Opinion ID: 373874
Heading Depth: 3
Heading Rank: 2

Heading: Violation of Commission Regulations

Text: 62 The purchased gas adjustment clause provisions 69 were adopted by the Commission to permit pipeline companies to protect themselves against supplier rate increases. 70 The clause allows pipelines to adjust their rates semiannually to reflect changes in unrecovered purchased gas costs. In the meantime, purchased gas costs above or below the current adjustment are placed in a deferred account (Account 191), to be recovered over the next six-month period as a surcharge to the rates, or in the case of lower costs, a reduction in the rates. 71 This relieves pipelines of the burden of continuous rate filings, enabling them to recover expeditiously the cost of purchased gas (which) constitutes the largest single component of their cost of service. 72 63 The unrecovered purchased gas cost account is Account 191 of the Uniform System of Accounts for Natural Gas Companies. It provides: 64 191 Unrecovered purchased gas costs. 65 A. This account shall include purchased gas costs related to Commission approved purchased gas adjustment clauses when such costs are not included in the utility's rate schedules on file with the Commission. 73 66 The pertinent regulation defines purchased gas cost as 67 the cost of wellhead purchases, field line purchases, plant outlet purchases, transmission line purchases, and pipeline production from leases acquired on and after October 7, 1969. Nonconcurrent exchange transactions may be reflected as a cost of purchased gas. 74 68 Panhandle points out that these regulations nowhere permit inclusion of transportation costs or revenues. It argues that the subject revenues should instead be credited to Account 489, titled Revenues from transportation of gas for others. 75 69 Panhandle also argues that the challenged order violates longstanding Commission precedent and lists a number of cases where the Commission has refused to allow inclusion of transportation costs in a PGA clause. 76 FERC distinguishes these decisions on the basis that they involved pass-through of costs, not revenues. 77 To demonstrate that the order under review is in accord with Commission precedent, it cites a number of recent orders, none judicially reviewed, in which it has ordered crediting of transportation revenues. 78 70 Thus the Commission's position seems to be that the PGA regulations allow pass-through of transportation revenues, but not of costs. We do not read the carefully constructed purchased gas regulations so loosely. Account 191 applies to Costs, not Revenues, and to Purchased gas items, not Transportation items. Moreover, Account 489 by its terms appears to be the proper locus for transportation revenues. 71 The Commission agrees that Account 489 is the usual situs for revenues, but it claims that use of that account would be inappropriate here because Account 489 defers revenues until a rate change proceeding under Section 4, and has no provision for flowing excess revenues back to Panhandle's jurisdictional customers. 79 Also conceding that nothing in the PGA regulations speaks to transportation costs and revenues, the Commission argues that nothing specifically precludes using these mechanisms to respond to the Commission's regulatory purposes. 80 It then cites authority that its powers must be construed broadly in the public interest. 81 It points out that in the absence of the condition, Panhandle would continue to overcollect . . . the excess transportation revenues. 82 72 We agree that  'the Commission's broad responsibilities . . . demand a generous construction of its statutory authority,'  83 but we do not believe the Commission should have authority to play fast and loose with its own regulations. It has become axiomatic that an agency is bound by its own regulations. 84 The fact that a regulation as written does not provide FERC a quick way to reach a desired result does not authorize it to ignore the regulation or label it inappropriate. 85 73 Thus, the order under review must be set aside because in requiring crediting of Transportation revenues to the Purchased gas account, the Commission violated its own regulations. 86 74