Opinion ID: 304693
Heading Depth: 1
Heading Rank: 4

Heading: Penn Gas' Specific Objections

Text: 46 Penn Gas identifies four specific areas as containing controverted issues of fact, and asserts that with respect to each the Commission could not possibly have assumed the underlying facts as presented by Penn Gas to be correct. On this basis, it urges that a full and formal evidentiary hearing is required. We believe that in each instance Penn Gas confuses contrary conclusions which might be drawn from accepted basic facts with contradictions in the basic facts themselves. We find no conflict in fundamental facts calling for a hearing; we do find that the FPC has placed interpretations on and drawn conclusions from the facts which differ from those urged by Penn Gas, and that the Commission's expertise entitled it to do so, and that it has done so reasonably. A. Delivery Points 47 Penn Gas claims that it suffers unlawful rate discrimination in that it receives natural gas from Manufacturers at only one delivery point, in contrast to larger customers who receive gas at numerous points, thus requiring Penn Gas to bear the cost differential of serving a number of points. 46 48 In the first place, simply showing a higher cost, which the Commission accepts as true with respect to Manufacturers' larger customers, does not conclude the investigation of whether a rate is unduly discriminatory to smaller customers such as Penn Gas. The higher cost may be offset by other considerations. And the burden of establishing that system-wide rates are unlawful in that they discriminate unduly against smaller consumers rests with Penn Gas. 49 The FPC, despite the admitted difference in cost, has rejected the allocation of costs by delivery points. [A]ny attempt to arrive at such perfection would be not only delusory, but also impracticable and infeasible from both the management and regulatory point of view. 47 The Supreme Court has stated, . . . where as here several classes of service have a common use of the same property difficulties of separation are obvious. Allocation of costs is not a matter for the slide-rule. It involves judgment on a myriad of facts. 48 And this kind of judgment is particularly appropriate for the FPC to make. 50 The Commission rejected Penn Gas' claim of unlawful discrimination, pointing from among a myriad of facts to the benefits Penn Gas gained from the higher load factor purchase of gas by Manufacturers from Transcontinental Gas Pipe Line Corporation for Penn Gas' account; the ability of Manufacturers to use valley gas resulting from such purchase; Manufacturers' larger customers, whose service needs allow it to make service available to, inter alia, Penn Gas; and the fact that storage fields serve the entire system, either directly or by displacement. B. Rate Zoning 51 While the Commission accepted Penn Gas' view of the underlying facts as accurate in regard to rate zoning (i. e., that Manufacturers' system extends from West Virginia to the Pennsylvania-New York state line; that Manufacturers' underground storage projects are located in the western part of its system; and that Manufacturers purchases natural gas from a number of companies at different points along its system), it did not, nor was it required to, accept Penn Gas' opinion that as a result of these facts alone Manufacturers' rates should be zoned between two broad geographical areas. Looking to the conclusions submitted by Manufacturers and by the FPC staff, not prohibited in light of the fact that it was passing on the merits of the proposed Stipulation and Agreement, 49 the Commission decided that it was not feasible to zone Manufacturers' system: 52 Penn Gas . . . ignores that the flow of gas on Manufacturers' system is in a grid pattern, i. e., gas flows in many directions and in different directions at different times. Five pipeline suppliers deliver gas into Manufacturers' system at 14 points surrounding the market area, and a large portion of such deliveries are into storage fields which serve the entire system, either directly or by displacement. Thus, there is no basis for Penn Gas' zoning proposal. 50 53 Such a determination clearly lies within the Commission's discretion. C. Pricing of Exchange Gas 54 The Commission accepted Penn Gas' view of the underlying facts: that the exchange rate has an impact on Manufacturers' cost of service and therefore on the fairness of the rates in the proposed Stipulation and Agreement; that if the gas exchanged was priced at the rates set forth in Manufacturers' Rate Schedule CDS and WS, 51 such higher pricing would also reduce the cost of service to Manufacturers' other customers; and that the value of winter gas deliveries by Manufacturers to the Cumberland and Allegheny Gas Company may be higher than the value of the summer gas deliveries which Manufacturers receives from them. 55 The FPC refused, however, to accept the opinion of Penn Gas' witness that this pricing was unduly discriminatory, since this witness (Benson) used both the Cumberland and Allegheny requirements from Manufacturers and the amount of gas available from Cumberland and Allegheny for Manufacturers based on the design peak day. 52 The Commission found: 56 The method utilized by Penn Gas' witness is inappropriate since it includes the net imbalance volumes rather than being based on total annual deliveries. Penn Gas' approach is tantamount to billing on the basis of a hypothetical load factor of 21 percent in contrast to the actual load factor of 38 percent. 53 57 As such, the Commission properly relied upon its own expertise in regard to the selection of volumes to be used and the proposed rates to be applied to these volumes. 54 D. Federal Income Tax Allowance 58 While the Commission accepted Penn Gas' view that Manufacturers' joint filing of its tax return with the Columbia Gas System produced a saving, there exists a factual controversy as to the precise percentage of this saving. However, as the Commission indicates, Penn Gas did not file its own testimony on this matter but relied instead on the FPC staff's testimony. 59 Prior to the Commission's issuance of the first order in the case at bar, accepting the proposed Stipulation and Agreement, Manufacturers and the FPC's staff had disagreed as to the precise tax saving percentage, but then reached agreement on the figure of five percent. Before accepting this figure as a resolution of this question on the merits, the Commission indicated that it had considered Penn Gas' objections to this five percent figure, but found them wanting in view of its treatment of objections identical in substance advanced initially by the FPC staff in Columbia Gulf Transmission Co., et al. 55 The Commission had there denied such objections. 60 The FPC stated in the case at bar that it could see no reason to alter the treatment of these issues here from that in Columbia Gulf, an upstream affiliate of Manufacturers and [the] Home [Gas Company]. 56 The Commission had found over the course of a test period in Columbia Gulf that a five percent tax saving was a reasonable compromise.