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07/25/89 Trunkline Gas Company, v. Federal Energy Regulatory

July 25, 1989

TRUNKLINE GAS COMPANY, PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT, MICHIGAN CONSOLIDATED GAS COMPANY, CONSUMERS POWER COMPANY, MISSISSIPPI RIVER TRANSMISSION CORPORATION, COLUMBIA GAS



Before addressing these matters, we dispose of a contention that the Commission itself believes requires a remand. FERC made its decision retroactive to May 1, 1987. The company argues that this aspect of the order violates the proper relationship between § 4 and § 5 of the Natural Gas Act, 15 U.S.C. §§ 717c, 717d (1982). Our intervening decision in East Tennessee, 863 F.2d at 941-45, makes clear that such a retroactive elimination could conform to §§ 4 and 5 only under narrow circumstances. The Commission asks for a remand for it to consider the possibility that such circumstances exist here. Without suggesting that they do, we remand for the Commission to explore the issue.

UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT

TRANSMISSION CORPORATION, INDIANA GAS COMPANY, INC.,

PANHANDLE EASTERN PIPE LINE COMPANY, GENERAL SERVICE

CUSTOMER GROUP, MICHIGAN GAS UTILITIES COMPANY, Intervenors 1989.CDC.256

Petition for Review of an Order of the Federal Energy Regulatory Commission.

APPELLATE PANEL:

Mikva and Williams, Circuit Judges, and Will,* Senior District Judge. Opinion for the Court filed by Circuit Judge Williams.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WILLIAMS

Trunkline Gas Company contests FERC's deletion of its minimum bill. In support of its action, the Commission cites several recent decisions of this court approving its efforts to eliminate most minimum bills as being anticompetitive and unjust. See, for example, East Tennessee Natural Gas Company v. FERC, 274 U.S. App. D.C. 243, 863 F.2d 932 (D.C. Cir. 1988); Tennessee Gas Pipeline Company v. FERC, 276 U.S. App. D.C. 359, 871 F.2d 1099 (D.C. Cir. 1989). Trunkline asserts, however, that certain elements of this case distinguish it from our precedents. First, it argues that its price disadvantage compared to the spot market, together with its customers' decisions to purchase gas primarily from others, demonstrate that its minimum bill is in fact not anticompetitive. Second, it contends that the combination of FERC's elimination of its minimum bill and its prior rulings -- shifting from Trunkline's demand charge to its commodity charge both its take-or-pay expenses and its minimum bill payments to Trunkline LNG Company (Trunkline Gas's supplier of liquified natural gas) -- effectively denies it the assurance it deserves of recovering these fixed costs. Finally, Trunkline asserts that deletion of its minimum bill will deny its investors reasonable assurance of the company's creditworthiness.

BACKGROUND

The current bout between Trunkline and FERC began with Trunkline's filing on October 31, 1986 of an application under § 4 to increase its rates. Trunkline's proposed tariff included provisions for a minimum bill:

Minimum Annual Bill : The minimum annual bill shall consist of the sum of the following amounts:

The sum of the monthly demand charges for the year.

A minimum volume charge for the year equal to the product of 75% of the Maximum Daily Contract Quantity and 365 (366 in leap year), multiplied by the Commodity Charge per Dt, less Gas Cost and Variable Cost Components, as set forth on Sheet No. 3-A.

Trunkline Gas Co., 40 FERC P. 63,033, at 65,145 (1987). Thus it included neither the purchased gas costs that the Commission had deleted from minimum bills effective on adoption of Order No. 380,*fn1 nor its other variable costs, which the Commission had ordered be excluded ...


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