[Federal Register Volume 62, Number 101 (Tuesday, May 27, 1997)]
[Notices]
[Pages 28692-28694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13789]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. IN97-1-000]
Questar Pipeline Company; Order Instituting Proceeding
Issued May 9, 1997.
Before Commissioners: Elizabeth Anne Moler, Chair; Vicky A.
Bailey, James J. Hoecker, William L. Massey, and Donald F. Santa,
Jr.
After completing a preliminary investigation under the Commission's
Rules Relating to Investigations, 18 CFR Part 1b, the Enforcement
Section, Office of the General Counsel (Enforcement), has reported to
the Commission that from November 1, 1988 through September 30, 1992,
Questar Pipeline Company (Questar) may have collected gathering rates
from Mountain Fuel Supply Company (Mountain Fuel) that violate section
4(d) of the Natural Gas Act (NGA), 15 U.S.C. Sec. 717c(d) (1994), and
Questar's Federal Energy Regulatory Commission (FERC) tariff. The
instant order establishes a proceeding, pursuant to sections 4, 5 and
16 of the NGA, 15 U.S.C. Secs. 717c, 717d and 717o (1994).
As discussed below, the Commission is ordering Questar to show: (a)
Why it has not violated section 4(d) of the NGA and its FERC tariff as
a result of its gathering charges to Mountain Fuel from November 1,
1988 through September 30, 1992; and (b) why it should not refund (with
interest running through the refund date) the portion of those
gathering charges that exceeded the one-part gathering rates contained
in the revisions to Sheet No. 8, Volume 3, of Questar's tariff that
were in effect during that period.
A. Background
For a period including November 1, 1988 through September 30, 1992,
Questar was an interstate pipeline engaged in the transportation and
sale of natural gas in interstate commerce, and was located in Salt
Lake City, Utah. Mountain Fuel was a local distribution company also
located in Salt Lake City. Questar and Mountain Fuel were corporate
affiliates.
Questar gathered and transported gas for Mountain Fuel. Volume No.
3 of Questar's FERC tariff contained Rate Schedule No. X-33 (RS X-33),
which governed Questar's transportation for Mountain Fuel, and Sheet
No. 8, which governed the transportation rates Questar charged under RS
X-33. Questar periodically filed revisions to Sheet No. 8 with the
Commission.
On September 9, 1988, Questar filed two tariff sheets with the
Commission that included gathering rates. One of these was Tenth
Revised Sheet No. 8, which set out a gathering rate of $0.28941 per
decatherm (Dth), to become effective November 1, 1988. The Commission
accepted these sheets for filing on December 1, 1988. 45 FERC para.
61,447 (1988).
On April 17, 1989, Questar filed an offer of settlement in Docket
No. RP88-93. Questar's offer included Substitute Tenth and Eleventh
Revised Sheets No. 8, effective November 1, 1988 and January 1, 1989,
respectively, both of which contained a gathering rate of $0.23095/Dth.
On October 6, 1989, the Commission approved Questar's settlement offer
in Docket No. RP88-93, with modifications not relevant here. 49 FERC
para. 61,018 (1989).\1\ The settlement gathering rate of $0.23095/Dth
remained in effect through October 1991.
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\1\ All citations to the FERC Reports are captioned Questar
Pipeline Co. unless otherwise indicated.
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On July 24, 1992, Questar submitted a settlement offer in Docket
No. RP91-140. The settlement offer included Third Substitute Seventh
Revised Sheet No. 8 and Second Substitute Eighth Revised Sheet No. 8,
effective November 1, 1991 and January 1, 1992, respectively, both of
which included a ``one-part'' (commodity only, as opposed to demand and
commodity) gathering rate of $0.18296/Dth. The offer also included
Ninth Revised Sheet No. 8, effective October 1, 1992, which contained a
one-part gathering rate of $0.32693/Dth.\2\ The Utah Division of Public
Utilities (UDPU), which regulated Mountain Fuel's retail rates in Utah,
intervened in this docket and filed comments supporting the settlement.
On November 3, 1992, the Commission approved the settlement. 61 FERC
para. 61,180 (1992).
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\2\ On August 12, 1992, Questar amended its settlement offer in
ways not relevant here.
