Opinion ID: 572124
Heading Depth: 2
Heading Rank: 2

Heading: Roll-In of Gas Costs for the Incremental Services

Text: 36 In reaching its decision to allocate the gas costs for Algonquin's various services on a rolled-in basis, the Commission relied on the identical nature of the gas Algonquin sells under its different rate schedules. The gas Algonquin sells, from whichever source it comes, enters the pipeline at or near the beginning point of [the] system in New Jersey, the gas is commingled in the system and [t]here are no significant Btu content or pressure differences between the various sources of supply. 47 FERC 61,155. Because all customers receive gas purchased from all suppliers, id., the Commission concluded that it would be unjust and unreasonable to allocate the gas costs among the different rate schedules on an incremental basis.
37 The petitioners assert that the Commission erred in refusing to consider the impact of the new policy statement on the rate schedules at issue. They contend that, having announced a policy favoring the operation of market forces, the Commission was constrained to apply that policy to this proceeding at the rehearing stage. 38 On the question of the policy statement, the rehearing order states: 39 In this proceeding, the Commission is presented with a record that was developed prior to the Commission's articulating rate design policy objectives as reflected in the policy statement.... Because the parties will have an opportunity to create a record in light of the policy statement in Algonquin's new rate case [that will be filed in one month], the Commission has decided not to require development of a record consistent with the policy statement in this docket. 40 49 FERC at 61,110. In this court, the Commission takes the same position, asserting that it was not error to postpone consideration of the policy statement's impact on Algonquin's rates until the next rate proceeding, especially when the next rate case was to be filed less than one month after the release of the rehearing order. 41 The policy statement directs those involved in rate cases to develop records consistent with the content of this policy statement. 47 FERC at 62,059. It gives the Commission latitude, however, to decide in which [of several] proceeding[s] it would be appropriate to develop records on [292 U.S.App.D.C. 207] the issues discussed above. Id. The Commission did not refuse categorically to apply the policy statement; it merely postponed doing so until presented with a record developed along the lines the policy statement directs. Accordingly, the Commission was merely exercising its well-established discretion to order [its] own proceedings and control [its] own docket[ ], Association of Businesses Advocating Tariff Equity v. Hanzlik, 779 F.2d 697, 701 (D.C.Cir.1985), and its decision does not constitute an abuse of discretion. See also Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 543-44, 98 S.Ct. 1197, 1211-12, 55 L.Ed.2d 460 (1978); Natural Resources Defense Council v. SEC, 606 F.2d 1031, 1056 (D.C.Cir.1979).
42 The petitioners urge reversal of the gas-cost roll-in on the ground that the Commission undertook no discussion of the effect the roll-in would have on the pipeline's customers. We have previously emphasized the Commission's duty to examine the cost-shifting effect of its orders. In Columbia Gas Transmission Corp. v. FERC, 628 F.2d 578, 587 (D.C.Cir.1979), we remanded a rate proceeding to the Commission because it had fail[ed] to provide an adequate explanation for or any evidence in support of [a] geographical shifting of costs. Similarly, in North Carolina v. FERC, 584 F.2d 1003, 1012 (D.C.Cir.1978), we held that the Commission had not established that its order was just and reasonable in light of [its] failure to make findings as to the impact the [order] would actually have on ultimate consumers. 43 The Commission's failure to determine the impact of its order is not, as the Commission's actions seem to indicate, a matter that is optional, at the Commission's discretion. From the very beginning of the Natural Gas Act, the courts have held that it is not the theory of a rate order but its impact that determines its legality. 44 Id. at 1014 (citing Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 287-88, 88 L.Ed. 333 (1944)) (original emphasis). Because the FERC, in rolling in Algonquin's gas costs, did not explicitly consider the cost shifting that its order might effect, we hold that it has failed to ascertain that the mandated rates are just and reasonable. For this reason, we remand the portion of the order that rolled in gas costs for further action by the Commission. 45