United Mun. Distributors Group v. F.E.R.C.

• Decision Date: 13 April 1984
• Docket Number: No. 83-1451,83-1451
• Citation: 732 F.2d 202
• Parties: UNITED MUNICIPAL DISTRIBUTORS GROUP, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, United Gas Pipe Line Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 202

732 F.2d 202

235 U.S.App.D.C. 316

UNITED MUNICIPAL DISTRIBUTORS GROUP, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent United Gas Pipe Line Company, Intervenor.

No. 83-1451.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 25, 1984.

Decided April 13, 1984.

Petition for Review of an Order of the Federal Energy Regulatory commission.

James R. Choukas-Bradley, Washington, D.C., with whom William T. Miller, Washington, D.C., was on brief, for petitioner.

Robert F. Shapiro, Atty., Federal Energy Regulatory Commission, Washington, D.C., with whom Stephen R. Melton, Acting General Counsel, and Jerome M. Feit, Sol., Federal Energy Regulatory Commission, Washington, D.C., were on brief, for respondent.

Irving Jacob Golub, Houston, Tex., with whom Phillip D. Endom, Houston, Tex., was on brief for intervenor. Cecil W. Talley, Houston, Tex., also entered an appearance for intervenor.

Before SCALIA and STARR, Circuit Judges, and GESELL, ^* United States District Judge for the District of Columbia.

Opinion for the Court filed by Circuit Judge STARR.

STARR, Circuit Judge:

In this case, petitioner United Municipal Distributors Group ("UMDG"), a group of municipal distributors of natural gas in Alabama and Florida, petitions for review under 15 U.S.C. Sec. 717r(b) (1982) of two orders of the Federal Energy Regulatory Commission ("FERC" or "Commission") approving a settlement of rate increases filed by intervenor United Gas Pipe Line Company ("United"). FERC approved the settlement as to all parties except UMDG, which had objected to the settlement on the ground that the settlement should have been conditioned on the severance and reservation of an issue relating to FERC's treatment of United's corporate income tax. In the face of UMDG's objection to the settlement, FERC remanded the case as to UMDG only for a full administrative hearing on the question of United's rates. UMDG challenges this action on several grounds, namely that FERC's disposition of this case contravenes judicial precedent and FERC regulations regarding settlement procedures; represents a departure from prior FERC precedent with respect to settlements; and works a violation of the antidiscrimination provisions of the Natural Gas Act ("NGA"), 15 U.S.C. Secs. 717-717z (1982). We disagree and uphold the Commission's orders.

I.

On June 30, 1981, United, a large gas pipeline company, filed an application for an increase in its rates pursuant to section 4 of the NGA, 15 U.S.C. Sec. 717c. FERC accepted the rates for filing and suspended their effectiveness for the maximum period of five months, until January 1, 1982, after which they became effective subject to refund. Order Accepting for Filing and Suspending Tariff Sheets, Subject to Conditions and Establishing Procedures, United Gas Pipe Line Company, 16 FERC (CCH) p 61,093 (June 30, 1981). The Commission permitted some twenty parties, including United's direct and indirect customers and several state utility commissions, to intervene. Following settlement negotiations among United, the various intervenors, and the Commission staff, United filed a settlement agreement with the Commission on October 1, 1982. The Commission staff submitted comments in support of the settlement. Only UMDG filed comments in opposition. Certification of Settlement Proposal, United Gas Pipe Line Company, 21 FERC (CCH) p 63,041 (November 12, 1982). UMDG argued that the settlement should be conditioned upon the inclusion of a reservation clause, which would permit resolution of an issue known as the "consolidated tax" or "stand-alone" issue following the completion of judicial review of another FERC proceeding involving this specific issue. ¹

The presiding administrative law judge (ALJ) certified the settlement proposal to the Commission. 21 FERC (CCH) p 63,041 (Nov. 12, 1982). In doing so, the ALJ concluded

that there are no material facts in dispute, that there is substantial evidence in the record upon which the Commission may base a reasoned decision on the merits of all contested issues, [and] that a formal evidentiary hearing would serve no useful public purpose....

