Consumers Energy Co. v. Federal Energy Regulatory
| Decision Date | 09 August 2000 |
| Docket Number | No. 99-4097,99-4097 |
| Citation | 226 F.3d 777 |
| Parties | (6th Cir. 2000) Consumers Energy Company, Petitioner, v. Federal Energy Regulatory Commission,Respondent. Argued: |
| Court | U.S. Court of Appeals — Sixth Circuit |
Deborah A. Moss, William M. Lange, CONSUMERS ENERGY CO., Washington, D.C., for Petitioner.
David H. Coffman, Beth G. Pacella, FEDERAL ENERGY REGULATORY COMMISSION, Washington, D.C., for Respondent.
Before: COLE and GILMAN, Circuit Judges; TARNOW, District Judge*.
Consumers Energy Company has petitioned this court for review of an order of the Federal Energy Regulatory Commission (FERC) that granted Consumers's petition to decrease certain of its rates but, according to Consumers, in doing so attempted to extend its regulatory authority beyond the boundaries authorized by Congress. For the reasons set forth below, we GRANT the petition, SET ASIDE the challenged order, and REMAND this case for further proceedings consistent with this opinion.
The Natural Gas Act (NGA), 15 U.S.C. §§ 717-717z, confers upon FERC comprehensive regulatory authority over natural gas companies that engage in the sale of natural gas for resale or interstate gas transportation. Congress has carved out several exceptions to FERC's otherwise plenary authority. "Hinshaw pipelines" make up one of those exceptions. A Hinshaw pipeline is a natural gas pipeline that receives all of its out-of-state gas from persons "within or at the boundary of a [s]tate if all the natural gas so received is ultimately consumed" within the state in which it is received. 15 U.S.C. § 717(c). Congress concluded that Hinshaw pipelines are "matters primarily of local concern," and so are more appropriately regulated by pertinent state agencies rather than by FERC.
Although they are ordinarily outside of FERC's jurisdiction, Hinshaw pipelines "can unquestionably come under FERC authority when [they] engage in activities that go beyond the intrastate transport of gas." Public Utils. Comm'n of Ca. v. FERC, 143 F.3d 610, 615 (D.C. Cir. 1998). Nevertheless, FERC has promulgated a regulation that allows Hinshaw pipelines, in limited circumstances, to engage in activities that would otherwise bring them fully within FERC's jurisdiction while still maintaining (for the most part) their status as Hinshaw pipelines. See 18 C.F.R. § 228.224. In order to avail itself of the regulation, a Hinshaw pipeline must apply for a blanket "certificate of public convenience and necessity" (the triggering event for full FERC jurisdiction) pursuant to § 7 of the NGA, 15 U.S.C. § 717f, but only with regard to the pipeline's interstate activities.
The Hinshaw pipeline is then permitted to engage in certain interstate activities without being subjected to the full range of the NGA's requirements, which include extensive filing and reporting obligations. In exchange, the activities of the pipeline that would ordinarily subject it to full FERC jurisdiction must be provided without undue discrimination, and at "fair and equitable" rates. The Hinshaw pipeline may then base its rates on the rates for comparable service as approved by the pertinent state regulatory agency, or it must apply to FERC for approval of its proposed rates.
Consumers operates a Hinshaw pipeline pursuant to a "blanket certificate" obtained under 18 C.F.R. § 284.224. On November 23, 1998, Consumers petitioned FERC for approval to decrease its previously authorized rate for interruptible natural gas transportation services. FERC approved the proposed reduction, but its order required Consumers to file, on or before December 1, 2001, and then again at three-year intervals, petitions "for rate approval to justify its current rate or to establish a new maximum rate." Consumers requested a rehearing, essentially arguing that FERC exceeded its statutory authority by placing on Consumers the burden of justifying its rate as fair and equitable. Under the appropriate section of the NGA, Consumers argued, it is FERC that must shoulder the burden of showing that Consumers's rate is unfair or inequitable.
FERC denied the request for rehearing, reasoning that because Consumers is not subject to the full array of reporting obligations that apply to interstate pipelines, it was important to require Consumers to periodically turn over relevant information so that FERC could ensure the continued fairness and equitability of Consumers's rate. If Consumers did not want to file to reestablish its rate every three years, FERC concluded, Consumers was free to file a blanket application under § 7 and be treated like an interstate pipeline, "with all of the attendant regulatory obligations."
This petition for review followed. Consumers maintains that it was not, and is not, objecting to being required to provide FERC with information so that FERC can formulate informed conclusions about the fairness and equitability of Consumers's rate. Rather, Consumers insists, it is objecting to what it perceives to be an attempt by FERC to justify its order as a valid exercise of FERC's authority under § 4 of the NGA, 15 U.S.C. § 717c. . Had FERC issued its order under § 5 of the NGA, 15 U.S.C. § 717d--which Consumers maintains was actually the only proper basis of authority for FERC's order--FERC would have to shoulder the burden of establishing that Consumers's rate is unfair or inequitable. Moreover, under § 5 of the NGA, rate changes may only be imposed prospectively. Section 4 permits certain retroactive adjustments.
This is one of those peculiar cases in which it is not easy to understand what the litigants are disputing. Consumers and FERC agree that under § 10(a) of the NGA, 15 U.S.C. § 717i(a), FERC can require Consumers to provide it with information at regular intervals. They also agree that if FERC wants to revise Consumers's rates, FERC will have to bear the burden of justifying any change, as it must under § 5 of the NGA.
The only apparent source of contention is Consumers's suspicion that FERC was trying to slide through an attempt to regulate it under § 4 of the NGA, rather than under § 5. It would not be the first...
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Atlantic City Elec. Co. v. F.E.R.C.
...five."); Western Res., Inc. v. FERC, 9 F.3d 1568, 1578 (D.C.Cir.1993) ("We now make it an even six."); see also Consumers Energy Co. v. FERC, 226 F.3d 777, 780 (6th Cir.2000) (Natural Gas Act); Louisiana v. Federal Power Comm'n, 503 F.2d 844, 861 (5th Cir.1974) (same). Nor may FERC prohibit......