Antrim Resources v. Public Service Com'n
| Decision Date | 20 October 1989 |
| Docket Number | 105804,Docket Nos. 105380 |
| Citation | 446 N.W.2d 515,179 Mich.App. 603 |
| Parties | In the Matter of the Application of Michigan Consolidated Gas Company for approval of a price change determined pursuant to price amendments to gas purchase contracts with certain Michigan producers. ANTRIM RESOURCES, H.R. Fruehauf, Jr., Janet Allen Fruehauf, Leo M. Riley Company, R.E. George, and Northern Michigan Land and Oil Corporation, Appellants, v. PUBLIC SERVICE COMMISSION and Michigan Consolidated Gas Company, Appellees. In the Matter of the Application of Michigan Consolidated Gas Company for approval of a price change determined pursuant to price amendments to gas purchase contracts with certain Michigan producers. GRACE PETROLEUM CORPORATION, Marathon Oil Company, and Dart Oil and Gas Company, Appellants, v. PUBLIC SERVICE COMMISSION, and Michigan Consolidated Gas Company, Appellees. 179 Mich.App. 603, 446 N.W.2d 515 |
| Court | Court of Appeal of Michigan — District of US |
[179 MICHAPP 605] J. Andrew Domagalski, Richland, for Antrim Resources, et al.
Varnum, Riddering, Schmidt & Howlett by Jack D. Sage and Mark L. Collins, Grand Rapids, for Grace Petroleum Corp., et al.
Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., and Don L. Keskey, and Patricia S. Barone, Asst. Attys. Gen., for the Public Service Com'n.
Foster, Swift, Collins & Coey, P.C. by William K. Fahey, Lansing, and Daniel L. Schiffer and Dennis R. O'Connell, Detroit, for Michigan Consolidated Gas Co.
Before DOCTOROFF, P.J., and SAWYER and JASON, * JJ.
This is an appeal from a Michigan Public Service Commission opinion and order entered on December 8, 1987 (Public Service Commission Case #U-8573), establishing the common purchaser price between Michigan Consolidated Gas Company and its natural gas producers. Appellants (hereinafter producers) are eight among forty-five intrastate natural gas producers who have long-term gas purchase contracts with Michigan Consolidated Gas Company (Mich Con). Mich Con is a "common purchaser" pursuant to M.C.L. Sec. 483.104; M.S.A. Sec. 22.1314, subject to the control and regulation of the Michigan Public Service Commission under 1929 P.A. 9; M.C.L. Sec. 483.101 et seq.; M.S.A. Sec. 22.1311 et seq. The producers question the jurisdiction of the PSC to determine a ceiling price which Mich Con may pay for Michigan-produced[179 MICHAPP 606] gas and dispute the PSC's calculation of the ceiling price. We affirm.
Early in 1986, Mich Con and the producers entered into amendments of their gas purchase contracts which modified the pricing structure for the calendar years 1986-88. The ceiling price for the first year, 1986, was negotiated at $3.65 per unit of purchase. The amendments also contained a formula to determine the ceiling price to be paid for natural gas in 1987 and 1988. The amendment provided in paragraph 1:
1. Subject to the obtaining of Michigan Public Service Commission (MPSC) approvals of the requested price changes to be sought by Buyer as discussed in paragraph 4 below, the price for gas produced under each of the Contracts shall be charged at levels which achieve in each calendar month of the calendar year in question the lesser of the then current cost of gas as determined in accordance with the Contract or the following not to exceed cost of gas:
(a) For the calendar year 1986, the price for gas produced under each of the Contracts shall be set at such a level which will achieve a not to exceed cost of gas of $3.65 per unit of purchase.
(b) For the calendar year 1987, the price for gas produced under each of the Contracts shall be set at such a level which will achieve a not to exceed cost of gas per unit of purchase equal to the product of (i) the 1986 not to exceed cost of gas per unit of purchase authorized by the MPSC multiplied by (ii) the "Index" for the year 1987 as determined by the procedure set forth in paragraph 2 below. [Emphasis added.]
Paragraphs 2 and 3 read in pertinent part:
2. The Index for calendar year 1987 shall be calculated by dividing the Weighted Average Price Comparison (WAPC), as determined in accordance [179 MICHAPP 607] with paragraph 3 below, as of October 1, 1986, by the WAPC as of January 1, 1986. The Index for calendar year 1988 shall be calculated by dividing the WAPC as of October 1, 1987 by the WAPC as of October 1, 1986.
3. For purposes of determining the Index, the WAPC shall be the sum of the following suppliers' commodity gas cost components, in effect under applicable rate schedules on January 1, 1986, October 1, 1986 and October 1, 1987 divided by 4:
(a) ANR Pipeline (ANR)
(b) Panhandle Eastern Pipe Line Company (Panhandle)
(c) Northern Natural Gas Company (Northern Natural)
(d) Natural Gas Pipeline Company of America (Natural Gas Pipeline)
... In order to calculate WAPC's on a consistent basis, if rate design changes are made to the elements of the gas cost components for any of the listed suppliers, the parties hereto agree to calculate, as is necessary, the gas cost components on the same or a substantially equivalent basis used to determine the gas cost components shown above for January 1, 1986. [Emphasis added.]