Id. The Commission, by order issued February 3, 1983, approved the settlement "in its entirety as to all of United's customers except UMDG." Order Approving Settlement, United Gas Pipe Line Company, 22 FERC (CCH) p 61,094, at 61,145 (Feb. 3, 1983). FERC found that, by attempting to reserve the consolidated tax issue, UMDG had rejected the "entire settlement package." Id. The Commission therefore remanded for a full hearing under section 4 of the NGA on the rates to be charged UMDG by United. Id. The Commission denied UMDG's petition for rehearing, stating:

When a party contests a proposed settlement the Commission may act on the settlement as an on the merits resolution of the issues raised based upon substantial evidence. That is not what the Commission did in this instance. We approved the uncontested settlement between United and the majority of its customers and remanded the question of rates for the one contesting party ( [U]MDG) for a hearing. We did not attempt to decide the issue of just and reasonable rates for [U]MDG, but, rather, provided it the full due process opportunity to present its case to the Commission....

We believe our order reflects a prudent policy. That policy is one of preserving a settlement for the vast majority of the contented parties, allowing them to have the benefit of their bargain. The one contesting party will have the full due process right of a hearing. We thus encourage the settlement process while affording any party dissatisfied with a proposed settlement an opportunity to process his case....

Order Denying Rehearing, United Gas Pipe Line Company, 23 FERC (CCH) p 61,101, at 61,246 (April 19, 1983). This appeal followed. This court granted a stay of that portion of the FERC order remanding UMDG's part of the case to the ALJ for a rate hearing, stating that "the granting of this stay, while it maintains the status quo, is not a vindication of petitioner's claims; we express no view on the merits of this case." United Municipal Distributors Group v. FERC, No. 83-1451 (June 22, 1983).

II.

A. Reviewability of FERC's Orders.

Before addressing the merits of UMDG's claims, we must first determine whether the orders at issue are ripe for judicial review. ² United argues that FERC's decision to remand the case for a rate hearing is not ripe for review under Papago Tribal Utility Authority v. FERC, 628 F.2d 235 (D.C.Cir.),cert. denied, 449 U.S. 1061, 101 S.Ct. 784, 66 L.Ed.2d 604 (1980), and other decisions of this court. We reject this argument and conclude that these orders are final and reviewable.

United's argument fundamentally misperceives both the nature of UMDG's challenge and this court's decision in Papago and its progeny. First, petitioner is seeking review of the Commission's orders approving the settlement as to all parties except UMDG and remanding the case to the ALJ for a full hearing on rates. UMDG argues that this action is outside FERC's powers under applicable statutes and regulations to approve settlements. UMDG's argument is, in effect, that it should not be forced to bear the burden of a full-blown rate proceeding. Thus, United's suggestion that UMDG's interests remain unaffected until FERC decides UMDG's rates upon conclusion of the rate proceeding utterly mischaracterizes UMDG's complaint.

Second, and more fundamentally, United's characterization of this order as a nonfinal, unreviewable order is inconsistent with this court's teachings in Papago and subsequent decisions. In Papago, this court held that FERC orders accepting rate filings and suspending the proposed new rates were not final, reviewable orders, inasmuch as no hearing on the lawfulness of the rates had been held. ³ 628 F.2d at 243. In doing so, the court examined three factors: (1) whether the order is final when viewed in relation to its place in the administrative process; (2) whether the party seeking review will suffer irreparable harm in the absence of review; and (3) whether judicial review would "invade the province reserved to the discretion of the agency." ⁴ Id. at 239-43.

The application of the Papago analysis to the Commission's orders in this case demonstrates that they are in fact final and reviewable. First, the orders grant final approval to a rate settlement under section 4 of the NGA. The orders are thus analogous to a "final determination of the justness and reasonableness of the rate filing," which the Papago court characterized as "[t]he quintessential reviewable order." 628 F.2d at 239. This settlement brings the ratemaking proceeding to a close for all parties except UMDG, and therefore does not resemble the acceptance of rate filings or refusals to initiate proceedings found unreviewable in Papago and its progeny. Second, requiring UMDG to do precisely what it strenuously argues FERC is not authorized to do and to seek judicial review afterward would preclude the relief UMDG seeks. ⁵ Finally, judicial review at this stage would not invade the Commission's province by dictating how FERC should proceed with the remanded ratemaking. Rather, judicial review of the orders here is limited to determining the propriety of the Commission's actions in approving the rate settlement as to all parties except UMDG. We therefore conclude that the two FERC orders at issue here are final and reviewable. ⁶

B. The Validity of The Commission's Approval of the Settlement.

1. Statutes, Regulations, and Judicial Precedent Governing Settlements.

UMDG vigorously argues that the statutes, regulations, and judicial decisions governing settlements of rate cases under section 4 of the NGA do not authorize the procedure used by FERC in this instance. ⁷ UMDG also argues that the Commission's action contravenes regulations and judicial precedent governing FERC's settlement...