Mississippi Valley Gas Co. v. F.E.R.C., 94-1486

Decision Date20 October 1995
Docket NumberNo. 94-1486,94-1486
Citation68 F.3d 503
PartiesMISSISSIPPI VALLEY GAS COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Southern Natural Gas Company, et al., Intervenors.
CourtU.S. Court of Appeals — District of Columbia Circuit

J. Michel Marcoux, Washington, DC, argued the cause and filed the briefs for petitioner.

Katherine Waldbauer, Federal Energy Regulatory Commission, argued the cause for respondent, with whom Jerome M. Feit, Solicitor, and Joseph S. Davies, Deputy Solicitor, Federal Energy Regulatory Commission, Washington, DC, were on the briefs. Jill L. Hall, Federal Energy Regulatory Commission, entered an appearance.

Patrick B. Pope, Deborah L. Dille, Birmingham, AL, and James J. Flood, Jr., Washington, DC, were on the brief for intervenor Southern Natural Gas Company.

Edward J. Grenier, Jr., Washington, DC, entered an appearance for intervenor Georgia Industrial Group. Joel F. Zipp and Paul W. Diehl, Washington, DC, entered appearances for intervenor South Carolina Pipeline Corporation. James W. McTarnaghan and Jeffrey D. Komarow, Washington, DC, entered appearances for intervenor Alabama Gas Corporation. John T. Stough, Jr. and Kevin M. Downey, Washington, DC, entered appearances for intervenors Atlanta Gas Light Company and Chattanooga Gas Company. James R. Choukas-Bradley, Washington, DC, entered an appearance for intervenors Municipal Gas Authority of Georgia, et al. Michael R. Waller, Washington, DC, entered an appearance for intervenor Florida Power Corporation. Frederic G. Berner, Jr. and Nancy Y. Gorman, Washington, DC, entered appearances for intervenor Arcadian Fertilizer, L.P.

Before: EDWARDS, Chief Judge, SENTELLE and TATEL, Circuit Judges.

Opinion for the Court filed by Chief Judge HARRY T. EDWARDS.

HARRY T. EDWARDS, Chief Judge:

In December 1993, the Federal Energy Regulatory Commission ("FERC") approved settlement agreements in several ratemaking cases involving gas transportation rates charged by Southern Natural Gas Company ("Southern") for the period from September 1989 through April 1993. Southern Natural Gas Co., 65 F.E.R.C. p 61,348 (1993); Southern Natural Gas Co., 65 F.E.R.C. p 61,347 (1993). The settlement agreements provide that rates for part of that period may be determined based on the estimated gas transported (the "throughput"), reduced to reflect gas transported at discounted rates. 65 F.E.R.C. p 61,348 at 62,840; 65 F.E.R.C. p 61,347 at 62,827.

Mississippi Valley Gas Company ("MVGC"), a Southern customer, opposed the settlement agreements, and asked FERC to reconsider them in light of the harmful effect of rate discounts and related throughput reductions on captive customers (such as MVGC), who must use gas and can only obtain it from one provider. 1 According to MVGC, discounts granted by Southern to meet competition from other gas pipelines ("gas-on-gas" competition) are inevitably unfair to captive customers and, thus, are both illegal under the Natural Gas Act 2 and inconsistent with FERC regulations and orders. FERC reviewed the settlement agreements and granted additional hearings with respect to some of MVGC's complaints, but dismissed its claim that Southern's throughput reduction for gas-on-gas discounts discriminates against captive customers. Southern Natural Gas Co., 67 F.E.R.C. p 61,156 (1994); Southern Natural Gas Co., 67 F.E.R.C. p 61,155 (1994).

MVGC promptly petitioned for review, initiating the instant action. Although MVGC undoubtedly was prudent in seeking judicial review, we find that review at this time would be premature, because MVGC may eventually obtain the relief it seeks in the course of the hearings still pending before FERC. Therefore, we dismiss MVGC's appeal as unripe, with the understanding that, if the pending FERC hearings do not grant MVGC full relief from the rate increases attributable to throughput reduction for gas-on-gas discounts, MVGC may challenge Southern's throughput reduction once the final rates have been established by FERC.

I. BACKGROUND

Between August 1989 and February 1992, Southern filed three proposed rate revisions (RP89-224, RP90-139, and RP92-134) with FERC to set its gas transportation rates for the period from September 1, 1989 through April 30, 1993. MVGC and other Southern customers contested the proposed changes, and FERC thereafter held hearings on the challenged rates.

On April 30, 1993, after FERC had received several volumes of testimony, but had not yet issued final orders in Southern's rate cases, Southern proposed a settlement of the RP92-134 case. On June 4, 1993, an Administrative Law Judge ("ALJ") certified that FERC could accept the settlement because the parties in opposition had raised no genuine issues of material fact to support their claims. Southern Natural Gas Co., 63 F.E.R.C. p 63,012 (1993). Southern then proposed a settlement of the RP89-224 and RP90-139 rate cases, and an ALJ certified that FERC could accept this settlement as well.

