., generally 79 S.Ct. H.R. 360 U.S. 1st Sess. 18-19. See (1959) (citing Hope (1941); Rep.No. Cong., FPC v. Natu- L.Ed.2d 1312 77th 1st Sess. S.Rep.No. 320 U.S. 64 S.Ct. L.Ed. Cong., ral Gas Sess. 77th 2d (1944)). *8 Pipe 27. Panhandle E. v. Public Serv. Line Co. 25. Id Comm’n, 507, 520, 332 92 U.S. 68 S.Ct. (1947). L.Ed. 7(c), 128 Act 52 Stat. 825 § 26. Natural Gas 717f(c) (current (1938) at 15 § version U.S.C. language by (1976)). the 717f(c) (1976). The deletion of this 28. 15 U.S.C. § 7 was not intended to § amendment 1942 purpose. change congressionally declared 717f(e). 29. Id. § Hearings Before the House Interstate and See 1128 services, company provide The “addi- under section 4.30
crease thirty days file its rates before covering must fixed tional revenues same then go may into effect.31 The Commission overcollections.40 costs” are suspend the new rate schedule for five claims that if in fact the Com- Thereafter rates months.32 the increased high, it mission believes rates are too may may be collected but the Commission the customary procedures must follow un- require a bond to of “in- ensure refunds 5 of the permits der section Act which it to charges by rates or its decision creased hearing” “after only only act after a justified.”33 not burden found The finding that Panhandle’s overall are rates in section 4 is on the proof proceedings unjust.41 The argues Commission that since gas company.34 natural crediting the revenue condition was im- hand, unjust On other if rates or posed pursuant section Commission’s unreasonable, may adjust power, requirements hearings section pursuant them This section 5.35 section findings apply.42 do not Commission, provides “[wjhenever underlying premise The of the Commis- a hearing after . . . find that shall argument sion’s is that it had unreasonable, rate unjust, ... is under section to condition the certificate unduly discriminatory, preferential, require crediting, as the long so just shall Commission determine the was “supported by condition soundly based reasonable rate . . . and shall fix the findings in record” and was reasona- adjust- same order.”36 5 rate Section do interpret ble.43 We section so only,37 ments be prospective and the expansively. Commission not order rate increases (b) Scope of the the company unless has a new filed rate Conditioning Power schedule.38 language 7(e) The actual of section case,
In the instant the Commission has broad granting indeed. states that attempted to effectuate policies of the “The certificates: have Natural Gas shall by mandating Act a flow- to attach to the through of issuance of the revenues to resale customers as and to the rights a condition certificate exercise on a section 7 granted certificate. thereunder such has reasonable terms implicitly determined conditions permitting Panhandle to convenience retain necessity may require.” these revenues would In the absence Act, allow to be “unjustly of sections and 5 of the enriched this broad expense of conceivably consumers.”39 Since theoreti- mandate could ad- authorize cally Panhandle already recovering justment from not involved in the actual prior rates set in a proceeding. settlement the fixed certificate But section 7’s capacity permits unused conditioning power broad must be read in 717d(a) 30. Id 717c. (1976). § 38. 15 U.S.C. 717c(d). Id
31. (25 39. Trunkline Gas Docket No. CP78-43 1978), Sept. reprinted (explaining in J.A. at 136 717c(e). 32. Id. § crediting order). basis of revenue in the instant Id 33. Respondent 40. Brief for at 28. 34. Id 41. Brief of Petitioner at 34. Id § 717d. Respondent 42. Brief for at 28-30. 717d(a). Id § Id. at 17-22. Comm’n,
37. Atlantic Ref. Serv. Co. v. Public 378, 389, 360 U.S. 79 S.Ct. L.Ed.2d 1312
H29
(ii)
Against
Protections
Regula-
Erosion of
4 and 5.
In that
conjunction with sections
Rate
tory Lag
Instability
and
context,
we believe that
three reasons
for
not extend to
conditioning power does
the
Act’s
Although
principal purpose
the
is to
approved rates
for
adjusting previously
against
rates,
protect consumers
excessive
a
in the
not before the Commission
services
corollary
is to
purpose
allow natural
proceeding.
certificate
relevant
companies
cost of
a rea-
their
service and
Recognizing
rate of return.45
that
sonable
of
Role of Section 5
(i)
the
Emasculation
companies
interest
it is
that
reading
First,
would
expansive
the more
high
revenues maintain
adequate
receive
5
the role of section
effectively emasculate
service, Congress designed sections
quality
ratemaking
Any time the
scheme.
in the
regu-
protect companies against
4 and 5 to
that
good
had
reason to believe
provide a
latory lag46
degree
and
of cer-
unjust or unreason-
pipeline’s
rates were
sec-
tainty
their rate schedules. Under
granting
able,
simply condition
it could
4,
has
a new rate
company
tion
once a
filed
adjustment
certificates on the
of new
statutory sus-
and the five-month
schedule
rates,
only
to terminate
those
condition
period
elapsed,
go into
pension
has
the rates
proceed-
a new rate
when the
filed
subject
obligation.
to a refund
effect —
Thus,
There would be no
under section 4.
proceedings
should administrative
to use section 5 so
longer
need for the Commission
companies
take
than five
are
months
pipelines
requesting
against
of reve-
long
protected
continued
additional
loss
instead,
approved by
could nues. Once rates are
certifi-
certificates —
proceedings,
cate or in
4
the Com-
section
reduc-
simply condition certificates
change them
sec-
may
only
mission
after a
pipelines,
and shift
burden
tions
hearing
specific findings
tion 5
and
previous
affirmatively
show
unjust
or unreasonable.47 Section
just
and reasonable.
rates continued
be
prospective
5 rate reduction orders
stopgap
to a
Section 5 would be reduced
compa-
only.
stability;
This ensures rate
device,
unjust
necessary
reducing
or un-
for
previously ap-
receiving
nies
count on
only
rates
when no new certifi-
reasonable
proved revenues
the threat of an
without
were
We
filings
being
cate
made.
do not
requirement
a later
indefinite refund
7
meant to reduce so
think that section was
date.
