Transcontinental Gas Pipe Line Corp. v. F.E.R.C., s. 89-1367

Citation922 F.2d 865
Decision Date11 January 1991
Docket Number89-1417,Nos. 89-1367,s. 89-1367
PartiesTRANSCONTINENTAL GAS PIPE LINE CORPORATION, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Public Service Commission of the State of N.Y., Public Service Electric and Gas Company, Brooklyn Union Gas Company, Washington Gas Light Company, North Carolina Utilities Commission, North Carolina Natural Gas Corporation, Public Service Company of North Carolina, Inc., Intervenors. ELIZABETHTOWN GAS COMPANY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Brooklyn Union Gas Company, Process Gas Consumers Group, et al., North Carolina Natural Gas Corporation, Public Service Company of North Carolina, Inc., Intervenors.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Petitions for Review of Orders of the Federal Energy Regulatory Commission.

Michael J. Fremuth, with whom Robert G. Hardy and Anthony J. Ivancovich, Washington, D.C. were on the brief, for petitioner Transcontinental Gas Pipe Line Corp. in No. 89-1367 and intervenor in No. 89-1417.

John T. Miller, Jr., with whom William I. Harkaway and Harvey L. Reiter, Washington, D.C. for Consolidated Edison Co. of N.Y., Rebecca S. Haney, James F. Bowe, Jr., and O. Julia Weller, Washington, D.C., for Long Island Lighting Co., Steven A. Taube, Washington, D.C. for Philadelphia Gas Works, Mary E. Baluss, Washington, D.C. for Philadelphia Elec. Co., Barbara K. Heffernan, Washington, D.C. for Delmarva Power & Light Co., Jerry W. Amos, Greensboro, N.C. for Piedmont Natural Gas Co., Inc., Telemac N. Chryssikos, Washington, D.C. for Washington Gas Light Co., and James R. Lacey, Glen Ridge, N.J. for Public Service Elect. and Gas Co. were on the joint brief, for petitioners Elizabethtown Gas Co., et al., in No. 89-1417 and intervenors in No. 89-1367.

Catherine C. Cook, Attorney, F.E.R.C., for respondent. Joseph S. Davies, Deputy Sol., and Timm L. Abendroth, Atty., F.E.R.C., Washington, D.C., were on the brief for respondent in No. 89-1367 and No. 89-1417.

Richard A. Solomon and David D'Alessandro, Washington, D.C. entered appearances for intervenor Public Service Com'n of the State of N.Y.

Richard H. Davidson, Gregory Grady, Washington, D.C., Donald W. McCoy, Fayetteville, N.C., and F. Kent Burns, Raleigh, N.C. entered appearances for intervenor North Carolina Natural Gas Corp., et al.

Michael W. Hall, Washington, D.C. entered an appearance for intervenor Brooklyn Union Gas Co.

Frank H. Strickler, Gordon M. Grant, and Ralph E. Fisher, Washington, D.C. entered appearances for intervenor Elizabethtown Gas Co., et al.

Morton L. Simons, Washington, D.C. entered an appearance for intervenor North Carolina Utilities Com'n.

William R. Hoatson, Newark, N.J. entered an appearance for intervenor Public Service Elec. and Gas Co.

Before BUCKLEY, SENTELLE, and HENDERSON, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

This case is the consolidation of two challenges to orders of the Federal Energy Regulatory Commission ("FERC" or "the Commission") directing Transcontinental Gas Pipe Line Corporation ("Transco") to refund fuel retainage costs it charged to local gas distribution companies ("LDCs") for the period of April 1, 1984 to April 1, 1987. Transco petitions for review of these orders, arguing that the fuel retention rates for that time period were previously resolved in a settlement agreement between the parties and therefore were not a proper subject before the Commission, and that the Commission lacked authority to authorize refunds under that settlement agreement. The LDCs challenge the orders on the grounds that the Commission erred in limiting refunds to the three-year refund period. We deny both petitions.

I. BACKGROUND

On September 30, 1983, Transco filed for a general rate increase pursuant to Section 4(e) of the Natural Gas Act, 15 U.S.C. Sec. 717c(e). This filing, Docket No. RP83-137-000 ("RP83-137") proposed, inter alia, revisions to Transco's Rate Schedule for interruptible transportation service, Schedule T-I, and a new Rate Schedule for those customers who did not qualify for interruptible transportation service, Schedule T-II. The Commission accepted this filing on October 28, 1983, but suspended its effectiveness until April 1, 1984, subject to hearings and refund. Transcontinental Gas Pipe Line Corp., Order Accepting for Filing and Suspending Revised Tariff Sheets, Subject to Refund and Conditions, Granting Waiver, Initiating Hearing, and Establishing Procedures, 25 F.E.R.C. p 61,144, at 61,384 (Oct. 28, 1983).

