Opinion ID: 2238939
Heading Depth: 1
Heading Rank: 2

Heading: Federal Preemption and the Filed Rate Doctrine

Text: We begin our analysis with a review of the preemptive effect of the Natural Gas Act (15 U.S.C. § 717 et seq. (1988)), as construed by the courts in the filed rate doctrine. The relevant statutory provisions are sections 1(a), 4, and 5 of the Act. Section 1(a) provides in relevant part: [I]t is declared that the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest. (15 U.S.C. § 717(a) (1988).) Complementing this broad declaration of purpose, sections 4 and 5 of the Act provide for pervasive regulation of pipeline rates and charges by FERC. The filed rate doctrine is an outgrowth of straight-forward principles of Federal preemption. ( Arkansas Louisiana Gas Co. v. Hall (1981), 453 U.S. 571, 577, 101 S.Ct. 2925, 2930, 69 L.Ed.2d 856, 863-64.) The preemptive authority of the filed rate doctrine arises from section 4 of the Natural Gas Act ( Arkansas Louisiana, 453 U.S. at 577, 101 S.Ct. at 2930, 69 L.Ed.2d at 863) and is mandated by the supremacy clause of the United States Constitution. U.S. Const., art. VI, cl. 2; Nantahala Power & Light Co. v. Thornburg (1986), 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943. In enacting the Natural Gas Act, Congress gave exclusive and plenary authority to FERC to regulate the transportation and sale for resale of natural gas moving in interstate commerce, including the power to regulate interstate natural gas prices. ( Northern Natural Gas Co. v. State Corp. Comm'n (1963), 372 U.S. 84, 91, 83 S.Ct. 646, 650-51, 9 L.Ed.2d 601, 607; Illinois Natural Gas Co. v. Central Illinois Public Service Co. (1942), 314 U.S. 498, 506-09, 62 S.Ct. 384, 387-88, 86 L.Ed. 371, 376.) Indeed, in Illinois Natural Gas, the United States Supreme Court explicitly confirmed Congress' intent as expressed in the Natural Gas Act to occupy the field in regulating interstate natural gas rates and services. Illinois Natural, 314 U.S. at 506-09, 62 S.Ct. at 387-88, 86 L.Ed. at 376-78. From Congress' intent in the Natural Gas Act, as applied to rates approved by the Federal commission, the Supreme Court pronounced the rule of Federal preemption known as the filed rate doctrine. ( Montana-Dakota Utilities Co. v. Northwestern Public Service Co. (1951), 341 U.S. 246, 71 S.Ct. 692, 95 L.Ed. 912.) The Montana-Dakota Court stated that the right to a reasonable rate is the right to the rate which the [Federal] Commission files or fixes, and    except for review of the Commission's orders, [a] court[] can assume no right to a different one on the ground that, in its opinion, it is the only or the more reasonable one. Montana-Dakota, 341 U.S. at 251-52, 71 S.Ct. at 695, 95 L.Ed, at 919. This court has long recognized that the Natural Gas Act preempts the ICC from directly or indirectly setting natural gas rates. ( City of Chicago v. Illinois Commerce Comm'n (1958), 13 Ill.2d 607, 150 N.E.2d 776.) Confirming the preemptive effect of FERC-set rates, the United States Supreme Court recently held that when a State regulatory commission determines intrastate retail rates, it must give binding effect to interstate power rates filed with FERC or fixed by FERC. Nantahala, 476 U.S. at 962, 106 S.Ct. at 2354, 90 L.Ed.2d at 951. We must reject the Industrial Consumers' suggestion that the take-or-pay costs are extraordinary one-time charges that are not subject to Federal preemption under the filed rate doctrine. The filed rate doctrine applies to the take-or-pay costs at issue here because they are FERC-approved costs associated with the procurement of gas from wholesale suppliers. ( Nantahala, 476 U.S. at 966, 106 S.Ct. at 2356-57, 90 L.Ed.2d at 954.) Citing with approval this court's decision in City of Chicago, the Supreme Court in Nantahala noted that State courts have broadly applied the filed rate doctrine in several contexts in which FERC had established wholesale power prices. ( Nantahala, 476 U.S. at 965-66, 106 S.Ct. at 2356, 90 L.Ed.2d at 954.) We believe that the preemptive effect of the filed rate doctrine encompasses the FERC charges in this context as well. It is clear from the legislative history and express language of the Natural Gas Act, and from the consistent pronouncements by the Supreme Court, that Congress intended Federal law to occupy the field of regulating interstate sale of wholesale gas. We are thus compelled in this context of FERC-mandated take-or-pay costs to adhere to the consistent application of the preemptive effect of the filed rate doctrine.