United Gas Pipe Line Company v. Memphis Light, Gas and Water Division Federal Power Commission v. Memphis Light, Gas and Water Division Texas Gas Transmission Corporation v. Memphis Light, Gas and Water Division

• Citation: 358 U.S. 103,3 L.Ed.2d 153,79 S.Ct. 194
• Decision Date: 08 December 1958
• Docket Number: 26,Nos. 23,25,s. 23
• Parties: UNITED GAS PIPE LINE COMPANY, Petitioner, v. MEMPHIS LIGHT, GAS AND WATER DIVISION et al. FEDERAL POWER COMMISSION, Petitioner, v. MEMPHIS LIGHT, GAS AND WATER DIVISION et al. TEXAS GAS TRANSMISSION CORPORATION and Southern Natural Gas Company, Petitioners, v. MEMPHIS LIGHT, GAS AND WATER DIVISION et al
• Court: U.S. Supreme Court

358 U.S. 103

79 S.Ct. 194

3 L.Ed.2d 153

UNITED GAS PIPE LINE COMPANY, Petitioner,

v MEMPHIS LIGHT, GAS AND WATER DIVISION et al.

FEDERAL POWER COMMISSION, Petitioner,

v. MEMPHIS LIGHT, GAS AND WATER DIVISION et al.

TEXAS GAS TRANSMISSION CORPORATION and Southern

Natural Gas Company, Petitioners,

v. MEMPHIS LIGHT, GAS AND WATER DIVISION et al.

Nos. 23, 25, 26.

Argued Oct. 20, 21, 1958.

Decided Dec. 8, 1958.

Rehearing Denied Jan. 19, 1959.

See 358 U.S. 942, 79 S.Ct. 344.

Solicitor General J. Lee Rankin, Washington, D.C., for petitioner Federal Power Commission.

[Syllabus intentionally omitted]

Mr. Ralph M. Carson, New York City, for other petitioners.

Messrs. George E. Morrow, Memphis, Tenn., and Reuben Goldberg, Washington, D.C., for respondents.

[Amicus Curiae intentionally omitted]

Mr. Justice HARLAN delivered the opinion of the Court.

We review a judgment of the Court of Appeals for the District of Columbia Circuit which directed the Federal Power Commission to reject certain rate schedules for natural gas filed with it by petitioner United Gas Pipe Line Company (United) under § 4(d) of the Natural Gas Act of 1938, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq., 15 U.S.C.A. § 717 et seq.

United, a regulated natural gas pipeline company, supplies gas to Texas Gas Transmission Corporation (Texas Gas), Southern Natural Gas Company (Southern Gas), and Mississippi Valley Gas Company (Mississippi),¹ under a number of long-term service agreements made and filed with the Commission prior to September 30, 1955, each of which contains the following pricing provision: ²

'All gas delivered hereunder shall be paid for by Buyer under Seller's Rate Schedule (the appropriate rate schedule designation is inserted here), or any effective superseding rate schedules, on file with the Federal Power Commission. This agreement in all respects shall be subject to the applicable provisions of such rate schedules and to the General Terms and Conditions attached thereto and filed with the Federal Power Commission which are by reference made a part hereof.' (Italics supplied.)

On September 30, 1955, United, proceeding under § 4(d) of the Natural Gas Act, filed with the Commission new rate schedules, together with supporting data, increasing its prices for gas as of November 1, 1955, by amounts estimated to yield total additional annual revenues of $9,978,000 from sales under the agreements here involved and from other sales also subject to the Commission's jurisdiction. Exercising its powers under § 4(e) of the Act, the Commission ordered a hearing as to the propriety of the new rates, and, except as to those relating to sales of gas for resale for industrial use only, suspended their effectiveness from November 1, 1955, to April 1, 1956, the maximum period of suspension authorized by the statute.³ Thereafter Texas Gas, Southern Gas, Mis- sissippi, Memphis, and others claiming an interest in the proceedings were permitted to intervene, and on February 6, 1956, the Commission commenced the taking of evidence as to the lawfulness of United's new rates under the 'just and reasonable' standard of § 4(e).

On February 27, 1956, this Court announced its decision in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373, in which it was held that United could not escape a contract obligation to furnish Mobile with natural gas at a single specified price for a term of years by unilaterally filing an increased rate schedule under § 4(d) of the Natural Gas Act. Following that decision the respondents in the present case for the first time moved the Commission to reject United's new rate schedules, claiming that their filing constituted an attempt on the part of United to change unilaterally the terms of its service agreements with Texas Gas, Southern, and Mississippi, and that such an attempt ran afoul of our decision in Mobile. Construing these agreements as in effect constituting undertakings by the purchasers to pay United's 'going' rates, as established from time to time in accordance with the procedures prescribed by the Natural Gas Act, the Commission refused to reject United's filings. It distinguished Mobile on the ground that the contract there involved specified a single fixed rate for the gas to be supplied under it which United was contractually foreclosed from changing without the agreement of the purchaser. 16 F.P.C. 19, 15 P.U.R.3d 279.

