United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 25, 1998 Decided October 20, 1998
No. 97-1140
Northeast Energy Associates, et al.,
Petitioners
v.
Federal Energy Regulatory Commission,
Respondent
UGI Utilities, Inc., et al.,
Intervenors
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Charles H. Shoneman argued the cause for petitioners.
With him on the briefs was Betsy R. Carr.
David H. Coffman, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief were Jay L. Witkin, Solicitor, John H. Conway,
Deputy Solicitor, and Susan J. Court, Special Counsel. Ed-
ward S. Geldermann and Joel M. Cockrell, Attorneys, en-
tered appearances.
Michael J. Thompson, Jonathan L. Socolow and David A.
Glenn were on the brief for intervenor Transcontinental Gas
Pipe Line Corporation.
Before: Edwards, Chief Judge, Wald and Sentelle,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Wald.
Wald, Circuit Judge: Transcontinental Gas Pipe Line Cor-
poration ("Transco") transports natural gas through pipelines.
It proposed changing numerous rates it charges for this
service in a filing with the Federal Energy Regulatory Com-
mission ("FERC" or "Commission"). In total, Transco in-
creased its revenue under the proposal, but the filing called
for decreases in two rates applicable exclusively to petitioners
Northeast Energy Associates and North Jersey Energy As-
sociates ("Energy Associates"). FERC accepted the filing,
suspended the new rates for five months, and ordered a
hearing, rejecting Energy Associates' request that the de-
creased rates applicable to it be implemented promptly and
suspended for only one day. FERC denied Energy Associ-
ates' petition for rehearing repeating its request for a one day
suspension. Energy Associates now petitions for review of
that denial. Because FERC failed to explain adequately its
departure from past precedent and policy in suspending the
rate decreases for five months, we grant the petition and
remand to the agency to justify or remedy the departure.
I. Background
A natural gas pipeline operator must submit to FERC
proposed changes in the rates it charges. See 15 U.S.C.
s 717c(d). FERC determines whether the new rates are
"just and reasonable." See 15 U.S.C. s 717c(a). The Natural
Gas Act ("NGA") encourages quick action; absent a response
within thirty days, the pipeline can put the proposed rates
into effect. See id. FERC can accept the changes, allowing
them to go into effect on the date proposed by the pipeline (as
long as that date is at least thirty days after the proposal was
submitted).1 The Commission can also gain more time by
accepting but suspending the new rates for up to five months
and ordering a hearing. See 15 U.S.C. s 717c(e). While five
month suspensions are typical, shorter suspension periods are
frequently imposed when the maximum "may lead to harsh
and inequitable results." Columbia Gas Transmission Corp.,
82 F.E.R.C. p 61,301, at 62,200 (1998) (citing Valley Gas
Transmission, Inc., 12 F.E.R.C. p 61,197 (1980)). If FERC
does not render a decision by the end of a suspension period,
the pipeline can implement the new rates. See 15 U.S.C.
s 717c(e).
In a November 1, 1996, submission to FERC, Transco
proposed to change many of its rates effective December 1,
1996. Overall, the proposal called for an $83 million annual
increase in charges, but two rates--X-319 and X-320--actu-
ally decreased. X-319 and X-320 are incremental rates2 that
Transco charges for transporting natural gas to Energy
Associates' cogeneration plants in Massachusetts and New
Jersey. These incremental rates include a portion of Tran-
sco's systemwide administrative and general ("A&G") costs.3
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1 "[F]or good cause shown," FERC may allow changed rates to go
into effect sooner. 15 U.S.C. s 717c(d).
2Under incremental pricing the costs of particular facilities are
assigned to particular customers and recaptured by increasing
the rates charged to those customers. Under rolled-in pricing
the costs of the facilities are added to the pipeline's total rate
base and recaptured by an increase in the general rate charged
to all customers in proportion to the pipeline capacity they use.
TransCanada Pipelines Ltd. v. FERC, 24 F.3d 305, 307 n.1 (D.C.
