The U.S. Court of Appeals for the District of Columbia Circuit Tuesday overturned and remanded a FERC decision which prohibited allocation of interruptible capacity on PG&E Gas Transmission, Northwest based on the total revenue deriving from a bid, saying the Commission failed to explain why it was departing from its own precedents.

FERC had rejected PG&E-GT’s initial attempt to rank maximum rate bids based on total revenue, saying that bids for the longest distance would always win out over maximum rate bids for shorter hauls. The Federal Energy Regulatory Commission said this would discriminate against short haul bidders. It later accepted a substitute offered by PG&E-GT to allocate capacity by pro-rating it to all maximum rate bidders. While installing the second option, the pipeline challenged FERC’s initial ruling in court.

The court made short work of rejecting the Commission’s contention that the issue was moot because the second option had been installed, which FERC said negated any injury to PG&E-GT. Not so, said the court. PG&E-GT was injured and continued to be injured because the Commission rejected its first choice mechanism. A court reversal could cure that injury.

On the merits, the court said FERC’s attempts to explain away the fact that its decision in the PG&E-GT case ran counter to several previous rulings in similar cases for other pipelines “was confusing at best, if not outright disingenuous.” It noted FERC previously accepted net revenue or distance-based schemes from Northern Natural Gas, Tennessee Gas Pipeline and Trunkline Gas. The attempts by FERC counsel to explain away those decisions “were alternately non-existent, misleading and irrelevant.”

The Commission attorney argued before the court that the PG&E-GT case was different because it would award the capacity based solely on distance, while the other cases involved zone-based systems where distance was just one of a number of factors. The court found that argument was “purely a post hoc justification” by counsel and was not contained in the FERC order. The order itself glossed over the precedents and “crossed the line between from the tolerably terse to the intolerably mute,” the court said, quoting from a prior court decision.

“FERC’s failure to come to terms with its own precedent reflects the absence of a reasoned decisionmaking process. Accordingly the court vacated the order and remanded it to the Commission for further consideration.

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