Narrative Opinion Summary
In this case, Williston Basin Interstate Pipeline Company sought to capitalize on surplus working gas following the natural gas industry's restructuring under FERC Order No. 636. Initially allowed to sell the gas at market prices, Williston was later mandated by FERC to sell the surplus gas to former customers at cost. This decision was anchored in the principle that benefits from corporate realignments, including surplus storage gas, should be shared with customers who historically bore operational burdens. The Commission's ruling was consistent with precedents from ANR Pipeline Co. and Panhandle Eastern Pipe Line Co., reinforcing that storage-related losses and gains should be borne by customers, not pipeline investors. Williston's attempts to differentiate its case were unpersuasive, as FERC's decision adhered to established regulatory principles and Order No. 636's framework. Despite Williston's arguments against the fairness of this allocation, the Commission maintained its position that customers should benefit from any transition gains, reflecting a symmetrical approach to risk and reward. The petition for review was denied, affirming FERC's authority and the rationale behind customer benefit allocation in the context of industry restructuring.
Legal Issues Addressed
Allocation of Gains and Lossessubscribe to see similar legal issues
Application: The decision underscores the principle that customers who bear the risks of industry changes should also benefit from gains, reinforcing a symmetrical approach to risk and reward in utility management.
Reasoning: A system allowing utilities to benefit from good outcomes while customers bear the risks of losses creates adverse incentives for utility management. Therefore, if customers are expected to absorb losses from industry changes, they should also be entitled to benefits from any gains realized.
Customer Entitlement to Benefits from Corporate Realignmentssubscribe to see similar legal issues
Application: The Commission's decision was supported by a previous settlement agreement underscoring that customers should profit from corporate realignments.
Reasoning: The Commission's decision was also aligned with a 1985 settlement agreement affirming that customers should profit from corporate realignments, particularly in cases of reduced storage volumes.
FERC Authority under Order No. 636subscribe to see similar legal issues
Application: FERC required Williston to sell its surplus working gas to former customers at cost, aligning with Order No. 636's principles of customer benefit sharing.
Reasoning: Ultimately, FERC required Williston to sell the gas to its former customers at cost, referencing previous cases where customers had to absorb losses from high-priced gas and emphasizing the importance of sharing benefits with customers who had historically borne utility operation burdens.
Precedent and Consistency in Regulatory Decisionssubscribe to see similar legal issues
Application: FERC's decision relied on precedents from similar cases, emphasizing consistent regulatory treatment of storage gas profits and losses.
Reasoning: Precedents from ANR Pipeline Co. and Panhandle Eastern Pipe Line Co. support this allocation, emphasizing that losses should not fall on pipeline investors. If a pipeline cannot recover costs from storage customers, it may include these costs as transition costs under specific eligibility and prudence criteria.