Public Service Com'n of State of N.Y. v. F.E.R.C.
| Decision Date | 06 March 1987 |
| Docket Number | 85-1789 and 85-1800,Nos. 85-1646,s. 85-1646 |
| Citation | 813 F.2d 448 |
| Parties | PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Columbia Gas Transmission Corporation, Public Service Electric and Gas Company, Cities of Clarksville and Springfield, Tennessee, Tennessee Gas Pipeline Company, Conoco, Inc., Intervenors. TENNESSEE GAS PIPELINE COMPANY, a DIVISION OF TENNECO, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Public Service Commission of the State of New York, Pennsylvania Gas and Water Co., Orange and Rockland Utilities, Inc., Nashville Gas Co., Cities of Clarksville and Springfield, Tennessee, the Berkshire Gas Company, et al., Peoples Gas Light and Coke Company, Public Service Electric and Gas Company, Conoco, Inc., Columbia Gas Transmission Corporation, East Tennessee Group, Intervenors. CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Public Service Commission of the State of New York, Tennessee Gas Pipeline Company, Pennsylvania Gas and Water Co., Berkshire Gas Company, et al., East Tennessee Group, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of Orders of the Federal Energy Regulatory commission.
Dennis Lane, Washington, D.C., with whom David E. Blabey, Albany, N.Y., and Richard A. Solomon, Washington, D.C., were on the brief, for Public Service Com'n of the State of N.Y., petitioner in No. 85-1646 and intervenor in Nos. 85-1789 and 85-1800. David D'Alessandro, Washington, D.C., entered an appearance for petitioner/intervenor.
William I. Harkaway, with whom Harvey L. Reiter, Washington, D.C., and Barbara M. Gunther, New York City, were on the brief, for Consolidated Edison Co. of N.Y., Inc., petitioner in No. 85-1800.
Michael E. Small, with whom Dale A. Wright, Jeffrey D. Komarow and Terence J. Collins, Washington, D.C., were on the brief, for Tennessee Gas Pipeline Co., petitioner in No. 85-1789 and intervenor in Nos. 85-1646 and 85-1800. Robert H. Benna, Washington, D.C., entered an appearance for petitioner/intervenor.
Joshua Z. Rokach, Atty., F.E.R.C., Washington, D.C., for respondent. Jerome M. Feit, Sol. and Andrea Wolfman, Atty., F.E.R.C., Washington, D.C., were on the brief for respondent. Barbara J. Weller, Atty., F.E.R.C., Washington, D.C., entered an appearance for respondent.
William T. Miller and James R. Choukas-Bradley, Washington, D.C., were on the brief, for intervenors, Cities of Clarksville and Springfield, Tenn., in Nos. 85-1646 and 85-1789.
James R. Lacey, Newark, N.J., entered an appearance for intervenor, Public Service Electric and Gas Co. in Nos. 85-1646 and 85-1789.
Steve H. Finch, Stephen J. Small and G.D.H. Snyder, Charleston, W.Va., entered appearances for intervenor, Columbia Gas Transmission Corp. in Nos. 85-1646 and 85-1789.
Ernest J. Altgelt, III, Houston, Tex., entered an appearance for intervenor, Conoco, Inc. in Nos. 85-1646 and 85-1789.
Glenn W. Letham and Kenneth M. Albert, Washington, D.C., entered appearances for intervenor, Pennsylvania Gas and Water Co. in Nos. 85-1789 and 85-1800.
John W. Glendening, Jr. and Bruce B. Glendening, Washington, D.C., entered appearances for intervenors, The Berkshire Gas Co., et al. in Nos. 85-1789 and 85-1800.
Jack M. Irion, Shelbyville, Tenn., entered an appearance for intervenor, East Tennessee Group in Nos. 85-1789 and 85-1800.
Harry H. Voight, M. Reamy Ancarrow and Mindy A. Buren, Washington, D.C., entered appearances for intervenor, Orange and Rockland Utilities, Inc. in No. 85-1789.
Jerry W. Amox entered an appearance for intervenor, Nashville Gas Co. in No. 85-1789.
Karen Cargill, Chicago, Ill., entered an appearance for intervenor, Peoples Gas Light and Coke Co. in No. 85-1789.
Before WALD, Chief Judge, SILBERMAN, Circuit Judge, and GESELL, * District Judge.
Opinion PER CURIAM.
