Tennessee Gas Pipeline Co. v. Federal Power Commission
| Decision Date | 21 September 1979 |
| Docket Number | No. 77-1566,77-1566 |
| Citation | 606 F.2d 1373,197 U.S.App.D.C. 1 |
| Parties | TENNESSEE GAS PIPELINE COMPANY, a division of Tenneco, Inc., Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Consolidated Edison Company, Inc. of New York, Public Service Commission of the State of New York, Columbia Gas Transmission Co., Public Service Electric & Gas Co., New England Customer Group, Tennessee Natural Gas Lines, Inc., General Motors Corporation, Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Melvin Richter, Washington, D. C., with whom Dale A. Wright, Washington, D. C., was on the brief, for petitioner.
McNeill Watkins, II, Atty., Federal Energy Regulatory Commission, Washington, D. C., with whom Howard E. Shapiro, Sol., Federal Energy Regulatory Commission, Washington, D. C., was on the brief, for respondent.
Dennis Lane, Washington, D. C., with whom Peter H. Schiff, Gen. Counsel, Public Service Commission of the State of New York, Albany, N. Y., and Richard A. Solomon, Washington, D. C., were on the brief, for intervenor Public Service Commission of the State of New York.
John D. Daly and Stephen J. Small, Charleston, W. Va., were on the brief, for intervenor Columbia Gas Transmission Corp.
William I. Harkaway, Washington, D. C., was on the brief, for intervenor Consolidated Edison Co. of New York, Inc.
Also Carl W. Ulrich, Washington, D. C., entered an appearance for intervenor Public Service Elec. and Gas Co.
Also John W. Glendening, Jr. and Paul W. Fox, Washington, D. C., entered appearances for intervenor New England Customer Group.
Also William W. Bedwell, Washington, D. C., entered an appearance for intervenor Tennessee Natural Gas Lines, Inc.
Also Edward J. Grenier, Jr., Richard P. Noland, Floyd I. Robinson and Robert W. Clark, III, Washington, D. C., entered appearances for intervenor General Motors Corp.
Also Steven A. Taube, Atty., Interstate Commerce Commission, Washington, D. C., entered an appearance for respondent.
Also Sheila S. Hollis, Washington, D. C., entered an appearance for intervenor Public Service Commission of the State of New York.
Before ROBB and WILKEY, Circuit Judges, and RICHEY, * United States District Judge, United States District Court for the District of Columbia.
Opinion for the Court filed by Circuit Judge WILKEY.
Tennessee Gas Pipeline Company (Tennessee) petitions this court to vacate two orders 1 of the Federal Power Commission 2 arising from a proceeding which Tennessee maintains has become moot. The Commission found, after a hearing, that Tennessee's curtailment of natural gas deliveries occasioned by deficient pipeline capacity was unjust and unduly preferential under section 4 of the Natural Gas Act. 3 Because we are of the opinion that there no longer exists a live controversy suitable for judicial review, we vacate the subject order and remand for proceedings consistent with this opinion.
Tennessee is an interstate natural gas pipeline company. Its sales of natural gas are governed by three sorts of rate schedules: Contracted Demand (CD), General Service (G), and Small General Service (GS). CD customers are those possessing alternative natural gas sources as, for example, another pipeline, local production, or underground storage. G and GS customers are without alternative sources and are commonly termed requirements customers. Although all customers were contractually entitled to purchase the maximum quantities specified in their contracts, historically only the CD customers did so; the G and GS customers purchased gas in amounts well below their entitlements. Over time, however, the actual demand of G and GS customers has grown to accommodate their increased gas resales to other purchasers. Thus, average daily G and GS demand expressed as a fraction of contractual entitlements (the so-called "load factor") increased from roughly sixty percent in 1973 to seven-three percent in 1974. 4 In order to supply the increased demand it has been Tennessee's practice each year to seek Commission authorization to construct and operate expanded pipeline capacity. Its annual applications were based on estimates of future gas requirements furnished Tennessee by its G and GS customers.
4. Under the curtailment settlement approved by the Commission in Docket No. RP75-50 by order of February 28, 1977, Tennessee would be barred from any such reinstitution of capacity curtailment until November 1, 1980.
