Title: Wyoming Consumer Group v. Public Service Com'n of Wyoming

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Wyoming Consumer Group v. Public Service Com'n of Wyoming1994 WY 97882 P.2d 85Case Number: 93-178Decided: 10/05/1994Supreme Court of Wyoming
WYOMING 
CONSUMER GROUP, a not for profit corporation,

Appellant 
(Petitioner),

v.

PUBLIC 
SERVICE COMMISSION OF WYOMING; and Natural Gas Processing,

Appellees 
(Respondents).

Appeal 
from District Court, Washakie County, Gary P. Hartman, 
J.

 

Representing 
Appellant:

Daniel 
T. Davis, Worland, for appellant.

Representing 
Appellees:

Joseph 
B. Meyer, Atty. Gen., Michael L. Hubbard, Sr. Asst. Atty. Gen., and Kristin H. 
Lee, Asst. Atty. Gen., for appellee Public Service Com'n.

Thomas 
A. Nicholas of Hirst & Applegate, Cheyenne, for appellee Natural Gas 
Processing.

 

Before 
THOMAS, CARDINE,* GOLDEN, and TAYLOR, JJ., 
and BROWN, J. Ret.

* 
Retired July 6, 1994.

CARDINE, 
Justice, Retired.

[¶1]      Wyoming Consumer 
Group (the Group) appeals from a Public Service Commission (PSC) decision 
granting the application of Wyoming Gas Company (WyoGas) to pass on a net 
wholesale gas cost decrease of $0.0106 per delivered MCF.

[¶2]      We 
affirm.

[¶3]      The Group raises 
two issues:

1. 
Is the "pass-on" gas price at Little Grass Creek, the Basin Gathering System, 
Manderson Field, and Desert Springs Field, as of November 1, 1991, excessive and 
in violation of law, and if it is, did the Public Service Commission err in not 
reducing the utility's rates[?]

2. 
Has Wyoming Gas Company violated its duty to provide reasonable rates by failing 
to fully and effectively convert from high cost gas purchased from Williston 
Basin Interstate Pipeline Company (WBI), and if it has, should the Public 
Service Commission reduce the utility's rates to a point reflecting substantial 
compliance?

[¶4]      Appellee Natural 
Gas Processing (NGP) rephrases the issues somewhat:

A. 
Is the scope of review sought by the Wyoming Consumer Group permitted under the 
Wyoming Rules of Appellate Procedure, the Wyoming Administrative Procedures Act 
or Wyoming Case Law[?]

B. 
Are the Public Service Commission's findings of fact relating to the 
reasonableness of Wyoming Gas Company's purchases of natural gas supply and 
reasonableness of Wyoming Gas Company's rates supported by substantial 
evidence[?]

C. 
Are the Public Service Commission's findings of fact relating to Wyoming Gas 
Company's conversion off Williston Basin Interstate Pipeline supported by 
substantial evidence[?]

 

FACTS

[¶5]      In 1983, NGP, a 
natural gas supplier, purchased a controlling interest in WyoGas, a utility, 
which supplies gas to the communities of Basin, Byron, Greybull, Manderson, 
Thermopolis, and Worland. In 1988, WyoGas was merged into NGP. The utility 
continues to operate under the WyoGas name.

[¶6]      Currently, WyoGas 
purchases gas from NGP at the Desert Springs Field, the Little Grass Creek Unit, 
the Basin Gathering System and the Manderson Field. NGP supplies about 73 
percent of WyoGas' requirements with the remaining 27 percent being provided by 
Williston Basin Interstate Pipeline Company (Williston 
Basin).

[¶7]      In October of 
1991, WyoGas filed an application with the PSC to adjust its commodity balancing 
account and pass on a net wholesale gas savings of $0.0106 per delivered MCF to 
its customers with an effective date of November 1, 1991.

[¶8]      On November 21, 
1991, the Group filed a petition with the PSC alleging that WyoGas was 
overpaying for its gas. The basis of the Group's complaint was the contracts 
that WyoGas had entered into with NGP and Williston Basin. The Group alleged 
that NGP was using its position as owner of WyoGas to sell its gas above the 
market price. The Group also alleged that NGP had failed to fully take advantage 
of a conversion program which would have reduced WyoGas' dependency on high 
priced gas purchased from Williston Basin.

[¶9]      The PSC held 
public hearings on WyoGas' application and, on September 4, 1992, it issued its 
Memorandum Opinion, Findings and Order. The PSC concluded that NGP sold gas to 
WyoGas at a fair market value; that WyoGas had made reasonable efforts to find 
alternative lower cost, long-term, firm gas supplies; and that WyoGas has used 
reasonable efforts in its actions regarding conversion.