Cir.1994). See also Tennessee Valley Mun. Gas Ass'n v. FERC,
140 F.3d 1085, 1087-88 (D.C. Cir. 1998).
3 The record, while not entirely clear, suggests that the A&G
costs include operation and maintenance ("O&M") and supervisory
and engineering ("S&E") components.
On November 13, Energy Associates asked FERC to ac-
cept the revised X-319 and X-320 rates and to suspend them
for only one day even if other rates in the same filing were
suspended for a longer period. See Joint Appendix ("J.A.")
at 80. This would allow Energy Associates to "immediately
enjoy the lower incremental rate[s]." Id. (emphasis in origi-
nal).
FERC accepted Transco's filing on November 29, but
suspended all of the changes for the full five months. See
Transcontinental Gas Pipe Line Corp., 77 F.E.R.C. p 61,235,
at 61,954 (1996) ("Transco I"). It responded to Energy
Associates' request directly by stating:
This tariff sheet is part of an overall rate case filing that
reflects increases and decreases in various costs. These
rate schedules appear to contain both direct and allocat-
ed costs and therefore, it is not clear that the shortened
suspension period would allow Transco to fully recover
its costs.
Id. at 61,953. Speaking to the entire filing, the Commission
added that a maximum length suspension would not produce
harsh and inequitable results in this case. Id. at 61,954.
Energy Associates requested rehearing, again asking for a
one day suspension for X-319 and X-320 so that it could
immediately benefit from the decreased rates. It informed
FERC that a five month delay in implementation would cost
it approximately $150,000.4 Energy Associates argued that
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4 The refund provision in the NGA does not protect Energy
Associates. When FERC suspends a rate change of any kind, it
typically attaches a refund condition to protect the pipeline's cus-
tomers if the agency has not completed its review by the end of the
suspension period. See 15 U.S.C. s 717c(e). Thus, if proposed
increases go into effect after the suspension period but are ulti-
mately found to be too high, the pipeline must refund its excessive
receipts. If the increases are ultimately approved, however, the
pipeline cannot collect from its customers the difference between
the new and old rates that it had to forego during the suspension
period. Conversely, if proposed decreases are suspended but ulti-
mately approved, the customer is not entitled to a refund of the
FERC's X-319 and X-320 suspension decision "departed
from applicable precedent, violated the intent of the NGA to
protect consumers, abused its discretion and failed to engage
in reasoned decisionmaking." J.A. at 93. The request relied
heavily on FERC's decision in Tennessee Gas Pipeline Co., 70
F.E.R.C. p 61,076 (1995) ("Tennessee I"), to suspend decreas-
es in incremental rates for one day while suspending increas-
es in the balance of the rates in the same filing for five
months. Because some rates were to be reduced in Tennes-
see I, FERC considered a full length suspension of all rates
harsh and inequitable. Id. at 61,202. Energy Associates
called Tennessee I's "fact situation virtually identical." J.A.
at 98.
FERC denied rehearing on February 3, 1997. It stated
that its earlier order "adequately addressed the issue raised
by the Energy Associates," Transcontinental Gas Pipe Line
Corp., 78 F.E.R.C. p 61,101, at 61,359 (1997), but added a new
rationale in a footnote: "In any event, Transco would be
under no obligation to move one portion of its rate filing into
effect in advance of the rest of the filing even if we were to
grant Energy Associates' request." Id. at n.7. The footnote
referred to two new procedural rules the Commission had
recently adopted, 18 C.F.R. s 154.7(a)(9) and 18 C.F.R.
s 154.206(b). Section 154.7(a)(9) requires a pipeline, when
filing rate changes, to include:
A motion, in case of minimal suspension, to place the
proposed rates into effect at the end of the suspension
period; or, a specific statement that the pipeline reserves
its right to file a later motion to place the proposed rates
into effect at the end of the suspension period.
