Challenges to Negotiated-Rate Policy, Orders Denied
Ruling that the case was not yet ripe for review, the D.C.
Circuit Court of Appeals has denied challenges to FERC's policy
statement and subsequent orders that gave interstate gas pipelines
permission to enter into negotiated rates with their customers.
Burlington Resources Oil & Gas Co. et al petitioned the court
to review FERC's 1996 policy statement on alternative pricing
methods, arguing that it was "aggrieved" by the Commission's
action. It further claimed the policy was, in fact, a rule, and
that FERC in promulgating it did not follow the required
notice-and-comment procedures [No. 96-1160 et al.].
Separately, the Northern Municipal Distributors Group et al took
issue with five orders that awarded pipelines the authority to
negotiate rates. The LDCs argued that, by allowing negotiated rates
to take effect with only a one-day suspension, the Commission
abdicated its statutory responsibility under Section 5 to review
filed rates, and unlawfully put customers in the position of having
to prove that a rate was unreasonable [No. 96-1455 et al]. The
cases were consolidated by the appellate court for the purpose of
"The legal significance of the case is in the reviewability of a
policy statement. It reaffirms that a policy statement is not
appealable," said Lorraine Cross of the Interstate Natural Gas
Association of America. "As a policy matter, I don't think that you
could read into it one way or another whether the court would
uphold negotiated rates."
The court agreed with FERC's position that neither group of
petitioners was aggrieved by the policy statement and/or subsequent
orders, and that neither challenge was ripe for review. For a party
to prove it is aggrieved, it must show that an order causes it
concrete injury, actual or imminent, the court said.
"Burlington does not meet any of these conditions. Burlington
points to no injury, concrete or otherwise, that is in any way
actual or imminent. The rates that [it] pays have not changed -
nor, indeed, did anything concrete change by virtue of the policy
statement alone. Each potential problem on Burlington's list is
entirely speculative," the court wrote in an eight-page decision.
"Further, even assuming that Burlington would surely be harmed
if negotiated rates were in use, the policy statement does not
approve any such rate. The policy statement does not even approve
any particular proposal to negotiate a rate, let alone any actual
negotiated rate; rather, it simply indicates the Commission's
willingness to accept proposals from pipelines seeking to negotiate
rates - if they meet the guidelines laid out in the policy
statement." Consequently, FERC's policy statement by itself is not
fit for judicial review, the court noted.
Even if the court were to review specific orders that arose from
the policy statement, "we would still not have enough information
about the effect of the policy. None of the orders sheds additional
light upon how the negotiated-rate policy will operate in fact,"
the court opined. To date, only seven pipelines have used their
authority to enter into a negotiated-rate contract, and - "so far
as we know" - FERC has approved at least one such negotiated deal
involving NorAm Gas Transmission, it said. The court has delayed
its review of that case pending the outcome of this case.
Citing many of the same reasons, the court also rejected the
challenges of the municipal distributors to five orders that
awarded pipelines permission to negotiate rates. "...[N]one of the
orders says enough about the real-world consequences of the policy
to illuminate it sufficiently for review."