5,
role of
sharply the
section
therefore
adopt
expansive interpre-
Interpreting
conditioning power
decline to
FERC’s
adjustment
previously approved
allow
conditioning power.44
tation of the
could,
course,
supra.
a more
45. See
26
44. One
take
limited
note
scope
7(e)
than
§
view of
does
Commission,
disputed
FPC,
still sustain the
or-
Algonquin
v.
Gas Transmission Co.
provide
219,
The narrower
215,
952,
der.
construction
U.S.App.D.C.
175
956
534 F.2d
the strictures of
5 could be avoided
(1976)
§
(referring
protections).
to 4§
crediting
unanticipated
only
revenue
when
relatively cost-free
are to be received
47. See Atlantic Ref. Co. v. Public Serv.
pipeline from
services. Such
certificated
Comm’n,
378, 389,
1246,
392,
360 U.S.
79 S.Ct.
interpretation might not emasculate the role
an
(1959);
Interstate Gas
L.Ed.2d 1312
Colorado
fully as
broad
5 so
does FERC’s
construc-
§of
FPC,
943,
1944),
(10th
v.
142 F.2d
Co.
Cir.
tion,
support
crediting
and would still
aff’d,
581,
829,
324 U.S.
65 S.Ct.
89 L.Ed.
scope
expanding
of 7 in
this case. But
§
FPC,
(1945);
Sierra Pac. Power
v.
cf.
Co.
significant-
more limited fashion would still
142,
605,
U.S.App.D.C.
223 F.2d
additionally
ly
role of
dilute
erode the
§
(under
(1955)
Act —vir-
Federal Power
protections of
See notes 45-52 and
§§ and 5.
tually
Act —a
identical
5 of Natural Gas
text,
accompanying
pp.---of
198 U.S.
finding
prerequisite to
of unreasonableness
is a
pp.
App.D.C.,
1129-1130 of 613 F.2d infra.
.
aff’d,
rate),
Commission modification
filed
somewhere,
must be
The line
drawn
350 U.S.
76 S.Ct.
rates eliminates stability destroyed is because they may swoop. proceedings, Rate or rate certificates filed, immediate is any time a certificate at a adjusted by the Commission after only be previously ordered as to may be reductions unreasonable, finding unjust, are reve- against Protections approved rates. rate.49 It not the lowest reasonable or delay are by administrative nue loss caused ap- after rates have been would be ironic thirty- seriously diluted. In addition theoretically just and reasonable proved as rate sus- day filing period and five-month 4 to allow the Commission under section Act, by the a pension period prescribed crediting or other reduce them revenue the revenues pipeline deprived would be finding that specific means without a previously approved during rates from just and reasonable.50 longer rates are no new section 4 necessary prepare time adopt the wider We therefore decline filings.48 expan- Because the Commission’s 7 construction of section that would do conditioning power sive view away requirement with the section 5 largely extinguish protections of sec- these findings reducing hearings and before adopt we refuse to it. tions and rates.51 Require- (iii) Circumvention Hearings Findings and ments For these reasons we hold that FERC 7 certifi- may not as a condition on a section Finally, reject interpreta- we the broad require adjust previ- cate tion of section 7 because it allows circum- cus- ously approved by the Commission for requirements of a hear- vention of section receiving the services to be cer- tomers not findings justness specific as to and existing rates. The law tificated.52 reasonableness of met, filings requirements Preparation apparently finding there is no § for new 4 of 5 are § consuming. interpreta- impose can be time If FERC’s need to rate reductions certificate correct, condition, may straightforward loss of tion of 7 were to eliminate § in a be done grant time revenues between the and could of certificate manner under 5.§ gas company proceedings, § a natural prepare filing seek- a “defensive” before attempts “quickly Judge Wright ing panies, certificates, We com- new certificates. decline force dispose!]” raised of the serious issues seeking transportation when or other by claiming that rates Commission’s are not order preparing mas- to choose between adjusted at He claims that “[r]ates all. filings risking sive rate addition- beforehand or adjusted; only are not the size of future rate during imposition preparation al revenue loss of new changes purchased gas via account is af- filings 4§ after of a revenue credit- Concurring Dissenting Opinion fected.” ing requirement. - U.S.App.D.C., at of 198 at 1146 of 613 F.2d. This is a difference without supra. 49. See note 47 order, distinction. Under the Commission’s quite unseemly It not be so to condition placed previ- a certificate on reduction of other rates (the purchased gas Account 191 unrecovered ously yet just approved certificated but not as account) against any gas price to be offset question and reasonable. That is not before us. aggregated price decreases. increases with previously The rates here reduced had been subsequent When the six-month approved by the Pipe Line E. issues, adjustment order the net result is a Docket No. RP75-102. lower rate than that which resale customers pay. tinkering would otherwise with is argument 51. An could be made that the condi- previously approved for resale rate schedules permissible tion before us 5§§ would be under objectionable. customers that we find imposed appropriate hearing and if and after an say point We think it fair to that a focal findings. The Commission could consider disagreement Judge Wright our proper is the justness pipeline’s and reasonableness of a credit- light part characterization structure in of new revenues as ing lenged by 7(e), order. He views the essence of the chal- hearing required of the certificate “govern[ing] proper findings mandating as the use of reve- order enter before reve- generated crediting. nues from a new service.” Id. at- nue Since the Commission did not U.S.App.D.C., F.2d. Be- procedure here, 1144 of 613 question of 198 follow such a squarely us, pipeline’s arguably cause the rate of return before do not rule on we do, crediting however, utility practical We it was be- it. the same after revenue doubt the hybrid hearing any transportation of such a revenues were re- device. Once the fore (c) cant and the Case Law Commission can arrive at a keeping rate that is in with the great many cases cites a The Commission necessity. convenience and The Con- of its the “considerable breadth” to show *11 7(e). gress, 7(e), in section has authorized the Com- conditioning authority § under distinguishable from the' mission to condition The decisions certificates in such hand, not find them at and we do case public manner as the convenience and controlling. necessity may require. pro- Where the posed