Following its usual practice, Tennessee on 31 October 1972 applied for a certificate permitting an expansion of capacity to accommodate 1974 demand, as estimated by the G and GS customers earlier in 1972. The Commission granted the certificate in an order of 1 May 1973 in Docket No. CP73-115. 5 However, apparently concerned about Tennessee's expanding sales in a period of national shortage, the Commission had inserted a proviso that its action was "without prejudice to a final determination on the issues of the sales volumes sold through such facilities." 6 On rehearing the Commission vacated the proviso and instead instituted a new proceeding directing Tennessee to show cause why volumetric limitations should not be placed on sales to each of its customers. 7 Hearings in that proceeding commenced on 16 October 1973 and continued intermittently through January 1974.
The expansion authorized in the Commission's order of 1 May was completed and placed in service by the end of 1973. Meanwhile, however, Tennessee had received revised estimates of its G and GS customers' expected 1974 demand-estimates, some 48,000 Mcf per day over their prior estimates. In light of the revisions, Tennessee sought permission in November 1973 for further capacity expansion, without which anticipated demand could not be met. 8
In order to handle the capacity shortfall in the event the proposed additions were not constructed, Tennessee filed tariff revisions on 28 September 1973 under which it would curtail sales of gas "(i)f for any reason whatever" it were unable to deliver its customers' requirements. Tennessee's plan was to curtail sales to various customers in accordance with a schedule of priorities ranking various end uses of the gas. The principal effect of the scheme, and the one eventually found to run afoul of section 4 of the Act, 9 was to curtail preexisting service to CD customers in order to supply the unanticipated demand of G and GS customers.
After first accepting the filing and suspending its effectiveness for one day, the Commission found that the proposed curtailment deviated only slightly from the Commission's governing policy statement and vacated the suspension. 10 Thus, "in the interests of certainty for pipeline and customer planning," 11 the curtailment plan was permitted to become effective, in accordance with its terms, as of 31 October 1973.
Although Tennessee's curtailment plan ultimately became effective, it provoked numerous protests, chiefly from CD customers who thought themselves unfairly treated. The Commission responded to the continuing protest of Columbia Gas Transmission Corp., an intervenor before this court, in an order issued 7 December 1973 12 which, while noting that the acceptance of Tennessee's filing had mooted requests that the filing be rejected or suspended, treated Columbia's protest as a complaint under section 5(a) of the Natural Gas Act and ordered a hearing to determine:
whether curtailment by Tennessee due to its alleged lack of capacity would be unjust, unreasonable, unduly discriminatory or preferential or otherwise unlawful under the Natural Gas Act. 13
13. In fact Tennessee reasserted the correctness of capacity curtailment in its application for rehearing by attaching its brief on exceptions on that point.
By a subsequent order the Commission expanded the subject matter of the hearing to include:
what effect Tennessee's implementation of its curtailment plan due to lack of capacity, or otherwise, will have on its customers and their customers and whether modifications should be made in Tennessee's curtailment plan and/or its implementation. 14
Thus by early December 1973 the Commission had begun two proceedings with respect to Tennessee's practices: (1) the inquiry into the advisability of volumetric limitations on sales, and (2) the section 5(a) complaint proceeding concerning the curtailment plan. It is the Commission's decision in the latter proceeding that is the subject of the instant petition.
On 27 December 1973 Tennessee advised its customers that it would begin curtailing gas sales in accordance with its filed plan. Under that plan, as we have noted, reductions depended on the priority of the end use of the gas and were in practice confined to a cutback of roughly sixty percent of the lowest priority sales. 15 In consequence, approximately one-half of the curtailment was incurred by CD customers and the balance by G customers. Tennessee continued to curtail sales through September 1974, at which time its capacity shortage was superseded by a general gas Supply shortage.
On 26 November 1974 the Commission affirmed an initial decision in the volumetric limitations proceeding which found that controls on Tennessee's sales, fixed for each customer at the level of its originally estimated 1974 demand, would for a variety of reasons be in the public interest. 16 In imposing volumetric limits, the Commission did not address the lawfulness of Tennessee's curtailment plan either generally or as recently applied in the circumstances of the capacity shortage. Moreover, the Commission emphasized that the controls were temporary, meant only "to freeze growth...
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