Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-94-01562/USCOURTS-caDC-94-01562-0/pdf.json

Parties Involved:
Federal Energy Regulatory Commission
Respondent
Tennessee Valley Municipal Gas Association
Petitioner

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 6, 1998 Decided April 21, 1998

No. 93-1566

Tennessee Valley Municipal Gas Association, et al.,

Petitioners

v.

Federal Energy Regulatory Commission,

Respondent

ANR Pipeline Company, et al.,

Intervenors

Consolidated with

Nos. 93-1837, 94-1016, 94-1023, 94-1357, 94-1562

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Jennifer N. Waters argued the cause for petitioners East

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ciation. With her on the briefs were Jack M. Irion, Glenn W.

Letham and Channing D. Strother, Jr.

Lee A. Alexander argued the cause for petitioners Ocean

State Power, et al. With him on the briefs were Stefan M.

Krantz and Yoav K. Gery. Carl M. Fink entered an appearance.

Edward S. Geldermann, Attorney, Federal Energy Regulatory Commission, argued the cause for respondents. With

him on the brief were Jay L. Witkin, Solicitor, John H.

Conway, Deputy Solicitor, Susan J. Court, Special Counsel,

and Janet Kay Jones, Attorney.

Robert H. Benna argued the cause for intervenor Tennessee Gas Pipeline Company. With him on the brief was

Jeanne M. Bennett. Michael J. Fremuth entered an appearance.

Bruce A. Connell, Kevin M. Sweeney, Joseph D. Naylor,

John E. Dickinson, Michael L. Pate, Charles J. McClees, Jr.,

Mickey Jo Lawrence, and Norma J. Rosner were on the brief

for intervenors Indicated Shippers. J. Paul Douglas entered

an appearance.

Before: Wald, Sentelle, and Randolph, Circuit Judges.

Opinion for the Court filed Per Curiam.

Per Curiam: The two issues presented in these consolidated petitions arise from orders of the Federal Energy Regulatory Commission relating to Tennessee Gas Pipeline Company's restructuring of its service and operations to conform

with Order No. 636. See United Distribution Cos. v. FERC

("UDC"), 88 F.3d 1105 (D.C. Cir. 1996).

The first issue deals with a difference in the pipeline's

treatment of some of its "small" customers in terms of their

eligibility for "one-part" sales service, eligibility that is for a

discount subsidized by other pipeline customers. The ComUSCA Case #94-1562 Document #346739 Filed: 04/21/1998 Page 2 of 6
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mission's order of November 12, 1993, set a 5,300 dekatherm

("Dth/day") eligibility limit on the pipeline's former "indirect"

small customers, but allocated a 10,000 Dth/day eligibility

limit on Tennessee's former upstream, or "direct," small

customers. See 65 F.E.R.C. p 61,224, at 62,062-63 (1993).

Petitioners East Tennessee Group and Tennessee Valley Municipal Gas Association, representing some of the pipeline's

former indirect small customers, point out that after restructuring they are in the same position as the pipeline's former

"upstream" small customers; both classes are now direct

customers. Their argument is that the Commission's approval of an eligibility cutoff for former upstream small customers

nearly double that granted to former indirect small customers

amounts to "undue discrimination" in violation of the Natural

Gas Act, 15 U.S.C. ss 717c(b), 717d(a). The Commission, of

course, denies that it has discriminated. In its view, it has

merely maintained the status quo. Before restructuring the

eligibility limit for indirect small customers was no more than

5,300 Dth/day; for upstream small customers, the limit was

10,000 Dth/day. Maintaining these cutoffs, the Commission

believes, did not result in unequal treatment. Both classes of

small customers were treated the same: They were placed in

the same position after restructuring as they were in before

restructuring.

We had a related problem before us in UDC. Order No.

636-B indicated that an upstream pipeline's former indirect

small customers could qualify for discounts only if they could

demonstrate need in the individual restructuring proceedings,

although former upstream small customers automatically received the discount. See 61 F.E.R.C. p 61,272, at 62,020

(1992). East Tennessee Group and Tennessee Valley Municipal Gas Association claimed that this difference in treatment

amounted to "undue discrimination" against them. We held

that the Commission had failed to justify this seemingly

"arbitrary distinction between former indirect small customers of upstream pipelines (who are now direct small customers) and small customers who have always been direct customers of the same pipelines," and remanded the "issue to the

Commission for further consideration of whether or not the

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small customer benefits should be made available to the

former downstream small customers." UDC, 88 F.3d at 1175.

The Commission rendered its orders in this case before

UDC came down. In the ordinary course, we would consider

vacating and remanding for reconsideration in light of our

intervening decision. Although there are differences between

the issue in UDC and the issue in this case, other developments convince us that the proper course is to send the case

back. Proceedings on remand from UDC are well underway.

