Public Utilities Commission of State of Colo. v. Federal Energy Regulatory Commission, 80-1117
| Decision Date | 24 August 1981 |
| Docket Number | No. 80-1117,80-1117 |
| Parties | , 44 P.U.R.4th 261 PUBLIC UTILITIES COMMISSION OF the STATE OF COLORADO, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Gas Research Institute, Northern Distributor Group, American Gas Association, Interstate Natural Gas Association of America, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory commission.
Eugene C. Cavaliere, Asst. Atty. Gen., State of Colo., Denver, Colo., for petitioner.
A. Karen Hill, Atty., Federal Regulatory Commission, Washington, D. C., with whom Robert R. Nordhaus, Gen. Counsel and Jerome Nelson, Sol., Federal Energy Regulatory Commission, Washington, D. C., were on the brief, for respondent. Rhodell G. Fields, Atty., Federal Energy Regulatory Commission, Washington, D. C., also entered an appearance for respondent.
Christopher T. Boland, Washington, D. C., with whom James M. Broadstone, Washington, D. C., was on the brief, for intervenor, Gas Research Institute.
David J. Muchow, Arlington, Va., and John A. Myler, Washington, D. C., were on the brief, for intervenor, American Gas Association.
Peter H. Schiff, Gen. Counsel, Public Service Commission of the State of New York, Albany, N. Y., Richard A. Solomon, Washington, D. C., were on the brief, for amicus curiae Public Service Commission of the State of New York urging affirmance.
George C. Mastor, Minneapolis, Minn., and Ned Willis, Perry, Iowa, entered appearances for intervenors, Northern Distributors Group.
Lawrence V. Robertson, Jr., Washington, D. C., entered an appearance for intervenor Interstate Natural Gas Association of America.
Before MIKVA and EDWARDS, Circuit Judges, and VAN PELT, * Senior District Judge for the District of Nebraska.
Opinion for the court filed by Senior District Judge VAN PELT.
Petitioner seeks review of Opinion No. 64, Docket No. RP79-75 (Oct. 2, 1979) of the Federal Energy Regulatory Commission (referred to herein as FERC or "the Commission"). Opinion No. 64 substantially approved Gas Research Institute's (GRI's) 1980 research and development (R & D) program, and the related 1980-84 five-year R & D plan, and allowed GRI's jurisdictional members to collect a general R & D funding unit of 4.8 mills per Mcf 1 in their rates for sales of natural gas. Petitioner's argument both before the Commission and this court is that FERC had no jurisdiction to approve the program of funding because:
1. GRI is not a natural gas company and does not engage in the transportation or sale of natural gas in interstate commerce, and therefore FERC has no jurisdiction over GRI; and
2. Even if FERC had jurisdiction over GRI, some of the R & D projects planned by GRI fall outside the jurisdiction of FERC and such costs cannot be imposed upon consumers of natural gas.
Before deciding these issues, it may be helpful to review briefly the functions and purpose of both FERC and GRI.
FERC came into being on October 1, 1977 pursuant to the provisions of the Department of Energy Organization Act of August 4, 1977, Pub.L.No.95-91, 91 Stat. 565 () and Executive Order No. 12009, 42 Fed.Reg. 46267 (Sept. 13, 1977). It assumed the functions and regulatory responsibilities of the Federal Power Commission (FPC) on that date. Under the Natural Gas Act, 15 U.S.C. § 717 et seq., FERC has the authority to regulate the interstate transportation and sale of natural gas by natural gas companies. See § 717(b). 2 A natural gas company is defined in § 717a as a person or corporation "engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for resale."
