Opinion ID: 402324
Heading Depth: 2
Heading Rank: 2

Heading: the corning petition

Text: 10 Corning accepts for purposes of its current controversy with the Commission 12 FERC's lack of authority to directly order a wholesale customer (distribution company) of a regulated pipeline company to reimburse the distribution company's customers (consumers).... Corning Brief 37. Accordingly, Corning did not seek a Commission decree ordering Columbia or the distribution company that sold Columbia's gas to Corning, Shenandoah Natural Gas Company (Shenandoah), to reimburse Corning for its conversion costs. Id. at 38; J.A. 118. Rather, Corning urged FERC to adjust, to the extent Corning had incurred conversion expenses, the price Columbia charged Shenandoah for LNG even though Shenandoah has not, voluntarily or pursuant to direction by state authority, reimbursed Corning. 13 11 Because Shenandoah has borne no loss, the Commission declined to make the adjustment Corning sought. FERC agreed with the analysis of the administrative law judge, J.A. 98, who reasoned that only after state authority had imposed the end user's costs on the distributor could such costs create undue discrimination with respect to other direct wholesale customers of Columbia.... (T)he Commission then could find that such costs should be reimbursed by Columbia and spread system-wide to eliminate the undue discrimination. Id. at 21. However, until the distributor is out-of-pocket, the Commission could not conclude that the wholesale rate the distributor paid Columbia occasioned undue discrimination. In so viewing the matter, FERC recognized that it is for the states to say whether rates charged by distributors to retail customers are just and reasonable. In respecting state regulatory authority and declining to forecast action by state commissions, FERC, approving the ALJ's initial decision, exercised sound discretion. See id. We believe FERC displayed proper sensitivity to the federal-state regulatory ambits involved and did not err in refusing to alter the wholesale rate before a distributor has borne any loss. 14 12 Texas Eastern Transmission Corp. v. FPC, 414 F.2d 344 (5th Cir. 1969) (Texas Eastern II ), cert. denied, 398 U.S. 928, 90 S.Ct. 1817, 26 L.Ed.2d 89 (1970), cited by Corning, does not warrant a different result. During the period 1961-64, Texas Eastern, an interstate pipeline carrier of natural gas, had paid rate increases to its suppliers. Texas Eastern had not passed these rate increases on to its distributor-customers in the form of higher prices. Ultimately the suppliers' rate increases were held unlawful; the suppliers were ordered to refund the amounts collected pursuant to these excessive rates. See Texas Eastern Transmission Corp. v. FPC, 357 F.2d 232, 233-35 (5th Cir. 1966) (Texas Eastern I ). 13 The FPC then concluded that Texas Eastern had earned more than a reasonable rate of return for the years in question. It therefore ruled that Texas Eastern was not entitled to the refunds and ordered the pipeline to pass them on to its distributors, through rates within the Commission's jurisdiction. The Commission believed that by ordering this pass on, it was serving the statutory purpose of the Act of benefitting ultimate consumers by placing the refunds within the jurisdiction of the state regulatory authorities so as to place them in position to benefit the ultimate consumers. Texas Eastern II, 414 F.2d at 350. The Fifth Circuit affirmed this order both as an action within the FPC's statutory authority and as a product of rational decisionmaking. Id. at 348-50. 15 14 The Commission here has ruled that the rate paid by a distributor to Columbia is not unduly discriminatory, unjust or unreasonable if that distributor has not incurred, directly or indirectly, any modification costs. In contrast to the situation in Texas Eastern, 16 there are currently no refunds to be disbursed as a result of Columbia's sales to Shenandoah. FERC determined that a reallocation of costs among the pipeline's wholesale customers fairly should depend on assurance that distributors awarded reimbursement are in fact obligated to pay the amount reimbursed. We find that determination both consistent with the Commission's responsibilities under the Natural Gas Act and a rational solution to the part of the problem generated by Columbia's introduction of Algerian LNG that is before us for review.