Opinion ID: 373874
Heading Depth: 4
Heading Rank: 2

Heading: Disallowing Offset of Revenues by New Transportation

Text: Costs Was Unreasonable 81 Assuming arguendo that the Commission's order was authorized by section 7, did not violate its regulations, and was otherwise supported by soundly based findings in the record, we think the order was unreasonable because it did not allow offset of revenues by increased transportation costs. In its application for reconsideration and rehearing to FERC in the LOF proceeding, Panhandle urged that requiring crediting of revenues and prohibiting flow-through of increased transportation costs constituted a double penalty. The company expressed a willingness to develop with the Commission staff an appropriate provision dealing with the flow-through of transportation costs paid by Panhandle to others as well as transportation revenues received by Panhandle from others. 93 The Commission's response was that Panhandle was free at any time to submit a section 4 general rate change in the event its other transportation costs were preventing it from earning a reasonable return. 94 82 Panhandle argues that the Commission's facile response . . . fall(s) woefully shy of the 'reasoned consideration' standard that is required by law. 95 FERC maintains its disposition was correct because the revenue crediting requirement was directly connected to the Commission's section 7 conditioning power, but the request to flow through costs for unspecified transportation services was more suited to a general rate case where a general tracking provision might be allowed. 96 83 We find the Commission's justifications inadequate. The fact that Panhandle could seek a tracking provision in a rate case does not make inappropriate the allowance of an offset of transportation costs against transportation revenues before crediting the balance for resale customers. Furthermore, we think such a netting procedure would be essential where both transportation costs and revenues were unanticipated even assuming the pipeline was in other respects recovering its costs. The unforeseen income may increase a pipeline's revenues above the just and reasonable level, but the unforeseen costs, at the same time, would directly reduce the size of this over-collection. If any amount needed to be credited under the Commission's theory, we think it would be the unanticipated revenues from transportation for others less the unanticipated costs of transportation by other pipelines. 84 Therefore, we think the Commission's order was unreasonable to the extent it did not allow netting out of new transportation costs prior to the entry of the credit in Account 191. 97