Panhandle Eastern Pipe Line Co. v. F.E.R.C., s. 87-1431
| Decision Date | 06 October 1989 |
| Docket Number | 88-1002,87-1835,87-1584,87-1780,87-1539,87-1659,87-1648,Nos. 87-1431,88-1145 and 88-1149,87-1579,s. 87-1431 |
| Parties | PANHANDLE EASTERN PIPE LINE COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Union Electric Co., et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of Orders of the Federal Energy Regulatory Commission (RP 82-58 & 82-105).
Brian D. O'Neill, with whom Raymond N. Shibley and Bruce W. Neely, Washington, D.C., were on the brief, for Panhandle Eastern Pipe Line Co., petitioner in Nos. 87-1431 & 87-1780 and intervenor in Nos. 87-1539, 87-1579, 87-1584, 87-1835, 88-1002, 88-1145 & 88-1149.
Philip B. Malter, with whom Charles F. Wheatley, Jr., Deerfield, Ill., was on the brief, for Municipal Defense Group, petitioner in Nos. 87-1584 & 88-1002 and intervenor in No. 87-1431. Timothy P. Ingram, Arlington, Va., also entered an appearance for Municipal Defense Group.
Linda Gillespie Stuntz, Washington, D.C., with whom Richard D. Avil, Jr., Cleveland, Ohio, (for The East Ohio Gas Co.), and Jeffrey M. Petrash, Washington, D.C., and James H. Holt (for Michigan Consolidated Gas Co.) were on the brief, for petitioners/intervenors. Paul T. Ruxin and Carolyn Y. Thompson, Washington, D.C., also entered appearances for The East Ohio Gas Co.
John R. Schaefgen, Jr., Washington, D.C., for petitioners General Service Customer Group, Indiana Gas Co., and supporting intervenor Citizens Gas & Coke Utility. Daniel W. McGill, Indianapolis, Ind., Tom Rattray, and Ronald E. Christian (for Indiana Gas Co.), Richard M. Merriman and Stephen L. Huntoon, Washington, D.C., (for General Service Customer Group), and William P. Diener and Steven M. Sherman, New York City, (for Citizens Gas & Coke Utility) were on the joint brief for petitioners/intervenor. J. Richard Tiano, Kenneth T. Rynne, and Perry D. Robinson, Washington, D.C., also entered appearances for petitioner Indiana Gas Co. in No. 88-1145.
Richard A. Solomon, with whom Mary A. McReynolds, Washington, D.C., was on the brief, for Quantum Chemical Corp., petitioner in No. 87-1579, intervenor in Nos. 87-1431 and 87-1659, and for intervenor National Distillers & Chemical Corp. in Nos. 87-1539 and 87-1584. David D'Allessandro also entered an appearance for Quantum Chemical Corp. and National Distillers & Chemical Corp. Frank R. Lindh, Attorney, F.E.R.C., Washington, D.C., with whom Catherine C. Cook, Gen. Counsel, and Jerome M. Feit, Sol., Washington, D.C., were on the brief, for respondent. Dwight Alpern, Atty., F.E.R.C., Detroit, Mich., also entered an appearance for respondent.
John R. Schaefgen, Jr., with whom Randall V. Griffin, Washington, D.C., (for Cent. Illinois Light Co.), William P. Diener, Steven M. Sherman, New York City, (for Citizens Gas & Coke Utility), Richard D. Avil, Jr., Cleveland, Ohio, Linda Gillespie Stuntz (for The East Ohio Gas Co.), Jeffrey M. Petrash, Washington, D.C., James H. Holt (for Michigan Consol. Gas Co.), Fredric J. George, Charleston, W.Va., Giles D. Snyder, Stephen J. Small, Boston, Mass., (for Columbia Gas Transmission Corp.), Richard M. Merriman, Stephen L. Huntoon, Washington, D.C., (for General Service Customer Group), and Daniel W. McGill, Indianapolis, Ind., Tom Rattray, and Ronald E. Christian (for Indiana Gas Co.) were on the joint brief, for intervenors in support of respondent.
William A. Mogel, Washington, D.C., entered an appearance, for intervenor Union Electric Co.
William M. Lange, Colorado Springs, Colo., entered an appearance, for intervenor Michigan Gas Storage Co.
William T. Miller, Susan N. Kelly, and Mark C. Darrell, Washington, D.C., entered appearances, for intervenor National Helium Corp.
Dan L. Keskey and Henry J. Boynton, Lansing, Mich., entered appearances, for intervenors The State of Michigan, et al.
Glen S. Howard, Washington, D.C., entered an appearance, for intervenors The Process Gas Consumers Group, et al.
Daniel F. Collins, Washington, D.C., and Steven A. Taube entered appearances, for intervenor ANR Pipeline Co.
