Narrative Opinion Summary
The consolidated cases of Trunkline LNG Company v. Federal Energy Regulatory Commission (FERC) and Panhandle Customer Group v. FERC involve challenges to FERC's decisions on the prudence of Trunkline's LNG import contract amendment and various accounting matters. The Panhandle Customer Group disputed FERC's failure to rule on the contract amendment's prudence, leading the court to remand the issue for further consideration. Trunkline's appeal on multiple accounting rulings related to its rate base was denied. The case background includes Trunkline's 1973 agreement to import LNG from Algeria, with subsequent amendments due to delivery issues. Trunkline's contract amendment led to disputes over rising Algerian gas prices, prompting regulatory and judicial reviews. FERC's jurisdiction over the contract amendment was contested, with the court emphasizing agency jurisdiction determinations. Accounting disputes involved the inclusion of construction financing costs, deferred taxes, cash working capital, and stored LNG in the rate base. FERC's decisions on these matters were largely upheld, with the court deferring to FERC's expertise and rationale. The ruling also addressed the imprudence of Trunkline's payments to Lachmar Shipping, emphasizing the lack of contractual mechanisms for recouping overpayments. The court affirmed FERC's decisions, requiring refunds to ratepayers for certain costs, and remanded the prudence issue of the contract amendment back to FERC for further proceedings.
Legal Issues Addressed
Allowance for Funds Used During Constructionsubscribe to see similar legal issues
Application: FERC's determination that Trunkline could not capitalize construction financing costs beyond the facility’s readiness date was upheld, as Trunkline bore the risk of delays linked to Algerian non-performance.
Reasoning: FERC rejected both arguments, asserting that Trunkline bore the risk of project delays linked to Algerian non-performance, which justified not allowing AFUDC inclusion beyond the facility's readiness date.
Cash Working Capital and Expense Lag Calculationssubscribe to see similar legal issues
Application: FERC's calculation of the expense lag in determining cash working capital was upheld, emphasizing the timing from receiving gas to payment rather than from sale to payment.
Reasoning: FERC disagrees, arguing that the calculation should start from when Trunkline receives gas from suppliers to when it pays for it, resulting in an expense lag of 22.32 days.
Deferred Taxes and Ratepayer Benefitssubscribe to see similar legal issues
Application: FERC ruled that the rate base should include the time value benefit of deferred taxes, ensuring ratepayers receive the full tax benefit from the construction costs reflected in gas prices.
Reasoning: Both parties agree that the ratepayers are entitled to a reduction in the rate base for deferred taxes, which is the difference between taxes paid and what would have been paid under depreciation.
Imprudence of Shipping Paymentssubscribe to see similar legal issues
Application: FERC's determination that Trunkline's payment to Lachmar Shipping was imprudent and should not be borne by ratepayers was upheld due to the lack of a mechanism to recoup overpayments.
Reasoning: The Federal Energy Regulatory Commission (FERC) determined that Trunkline's payment was imprudent, stating that ratepayers should not bear the $14.5 million loss.
Jurisdiction Over Import Authorizationsubscribe to see similar legal issues
Application: The court addressed whether FERC had jurisdiction to review Amendment No. 1 after ERA's decision; it concluded that Trunkline failed to justify deviation from the established principle that agencies should first determine their jurisdiction.
Reasoning: Trunkline argues that the Energy Regulatory Administration (ERA) implicitly determined the prudence of Amendment No. 1 by not revoking its import authorization, claiming that any reevaluation by the Federal Energy Regulatory Commission (FERC) would exceed its jurisdiction.
Prudence Review of Contract Amendmentssubscribe to see similar legal issues
Application: The prudence of Trunkline LNG's contract amendment for importing LNG was challenged and the court remanded this issue back to FERC for further consideration.
Reasoning: The Panhandle Customer Group, representing natural gas distribution companies, contends that FERC should have ruled on the prudence of the contract amendment. The court remands this issue back to FERC for further consideration.
Rate Base Adjustments and Accounting Practicessubscribe to see similar legal issues
Application: FERC's broad authority in rate-setting was upheld, with the court emphasizing that Trunkline had not demonstrated that the accounting rulings resulted in an unjust or unreasonable rate base.
Reasoning: Trunkline is also seeking review of six FERC accounting rulings related to its rate base for selling imported gas. The court emphasizes that FERC has broad authority in rate-setting, only needing to ensure rates are 'just and reasonable.'
Rate Base Inclusion for Stored LNGsubscribe to see similar legal issues
Application: FERC's decision to exclude certain storage costs from the rate base due to insufficient evidence of necessity for cryogenic purposes was upheld, requiring refunds to ratepayers.
Reasoning: Consequently, FERC concluded that Trunkline failed to demonstrate a requirement for holding any gas, resulting in a directive for refunds to ratepayers.