price keeping is not in with the initially Supreme FERC cites the Court’s public interest because it is out of line or Refining Atlantic v. opinion seminal Co. approval because might result in a (CATCO).53 Public Commission Service triggering general price of There, rises or an declared that the Commis- Court give scrutiny applicant’s existing sion should “a most careful increase in the price pro- responsible reaction to initial by reason of “favored nation” clauses or 7.”54 The posals producers of under otherwise, § the Commission in the exercise delay that the interminable Court noted might of its discretion attach such condi- proceedings, 5 “the fact involved in section necessary.57 tions as it believes given that the Commission was not 7,” suspend power to initial rates under § The Court noted that in allowing the a and the absence under section 5 refund of Commission to attach rate conditions on protection important “it the more make certificates, given 7 only scope “§ . that ‘this crucial sale should not necessary single statutory for ‘a scheme permanently be certificated unless the rate under which all rates are established initial- level has been shown to be ly by gas companies the natural . ”55 appropriate interest.’ Without rate subject being by modified the Commis- ” certificate, conditions in the “a windfall for 58 Further, “[sjection sion.’ procedures 7 gas company consequent the natural with a in such situations thus act to hold line squall for the consumers” could result. The adjudication awaiting just of a and reasona- Congress Court found that did “[t]his rate.”59 ble 56 not intend.” continued,
The Court
generally
other decisions cited us
ex-
is,
course,
pand
7(e)
or refine this
conditioning
There
of
available in such a
section
situation,
appli-
a
which the
power regarding
method
rates and
pro-
contractual
ceived, Judge Wright suggests
5
not
§
the rate reductions are limited
the amount
emasculated, protections against regulatory lag
significantly
of
undercuts
credited —
instability
eroded,
and rate
are not
policies
4
of
and 5 as we have here
§§
hearing
finding requirements
of 5 are not
outlined.
Id.
U.S.App.
at---of
circumvented.
D.C.,
198
378,
1146-1147 of 613 F.2d. He submits that
1246,
53. 360 U.S.
79 S.Ct.
As to rate
rates are set
tial
section principle
rates,
against
have
excessive
other
sumers
adjudication
awaiting
the line
“to hold
used
scrutiny
than the Commission’s section
rate.”61
just
reasonable
rates,
possibility
is the
of a subse-
proposed
just
not acted
Here,
has
proceeding to lower rates.63
quent section 5
rates,
but
on certificated
the line
to hold
delay,
suspension power,
lack
other,
approved rates
previously
adjust
relief in
lack of
to order retroactive
cited,
own
not
and our
well.62 has
proceedings
important
make it
section 5
disclose,
judicial au-
does
research
[by
“hold the line
certifi-
the Commission to
thority holding that
awaiting
adjudication
cate condition]
just and
*12
found
previously
tinker
Here,
just
just and reasonable ratefs].”64
conditioning
a certificate
reasonable
already
reasonable rates have
been ad-
and
For
or services.
dealing with other sales
approved
settlement
judicated, at least
mentioned, we decline
already
reasons
The resale customers
by the Commission.
conditioning
so extend
Commission’s
pro-
a section 4
protection
have had the
powers.
pro-
ceeding
suspension
with its refund and
addition,
the considera-
we note that
In
visions,
continuing protec-
and as well have
section 7 to set
mandating the use of
tions
5,
though
may
of section
inadequate
tion
sales or services
rates for certificated
initial
already
The rates have
been
be of itself.
adjust previously
require
its use
do
theoretically just
reasona-
approved
as
and
services. As
approved rates for other
FPC,
record);
Cattery
ings
Improvement
Inc. v.
290
Texaco
Co. v.
60. United Gas
Inc.,
223,
30,
149,
(5th
1961) (power
Properties,
360,
86 S.Ct.
to set
382 U.S.
F.2d
154-55
Cir.
229—
(1965) (where reviewing
prices).
284
15 L.Ed.2d
initial
permanent certif-
that unconditional
court finds
rate,
permitted
Commission on
icate
excessive
CATCO,
392,
require
may
125
re-
tioning, as it is initial recognize We that there be instances posed. interest here seems Since essentially where certification of cost-free by sections 4 adequately protected to be and push compa- services will require feel the cited cases we do not ny’s just rate of return over the and reason- scope of section 7 to allow us to extend Nevertheless, level. able we'do not believe adjustment previously approved rates for problem the solution ignore is to pertinent services not involved in the certif- policies protections of sections 4 and 5 proceeding. icate companies keep and forbid pending filing. a section 4 We think a (d) Authority Conclusion as to acceptable equitable more solution contrary we inter Because believe adoption by would be the the Commission in pretation would emasculate the role of sec appropriate proceedings66 of some sort of protections provided tion dilute the system “tracker” reve- against regulatory lag sections 4 and 5 nues and costs similar to the PGA clause.67 instability, pro eliminate section 5 A system tracker would avoid the infirmi- hearings specific findings tections of *13 of ties order here —it Commission’s justness pri- and reasonableness of rates would not eliminate the role of section order, or to a rate reduction and in the would avoid revenue loss caused admin- binding contrary precedent, of absence we lag provide istrative stability, and and hold that does not have it would not run afoul of the section 5 compel under section 7 to flow- policies hearings Further, findings. and through of revenues to customers of serv such a tracker would allow resale customers pro ices not under in that consideration to receive the benefits and bear the burdens ceeding for certification.65 provided by services and doing, In so we do not mean to intimate companies. for other We cannot force the may company’s that FERC not take a over- adopt system, Commission to such a but all rate structure into consideration in issu- today’s holding certainly should not be certificate orders. It evaluate that precluding viewed as use of myriad they and other factors as bear on tracking approved appropriate clauses as convenience necessity. proceedings.68 The Judge Wright tacitly agrees through” pro- 65. We think Chief at the time of their certification ceeding require with us when he states that “Section 4 is the than to the existence