Before RUTH BADER GINSBURG, BUCKLEY, and SENTELLE, Circuit Judges.
Opinion PER CURIAM.
TABLE OF CONTENTS
Page
I. BACKGROUND ................................................. 1104
A. Statutory Background ................................. 1104
B. Administrative Proceedings ........................... 1104
II. DISCUSSION ................................................. 1107
A. The "Sole Supplier" Issue ............................ 1107
B. The D2 Charge ....................................... 1110
C. The Minimum Commodity Bill ........................... 1113
D. The Imputed Load Factor for SG Customers ............. 1115
E. The Effective Date of FERC's Order ................... 1118
1. Standard of Review ............................. 1118
2. The Settlement Agreement ....................... 1118
3. The Commission's Rulings ....................... 1119
4. Analysis ....................................... 1120
a. December Effective Date 1120
b. February vs. August Effective Date 1121
c. Minimum Bill Provisions 1122
III. CONCLUSION ................................................. 1122
Panhandle Eastern Pipe Line Company and several other petitioners seek review of a series of Federal Energy Regulatory Commission (FERC or Commission) orders requiring changes in Panhandle's natural gas sales tariff. This appeal presents five major questions.
On two related issues, we grant the petition for review and remand to the Commission. First, FERC ordered Panhandle to offer its favorable G rate schedule, previously available only to "full requirements" customers who purchased gas exclusively from Panhandle, to its "partial requirements" customers as well, who nonetheless remained free to buy gas from sellers other than Panhandle. We conclude that the Commission has failed to explain the fairness of releasing customers from their obligation to take their total requirements from Panhandle, while simultaneously ordering Panhandle to continue to provide them with G schedule benefits.
Second, the Commission directed Panhandle to switch to a "modified fixed and variable" rate design and to implement a two-part demand charge, with the second charge based on a customer's unilateral nomination (i.e., specification) of an annual level of natural gas service. Although FERC has the authority to mandate such changes, we do not find it reasonable on the present record for the Commission to permit Panhandle's customers to nominate low levels of service (thereby reducing their demand charges), while at the same time requiring the pipeline to stand ready to serve them at the level described in its operating certificate.
On the remaining issues, however, we uphold the Commission's judgment. FERC's elimination of Panhandle's fixed-cost minimum commodity bill is consistent with recent Commission decisions approved by federal courts. FERC also reasonably maintained the imputed load factor for certain small customers, based on Commission precedent. Finally, we conclude that FERC's determination that its orders became effective on the date of its order on rehearing (August 19, 1987) rests on a reasonable contractual interpretation.
The Natural Gas Act, 15 U.S.C. Secs. 717-717w (1982) (NGA) authorizes the Federal Energy Regulatory Commission to approve "just and reasonable" rates for natural gas sold or transported by interstate pipelines. Id. Sec. 717c(a). Natural gas companies must file with FERC schedules showing all rates and must justify any proposed changes. Id. Sec. 717c(c)-(d). Section 5(a), id. Sec. 717d(a), provides:
Whenever the Commission, after a hearing had upon its own motion or upon complaint of any State, municipality ... or gas distributing company, shall find that any rate, charge, or classification demanded, ... charged, or collected by any natural gas company ... is unjust, unreasonable, unduly discriminatory, or preferential, the Commission shall determine the just and reasonable rate, charge [etc.] ... and shall fix the same by order.
Finally, section 7, id. Sec. 717f, grants FERC the power to issue "certificate[s] of public convenience and necessity" authorizing qualified companies to transport and sell natural gas.
The energy crisis of the 1970's exposed the failure of the NGA's regulatory framework, through its price controls, to provide the economic incentives necessary to encourage development of new natural gas sources and to ensure an adequate supply of gas at reasonable prices. Congress responded by enacting the Natural Gas Policy Act of 1978, 15 U.S.C. Secs. 3301-3432 (1982) (NGPA), which deregulated wellhead prices and established a market-based natural gas pricing system under the Commission's general oversight. See Transcontinental Gas Pipe Line Corp. v. State Oil & Gas Bd., 474 U.S. 409, 420-21, 106 S.Ct. 709, 715-16, 88 L.Ed.2d 732 (1986). Over the past decade, FERC has sought to implement the NGPA's policy of promoting competitive natural gas pricing through a series of rules and decisions, as exemplified by the orders now under review.
For over thirty years, petitioner Panhandle Eastern Pipe Line Company (Panhandle) charged its large resale customers for natural gas in accordance with the two rate schedules established in Panhandle Eastern Pipe Line Co., 10 F.P.C. 185 (Opinion No. 214), modified, 10 F.P.C. 322 (1951), further modified, 13 F.P.C. 53 (1954) (Opinion No. 269), rev'd in part, 230 F.2d 810 (D....
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