Opinion ID: 1175259
Heading Depth: 1
Heading Rank: 3

Heading: Availability of Gas

Text: The allocation for the Idaho market from the forthcoming pipeline now stands at 33,149 Mcf of peak day gas. There is within the capacity of the pipeline 15,000 Mcf of gas unallocated. To get a further. allocation it is necessary to make application to the Federal Power Commission and to support the application at a hearing before that body. The witnesses for the parties stated and admitted that there would be a spirited contest between customers in Idaho and others elsewhere for the unallocated gas. Prospects are that additional gas will be available in the future as new fields are opened up and new sources developed, or additional supplies made available from existing reserves. All parties expressed the hope and expectation that such additional gas will in the future become available to the markets of the northwest. But for the present and for the purpose of determining the issues presented to the commission, and now before this court, it must be considered that there is a limit to the amount of gas available for consumption in this state, and that such limit is the amount presently allocated. To plan and construct a distribution system, in a new and unproven market area, upon the basis of an unlimited supply of gas, is highly speculative and dangerous, not only to those who propose to make the installation, but also to the consumers who invest in appliances and equipment and who must pay the rates necessary to maintain such system. Referring to the importance of the showing of an adequate gas supply in certificate proceedings, the Federal Power Commission recognized the controlling nature of that issue when it said: An adequate gas supply is the bedrock upon which such findings must be grounded. In re Northern Natural Gas Company, 94 P.U.R. (N.S.) 485, at 499. Appellant's plan contemplates a supply of 36,168 Mcf, some 10% above the present allocation. However, as pointed out by Mr. Remmel and Mr. Ross, by shifting the load from interruptible to firm customers, appellant could meet the peak day demands, even though the 10% additional gas does not become available. The conclusion is without dispute in the record that appellant's plan is financially and economically sound and feasible within the known gas supply. Respondent's plan is based upon an estimated contract demand of 41,669 Mcf for the first and second years; 55,940 Mcf for the third year; 67,940 Mcf the fourth year, and 80,150 Mcf the fifth year. While its estimated peak day sales would be within the available gas supply the first year, its estimated residential sales alone for the second year exceed that supply. Its total sales for the second year are estimated at 45,014 Mcf; 63,608 Mcf for the third year; 80,041 Mcf for the fourth year; and 95,443 Mcf for the fifth year. While some of this peak day excess may be provided by the proposed peak shaving supply, it is apparent that basically respondent must rely and does rely upon a supply of natural gas far in excess of the amount presently available. It is obvious, and it is admitted, that manufactured gas cannot, because of its cost ($2 per Mcf), become an important source of supply for any distributor, but can be economically used only for peak shaving purposes. It thus becomes apparent that respondent's plan is unsound and unworkable when related to the presently available gas supply. Indeed, Mr. Carpenter, respondent's expert, admitted that its plan would fail if limited to the present allocation, but contended that respondent could successfully operate on the supply of 36,168 Mcf, set out in appellant's proposal, by adopting appellant's higher rates. In view of other of respondent's miscalculations herein pointed out, and its overextended capital investment, that conclusion is questionable. However, assuming it to be true, it must then be accepted as beyond question that appellant could provide the service at a still lower rate, because of its lower capital investment. The commission cannot speculate, nor join the respondent in speculating, upon the future availability of gas, but must confine its determinations to facts susceptible of demonstration within reasonable limits. If the commission in these proceedings gives its approval to the laying of pipe for which there may be no gas, or for which the supply may be insufficient to make a profitable return on the investment, does it not thereby commit itself in advance to allow such capital expenditures to be included in the rate base and to authorize the imposition of excessive rates to provide a return thereon? The Commission has a duty to prevent, so far as lies within its legal powers, investments in service facilities in excess of those actually needed for adequate service. Wisconsin Commission in Re Dahlberg Light & Power Company, 16 P.U.R.(N.S.) 530. Respondent's plan appears to have been hastily prepared and ill considered; and it was admitted by its experts to be unworkable within the present gas supply. Its approval by the commission thus rests upon speculation as to future possibilities. In giving its approval to such a proposal, when another proposal was before it, which is admittedly sound and feasible, the commission has not regularly pursued its authority.