United Gas Pipe Line Company v. Mobile Gas Service Corporation Federal Power Commission v. Mobile Gas Service Corporation

Decision Date27 February 1956
Docket Number31,Nos. 17,s. 17
Citation76 S.Ct. 373,350 U.S. 332,100 L.Ed. 373
CourtU.S. Supreme Court

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Mr. Howard E. Wahrenbrock, Washington, D.C., for F.P.C.

Mr. Thomas Fletcher, Houston, Tex., for United Gas Pipe Line Co.

Mr. William C. Chanler, New York City, for respondent Mobile Gas Service Corp.

Mr. Justice HARLAN delivered the opinion of the Court.

The question presented in this case is whether under the Natural Gas Act, 52 Stat. 821, 15 U.S.C. § 717 et seq., 15 U.S.C.A. § 717 et seq., a regulated natural gas company furnishing gas to a distributing company under a long-term contract may, without the consent of the distributing company, change the rate specified in the contract simply by filing a new rate schedule with the Federal Power Commission. The pertinent provisions of the Act are set forth in the margin.1

Respondent Mobile Gas Service Corporation (Mobile), a distributor of natural gas to domestic and industrial users in Mobile, Alabama, acquires its gas from petitioner United Gas Pipe Line Company (United), a 'natural-gas company' subject to regulation under the Act. In 1946 the Ideal Cement Company (Ideal), planning to construct a cement plant in the city provided it could be assured a supply of gas at a sufficiently low rate, obtained from Mobile an agreement to furnish gas for a 10—year term at 12 cents per MCF (thousand cubic feet). Mobile, in turn, before entering into a contract with Ideal, obtained from United a 10—year contract to supply gas for resale to Ideal at the equivalent of 10.7 cents per MCF, a rate substantially lower than that for other gas furnished by United. This contract was filed with the Federal Power Commission as an amendment to the general supply contracts between Mobile and United, and, with the approval of the Commission, became a part of United's filed schedules of rates and contracts.

In June 1953 United, without the consent of Mobile, filed new schedules with the Commission which purported to increase the rate on gas for resale to Ideal to 14.5 cents per MCF, a rate more closely approximating that for other gas furnished to Mobile by United. Claiming that United could not thus unilaterally change the contract rate, Mobile petitioned the Commission to reject United's filing. The Commission denied the petition, holding that under § 4(d) of the Act the new rate, being a non-suspendible industrial rate, automatically became effective 30 days after filing and would remain in effect unless and until the Commission should, after investigation under § 4(e), determine the new rate to be unlawful. Mobile paid the new rate until April 15, 1955, when United, with Commission approval, accepted an assignment to it of Mobile's contract with Ideal.2 This assignment made the pending investigation into the lawfulness of the new rate moot, since in the Commission's view its determination on that matter would have no retroactive effect. Thus the only question before us is whether United property collected from Mobile the difference between the old 10.7-cent rate and the new 14.5-cent rate during the period from July 25, 1953 (when the new rate purportedly went into effect), to April 15, 1955 (when United took over the Ideal contract)—a sum aggregating approximately $240,000. On Mobile's petition for review, the Court of Appeals for the Third Circuit (Hastie, J., dissenting) reversed the Commission's order, directed it to reject United's filing of the new schedule insofar as it purported to increase the rate in question, and held Mobile entitled to a return of the amounts paid in excess of the contract rate. 215 F.2d 883. Both the Commission and United, which had intervened in the Court of Appeals, petitioned for certiorari, which we granted because of the importance of this question in the administration of the Natural Gas Act. 348 U.S. 950, 75 S.Ct. 446, 99 L.Ed. 742. For the reasons discussed below, we hold that the Natural Gas Act does not give natural gas companies the right to change their rate contracts by their own unilateral action.

