Consolidated Gas Supply Corp. v. Federal Power Commission
| Decision Date | 09 October 1975 |
| Docket Number | 74-1395,74-1393,74-1463,Nos. 74-1343,74-1489,s. 74-1343 |
| Citation | 520 F.2d 1176,172 U.S.App.D.C. 162 |
| Parties | , 12 P.U.R.4th 376 CONSOLIDATED GAS SUPPLY CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, United Gas Pipeline Company, Memphis Light, Gas & Water Division, New Orleans Public Service, Inc., Public Service Commission of the State of New York, Texas Gas Transmission Corporation, Entex, Inc., State of Louisiana and Louisiana Municipal Association, Louisiana Gas Service Co., Intervenors. COLUMBIA GAS TRANSMISSION CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Memphis Light, Gas & Water Division, United Gas Pipeline Co., the Public Service Commission of the State of New York, Texas Gas Transmission Corporation, Entex, Inc., New Orleans Public Service Inc., the State of Louisiana and Louisiana Municipal Association, Southern Natural Gas Company, Intervenor. MEMPHIS LIGHT, GAS & WATER DIVISION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, United Gas Pipeline Company, the Public Service Commission of the State of New York, Texas Gas Transmission Corp., Entex, Inc., New Orleans Public Service, Inc., the State of Louisiana and Louisiana Municipal Association, Texas Eastern Transmission Corporation, Laclede Gas Company, Louisiana Gas Service Company, Intervenors. STATE OF LOUISIANA and Louisiana Municipal Association, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Texas Gas Transmission Corporation, United Gas Pipeline Co., Entex, Inc., Mississippi River Transmission Corporation, Louisiana Gas Service Company, Intervenors. UNITED GAS PIPELINE COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, New Orleans Public Service, Inc., Public Service Commission of the State of New York, Entex, Inc., Louisiana Gas Service Company, State of Louisiana andLouisiana Municipal Association, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Charles R. Brown, Washington, D. C., of the bar of the Supreme Court of Wisconsin, pro hac vice by special leave of court with whom Norman A. Flaningam, Washington, D. C., George L. Weber, Washington, D. C., Daniel L. Bell, Jr., and Giles D. H. Snyder, Charleston, W. Va., were on the brief, for petitioner in No. 74-1343 and 74-1393.
Reuben Goldberg, Washington, D. C., with whom George E. Morrow, Memphis, Tenn., was on the brief for petitioner in No. 74-1395 also entered an appearance for intervenor Memphis Light, Gas and Water Division.
Arnold D. Berkeley, Washington, D. C., with whom David R. Straus, Washington, D. C., was on the brief for petitioners in No. 74-1463, also entered appearances for intervenors State of Louisiana and Louisiana Municipal Assn.
Stephen A. Wakefield, Washington, D. C., with whom Robert A. Webb, Alvin M. Owsley, Jr., William B. Cassin, Phillip D. Endom and I. Jay Golub, Houston, Tex., were on the brief for petitioner in No. 74-1489 and intervenor United Gas Pipeline Co.
Charles E. Bullock, Atty., Federal Power Commission, with whom Drexel D. Journey, Acting Gen. Counsel, George W. McHenry, Jr., Solicitor and Richard A. Oliver, Atty., Federal Power Commission, were on the brief for respondent. William M. Sawyer, Atty., Federal Power Commission, also entered an appearance for respondent.
Peter H. Schiff, Gen. Counsel, Public Service Commission of the State of New York, Albany, N. Y., and Richard A. Solomon, Washington, D. C., were on the brief for intervenor Public Service Commission of the State of New York.
Christopher T. Boland, Washington, D. C., was on the brief for intervenor Texas Gas Transmission Corp.
William W. Bedwell and John J. Mullally, Washington, D. C., were on the brief for intervenor Mississippi River Transmission Corp.
Platt W. Davis, III, Washington, D. C., and J. Evans Attwell, Houston, Tex., were on the brief for intervenor Texas Eastern Transmission Corp.
Clayton L. Orn, Houston, Tex., was on the brief for intervenor New Orleans Public Service, Inc.
Jefferson D. Giller, Houston, Tex. and Michael J. Manning, Washington, D. C entered appearances for intervenor Entex, Inc.
Philip C. Wrangle entered an appearance for intervenor Southern Natural Gas Co.
J. David Mann, Jr., Washington, D. C., entered an appearance for intervenor Laclede Gas Co.
H. Sloan McCloskey, New Orleans, La., entered an appearance for intervenor Louisiana Gas Service Co.
Before BAZELON, Chief Judge, FAHY, Senior Circuit Judge, and LEVENTHAL, Circuit Judge.
Opinion for the Court filed by Circuit Judge LEVENTHAL.
Petitioners seek review of Opinion No. 671 of the Federal Power Commission 1 and its Opinion No. 671-A 2 and order on rehearing which establish principles for the setting of rates for jurisdictional sales of natural gas by the United Gas Pipeline Company. In evaluating the rate tariff proposed by United, the FPC made marked revisions in the method of cost allocation and rate design it has used since its 1952 decision in Atlantic Seaboard Corp. 3 Specifically, the FPC shifted a significantly greater proportion of fixed costs from the demand component to the commodity component of its two-part cost allocation and rate design structure. Whether this departure is justified under present conditions of supply shortage is the major issue raised by United and other Petitioners Memphis Light, Gas & Water Division, 4 Columbia Gas Transmission Corp. and Consolidated Gas Supply Corp. 5 Intervenors Mississippi River Transmission Corp., Texas Eastern Transmission Corp., Texas Gas Transmission Corp., 6 and the Public Service Commission of New York join in attacking the allocation formula adopted by the Commission.