[¶10]   The Group appealed this decision to 
the district court, which affirmed the PSC's decision in its entirety. The Group 
now appeals to this court.

STANDARD 
OF REVIEW

[¶11]   Our review of PSC decisions is well 
established and straight forward. We begin by noting that the scope of our 
review is determined by W.S. 16-3-114(c) (1990), which 
provides:

(c) 
To the extent necessary to make a decision and when presented, the reviewing 
court shall decide all relevant questions of law, interpret constitutional and 
statutory provisions, and determine the meaning or applicability of the terms of 
an agency action. In making the following determinations, the court shall review 
the whole record or those parts of it cited by a party and due account shall be 
taken of the rule of prejudicial error. The reviewing court 
shall:

(i) 
Compel agency action unlawfully withheld or unreasonably delayed; 
and

(ii) 
Hold unlawful and set aside agency action, findings and conclusions found to 
be:

(A) 
Arbitrary, capricious, an abuse of discretion or otherwise not in accordance 
with law;

(B) 
Contrary to constitutional right, power, privilege or 
immunity;

(C) 
In excess of statutory jurisdiction, authority or limitations or lacking 
statutory right;

(D) 
Without observance of procedure required by law; or

(E) 
Unsupported by substantial evidence in a case reviewed on the record of an 
agency hearing provided by statute.

See 
Mountain Fuel Supply Co. v. Public Serv. Comm'n, 662 P.2d 878, 881-82 
(Wyo. 1983). In this appeal the Group is essentially arguing that the evidence 
supported its position rather than the position of the PSC. Therefore, W.S. 
16-3-114(c)(ii)(E) is applicable, and we must determine if the PSC's decision is 
supported by substantial evidence.

Substantial 
evidence is:

"such 
relevant evidence as a reasonable mind might accept as adequate to support a 
conclusion." Such evidence may be less than the weight of the evidence, but 
cannot be clearly contrary to the overwhelming weight of the evidence. It is 
more than a mere scintilla of evidence or suspicion of a fact to be 
established.

Montana 
Dakota Utilities Co. v. Public Serv. Comm'n, 
847 P.2d 978, 983 (Wyo. 1993) (quoting Mountain Fuel, at 882) (citations 
omitted). The Group bears the burden of proving a lack of substantial evidence. 
Montana Dakota, at 983. Furthermore,

[i]f 
there is present substantial evidence to support a finding of the agency, the 
ultimate weight to be given that evidence before the PSC, as the trier of fact, 
is to be determined by the PSC in light of its expertise and the experience of 
its members in such matters.

Mountain 
Fuel, 
at 883.

DISCUSSION

[¶12]   We begin by summarizing the 
pertinent terms of the four contracts which WyoGas has entered into with 
NGP:

Little 
Grass Creek Contract

This 
contract was entered into June 1, 1980, with NGP and is to last as long as 
commercial production continues in the unit. Gas under the contract costs $2.00 
per MMBTU plus a $0.335 delivery charge for a total cost to WyoGas of $2.335 per 
MMBTU. The contract calls for price redetermination every two years. There is no 
minimum take required but WyoGas is required to use its best efforts to buy gas 
off of the contract. Little Grass Creek supplies the town of 
Thermopolis.

Basin 
Gathering System Contract

The 
contract was entered with NGP on January 1, 1985. It provides for a twenty-year 
term with an evergreen clause.[1] The delivered cost of the gas is 
$2.721 per MMBTU and price redetermination is every two years. There is no 
minimum take requirement but there is a best efforts clause. This contract 
supplies the needs of the town of Basin.

Manderson 
Field Contract

This 
contract was entered into on November 1, 1990, with NGP. It is a twenty year 
contract with an evergreen clause. The gas from Manderson Field costs $2.00 per 
MMBTU plus a $0.667 per MMBTU delivery cost which equals a total cost of $2.667 
per MMBTU. This contract also has a best efforts clause and no minimum take 
requirement. The gas from Manderson supplies the towns of Greybull, Byron, 
Worland, and Manderson.

Desert 
Springs Field Contract

This 
contract with NGP is dated February 1, 1989. It too is for twenty years with an 
evergreen clause and no minimum take is required though it contains a best 
efforts clause. Gas from Desert Springs costs $2.971 per MMBTU with $0.971 of 
that delivery costs. Desert Springs supplies Worland.