of a track- evaluating changes ing provision mechanism for in the prerequisite. Concurring as a services, already associated with certificated Dissenting Opinion 198 U.S. at-n.18 provides while Section 7 the mechanism for App.D.C., F.2d. We think at 1145 n.18 of 613 pricing conditioning new services.” Con- proper that the time to decide what factors will curring and Dissenting Opinion at-of approved affect set, rates is at the time are U.S.App.D.C., (emphasis 1147 of 613 F.2d add- adjust- not afterward. Once rates and rate ed). dichotomy opinion This drawn in his approved ment mechanisms have been in. § strongly supports our conclusion that a 7§ proceeding, we do not think the Commission proceeding appropriate is not the occasion for adjust has to further them in a subse- adjustment previously approved rates not quent proceeding certificating 7§ a new ser- then before the Commission. vice. instance, might begin 66. For Thus, agree Judge Wright’s we cannot with approving tracking clauses in individual 4§ implication disposition that our of Nos. 78- proceedings, might rulemaking adopt or it “effectively prevent[s] 1356 and 1960 the Com- policy allowing inclusion of such clauses in rate adopting expeditious procedures mission from filings under 4.§ altogether” dealing changes in various Judge Wright appro- occurring pro- suggests costs and is more between 4§ priate ceedings. Concurring Dissenting Opinion to decide whether costs and revenues - U.S.App.D.C., associated with of 198 new services should be “flowed at 1144 of 613 purchased gas adjustment approved Regulations. of Commission 2. Violation clauses when such costs are not included adjustment pro- gas clause purchased utility’s rate schedules on file with in the by the adopted visions69 were the Commission.73 companies protect “permit supplier rate increas- against themselves regulation “pur- defines pertinent pipelines adjust The clause allows es.” gas cost” as chased semiannually changes to reflect their rates purchases, wellhead line the cost of field gas costs. In the purchased in unrecovered purchases, plant purchases, outlet trans- meantime, gas or be- purchased costs above purchases, pipeline pro- line mission adjustment placed in a the current low acquired duction from leases on and after 191), (Account to be recov- account deferred October 1969. Nonconcurrent ex- period as a ered over the next six-month rates, change the case of as a surcharge to the or in transactions reflected lower a reduction rates.71 This purchased gas.74 cost of of the burden of continu- pipelines relieves points regulations out that these Panhandle enabling them to recover filings, ous rate permit nowhere inclusion of purchased gas expeditiously “the cost argues costs or revenues. It the sub- single largest com- constitutes [which] ject credited to revenues should instead be ponent of their cost of service.” from trans- Account titled “Revenues purchased gas cost /The unrecovered portation gas for others.”75 Sys- 191 of the account is Account Uniform argues the chal- also Compa- for Natural tem of Accounts Gas lenged longstanding order violates Commis- provides: nies. precedent sion and lists a number of cases costs. Unrecovered where the Commission has refused to allow pur- A. shall include This account inclusion of costs in a PGA chased costs related to Commission open option tinguishable. *14 disposition F.2d. Our leaves The Commission ordered reve- adopting tracking crediting purported authority; similar to the clauses PGA nue under its 7§ provision changes to handle of trans- ap- interim adopted the PGA mechanism must be portation costs and revenues. A more novel proved proceeding any price at a 4 before § tracking provision solution no where exists adjustment may what be made. To extent the approve would be for the Commission to scheme,” regulations statutory PGA “alter the subject transportation services to a “cross-re- - U.S.App.D.C., id. at n.19 of 198 at 1145 fund” to Panhandle’s customers in the event a F.2d, any, n.19 of 613 if and whether such subsequent ratemaking disclosed that its rates 4, permissible “alteration” is under are issues § unjust had been or unreasonable. We note presented appeal, not in and we do not procedure that such a would not emasculate decide them. 5, delay engender the role of administrative § loss, consequent and hearings nor eliminate 452, 1049, (1972). 70. Order No. 47 F.P.C. 1050 findings justness as to and rea- proc- sonableness of rates the administrative 154.38(d)(4) (1979). 71. 18 C.F.R. § addition, ess. In a refund condition would have imposing advantage no irretrievable loss 452, 1049, (1972). 72. Order No. 47 F.P.C. 1050 company on the or the consumer. There is a possibility that the “cross-refund” condition might implied pro- (1979). somehow run afoul of the 73. 18 § C.F.R. 201 5; scription of retroactive relief in whether § procedure that of itself would invalidate 154.38(d)(4) (1979). 74. 18 C.F.R. n.1 an issue we do not decide. transportation gas 75. 489 Revenues from Judge Wright suggests 69. Chief that in this others. tacitly regulations, section we endorse the PGA This account shall include revenues from and claims that this is inconsistent with our transporting gas companies through holding for other crediting that revenue is unauthorized transmission, production, by Concurring and distribu- Dissenting Opinion 7.§ lines, compressor U.S.App.D.C., tion stations of the utili- -n.19 of 198 at 1145 n.19 of ty. crediting 613 F.2d. We think that revenue imposed provisions (1979). here PGA are dis- 18 C.F.R. 201
1135
speaks
transportation
regulations
distinguishes these deci-
FERC
clause.76
revenues,
argues
the Commission
that
pass-
that
involved
on the basis
sions
precludes using
costs,
“nothing specifically
To dem-
these
not revenues.77
through of
respond
to the
under review is
mechanisms to
Commission’s
that
the order
onstrate
cites a
regulatory purposes.”80
then cites au-
precedent,
accord
orders,
judicially
powers
none
must be
thority
of recent
construed
number
reviewed,
crediting
which it has ordered
interest.81 It
broadly
points
condition,
transportation revenues.78
in the absence of the
out that
continue to
Panhandle would
“overcollect
position seems
the Commission’s
Thus
transportation
the excess
reve-
regulations
pass-
allow
be that
PGA
82
nues.”
revenues, but not
through of
carefully
read the
We do not
of costs.
“
agree
We
‘the Commission’s
gas regulations
so
purchased
constructed
responsibilities
broad
.
.
