Summary
The United States Court of Appeals for the Tenth Circuit upheld Federal Energy Regulatory Commission orders concerning Colorado Interstate Gas Company’s minimum commodity bill in a rate increase proceeding under § 4 of the Natural Gas Act. The court held that the Commission could retroactively modify the minimum bill and could reject the company’s compliance filing because it improperly allowed recovery of fixed costs at the higher H-1 rate.
Topics
Practice areas
Questions Presented
- Whether FERC had authority under section 4 of the Natural Gas Act to review and retroactively modify a minimum commodity bill that CIG had not proposed to change.
- Whether the section 4 suspension and refund authority applied to an identical minimum-bill provision in a later service agreement accepted under section 7 of the Natural Gas Act.
- Whether CIG's challenge to the scope of FERC's modification order was waived because it was not raised in CIG's application for rehearing.
- Whether FERC reasonably interpreted its modification order to prohibit CIG from recovering fixed costs under the higher H-1 rate in its compliance filing.
Holdings
- When a natural gas company files new rates under section 4, FERC may scrutinize integral provisions of the company's overall rate structure, including a minimum commodity bill that the company did not propose to change.
- FERC may retroactively modify an integral rate provision under section 4 when the rate increase was suspended subject to refund.
- A later service agreement containing an identical minimum-bill provision did not eliminate the suspension order or preclude FERC from exercising its section 4 refund power.
- CIG's failure to challenge the scope of the modification order in its application for rehearing did not waive judicial review because the Commission's ambiguous order did not reveal that CIG was aggrieved until the compliance filing was rejected.
- FERC reasonably interpreted its modification order to prohibit CIG from assessing H-1 deficiencies at the higher H-1 rate, and the rejection of CIG's compliance filing was within FERC's authority.
Key quotations
“By filing the rate increase, a gas company assumes the risk of having to justify its entire rate structure” (807)
“The sections 4 and 7 proceedings CIG initiated were independent.” (809)
“The Commission acted within its authority in rejecting CIG's compliance filing.” (811)
Factual background
CIG sold interstate natural gas to Natural Gas Pipeline Company of America under service agreements containing a minimum commodity bill requiring Natural to take or pay for 90 percent of its contractual entitlement. Deficiency charges under both the F-1 and H-1 schedules were assessed at the lower F-1 rate, and Natural later purchased less than 90 percent of its entitlement. During CIG's section 4 rate-increase proceeding, the Commission found the minimum bill unjust and unreasonable, ordered it modified retroactively to eliminate recovery of variable costs, and rejected CIG's compliance filing insofar as it sought to assess H-1 deficiencies at the higher H-1 rate.
Procedural history
CIG initiated a general rate-increase proceeding under section 4 of the Natural Gas Act. The Commission approved part of a settlement, severed the minimum-bill issue, later found the existing minimum bill unjust and unreasonable, ordered a retroactive modification, denied rehearing, and rejected CIG's revised compliance filing. CIG sought review in the Tenth Circuit, which consolidated the appeals and affirmed.