The federal appeals court in Washington, DC dismissed Tuesday a petition for review brought by Southern Natural Gas Co.’s shippers who claimed they were, or potentially will be, aggrieved by a FERC order that allows the pipeline to offer service to Southern Company Services (SCS) at lower rates than what they pay.

The group of Sonat shippers — led by Alabama Municipal Distributors Group — challenged a Commission decision in 2001, which awarded the pipeline a certificate to build new facilities to supply gas to a power generation plant planned by SCS, as well as authorized discount rates for SCS. The shippers argued the order would raise their transportation rates on Sonat, along with demand and ultimately the price for natural gas in the southeastern region, causing them harm.

But the court ruled the shippers’ claim of injury to their transportation rates was premature. “The effect that the SCS transaction will have on petitioners’ rates will be decided in Southern’s next rate case…What that effect will be, no one can now say. The injury has not yet materialized nor has the factual record related to that injury been established.” The ruling, however, kept open the door for shippers to mount a later court challenge to FERC’s 2001 order if their interests are “adversely” affected in the Sonat rate case.

The court said the shippers’ challenge presently was unripe for review, and it added they failed to show that any delay by the court in reviewing the matter would inflict hardship. “Because the petitioners’ theory of an immediate impact on the price of gas has failed, and no rate change (of whatever degree) will take effect independently of Southern’s next rate case, here too delay will cause them no harm.”

If anything, the increased throughput resulting from the SCS contract will decrease the unit rate on Sonat, which would benefit the pipeline’s existing shippers, the appeals court opined in its five-page ruling. “It appears undisputed that once Southern adopts system-wide rates reflecting the new service, the effect will be to reduce petitioners’ rates.”

As for shippers’ claims of higher gas demand and prices in the Southeast region, the court said, “The only way Southern’s transportation discount could raise demand would be if it were to cause SCS’s delivered gas costs to be lower than they would otherwise have been, and thus its electricity prices to be ever so slightly lower than they would have been, thereby driving up electricity consumption, and with it gas consumption, compared to what they have been without the discount.” However, Sonat shippers “have not even mentioned this possibility, much less offered supporting empirical analysis.”

The court said the shippers “hinted” at this theory of competitive injury during oral arguments, but they “never made such an argument in their briefs, and have given us no evidence of such competitive injury.”

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