Between 1980 and 1982, Tennessee Gas Pipeline Co. ("Tennessee"), an unincorporated division of Tenneco, Inc., submitted several rate filings to the Federal Energy Regulatory Commission ("FERC"). Under section 4 of the Natural Gas Act, 15 U.S.C. Sec. 717c (1982), the Commission may only approve rates that are just and reasonable. In determining whether proposed rates are just and reasonable, FERC usually engages in a three-step process: (1) determining the pipeline's total cost of service; (2) allocating costs between jurisdictional and nonjurisdictional customers; and (3) designing pipeline rates that will recover costs allocated to jurisdictional customers. See Consolidated Gas Supply Corp. v. FPC, 520 F.2d 1176, 1179-80 (D.C.Cir.1975). Certain elements of Tennessee's proposed calculation of its cost of service (the first step) and its proposed pipeline rate (the third step) drew challenges from customers. In August, 1982, the matter was referred to a FERC Administrative Law Judge ("ALJ") who, after conducting hearings, issued a decision on December 7, 1983. The full Commission subsequently affirmed the ALJ in part and reversed in part, Tennessee Gas Pipeline Co., 32 FERC p 61,086, Opinion No. 240, reh'g denied, 33 FERC p 61,005, Opinion No. 240-B (1985). Adversely affected parties at the administrative level now petition this court for review of five aspects of the Commission's decision.
Our standard of review of the Commission's ratemaking is limited. FERC's determinations regarding rates of return, definitions of rate bases, and other technical aspects of ratemaking are entitled to considerable deference, see Permian Basin Rate Cases, 390 U.S. 747, 766-67, 88 S.Ct. 1344, 1359-60, 20 L.Ed.2d 312 (1968); Public Service Commission of New York v. FERC, 642 F.2d 1335, 1342 (D.C.Cir.1980), cert. denied, 454 U.S. 879, 880, 102 S.Ct. 360, 362, 70 L.Ed.2d 189 (1981). And ordinarily we "are without authority to set aside any rate selected by the Commission which is within a 'zone of reasonableness,' " Permian Basin, 390 U.S. at 767, 88 S.Ct. at 1360. Nevertheless, our review must ensure that "each of the order's essential elements is supported by substantial evidence," id. at 792, 88 S.Ct. at 1373, and "reached by reasoned decisionmaking--that is, a process demonstrating the connection between the facts found and the choice made." ANR Pipeline Co. v. FERC, 771 F.2d 507, 516 (D.C.Cir.1985). FERC bears the burden of explaining the reasonableness of any departure from a long-standing practice, and any facts underlying its explanation must be supported by substantial evidence. See Columbia Gas Transmission Corp. v. FERC, 628 F.2d 578, 585-86 (D.C.Cir.1979). Moreover, when an agency "seeks to change a controlling standard of law and apply it retroactively in an adjudicatory setting, the party before the agency must be given notice and an opportunity to introduce evidence bearing on the new standard." Hatch v. FERC, 654 F.2d 825, 835 (D.C.Cir.1981). With these principles in mind, we consider each issue in turn.
At times when Tennessee's full capacity is not needed to satisfy its obligations to provide firm sales and transportation services, 1 Tennessee also provides sales and transportation services which are interruptible at Tennessee's discretion. See Joint Appendix ("J.A.") at 268-69. In November, 1981, Tennessee filed the Interruptible Transportation Service Rate ("IT rate") schedule at issue here to apply to its interruptible transportation services performed under Part 284 of the Commission's regulations, 18 C.F.R. Secs. 284.1 et seq. See J.A. at 267. The rate adopted by Tennessee for its interruptible transportation service is a volumetric rate, under which a stated amount is charged for each unit of gas transported. The IT rate incorporates all of the fixed costs charged to Tennessee's firm transportation customers. 2 See J.A. at 425-27. The rate is designed as a 100% load factor rate, the lowest per-unit rate at which a firm transportation customer could receive service from the pipeline. 3 See J.A. at 269. The ALJ approved Tennessee's use of the 100% load factor rate for its interruptible transportation service, see Tennessee Gas Pipeline Co., 25 FERC p 63,052 (1983), at 65,150, and the Commission affirmed. Opinion 240 at 61,228.
In the proceedings below, petitioner Consolidated Edison Company of New York ("Con Ed") raised several objections to the IT Rate Schedule filed by Tennessee, two of which remain at issue. First, Con Ed argues that the Commission's approval of the IT rate was unreasonable because the rate included all of the fixed costs charged to Tennessee's firm transportation customers. Con Ed's position is that Tennessee should be allowed to recover in its IT rate fixed costs "equal to the fixed costs in Tennessee's sales commodity charge," but that none of the fixed costs allocated to the demand component should be incorporated in the IT rate. 4 See Reply Brief of Petitioner Consolidated Edison Company of New York, Inc. at 11 n. 7.
In deciding whether to approve the IT rate schedule adopted by Tennessee, the Commission was concerned about the possibility that the costs of providing the interruptible transportation service might be subsidized by rates Tennessee charged its firm service customers. See Opinion 240-B at 61,010 (). Accordingly, the Commission concluded that Tennessee must recover the full costs of providing interruptible transportation service in the rates it charged for that service. There was evidence in the record that Tennessee's interruptible service is in fact very similar to its firm transportation service, in that Tennessee offers the IT service only when it can provide...
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