New Orleans Public Service, Inc. v. Federal Energy Regulatory Commission

• Citation: 659 F.2d 509
• Decision Date: 15 October 1981
• Docket Number: 79-3789,Nos. 79-3788,s. 79-3788
• Parties: NEW ORLEANS PUBLIC SERVICE, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. . *
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 509

659 F.2d 509

NEW ORLEANS PUBLIC SERVICE, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

Nos. 79-3788, 79-3789.

United States Court of Appeals Fifth Circuit. ^*

Oct. 15, 1981.

Clayton L. Orn, Anderson, Brown, Orn & Jones, Houston, Tex., William C. Nelson, Gen. Counsel, New Orleans, La., for New Orleans Public Service, Inc.

Thomas W. Pounds, Elizabeth Wade, Irving Jacob Golub, Baker & Botts, Houston, Tex., for United Gas Pipe Line Co.

William T. Miller, Miller, Balis & O'Neil, Washington, D. C., for United Municipal Distributors Group.

Christopher T. Boland, John F. Harrington, Washington, D. C., for Texas Gas Transmission Corp.

John B. Rudolph, Washington, D. C., James H. Wuller, St. Louis, Mo., for Mississippi River Transmission Corp.

Jerome Nelson, Sol., Barbara Weller, Jane Murphy, Washington, D. C., for Federal Energy Regulatory Com'n.

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

Before HENDERSON, ANDERSON and SAM D. JOHNSON, Circuit Judges.

R. LANIER ANDERSON, III, Circuit Judge:

The parties in this case are petitioner New Orleans Public Service, Inc. ("NOPSI"), intervenors United Gas Pipe Company ("United") and Mississippi River Transportation Corporation ("MRTC") and respondent Federal Energy Regulatory Commission ("FERC"). NOPSI is a public utility supplying electric energy, natural gas and transit services in New Orleans, Louisiana. As the purchaser of 41% of the natural gas sold in United's southern zone, NOPSI is United's largest southern zone customer. United is an interstate gas pipeline company regulated by the FERC pursuant to the Natural Gas Act, 15 U.S.C.A. § 717, et seq. (West 1976). United has a pipeline system in Texas, Louisiana, Mississippi, Alabama and Florida with two rate zones, northern and southern. It is NOPSI's principal supplier of natural gas. MRTC, a natural gas company, is a customer of United. The FERC is the successor agency to the Federal Power Commission ("FPC") charged, among other things, with responsibility for "the establishment, review, and enforcement of rates and charges for the transportation and sale of natural gas by a producer or gatherer or by a natural gas pipeline or natural gas company under §§ 1, 4, 5 and 6 of the Natural Gas Act." 42 U.S.C.A. § 7172(a)(1)(C) (West Supp. 1980).

Two contested settlements are involved in this consolidated appeal. The first settlement involved a series of seven proceedings ¹ covering rate filings by United which became effective on different dates from June 1, 1971, to October 9, 1976. The first settlement was approved by Commission Opinion No. 52 issued July 31, 1979. We refer to the proceedings involved in the first settlement as the first proceeding. The second settlement, approved by Commission order issued July 30, 1979, involved a single proceeding, FERC Docket No. RP77-107, for a "locked-in" ² period from January 1, 1978, to December 1, 1978. We refer to the second settlement as the second proceeding. In this appeal, NOPSI seeks review of the FPC orders approving these two contested settlements. We affirm FERC and enforce its orders.

NOPSI argues that the FERC erred in accepting the settlement agreements because the administrative settlement procedures followed were inappropriate; that FERC's findings with respect to each case are not supported by substantial evidence; and that the FERC erred in approving settlements which reflected continued use of the United ³ methodology of cost classification and allocation. We address each argument in turn.

I. ADMINISTRATIVE SETTLEMENT PROCEDURES

NOPSI argues that the Commission erred in accepting the contested settlement in the first proceeding because no evidentiary hearing was held in connection with that proceeding. FERC may adopt a contested settlement only if it finds by substantial evidence on the record as a whole that the agreement will establish just and reasonable rates, NOPSI argues. An evidentiary hearing is necessary for the Commission to make such findings, according to NOPSI, and the hearing held in connection with the settlement proposal for the second proceeding is not sufficient to comply with the hearing requirement with respect to the first proceeding. We reject NOPSI's argument.

