Rate Regulation: Natural Gas Pipelines Administrative Law: Scope of Judicial Review

摘要

Transcontinental Gas Pipe Line Corp. (Transco) operates a pipeline from the production areas in the Gulf of Mexico to the environs of New York City. The pipeline is divided into 6 zones, three upstream in the Gulf area and three in the downstream consumer area. As a result of Order No. 636 in 1992, Transco develops a firm transportation service for its consumers. That service tariff is divided into two parts, an initial reservation charge to guarantee that capacity would be available and a usage charge. The FERC requires pipelines to recover the fixed costs of firm transportation service through the reservation charge. Most pipeline companies respond to Order No. 636 by offering "firm to the wellhead" (FTW) service that includes charges for bom supply lateral lines and the mainline. Transco, however, charges two-part FT rates for transporting gas on the mainline but imposes a one-part rate based on actual volumes transported on the lateral lines. Transco seeks FERC approval for various changes to its rate structure. FERC rejects an initial proposal because it would modify the Transco contract with its existing shippers. Upon appeal, the issue is remanded back to the FERC to see if the proposed changes would be acceptable. Exxon Corp. v. Federal Energy Regulatory Commission, 206 F.3d 47 (DC. Cir. 2000). The FERC then again rejects the Transco proposal. After a second round of judicial review, the case is again remanded to the FERC because of a potential conflict with its ruling and prior rulings. Exxon Mobil Corp. v. Federal Energy Regulatory Commission, 315 E3d 306, 156 O.&G.R. 393 (DC. Cir. 2003). The FERC men issues a third order that also rejects both of the proffered Transco plans. This third round of judicial review ensues. The scope of judicial review of FERC ratemaking orders is deferential under the arbitrary, capricious and abuse of discretion standard. That deference is especially appropriate where a complex issue involving a matter within the expertise of the FERC is raised, Given that deferential scope of review and the FERC's reasoned explanation for its decision, the court affirms that decision.