Opinion ID: 362296
Heading Depth: 2
Heading Rank: 3

Heading: Principles of Review of Ancillary FPC Producer Regulation

Text: 22 Optional certification, like other new FPC initiatives of the last decade, poses certain special problems for judicial review which we deem worthy of separate discussion. 23 The main path of development in FPC producer regulation has been, of course, the evolution from individualized ratemaking to areawide and nationwide ratemaking. However, in the last decade, there has been a second major path of development in FPC producer regulation in the form of a series of special ratemaking programs. 28 These have included deregulation of small producers, 29 deregulation of emergency purchases, 30 advance payments, 31 special relief proceedings, 32 contingent escalations and refund work-off credits, 33 and special rates for renewal contracts (rollover gas). 34 24 Some of these programs have patently violated the statutory command that the FPC exercise its responsibility to regulate producer rates and that it not simply rubber stamp rates set by contract. 35 Other programs have presented the courts with a more difficult task calling for sensitivity to the conflict between the need for administrative flexibility in responding to a crisissituation and the overriding requirement of administrative fidelity to legislative command. We have been consistently mindful of the broad discretion accorded the Federal Power Commission in its efforts ' to devise methods of regulation capable of equitably reconciling diverse and conflicting interests . . . in this time of acute energy shortage.'  36 However, we have also been mindful that Congress created the FPC to impose limits that avoid extortionate natural gas rates. If a decision is to be made to deregulate natural gas prices, it must be made by Congress, not by the FPC, and this court cannot permit administrative transgression of the legislative mandate in this regard. Accordingly, we have been consistently concerned that the FPC (give) 'reasoned consideration' to the shaping of its order in an effort to protect consumers from paying substantially more than necessary to bring forth the needed supplies. 37 25 To resolve the conflict, we have elaborated several flexible principles of review applicable to these cases, which we discuss below but summarize here to provide an overall perspective. The basic tension in reviewing these FPC programs is that they provide producers with rates in excess of those found to be just and reasonable under the nationwide ratemaking proceedings. In return, these ancillary programs, according to the FPC, encourage producers to engage in additional exploration and development of vitally needed new gas sources. We have upheld these programs if they satisfy three principles. There must be substantial evidence showing a Demonstrable connection between the funding in the program under scrutiny and the increased gas supply which it will allegedly produce. 38 There must be some minimum level of coordination of the program under scrutiny with national ratemaking and other programs so that they create no conflicting or unnecessarily duplicating incentives. 39 Lastly, there must be evidence of producers' actual costs so that it can be determined whether the additional funding results in profits too huge to be reconcilable with the legislative command. 40 26