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B. The Alleged Overcharges
Based on the information gathered in its investigation, Enforcement
alleges that during the period from November 1, 1988 through September
30, 1992:
1. Questar's gathering rates to Mountain Fuel exceeded the
gathering rates set out in the revisions to Sheet No. 8. The excessive
rates, per decatherm, were as follows:
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Months Tariff rate Charged rate Excess rate
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11-12/88........................................................ $0.23095 $0.27840 $0.04745
01-12/89........................................................ .23095 .24580 .01485
01-12/90........................................................ .23095 .27940 .04845
01-10/91........................................................ .23095 .28064 .04969
[[Page 28693]]
11-12/91........................................................ .18296 .28064 .09768
01-09/92........................................................ .18296 .28190 .09894
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2. Questar's gathering overcharges to Mountain Fuel totaled
$3,427,192. The overcharges for the time periods set out in para. 1
were as follows:
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Decatherms
Months sold Excess rate Overcharge
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11-12/88........................................................ 5,619,369 $0.04745 $266,639
01-12/89........................................................ 18,439,042 .01485 273,820
01-12/90........................................................ 15,107,171 .04845 731,942
01-10/91........................................................ 14,613,340 .04969 726,137
11-12/91........................................................ 5,496,168 .09768 536,866
01-01/92........................................................ 9,013,427 .09894 891,788
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3. Mountain Fuel passed through to its customers all gathering
charges that it paid to Questar, including Questar's overcharges.
C. Discussion
During the course of the investigation, Questar made a number of
contentions that warrant comment. Questar argued that the Commission
lacks jurisdiction over its gathering rates, and cited Section 1(b) of
the NGA, 15 U.S.C. Sec. 717(b) (1994), and Northwest Pipeline Corp. v.
FERC, 905 F.2d 1403 (10th Cir. 1990), in support of this assertion.
Section 1(b) states that the NGA does not apply ``to the production or
gathering of natural gas.'' In Northwest Pipeline, the court reversed a
Commission order asserting jurisdiction over what the Commission
claimed were a pipeline's transportation rates; the court held that the
Commission had failed to adequately support its conclusion that the
pipeline's rates were for transportation rather than gathering.
However, Northern Natural Gas Co. v. FERC, 929 F.2d 1261 (8th Cir.
1990), cert. denied, 502 U.S. 856 (1991), rather than Northwest
Pipeline, governs the Commission's authority to regulate Questar's
gathering rates. In Northern Natural, the court upheld the Commission's
authority to regulate an interstate pipeline's gathering rates on the
ground that the rates were charged ``in connection with''
jurisdictional transportation and therefore were subject to regulation
under section 4(a) of the NGA, 15 U.S.C. Sec. 717c(a) (1994). The court
distinguished the Tenth Circuit's decision in Northwest Pipeline,
noting that the Tenth Circuit had relied on the Commission's failure to
support its determination that the rates were transportation rates; in
Northern Natural, the Commission acknowledged that the rates were
gathering rates.
Questar also argued that the Commission never asserted its
jurisdiction over Questar's gathering rates. Questar stated that the
first time any representative of the Commission directed Questar to
include a gathering rate in its tariff sheets was during an August 4,
1988 meeting that Questar had arranged with staff of the Office of
Pipeline Regulation (OPR) to discuss a July 18, 1988 letter order that
the Director of OPR had issued in Docket No. RP88-93. In that meeting,
OPR staff directed Questar to include a ``gathering rate of general
applicability'' in its tariff. On August 17, 1988, Questar included a
challenge to staff's directive in Questar's appeal of the letter order.
``Questar Pipeline Company's Appeal from Staff Action'' (Docket No.
RP88-93-005, et al.). Questar based its challenge on the assertion that
the Commission lacks jurisdiction over gathering. Id. at pp. 18-19. On
February 1, 1989, the Commission denied Questar's appeal in part, but
did not address Questar's jurisdictional challenge. 46 FERC para.
61,115 (1989).\3\ Questar views the Commission's silence on this point
as a failure to assert jurisdiction.
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\3\ Questar did not seek rehearing.