Memphis also challenges the FPC's elimination of the demand charge adjustment clause, which required that the demand charge due from a customer of United be credited for those amounts demanded by the customer but not delivered by United. The state of Louisiana, and the Louisiana Municipal Association 7 would have us overrule the Commission's systemwide allocation of costs attributable to United's storage facilities; historically those costs had been allocated solely to the Northern Zone, the area in which the facilities are located and which they directly serve. Louisiana also contests the Commission's increase of the penalty for unauthorized overruns from $3 to $10 per Mcf. We affirm the Commission's orders.
The process of setting rates under the Natural Gas Act for jurisdictional sales of natural gas has three distinct stages. First, the total cost of service is determined at a level sufficient to embrace return (profit) and taxes payable. The different elements of the cost of service are classified to either a commodity or a demand category. This interrelates with the formation of a two-part rate: a fixed demand component related to the customer's basic entitlement to receive gas from the natural gas company; and a commodity component with a rate specified for each unit of gas received. Variable costs 8 are assigned to the commodity or volumetric component because they fluctuate according to the volume of gas delivered. Fixed costs, 9 which are incurred in advance to provide the capacity to supply customers' peak demand, as well as to service nondemand volumes, have been divided equally between demand and commodity components under the Atlantic Seaboard method.
In the second stage of the process, the total costs are allocated between jurisdictional and non-jurisdictional customers. Demand costs may be allocated on the basis of peak-day or peak-period demands, while commodity costs are allocated according to the percentage of test-year sales attributable to each class of customers.
Rates are then designed to recover the costs allocated to jurisdictional customers. 10 Commodity costs are recovered by a cents-per-mcf commodity charge, which is paid by all customers on the basis of the total volume of gas actually delivered (annual use). Under Atlantic Seaboard the commodity charge recovers all variable costs and half of the fixed costs. Demand costs are recovered by a fixed monthly demand charge paid by those who have a contractual right to demand specified quantities of gas on peak days. The demand charge may be calculated according to the maximum amount that the customer has a right to demand as specified in the service agreement, or on the basis of the highest daily take for each customer during the past twelve months. United switched from the former to the latter method in April of 1974.
Demand charges fall most heavily on city-gate customers, typically local distribution companies that take gas at the "city gate," for sale primarily to commercial and residential customers. They usually take at a low load-factor; that is the volume of purchases of the city-gate customers tends to fluctuate considerably, between the cold winter season of high demand and the slack summer season. Because of these fluctuations the proportion they pay in demand charges is high compared to their commodity charges. In contrast, commodity charges are relatively more significant for high load-factor customers pipeline customers, who receive a relatively steady supply throughout the year, either because they service industrial customers not subject to the weather-related fluctuations characteristic of human needs, or because they have constructed storage facilities to which they can route any summer receipts in excess of their customer's summer requirements. Any shift towards the commodity component of the tariff increases the relative burden borne by the high-load customers. In the decision under review, the FPC revised its approach to cost classification and allocation and rate design, attributing only 25% of United's fixed costs to demand and 75% to commodity.
The decision in Atlantic Seaboard to...
To continue reading
Request your trial
-
United States ex rel. Parco v. Morris
...P-2. 10 The Parcos cite such cases as Duquesne Light Co. v. EPA, 522 F.2d 1186, 1193 (3d Cir. 1975); Consolidated Gas Supply Corp. v. FPC, 172 U.S.App.D.C. 162, 520 F.2d 1176, 1187 (1975); Maine v. CAB, 520 F.2d 1240, 1245 (1st Cir. 1975); and Oil Shale Corp. v. Morton, 370 F.Supp. 108, 123......
-
Borden, Inc. v. F.E.R.C.
...supplemented, 444 F.2d 125 (5th Cir.), cert. denied, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 47 (1970).19 Consolidated Gas Supply Corp. v. FPC, 520 F.2d 1176, 1185 n. 45 (D.C.Cir.1975) (quoting Public Serv. Comm'n v. FPC, 511 F.2d 338, 345 (D.C.Cir.1975)); see also Office of Consumers' Couns......
-
United Distribution Companies v. F.E.R.C.
...(7th Cir.1967); United Gas Pipe Line Co., 50 FPC 1348 (1973), reh'g denied, 51 FPC 1014 (1974), aff'd sub nom. Consolidated Gas Supply Corp. v. FPC, 520 F.2d 1176 (D.C.Cir.1975); Columbia Gas Transmission Corp. v. FERC, 628 F.2d 578 (D.C.Cir.1979); Northern Indiana Pub. Serv. Co. v. FERC, 7......
-
Public Service Commission for State of N. Y. v. Federal Power Commission
...91 L.Ed. 1995, 1999 (1947).45 Part II infra.46 Part III infra.47 See text infra at notes 123-124.48 Consolidated Gas Supply Corp. v. FPC, 172 U.S.App.D.C. ----, 520 F.2d 1176, at 1185 (1975) (footnotes omitted).49 I do not suggest that the lower rates may not under proper conditions include......