Federal Power Commission v. Tennessee Gas Transmission Company City of Pittsburgh, Pennsylvania v. Tennessee Gas Transmission Company, Nos. 48

CourtUnited States Supreme Court
Writing for the CourtCLARK
Citation9 L.Ed.2d 199,83 S.Ct. 211,371 U.S. 145
PartiesFEDERAL POWER COMMISSION, Petitioner, v. TENNESSEE GAS TRANSMISSION COMPANY, The Manufacturers Light and Heat Company, The Ohio Fuel Gas Company and United Fuel Gas Company. CITY OF PITTSBURGH, PENNSYLVANIA, Petitioner, v. TENNESSEE GAS TRANSMISSION COMPANY et al
Decision Date03 December 1962
Docket NumberNos. 48,50

371 U.S. 145
83 S.Ct. 211
9 L.Ed.2d 199
FEDERAL POWER COMMISSION, Petitioner,

v.

TENNESSEE GAS TRANSMISSION COMPANY, The Manufacturers Light and Heat Company, The Ohio Fuel Gas Company and United Fuel Gas Company. CITY OF PITTSBURGH, PENNSYLVANIA, Petitioner, v. TENNESSEE GAS TRANSMISSION COMPANY et al.

Nos. 48, 50.
Argued Oct. 17, 1962.
Decided Dec. 3, 1962.

Ralph S. Spritzer, Washington, D.C., for petitioner in No. 48.

Charles S. Rhyne, Washington, D.C., for petitioner in No. 50.

Page 146

Harry S. Littman, Washington, D.C., for respondent Tennessee Gas Transmission Co.

Brooks E. Smith, New York City, for respondents Manufacturers Light & Heat Co., Ohio Fuel Gas Co., and United Fuel Gas Co.

Mr. Justice CLARK delivered the opinion of the Court.

This case involves the authority of the Federal Power Commission after hearing to order an interim rate reduction as well as a refund of amounts collected in excess thereof where a portion of a previously filed increased rate is found unjustified but the remainder of the proceeding is deferred. Respondent Tennessee Gas Transmission Company, a natural gas company, included within its filed increased rate schedule a 7% over-all return on its net investment. In considering this item1 along with others involved in the filing, including the allocation of the over-all cost of service among its rate zones, the Commission concluded, after a full hearing, that 6 1/8% rather than the filed 7% would be a just and reasonable return. It accordingly required Tennessee Gas to file reduced rates, based on the lower return figure, retroactive to the end of a five-month suspension period, and ordered a refund of the excessive amounts collected since that date. 24 F.P.C. 204. The Court of Appeals, 293 F.2d 761,

Page 147

found that the 6 1/8% return was just and reasonable. It held, however, by a divided vote, that the Commission erred in ordering an immediate reduction and refund since it had not determined other issues in the proceeding, particularly that of the proper allocation of the over-all costs of the company's services among its six zones. The latter, the court reasoned, might be determinative of the ultimate question of whether the over-all filed rates in each zone were just and reasonable; therefore, the interim order might result in irretrievable loss to the company. The importance of the question in the administration of the Natural Gas Act led us to grant certiorari, 368 U.S. 974, 82 S.Ct. 479, 7 L.Ed.2d 437. We have concluded that the issuance of the order was an appropriate exercise of the power granted the Commission by the Act.

I.

Tennessee Gas does not have a system-wide rate applicable to all services regardless of where performed. It has since the early 1950's, with Commission approval, divided its extensive pipeline system into six rate zones with rate differentials. The appropriate allocation of its costs of service among these zones and types of customers was not then decided by the Commission nor agreed upon between the parties, but was left for future decision. It was in this posture that in 1959 Tennessee Gas, pursuant to § 4(d) of the Natural Gas Act, 2 filed with the Com-

Page 148

mission proposed increased rates for its six rate zones. The rates were predicated upon a cost of service which included a claim to a 7% rate of return on net investment. At the inception of hearings on the reasonableness of the filed rates the Commission, under its § 4(e)3 authority, imposed a five-month suspension period on the proposed increase after which the rates became effective subject to refund of any portion not ultimately justified by Tennessee Gas in the Proceedings.

Hearings commenced on February 2, 1960, and Tennessee Gas presented its evidence on cost of service and rate of return. The Commission staff presented evidence on the latter alone and then proposed that the rate of return issue be treated separately from cost of service and allocation of rates among zones. At the time of this proposal to the Commission the zone allocation issue was also pending in another docket in a proceeding involving Tennessee Gas. By motion Tennessee Gas requested that the allocation issue be decided simultaneously with that involving the rate of return. On August 5, 1960, this motion was denied, and four days later the Commission issued the interim order under attack here. It found that a 7% return was excessive and that a 6 1/8% rate of return was just and reasonable. This finding was based on the

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Commission's determination that Tennessee Gas had failed to justify a rate of return greater than 6 1/8%. Accordingly, the Commission issued an interim order which disallowed the 7% return, required Tennessee Gas to file appropriate lower rates retroactively to the effective date of the increased rates and ordered refunds of the differences collected since that time. Tennessee Gas does not contest the Commission's determination that a 6 1/8% return on its net investment is just and reasonable. It does contend that to require the refunds prior to a determination of cost allocation among its zones of operation might result in its being unable to realize this return during the refund period. In this connection it points out that the rates as finally determined might, in some of its zones, be above the rates collected less the refund ordered. This would result in Tennessee Gas not being able to recoup a return of 6 1/8% since it would be unable to collect retroactively the higher rates found appropriate in those zones while it would be required to make full refunds in the remaining lower rate zones.

