Opinion ID: 721438
Heading Depth: 3
Heading Rank: 2

Heading: The standard for determining the best bid

Text: 173 The LDCs and Industrial End-Users raise three challenges to the methods selected by the Commission for determining the prevailing bidder and price in the capacity release transaction. In Order No. 636, FERC concluded that conditions set by LDCs on their release of capacity must not prefer any shipper, such as an end-user, over other shippers, and cannot take into account the use of the LDC's own facilities. Order No. 636-B, p 61,272, at 61,997. The LDCs maintain that, in a market sense, this rule prohibits them from selecting what is truly the best bid, i.e., one that reflects [the] greatest economic benefit to the releasing shipper. Specifically, the LDCs want the right to favor their own end-users in capacity sales, a practice that ultimately would reduce the LDCs' own costs. But that is not a right to which they are entitled under the Natural Gas Act. The LDCs' claim is at bottom nothing more than an objection to FERC's open-access, nondiscrimination policy. The goal of capacity release is to create a uniform national market for transportation, not to maximize the benefit to LDCs. Only by utilizing nondiscriminatory factors in determining the prevailing bid can FERC ensure that the shipper that places the highest value on capacity receives it. 174 [319 U.S.App.D.C. 97] The Industrial End-Users make the related argument that FERC acted arbitrarily in refusing to grant a bidding preference to LDCs' existing end-users. In particular, they note that FERC did grant existing end-users a preference in acquiring capacity released by upstream pipelines under the section 284.242 mandatory capacity release program. As with the immediately preceding claim, however, the standard set by FERC fundamentally is part of its nondiscrimination and open-access policy. Moreover, as FERC notes, an end-user can be sure of receiving capacity by entering into a pre-arranged deal with its LDC at the maximum allowable price. 76 The preference granted under the mandatory program, in contrast, is unrelated to the development of a transportation market through capacity release; it is specifically intended to ensure that when pipelines engage in unbundling, their end-users are not deprived of the transportation necessary to fulfill their pre-existing gas needs. 175 The Electric Generators finally contend that FERC should not uniformly have set the maximum allowable rate for resales of capacity at the originally determined maximum rate. They contend that this will in some instances result in discrimination against shippers who pay higher initial incremental rates. 77 The Commission responds that this issue is too complex and fact-bound to address in the overarching Order No. 636 proceedings, and that it should be deferred to the restructuring proceedings, where a better record can be developed. See Order No. 636-A, p 30,950, at 30,561 ([T]he parties in restructuring proceedings involving incremental rates should consider and propose methodologies to ensure that the capacity release mechanism operates efficiently and that all parties are treated fairly and equitably, without undue discrimination.). We agree. The Electric Generators' explication of their claim in these proceedings is far too sparse to allow for reasoned evaluation, primarily because the relevant factual record is not before us. Their claim may properly be evaluated by the Commission in individual restructuring proceedings where further facts can be developed. 176