Opinion ID: 721438
Heading Depth: 4
Heading Rank: 1

Heading: LDCs' claim

Text: 208 The LDCs 82 claim that the switch to SFV rate design will undermine gas purchasers' ability to make economically efficient choices of gas suppliers because the per unit gas price they face from a supplier will not reflect the distance which the gas must travel over a pipeline to reach the customer. In consequence, a gas purchaser might choose to buy from supplier A, who transmits gas over pipeline AA for a distance of 1,000 miles, when the economically efficient outcome would have been for the purchaser to buy from supplier B, who transmits slightly more expensive gas over pipeline BB for a distance of only 500 miles. The LDCs' analysis, however, overlooks two important facts. First, as FERC points out, the variable cost of transportation--basically the cost of fuel [319 U.S.App.D.C. 106] for pipeline compressors, will still be included in the commodity and usage charges. So gas purchasers will receive the proper signal regarding the actual differences among suppliers in variable transportation costs. See Order No. 636, p 30,939, at 30,437. Furthermore, gas purchasers will still take differences in fixed transportation costs into account, because those cost components will be included in the reservation and demand charges. Id. As FERC notes, [l]ocational advantages will continue to matter, because long-distance transportation generally will require more facilities, and thus will have higher fixed costs, than shorter-distance arrangements. 209 The LDCs argue, citing Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 648 n. 10, 100 S.Ct. 1925, 1928 n. 10, 64 L.Ed.2d 580 (1980) (per curiam), that FERC's removal of transportation costs from per unit charges at the supplier level amounts to base point pricing, which, they argue, would be [a] per se violation [ ] of the antitrust laws, if done by agreement among private parties to fix the price of transportation added to the price of products. While we have concluded that FERC's response to this argument is adequate, we further note that the base point pricing cases have involved private agreement in otherwise unregulated markets, and commodities such as cement, expensive to transport as contrasted with natural gas, a product which not only is the subject of pricing regulation but also is extraordinarily inexpensive to transport over pre-existing pipelines. Cf. FTC v. Cement Institute, 333 U.S. 683, 697, 68 S.Ct. 793, 801, 92 L.Ed. 1010 (1948). We accordingly reject the LDCs' challenge to FERC's decision to implement SFV rate design. 210