Opinion ID: 351699
Heading Depth: 1
Heading Rank: 7

Heading: contract abrogation

Text: 96 Several petitioners object that the permanent curtailment plan, is allocating natural gas solely according to end-use, has improperly ignored the agreements reached by the parties themselves. The focus of complaint is that users are no longer characterized as firm or interruptible, with the former having priority over available natural gas supplies, and paying a higher price for that privilege. 15 But this argument is not new. It was raised in challenging the interim curtailment plan before this court in ASARCO, which was also an end-use plan. ASARCO, supra, 161 U.S.App.D.C. at 16, 17, 494 F.2d at 935, 936. Both the legal permissibility of relying on end-use as an allocative scheme, and the substantiality of the evidence underlying the FPC's choice of the end-use method on the El Paso system, were upheld. In Louisiana Power and Light, supra, the Supreme Court held that the Natural Gas Act fully authorized the pipeline's tariff to impose a curtailment plan despite contrary terms in existing contracts and in so holding distinguished United Gas Pipe Line Co. v. Mobil Gas Service Corp., 350 U.S. 332, 344, 76 S.Ct. 373, 100 L.Ed. 373 (1956). See 406 U.S. at 646-647, 92 S.Ct. 1827. 97 In Opinion No. 697, the Commission relies on the fact that regulations of the California Public Utilities Commission require natural gas service to be interruptible for industrial customers over 200 mcf per day. As a result, the informative function of an interruptible, as opposed to a firm contract, is somewhat distorted. It is not the free market allocating to the most productive user because that user can pay the highest price, but a government-imposed constraint upon the free market whereby at least some California users who would have paid to be firm-customers are subject to curtailment before EOC users. (J.A. 421-422; Tr. 16,595-96). 98 It is not material, as petitioners urge on this court, that an actual instance of curtailment of California residential users in the face of continuing EOC industrial use has not yet arisen. The Commission acts within the scope of its discretion when it considers contingencies, for that is the nature of the emergency curtailment plans originally required by Order No. 431. 99 While fully within its authority in establishing categories of end-use, the Commission still paid slight attention to the efficient allocation reflected in firm and interruptible contracts. The Commission explicitly held that it was abrogating existing contractual entitlements only because and to the extent that they were not effectively serving this allocative function. (J.A. 422, Tr. 16596). As the Commission has impliedly adopted the premise that, in the absence of evidence of distortion, the distributive scheme worked out by private parties will accomplish the most efficient allocation of scarce resources, its declaration of priority categories based on end-use should allow for private contractual arrangements. Within end-use priority categories, there is still room for individual contracts to spring up, with some users requesting priority over others, and being willing to pay for it. Such arrangements would evidence that the parties themselves have agreed on a common unit for measuring their self-perceived needs. Hence, for example, if one manufacturing plant is able rather freely to substitute between natural gas and other fuels, it would not be willing to pay as much for the gas as would a second manufacturer whose operations entirely rely on energy from natural gas. Yet, under Opinion No. 697, both would be classified in Priority 3. 100 The Commission's present order should be read to allow natural gas consumers to contract for firm or interruptible fuel within priority classifications until the Commission rules otherwise. That interpretation is not precluded by any position taken by the FPC in its Opinion No. 697; rather, it is a necessary consequence of the Commission's statement that the value of the 'firm-interruptible' contract distinction as a curtailment standard is thus largely dependent upon the accuracy with which it reflects the intensity of purchaser's need for gas. (Opinion No. 697, J.A. 422, Tr. 16596). To the extent that the California regulations require all service to be interruptible, the Commission in some areas may desire to prohibit consumers from contracting for firm service even within priority categories. But that would only affect industrial use in excess of 200 mcf daily; and would require an explicit ruling by the Commission, if it so desires, on remand. For the present, nothing in Opinion No. 697 or 697A should be read to prohibit such contracting within priority categories.