When the pipeline "reserves its right" or by default, when it
does not follow either option, the rates do not go into effect at
the end of the suspension period until the pipeline does file a
motion.5 See 18 C.F.R. s 154.206(b); Filing and Reporting
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difference between the old and new rates during the suspension
period.
5 This rule was evidently adopted to bring Commission practices
into line with 15 U.S.C. s 717c(e), which states that, "[i]f the
Requirements for Interstate Natural Gas Company Rate
Schedules and Tariffs, 60 Fed. Reg. 52,960, 52,974 (1995)
("Order 582") (explanation of 18 C.F.R. s 154.206 accompany-
ing Final Rule). Transco's rate change proposal in this case
took the "reserves its right" course and included a statement
that "Transco will file a separate motion, in accordance with
... 18 C.F.R. s 154.206, to comply with the directives in the
suspension order...." J.A. at 7.
Energy Associates filed a timely petition for review asking
this court to order FERC to require retroactive implementa-
tion of the decreased X-319 and X-320 rates, without any
suspension, along with appropriate refunds to Energy Associ-
ates for the intervening period between Transco's proposed
effective date and the date the lower rates actually went into
effect.
II. Analysis
A.Standing
We begin with FERC's argument that Energy Associates
lack standing to challenge the five month suspension of the
X-319 and X-320 rates. Article III standing requires a
plaintiff to "demonstrate that he has suffered injury in fact,
that the injury is fairly traceable to the actions of the
defendant, and that the injury will likely be redressed by a
favorable decision." Bennett v. Spear, 117 S. Ct. 1154, 1161
(1997) (quotation marks and citations omitted). FERC con-
cedes, and we agree, that Energy Associates alleges an
injury, but argues that the second and third prongs--causa-
tion and redressability--are lacking. Because Energy Asso-
ciates only asked the Commission for a one day suspension
(as opposed to acceptance without any suspension), FERC
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proceeding has not been concluded and an order made at the
expiration of the suspension period, on motion of the natural-gas
company making the filing, the proposed change of rate ... shall go
into effect." See Filing and Reporting Requirements for Interstate
Natural Gas Company Rate Schedules and Tariffs, 60 Fed. Reg.
52,960, 52,974 (1995). Previously, rates suspended for a minimal
period would take effect without a motion.
explains that had the request been granted the s 154.7(a)(9)
and s 154.206(b) motion rule would have prevented the de-
creases from taking effect without a motion by Transco. The
Commission contends that Transco would not have filed such
a motion while the increases remained suspended for five
months.6 Thus, even if FERC had given Energy Associates
what it asked for, Energy Associates would not have gotten
its lower rates, so that FERC's action was not the cause of its
injury.
FERC overlooks some important points, however. Al-
though Energy Associates' specific request was for a one day
rather than no suspension, its desire for immediate implemen-
tation of the decreased rates was manifest at all times, see
J.A. at 80, 91, and FERC clearly could have effectuated this
result by accepting the X-319 and X-320 rates without sus-
pension, thus obviating the need for any motion by Transco
under its new rules. Indeed, this was the Commission's
professed policy for handling most rate decrease proposals.
See Filing and Reporting Requirements for Interstate Natu-
ral Gas Company Rate Schedules and Tariffs Final Rule;
Order on Rehearing, 61 Fed. Reg. 9613, 9616 (1996) ("Order
582-A"). Thus FERC can be said to have caused Energy
Associates' injury by refusing to follow its regular practice in
not suspending a decrease in rates. As to redressability, we
are concerned primarily with Energy Associates' contention,
raised in the request for rehearing and before this court, that
FERC departed from past precedent and policy in suspend-
ing the decreases. If we find that FERC so departed without
adequate explanation, remand to the Commission is an appro-
priate remedy. On remand FERC might determine that
precedent and policy dictate acceptance of the decreases
without suspension. This possibility, though not a certainty,
is sufficient to meet the redressability requirement. See
Motor & Equip. Mfrs. Ass'n v. Nichols, 142 F.3d 449, 457-58
(D.C. Cir. 1998) (redressability satisfied because court's deci-
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6 Transco intervened and informed the court that, consistent
with FERC's position, it would not have filed a motion to put the
decreases into effect while the increases were suspended.
