Opinion ID: 726048
Heading Depth: 4
Heading Rank: 2

Heading: Equitable Factors Regarding the Risk of Uncertainty: The Customers' Argument

Text: 50 As a threshold matter, the Customers argue that we should not defer to the Commission's discretionary decision to deny interest because the agency reversed its position in this case without explanation. The challenged orders, however, quite plainly manifest the Commission's reasoning: faced with the impenetrable uncertainty regarding the effect that its legal error had visited upon all the Pipeline Petitioners, the Commission did the best that it could to muddle through. The Customers do not deny that they benefitted from the gas for which the Pipelines incurred the production-related costs now at issue, and they have failed to establish that but for the Commission's legal error they would have incurred a lesser cost than the FERC imposed upon them by denying them interest on the sums unlawfully taken from them. 51 The Customers' strongest argument for requiring the Pipeline Petitioners to shoulder a greater share of the burden of uncertainty is that the Pipelines created the uncertainty when in 1985 they sought authority for direct billing in order to serve their own interests. Indeed, as noted earlier, the Commission initially ordered full refunds with interest, in part upon the equitable ground that as the proponent[s] of the action held to be erroneous on appellate review, [the Pipeline Petitioners have] less justification to seek the benefit of the Commission's exercise of [its] equitable remedial authority [ ] than the customers who were required to pay the illegal charge, and that the Pipeline Petitioners had undertaken to bill directly with the knowledge that [it] was subject to judicial review. See, e.g. Panhandle, 63 FERC p 61,130 at 61,835. 52 In Public Utilities Comm'n of Calif. v. FERC, 988 F.2d 154, 163 (D.C.Cir.1993), we held that the Commission may exercise its remedial authority to relieve a party from the predicament caused by that party's reliance upon an illegal order even if the illegal order merely induced rather than compelled the party to act. Here the Customer Petitioners challenge the Commission's finding that the agency's legal error even induced the Pipeline Petitioners to pursue authority for direct billing. 53 In January 1985 the Commission approved Natural Gas Pipeline Company's largely unopposed proposal for direct billing. See 30 FERC p 61,138. The Commission's order includes no express endorsement of direct billing as the preferred method for recovering Order No. 94 costs, however. 54 In June 1985 the Commission authorized another pipeline to bill customers directly for production-related costs that the pipeline had incurred under § 110 of the NGPA. Tennessee Gas Pipeline, 31 FERC p 61,308. The Customers do not dispute that this order could have induced the Pipeline Petitioners to pursue direct-billing authorization in order to recover their Order No. 94 costs. 55 These two orders seem to be all the Commission-generated inducement that Texas Eastern had when it, first among the Pipeline [320 U.S.App.D.C. 385] Petitioners, filed for direct-billing authorization in July 1985. See Texas Eastern, 66 FERC p 61,035, reh'g denied 69 FERC p 61,064 (1994). In finding that Texas Eastern should not be blamed for pursuing this course because the Commission's acceptance of other pipelines' Order No. 94 direct bill proposals placed Texas Eastern under competitive pressures to propose a similar recovery mechanism, 69 FERC p 61,064 at 61,270, the Commission did not cite its January and June 1985 orders. It did do so, however, in reaching a similar conclusion regarding Texas Gas, which applied for direct-bill authorization a few weeks later, in August 1985. Texas Gas, 69 FERC p 61,068 at 61,300 n. 42, denying reh'g of 66 FERC p 61,033 (1994). The Commission also cited two orders issued very shortly after these pipelines filed their direct-bill petitions. 69 FERC p 61,068 at 61,300 nn.42 & 43, citing 32 FERC p 61,230 (August 1985) and 32 FERC p 61,433 (September 1985). While Texas Eastern and Texas Gas obviously did not rely upon those orders, they are evidence of the contemporaneous policy that, the Commission found, induced the Pipeline Petitioners to pursue direct billing authority. That Texas Eastern and Texas Gas succeeded in obtaining Commission approval for their direct-bill proposals suggests that they had correctly sensed a policy shift in the January and June orders. In any event, the Commission's assessment of the competitive climate created by its own orders merits substantial deference; we therefore hold that the Commission reasonably concluded that it induced the Pipeline Petitioners to jump on the direct-bill bandwagon. 56 Next the Customer Petitioners point to the Commission's finding that the Pipelines' settlements with other customers may have given them greater cost-recovery than the PGA mechanism would have. See, e.g., Panhandle, 64 FERCp 61,218 at 62,636-37. This possibility, however, provides no basis (either descriptive or normative) for the conclusion that the Customers draw, namely, that as a result of these settlements, the Pipeline Petitioners had voluntarily assumed the risk that they might not recover any production-related costs from Columbia, MichCon, and MGU. 57 The Customers make two final points. First, they argue that even if the Pipeline Petitioners experienced a decrease in gas sales after the Commission approved their proposals for direct-billing, see, e.g., Panhandle, 69 FERC p 61,048 at 61,193, they avoided the competitive disadvantage entailed in having to recover their costs by increasing their commodity price. Second, the Customers contend that the FERC erred when it found that the Pipelines did not have use of the monies they unlawfully collected from the Customers. Each point provides a good reason to impose substantial costs upon the Pipeline Petitioners--as the Commission did--but neither provides a reason for holding the Pipeline Petitioners more responsible than the Customers for the uncertainty that hangs over this case. 58 The Commission gave each group of Petitioners an opportunity to demonstrate that, but for the agency's legal error, they would have fared better than they do under the orders challenged here. Neither has succeeded; the uncertainty is simply too great. 59