The question presented is solely one of the proper interpretation of the Natural Gas Act, there being no claim that the statute, if interpreted to permit a natural gas company unilaterally to change its contracts, would be unconstitutional. Cf. Midland Realty Co. v. Kansas City P. & L. Co., 300 U.S. 109, 57 S.Ct. 345, 81 L.Ed. 540. The Act3 requires natural gas companies to file all rates and contracts with the Commission, § 4(c), and authorizes the Commission to modify any rate or contract which it determines to be 'unjust, unreasonable, unduly discriminatory, or preferential', § 5(a). Changes in previously filed rates or contracts must be filed with the Commission at least 30 days before they are to go into effect, § 4(d), and, except in the case of industrial rates, the Commission may suspend the operation of the new rate pending a determination of its reasonableness, § 4(e). If a decision has not been reached before the period of suspension expires, a maximum of five months, the filed rate must be allowed to go into effect, but the Commission's order may be made retroactive to that date.

In construing the Act, we should bear in mind that it evinces no purpose to abrogate private rate contracts as such. To the contrary, by requiring contracts to be filed with the Commission, the Act expressly recognizes that rates to particular customers may be set by individual contracts. In this respect, the Act is in marked contrast to the Interstate Commerce Act, which in effect precludes private rate agreements by its requirement that the rates to all shippers be uniform, a requirement which made unnecessary any provision for filing contracts. See Armour Packing Co. v. United States, 209 U.S. 56, 28 S.Ct. 428, 52 L.Ed. 681. The Commission in its brief recognizes this basic diifference between the two Acts and notes the differing natures of the industries which gave rise to it. The vast number of retail transactions of railroads made policing of individual transactions administratively impossible; effective regulation could be accomplished only by requiring compliance with a single schedule of rates applicable to all shippers. On the other hand, only a relatively few wholesale transactions are regulated by the Natural Gas Act and these typically require substantial investment in capacity and facilities for the service of a particular distributor. Recognizing the need these circumstances create for individualized arrangements between natural gas companies and distributors, the Natural Gas Act permits the relations between the parties to be established initially by contract, the protection of the public interest being afforded by supervision of the individual contracts, which to that end must be filed with the Commission and made public.

The provision of the Natural Gas Act directly in issue here is § 4(d), which provides that 'no change shall be made by any natural-gas company in any such (filed) rate * * * or contract * * * except after thirty days' notice to the Commission', which notice is to be given by filing new schedules showing the changes and the time they are to go into effect. It is argued that this provision authorizes a natural gas company to change its rate contracts simply by filing a new schedule of rates, to go into effect in no less than thirty days. On its face, however, § 4(d) is simply a prohibition, not a grant of power. It does not purport to say what is effective to change a contract, any more than § 4(c) purports to define what constitutes a 'contract' that may be filed with the Commission. The section says only that a change cannot be made without the proper notice to the Commission; it does not say under what circumstances a change can be made. Absent the Act, a unilateral announcement of a change to a contract would of course be a nullity, and we find no basis in the language of § 4(d) for inferring that the mere imposition of a filing-and-notice requirement was intended to make effective action which would otherwise be of no effect at all. In short, § 4(d) on its face indicates no more than that otherwise valid changes cannot be put into effect without giving the required notice to the Commission. To find in the section a further purpose to empower natural gas companies to change their contracts unilaterally requires reading into it language that is neither there nor reasonably to be implied.

It is argued, however, that a different conclusion is compelled when § 4(d) is read with the other provisions of the Act. Petitioners attempt to characterize the Act as setting up two separate and distinct 'procedures' for changing rates: (1) the 'hearing and order' procedure of § 5(a) under which the Commission may determine existing rates to be unreasonable and order changes to be made; and (2) the 'filed-rate' procedure of § 4(d) and (e) under which the natural gas company may initiate changes, in which event the Commission's only concern is with the reasonableness of the new rate. These are said to be complementary and mutually exclusive procedures, the choice between which—since both expressly relate to changes in 'contracts' as well as other rates depends solely on who is seeking the change and not on whether the rate sought to be changed is embodied in a contract. From this characterization of the procedures, petitioners conclude that when a natural gas company initiates a rate change under § 4(d) the proceedings are governed exclusively by § 4(d) and (e), and hence the Commission's only power is that which it has under § 4(e) to set aside the new rate if that is found to be unlawful.

The major defect of this argument is that it assumes the answer to the very question in issue—whether...

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