. demand a
costs, not
applies
191
loosely. Account
generous
statutory
construction of its
au-
items,
revenues,
gas
not
purchased
and to
”83
we do not
thority,’
but
believe the Com-
Moreover, Account
items.
have
play
mission should
fast
proper
appears to be the
by its terms
489
regulations.
and loose with its own
It has
transportation revenues.
locus for
agency
become axiomatic that an
is bound
that Account 489
agrees
The Commission
regulations.84 The
its own
fact
that a
revenues,” but
situs for
“is the usual
regulation as written does
provide
“would be
that use of that account
claims
quick way
to reach a
desired result
489
here” because Account
inappropriate
ignore
does not authorize it to
the regula-
change pro-
until a rate
revenues
“defers
“inappropriate.”85
tion or label it
4,
provi-
and has no
ceeding under Section
Thus, the order under
flowing excess revenues back to
review must
sion for
be set aside because in
jurisdictional
requiring crediting
customers.”79
conceding
nothing
purchased
in the PGA
Also
Dulles,
363,
In its order
84. Service v.
354 U.S.
Brief of Petitioner at
76. See
S.Ct.
1152,
78-1960,
(1957);
rehearing
1 L.Ed.2d
denying
Union of
in No.
affirmed
Con-
AEC,
infra,
U.S.App.D.C.
today,
cerned Scientists v.
Part II B
us
see
(1974);
tracking
499 F.2d
see United
rate in
authorization for
stated that
Nixon,
683, 695-96,
v.
States
U.S.
S.Ct.
purchased
extend to
“did not
creases
Note,
(1974);
(a) Crediting Basis for Revenue significance that is not without express an point at no made theory attaching Commission The Commission’s finding Panhandle’s rates continued to (1) Panhan- that condition is that the certificate its full cost of service. The Com- was de- recover configuration of rates dle’s extant service; (2) merely did. This mission assumed its full cost of signed to recover assumption precarious to us a rather any uncontemplated reve- seems consequently, rising make in view of the costs90 in nues, through the such as those obtained aspects society question, would almost all between transportation services in and the instant of Pan- time the rate case was filed permit recovery double of certain validity assump- entered. The of the pro items of cost and would tanto order handle’s return, and conse- tion is also undermined increases in need raise Panhandle’s rate services, just quently charged, above the for and costs Further, reasonable level.88 If the state of the world evidenced No. 78-1960. as the be, observed, general were as the Commission assumes rate level Policy sup- Under of the Natural Gas hold certificate conditions must be (West by soundly ported findings record). Act of 15 U.S.C. 3301-3432 §§ based Supp. 1979), recently issued regulations requiring pipelines interstate Initially appears thereby to credit to Account 191 and “flow thought utilizing services back” to their customers revenues from trans- previously capacity excess as be- portation pipelines of natural for intrastate consequently required costless and that the companies and local distribution to the extent resulting fully against revenues be credited such revenues and volumes ex- rehearing Account 191. The Commission on representative determining ceed levels used position slightly, this case modified its initial establishing cost of service and rates. 44 Fed. permitting the incremental associated Reg. (1979) (final amending rule with the service to be offset 284.103). adopted C.F.R. The Commission against prior entry into Account respecting transportation agree- the same rule accompanying p.- 191. See note 9 and text *16 Fed.Reg. ments with certain end-users. 44 p. U.S.App.D.C., supra. of 198 1123 of 613 F.2d (1979) (to 30329-30 be codified at 18 C.F.R. 284.205(b)). § Since the enactment of the stat- Co., Pipe 89. Panhandle E. Line Docket No. promulgation regulations ute and oc- (the approving RP75-102 relevant order the order, entry they curred after of the instant 1977). part April was issued settlement 25 provide support no for the deci- Commission’s validity regulations sion here. The of the new case, acknowledged consequently 90. The Commission in Natural is not an issue in this and America, Pipeline question we Gas Co. of leave that undecided. Docket No. CP78- (26 1978), pipeline 439 Dec. 5 F.E.R.C. —that FPC, 87. See California v. 315 F.2d Oil Co. utility costs have risen more than since 36% (10th FPC, 1963); 656 Cir. Pure Oil Co. v. 292 filing. when 1975 Panhandle made its rate (7th 1961) (both F.2d 352-53 cases Cir.
1137 expressed subject penalty. -company the double The a presently of for Panhandle willingness develop with the proceeding.91 another dealing appropriate provision staff “an that the We do not think Commission’s flow-through transportation the of costs assumption continuing as to the dubious by others as well paid Panhandle adequacy qualifies rates as a of the 1975 by transportation revenues received Pan- finding[] in the record” “soundly based handle from others.”93 Commission's 7(e) be upon which section conditions must response was Panhandle was free at that of support, founded. In the absence such general time to 4 submit a section the order must be set aside.92 change in the event its other (b) Disallowing of Revenues Offset preventing earning costs were it from a Transportation Costs Was New reasonable return.94 Unreasonable argues Panhandle that Commission’s that Assuming arguendo Commis- response . woefully “facile . . fall[s] sion’s was authorized section did order shy of ‘reasoned consideration’ standard regulations, and was other- not violate its required that law.”95 main- soundly findings based supported by wise disposition its tains was correct because the record, the order was unrea- we think was crediting requirement “direct- not allow sonable because it did offset ly connected” to the Commission’s section 7 by increased costs. revenues conditioning request power, but flow In its and application for reconsideration “unspecified transporta- costs for rehearing proceeding, to FERC in LOF general a tion services” was “more suited to urged requiring crediting tracking provi- general rate case a prohibiting flow-through where might a sion increased constituted allowed.”96 requirement pipe- we that the 91. RP78-62. where do find a Docket No. proceeding to line also initiate a 4 be able to § argues colleague that until 92. Our retain such If the revenues. Commission fears revised, may oper- rates “are