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However, the Commission's December 1, 1988 order, discussed supra,
accepting the Questar tariff filing that included Tenth Revised Sheet
No. 8--which contained a gathering rate--constituted an assertion of
the Commission's jurisdiction over Questar's gathering rates for
Mountain Fuel. Moreover, Questar's filing of that tariff sheet
constituted Questar's acceptance of that jurisdiction, at least for the
period in which the tariff gathering rate remained in effect. The
Commission orders approving the settlements in Docket Nos. RP88-93 and
RP91-140 constituted additional instances of the Commission's assertion
and Questar's acceptance of Commission jurisdiction over Questar's
gathering rates.
Indeed, Questar's acceptance of these settlements precludes the
company from challenging the Commission's jurisdiction over Questar's
gathering rates during the period at issue. In Colorado Interstate Gas
Co. v. FERC, 83 F.3d 1298 (10th Cir. 1996), the court held that an
interstate pipeline that had entered into a settlement requiring it to
charge specified gathering rates lacked standing to challenge
Commission jurisdiction over those rates during the term of the
settlement. The settlement rates in either Docket No. RP88-93 or Docket
No. RP91-140 were in effect throughout the period from November 1, 1988
through September 30, 1992.\4\
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\4\ Questar also suggested that the settlement the Commission
approved in Docket No. RP91-140 precludes further Commission action
based on Questar's past gathering charges. Questar cited section
III.B(2), which states that the settlement resolves ``any current
dispute or inquiry raised by . . . the Commission concerning prior
statements of Questar's rates for gathering services on its FERC Gas
Tariff rate sheets.''
However, the Commission's order approving the settlement
reserves the Commission's right to redress Questar's overcharges to
Mountain Fuel. Ordering Paragraph (C) states:
The Commission's approval of this settlement does not preclude
any Commission action regarding Questar's collection of gathering
charges from Mountain Fuel Supply Company prior to the date of this
order.
61 FERC at p. 61,656. Questar did not seek rehearing of this
order.
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Questar also claimed that the gathering rates contained in the
revisions to Sheet No. 8 did not apply to Mountain Fuel. Questar
contended that these rates were ``default rates'' that only applied to
those gathering contracts that did not provide for specific gathering
rates (such as contracts that expressly incorporated the prevailing
tariff rate). During the period at issue, Questar calculated its
gathering charges to Mountain Fuel in accordance with a gathering
agreement that the two affiliates executed in 1987,
[[Page 28694]]
but never filed with the Commission. Questar argued that the rates
calculated under this gathering agreement superseded the rates
contained in the revisions to Sheet No. 8.
Questar's contentions are inconsistent with applicable law. Once
the Commission's orders approving the settlements in Docket Nos. RP88-
93 and RP91-140 became final and no longer subject to judicial review,
the gathering rates (and effective dates) contained in the revisions to
Sheet No. 8 took precedence over any gathering rate dictated by the
Questar-Mountain Fuel gathering agreement. See Arkansas Louisiana Gas
Co. v. Hall, 453 U.S. 571, 582, (1981) (where the tariff rate and the
contract rate conflict, the tariff rate controls).
Questar further contended that even if the Commission has the legal
right to require Questar to refund a portion of its gathering charges
to Mountain Fuel, the Commission's exercise of that right would be
inequitable. The company offered several reasons for this contention.
Questar produced two ``supplemental agreements'' in which the UDPU
endorsed the Questar-Mountain Fuel gathering agreement. In the first
``supplemental agreement,'' which Questar's predecessor, Mountain Fuel
and the UDPU executed on November 5, 1987, the UDPU stated that the
gathering agreement ``provides a fair, just and reasonable means for
[Mountain Fuel] to obtain gathering services from [Questar],'' and
agreed not to challenge Mountain Fuel's passthrough of the gathering
rates charged by Questar during 1988. In the second ``supplemental
agreement,'' which Questar, Mountain Fuel and the UDPU executed on
April 27, 1989, the parties agreed, among other things, that Questar
would charge Mountain Fuel a gathering rate of $0.2458/Dth during
calendar year 1989 and that the UDPU, which had intervened in Docket
No. RP88-93, would support Questar's proposed settlement in that
docket.
