Opinion ID: 492011
Heading Depth: 2
Heading Rank: 4

Heading: Insufficiency Under MPC III.

Text: 218 Maryland People's Counsel argues that under the principle established in Maryland People's Counsel v. FERC, 768 F.2d 450 (D.C.Cir.1985) (MPC III ), the Commission was required to afford firm customer an immediate option to convert any purchase obligation completely. 22 We find the claim unpersuasive. 219 In MPC III this court addressed the validity of certain special marketing programs (SMPs), successors to the SMPs held invalid in Maryland People's Counsel v. FERC, 761 F.2d 768 (D.C.Cir.1985) (MPC I ). The SMPs reviewed in MPC I authorized the following approach to the mounting problem of high-cost gas subject to high take-or-pay burdens: A producer would resell, at market rates, high-cost gas previously committed to a pipeline. A limited class of persons was eligible to purchase, and that class excluded captive consumers. The producer would credit the pipeline's take-or-pay liability for the sale, and the pipeline would transport the gas to the new purchaser. This court held the program invalid because it excluded captive consumers from the class of eligible new purchasers, without adequate consideration of possible anti-competitive and anti-consumer consequences. FERC then amended the program to permit anyone with a firm contractual entitlement to purchase a pipeline's gas to nominate up to 10% of its contract demand to be purchased under the SMP. Thus the second-generation SMPs gave captive customers access to gas at competitive wellhead prices, but only up to the 10% figure. This court overturned the second-generation SMPs, finding them to be of a piece with the first. MPC III, 768 F.2d at 455. 220 We think that MPC finds more in MPC III than it contains. The Commission there made no effort to justify the 10% option in the second-generation SMPs by reference to classical grandfathering values. Here, by contrast, it invokes those values emphatically and we think plausibly, arguing that the pipelines require time to adjust to the new dispensation, particularly to resolve the take-or-pay problems presented by the producer-pipeline contracts. J.A. 1152. The specific phase-in period and percentages and election procedures resulted from detailed consideration of various options. 23 See J.A. 1145-55. In the event that the Commission modifies its disposition of the producer-pipeline contracts in light of our treatment of the take-or-pay issue or for any other reason, however, the Commission may wish to reconsider the phase-in of the conversion option.