Opinion ID: 360136
Heading Depth: 2
Heading Rank: 2

Heading: Curtailment on the Transco Pipeline

Text: 34 Transco is one of the major transmission systems in the United States engaged in the transportation and sale of natural gas in interstate commerce and, as such, is subject to regulation by the Commission under the Natural Gas Act. 8 Transco's pipeline system extends from its supply sources in Texas, Louisiana, Mississippi, and the offshore Gulf of Mexico area through the states of Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Pennsylvania, and New Jersey, to its termini in the New York Metropolitan area. The pipeline serves 81 customers. Of these, 80 are wholesale customers public utilities and municipalities which purchase the gas for resale to ultimate customers. 35 In 1971 Transco experienced gas supply shortages and commenced curtailment of service. The shortages are continuous, year-round and worsening. Curtailment levels have gone from 7.41% In 1972-1973 to 44% In 1976-1977. 9 From 1971 to 1976 curtailment on the system was governed by a series of short-term interim settlement agreements among Transco, its customers, and other interested parties. These interim settlements were, in some instances, approved by the Commission and, in other instances, mandated by orders of this Court. 10 36 The first and second interim settlement agreements, which were in effect from November 1971 through November 1974, provided for pro rata curtailment of deliveries on the basis of contract entitlements and contained compensation mechanisms that allowed for reimbursement reimbursement of those customers curtailed more than the system-wide weighted average by those distributors curtailed less than the system-wide weighted average. 37 The third interim settlement agreement was in force from November 1974 through November 1975. The need for this plan resulted from an increased level of curtailment on the Transco system which endangered high-priority service. This interim agreement was designed to mitigate the danger to high-priority service by functioning basically on a 50 percent pro rata basis and 50 percent end-use basis. Like the two earlier agreements, this hybrid plan contained a compensation provision by which the least curtailed customers compensated the most curtailed customers. 38 The fourth and final interim settlement agreement was in effect from November 1975 to October 1976. In response to the fact that curtailment on the system had further deepened, this fourth plan was essentially a two-priority end-use plan. Unlike the three earlier interim plans, however, this settlement agreement did not contain a compensation mechanism. 39 During 1976 the parties once again conducted settlement discussions in an effort to work out an acceptable curtailment plan, but, unfortunately, this time a settlement was not achievable. 40 In the meantime, however, throughout the course of these various interim plans, hearings were held at the Commission on a Permanent curtailment plan. Transco had filed its first permanent curtailment proposal in May 1971 in response to FPC Order No. 431. 11 However, the Commission had terminated that docket when, by order of 15 November 1971, 12 it approved the first interim agreement. Approval was conditioned on Transco's submission of a New permanent curtailment plan by January 1972. Transco did submit the new permanent plan on schedule, and the Commission set it for hearings in Docket No. RP72-99. Then, at this point, the second interim agreement was arrived at by interested parties and approved by the Commission. 13 This settlement agreement required Transco to file a new curtailment plan with the Commission not later than 1 May 1973. On that date Transco Did not file a new curtailment plan but moved instead for an extension of the second interim agreement. By order of 23 May 1973 the Commission denied Transco's motion and directed the company to file by 1 July 1973 a curtailment plan in conformity with Order No. 467, the Statement of Policy calling for end-use plans which the Commission had issued in January 1973. 14 Pursuant to the Commission's direction, Transco filed a 467-type end-use curtailment plan on 29 June 1973. By order of 30 July 1976 the Commission suspended the 467-type plan and set the matter for hearing in Docket No. RP72-99. Hearings commenced in September 1973 and continued intermittently through 25 June 1974; the record was closed on 11 July 1974, and initial and reply briefs were filed on 1 and 25 November 1974 respectively. 41 At these hearings Transco presented witnesses explaining how a 467 plan would be implemented if the Commission directed that one be adopted for the Transco system. Transco's proposed implementation of the 467 plan was tied to a base period the twelve months from May 1972 through April 1973 for which period Transco had collected from each of its customers an analysis of sales based on the nine priority categories of Order No. 467; for customers served by more than one pipeline, Transco allocated each customer's resale market among the several pipelines on a proportionate basis reflecting base-period volumes provided by each pipeline. Transco further indicated that it proposed to curtail on a seasonal basis (I. e., derive a volumetric allocation for each customer for a 5-month winter period and separate volumetric allocation for the 7-month summer period), rather than on the monthly or daily basis followed by other pipelines, and it presented various studies showing the volumetric allocations that would result under the plan for each customer at various assumed levels of curtailment. 42 All of Transco's major customers presented witnesses to stand cross-examination on the base-period market data submitted by those customers to Transco. Testimony was also received on the financial adjustment (or compensation) that would be necessary should the disparate curtailments caused by a 467 plan become effective. No testimony was presented by the Commission staff, and, with very limited exception, Transco's customers and affected State regulatory commissions offered no support for the 467 approach. 43 The Commission subsequently directed its staff to prepare a draft environmental impact statement and ordered further hearings and briefs on the environmental issue. A hearing on the environmental question was held in June 1976, and initial and reply briefs were filed during August 1976. 44 With the fourth interim curtailment agreement due to expire by its own terms on 31 October 1976 and with the parties unable to reach agreement on a new interim settlement agreement, the Commission cleared the way for expeditious consideration of a permanent curtailment plan for the Transco system, based upon the record evidence which had been accumulated over several years in Docket No. RP72-99. On 16 August 1976 the Commission granted a motion by its staff to omit the intermediate decision by the presiding hearing examiner and directed that the entire record be certified to the Commission for its decision in the first instance. To assist the Commission in prescribing a permanent plan, the 16 August order also permitted the filing of updated briefs in Docket No. RP72-99.