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High-Court Review Sought of FERC v. State's Rights

High-Court Review Sought of FERC v. State's Rights

The California Public Utilities Commission (CPUC) and Southern California Gas (SoCalGas) petitioned the Supreme Court last week to review the nettlesome issue of where does FERC's jurisdiction end and the states' jurisdiction begin.

The issue arises out of a FERC order that overrode a CPUC ruling permitting SoCalGas, a Hinshaw-exempt LDC, to charge shippers a fee to use facilities at Wheeler Ridge, CA, that connected its distribution system to a pipeline system operated jointly by Kern River Gas Transmission and Mojave Pipeline. The California regulators allowed the charge to defray the costs of the new facilities, which were built to facilitate the interstate shipments of gas that were destined solely for in-state distribution and in-state consumption. FERC called the SoCalGas-imposed charge "illegal" because it placed an additional burden on interstate shippers to California.

The 1996 Commission reversal, which was upheld by the D.C. Circuit Court of Appeals two years later, amounted to a "power grab" by the federal agency of the CPUC's jurisdiction, the petitioners told the high court. In seeking a writ of certiorari, they asked the court to "restore the states' comprehensive authority to regulate the facilities, rates and services of local distribution companies, and to clarify the boundaries between state and federal authority [in] the context of the new, unbundled natural gas industry..."

Petitioners pointed out that SoCalGas is a Hinshaw facility, which exempts it from federal jurisdiction and puts it under the purview of the state. A Hinshaw facility is one that receives gas within or at the state boundary for ultimate consumption within the state. As such, "the CPUC's determination to impose fees for the right to deliver gas into the facility was well within the state's authority" under the Natural Gas Act (NGA), they argued.

The petitioners cited the Supreme Court's 1997 decision in General Motors Corp. vs. Tracy, which recognized states' authority over Hinshaw facilities. The court said thenthat the Hinshaw Amendment to the NGA "leave[s] jurisdiction over companies engaged in the distribution of natural gas exclusively in the states as always had been intended." Specifically, petitioners insisted the amendment "creates a fence between FERC-regulated interstate pipeline facilities and state-regulated Hinshaw facilities that FERC cannot climb."

In light of the General Motors' decision, "FERC's effort to preempt the authority of the CPUC...strikes at what continues as the central authority of the states: the power to determine whether new facilities should be constructed by local distribution companies and, if so, to exercise their ratemaking power so that the cost of new facilities will be borne by the appropriate users of those facilities," SoCalGas and California regulators said. Susan Parker

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