Narrative Opinion Summary
This case involves Orange and Rockland Utilities' challenge to two aspects of the Federal Energy Regulatory Commission's (FERC) decisions regarding Tennessee Gas Pipeline Company's 1982 rate filing. The main legal issue centers around FERC's affirmation of a '100% load factor rate' for interruptible gas sales, which the Commission upheld to prevent cost-shifting to firm customers. Tennessee Gas Pipeline's proposal to lower rates for interruptible sales was rejected due to insufficient evidence of competitive necessity and potential adverse impacts on firm customers. The burden of proof for justifying rate changes was placed on Tennessee, which failed to provide adequate evidence. Additionally, the case examined the allocation of transmission costs, particularly higher rates imposed on storage service customers. The Commission's decision was ultimately affirmed regarding interruptible sales rates but remanded for further consideration on the treatment of storage costs due to insufficient clarity in their rationale. The court's decision reflects a cautious approach to rate setting and cost allocation in gas transmission, emphasizing the importance of equitable cost distribution among different types of service customers.
Legal Issues Addressed
Burden of Proof in Rate Changessubscribe to see similar legal issues
Application: Tennessee Gas Pipeline Company had the burden to demonstrate the necessity of a proposed rate reduction to avoid cost-shifting, which they failed to meet.
Reasoning: The Commission maintained that the burden of proof lies with the pipeline proposing a rate change, even if it is a reduction, due to the risk of cost-shifting to firm customers.
Cost Allocation for Storage Servicessubscribe to see similar legal issues
Application: The Commission accepted the allocation of higher transmission costs to storage service customers due to peak period usage, despite potential double charges.
Reasoning: Regarding the transmission of gas from storage to delivery, storage service customers pay a higher unit rate for transportation than firm service CD customers during peak periods.
Judicial Review and Remandsubscribe to see similar legal issues
Application: The court remanded the case for further consideration of storage cost allocation, citing a lack of clarity in the Commission's decision-making process.
Reasoning: The Commission's rationale lacks clarity, leading to confusion among judges regarding its decision-making process.
Policy on Fixed Cost Allocationsubscribe to see similar legal issues
Application: The Commission's decision reflects its policy that interruptible services should contribute to fixed costs, despite different treatment of electricity generation costs.
Reasoning: The Commission maintained that interruptible service should contribute to fixed costs since it utilizes facilities for which these costs were incurred.
Rate Setting for Interruptible Gas Salessubscribe to see similar legal issues
Application: The Federal Energy Regulatory Commission (FERC) upheld the requirement for a '100% load factor rate' for interruptible sales, maintaining that lower rates would improperly shift costs to firm customers.
Reasoning: The Commission's requirement for a '100% load factor rate' for interruptible sales is upheld.