Opinion ID: 484619
Heading Depth: 1
Heading Rank: 1

Heading: interruptible transportation service rate

Text: 16 At times when Tennessee's full capacity is not needed to satisfy its obligations to provide firm sales and transportation services, 1 Tennessee also provides sales and transportation services which are interruptible at Tennessee's discretion. See Joint Appendix (J.A.) at 268-69. In November, 1981, Tennessee filed the Interruptible Transportation Service Rate (IT rate) schedule at issue here to apply to its interruptible transportation services performed under Part 284 of the Commission's regulations, 18 C.F.R. Secs. 284.1 et seq. See J.A. at 267. The rate adopted by Tennessee for its interruptible transportation service is a volumetric rate, under which a stated amount is charged for each unit of gas transported. The IT rate incorporates all of the fixed costs charged to Tennessee's firm transportation customers. 2 See J.A. at 425-27. The rate is designed as a 100% load factor rate, the lowest per-unit rate at which a firm transportation customer could receive service from the pipeline. 3 See J.A. at 269. The ALJ approved Tennessee's use of the 100% load factor rate for its interruptible transportation service, see Tennessee Gas Pipeline Co., 25 FERC p 63,052 (1983), at 65,150, and the Commission affirmed. Opinion 240 at 61,228. 17 In the proceedings below, petitioner Consolidated Edison Company of New York (Con Ed) raised several objections to the IT Rate Schedule filed by Tennessee, two of which remain at issue. First, Con Ed argues that the Commission's approval of the IT rate was unreasonable because the rate included all of the fixed costs charged to Tennessee's firm transportation customers. Con Ed's position is that Tennessee should be allowed to recover in its IT rate fixed costs equal to the fixed costs in Tennessee's sales commodity charge, but that none of the fixed costs allocated to the demand component should be incorporated in the IT rate. 4 See Reply Brief of Petitioner Consolidated Edison Company of New York, Inc. at 11 n. 7. 18 In deciding whether to approve the IT rate schedule adopted by Tennessee, the Commission was concerned about the possibility that the costs of providing the interruptible transportation service might be subsidized by rates Tennessee charged its firm service customers. See Opinion 240-B at 61,010 (what Con Ed advocates is a special discount rate that it (and only it and other interruptible transportation customers) would benefit from at the expense of other on-system customers who cannot utilize that service). Accordingly, the Commission concluded that Tennessee must recover the full costs of providing interruptible transportation service in the rates it charged for that service. There was evidence in the record that Tennessee's interruptible service is in fact very similar to its firm transportation service, in that Tennessee offers the IT service only when it can provide it without interruption. As Tennessee's Director of Rates testified:Any time Tennessee agrees to render best efforts transportation services, it is only after it has reviewed its current operations and determines that it has capacity to render service. While the services are technically subject to interruption, in reality the services are not likely to be interrupted and hence are of a quality comparable to firm service. 19 J.A. at 268. Because the IT service is, as a practical matter, just as reliable as a firm transportation service, an IT rate that did not incorporate all of the fixed costs of the firm service rate would in effect require Tennessee's other (non-IT) customers to subsidize its provision of the IT service. The Commission thus reasonably concluded that equity requires the acceptance of the 100 percent load factor rate. Opinion 240-B at 61,010. See also Wyoming Interstate Co., 34 FERC p 61,340 (1986), at 61,634 (approving contested offer of settlement which provided for 100% load factor rate for interruptible transportation service; that rate ensures that [the interruptible transportation customer] will pay no more than it would as a firm customer). 5 20 The Commission also noted that its regulations require Tennessee, in most instances, to credit transportation revenues in excess of costs to Tennessee's purchased gas account for the benefit of its on-system customers. Opinion 240 at 61,228. Thus, the Commission concluded, any excess revenues collected as a result of the inclusion of fixed costs in the IT rate would not be retained by Tennessee for its own use. Id. Con Ed argues that under the terms of a settlement approved by the Commission several weeks before the issuance of its opinion in this case, Tennessee was permitted to retain all transportation revenues, and that therefore the Commission was incorrect in asserting that revenues collected under the IT rate would be refunded to Tennessee's on-system customers. See 31 FERC p 61,308 (1985), at 61,691. The settlement also provided, however, that Tennessee would incorporate a representative level of transportation volumes into its general system rates through a $20 million reduction in Tennessee's current rates. Id. 6 This reduction in rates had the same effect as a revenue crediting provision in ensuring that any excess revenues collected would benefit Tennessee's customers. 21 The second issue raised by Con Ed concerns the requirement under Sec. 4(c) of the Natural Gas Act, 15 U.S.C. Sec. 717c(c), that a natural gas pipeline set forth in its tariff policies and practices that affect the pipeline's rates and services. Con Ed argues that the Commission improperly rejected its proposal that Tennessee be required to state in its tariff its policy of giving priority to requests for the interruptible transportation service by on-system (sales) customers over requests by off-system customers, in the event that capacity limitations make it impossible to fulfill all requests for that service. Con Ed bases its assertion that Tennessee has such a policy on the statement in Tennessee's Brief Opposing Exceptions to the Second Initial Decision that if a conflict did develop ... Tennessee's general policy would be to offer transportation service to the on-system customer first. J.A. at 558-59. Tennessee qualified this statement, however, by noting that an occasion, such as an emergency, could arise where an off-system customer might have a greater need for IT service than an on-system customer, in which case Tennessee would presumably give priority to the off-system customer. J.A. at 559. 7 After considering Con Ed's argument that both the general policy and the emergency exception should be stated in Tennessee's tariff, the Commission concluded that [w]e believe it is better policy to accord management the discretion to determine the needs of an 'emergency' situation when it arises, rather than attempting at this time to envision all such emergencies for implementation in the rate schedule. Opinion 240-B at 61,009-10. 22 This court has held that the statutory directive that rate filings with the Commission set forth the ... practices ... affecting such rates and charges must be read as requiring 23 the recitation of only those practices that affect rates and service significantly, that are realistically susceptible of specification, and that are not so generally understood in any contractual arrangement as to render recitation superfluous. It is obviously left to the Commission, within broad bounds of discretion, to give concrete application to this amorphous directive. 24 City of Cleveland v. FERC, 773 F.2d 1368, 1376 (D.C.Cir.1985). 8 It was reasonable for the Commission to conclude that the policy at issue here did not significantly affect Tennessee's provision of the IT service. There was evidence that a conflict between a request for the service by an on-system customer and one by an off-system customer was highly unlikely to occur, because of the geographical separation between the area in which the service had been provided to on-system customers and that in which it had been provided to off-system customers. See J.A. at 37-39. Given the practical insignificance of Tennessee's priority policy, the Commission acted within its discretion in not requiring Tennessee to state that policy in its tariff.