Opinion ID: 351699
Heading Depth: 1
Heading Rank: 5

Heading: fuel storage

Text: 69 The injection of natural gas into storage tanks by PG&E and SoCal, the two California customers of El Paso, creates a difficulty in the curtailment categories that was first addressed in our ASARCO opinion. The interim plan on review there, Opinion No. 634, treated natural gas retained in storage as outside the scheme of any end-use deserving priority classification. Conversely, when such natural gas was withdrawn from storage, it was treated as though it had been supplied from an independent source. 70 The interim plan had allocated natural gas between the California and EOC users in accordance with the percentage reliance of each user upon the El Paso system. All the EOC users relied exclusively on El Paso, but the California users had alternate sources for natural gas, with the result that they received about 80% of their total supplies from El Paso. The central concept of the curtailment plan is to accord as much natural gas as possible within each priority category, up to a user's total needs, and then to progress to the next highest priority level. But in determining what a user's total needs were, the California customers were evaluated at their needs from El Paso or about 80% of their actual total needs. 71 With a fixed amount of natural gas supplied by El Paso, the California users made up the difference at peak times from other sources, and at slack times, injected the El Paso-supplied surplus into storage tanks. The EOC customers, in contrast, stored no El Paso fuel but altered their daily purchases depending upon conditions. 72 By treating the natural gas taken from the California users' storage tanks as coming from an independent supply, Opinion No. 634 reduced the estimate of those users' reliance on El Paso. It seemed as though more natural gas was coming from non-El Paso sources than was actually the case. Accordingly, the allocations to the California customers of curtailed gas were lower than they should have been. It was this unfairness that prompted the remand of the issue in ASARCO. 73 The response of Opinion No. 697 was to treat storage-injection as an end-use in itself, and afford it Priority 2 classification. The Commission's reasoning was Natural gas used for injection into storage should also be accorded a relatively high priority as the primary purpose of storage is the protection of service to residential and other temperature-sensitive consumers during the winter heating season. (Tr. at 16,602; J.A. at 428). That statement incorporates two separately distinguishable conclusions concerning origin, and then priority, of storage gas. 74 Since Opinion No. 697, like Opinion No. 634, views withdrawals from storage as an independent source of fuel supply, our mandate in ASARCO is sought to be complied with by recognizing the El Paso-origin of storage fuel as it enters storage, rather than when it is taken out from storage. That is an acceptable way of guaranteeing that the California users are not viewed as less dependent upon El Paso natural gas than they actually are. The second step is to decide in which of the five priorities the natural gas allocated to storage should be placed. If the storage gas were measured as it was used, this would present no problem, for then it would simply be added to the other volumes of gas being utilized for each of the priority classifications. But the Commission's decision to consider storage fuel as it enters storage presents it with a difficulty from which it is not fully extricated by Opinion No. 697A. 75 In Opinion No. 697, all storage gas was accorded Priority 2 classification. This solved the problem of underestimating California users' reliance on El Paso. However, it accorded a high priority to substantial quantities of natural gas that might not eventually be consumed in a high priority end-use. The FPC's language in Opinion No. 697, quoted above, was weak on its face: because the primary purpose of storage gas was Priority 1 or 2 uses, the exclusive priority classification for such gas would be Priority 2. 76 The Commission's proposed correction, in Opinion No. 697A, was to afford Priority 2 classification only to that percentage of a customer's storage gas equal to the percentage of natural gas actually devoted to a non-storage Priority 1 or 2 end-use by the particular customer. This meant that all other storage gas was treated as not coming from the El Paso system, either at the time of injection or at the time of eventual utilization. To that extent, the Commission has failed to comply with our ASARCO decision, where, with reference to a proposal by the FPC staff rejected by the Commission, it was stated: 77 There is no suggestion that the proposed storage adjustment formula would impede implementation of the interim plan. The mere fact that the solution is complicated cannot justify the Commission in refusing to provide just and reasonable interim curtailment procedures. We therefore remand this matter to the Commission for further consideration of the proposed storage adjustment formula. 78 ASARCO, supra, 161 U.S.App.D.C. at 24, 494 F.2d at 943. 12 79 Hence, the Commission failed to accomplish what it set out to do in Opinion No. 697A regarding the storage fuel priority classification. Rather than relying on its former assumption that storage fuel was primarily intended for residential and other high priority uses, the Commission offered the solution described above. But the premise of that solution, that natural gas taken from storage will be distributed across all end-uses and priority classifications, is not correct. Storage gas is relied upon primarily for low-priority end-uses. When the need for storage use arises, it must be that the other sources of natural gas have not been able to supply all current demand. But the higher priority uses would have been met first. Hence, the function of storage gas must be to supply the lower tier of priorities in the order of their preference. Admittedly, there could be occasions where the shortage was so severe, that in order to supply even the top priority category, resort to storage would be necessary. But as a general rule, at least for the immediate present, the percentage of storage gas that is used for higher priority end-uses will be less than the percentage of all gas that is used for higher priority end-uses. 80 A remand to the Commission on the issue of storage is therefore necessary. In revising its permanent curtailment plan for the El Paso system, the Commission must guarantee: 1) That all use of El Paso-originating natural gas (whether detained in storage for a period of time or not) be recognized in setting the percentage reliance of California customers upon El Paso. 2) That double counting be avoided either by considering the El Paso origin of the natural gas as it is injected into storage, or as it is withdrawn from storage, but not both. 3) That the priority accorded to natural gas kept in storage be in proportion to the eventual end-uses of that gas, unless the Commission wishes to support with an evidentiary hearing the importance of storage gas irrespective of the end-use to which it is eventually put. This last position was strongly hinted at in the Commission's brief, but formed no part of the storage-priority decision by the Commission itself, and hence cannot be accepted as an explanation before this court. Securities and Exchange Commission v. Chenery Corporation, 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943).