pipeline’s drive the that such new services will adequate. ate as if were still” He notes just rate of return above the and reasonable FPC, language Co. in California Oil (10th v. level, may proceeding, 5§ resort to a 1963), proceed- 7§ F.2d Cir. possible other remedies we outlined at utilize involving ings “rate” cases “the com- are not -p. accompanying text notes 66-68 and ‘just plex problems as to and intricate what is a U.S.App.D.C., p. 1133 of 613 F.2d price.” Concurring Dis- and reasonable’ supra. - n.24, senting Opinion at- n.25 of 198 n.24, U.S.App.D.C., at 1148 1149 n.25 of 613 Application for Reconsideration Rehear- agree proceedings F.2d. should § We ing, reprinted in J.A. at 65-66. just question what is not involve the a reasonable rate. But since basis of the Pipe Docket 94. Panhandle E. Line No. appears challenged to be that increased order (22 1978), reprinted in CP77-479 Feb. J.A. at unduly transportation revenues will raise Pan- making unjust its handle’s rate of rates return — think the Commission is and unreasonable —we obligated Brief of at 36. Petitioner support assumptions for its to find case, In this we think the record. Commis- Respondent 96. Brief for at 31. Commis- prior, possibly out- sion’s reference to the dated, argues inadequate support sion also that to the extent Panhandle’s rate case is for the request sought charges pass additional “to condition. customers,” require 4§ to its would a full Judge Wright suggests that also “Panhandle However, showing. Id. cost-of-service we right has no by to increase its rate of return more if had think that under keeping new revenues —with- adjust without 7 to rates downward resorting § § 4—than out to Section FERC has to (as arguendo), proceeding assume using we here return Sec- decrease the rate of - similarly U.S.App. under 7 to powers.” have Id. at tion D.C., proceeding. disagree. 4§ F.2d. We allow to rise without at 1148 of 613 As prevented Act, if And even 4 somehow flow- we read the if a desires to earn *17 increases, service, transportation money by providing cost of net more it simply apply least should have allowed need for a No- the Commission at certificate. B. No. 78-1960 justifications find the Commission’s We could The fact that Panhandle inadequate. The order under review in No. 78-1960 tracking in a rate case does provision seek a disposition of a involved Commission’s of an inappropriate make the allowance not filing “prepared in an Panhandle effort against trans- transportation costs offset acceptable solution to the serious find an crediting the bal- portation revenues before flowing from FERC’s revenue problems” Furthermore, for resale customers. ance crediting policy.98 proposal netting procedure would be we think such a transportation was to include additional costs essential where both as- unanticipated were and revenues charges costs and in Account 191 in the —even respects pipeline was in other suming the way compelled was same credit its in- recovering its The unforeseen costs. transportation revenues. The Commission pipeline’s come increase a rejected suggestion. today Because we level, just but the above the and reasonable crediting policy, invalidate the revenue in time, costs, at the same unforeseen large questions measure the in this raised of this “over-collec- directly reduce the size petition resolve themselves. To the extent If amount needed to be credited tion.” petition issues in this are not mooted our theory, we think it under the Commission’s 78-1356, disposition of No. we affirm the unanticipated revenues from would be the order. Commission’s others less the unantici- transportation for pated transportation by pipe- other costs of argues the Commission’s lines. recover, refusal to allow the “to
Therefore, we think the Commission’s or-
191,”
an offset to Account No.
new trans
der was unreasonable to the extent
it did
“bald,
portation
upon
costs was based
whol
netting
not allow
out of new
ly unsupported assumptions as to the ade
entry
in
prior
credit
level,”
quacy of Panhandle’s overall rate
Account 191.97
and therefore violated section 5.99 If Pan
referring
handle is
to the Commission’s re
4. Conclusion —No. 78-1356
fusal to net out
costs from
Because the order under review in No.
crediting,
revenues before
there
improper
1356 constituted an
exercise of
validity
argument.100
some
to the
That
conditioning
the Commission’s section 7
mooted, however,
question is
since we void
power, violated the
account-
Commission’s
crediting procedure
the revenue
in No. 78-
ing regulations,
supported
was not
If,
hand,
1356.
on the other
Panhandle is
record,
soundly
findings
based
arguing
prohibiting flow-through
was unreasonable in the absence of an off-
transportation costs is violative of section 5
set,
aside,
we
set
and remand the case for
crediting,
even in the absence of revenue
proceedings
further
not inconsistent with
opinion.
agree.
we cannot
Refusal
to allow flow-
merely by
the new revenues to be offset
new costs to
an infusion of evenhanded treatment
revenues,
remand,
the extent costs did not exceed
since
of revenues and costs. On
under our
thereby
no net
decision,
increases in costs would
result.
only
must
the Commission’s or-
reasonableness,
stay
ders
within the bounds of
opinion concurring
part
97.
In his
in
and dis-
parameters
supported by
but
within
suffi-
also
senting
part,
Judge Wright agrees
Chief
statutory
findings
support,
cient
with record
unreasonably
us that the Commission acted
authority,
regulations.
and its
treating costs and revenues dif-
ferently. However, he also claims that our
Supplemental
Brief of Petitioner at 6.
holding the Commission’s action unreasonable
ground
gives
as an additional
for reversal
rise
anomaly
holdings”
Id.
of “alternative
lead-
at 9.
Concurring
to “different results.”
Dis-
-
senting Opinion
U.S.App.
n.19 of 198
Indeed,
today’s opinion
we
elsewhere
D.C., at 1145 n.19 of 613 F.2d. This is not the
appropriate
an
hold it
to disallow
unreasonable
imply
case. We do not mean
that the inval-
crediting.
offset before
idity of the
be remedied
instant order would
*18
through
requirements.”103
of increased costs does not consti
If Panhandle is
poli
arguing that
to allow
change,
transportation
tute a rate
and therefore the
refusal
apply.
recovery
arbitrary
not
cost
is
in the context
simply
cies of section 5
do
crediting requirement,
the revenue
the ar-
Panhandle also contends
Com-
gument is moot.
