Opinion ID: 382647
Heading Depth: 1
Heading Rank: 3

Heading: AEPCO's CHALLENGE TO THE PRICE OF THE RESTITUTION GAS

Text: 30 (No. 78-1198) 31 AEPCO's principal grievance does not go so much to the amount of gas which was returned to it and other EOC P-5 customers, as to the price which it had to pay for the gas. In its settlement plan, El Paso proposed, and the Commission agreed, that the gas should be returned at then current 1978 prices, rather than the lower 1974 prices in effect at the time the gas was diverted from the EOC P-5 customers. AEPCO mounts three basic challenges to the Commission's approval of the use of 1978, rather than 1974, prices: (1) the gas returned in 1978 was the same gas diverted in 1974, and should therefore be returned at the same price; (2) AEPCO was merely a victim of El Paso's illegal conduct, and should not be required to suffer severe financial penalty as a result; and (3) the Commission's order results in a windfall to El Paso. We find none of these contentions persuasive, and therefore we affirm the Commission. 32 We note preliminarily the court's narrow scope of review over decisions such as the Commission has had to make in this case. It is an unfortunate reality that a natural gas shortage exists and as a result, the public interest in maintaining adequate supplies occasionally requires some measure of sacrifice by the companies involved in the distribution and use of natural gas. However unpleasant that may be, it is inevitable, and as the Third Circuit has observed, (n)ot all parties injured as a result of the . . . natural gas crisis can be made whole. Hercules, Inc. v. FPC, 552 F.2d 74, 89 (3rd Cir. 1977). The difficult problem of balancing competing equities and interests has been given by Congress to the Commission with full knowledge that this judgment requires a great deal of discretion. Accordingly, it is not the role of the courts to second guess the Commission's judgment because we think we could devise a better solution than that which the agency has adopted so long as the agency's determination has a rational basis. Gulf Oil Corp. v. FPC, 563 F.2d 588, 608 (3rd Cir. 1977). We find such a rational basis in the orders presently under review. 33 In determining the price of the restitution volumes, the Commission, as it must, looked not only to the private interests at stake, but also to the broader public interest. It concluded that El Paso's load equation proposals had served a valuable public service by assuring adequate winter gas supplies to EOC high priority customers, 10 a conclusion we concur in. Moreover, the Commission noted that restitution would be made with gas supplies currently purchased by El Paso from its suppliers at currently effective rates, 11 not the lower 1974 rates. Therefore, if El Paso was required to sell the gas to AEPCO at 1974 rates, a substantial dollar injury would be imposed upon El Paso for providing the protection afforded by load equation. . . . 12 We agree with the Commission that in the circumstances of this case, any such penalty would be inequitable. Also, as the Commission found, the penalty would act as an industry-wide deterrent against taking emergency actions to protect service on the authority of a temporary certificate, 13 a result plainly contrary to the public interest. 34 The Commission also considered, and in our view properly rejected AEPCO's contention that it will suffer undue hardship if it is required to pay 1978 prices. On the contrary, AEPCO's surplus of natural gas during the period of restitution has allowed it to avoid resorting to expensive alternative fuels. Thus any injury it might have suffered due to the discriminatory diversions of gas in 1974 and 1975 has been offset by its more recent savings. Further, under the settlement plan approved by the Commission, AEPCO not only received California's pro rata share of the load equation gas, the amount it claimed it was entitled to, it received all of the gas diverted from it for storage with PG&E. In this respect, AEPCO got more gas under the termination of load equation than it would have gotten had load equation been implemented without any discriminatory features. The Commission properly took these factors in to account in concluding that the restitution volumes should be priced at 1978 rates. 35 Finally, AEPCO's principal claim that the volumes returned in 1978 were the same volumes of gas diverted from AEPCO in 1974, and should therefore be priced at 1974 rates cannot withstand scrutiny. Indeed, as the Commission noted, AEPCO's theory . . . bears no relationship to reality. 14 Under the load equation agreement, all of the load equation gas was sold to PG&E. Title in the gas passed to PG&E, including the right to use it as PG&E might please. Although PG&E remained contractually bound to return gas to El Paso in the event of an EOC shortage, this return would be accomplished by curtailing future deliveries to PG&E and using new gas to supply EOC high priority customers. In the meantime, PG&E could draw on its storage capacity to meet its local needs. No part of this arrangement is dependent on the storage of any particular volumes any particular molecules of gas, no gas was physically returned from PG&E to EOC customers, and all the gas delivered to EOC customers at all times was new gas purchased by El Paso at prices current at the time of the sale. We therefore reject AEPCO's claim that the restitution gas must be returned at 1974 prices, and we affirm the Commission's decision as a reasonable solution to a difficult problem.