Tennessee Gas Pipeline Co. v. Federal Energy Regulatory Commission
| Decision Date | 16 October 1979 |
| Docket Number | 77-1498,77-1712 and 77-1719,Nos. 77-1496,77-1653,s. 77-1496 |
| Citation | 606 F.2d 1094,196 U.S.App.D.C. 187 |
| Parties | TENNESSEE GAS PIPELINE COMPANY, a Division of Tenneco Inc., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Public Service Commission of the State of New York, Entex, Inc., Columbia Gas Transmission Company, Public Service Electric and Gas Company, Northern Illinois Gas Company and New England Customer Group (Bay State Gas Co.), Intervenors. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Tennessee Gas Pipeline Company, Columbia Gas Transmission Corporation, New England Customer Group, et al., Northern Illinois Gas Co. and Public Service Electric and Gas Co., Intervenors. INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Columbia Gas Transmission Corp., Tennessee Gas Pipeline Co., Public Service Electric and Gas Co. and Public Service Commission of the State of New York, Intervenors. TRANSCONTINENTAL GAS PIPE LINE CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Columbia Gas Transmission Corp., United Cities Gas Company, Public Service Electric & Gas Company, Tennessee Gas Pipeline Co. and Public Service Commission of the State of New York, Intervenors. MICHIGAN WISCONSIN PIPE LINE COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Wisconsin Natural Gas Co., Associated Natural Gas Co. and Michigan Gas Utilities Co., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Harold L. Talisman, Washington, D. C., with whom Melvin Richter, Dale A. Wright, Patricia A. Curran, Terence J. Collins, Gregory Grady and Lilyan G. Sibert were on the brief, for Tennessee Gas Pipeline Co., petitioner in No. 77-1496, intervenor in Nos. 77-1498, 77-1653 and 77-1712 and amicus curiae in No. 77-1719.
Richard J. Flynn, Washington, D. C., with whom Frederic G. Berner, Jr., and Charles V. Shannon, Washington, D. C., were on the brief, for Michigan Wisconsin Pipe Line Co., petitioner in No. 77-1719 and amicus curiae in No. 77-1496.
Thomas F. Ryan, Jr., Washington, D. C., with whom Robert G. Hardy, Washington, D. C., was on the brief, for Transcontinental Gas Pipe Line Corp., petitioner in No. 77-1712.
Edward W. Hengerer and Norman A. Pedersen, Attys., Federal Energy Regulatory Commission, Washington, D. C., with whom Howard E. Shapiro, Sol., and Philip R. Telleen, Atty., Federal Energy Regulatory Commission, Washington, D. C., were on the brief, for respondents.
Richard A. Solomon, Washington, D. C., with whom Peter H. Schiff, Albany, N. Y., and Sheila S. Hollis, Washington, D. C., were on the brief, for Public Service Commission of the State of New York, petitioner in No. 77-1498 and intervenor in Nos. 77-1496 and 77-1712.
Jerome J. McGrath, John H. Cheatham, III, Washington, D. C., and J. Evans Attwell, Houston, Tex., were on the brief, for petitioner Interstate Natural Gas Ass'n of America in No. 77-1653.
John D. Daly and Giles D. H. Snyder and Stephen J. Small, Charleston, W. Va., were on the brief for intervenor Columbia Gas Transmission Corp. in Nos. 77-1496, 77-1498, 77-1653 and 77-1712.
Robert H. Gorske, Milwaukee, Wis., was on the brief, for intervenor Wisconsin Natural Gas Co. in No. 77-1719.
Irving Jacob Golub, Stephen A. Wakefield, William B. Cassin and Phillip D. Endom, Houston, Tex., were on the brief, for amicus curiae United Gas Pipe Line Co. in Nos. 77-1496, 77-1498 and 77-1653.
Allan Abbot Tuttle, Robert W. Perdue and Dennis Lane, Attys. Federal Energy Regulatory Commission, Washington, D. C., entered appearances for respondent.
Paul W. Fox and John W. Glendening, Jr., Washington, D. C., for intervenor New England Customer Group in Nos. 77-1496 and 77-1498.
J. Stanley Stroud, Chicago, Ill., entered an appearance for intervenor Northern Illinois Gas Co. in Nos. 77-1496 and 77-1498.
Carl W. Ulrich, William R. Duff, Washington, D. C., Edward S. Kirby and James R. Lacey, Newark, N. J., entered appearances for intervenor Public Service Electric and Gas Co. in Nos. 77-1496, 77-1498, 77-1653 and 77-1712.
