Elizabethtown Gas Co. v. F.E.R.C.
| Decision Date | 17 December 1993 |
| Docket Number | 92-1059,Nos. 92-1030,s. 92-1030 |
| Parties | , 149 P.U.R.4th 160 ELIZABETHTOWN GAS COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Columbia Gas Transmission Corporation, Washington Gas Light Company, Transcontinental Gas Pipe Line Corporation, The City of Danville, Virginia, The Process Gas Consumers Group, et al., South Jersey Gas Company, South Carolina Pipeline Corporation, Sun Company, Inc., ANR Pipeline Company, The Brooklyn Union Gas Company, Piedmont Natural Gas Company, Inc., Dakota Gasification Company, and Transco Municipal Group, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory Commission.
John T. Miller, Jr. for petitioner Elizabethtown Gas Co.
Edward J. Grenier, Jr., with whom Sterling H. Smith and Roger D. Williams were on the brief for petitioners Process Gas Consumers Group, American Iron and Steel Institute, and Georgia Industrial Group.
Timm L. Abendroth and Eric L. Christensen, Attys., FERC, with whom William S. Scherman, General Counsel, and Jerome M. Feit, Solicitor, FERC, were on the brief for respondent.
Michael J. Fremuth, with whom Anthony J. Ivancovich, Michael W. Hall, Mary Jane Reynolds, Randall R. Conklin, David A. Glenn, John K. Keane, Jr., Telemac N. Chryssikos, and Robert B. Evans were on the joint brief for intervenors Transcontinental Gas Pipe Line Corp., Dakota Gasification Co., The Brooklyn Union Gas Co., and Washington Gas Light Co.
Thomas J. Eastment and Alan W. Tomme entered appearances for intervenor Union Pacific Resources Co.
James F. Bowe, Jr. and O. Julia Weller entered appearances for intervenors Virginia Natural Gas, Inc., and Long Island Lighting Co.
Cheryl L. Jones and Barbara K. Heffernan entered appearances for intervenor Delmarva Power & Light Co.
Michael J. Thompson and Wade H. Hargrove entered appearances for intervenor Public Service Company of N.C., Inc., Michael J. Thompson and Donald W. McCoy entered appearances for intervenor North Carolina Natural Gas Corp.
Steven A. Taube, entered an appearance for intervenor Philadelphia Gas Works.
F. Nan Wagoner entered an appearance for intervenor Texas Eastern Transmission Corp.
James H. Byrd, James R. Choukas-Bradley, L. Clifford Adams, Jr. entered appearances for intervenors Transco Municipal Group and the Municipal Gas Authority of Georgia.
Kenneth D. Brown entered an appearance for intervenor Atlanta Gas Light Co. R. Brian Corcoran entered an appearance for intervenor Owens-Corning Fiberglas Corp.
Thomas J. Eastment and Charles F. Hosmer entered appearances for intervenor ARCO Oil and Gas Co., Thomas J. Eastment and David R. Stevenson entered appearances for intervenor Chevron U.S.A. Production Co., Thomas J. Eastment and J. Paul Douglas entered appearances for intervenor Conoco, Inc., Thomas J. Eastment and C. Roger Hoffman entered appearances for intervenor Exxon Corp., Thomas J. Eastment and John S. Carr entered appearances for intervenor Mobil Natural Gas, Inc., Thomas J. Eastment and Michael L. Pate entered appearances for intervenor OXY USA, Inc., Thomas J. Eastment entered an appearance for intervenor Shell Gas Trading Co., Thomas J. Eastment and Ralph J. Pearson, Jr. entered appearances for intervenor Texaco, Inc. and Texaco Marketing, Inc.
R.J. Clark entered an appearance for intervenor UGI Corp.
Marye L. Wright, Giles D.H. Snyder, and Stephen J. Small entered appearances for intervenor Columbia Gas Transmission Corp.
Robert B. Evans, John K. Keane, Jr., and Telemac N. Chryssikos entered appearances for Washington Gas Light Co.
Michael J. Fremuth, Anthony J. Ivancovich, David A. Glenn, and Randall R. Conklin entered appearances for intervenor Transcontinental Gas Pipe Line Corp.
Frederick H. Ritts entered an appearance for intervenor The City of Danville, Virginia.
Edward J. Grenier, Jr. and Sterling H. Smith entered appearances for intervenors The Process Gas Consumers Group, The American Iron and Steel Institute, and Georgia Industrial Group.
William C. Bingham, Jr., entered an appearance for intervenor South Jersey Gas Co.
Joel F. Zipp and Morley Caskin entered appearances for intervenor South Carolina Pipeline Corp.
