Consolidated Edison Co. of New York, Inc. v. F.E.R.C.

• Decision Date: 10 March 1992
• Docket Number: No. 91-1127,91-1127
• Citation: 958 F.2d 429
• Parties: CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Central Hudson Gas and Electric Corporation, Mountaineer Gas Company, Nashville Gas Company, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 429

958 F.2d 429

294 U.S.App.D.C. 211

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Central Hudson Gas and Electric Corporation, Mountaineer Gas Company, Nashville Gas Company, et al., Intervenors.

No. 91-1127.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 28, 1992.

Decided March 10, 1992.

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

Harvey L. Reiter, with whom William I. Harkaway and Marc Richter, for Consolidated Edison Co. of New York, Inc., Barbara K. Heffernan and Tom Rattray, for The Berkshire Gas Co., et al., and J. Richard Tiano, for The Southern Connecticut Gas Co., were on the joint brief, for petitioners. Barbara M. Gunther also entered an appearance for petitioners.

John Robinson, Attorney, Federal Energy Regulatory Commission, with whom William S. Scherman, General Counsel, Jerome M. Feit, Sol., and Joseph S. Davies, Deputy Sol., were on the brief, for respondent. Jill Hall, Attorney, Federal Energy Regulatory Com'n, also entered an appearance for respondent.

Michael E. Small, with whom Robert H. Benna, was on the brief, for intervenor, Tennessee Gas Pipeline Co.

Peter C. Lesch and Steve Stojic entered appearances for intervenor, Mountaineer Gas Co.

Frederick J. Killion and Donald K. Dankner entered appearances for intervenor, Central Hudson Gas and Electric Corp.

James F. Moriarty and Michael J. Manning entered appearances for intervenor, Tennessee Small General Service Customer Group.

Edward B. Myers and Gerard A. Maher entered appearances for intervenor, Orange and Rockland Utilities, Inc.

Kenneth D. Brown and James R. Lacey entered appearances for intervenor, Public Service Elec. and Gas Co.

Before MIKVA, Chief Judge; RUTH BADER GINSBURG and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge RUTH BADER GINSBURG.

RUTH BADER GINSBURG, Circuit Judge:

This case concerns the authority of the Federal Energy Regulatory Commission (Commission or FERC) to accelerate the effective date of a natural gas pipeline's out-of-cycle purchase gas adjustment (PGA). ¹ The governing prescription, section 4(d) of the Natural Gas Act, 15 U.S.C. § 717c(d), places a thirty-days' waiting period between the supplier's notice of a rate increase and the effective date of the changed rate; "for good cause shown," however, FERC may shorten or dispense with the waiting period. FERC exercised its section 4(d) authority in the controversy before us on these facts: (1) on November 30, 1990, Tennessee Gas Pipeline Company (Tennessee) filed for an out-of-cycle PGA increasing the commodity portion of its gas sales rate; (2) on December 27, 1990, the Commission accepted the PGA as filed and granted Tennessee's November 30 request for a December 1, 1990 effective date. See Tennessee Gas Pipeline Co., FERC Letter Order, Dkt. No. TQ91-2-9-000 (Dec. 27, 1990); Tennessee Gas Pipeline Co., 54 FERC p 61,165 (1991) (denying rehearing).

Petitioners Consolidated Edison Company of New York, Inc., et al. (collectively, Con Edison) are New York and New England local distribution companies who purchase portions of their gas supplies from Tennessee at rates regulated by FERC. Petitioners argue, principally, that the December 1, 1990 effective date is inconsonant with the "filed rate doctrine." ² December 27, 1990, the date of FERC's order accepting Tennessee's filing, petitioners maintain, is the earliest effective date FERC could approve. ³

We conclude that the Commission reasonably construed and exercised its section 4(d) authority to dispense with the thirty days' waiting period. The December 1 effective date, we hold, was not impermissibly early for the rate change Tennessee's November 30 application requested.

I. The Regulatory Setting

Section 4(a) of the Natural Gas Act (NGA), 15 U.S.C. § 717c(a), requires that all rates charged by a natural gas company for the transportation or sale of gas be "just and reasonable." Pipelines must file their rates and rate changes with the Commission in tariffs supported by detailed cost information. Id. § 717c(c); 18 C.F.R. § 154.63. Pending Commission investigation into the lawfulness of a new or changed rate, FERC may suspend the rate for a period of up to five months; at that point, the proposed rate must be given effect. See 15 U.S.C. § 717c(e). If FERC ultimately determines, at the completion of its investigation, that the initially-suspended rate was unreasonable, however, FERC may order the seller to refund the overcharge, with interest. Id. ⁴

Section 4(d), 15 U.S.C. § 717c(d), the statutory provision of principal concern in this case, states that, "[u]nless the Commission otherwise orders," no rate change shall become operative "except after thirty days' notice to the Commission and to the public." The required notice is given "by filing with the Commission ... schedules stating plainly the change ... to be made ... and the time when the change ... will go into effect." "[F]or good cause shown," the Commission "may allow changes to take effect without requiring the thirty days' notice." ⁵ See also 18 C.F.R. § 154.51 (Commission's rule on permitting filed changes to become effective without thirty days' notice).