However, the UDPU's general endorsement of the gathering agreement
did not relieve Questar of the obligation to charge Mountain Fuel the
gathering rates contained in Questar's tariff. The UDPU did not have
jurisdiction over Questar's gathering rates. See Schneidewind v. ANR
Pipeline Co., 485 U.S. 293 at 310 (1988) (quoting Nothern Natural Gas
Co. v. State Corporation Comm'n of Kansas, 372 U.S. 84 at 91-92 (1963))
(``When a state regulation `* * * presents the prospect of interference
with the federal regulatory power, then the state law may be pre-empted
even though `collision between the state and federal regulation may not
be an inevitable consequence.' ''). In addition, the UDPU did not
address Questar's gathering rates for 1990 through 1992, a period that
includes 33 of the 47 months at issue. Finally, the UDPU's support of
the settlements in Docket Nos. RP88-93 and RP91-140 conflicts with the
agency's endorsement of the gathering agreement because the settlements
provided for lower gathering rates than those Questar charged under the
agreement.
Questar further asserted that its alleged gathering overcharges did
not harm Mountain Fuel's ratepayers. Questar noted that during the
relevant time period, Rate Schedule No. CD-1 of Questar's tariff (RS
CD-1) governed its sales of gas to Mountain Fuel. Questar contended
that it subtracted the gathering revenues collected under its
transportation rate schedules--including RS X-33--from the cost of
service used in calculating its sales rate under RS CD-1. Thus, Questar
argued, if it had charged Mountain Fuel the tariff rate for the
gathering provided under RS X-33, the pipeline would have had to charge
Mountain Fuel a higher rate for the gas Questar sold Mountain Fuel
under RS CD-1 to fully recover its costs.
However, Questar's gathering rates and sales rates were determined
in the settlements that the Commission approved in Docket Nos. RP88-93
and RP91-140. Charging Mountain Fuel the settlement gathering rates
would not have allowed Questar to charge its affiliate higher sales
rates; Questar would have had to charge Mountain Fuel the sales rates
set out in the settlements. Therefore, it appears that if Questar had
charged Mountain Fuel the settlement gathering rates, Mountain Fuel's
ratepayers would have benefitted.
Finally, Questar asserted that if it is forced to refund its
alleged overcharges, it will not recover its cost of service for the
period during which the overcharges took place. However, this
assertion, even if proven by Questar, would not appear to excuse
Questar's refund obligation. It appears that the imposition of refunds
is necessary to enforce the settlements that the Commission determined
to be in the public interest in Docket Nos RP88-93 and RP91-140. The
Commission and courts have long recognized that upholding such
settlements serves a strong public interest. E.g., Mobil Oil Corp. v.
FPC, 570 F.2d 1021, 1026 (D.C. Cir. 1978) (``[J]ust as encouraging
settlements is in the public interest, so is abiding by settlements
that are entered into in good faith and without overreaching.'')
The Commission orders:
(A) Within 30 days of the issuance of this order, Questar shall:
(1) File an answer to the allegations of overcharges and violations
that conforms to the requirements of Rule 213 of the Commission's
Rules, 18 CFR 385.213. In its answer, Questar shall admit or deny,
specifically and in detail, each allegation set forth in Part B of this
order, and shall set forth every defense relied on. If an allegation is
only partially accurate, Questar shall specify that part of the
allegation it admits and that part of the allegation it denies.
(2) Show (a) why it has not violated section 4(d) of the NGA and
its FERC tariff as a result of its gathering charges to Mountain Fuel
during the period November 1, 1988 through September 30, 1992 and (b)
why it should not refund (with interest running through the refund
date) the portion of those gathering charges that exceeded the one-part
gathering rates contained in the revisions to Sheet No. 8 that were in
effect during that time period.
(3) Questar shall separately state the facts and the arguments that
it advances. Questar must support with exhibits, affidavits and/or
prepared testimony any facts that it alleges. Questar's statement of
material facts must include citation to supporting data. At a minimum,
Questar should provide work papers and any other documents to support
its allegations that all of the revenues received by Questar associated
with the Mountain Fuel gathering agreement were used in the applicable
rate proceedings to reduce the cost of service allocated to Questar's
sales service under Rate Schedule CD-1, and Mountain Fuel was the only
customer receiving service under Rate Schedule CD-1. All materials must
be subscribed and verified as set forth in sections 385.2005 (a) and
(b)(2) of the Commission's regulations, 18 CFR 385.2005 (a) and (b)(2).
(B) Notice of this proceeding shall be published in the Federal
Register. Interested parties shall file petitions for intervention no
later than 30 days after the date of publication.
By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 97-13789 Filed 5-23-97; 8:45 am]
BILLING CODE 6717-01-M