The best brief description of GRI's membership and purpose appears in Opinion No. 64, which states:
GRI was incorporated on July 8, 1976, under the General Illinois Not for Profit Corporation Act. GRI does not engage directly in research, development and demonstration activities. It is a planning and managing organization which engages in such activities through RD&D project contracts with laboratories, universities and others. As of March 1979, GRI had 190 members 28 interstate pipeline members, 136 distribution company members, 24 municipal utility members, and two associate members. 3
Prior to GRI's incorporation in 1976, the natural gas industry's research efforts were carried on collectively under the auspices of the American Gas Association (AGA) which is a trade association currently representing some 300 companies involved in the transportation and distribution of natural gas. AGA has filed a brief as an intervenor in this proceeding. Their brief indicates that AGA's first research project was undertaken in 1923 and such research has gradually been expanded through the years until by 1976 AGA had some 90 individual research projects divided into five major areas. 4 The research done by AGA was broad in scope, and this trend has been continued by its successor in interest, GRI. 5
The first issue for our consideration is whether the Commission has any jurisdiction to approve GRI's research and development program and budget, not just the specific items contained within it. Petitioner contends that the Natural Gas Act does not confer any jurisdiction upon FERC to entertain or rule upon an application filed by a corporation which is not a natural gas company and does not sell or transport gas in interstate commerce. FERC has recognized that GRI is not a natural gas company within the meaning of § 717a(6). In opinion 11, which was an approval of GRI's first request for R & D advance approval in 1977, the Commission specifically stated:
GRI is not and does not propose to become a "natural gas company" within the meaning of Section 2(6) of the Natural Gas Act and, as a result, it is not and does not propose to become subject to our continuous jurisdiction.
The Commission went on to find, however, that because GRI was a R & D organization supported by the natural gas industry, it fell within the Commission's regulation of R & D organizations in 18 C.F.R. § 154.38(d)(5) and its initial application fell within Sections 4, 8, 15 and 16 of the Natural Gas Act, 6 and that future annual applications would be submitted under the ratemaking authority granted to the Commission in Section 4 of the Act.
Section 4 of the Act, 15 U.S.C. § 717c, provides that all rates charged by a natural gas company must be "just and reasonable" and that every natural gas company must file schedules showing all rates and charges for any transportation and sale of natural gas. No change in any rates or charges can be made without first filing a copy of the proposed changes with FERC. The Commission then may hold a hearing on the lawfulness of the proposed rate. Under § 717d, the Commission has the authority to determine what constitutes a just and reasonable rate and to fix the same by order.
In this case GRI is proposing an increased assessment among its members of the costs of research and development. The 29 interstate pipeline companies belonging to GRI are natural gas companies subject to FERC's regulation. Before they can raise their rates to incorporate GRI's assessment they would need commission approval. Instead of requiring each company to submit an application for a rate increase, FERC has enacted 18 C.F.R. § 154.38(d)(5) which allows the R & D organization to submit the request for Commission approval. 18 C.F.R. § 154.38(d)(5)(ii) states in part:
Where more than one jurisdictional company proposes to support an RD&D 7 organization as defined below, an approval request may be submitted to the Commission by the RD&D organization covering the organization's RD&D program as defined below. Approval by the Commission of such RD&D program shall constitute approval of individual companies' contributions to the RD&D organization. Organizations eligible to receive contributions from companies and to request program approval from the Commission under this section may be ... RD&D organizations broadly supported by a single industry sector ....
Petitioner made no argument either before the Commission or this court with regard to Commission Rule 154.38(d)(5), 8 relying instead on the premise that
if the FERC did not have jurisdiction under the substantive sections of the Natural Gas Act, then Section 154.38(d)(5)(i) through (v) cannot confer this jurisdiction.
Petitioner's brief at 26. Its sole argument is based on the fact GRI is not a natural gas company. We find such argument to be unduly restrictive and to exalt form over substance.
FERC does not seek to regulate that over which it has no statutory authority, but seeks to simplify the application procedures for those companies over which it does have jurisdiction. Instead of requiring each of the 29 interstate pipeline companies to apply for approval of R & D costs, FERC allows the R & D organization, which actually incurs the costs and plans the programs and budget, to submit a single application on their behalf. This seems to be the rare instance of a government agency trying to cut red tape, about which we all too often hear, only to be penalized for trying to streamline procedures.
It has been held on numerous occasions that the Federal Power Commission (FERC's predecessor) could exercise its ratemaking authority in a generic fashion as opposed to on a case-by-case basis. One of the issues in Permian Basin Area Rate Cases, 390 U.S. 747, 768, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 312 (1968), was whether
the Commission may, consistently with the Constitution and the Natural Gas Act, regulate producers' interstate sales by the prescription of maximum area rates, rather than by proceedings conducted on an individual producer basis.
The Supreme Court found that area regulation under the circumstances was permissible. The...
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