The Court of Appeals reversed. Accepting for the purposes of its decision the Commission's interpretation of United's service agreements, the Court of Appeals held that nonetheless the Commission lacked 'jurisdiction' to consider under § 4(e) the lawfulness of United's new rate schedules. The court regarded Mobile as establishing that § 4(e) applies only to rate changes whose specific amount has been mutually agreed upon between a seller and purchaser, and that where a purchaser has not so agreed, a rate change can be effected only by action of the Commission under § 5(a) of the Act.⁴ Since the rates set forth in United's new schedules had not been agreed to by its customers, the Court of Appeals therefore held that the Commission had no jurisdiction to proceed under § 4(e) to examine them, and that accordingly United's filings under § 4(d) should have been rejected. 102 U.S.App.D.C. 77, 250 F.2d 402. We granted certiorari because of the claim that the Court of Appeals misinterpreted our decision in Mobile, and on the suggestion that its judgment seriously frustrates the proper administration of the Natural Gas Act. 355 U.S. 938, 78 S.Ct. 429, 2 L.Ed.2d 420.

It is apparent that the Court of Appeals misconceived the import of our decision in Mobile. The contract before the Court in that case required United to furnish natural gas to Mobile at a single fixed price of 10.7 cents per MCF (thousand cubic feet) for a period of 10 years. The contract contained no provision for any different rate, or for changing the agreed rate during the term of the agreement. It was argued by United that the Natural Gas Act gave it the right to abrogate this unqualified contract obligation and increase at will its price of gas to Mobile by filing new rate schedules under § 4(d), subject only to the Commission's approval of such schedules under § 4(e). In rejecting that contention this Court held that the Natural Gas Act, unlike the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq., 'evinces no purpose to abrogate private rate contracts as such,' that the Act did not 'empower natural gas companies to change their contracts unilaterally,' and that in this respect regulated natural gas companies stood in no different position under the Act than they would have in the absence of the Act. 350 U.S. at pages 338, 340, 343, 76 S.Ct. at pages 378, 379, 380, 100 L.Ed. 373. Since United had contractually bound itself to furnish gas to Mobile throughout the contract term at a particular price, we held that its obligation could be abrogated only by the Commission, in the exercise of its paramount regulatory authority under § 5(a). Ibid., 350 U.S. at pages 344—345, 76 S.Ct. at pages 380, 381.

The United contract now before us, as construed by the Federal Power Commission and as viewed by the Court of Appeals for the purposes of decision, is vitally different from that in Mobile. On this view of the contract United bound itself to furnish gas to these customers during the life of the agreements not at a single fixed rate, as in Mobile, but at what in effect amounted to its current 'going' rate. Contractually this left United free to change its rates from time to time, subject, of course, to the procedures and limitations of the Natural Gas Act. In such circumstances there is nothing in Mobile which suggests that United was not entitled to file its new schedules under § 4(d), or that the Commission had no jurisdiction to consider them under § 4(e). On the contrary we said in Mobile (350 U.S. at page 343, 76 S.Ct. at page 380):

'* * * except as specifically limited by the Act, the rate-making powers of natural gas companies were to be no different from those they would possess in the absence of the Act: to establish ex parte, and change at will, the rates offered to prospective customers; or to fix by contract, and change only by mutual agreement, the rate agreed upon with a particular customer. No more is necessary to give full meaning to all the provisions of the Act: consistent with this, § 4(d) means simply that no change—neither a unilateral change to an ex parte rate nor an agreed-upon change to a contract—can be made by a natural gas company without the proper notice to the Commission. * * *'

The Court of Appeals therefore erred in reading Mobile as limiting the procedures prescribed by § 4(d) and (e) to instances where the parties by mutual agreement had 'reformed' a rate contract. The reason these procedures were unavailable to United in Mobile was because the company had bargained away by contract the right to change its rates unilaterally, and not because § 4 does not apply to such rate changes whether made pursuant to or in the absence of a contract.

Moreover, we find nothing in the scheme of the Natural Gas Act which would justify the restrictive application which the Court of Appeals' decision gives to § 4(d) and (e). Section 4(c) requires every natural gas company initially to file with the Commission its rates for any 'sale subject to the jurisdiction of the Commission, * * * together with all contracts which in any manner affect or relate to such rates * * *.' Section 4(d) provides for the giving of notice of any change 'in any such rate * * * or contract relating thereto * * *' by finding new rate schedules with the Commission and keeping them open for public inspection.⁵ And § 4(e) authorizes Commission review of the lawfulness of any such changed rate.⁶ The record before us affirmatively shows that United in the filings here at issue has complied...