Michael J. Manning and Patrick J. Keeley, Washington, D. C., entered appearances for intervenor Entex, Inc. in No. 77-1496.
Jack M. Irion, Shelbyville, Tenn., entered an appearance for intervenor United Cities Gas Co. in No. 77-1712.
Richard M. Merriman, J. Richard Tiano and Richard T. Witt, Washington, D. C., entered appearances for intervenors Associated Natural Gas Co. and Michigan Gas Utilities Co. in No. 77-1719.
Before LEVENTHAL and WILKEY, Circuit Judges, and HAROLD GREENE, * District Judge, United States District Court for the District of Columbia.
Opinion for the Court filed by Circuit Judge LEVENTHAL, in which Circuit Judge WILKEY and District Judge GREENE join.
We consider petitions of natural gas pipeline companies 1 for review of Federal Power Commission 2 rate making orders. The common element in these companion cases is the treatment of "advance payments," pre-payments for future deliveries of natural gas made by the pipelines in the context of an experimental "advance payment program," which was designed to facilitate capital formation by producers to finance development and production of additional gas supplies, thus helping to alleviate the natural gas shortage. In formulating "just and reasonable" pipeline rates in each case, the Commission denied rate base treatment for various expenditures. It deferred inclusion in rate base for advance payments made during the test period and not appro priately expended by the recipient producers within 30-days of the close of that period. We find that the Commission failed to administer the advance payment program with the required flexibility and thus remand the treatment of advance payments for further consideration. In certain respects, as will be noted, we affirm the Commission's other determinations.
The unhappy saga of the advance payment program has been detailed by this court on other occasions. 3 Conceived as one method of alleviating the impending natural gas shortage, the program was initiated in 1970 and was governed successively by a series of five "advance payment orders" until its termination at the end of 1975. 4 As originally formulated and approved by this court, the program was designed to facilitate capital formation by producers to finance development and production of new gas supplies. 5 It was contemplated that pipelines would provide production capital in the form of pre-payments to producers (advance payments) for future deliveries of natural gas. The order launching the program provided that such payments could be capitalized and included in the pipeline's rate base subject to qualifications, including the requirement that advances must be "reasonable and appropriate." 6 The orders also specified those producer expenditures permissible under the program ("qualifying expenditures"). Producers could be expected to seek advance payments because the advances would provide them with a source of interest-free capital. 7 It was anticipated that pipeline participation in the program also would be assured if pipeline rates could reflect a return on qualifying advance payments. 8 Current purchasers from the pipelineeline would shoulder, in the rates they paid, the "carrying charges" on these interest-free loans to producers, though the benefits from expansion of natural gas supplies would flow to future, not current, rate payers. 9 This departure from the usual rule of public utility regulation (that current rates should reflect the cost of supplying service to current rate payers) was thought justified by the "public interest in enlarging the field supply of natural gas, needed for existing facilities and contracts." 10
The program was conditionally approved by this court in Public Service Commission, State of New York v. FPC (PSC (Advance Payments) I), 11 as a "justifiable experiment in the continuing search for solutions to our nation's critical shortage of natural gas." 12 Resolving doubts in favor of the program, we stressed its experimental character and the need for flexibility and reevaluation as it evolved. We perceived the three advance payment orders that had been issued as of that time 13 "as an on-going effort by the FPC to determine experimentally the proper solution with regard to advance payments to help alleviate the gas shortage," and we were "impressed with the fact that the FPC (had) demonstrated a willingness to assimilate criticism . . . and adjust its treatment of advance payments to conform with the realities of the natural gas market." 14 We emphasized that the agency, in reaching "an accommodation of conflicting interests," was "making policy decisions of the type it was created to make." 15 But this judicial approval was predicated on the Commission's willingness to continue to respond to "the realities of the natural gas market" and to modify the program in light of accumulated experience. We reiterated these concerns in our response to New York Public Service Commission's petition for rehearing. 16 The advance payment order approved by our March 1972 ruling in PSC (Advance Payments) I expired at the end of that year. It was replaced in turn by the two orders pertinent to the instant cases, Order No. 465, 17 governing advance payments made during 1973, and Order No. 499, 18 governing the 1974-75 period. When the program again came before this court in Public Service Commission, State of New York v. FPC (PSC (Advance Payments) II ), 19 we ruled that the Commission had failed in its obligation "to engage in 'meaningful review, analysis and evaluation' of the...
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