It is well settled that the Commission ⁴ can approve contested settlements as long as it determines that the proposal will establish just and reasonable rates. Placid Oil Co. v. FPC, 483 F.2d 880, 893 (5th Cir. 1973), aff'd. sub nom. Mobil Oil Corp. v. FPC, 417 U.S. 283, 312-13, 94 S.Ct. 2328, 2347-48, 41 L.Ed.2d 72 (1974). Moreover, it is clear that in some circumstances the Commission can approve contested settlements without conducting a formal evidentiary hearing. Pennsylvania Gas & Water Co. v. FPC, 463 F.2d 1242 (D.C. Cir. 1972). We must determine whether the contested settlement proposal in this case comes within the boundaries of Pennsylvania Gas.

In Pennsylvania Gas & Water Co. v. FPC, 463 F.2d 1242 (D.C. Cir. 1972), petitioner Pennsylvania Gas claimed due process violations because of the settlement of rate proceedings without a hearing and over its objections. The court of appeals held that approval of the contested settlement by the FPC was proper though no formal evidentiary hearing was held because there was no dispute of fact. The court said, "In the case at bar, we find no possible dispute over the facts since the Commission accepted all of Penn Gas' factual allegations as correct." 463 F.2d at 1251. Furthermore, the court noted, the petitioner had had the opportunity to present its position to the Commission. It said, "Penn Gas has been afforded ample opportunity to present its position to the Commission from its participation in both the prehearing and informal conferences, its objections to the proposed 'Stipulation and Agreement' filed with the Commission, and its objections to the FPC's first order in its application for rehearing." 463 F.2d at 1251. The evidence reviewed by the FPC in deciding that a further hearing was not warranted included the testimony and exhibits filed by petitioner Pennsylvania Gas, petitioner's objections to the motion for approval of the "Stipulation and Agreement" and for termination of the proceedings, an answer in opposition to the Commission staff's response to its objections to the settlement agreement, and an application for rehearing further specifying its objections. 463 F.2d 1242 at 1245, n.11. The court explained that approval of a contested settlement is like the granting of a motion for summary judgment when there exist no genuine issues of material fact. It said:

(I)n agency proceedings settlements are frequently suggested by some, but not necessarily all, of the parties; if on examination they are found equitable by the regulatory agency, then the terms of the settlement form the substance of an order binding on all the parties, even though not all are in accord as to the result. This is in effect a "summary judgment" granted on "motion" by the litigants where there is no issue of fact.

463 F.2d at 1246.

It is clear from the record that the Administrative Law Judge carefully considered NOPSI's request for an evidentiary hearing in connection with the settlement in the first proceeding and expressly denied that request. J.A. at 316, et seq. Affirming the ALJ's decision, the Commission found that there was no need for a hearing because "(a) full evidentiary hearing has since taken place in United's subsequent rate increase proceeding, Docket No. RP77-107 .... The same parties and the same issues involved there are present in this case before us now." J.A. at 239 (Opinion and Order Approving Settlement Agreement in RP71-41, et al. at 10). Further explaining its rejection of NOPSI's request for a hearing, the Commission stated, "In this case, we have examined each of NOPSI's material objections and have concluded that its arguments either have no merit on their face or raise questions on subjects which have been determined previously as matters of policy generally applicable in all cases raising like issues and not requiring further hearing. Also, in light of the full hearings which took place in Docket No. RP77-107 on the issue of the allocation of charges by other pipe lines for transporting United's gas, we have no doubt that NOPSI has not been deprived of procedural due process." Id. at J.A. 275. The Commission found further that the decision in Pennsylvania Gas & Water Co. v. FPC, supra, supported its denial of a hearing and that NOPSI's opportunity to present its arguments through participation in the settlement conference and by filing comments with the Commission satisfied due process and statutory requirements. ⁵ The Commission specifically found that "NOPSI's objections to the settlement agreement do not involve an issue of material fact." Id. at J.A. 281.

We find no error in the Commission's determination that NOPSI has not raised an issue of material fact which required a hearing in the first proceeding in addition to the hearing previously held in connection with the second proceeding. We therefore hold that the Commission's approval of the settlement agreement in the first proceeding, without conducting a formal evidentiary hearing specifically in connection with that proceeding, was proper.

It is clear that NOPSI had an opportunity to present to the Commission NOPSI's opposition specifically directed to the settlement proposal in the first proceeding. It did so by filing a brief and testimony in opposition to the settlement agreement in the first proceeding (J.A. at 414-472), by filing comments opposing the settlement agreement (J.A. at 473-491), and by participating in settlement conferences in connection with that proceeding.

NOPSI claims, nevertheless, that factual disputes do exist thereby entitling NOPSI to an evidentiary hearing in connection with the settlement proposal in the first proceeding. NOPSI urges first...