The California Public Utilities Commission (CPUC) and SouthernCalifornia Gas (SoCalGas) petitioned the Supreme Court last week toreview the nettlesome issue of where does FERC’s jurisdiction endand the states’ jurisdiction begin.

The issue arises out of a FERC order that overrode a CPUC rulingpermitting SoCalGas, a Hinshaw-exempt LDC, to charge interstateshippers a fee to use facilities at Wheeler Ridge, CA, thatconnected its distribution system to a pipeline system operatedjointly by Kern River Gas Transmission and Mojave Pipeline. TheCalifornia regulators allowed the charge to defray the costs of thenew facilities, which were built to facilitate the interstateshipments of gas that were destined solely for in-statedistribution and in-state consumption. FERC called theSoCalGas-imposed charge “illegal” because it placed an additionalburden 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 “powergrab” by the federal agency of the CPUC’s jurisdiction, thepetitioners told the high court. In seeking a writ of certiorari,they asked the court to “restore the states’ comprehensiveauthority to regulate the facilities, rates and services of localdistribution companies, and to clarify the boundaries between stateand federal authority [in] the context of the new, unbundlednatural gas industry…”

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

The petitioners cited the Supreme Court’s 1997 decision inGeneral Motors Corp. vs. Tracy, which recognized states’ authorityover Hinshaw facilities. The court noted then that the HinshawAmendment to the NGA “leave[s] jurisdiction over companies engagedin the distribution of natural gas exclusively in the states asalways had been intended.” Specifically, petitioners insist theamendment “creates a fence between FERC-regulated interstatepipeline facilities and state-regulated Hinshaw facilities thatFERC cannot climb.”

In light of the General Motors’ decision, “FERC’s effort topreempt the authority of the CPUC…strikes at what continues asthe central authority of the states: the power to determine whethernew facilities should be constructed by local distributioncompanies and, if so, to exercise their ratemaking power so thatthe cost of new facilities will be borne by the appropriate usersof those facilities,” SoCalGas and California regulators said.

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