Public Service Commission of State of N. Y. v. Federal Energy Regulatory Commission
| Decision Date | 18 December 1980 |
| Docket Number | 79-2213 and 79-2322,Nos. 79-2182,79-2183,79-2184,79-2195,s. 79-2182 |
| Citation | 642 F.2d 1335 |
| Parties | The PUBLIC SERVICE COMMISSION of the STATE of NEW YORK, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Commonwealth Gas Pipeline Corp., Carolina Pipeline Corporation, Transcontinental Gas Pipe Line Corporation, Intervenors. NORTH CAROLINA NATURAL GAS CORPORATION, Public Service Company of North Carolina, Inc., Piedmont Natural Gas Company, Inc., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Carolina Pipeline Company, Commonwealth Gas Pipeline Corporation, Public Service Commission of the State of New York, Transcontinental Gas Pipe Line Corp., Brooklyn Union Gas Co. et al., Columbia Gas Transmission Corp., Washington Gas Light Company, Atlanta Gas Light Company, Intervenors. NORTH CAROLINA UTILITIES COMMISSION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Carolina Pipeline Company, Commonwealth Gas Pipeline Corporation, Public Service Commission of the State of New York, Transcontinental Gas Pipe Line Corp., Brooklyn Union Gas Co. et al., Columbia Gas Transmission Corp., Washington Gas Light Company, Atlanta Gas Light Company, North Carolina Natural Gas Corp. et al., Intervenors. LONG ISLAND LIGHTING COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Transcontinental Gas Pipe Line Corp., North Carolina Natural Gas Corp. et al., North Carolina Utilities Commission, Carolina Pipeline Company, CommonwealthGas Pipeline Corporation, Public Service Commission of the State of New York, Brooklyn Union Gas Company et al., Washington Gas Light Company, Atlanta Gas Light Company, Intervenors. The BROOKLYN UNION GAS COMPANY et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Transcontinental Gas Pipe Line Corp., Public Service Commission of the State of New York, Commonwealth Gas Pipeline Corporation, North Carolina Natural Gas Corp. et al., North Carolina Utilities Commission, Washington Gas Light Company, Atlanta Gas Light Company, Intervenors. TRANSCONTINENTAL GAS PIPE LINE |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Joseph P. Stevens with whom Michael W. Hall andSteven L. Zelkowitz, Brooklyn, N. Y., were on brief, for The Brooklyn Union Gas Co. et al., petitioners in No. 79-2213 and intervenors in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Richard A. Solomon, Washington, D. C., with whom Peter H. Schiff, Gen. Counsel, Public Service Commission of the State of New York, Albany, N. Y., and Dennis Lane, Washington, D. C., were on brief, for Public Service Commission of the State of New York, petitioner in No. 79-2182 and intervenors in Nos. 79-2183, 79-2184, 79-2195, 79-2213 and 79-2322.
Morton L. Simons, Washington, D. C., with whom Barbara M. Simons, Washington, D. C., was on brief, for North Carolina Utilities Commission, petitioners in No. 79-2184 and intervenor in Nos. 79-2195 and 79-2213.
Thomas F. Ryan, Jr., Washington, D. C., with whom Richard T. Boone and David J. Evans, Washington, D. C., were on brief, for Transcontinental Gas Pipe Line Corp., petitioners in No. 79-2322 and intervenors in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2213.
Gregory Grady, Washington, D. C., with whom Donald W. McCoy, Fayetteville, N. C. and F. Kent Burns, Raleigh, N. C., were on brief, for North Carolina Natural Gas Corp. et al., petitioners in No. 79-2183 and intervenors in Nos. 79-2184, 79-2195, 79-2213 and 79-2322.
Barbara J. Weller, Atty., Federal Energy Regulatory Commission, Washington, D. C., with whom Jerome Nelson, Sol., Joshua Z. Rokach, Andrew M. Zack and Howard Shapiro, Attys., Federal Energy Regulatory Commission, Washington, D. C., were on brief, for respondent.
William I. Harkaway and G. Douglas Essy, Washington, D. C., were on brief, for Consolidated Edison Co. of New York, Inc., petitioner in No. 79-2213 and intervenors in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Francis J. McShalley, Washington, D. C., was on brief, for Nat. Fuel Gas Supply Corp., petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
John T. Miller, Jr., Washington, D. C., was on brief, for Elizabeth Gas Co., petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Ira G. Megdal, Cherry Hill, N. J., was on brief, for South Jersey Gas Co., petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
William R. Duff, Washington, D. C., was on brief, for Public Service Elec. and Gas Co., petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Eugene J. Bradley, Associate Gen. Counsel, Philadelphia, Pa., was on brief, for Philadelphia Elec. Co., petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Robert C. Richards, Mineola, N. Y., was on brief, for Long Island Lighting Co., petitioner in No. 79-2195 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2213 and 79-2322.
