Opinion ID: 339939
Heading Depth: 2
Heading Rank: 6

Heading: Slow-Through of Rate Reductions

Text: 175 The presiding examiner concluded that in consequence of the reduction, through conventionalization of the lease-sale, of the rate which producers could obtain from Texas Eastern, the commodity charge in the latter's systemwide rates should be lowered. 579 In Opinion No. 565, the Commission did not reach Texas Eastern's contention that Section 7 did not authorize the course because it felt that another treatment would in any event be appropriate. 580 Since Texas eastern had pending before the Commission a Section 4 proceeding for a rate increase, sought partly on the basis of its Rayne Field costs, the Commission settled on a reduction of Texas Eastern's rates as an iterim step for the Section 4 proceeding. 581 Accordingly, the Commission ordered Texas Eastern to file substitute rates reflecting cost shrinkage arising from the instant proceeding, and to continue in effect rates reflecting costs at the applicable area rate until full payment to producers of the $134 million purchase price and amortization of the balance of the Rayne Field investment on its books, and thereafter to file new rates. 582 176 The Commission's general authority to issue interim rate orders is beyond question. 583 And indubitably, an interim order may decrease existing rates which are excessive. 584 The Commission might have entered an interim rate-reduction order in Texas Eastern's pending Section 4 proceedings on a finding that its rates were too high. 585 We see no infirmity in the action here arising simply from the fact that the Commission chose to promulgate such an order, on such a finding in the Section 7 proceeding as a step promoting the public interest in the Section 4l proceeding. 586 We accordingly accept the Commission's rate-reduction order for what it purports to be. 177 We hasten to add, however, that the Commission might also have passed the order as an exertion of its Section 7 authority. 587 Texas Eastern's sole challenge before the Commission to the examiner's method of rate-reduction flow-through was that the Commission lacked power in a Section 7 proceeding to revise systemwide rates previously found to be just and reasonable. 588 The Commission met that objection by issuance, for Texas Eastern's rate-increase proceeding, of the order on an interim basis upon a finding essentially that without flow-through of the reductions Texas Eastern's charges to customers would not remain reasonable. The Commission was equally free to flow through the reductions by an exercise of its Section 7 powers without encountering the criticism Texas Eastern offered. The methodology of Section 7 flow-through is an imposition of certification conditions pending any formal rate investigation that might be in order. 589 The very purpose of Section 7 certificate conditions is protection of consumers while the normally lengthy rate investigation is proceeding. 590 The mechanism of Section 7 condition-imposition is not ratemaking; indeed, ratemaking incidental to a levy of such conditions is unnecessary and inappropriate. 591 Texas Eastern's point fails both as to the avenue the Commission took and the one it could have taken. 178 The woes of rate-reduction flow-through do not end at this point, however, for the disposition ordained in Opinion No. 565 was soon cast aside. In Opinion No. 565-A, the Commission substituted the 20-cents in-line price for the 18.5-cent area rate as the basis for a producer rate-schedule filing to reflect what the Commission then deemed the appropriate producer reduction. 592 The Commission also concluded that it would not be in the public interest to require a new rate filing by Texas Eastern to track the 20-cent producer rate for the stated reason that such a filing might result in only a temporary reduction to its customers, and thus would bring about only a condition of instability without commensurate benefits. 593 Instead, the Commission levied on Texas Eastern a contingent liability to make refunds in the future to the extent that its actual rates exceed rates reflecting a 20-cent producer rate. 594 179 We have seen that the objective of initial gas-pricing in Section 7 certification proceedings must constantly be protection of consumers against exorbitance during the period prior to establishment of of firm prices by the ratemaking process. 595 We have held that the initial price which Texas Eastern should have been directed to pay its Rayne Field producers was the 18.5-cent rate by the 20-cent rate are totally at war with these vital considerations. Leaving Texas Eastern's too-high rates operative obviously sacrifices the interest of its customers in the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest, which was, we have said their due. 597 No more with respect to Texas Eastern than to the producers was the Commission's apprehension of a condition of instability sufficient justification for diluting that interest. 598 Nor is a refund liability an adequate substitute for the rate reduction which the Commission spurned. 599 180 In this posture of the case, it is clear that as a matter of law Opinion No. 565-A is erroneous and Opinion No. 565 is right in its treatment of rate-reduction by Texas Eastern. We must, then, set Opinion No. 565-A aside on that score. By the same token, since the Commission had no perceivable legal alternative to the disposition it assigned that matter in Opinion No. 565, we sustain the Commission's position in that respect.