sion to vacate EPA rule would give petitioner opportunity for
favorable outcome in new rulemaking); see also Community
Nutrition Inst. v. Block, 698 F.2d 1239, 1249 (D.C. Cir. 1983)
("redressability element ... does not prevent a court from
hearing a case which may ultimately be unsuccessful"), rev'd
on other grounds, 467 U.S. 340 (1984). Energy Associates
therefore meets the three standing requirements. The high-
er rates it paid during the five month suspension constitute
an injury traceable to FERC's actions that a favorable deci-
sion from this court may redress.
B.Consistency with Agency Precedent and Policy
FERC must always give reasons for suspending proposed
rate changes. See 15 U.S.C. s 717c(e). We review suspen-
sion decisions to determine whether the reasons given are "in
some way [ ] related to FERC's interim or ultimate inqui-
ries." Exxon Pipeline Co. v. United States, 725 F.2d 1467,
1473 (D.C. Cir. 1984).7 Even if this test is satisfied, however,
"remand ... for further articulation of reasons" is appropri-
ate if FERC "impos[es] two different suspension lengths in
cases that [a]re absolutely indistinguishable, and ... fail[s] to
offer even summary reasons to explain the difference." Id. at
1474; cf. Bush-Quayle '92 Primary Comm. v. FEC, 104 F.3d
448, 453 (D.C. Cir. 1997) (" 'an agency changing its course
must supply a reasoned analysis indicating that prior policies
and standards are being deliberately changed, not casually
ignored, and if an agency glosses over or swerves from prior
precedents without discussion it may cross the line from the
tolerably terse to the intolerably mute' " (quoting Greater
Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir.
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7 Although Exxon involved FERC's suspension of oil pipeline
rates under the Interstate Commerce Act, the case provides an
appropriate framework for reviewing FERC's suspension decision
here. The statutory provision considered in Exxon is identical in
all relevant respects to the Natural Gas Act's suspension provision.
Compare 15 U.S.C. app. s 15(7) (Interstate Commerce Act) with 15
U.S.C. s 717c(e) (Natural Gas Act). Exxon itself noted that in
construing statutes with virtually identical suspension provisions the
case law applying either is applicable to the other. See Exxon
Pipeline Co., 725 F.2d at 1470 & n.9.
1970)). Energy Associates argue that FERC's decision runs
afoul of this second test because the Commission departed
without explanation from the principles laid down in Tennes-
see I and the precedential effect of the later decision in the
same case affirming the suspension order, Tennessee Gas
Pipeline Co., 71 F.E.R.C. p 61,399 (1995) ("Tennessee II").8
As noted above, in Tennessee I FERC suspended incremental
rates proposed for decrease for one day and other rate
increases in the same filing for five months.9
As Energy Associates claim, the relevant facts addressed
by FERC in its Tennessee opinions appear comparable to
those in this case. Both rate filings involved numerous
individual rate changes and a net increase in revenue for the
pipeline. Like Transco's, Tennessee's filing also decreased
certain incremental rates (the NET/T-180 rates). The X-319
and X-320 rates include some allocated costs; although not
explicitly discussed in Tennessee I or II, a third opinion
issued eight months later makes clear that the NET/T-180
rates included a proportionally allocated share of systemwide
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8 We reject FERC's contention on appeal that there was no
need to distinguish Tennessee I and II in Transco I and the denial
of rehearing because the Tennessee decisions have no precedential
weight. FERC points out that it obtained a voluntary remand after
Tennessee II was appealed to this court but before the appeal was
heard. At approximately the same time, it promulgated the new
motion filing rule which it admits is in conflict with one aspect of its
Tennessee II ruling, i.e., that FERC can order a pipeline to
implement promptly a rate change after a minimal suspension
period without a motion. The new rule, however, only affects the
precedential significance of that one aspect of Tennessee II. The
remainder of Tennessee II has not been withdrawn or vacated and
FERC itself has recently cited Tennessee II. See Panhandle
Eastern Pipe Line Co., 82 F.E.R.C. p 61,163, at 61,602 n.28 (1998).
