Southern California Edison Co. v. F.E.R.C., 97-1450
| Decision Date | 04 February 1999 |
| Docket Number | No. 97-1450,97-1450 |
| Citation | 162 F.3d 116 |
| Parties | , Util. L. Rep. P 14,249 SOUTHERN CALIFORNIA EDISON COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Public Utilities Commission of the State of California, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
John G. Roberts, Jr. argued the cause for petitioner. With him on the briefs were Kevin J. Lipson, Richard T. Saas, Catherine E. Stetson and Stephen E. Pickett.
Larry D. Gasteiger, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Jay L. Witkin, Solicitor, and Susan J. Court, Special Counsel.
Richard C. Green argued the cause for intervenors El Paso Natural Gas Company, et al. With him on the brief were Judy A. Johnson, Kenneth M. Minesinger, James R. McCotter, David L. Huard, Patrick G. Golden, Joel L. Greene, John P. Gregg, Michael Hall, Kelly A. Daly, James H. McGrew, James F. Moriarty, Katherine B. Edwards, John C. Walley, Douglas M. Canter and Barbara S. Jost. David W. Anderson and Kim M. Clark entered appearances.
Before: EDWARDS, Chief Judge, WILLIAMS and GINSBURG, Circuit Judges.
Opinion for the Court filed by Circuit Judge WILLIAMS.
Petitioner Southern California Edison Company ("Edison") is an electric utility, and Southern California Gas Company ("SoCal") is a gas distributor--a local distribution company or LDC. To supply gas for the generation of electricity, Edison buys firm gas transportation service on the pipeline systems of both El Paso Natural Gas Company and SoCal. In a curious way (described below), Edison is not only a direct customer of El Paso, but, through SoCal, a kind of indirect customer. In 1995 El Paso filed new transportation rates with the Federal Energy Regulatory Commission under § 4 of the Natural Gas Act, 15 U.S.C. § 717c, and made an offer of settlement to which most of its customers agreed. Edison objected, raising claims that in a disputed rate case would have entitled Edison to a hearing (according to the unreversed determination of the administrative law judge, El Paso Natural Gas Co., 78 FERC p 63,006 at 65,131 (1997)). The Commission approved the settlement as "uncontested," protecting Edison's interests as a direct customer by severing it and allowing it to pursue its objections outside the settlement. But the Commission denied Edison any right to either severance or litigation in its role as an indirect customer of El Paso. See El Paso Natural Gas Co., 79 FERC p 61,028, reh'g denied, 80 FERC p 61,084 (1997). Finding the Commission order inconsistent with the settlement precedents of both the Commission and this court, we reverse.
* * *
Edison's role as an indirect customer of El Paso arises from gas industry restructuring. SoCal formerly sold gas both to its "core" customers (largely residential as we understand it) and to non-core ones such as Edison. As a result of restructuring, it now sells gas only to its "core" customers. SoCal still sells transportation services to the non-core customers. Thus Edison buys gas and ships it via El Paso to California, and via SoCal to its generating stations.
But because of SoCal's now abandoned sales service to non-core customers, it had reserved much more capacity on El Paso and other interstate pipeline systems than it now needs. To minimize its loss on this resource, SoCal sells the surplus capacity into the secondary market. Because the available capacity far exceeds demand, however, the resulting revenues fall well below SoCal's cost. See 79 FERC p 61,028 at 61,126. The California Public Utilities Commission ("CPUC") allows it to make up the loss by a charge to its non-core customers called the Interstate Transition Cost Surcharge ("ITCS"). See id. at 61,128-29 n. 21.
The only issue before us is the propriety of FERC's refusal either to hold up the settlement pending resolution of Edison's merits claims as an indirect customer, or to sever Edison from the settlement in both its capacities. Edison argues that the refusal was improper under both the Commission's precedents and our own. We examine the two sets of authorities in turn.
* * *
In United Gas Pipeline Co., 55 FERC p 61,070, 125 P.U.R.4th 527 (1991), reh'g denied, 64 FERC p 61,014 (1993), the Commission allowed indirect customers of a pipeline to block a settlement. The Commission here attempted to distinguish United in two ways. It first argued that, unlike the indirect customers in United, whose rates from direct customers were under FERC's jurisdiction, Edison "is concerned about SoCal's rate to its intrastate customers, ... which is a matter over which this Commission has no jurisdiction." 80 FERC p 61,084 at 61,294. This is blind to Edison's claim. Edison challenges the validity of the settlement's allocation of costs to El Paso's customers--including SoCal--not the subsequent allocation of SoCal's share to Edison. Equally blind is the Commission's suggestion that Edison's problems are of its own making, as it agreed before CPUC to bear a specified share of the ITSC. Id. Edison's agreement before CPUC to bear a share of costs being determined by FERC cannot possibly have waived its rights to challenge the size of the cost it has agreed to share.
A similar misunderstanding underlies the Commission's second proposed distinction. In United, it said, "[t]he relief that the objectors sought would require a different allocation than the one provided in the settlement." Id. Rejection of the settlement was proper because the indirect customers' objections went "to the very basis of the settlement." Id. Here, by contrast, Edison "can litigate its rate with El Paso, without affecting the consenting parties' rate." Id. This appears simply to change the subject. Of course the Commission's order lets Edison pursue its objections as a direct customer; but that does not enable it to pursue them as an indirect customer, even though, so far as appears, they go "to the very basis of the settlement" every bit as much as the objections in United.
Although not raised by the Commission, another possible distinction suggests itself. The Commission's order denying rehearing in United, after recognizing the general interest of indirect customers in the allocation of costs to their immediate upstream suppliers, see 64 FERC p 61,014 at 61,097, noted the particular unfairness possible if that settlement were approved over the indirect customers' objection: since the downstream...
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