Transco and the LDCs then entered negotiations and reached a rate settlement agreement on April 6, 1984, establishing basic cost service levels and providing that Transco would refund within thirty days of the Commission's approval of the agreement any amounts that had been collected in excess of the settlement rates. Settlement Agreement as to Rates of Transcontinental Gas Pipe Line Corp. 5 (Apr. 6, 1987) ("Settlement Agreement" or "Agreement"). The Agreement noted that Transco had made a separate filing with regard to Schedules T-I and T-II, and stated that, "only in the event the Commission does not provide for hearing of the separate filing, then Rate Schedules T-I and T-II shall be considered in the instant proceeding to have been reserved for hearing and disposition." Id. at 5. The Appendix to the Settlement Agreement contained revised Schedules T-I and T-II, but qualified these schedules as being "adjusted only for the cost of service adjustments underlying this Agreement." Id. The Commission approved this Settlement Agreement on July 25, 1984. Transcontinental Gas Pipe Line Corp., Order Approving Settlement, 28 F.E.R.C. p 61,146, at 61,265 (July 25, 1984).

The Commission held hearings on Transco's proposed increases to its Rate Schedules T-I and T-II in February and March of 1985. Following these hearings, the Administrative Law Judge ("ALJ") concluded, inter alia, that Transco had not sufficiently supported its proposed increase in its fuel retention rate from 4.8% to 6.1%. Transcontinental Gas Pipe Line Corp., Initial Decision of the Administrative Law Judge, 33 F.E.R.C. p 63,035, at 65,120, 65,155 (Nov. 8, 1985) ("Initial Decision"). The fuel retention rates are designed to "cover the cost of that portion of gas used to compress and to move the balance of the gas through the pipeline," Transcontinental Gas Pipe Line Corp., Order on Initial Decision, 46 F.E.R.C. p 61,227, at 61,682, 61,684 (Feb. 23, 1989) ("Order on Initial Decision"), stated as a percentage of the total amount of fuel transported. The ALJ cited testimony by Transco's witness that Transco's proposed 6.1% fuel retention rate assumed an essentially full pipeline, with a throughput, or utilization, rate of approximately 1,000 billion cubic feet ("Bcf."). In reality, however, the most recent figures indicated that the pipeline was operating at a throughput of approximately 975 Bcf., or less than the total maximum throughput capacity. Initial Decision, 33 F.E.R.C. at 65,154. As the fuel retention rate is directly related to the applicable throughput rate--the amount of fuel retained increases with the amount of fuel flowing through the pipeline--the ALJ found that the appropriate fuel retention rate for a 975 Bcf. throughput rate would be 4.8%. Id. at 65,155.

The Commission affirmed the ALJ's conclusions. Order on Initial Decision, 46 F.E.R.C. p 61,227, at 61,682. First, the Commission rejected Transco's arguments that the fuel retention rate had been resolved in the Settlement Agreement, and was therefore not a proper subject for hearing before the ALJ. Pointing to the fact that disagreement among the parties persisted after the Settlement Agreement regarding the appropriate fuel retention rate, the Commission concluded that neither the intervening Commission order approving the Settlement Agreement, nor the simple "passage of time" had served to resolve the issue of fuel retention costs. Id. at 61,684. In particular, the Commission found that later settlements between Transco and the LDCs in 1987 and 1988 again addressed the fuel retention rate issue, and that one of the LDCs, Philadelphia Gas Works, had specifically reserved its rights on the issue of fuel retention rates in the 1987 settlement. Id.

Second, the Commission agreed with the ALJ that the record supported a fuel retention rate of 4.8% rather than 6.1%. Accordingly, the Commission ordered Transco to refund the difference between the amount collected from its customers at the 6.1% rate and the 4.8% rate allowed by the Commission for the period between April 1, 1984 and April 1, 1987. For the period following April 1, 1987, the Commission found that the fuel retention rate was better addressed through Transco's later filing in Docket No. RP87-7-000 ("RP87-7"), which included the 6.1% figure. Id. at 61,686. Transco had submitted this filing on October 7, 1986, which the Commission accepted on November 5, 1986, to be effective April 1, 1987, subject to hearing and refund. Transcontinental Gas Pipe Line Corp., 37 F.E.R.C. p 61,089, at 61,223 (Nov. 5, 1986).

The Commission granted partial rehearing of its order on May 25, 1989. Transcontinental Gas Pipe Line Corp., Order Granting Rehearing in Part, 47 F.E.R.C. p 61,270, at 61,939 (May 25, 1989) ("Rehearing Order"). The Commission again rejected Transco's contentions that the Settlement Agreement previously had resolved the fuel retention rate, emphasizing that Article III of the Settlement explicitly reserved the T-I and T-II Rate Schedules for hearing and disposition, and that the fuel retention rate is part of the rate levels of those rate schedules. Id. at 61,944. As the Settlement Agreement did not address the T-I and T-II Rate Schedules, it also did not address the fuel retention rate, making that rate the proper subject for the ALJ's...

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