9 Treating different rates within a single filing differently for
suspension purposes is not by any means unique to Tennessee I and
II. See Columbia Gulf Transmission Co., 77 F.E.R.C. p 61,225
(1996); Colorado Interstate Gas Co., 75 F.E.R.C. p 61,090 (1996);
Green Mountain Power Corp., 59 F.E.R.C. p 61,213 (1992).
O&M and A&G costs. See Tennessee Gas Pipeline Co., 74
F.E.R.C. p 61,174, at 61,608-09 (1996).
Despite these similarities, FERC stated that suspending
Tennessee's decreased rates for five months would be harsh
and inequitable, but reached the opposite conclusion here and
upheld the five month suspension for the X-319 and X-320
rates. Contrary to Exxon's requirement that it explain the
different outcomes, FERC did not mention Tennessee I or II
at all.
The three reasons FERC did give in Transco I for denying
Energy Associates' request--the decreased rates were "part
of an overall rate case filing that reflects increases and
decreases in various costs," "it is not clear that the shortened
suspension period would allow Transco to fully recover its
costs," and the decreased rates "appear to contain both direct
and allocated costs"--also fall short of satisfying Exxon.
Each reason refers to facts that appear to be identical in the
Tennessee I and II filing. Moreover, the first two reasons
were explicitly considered and rejected in Tennessee II. The
pipeline in Tennessee II argued that isolating the NET/T-180
rates was improper because they were part of an "integrated
package." Tennessee II, 71 F.E.R.C. at 62,583. FERC
responded:
In a rate filing in which many revised tariff pages and
rate schedules are filed, the Commission may accept
some revised tariff sheets as filed, suspend some sheets,
and reject others. The Commission has never consid-
ered itself bound to accept, suspend, or reject as a single
package all the individual tariff sheets that compose a
rate filing.
Id. at 62,584 (footnote omitted). The pipeline also argued
that putting the decreases into effect five months before the
increases could cost it $1.5 million. See id. at 62,585. FERC
noted the relative insignificance of this amount in the context
of a proposal with an $820 million cost of service.10 See id.
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10 The numbers in this case demonstrate that the impact on
Transco is even smaller. Over five months, the decrease represents
The Commission further explained that under the NGA a
pipeline bears the risk that rate changes will take effect at
different points, see id., and that the alternative would force
"the customers with the rate decrease ... to pay the higher,
unsupported rates for at least five months, and possibly
longer, with no possibility of refunds." Id. at 62,585-86. The
third reason (direct and allocated costs), while not explicitly
considered in Tennessee I or II, appears inconsistent with
FERC's response to a similar argument in Tennessee II.
The pipeline there asserted that the decrease in the NET/T-
180 rates was attributable to a shift of certain costs from
those rates to others slated to be raised.11 See id. at 62,585.
The decreased and increased rates were therefore partially
linked because, if the Commission ultimately found that the
shifted costs did not belong in the increased rates, those costs
would likely be returned to the NET/T-180 rates. Similarly,
if FERC determines that Transco's proposal places too great
a share of the systemwide costs in the increased rates, the
decreased rates could ultimately go up. Yet FERC did not
consider this possibility sufficient to require identical suspen-
sion periods in Tennessee II. It is hard then to see why the
presence of some unspecified allocated costs in the X-319 and
X-320 incremental rates justifies a different conclusion.