If it is suggesting that
provisions
has confused the
of sec-
mission
absolutely
pass
is
entitled to
transporta-
5, by “thrust[ing] upon Panhan-
tions 4 and
tion costs in the absence of an affirmative
requirement
dle an unlawful
that it forfeit
finding by the Commission that the pipeline
transportation
its new
revenues automati-
can absorb the
disagree.
increased
we
cally,
obliged
and in
be
to com-
addition
probably
It
would be wise for the Commis-
general
proceed-
mence
rate case
to adopt
appropriate
sion
a mechanism in
ings to restore the funds needed to meet its.
proceedings allowing transportation
costs
expenses
transportation
for others.”
purchased
similar treatment
to that of
Again,
today’s holding,
in view of
this issue
costs, but we do not think it arbitrary for
is moot.
expand
Commission to refuse to
pipeline
submits that
it is error for
purchased gas
definition of
costs to benefit
interpret
regu-
the Commission to
the PGA
Panhandle in a section 7
proceed-
certificate
transportation
lations to include
ing for Trunkline. We think the decision to
argues,
but not costs.
It
“The Commission
narrowly
construe
regulation
the PGA
falls
ways.
regu-
cannot have it both
Either its
within that zone of reasonableness immu-
permit
including transportation
lations
nizing it from reversal.
items in the
they
accounts or
points
out that
in Tennessee
do not. Panhandle
submits
do
Pipeline
Gas
Co.104 and Texas Eastern
.
agree
not
.
.” We
with Panhan-
Corp.105
Transmission
the Commission al
regulation's
dle. But since the PGA
do not
tracking
lowed
transportation
charges.
permit
items,
transportation
inclusion of
These
special
cases involved
storage ar
the Commission’s refusal
transpor-
to allow
rangements, and the Commission was care
through
tation costs to flow
Account 191
ful in each one
deny precedential
value
upheld.
must be
to the cases. The holdings have not been
argument
Panhandle’s final
cases,
that it
followed in subsequent
and FERC
arbitrary
contrary
precedent
submits
that Tennessee Gas and Texas
pass-through
transpor
disallow
of increased
Eastern “are anomalies in a sea of consist
argues
tation
costs.
that since the
rulings
Com
ent Commission
rejecting rate fil
assumption
mission’s
regarding
ings
Panhandle’s
of this nature.”106 It
is not denied
PGA clause is that
“cannot
policy
Commission has a
against
gas purchase expenses,
absorb additional
permitting
tracking
and must
recover such costs
charges outside of
agreements.
settlement
clause, it
permissible
PGA
is not
for the
granted
That the Commission
gen
two sui
Commission to assume at
exceptions
special
same time
eris
when
storage ar
that the related
can
rangements
were
certainly
involved
does
compel
absorbed —at least without some examina
tracking
it to allow
when more
general
tion of the cost of service and
situations arise.107
Supplemental
Similarly,
101.
Brief of Petitioner at
we do not believe the narrow
holding
FERC,
Light
in Richmond Power &
v.
.
U.S.App.D.C.
(1978)
102
Id. at 18.
Therefore, we conclude
gener
accepting
that
rate decreases
mission
extent
be affirmed
No. 78-1960 must
related
compel
accept
it to
ally does not
not mooted
therein are
the issues
that
of
increases,
that
the facts
we think
rate
No. 78-1356.
disposition of
our
order,
of dis
disputed
it was an abuse
the
No. 78-1680
C.
pass on
not
Panhandle to
cretion
to allow
in
78-1630 are
No.
reviewed
orders
delivery
the location of
its costs. Due to
in
to
in Nos. 78-1356
related
those
no
makes
appears
it
that Panhandle
points,
they
charged
and costs
In
involve
for
charge
that
to Northern
its services.
increase,
was
seeking
natural
the rate
Panhandle
by Panhandle for
incurred
pass
for
to
on dollar
merely attempting
ar-
pipeline
transportation services. The
the
approved by
rate
Com
dollar
increases
arbitrary
Commis-
for the
gues that it was
pipelines. The Com
upstream
mission for
requirements of
full
to waive its
sion
authority
require
to
has
waive
mission
de-
showing to allow a rate
cost-of-service
tracking
proper
in a
ments of
crease,
to a
but refuse to do so as
related
is
case. We think that where a
responds
The Commission
cost increase.108
accounting
charges
merely an
conduit for
duty
the inter-
primary
protect
that
good
exists
pipelines,
made
other
cause
consumers,
waiving
est of
therefore
grant a
waiver.
decreases, but
requirements to allow rate
reasons,
por-
For these
we set
that
aside
increases,
within
breadth of its
not
was
the
denying
the
tion of
Commission’s order
Panhandle
concedes that
discretion. FERC
Docket
Panhandle’s rate increase in FERC
in
.
“has now
forth
its brief
set
RP78-39,
for fur-
No.
and remand the case
may be
to call
some data which
sufficient
opin-
this
proceedings
ther
consistent with
waiv-
of
of
for a
the denial
reexamination
that
does
appears
ion. Since it
Panhandle
“has not
company
that
argues
er” but
object
acceptance
not
to the Commission’s
submitted that data
pipeline’s
rate decrease in FERC
of
Act.” The
required by the Natural Gas
except
Docket No.
to the extent
RP78-40 —
that
Panhandle
suggests
“[i]f
discriminatory
it
treat-
demonstrates
sufficient cause
believes that
it has
ment —that
is af-
portion
the order
waiver,
request
it
granted a
then
should
firmed.110
grant such a waiver
Commission to
first instance.”
III. CONCLUSION
for
application
We
think
sum,
In
we find that
the Commission’s
rehearing
sufficiently clear
made it
procedure
crediting
rather novel revenue
regula-
was
seeking
pertinent
a waiver
disapproved
must be
in this
because
context
Furthermore,
Com-
7(e),
tions.
we believe the
it is
not authorized
section
accounting
mission
it to
had the relevant data before
violative of the Commission’s
soundly
regulations,
supported by
not
request.
rule on
it is
409-11,
ring
Dissenting Opinion
Id.
nues.
jority permits
alter
rates without a
FERC to
pretation
my
misreading
view is
—which
proceeding,
in the absence of
cost-of-service
rejected.
the Natural
Gas Act —should be
As
authority. By affirming
tracking
the Commis-
is,
majority’s
excep-
pocked
view is so
*25
authority
tracking
sion’s decision to waive
incomprehensible.
as
tions
to be
order,
majority silently
the third
the
admits
that
outside
alterations
in rates
be made
Refining
20. See Atlantic
Co. v. Public Service
proceedings.