In Order No. 636-C, the Commission reaffirmed its decision

to determine on a case-by-case basis the limits on former

indirect small customers' eligibility for the upstream pipeline's small-customer rate. See 78 F.E.R.C. p 61,186, at

61,776-78 (1997). To demonstrate why it was appropriate to

proceed in this manner, the Commission discussed its orders

in Tennessee's restructuring proceeding--this case--setting

different eligibility limits for former indirect small customers

and former upstream small customers. See id. at 61,778.

East Tennessee and Tennessee Valley Municipal Gas Association sought rehearing of Order No. 636-C. Their rehearing

petition makes arguments identical to those in their brief in

this case, using the same sources and at times even the same

language. The rehearing petition is still pending before the

Commission.

Thus, the general issue of the treatment of a pipeline's

former indirect small customers under Order No. 636 has not

yet been finally decided by the Commission. It would be

imprudent for us to review the merits of a question still under

consideration by the Commission. Accordingly we shall remand this aspect of the case to the Commission so that it may

be considered in light of the outcome of the rehearing of

Order No. 636-C.

The remaining matter before us is the challenge by JMC

Power Projects to what it describes as a final agency action in

the Commission's Second Compliance Order--a decision to

price the costs of newly constructed facilities on Tennessee on

an "incremental" rather than on a "rolled-in" basis. 64

F.E.R.C. p 61,020, at 61,219-21 (1993). These facilities, which

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were constructed to serve JMC Power Projects and other

Northeastern customers of Tennessee, consist of additions

and replacements of pipeline looping, and new compressors

and interconnections on Tennessee's integrated mainline.

They have been priced on an "incremental" basis since their

original certification, meaning that only those customers directly served by the facilities--customers such as JMC Power

Projects--pay for costs associated with them. See, e.g., 45

F.E.R.C. p 61,010 (1988). In the Second Compliance Order,

the Commission considered permitting Tennessee to switch

from incremental to "rolled-in" pricing, thereby spreading the

costs of the facilities across all customers of Tennessee. See

64 F.E.R.C. at 61,219-21.

We do not believe this challenge is ripe for review. Although the Commission considered the rolled-in pricing issue

in its Second Compliance Order, and tentatively concluded

that the evidence in the record did not justify it, the Commission expressly deferred making a final decision until the

parties had the opportunity to present further evidence in

Tennessee's ongoing rate case. See id. at 61,220-21. The

Commission informed the parties that they "should further

address the roll-in issue in Tennessee's ongoing rate proceeding.... There, the parties will have the opportunity to

develop a record that fully explores the costs and benefits to

the existing shippers...." Id. at 61,221. True to its word,

the Commission reconsidered the issue in the rate proceeding, and determined that the evidence did not support rolledin pricing. See Tennessee Gas Pipeline Co., 76 F.E.R.C.

p 61,022, at 61,112 (1996), reh'g denied, 80 F.E.R.C. p 61,060

(1997). JMC Power has not yet filed a petition for judicial

review from this final decision. It nevertheless argues that

the Commission's decision to defer the rolled-in rate issue in

the Second Compliance Order should be treated as a final

decision on the merits because it demonstrated that the

Commission was applying an unlawfully stringent standard in

determining whether rolled-in rates were justified. The

question is not, however, whether the evidence before the

Commission was sufficient to justify rolled-in rates. The

question is whether the Commission made a final decision

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about the validity of such rates. On that score, it appears

clear to us that the Commission decided only to examine the

issue in the rate proceeding.

JMC Power also thinks that the Commission must have

fully resolved the rolled-in rate issue because it required the

parties to develop an "exhaustive record" in the restructuring

proceeding, and because it had previously expressed its intent

to decide the rolled-in rate issue in the restructuring docket.

But whatever the Commission initially contemplated, it ultimately decided not to decide the issue. An agency has broad

discretion to determine when and how to hear and decide the

matters that come before it. See Mobil Oil Exploration v.

United Distribution Cos., 498 U.S. 211, 230 (1991); Algonquin Gas Transmission Co. v. FERC, 948 F.2d 1305, 1314-15

(D.C. Cir. 1991); GTE Service Corp. v. FCC, 782 F.2d 263,

273 (D.C. Cir. 1986). The Commission is not barred from

hearing new evidence in a rate case simply because it previously gathered evidence on that issue in the restructuring

proceeding. JMC Power points to no statute or regulation

preventing the Commission from deferring a final decision to

the rate proceeding even though, at an earlier point, the

Commission considered resolving the issue in the restructuring hearing.

* * * * *

We remand the eligibility limitation placed on Tennessee's

former indirect small customers for consideration in light of

the Commission's rehearing of Order No. 636-C. We deny

the petition to review the rate treatment of facilities on

Tennessee's pipeline for lack of a final judgment on that

issue.

So ordered.

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