Paul W. Diehl entered an appearance for intervenor Sun Co., Inc. (R & M).
J. Gordon Pennington and Daniel F. Collins entered appearances for intervenor ANR Pipeline Co.
Michael W. Hall entered an appearance for intervenor The Brooklyn Union Gas Co.
Jerry W. Amos entered an appearance for intervenor Piedmont Natural Gas Co., Inc.
Mary Jane Reynolds entered an appearance for intervenor Dakota Gasification Co.
Before EDWARDS, D.H. GINSBURG, and RANDOLPH, Circuit Judges.
Opinion for the Court filed by Circuit Judge D.H. GINSBURG.
The petitioners, a group of industrial gas consumers and a local distribution company (LDC), challenge orders of the Federal Energy Regulatory Commission approving two settlements between the Transcontinental Gas Pipeline Corporation (Transco) and its customers. See Transcontinental Gas Pipe Line Corp., 55 FERC p 61,446, reh'g denied, see 57 FERC p 61,345. The petitioners are Transco customers that did not join in the settlements. They contend that the agreements are inconsistent with the Natural Gas Act (NGA), the Natural Gas Policy Act (NGPA), and the Commission's own policies. We reject these contentions in large part, but remand the case for the Commission to reconsider whether the customers that benefit from the priority curtailment provision in one of the agreements should be required to compensate the customers that are harmed by virtue of that provision.
The Restructuring Settlement calls for Transco to "unbundle" its regulated transportation service from its natural gas sales or merchant service, which by the terms of the settlement is to be priced at market rates. The Transportation Settlement establishes the rates, terms, and conditions of transportation service on the Transco pipeline, using cost-based pricing principles.
Under the Restructuring Settlement, Transco will no longer sell gas bundled with transportation service (i.e., delivered gas); instead it will sell gas at the wellhead or pipeline receipt point, to be transported as the buyer sees fit. Transco's sales are to be market-based; that is, the rates are to be negotiated or arbitrated between Transco and its customers. 55 FERC at 62,331. In approving the Restructuring Settlement, the FERC determined that Transco's markets are sufficiently competitive to preclude the pipeline from exercising significant market power in its merchant function and to assure that gas prices are "just and reasonable" within the meaning of the NGA Sec. 4. Id. at 62,333. Therefore, in the settlement, the FERC authorized Transco in advance "to establish and to change" individually negotiated rates free of customer challenge under Sec. 4 of the NGA; the "only further regulatory action" possible under the settlement is the Commission's review of Transco's prices under Sec. 5 of the Act, upon the Commission's own motion or upon the complaint of a customer that is not a party to the settlement.
As initially submitted to the FERC, the Restructuring Settlement also contained a "pro rata curtailment provision," which provided that in times of supply shortage Transco would reduce its deliveries "in proportion to each customer's daily entitlement to Transco gas." The Commission rejected this provision on the ground that it did not protect certain high-priority customers (e.g., agriculturalists) "to the maximum extent practicable," as required by Title IV of the NGPA, 15 U.S.C. Secs. 3391-94. On rehearing, petitioner Elizabethtown Gas Company challenged this conclusion; in the alternative it argued that if priority distribution is to be permitted then high priority customers should at least be required to compensate lower priority customers for their loss of gas. The FERC rejected these arguments on the ground that such "policy arguments do not overcome the legal requirements under NGPA Sec. 401(a) to give curtailment priority to certain high priority users." 57 FERC at 62,117.
Finally, the Restructuring Settlement imposes a 2.3 cent "volumetric surcharge" upon all sales and transportation customers. The purpose of the surcharge is to enable Transco to recover costs it incurred in connection with its Great Plains coal gasification project.
The Transportation Settlement provides that rates for transportation services on Transco's pipelines are to be based upon cost-of-service pricing principles. The settlement allocates various costs among classes of transportation customers for the purpose of determining the prices each must pay. The petitioners challenge the allocation of two types of costs.
The first consists of certain fixed costs, such as taxes and return on equity, that are allocated among all the users of the pipeline through a so-called "load factor." An interruptible customer is charged a 100% load factor. A firm customer, however, is charged a 100% load factor only if it uses its full demand entitlement; a firm customer that uses less than its full entitlement pays a greater load factor. The second allocation involves "gathering and storage" costs and costs recorded in Account No. 858 of the Commission's Uniform System of Accounts.
In March 1992 Transco filed a new rate case in which it proposed to make changes in its rate structure but to retain basically the same cost allocations as those made in the Transportation Settlement. In particular, the new rate proposal again allocated a 100% load factor to interruptible rate customers and allocated gathering and storage costs and Account No. 858 costs to both transportation and sales customers. The present ...
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