Court Opinion

ID: 6921669
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:04:05.453096+00
Date Added: 2024-06-11T16:06:49.031956
License: Public Domain

TUTTLE, Chief Judge
(dissenting in part).
Although all members of the Court are in accord on the matters discussed in the main body of the opinion, I respectfully dissent from that part of the opinion that holds that the reduced rate of return cannot be legally effectuated by a Commission order until the Commission makes the determination of allocation of cost of service.
The significance of this issue is made apparent by the petition of the Columbia Companies. This petition asserts that these companies have consistently opposed the schedules filed by Tennessee to be effective in zones 2, 3 and 4, in which they operated because, so they alleged, Tennessee had allocated its cost of service unfairly against their interests and in favor of zones 1, 5 and 6. It is asserted that by reducing the rate to be charged by cutting from 7 percent to 6% percent the rate of return, this would increase the amount by which zones 1, 5 and 6 are underpaying their proper rates. It is clear that if the Commission should later determine that cost allocations improperly favored zones 1, 5 and 6, the customers in those zones would be benefitted to the extent that they had obtained the gas at the rate now approved by the Commissions’ interim order. This follows from the structure of the statute which makes rate increases prospective only. In other words, there is no way in which Tennessee could hereafter, if we approve this 6% percent order, collect additional sums to make up for the advantage zones 1, 5 and 6 will have enjoyed because they were favored temporarily with a cost of service allocation improperly weighted in their favor.
Columbia’s next contention, however, does not follow from this fact. Columbia claims to be prejudiced because it says zones 1, 5 and 6 may subsequently be found to have received gas too cheaply at Columbia’s expense. It is true that it is possible that the Commission may find that zones 1, 5 and 6 have received gas too cheaply. The weakness of Columbia’s position, however, is that Columbia is not, and cannot be, hurt by any such subsequent determination. This follows because the rates which Columbia is now paying are still being paid subject to a final determination as to their lawfulness as to all matters except the rate of returns on the common equity. Thus, it will be entitled to a refund of all amounts it may be found to have paid in excess of the correct rate because of an improper allocation of costs of service. Columbia is now immediately benefitted to the extent that it is paying, subject to refund, on schedules including a &Vs percent rather than a 7 percent rate of return. It is not an aggrieved party merely because the Commission did not proceed to a final determination of other possible savings to it at the same time.
The Columbia companies strongly argue that they are entitled under the statute, as an interested party, to a determination by the Commission of their complaint of undue preferences granted to the other zones in violation of Section 4(b) of the Natural Gas Act. They are undoubtedly entitled to such a determination, but not necessarily before the Commission can eliminate what it finds to be an unlawful increment in the price structure. See State Corporation Comm. of Kansas v. F. P. C., 8 Cir., 206 F.2d 690, certiorari denied 346 U.S. 922, 74 S.Ct. 307, 98 L.Ed. 416, Columbia could be hurt in these circumstances only if Tennessee were to be permitted to withhold refunds to which Columbia might become entitled on the ground that it could not recoup from zones 1, 5 and 6, and, therefore, it could not be required to refund excessive charges from zones 2, 3 and 4. As I will next show, this is not the law.
*769Tennessee claims that there is nothing in the Natural Gas Act that warrants the entry of an order that has the effect of reducing the charges it can make until the Commission decides whether it may not be charging too little from three zones even though it may be charging too much in three others.
The Commission answers this in two ways: (1) the allocation of costs in all six schedules was made by Tennessee. If these allocations are correct and are approved Tennessee will not be damaged. If they are incorrect they will be corrected and Tennessee will be required to make additional refunds to customers in those zones that were unfairly burdened by the improper allocations, but it will be unable to collect for any increased rates as such that a correct allocation would have warranted from the customers in the zones where there was an unfairly low increment of cost of service. This, the Commission says, is only the natural result of the regulatory scheme envisaged by the Natural Gas Act. The burden rests on the applicant to justify each rate increase. This includes the burden to establish the correctness of the allocation of costs of service as to each schedule filed. Tennessee stands in no different position than if the Commission, after the section 4 hearing, decided that Tennessee was entitled to an overall return of 7 percent on its investment, just as asked for by Tennessee, but decided that the cost allocations between the several zones were discriminatory, as here claimed by Columbia. The Commission would not have the authority to increase the schedules filed by Tennessee in zones 1, 5 and 6, but it would be under the obligation to reduce those for 2, 3 and 4 and make refunds for excess amounts paid by Columbia. See Interstate Power Co. v. Federal Power Comm., 8 Cir., 236 F.2d 372. In such a situation Tennessee would not realize the full permitted rate of return because it would have failed to substantiate the correctness of the cost allocation. Of course, the Commission could, and should under such circumstances, authorize the filing of new'schedules to have prospective effect to remedy the allocation imbalance, but it would have no power to authorize Tennessee to collect more from zones 1, 5 and 6 than its filed schedules called for. (2) The Commission has a second answer to Tennessee’s criticism in this regard. It seems to say that Tennessee still has several unresolved rate increases pending, all of which affect these same zones, and, if Tennessee is found to have undercharged zones 1, 5 and 6, it may have ample funds collected under bond subject to refund to customers in these zones from which it can recoup for a failure to charge the permissible rate for the period of this present rate proceeding. I think we need not speculate on this matter because I think the first contention elaborated above is sound.
I would affirm the Commission’s order in full.
Rehearing denied; TUTTLE, C. J., dissenting.