Court Opinion

ID: 9492868
Source: CourtListenerOpinion
Date Created: 2023-08-05 14:52:22.578373+00
Date Added: 2024-06-11T17:55:32.032567
License: Public Domain

RANDOLPH, Circuit Judge,
dissenting:
No party denies that Transco could exercise the Memphis clause and propose a rate change. But the Commission still had a statutory duty to ensure that the company’s § 4 proposal was “just and reasonable.” 15 U.S.C. § 717c. The Commission performed that duty and rejected Tran-sco’s filing because it did “not allow for a real choice of service options on Transco’s supply laterals.” 76 F.E.R.C. at 61,061. I believe the Commission offered a reasoned explanation for its decision.
The majority makes much of the Commission’s mention of “abrogation of contracts,” but then recognizes that this rationale is “perhaps intertwined” with the customer choice policy. Maj. op. at 52. Indeed, reference to the existing contracts was not an independent ground of the Commission’s decision, but a necessary consequence of the customer choice policy. If two-part rates are just and reasonable only when customers have already elected a reservation charge, then the Commission must ask the simple question whether the customers have in fact chosen a reservation charge. The Commission indicated that it would allow a change in rates after an open season, which would alter the bargain in the original contract. See id. This demonstrates that the Commission was not nullifying the Memphis clause.
Thus, the real question is whether the Commission was arbitrary and capricious in rejecting Transco’s proposal based on the customer choice policy. The Commission has rejected the idea of an outright ban on reservation charges, noting that such charges offer advantages to customers. See 76 F.E.R.C. at 61,059 (citing Order No. 436, 50 Fed.Reg. 42,408 (1985)). But the Commission also recognizes that reservation charges tie customers to the pipeline, creating an incentive to use, the pipeline even if more efficient service can be obtained elsewhere. See 76 F.E.R.C. at 61,060. The Commission thus decided that it is best left to individual customers to “weigh whether the advantages of obtaining a firm right to service on the pipeline are worth the limits which the reservation charge will inevitably impose on the desirability of its switching to supplies on another system.” Id. Because Transco’s proposal denied conversion shippers an opportunity to make this cost-benefit analysis for themselves, the Commission rejected it.
The majority emphasizes that customers have already chosen firm service. See maj. op. at 53-54. But the question is not whether customers already elected “essentially firm” service. The question is whether they already elected two-part rates. It is uncontested that they did not. The majority also finds the Commission’s decision “especially odd” because it supposedly conflicts with Order 636’s principle against fixed costs in usage charges. See id. This takes Order 636 too far. The Commission there decided only that “[i\f a reservation fee is charged, it must recover all fixed costs attributable to the firm service.” 18 C.F.R. § 248.8(d) (emphasis added). To find that fixed costs could never be included in usage charges would require doing away with interruptible service (which is necessarily a one-part rate), something the Commission certainly did not intend. According to the majority, the Commission rejected as unjust and unreasonable a two-part rate that is the “predominant manner” of “firm service.” Maj. *55op. at 58. This forgets that the predominant manner of service overall is to allow customers to choose whether to pay a reservation charge and receive firm service or to reject the reservation charge and receive lower priority service. Indeed, the majority does not cite a single case (in either § 4 or § 5 proceedings) in which the Commission approved two-part rates when customers had not previously made the calculation that reservation charges would be advantageous.
I therefore dissent.