[¶13]   The Group asserts that the price of 
gas charged to WyoGas under each of these contracts is above the fair market 
price. As support for its argument, the Group points to the deposition testimony 
of several other gas suppliers who operate in the same region as NGP. The Group 
contends that this deposition testimony shows that there are other gas suppliers 
willing to sell gas for substantially less than what WyoGas is currently 
paying.

[¶14]   The Group fails to distinguish 
between long-term and short-term contracts. We agree with the Group that there 
is cheaper gas available on the spot market; the record clearly shows that to be 
the case. However, all of WyoGas' contracts are long-term in nature. The 
testimony showed that WyoGas wanted longer term contracts in order to ensure 
proven reliability, reserves, field operation reliability, quantitative 
deliverability and financial reliability. WyoGas felt that its position as a 
small utility required this strategy. Consequently, WyoGas was willing to pay 
more for their gas because it gave them an assured supply.

[¶15]   The only evidence in the record on 
the fair market value of similar long-term contracts supports the PSC's 
decision. NGP sells gas to other entities on the open market at prices in excess 
of what WyoGas pays. The prices stated in depositions and relied upon by the 
Group relate to spot market or short-term contracts. Many of the deponents, 
however, testified either that they had no gas available for sale or that they 
were unwilling to enter long-term contracts under the terms WyoGas did with 
NGP.

[¶16]   The PSC concluded that long-term 
reliable gas supplies are essential in order to ensure an adequate supply and to 
meet peak requirements. We conclude that the PSC's decision that a reasonable 
price is paid by WyoGas for NGP gas is supported by substantial 
evidence.

[¶17]   The Group raises a host of other 
issues such as lack of consideration, unconscionability, failure to file with 
the PSC and contracting between related entities. These issues were not raised 
below, and we will not consider them.

[¶18]   The Group also challenges the 
contract between WyoGas and Williston Basin. The gas purchased under this 
contract is used by WyoGas to supply the peak needs of its customers. The 
majority of the gas, as a result, is purchased in the winter months. The gas 
from Williston Basin costs $5.205 per MMBTU. Williston Basin has implemented a 
conversion program whereby a customer such as WyoGas can convert a percentage of 
its required firm volume purchase to transportation rights on Williston Basin's 
interstate pipeline. The Group alleges that WyoGas has not taken full advantage 
of the benefits of the conversion program and, consequently, the gas purchased 
from Williston Basin costs more than it should.

[¶19]   The conversion program allowed a 
customer to convert as follows: 15 percent of volume on January 1, 1989; 15 
percent on November 1, 1989; 20 percent on November 1, 1990; and 25 percent on 
each November 1, 1991 and 1992. If the customer notified Williston Basin by June 
30, 1991, an additional five years was available to convert any remaining 
volumes. WyoGas had converted 50 percent of its Annual Entitlement Quantity - 
the total amount of gas Williston Basin would sell or transport to WyoGas in one 
year - and 14 percent of its Maximum Daily Quantity - the maximum amount of gas 
Williston Basin would sell or transport in a single day to 
WyoGas.

[¶20]   WyoGas argued that it had not 
converted the full percentages it was entitled to because it wanted to protect 
its gas supply for peak periods since it could not find suitable replacement 
sources for the higher priced Williston Basin gas. The PSC concluded that 
WyoGas' actions regarding its conversions were reasonable in light of the 
difficulty in finding lower cost reliable gas supplies.2

[¶21]   The Group appears to ignore the 
consequences of full conversion. In order to fully convert, WyoGas must find 
alternative gas supplies; the record is clear that WyoGas could not find any 
supplies which were as reliable as the Williston Basin gas. Importantly, this 
gas supply was used by WyoGas to meet the peak needs of its customers during the 
winter. Given the potentially harsh winters in this state, a reliable supply of 
gas for the heating needs of customers is vital. We hold that there is 
substantial evidence to support the PSC's finding that WyoGas acted reasonably 
in utilizing the conversion program.

CONCLUSION

[¶22]   There is substantial evidence in 
the record to support the PSC's decision that WyoGas is paying a reasonable 
price for its gas from NGP and that WyoGas has reasonably implemented the 
Williston Basin conversion program.

[¶23]   Affirmed.

Footnotes

1 An evergreen clause provides for the continuation of the contract after 
the primary term on a month-to-month basis unless canceled by one of the parties 
on thirty days written notice.

2 The PSC also found that the conversion issue may be moot because of the 
Federal Energy Regulatory Commission's Order 636. See 57 Fed.Reg. 13267 (1992).