John E. Holtzinger, Jr., Paul H. Kirk and John T. Stough, Jr., Washington, D. C., were on brief, for Atlanta Gas Light Co. intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2213.
Stephen J. Small, John M. Hill and Giles D. H. Snyder, Charleston, Va., were on brief, for Columbia Gas Transmission Corp., intervenor in Nos. 79-2183 and 79-2184.
Stanley M. Morley, Washington, D. C., for Carolina Pipeline Co., intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Stephen H. Watts, II, Richmond, Va., for Commonwealth Gas Pipeline Corp., intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2213.
Lewis Carroll, Birmingham, Ala., for Washington Gas Light Co., intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2213.
Thomas R. Hendershot was on brief, for Philadelphia Gas Works, petitioner in No. 79-2213 and intervenor in Nos. 79-2182, 79-2183, 79-2184, 79-2195 and 79-2322.
Before McGOWAN, WILKEY and WALD, Circuit Judges.
Opinion for the court filed by Circuit Judge McGOWAN.
These direct review proceedings under the Natural Gas Act involve two separate orders entered by the Federal Energy Regulatory Commission (FERC)-the successor agency to the Federal Power Commission (FPC), 42 U.S.C. § 7172(a)(1)(C). One of those orders, reflecting the Commission's consideration of rate increases filed in 1976 by Transcontinental Gas Pipe Line Corporation (Transco) with the FPC under section 4 of the Act, is challenged in respect of the 14% rate of return on equity allowed by it. The other order, entered by the Commission after a hearing initiated by it under section 5(a) of the Act, is attacked, on both procedural and substantive grounds, for its imposition of a new basis for allocating Transco's costs attributable to distance. For the reasons appearing hereinafter, we affirm with respect to the rate of return issue, but set aside the second order relating to cost allocation. 1
Transco operates a major long-line natural gas pipeline system running from its sources of supply in Texas and Louisiana through the southern and mid-Atlantic states to its terminus in the New York metropolitan area. Its service territory is divided into three sales rate zones: Mississippi, Alabama, and Georgia are in zone 1, the Carolinas, Virginia, and the District of Columbia in zone 2, and Maryland, Delaware, Pennsylvania, New Jersey, and New York in zone 3.
A 1962 settlement between Transco and its customers provided that customers in zone 2 would pay 2.8 cents per thousand cubic feet (Mcf) more than zone 1 customers, and that zone 3 customers would pay 3.6 cents per Mcf more than zone 2 customers. The 1962 settlement and subsequent rate settlements incorporating these cost allocations were approved by the FPC, and the rate differentials have been embodied in Transco's legally effective rate schedules.
On July 30, 1976, Transco filed with the FPC an application for $81.3 million in higher rates (Docket RP76-136). On December 30, 1976, Transco, in Docket RP77-26, proposed an increase in interruptible service rates. No change in the zone rate differentials was proposed by Transco in either of these filings. The FPC consolidated the two petitions. The parties were able to reach a partial settlement on issues not contested here that was approved by the Commission on June 27, 1978. 2 During the interim, Transco has applied for new rates to take effect on January 1, 1978. This meant that Transco's 1976 request for a higher rate of return was limited, or locked in, to the eleven months between February 1 and December 31, 1977. 3
After a hearing, a FERC administrative law judge issued an initial opinion establishing 14% as a reasonable rate of return on Transco's equity for the locked-in period. 4 The opinion also stated that the zone of reasonableness for this rate lay between 13.5 and 14.3%. 5 This initial opinion was adopted by the Commission on August 30, 1979. 6 The ALJ relied heavily upon testimony of the Commission's expert witness, who compared Transco's risks and rate of return to those of similar investments such as other pipelines and electric utilities. Record at 160-68. Transco's witness also compared Transco to such investments, but suggested that the Commission's witness had underestimated the risks facing Transco and concluded that from 161/2% to 17% would be a more reasonable rate of return. Record at 29-42, 45-51, 473.
Although Transco had not proposed any change in the 1962 zone allocations, the parties found themselves unable to agree on a method of cost allocation during settlement negotiations....
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