Opinion ID: 1929636
Heading Depth: 1
Heading Rank: 5

Heading: gas research institute expenses

Text: WGL challenges the Commission's refusal to allow the company to recover, as operating costs, projected increases in the wholesale cost of natural gas attributable to increases in Gas Research Institute surcharges effective January 1, 1981. The Commission limited the Company's recovery to the current amount of Gas Research Institute surcharges, i.e., the amount paid by WGL in the test year, 1979, approximately $93,000. [10] The Gas Research Institute (GRI) is a non-profit research and development corporation supported by the natural gas industry. Its members include interstate pipeline and distribution companies. GRI's costs are assessed its members who, in turn, incorporate the cost of their contributions into the rates they charge their retail utility customers such as WGL. Before the interstate wholesalers can raise their rates to reflect increases in their assessed contributions, they must receive approval from FERC. [11] The Natural Gas Act, 15 U.S.C. §§ 717 et seq. (1976), authorizes FERC to regulate the interstate transportation and sale of natural gas, including approving rates charged in interstate sales. So that wholesale companies need not petition FERC for permission to raise their rates whenever their assessed contributions are raised, FERC allows research and development corporations such as GRI to submit to FERC for approval a proposed budget, including contributions assessments. FERC approval of the research and development organization's plan constitutes approval of the member companies' contributions to the organization, including the wholesale rate increase reflecting the higher assessments. Since a wholesaler's rates reflect contributions to GRI, any increase in GRI costs to the wholesaler results in a higher purchase cost of gas to the local utility. The local utility's purchase cost is an operating expense and is properly included in the cost of service. WGL purchases natural gas from two wholesale companies, Columbia Gas Transmission Corporation and Transcontinental Gas Pipeline Corporation. Both wholesalers are members of GRI. In September 1980, FERC approved an increase in GRI assessments from .48 per Mcf. [12] to .56 cents per Mcf. effective January 1, 1981. [13] In the ratemaking proceeding under review here, WGL requested that it be allowed to raise its rates to reflect the correspondingly increased wholesale costs resulting from the increased GRI surcharges approved by FERC. [14] The Commission granted WGL permission to charge rates reflecting the Company's GRI contribution as of October, 1979, but refused to allow an adjustment to reflect the increase effective January, 1981. The Commission justified its decision on the grounds that the FERC approved increase was not a known and measurable expense, and that few benefits would accrue to District of Columbia ratepayers as a result of GRI activities. The Commission agrees that the entire wholesale cost of gas is recoverable by WGL as a cost of service. It is the Commission's position, however, that the authority of FERC to approve GRI charges to member companies was in question at the time of the present ratemaking proceeding, and thus that portion of wholesale costs attributable to GRI charges was not a measurable and certain expense. The Commission further contends that, even if FERC is found to have authority to approve the GRI increase, the Commission acted properly in denying the GRI charges and that the correct procedure was for the Company to return to the Commission and ask for a rate increase when the issue of FERC jurisdiction was settled. At the time the Commission issued its order, a suit was pending in the United States Court of Appeals for the District of Columbia Circuit challenging FERC's jurisdiction to approve GRI charges to member companies. Subsequent to the Commission's order in the present case, the court ruled that FERC has jurisdiction to approve GRI's program and budget and to rule on applications for rate increases submitted by GRI on behalf of the jurisdictional members. Public Utilities Commission of the State of Colorado v. Federal Energy Regulatory Commission, 660 F.2d 821, 825 (D.C. Cir.1981), cert. denied, ___ U.S. ___, 102 S.Ct. 2009, 72 L.Ed.2d 466 (1982). [15] The issue before us is whether the Commission erred in disallowing the increased GRI charges as reasonable operating expenses on the grounds that the above appeal was pending at the time of the Commission's decision. We hold that it did. It is well settled that the Natural Gas Act provides for exclusive federal regulation of interstate wholesales of natural gas. See Northern Natural Gas Company v. State Corporation Commission of Kansas, 372 U.S. 84, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963); Illinois Natural Gas Company v. Central Illinois Public Service Commission, 314 U.S. 498, 62 S.Ct. 384, 86 L.Ed. 371 (1942). State and local commissions have no authority, therefore, to inquire into the reasonableness of wholesale rates, but must allow them as reasonable operating expenses. See, e.g., Citizens Gas Users Association v. Public Utilities Commission of Ohio, 165 Ohio St. 536, 138 N.E.2d 383 (1956); City of Chicago v. Illinois Commerce Commission, 13 Ill.2d 607, 150 N.E.2d 776 (1958); United Gas Corp. v. Mississippi Public Service Commission, 240 Miss. 405, 127 So.2d 404 (1961). [16] In the instant case, the Commission chose to disregard a final FERC order approving wholesale rates on the ground that FERC's jurisdiction had been challenged by another utility commission in a petition for judicial review of the order. The Commission ignored the fact that in the absence of a stay the FERC order, as a final agency order, was fully in effect during proceedings for review. Jupiter Corp. v. Federal Power Commission, 137 U.S.App.D.C. 295, 303, 424 F.2d 783, 791 (1969), cert. denied, 397 U.S. 937, 90 S.Ct. 944, 25 L.Ed.2d 118 (1970); Ecee, Inc. v. Federal Power Commission, 526 F.2d 1270, 1274 (5th Cir.), cert. denied, 429 U.S. 867, 97 S.Ct. 176, 50 L.Ed.2d 147 (1976). We hold that the Commission had no authority to disallow as a reasonable operating expense the wholesale purchase cost of natural gas approved by FERC, including that portion of wholesale costs attributable to GRI surcharges to become effective January 1, 1981. Because we hold that the Commission had no jurisdiction to rule on the reasonableness of such surcharges, we need not reach, and the Commission was unauthorized to consider, the issue whether the GRI charges benefit the District of Columbia ratepayers. Finally, we decline PSC's invitation to rule that the United States Court of Appeals erred in Colorado and to hold that FERC was without jurisdiction to approve GRI expenses as a part of the wholesale rate paid by gas retail companies including WGL. Review of the rulings of FERC is vested by statute in the United States Court of Appeals, not this court. See 15 U.S.C. § 717r(b) (1976).