Paragraph 6 reads:
6. The cost of gas to be incurred by Buyer pursuant to this Amendment is expressly conditioned only upon obtaining MPSC approval thereof pursuant to Section 10 of 1929 PA 9, as amended; MCL 483.110, and is not conditioned on obtaining MPSC approvals involving any MPSC findings, determinations, or orders with respect to Buyer's GCR gas supply and cost review, 5-year forecast, or GCR reconciliation proceedings for the years 1986, 1987 and 1988. [Emphasis added.]
On March 21, 1986, Mich Con filed an application with the PSC for approval of the contract amendments as to the initial price change and the [179 MICHAPP 608] formula (Public Service Commission Case #U-8443). In its order of June 26, 1986, the PSC approved the initial $3.65 price for 1986 and held that it would remain in effect until further order of the PSC. The PSC also approved the procedure contained in the contract amendments for determining the price changes for 1987 and 1988.
On September 17, 1986, Mich Con filed an application for approval of a new 1987 ceiling price under its gas purchase contracts with all forty-five intrastate gas producers (Case #U-8573). On October 17, 1986, the application was amended to request a ceiling price of $3.11414 Mcf (thousand cubic feet), as computed according to the formula contained in the contract amendments which had been authorized by the PSC in Case # U-8443. The producers were granted status as intervenors and an evidentiary hearing was held before a hearing officer. The PSC staff, Mich Con and the producers participated in the evidentiary hearing. At the hearing and in the parties' briefs, the central issues in dispute concerned the producers' assertions that (1) the PSC did not have jurisdiction under Sec. 10 of 1929 P.A. 9 to establish prices that Mich Con may pay for commonly purchased natural gas and (2) the computation of the index under paragraphs 2 and 3 of the contract amendments was incorrect. Following the hearing and submission of briefs, the hearing officer issued a proposal for decision and the parties filed exceptions and replies. The PSC issued its final order and opinion on December 8, 1987. The PSC, following the hearing officer's recommendations, ruled that (1) it had jurisdiction pursuant to 1929 P.A. 9 to establish a reasonable and appropriate price at which a common purchaser may receive natural gas and to approve price changes, (2) Mich Con correctly calculated the index under the contract amendments,[179 MICHAPP 609] and (3) the $3.11414 per Mcf price calculated by Mich Con was reasonable and appropriate.
The producers filed separate appeals, which have been consolidated by this Court.
The initial issues raised by the producers require us to determine the extent of the jurisdiction of the PSC. The PSC possesses no "common law" powers. As a creature of the Legislature, the PSC possesses only that authority bestowed upon it by statute. Thus, a determination of the PSC's powers requires an examination of the various statutory enactments pertaining to its authority. Union Carbide Corp. v. Public Service Comm, 431 Mich. 135, 146, 428 N.W.2d 322 (1988). Section 6 of the Public Service Commission act, M.C.L. Sec. 460.1 et seq.; M.S.A. Sec. 22.13(1) et seq., outlines the PSC's powers and jurisdiction, but furnishes no grant of specific powers. Id., at pp. 146-147, 428 N.W.2d 322.
The intent of 1929 P.A. 9 is to grant to the PSC the power to control and regulate corporations, associations and persons engaged in the business of purchasing or selling or transporting natural gas for public use. Preamble and Secs. 3, 9, 10, 11, 12 and 13. Every corporation, association or person engaged in such business is known as a common purchaser. Section 4. One of the purposes of the act is the conservation of natural gas. Wolverine Natural Gas Corp. v. Consumers Power Corp., 296 Mich. 500, 506, 296 N.W. 660 (1941); Northern Michigan Exploration Co. v. Public Service Comm, 153 Mich.App. 635, 646, 396 N.W.2d 487 (1986); Secs. 7, 8 and 14. Another purpose of the act is to prohibit common purchasers from discriminating in price or amount for like grades of natural gas between producers. Wolverine Natural Gas, supra; Secs. 4, 6 and 8.
The PSC relies upon Sec. 10 of 1929 P.A. 9, M.C.L. Sec. [179 MICHAPP 610] 483.110; M.S.A. Sec. 22.1320, for the specific grant of jurisdiction to review and approve changes in gas prices paid by common purchasers. Section 10, prior to its amendment by 1987 P.A. 6 and for purposes of this appeal, stated:
Every common purchaser or common carrier of natural gas shall before receiving the same for transmission or delivery file with the commission a schedule of the rates and price at which it will receive gas at...
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