Opinion ID: 365972
Heading Depth: 2
Heading Rank: 1

Heading: The Presumption of Just and Reasonable Prices

Text: 28 The question raised for review is whether the Commission, having now established just and reasonable prices, may continue to measure petitioners' refund liabilities for sales under unconditioned temporary certificates against the in-line prices which conditioned their permanent certificates. 49 This is apparently a question of first impression. 29 We begin with the plain language of the Natural Gas Act, § 4 of which provides, in part: 30 All rates and charges made, . . . and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is hereby declared to be unlawful. 50 31 We think it a fair inference from this language, and from its judicial construction, that just and reasonable prices are statutorily preferred and that prices may lawfully vary from that standard only with substantial reason. 32 The courts have, of course, approved variances from just and reasonable prices when occasioned by the practical necessity of permitting gas to flow At some price. But in each case, the extent of the excusable variance precisely fit its rationale. 51 Thus, the issuance of permanent certificates containing the somewhat arbitrary in-line prices has been held permissible only so long as there were no just and reasonable rates fixed at the time. 52 Once just and reasonable rates have been determined, they are ordinarily to be taken as the initial prices at which subsequent sales are certificated. We said in this regard in our Rayne Field decision: 33 It is evident, however, that use of the in-line price as the yardstick for the initial-price determination on certification cannot be justified in situations where a just and reasonable area rate for gas of the vintage in question has already been established. The goal of gas-pricing to which the Act emphatically speaks is the just and reasonable rate, for which the in-line price is not a reliable substitute. . . . Rather, as we have explained, adoption of the in-line price as the initial price is merely an interim measure designed to hold the line until the just and reasonable rate for the gas can be ascertained. If that rate, by reason of a past determination, is already available, its use as the initial price for future gas sales follows logically and, we think, legally as a normal concomitant of certification . . . (O)nly the presence of an overriding consideration promoting an identifiable legislative purpose can justify administrative displacement of the just and reasonable rate through approval of another rate for gas to which the Act applies. The need for prompt setting of an initial price in a Section 7 certification proceeding becomes such a consideration where there is no just and reasonable rate as yet. But where, on the other hand, the just and reasonable rate has been established when the Commission comes to fix an initial price for gas, there is simply no need to resort to any other rate. 53 34 Reliance on in-line prices for measuring refund liabilities again has been an admittedly second-best solution. Although the Supreme Court has approved use of the in-line price as a refund floor where no just and reasonable price has been fixed, It observed that logically producers should be liable for refunds down to the just and reasonable level. The Court said in Sunray DX : 35 This Court stated in CATCO that the Natural Gas Act was so framed as to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges. 360 U.S. at 388, (76 S.Ct. 1246). Since the Natural Gas Act nowhere refers to in-line prices, the excessive rates referred to must be rates in excess of the just and reasonable rates at which § 4(a) commands that all gas must move. Logically, this would seem to imply that to assure the complete, permanent and effective bond of protection referred to, Any rate permitted to be charged during the interim period before a just and reasonable rate can be determined must be accompanied by a condition rendering the producer liable for refunds down to the just and reasonable rate, should that rate prove lower than the initial rate specified in the certificate. 36 In view of the fact that an initial price and a refund floor might be used to achieve distinct regulatory goals, it seems regrettable that the Commission and courts apparently have never entertained the possibility of separating these two aspects of an in-line price in particular cases. 54 37 Use of the in-line rate as a refund floor was nevertheless Upheld in light of the need to speed refunds to consumers at the earliest possible moment consistent with due process. 55 But it is quite clear that after just and reasonable prices have been established they ordinarily become the relevant floor for figuring refunds. Thus it is settled that refunds arising under either § 4(e) or § 7(c) which were not previously determined will have as a floor the just and reasonable price, if one exists, except insofar as a higher initial price may operate as an independent floor under Sunray DX. 56 38