Opinion ID: 370388
Heading Depth: 2
Heading Rank: 1

Heading: Canadian Advance Payments

Text: 101 The first question is whether the Commission properly excluded from Tennessee's rate base advance payments made to a Canadian producer. We approve the Commission's determination. 102 The Commission affirmed the ALJ's decision to exclude from rate base $37.5 million in advance payments made by Tennessee to an affiliated Canadian producer, for use in exploration and development activities in the Canadian Arctic Islands, a remote area in the northern reaches of Canada. 99 We discern that the principal basis of the Commission's determination was Tennessee's failure to demonstrate that receipt by the appropriate American consumers of the Canadian gas . . . will most likely occur. 100 103 The advance payment orders were expressly limited to domestic advances. 101 The Commission stated that (t)he sole basis for even considering Canadian advance payments is our prior statement that pending a Canadian advance payment rulemaking such advances 'shall be treated on a case by case basis.'  102 The Canadian advances were made in 1973 and Tennessee sought to have them charged to the contemporaneous rate payers, though it concedes that no gas will be forthcoming until the mid-1980's. 103 These advances were not used and useful for providing service to then current rate payers, and traditional rate making principles would call for exclusion from rate base. 104 The Commission's analysis seems to contemplate an exception from traditional principles, permitting rate base inclusion on a showing that a particular advance payment served the same purposes, and promised an equivalent benefit to rate payers, as those envisioned for domestic advances complying with the advance payment orders. 104 The fundamental objective of the advance payment program was to help elicit requisite gas supply by providing capital for expedited development and production during the interim period until an upward revision in producer rates would accomplish this objective. 105 The ends of the program could not be furthered unless the investments that were precipitated by advance payments inured to the benefit of jurisdictional rate payers. For this reason the program expressly assured that rate payers would not be charged for advances that did not produce gas, or that produced gas which did not flow to the advancing pipeline. 106 Similarly, as to Canadian advances, the Commission here required that the gas resulting from such advances must be shown most likely to flow to the advancing pipeline's domestic rate payers. This general approach was well within the Commission's broad discretion and consistent with that taken in previous adjudications. 107 105 More specifically, the Commission concluded that Tennessee had not carried its burden of showing that Arctic Islands gas would most likely flow to rate payers in the United States. Several uncertainties remained, E. g.: (1) whether reserves in the Arctic Islands region were sufficient to justify construction of a pipeline; (2) whether, at the time this gas would become available for market, Canada's total reserve situation would justify granting of the necessary export authorizations by the National Energy Board of Canada (NEB); and, (3) whether, assuming the existence of adequate reserves, the NEB would grant the required authorizations, rather than authorizing additional exports from other gas-producing regions, or otherwise modifying Canadian energy policy. As we recently have had occasion to note, in the present era of uncertainty for natural gas supply any attempt to predict NEB export policy is highly speculative. 108 The very existence in this case of a genuine dispute over the interpretation of a series of inconsistent and conflicting NEB reports is sufficient to support the Commission's judgment that the issue is not free from substantial doubt. We will not disturb the Commission's informed judgment when it acts as here, within an area of its special expertise and discretion.