In December 1993, FERC issued two companion orders addressing Southern's settlement proposals, Southern Natural Gas Co., 65 F.E.R.C. p 61,348 (1993), and Southern Natural Gas Co., 65 F.E.R.C. p 61,347 (1993). These orders approved modified versions of Southern's settlement proposals, subject to the outcome of evidentiary hearings at which MVGC would have the opportunity to cross-examine Southern's witnesses on certain issues, including the question of whether Southern had improperly granted discounts to affiliated companies. 3 65 F.E.R.C. p 61,348 at 62,839; 65 F.E.R.C. p 61,347 at 62,833-34.

Although these orders gave MVGC the possibility of relief on some issues, other concerns presented by MVGC were dismissed, including MVGC's assertion that reduction of Southern's throughput for gas-on-gas discounts was unfair and discriminatory. See 65 F.E.R.C. p 61,347 at 62,830 (FERC rejected MVGC's contention that throughput reduction to reflect discounts is improper because it found the claim raised no issue of material fact and was "contrary to Commission policy."); 65 F.E.R.C. p 61,348 at 62,843 (same). MVGC petitioned for review in this court after FERC denied its request for reconsideration of the throughput reduction issue in two companion orders issued in May 1994. Southern Natural Gas Co., 67 F.E.R.C. p 61,156 (1994); Southern Natural Gas Co., 67 F.E.R.C. p 61,155 (1994).

II. DISCUSSION

MVGC's complaint that Southern's gas transportation rates under the settlement agreements will be unfair and discriminatory is an attack on an aspect of FERC's practice of permitting gas pipelines to provide discounts to certain customers in order to meet competition. The practice of so-called selective discounting was first permitted by FERC in 1985. See Regulation of Natural Gas Pipelines After Partial Wellhead Decontrol, Order No. 436, 50 Fed.Reg. 42,408, 42,451 (1985). Under current FERC regulations, a pipeline may implement selective discounting by declaring "a maximum rate and a minimum rate" and charging any non-affiliated customer "any rate that is neither greater than the maximum rate nor less than the minimum rate on file" with FERC. 18 C.F.R. Sec. 284.7(d)(5) (1995). This court has reviewed these regulations, and has upheld FERC's authority to permit discounting to meet competition, with the caveat that such permission does not mean that FERC "is free to uphold every price distinction based on different demand elasticities." Associated Gas Distribs. v. FERC, 824 F.2d 981, 1011 (D.C.Cir.1987), cert. denied, 485 U.S. 1006, 108 S.Ct. 1468, 1469, 99 L.Ed.2d 698 (1988).

MVGC contends that discounts to meet gas-on-gas competition are precisely the type of discount that this court would disapprove of under Associated Gas. However, our review of that decision does not lead us to conclude that this court has specifically addressed the legality of gas-on-gas discounts. Associated Gas reviews the general practice of discounting to meet competition and notes that "judicial acceptance of such price differentials is longstanding," but reserves consideration of the possible discriminatory effect of "rate differentials based exclusively on competition between transporters with similar cost functions," stating that FERC "may properly defer its ultimate resolution of these issues to another day and another proceeding." Id. at 1011, 1012. The FERC orders at issue in this case seem to make it clear that the agency has decided to allow selective discounting to meet gas-on-gas competition. However, because we have determined to dismiss MVGC's petition for review on the ground of ripeness, we defer judgment on MVGC's argument that such a policy is illegally discriminatory.

A. Ripeness

Under Section 19(b) of the Natural Gas Act, 15 U.S.C. Sec. 717r(b) (1994), any party "aggrieved" by a FERC order may obtain judicial review of that order. In addition, a petitioner "must satisfy the requirements of constitutional standing." El Paso Natural Gas Co. v. FERC, 50 F.3d 23, 26 (D.C.Cir.1995). Both of these thresholds require that MVGC establish "injury in fact" to a protected interest. Id. (citing Shell Oil Co. v. FERC, 47 F.3d 1186, 1200 (D.C.Cir.1995)). A protected interest is one that is "arguably within the zone of interests to be protected or regulated by FERC under" the applicable statute. Moreau v. FERC, 982 F.2d 556, 564 (D.C.Cir.1993) (internal quotations and alteration omitted). Here, MVGC's standing to petition for review of the FERC orders is uncontested. MVGC has clearly demonstrated "injury in fact" because the FERC orders it challenges affect the rates it will pay Southern, and are directly within the authority conferred upon FERC by the Natural Gas Act. MVGC also meets the remaining criterion for Article III standing because it is likely that its alleged injury could be redressed by a favorable decision from this court. See Lujan v. Defenders of Wildlife, 504 U.S. 555,...

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