Courts have read sections 4(c), 4(d), and 5(a) together as embracing for the federally regulated natural gas market the "filed rate doctrine." As declared by the Supreme Court, that doctrine generally prohibits a regulated entity from charging rates "other than those properly filed with the appropriate federal regulatory authority." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101 S.Ct. 2925, 2930, 69 L.Ed.2d 856 (1981) (Arkla ). The constraints imposed by the filed rate doctrine, and the corollary proscription against retroactive ratemaking, limit both utility and regulator: "the Commission itself [may not] impos[e] a rate increase for gas already sold." Id. at 578, 101 S.Ct. at 2931; see Towns of Concord, Norwood, and Wellesley v. FERC, 955 F.2d 67, 70-72 (D.C.Cir.1992) (summarizing precedent on filed rate doctrine). According to case law accounts, the filed rate doctrine promotes certainty in the market, discourages undesirable price discrimination, and preserves the regulator's authority to determine at the threshold whether particular rates or practices are unlawful. See, e.g., Arkla, 453 U.S. at 582, 101 S.Ct. at 2932-33 ("granting the Commission an opportunity in every case to judge the reasonableness of the rate" is "clear purpose" of doctrine); Transwestern Pipeline Co. v. FERC, 897 F.2d 570, 577 (D.C.Cir.) (doctrine "allows purchasers of gas to know in advance the consequences of the purchasing decisions they make"), cert. denied, --- U.S. ----, 111 S.Ct. 373, 112 L.Ed.2d 335 (1990); cf. Maislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 110 S.Ct. 2759, 2765-69, 111 L.Ed.2d 94 (1990) (in Interstate Commerce Act context doctrine has historically served to prevent unjust discrimination).

We turn next in this background section to purchase gas adjustment clauses (PGAs) of the kind that underlie this controversy. PGAs allow pipelines to recover from their customers--promptly and without the cumbersome data production FERC requires in a full section 4 rate proceeding--certain costs incurred for the acquisition of natural gas. First adopted in 1972, and amended in 1978 and 1987 in response to an increasingly volatile and competitive natural gas market, the Commission's regulations, see 18 C.F.R. §§ 154.301 et seq., instruct pipelines, if they elect to recover costs through PGAs, to submit annual estimates of their projected gas costs, with quarterly revisions. 18 C.F.R. §§ 154.304-.305. Subject to the notice provisions of section 4(d) and FERC's procedural requirements, PGA changes based on these projections ordinarily are allowed to take effect on a quarterly basis. ⁶ Costs thus collected are subject to challenge and Commission review in the pipeline's next annual PGA filing and, where appropriate, to FERC-ordered refund.

When market conditions diverge sharply from those anticipated in its most recent PGA filing, a pipeline may file for an "out-of-cycle" PGA. Rate reductions out-of-cycle are granted as a matter of course; the Commission assumes the existence of section 4(d) "good cause" whenever a pipeline wants to cut its price immediately. See 18 C.F.R. § 154.309(b). Rate increases, on the other hand, are approved only on a case-by-case basis. Out-of-cycle PGAs are subject to the section 4(d) notice requirements. The Commission, however, retains its authority under that provision to dispense with the thirty days' notice period for "good cause." See Revisions to the Purchased Gas Adjustment Regulations, 52 FED.REG. 43,854, 43,871 (1987).

II. Analysis

Our review of FERC's order is guided by Chevron USA Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). See generally Office of Consumers' Counsel v. FERC, 783 F.2d 206, 218 (D.C.Cir.1986). Chevron instructs that when "Congress has directly [and unambiguously] spoken to the precise question at issue," a reviewing court must, of course, adhere to the legislators' judgment; where a statute is "silent or ambiguous," however, the court must accept any reasonable interpretation by the agency to which Congress has entrusted the statute's administration. See Chevron, 467 U.S. at 842, 843, 104 S.Ct. at 2781, 2782. We are satisfied that this case falls in the latter category.

Contending that deference is not called for here, Con Edison suggests--but, we note, only in its reply brief--that the Supreme Court's Maislin decision modifies or qualifies Chevron in the filed rate doctrine domain. We do not read Maislin as a departure from Chevron instructions. Maislin held that the Interstate Commerce Act does not permit the collection of a rate never filed with the regulator. In deciding...