Federal Power Commission v. Texaco Inc.

Summary

The Supreme Court considered the validity of Federal Power Commission Order No. 428, which established a blanket certificate procedure and indirect regulation of rates charged by small natural-gas producers. The Court held that indirect regulation was permissible under the Natural Gas Act, but that the order could not stand because it was ambiguous and failed clearly to ensure compliance with the statutory just-and-reasonable-rate requirement. The Court remanded the cases for further proceedings and emphasized that prevailing market prices could not serve as the exclusive measure of just and reasonable rates.

Holdings

1. The Natural Gas Act does not require the Commission to fix small-producer rates through orders directly addressed to the producers and does not prohibit indirect regulation through review of pipeline and large-producer purchased-gas costs.
2. The Commission may not exempt small-producer rates from the Natural Gas Act's requirement that all rates be just and reasonable.
3. Order No. 428 could not stand in its existing form because it was too ambiguous to demonstrate that the Commission would ensure just and reasonable rates and failed to provide the clarity required for judicial review.
4. The prevailing market price cannot be the exclusive or final measure of just and reasonable rates under the Natural Gas Act, although market price may be considered together with other relevant factors.

Questions Presented

1. Whether the Natural Gas Act permits the Federal Power Commission to regulate small-producer natural-gas rates indirectly through review of the purchased-gas costs of pipelines and large producers.
2. Whether the Natural Gas Act permits the Commission to exempt small-producer rates from the statutory requirement that all rates be just and reasonable.
3. Whether Order No. 428 adequately established and disclosed a mechanism for ensuring that small-producer rates would be just and reasonable.
4. Whether prevailing market prices may serve as the exclusive measure of just and reasonable rates under the Natural Gas Act.

Disposition

vacated_and_remanded