Opinion ID: 329424
Heading Depth: 2
Heading Rank: 1

Heading: The Elimination of the Demand Charge Adjustment

Text: 64 The FPC accepted United's proposal that its tariff be modified to relieve it from the operation of the demand charge adjustment provisions in its service agreements during curtailment due to supply shortages. Under the adjustment provisions, the demand charge was credited for failures by United to deliver the gas requested by the customer on any given day, up to the maximum contractual demand. 74 The Commission found the elimination of the adjustment necessary to ensure that United will receive revenues to meet some of the fixed costs of its system and will remain a viable economic entity. 75 65 Memphis Light, Gas & Water Division argues that there is insufficient evidence that this step is necessary and that, in any case, the failure to recover costs due to supply shortages is a risk that should be borne by those who have invested in United rather than by those who purchase gas from it. 76 66 In Rhode Island Consumers' Council v. FPC, 164 U.S.App.D.C. 134, 504 F.2d 203 (1974), we upheld a similar change in the rate tariff of Texas Eastern Transmission Corp. on the grounds that it permitted a de facto increase in the average price of gas and that the Commission was engaged in an exercise of discretion when it held that the emergency and severity of the shortfall warranted a price increase. 77 Considerations like these, we said, were peculiarly a matter for appraisal by the administrative agency. 78 67 That case does not wholly settle the problem. Even if it be assured that this pertinent amount of current revenue is necessary in order to be reasonable to investors, there may be a question whether the method of achieving it is fair and reasonable. 68 In Rhode Island we did not reach certain questions raised as to the discriminatory effects of the Commission's order because they had not been presented in petitioners' objections before the Commission. In this case, too, we must take the issues as they were shaped in the record, including the petition for rehearing, and we find no indication that the questions reserved in Rhode Island were fairly presented to the Commission. 69 In fact, the concerns we expressed in Rhode Island have been diluted in this case by the FPC's reduction of the demand charge. Our concerns are also diminished by United's decision to calculate its demand charge according to actual peak deliveries made in the past twelve-month period, rather than according to maximum contractual demand. This at least avoids the inequity of a demand charge assessed on the basis of contract entitlements that have become academic due to the FPC's curtailment actions.