The adequacy of the additional reason given by the Com-
mission for suspending X-319 and X-320 for five months in
the order on rehearing in this case requires further explora-
tion of FERC's new motion filing rule. Before the new rule
came into being, whenever FERC suspended a proposed rate
for a nominal period such as one day, it typically ordered the
pipeline to put the new rate into effect promptly thereafter;
no motion was required. See id. at 62,586-87. Decreases
were "usually given a minimal, or momentary suspension."
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a savings to Energy Associates of approximately $150,000 and the
cost of service for the entire rate filing is $793,104,220. J.A. at 2.
11 Although FERC was not convinced of the accuracy of this
claim, it responded as if it were true. See Tennessee II, 71
F.E.R.C. at 62,585 & n.31.
Id. at 62,584. These norms reflected FERC's policy, followed
in Tennessee II, of assuring prompt implementation of rate
decreases.
The new motion rule, however, makes it difficult if not
impossible for the Commission to maintain that norm because
a pipeline can delay implementation after the briefest of
suspensions in the case of rate decreases simply by withhold-
ing the required motion. Yet in promulgating the motion
rule FERC reiterated that the prompt implementation policy
for decreases remained intact. Speaking to the new rule (and
other changes), the Commission stated that it was "not chang-
ing its substantive rate policies in this rulemaking, but rather
bringing its filing requirements and procedures up to date to
match its current substantive policies." Order 582, 60 Fed.
Reg. at 52,962. FERC also spoke directly to the concern that
a pipeline could block prompt implementation of a decrease:
Usually the Commission accepts a proposed rate de-
crease without suspension. Where the Commission does
not suspend the effective date of a proposed decrease, a
... motion is not required and the proposed decrease
goes into effect on the date proposed by the pipeline in
its filing. However, it may be appropriate, under certain
circumstances to suspend a rate decrease and in such
instances a motion to place the rates into effect would be
required; for example, where it may not be clear initially
if it is a rate decrease due to pancaked cases.
Order 582-A, 61 Fed. Reg. at 9616.12 This latter statement in
particular reveals FERC's awareness of the problem created
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12 "Pancaked cases" describes the situation where multiple pro-
posals to change a rate are simultaneously pending before FERC.
What appears to be a decrease may turn out to be an increase if a
previously proposed larger decrease is subsequently granted. For
example, a pipeline charging a rate of one dollar might propose a
decrease to eighty cents. Months later the one dollar rate might
still be in effect if FERC has not determined whether the eighty
cents proposal is "just and reasonable." At that point, the pipeline
might propose a rate of ninety cents, an apparent decrease from the
current rate. If the eighty cents rate is later approved, however,
by the motion rule and its decision to work around it by
accepting decreases without suspension in ordinary cases.
When the rule was challenged on appeal FERC also told this
court that "there is no reason for assuming that the Commis-
sion will depart from its policy of attempting to place de-
creased rates into effect promptly." Br. for Resp't at 19,
JMC Power Projects v. FERC, No. 96-1225, 1997 WL 358188
(D.C. Cir. May 15, 1997) (unpublished disposition) (Addendum
to Initial Br. of Pet'rs).
Given these assurances, FERC is not in a position to rely
on the new motion rule as a principle reason for suspending
the X-319 and X-320 rates for five months without some
further explanation of the rule's impact on its previous sub-
stantive policy as to suspensions of rate decreases. Like the
three prior reasons offered in Transco I, the fourth reason
given on the denial of rehearing does not satisfy Exxon's
requirement that the Commission justify any decision to treat
Transco's rate change filing differently from similar proposals
in Tennessee I and II and other cases, and is inconsistent
with its pronouncements on the purpose and effect of its new
motion rule.
III. Conclusion
The decision to suspend the X-319 and X-320 rate decreas-
es for five months appears to be a departure from precedent
and policy that the Commission has not yet adequately ex-
plained. We therefore grant the petition and remand the
suspension order as to X-319 and X-320 so that FERC may
justify or remedy the departure.
So ordered.
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the ninety cents proposal becomes an increase. FERC has not
suggested here that the X-319 and X-320 proposals could turn out
to be increases.