The Court of Appeals, in setting aside the Commission's order of immediate reduction and refund, found that it was unreasonable and an abuse of discretion to thus splinter the issues, especially since the cost allocation among zones issue was deemed 'ripe for decision,'4 and

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a ruling on it was an 'essential element in determining whether the filed rates are excessive.' The court also questioned whether a hearing confined to the issue of rate of return was such a 'full hearing' as § 4(e) demands prerequisite to a ratechange and refund order.

The Federal Power Commission and the City of Pittsburgh, which is acting in behalf of resident consumers of natural gas, are here in separate cases. Since they raise identical factual and legal issues, we consider the two cases together.5

II.

As all of the respondents admit, there is 'no question' as to the Commission's authority to issue interim rate orders. Indeed, such general authority is well established by cases in this Court, Federal Power Comm. v. Natural Gas Pipeline Co., 315 U.S. 575, 62 S.Ct. 736, 86 L.Ed. 1037 (1942); New England Divisions Case (Akron, C. & Y.R. Co. v. United States), 261 U.S. 184, 43 S.Ct. 270, 67 L.Ed. 605 (1923), as well as in the Courts of Appeals. Panhandle Eastern Pipe Line Co. v. Federal Power Comm., 236 F.2d 606 (C.A.3d Cir. 1956); State Corporation Comm. of Kansas v. Federal Power Comm., 206 F.2d 690 (C.A.8th Cir. 1953). It is true that none of these cases involved an undecided cost allocation issue applicable retroactively. However, in Natural Gas Pipeline Co. this Court took pains to point out...

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87 practice notes
  • Public Service Commission of State of N. Y. v. Federal Power Commission, Nos. 24716
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • August 27, 1975
    ...denied sub nom., Frankel v. FPC, 382 U.S. 985, 86 S.Ct. 527, 15 L.Ed.2d 474 (1966). 464 Quoting FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 155, 83 S.Ct. 211, 9 L.Ed.2d 199 465 382 U.S. at 230, 86 S.Ct. at 364. 466 Compare also FPC v. Tennessee Gas Transmission Co., supra note 464,......
  • Arkansas Louisiana Gas Company v. Hall, No. 78-1789
    • United States
    • United States Supreme Court
    • July 2, 1981
    ...to be thereafter observed and in force." § 5(a), 52 Stat. 823, 15 U.S.C. § 717d(a) (emphasis added). See, e. g., FPC v. Tennessee Gas Co., 371 U.S. 145, 152-153, 83 S.Ct. 211, 215, 9 L.Ed.2d 199 (1962); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 353, 76 S.Ct. 368, 371, 100 L.Ed. 388 (19......
  • In re Permian Basin Area Rate Cases. &#8212 102, 105 117, 181 261, 262 266, 388, Nos. 90
    • United States
    • United States Supreme Court
    • May 1, 1968
    ...contract prices unless it first concluded that they 'adversely affect the public interest.' And see FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 153, 83 S.Ct. 211, 215, 9 L.Ed.2d 199. The Commission found that field prices of less than 9¢ per Mcf had such consequences, but it declin......
  • Mississippi Power & Light Co. v. United Gas Pipe Line Co., No. 84-4220
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 17, 1985
    ...court concluded that a refund would be an inadequate remedy. The case of Federal Power Commission v. Tennessee Gas Transmission Co., 371 U.S. 145, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962), supports the conclusion that refunds in a utility rate dispute are not adequate to compensate the consumers ......
  • Request a trial to view additional results
87 cases
  • Public Service Commission of State of N. Y. v. Federal Power Commission, Nos. 24716
    • United States
    • United States Courts of Appeals. United States Court of Appeals (District of Columbia)
    • August 27, 1975
    ...denied sub nom., Frankel v. FPC, 382 U.S. 985, 86 S.Ct. 527, 15 L.Ed.2d 474 (1966). 464 Quoting FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 155, 83 S.Ct. 211, 9 L.Ed.2d 199 465 382 U.S. at 230, 86 S.Ct. at 364. 466 Compare also FPC v. Tennessee Gas Transmission Co., supra note 464,......
  • Arkansas Louisiana Gas Company v. Hall, No. 78-1789
    • United States
    • United States Supreme Court
    • July 2, 1981
    ...to be thereafter observed and in force." § 5(a), 52 Stat. 823, 15 U.S.C. § 717d(a) (emphasis added). See, e. g., FPC v. Tennessee Gas Co., 371 U.S. 145, 152-153, 83 S.Ct. 211, 215, 9 L.Ed.2d 199 (1962); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 353, 76 S.Ct. 368, 371, 100 L.Ed. 388 (19......
  • In re Permian Basin Area Rate Cases. &#8212 102, 105 117, 181 261, 262 266, 388, Nos. 90
    • United States
    • United States Supreme Court
    • May 1, 1968
    ...contract prices unless it first concluded that they 'adversely affect the public interest.' And see FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 153, 83 S.Ct. 211, 215, 9 L.Ed.2d 199. The Commission found that field prices of less than 9¢ per Mcf had such consequences, but it declin......
  • Mississippi Power & Light Co. v. United Gas Pipe Line Co., No. 84-4220
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • May 17, 1985
    ...court concluded that a refund would be an inadequate remedy. The case of Federal Power Commission v. Tennessee Gas Transmission Co., 371 U.S. 145, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962), supports the conclusion that refunds in a utility rate dispute are not adequate to compensate the consumers ......
  • Request a trial to view additional results

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