Opinion ID: 577178
Heading Depth: 3
Heading Rank: 1

Heading: Unfair Competition and Undue Discrimination

Text: 38 Petitioners argue that the Commission's determination of public convenience and necessity was arbitrary and capricious in light of its failure to accept their arguments of unfair competition between Cascade and Northwest and of undue discrimination between various classes of consumers. Cascade cannot fairly compete, according to petitioners, (1) because it is required to offer transportation rates set by the state, which will not necessarily reflect the costs of providing local transportation; (2) because it must incur the costs of providing transportation services to any customer that desires it, while Northwest may cherry-pick the customers for which it will construct facilities; and (3) because any consumer that uses Cascade to transport gas locally will pay a total price reflecting (and greater than) the transportation rates charged by Northwest, and therefore it will always be cheaper to receive gas directly from Northwest. 39 In response, the Commission noted that at least the WUTC cannot complain of a competitive disadvantage created by present rate structures because this obstacle falls squarely within the WUTC's power to change. The WUTC may design cost-based rates tailored to the individual consumers seeking transportation services, eliminating the first two grounds for the claim of unfair competition. The Commission also found with regard to the second, cream-skimming allegation, that here it was the consumers who first approached Northwest and agreed to compensate it for construction of the facility. Further, the Commission responded that even if Northwest offers its services to select customers, this encourages the LDCs and state commissions to respond competitively to the needs of those consumers. 51 F.E.R.C. at 61,913. 40 Importantly, as Weyerhaeuser and Norpac urge in response to the third allegation, it is not a foregone conclusion that Cascade can never compete with direct delivery from Northwest. These consumers argue that a large capital investment must be made to construct and maintain the facilities required to receive direct deliveries. Presumably, since Cascade has already made and recovered its capital investment in similar facilities, it could discourage consumers from leaving its distribution system by offering cost-based, unbundled services. The Commission attributes the success of other LDCs in retaining customers to this type of action. 53 F.E.R.C. at 61,053. 12 41 Petitioners also argue that the Commission's policy unduly discriminates between high-volume consumers that by happenstance are located near an interstate pipeline and those located where it is not economically feasible to construct a bypass. In fact, the result of FERC's current bypass policy is to reserve for only select customers, like Weyerhaeuser and Norpac, access to reasonably priced natural gas service. Opening Brief of the Petitioner WUTC at 34-35. While this characterization implies that customers currently required to utilize Cascades services receive gas at unreasonable prices, the Commission responded with the sufficient explanation that its policies were designed to benefit even these consumers in the long run. 53 F.E.R.C. at 61,053. Further, the Commission indicated that Cascade may continue to approach the Commission and seek a remedy if Northwest engages in anti-competitive or discriminatory behavior. 51 F.E.R.C. at 61,913. 42 In light of these considerations, we cannot say that the Commission's approval of the bypass, in spite of these objections, was arbitrary or capricious.