Opinion ID: 492011
Heading Depth: 2
Heading Rank: 2

Heading: Allowance of Discounting Generally.

Text: 151 Several petitioners object that the Commission's allowing pipelines to discount from the maximum rates is in effect an approval of undue preference[s] and undue discrimination in violation of Secs. 4 and 5 of the NGA. But the mere fact of a rate disparity is not enough to constitute unlawful discrimination. Cities of Bethany v. FERC, 727 F.2d 1131, 1139 (D.C.Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d 229 (1984). The reporting system will enable the Commission to monitor behavior and to act promptly when it or another party detects behavior arguably falling under the bans of Secs. 4 and 5. This provision for flexibility conforms to Congress's intention in the NGA to allow a vital role for private contracting between the parties. See United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 338-39, 76 S.Ct. 373, 377-78, 100 L.Ed. 373 (1956); see also SeaLand Service, Inc. v. ICC, 738 F.2d 1311, 1316-19 (D.C.Cir.1984) (rejecting proposition that contract rates, based on individual contract but available to similarly situated shippers of like commodities, are automatically violative of nondiscrimination principle). Accordingly, given the Commission's broad latitude to choose between rulemaking and adjudication, see SEC v. Chenery Corp., 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947), 11 we could find the provisions illegal only if they carried such a risk of allowing undue discrimination or preferences as to be arbitrary and capricious. We do not find the risk so high. 152 The Associated Gas Distributors call our attention to the problem of discounts in favor of a pipeline's gas trading affiliate. We recognize that such transactions may carry more than the usual risk of undue discrimination. Cf. NGPA Sec. 601(b)(1)(E), 15 U.S.C. Sec. 3431(b)(1)(E) (1982) (imposing a special limit on pipeline recovery of cost of gas purchased from affiliate). But we see no reason to think that such a discount should be per se unduly discriminatory. If a pipeline gives its gas trading affiliate discounts identical to those given to unaffiliated parties in identical circumstances, the discount would not be unlawful merely on account of the affiliation. Accordingly, the risk of such discounts proving invalid is insufficient to justify invalidation of the rule. 153