4 § of
or
5§
Comm’n,
supra
note
1147 power conditioning cases the is an in those that upon a new service to condition were return, setting the of for certificat- I limited to rates of lowering of the rate overall Indeed, holding pre- such a is ed services. overstepped it had agree to that might have the very language of Act: cluded the this case.21 authority. That is not its power shall the to “The Commission have majority’s mischaracterization Once the of certificate and attach to the issuance the corrected, argu- is its three the order of rights granted the exercise of the there- Commission exceeded that the ments such terms and conditions under reasonable of. quickly disposed are 7 Section necessity and as the convenience First, majority argues proce- that the the 7(e), 717f(e) 15 require.” Section U.S.C. adopted FERC in this order would dure Panhandle to requiring The order the 5 in the role of Section “emasculate revenues flow its new scheme,” id., U.S.App.D.C. ratemaking squarely falls through to its customers -, by enabling 613 F.2d at at the apparent meaning within the of statuto- company’s rates pipeline a lower majority the ry language. The burden is on new certificates. attaching conditions to lan- why show the order exceeded that Second, argues procedure it that the erodes previous cases have guage; the fact that “regulatory lag” protections against the type a of condition concerned different id., “rate instability,” U.S.App.D.C. avails little. -, 1129, by exposing 613 F.2d at at the revenue majority assumes that unexpected rate re- companies pipeline flow-through requirement imposed here Third, proce- argues it that the ductions. pursuant to a permissible have been require- the dure circumvents Section for proceeding, but some Section findings justness hearing of a ments in a Section imposed not be reason could rates, id., and reasonableness 198 U.S. 7 proceeding. majority opinion, 198 See at-, App.D.C. 613F.2d at 1130. -, at U.S.App.D.C. F.2d merely three are restatements These between This misconceives the' differences the argument one the —that no magical two 4 has the sections. Section lower its Section 7 the used property that affords the Commission answer Panhandle’s other services. The greater powers than otherwise would underlying cost-of-service is the same: the Rather, main between have. the difference un- rate-of-return determinations are the sections 4 is mech- the is Section order; the changed by only disposition the evaluating changes in costs anism for new is Unless affected. already serv- certificated associated prevent adjust- all majority seeks to ices, provides while the mech- pro- ments between Section 4 or Section conditioning new pricing for anism clauses, ceedings, including tracking pur- ample has 7 FERC services. Under Section clauses, like, gas adjustment chased authority to certification of ensure deny is FERC the au- there no reason transportation— new service—such as does quo by flow- thority to maintain the status pipeline create an imbalance ing new revenues company’s profit structure. overall customers. B precedent concerning Most of conditioning power accepts Panhandle’s ar- scope majority of the Section 7 also setting review gument of rates contract that the first order under concerns service, regulations. ma- This for certified violates the Commission’s terms descrip- majority opinion, argument text on the name and jority observes. See based the account “unre- there no hint tion of Account and notes at note But long period. Strictly speaking, the next So as new case does not even lowering The revenue flow- revenues minus involve rates. merely gas the rates through requirement than the increase in reduce smaller will surcharge to increase. purchased to the consumer will continue account size *26 1148 revenue, while Account flowing through This account gas costs.” purchased covered above;22 pur- designed to serve precisely needless 191
has been described
con-
changes
correct when it
in costs
majority
accommodating
say,
poses
description of the
Per-
the name
basis.
cludes that
on a six-month
and revenues
revenues,
“costs,
and to
not
refer to
account
of the
descriptions
haps the names and
items,
not
purchased gas
court
changed, but this
should be
accounts
U.S.App.
198
Majority opinion,
items.”
agency nomen-
clumsy
not mistake
should
at-,
(emphasis in
must for new Mcf; plies per 102.83 cents gas natural alterna- majority opinion leaves little the cost of is 58.53 others tive to the Commission but to abandon per highest charge attempt adjust- cents Mcf. in this case make interim Refining challenges 28. Atlantic v. of an Co. Public Service Panhandle also the lack Comm’n, supra hearing evidentiary U.S. at note 360 79 S.Ct. orders under review. questions hearing This raises difficult about requirements requirements. and waiver of such my suggested disposition appeal, this Given price 29. This assumes that the re- questions these re- need be resolved: on equal ceives for new variable will be presumably mand procedural protections would accord the full per gas plus cost unit the fixed cost of the new by the statute per previously by ratemaking. mandated unit as set Of- provided agen- ten, however, or cy. sound discretion assumption is untrue —and pipeline’s shortfall will be even revenue more dramatic. argued also has the chal- view, my lenged discriminatory. In orders Application Rehearing satisfactorily explained of Panhandle for the differ- FERC has Pipe Company, Eastern Docket Line No. CP78- instanc- ence in treatment accorded in the cited 6, reprinted (arithmetic at JA 132 error es. corrected). new account for merits refusing to The order
costs and revenues. affirmed; flow-through has been allow cost flow-through requiring
the order suggest respectfully I reversed.
has been the two disposition of alternative my and remand both vacate
orders32—to leave the treatment —would
consistent options range wider a much problem. challenging deal with this majority apparently
might choose—as require treat —to changing like other and revenues
factors, 4 or Section await Section adjusting Panhandle’s before
proceedings adopt procedure chooseto might It
rates. flow-through of new trans-
for immediate might revenues. It costs and
portation distinguish short- between
choose arrangements, or
long-term pur- with and without companies
between adjustment clauses. gas cost
chased in its decision- have wide latitude
should necessary construct
making so that interest. I would
safeguards for the choose a simply that the Commission
insist like accounts alike. treats
procedure require; we all oth-
Evenhandedness should left to Com- policy
er choices should be the.
mission. MURPHY,
Timothy Appellant, R.
v. al. OF the ARMY et
DEPARTMENT 78-1258.
No. Appeals, Court
United States of Columbia Circuit.
District
Argued Oct.
Decided Dec. disposition majority’s supra. join order. See text and notes at notes of the third 5-6 I