final order approving all of its terms without condition or modification and grants any necessary waivers to effectuate all of the provisions. It further stipulates that, as a negotiated settlement of the instant proceeding, no party is to be bound by its terms in any other proceeding. Discussion The Commission finds that the settlement provides a reasonable resolution of all of the outstanding rate issues in Docket No. RP90-84-000. The Commission has evaluated the settlement rates and rate design in light of the policy statement. The goal of the policy statement is to promote productive and allocative efficiency on a pipeline through the design of rates that implement several objectives intended primarily to ration capacity in peak periods and maximize throughput in all periods. Texas Sea Rim demonstrates that it has substantial excess capacity, even during periods of peak demand, and has no queue for firm or interruptible service. Its intake is restricted to the gas reserves at a single receipt point offshore, and the quantity does not vary significantly from one season to another. Its facilities are used at a constant throughput level in both the winter and summer periods. Moreover, the remaining accessible gas reserves are limited and the volume of gas transported has declined. In these circumstances, the Commission finds that the rate design is unlikely to affect demand for transportation on Texas Sea Rim and the efficiency goals of the policy statement are not applicable here. The Commission agrees with Texas Sea Rim and staff that continuance of the existing one-part volumetric rates is appropriate. While a two-part rate with a demand charge is useful to ration capacity or apportion fixed costs among various service classes and customers for recovery, those factors are not matters for consideration on Texas Sea Rim where excess capacity exists and customers are limited. In these circumstances, seasonal rates are not necessary to maximize throughput during off peak periods, since throughput is restricted by the gas reserves at the offshore end point of the pipeline. The quantities of gas available to Texas Sea Rim do not vary from one season to another and are limited. No new markets would be served by reducing the off-peak rates, inasmuch as Texas Sea Rim has capacity available throughout the year for which it is not receiving any requests. Texas Sea Rim does not propose a mechanism by which firm customers may adjust contract demand. Because rationing capacity is unnecessary and there is no increase in peak charges, such a mechanism is neither necessary or appropriate. The settlement rates continue to derive the maximum rate for interruptible transportation service on a 100-percent load factor basis of the firm transportation rates. Because Texas Sea Rim has substantial excess capacity, the quality of service for interruptible customers is identical with that of firm customers and Texas Sea Rim therefore maintains the same commodity rate for both services. Thus, the 100-percent load factor rate properly reflects the quality of interruptible service. Should Texas Sea Rim be in the position in the future that it needs to maximize throughput, it has the ability to discount its interruptible rate. Other rate design considerations under the policy statement also are not relevant to Texas Sea Rim's system and do not require changes in its rate design. Mileage-based rates are not appropriate, since the system is only 14 miles long and all gas travels the same distance in one direction over the entire length of the pipeline. Similarly, there is no need to establish backhaul or exchange rates. There is only one point of receipt and one point of delivery on the system, so that Texas Sea Rim performs no backhaul or exchange services. Finally, Texas Sea Rim has not discounted its rates and has had no requests for discounted transportation service, so that the throughput levels underlying the settlement rates were not adjusted for discounting. The level of any future discounts can be considered in establishing a representative level of throughput in its next rate case. The tariff sheets submitted with the settlement reflect the rates established in the settlement as amended by the November 8, 1990 letter and are approved as proposed. However, Texas Sea Rim is directed to file the proposed tariff sheets in compliance with this order in order to have tariff sheets on file that are not under suspension. In addition, although Texas Sea Rim filed open-access rates, it has not filed its open-access rate schedules for service under Rate Schedules FT and IT nor has it filed terms and conditions or a form of service agreement for each rate schedule. In order for Texas Sea Rim to provide open-access service, it must have effective sheets in its tariff which contain these items. Accordingly, Texas Sea Rim must file tariff sheets which contain these items and which accurately depict the open-access service if it is going to provide open-access service. The Commission orders: (A) The proposed settlement filed by Texas Sea Rim is approved. (B) Within 30 days of issuance of this order, Texas Sea Rim is directed to file tariff sheets reflecting the rates, terms, and conditions of service reflected in the settlement approved in this order and to file tariff sheets establishing Rate Schedules FT and IT and reflecting the service to be provided under them, as more fully described in the order. [¶ 61,054] Texas Gas Transmission Corporation, Docket Nos. RP90-192-001, Order on Rehearing (Issued January 24, 1991) Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, On October 26, 1990, the Commission issued an order accepting and suspending tariff sheets, subject to refund and conditions and consolidating Docket No. RP90-192-000 with Texas Gas Transmission Corporation's (Texas Gas) ongoing section 4 rate proceeding, Docket No. RP90-104-000 et al.1 Timely requests for rehearing were filed by the Memphis Light, Gas and Water Division (Memphis) and the Western Kentucky Municipal Group, the Jackson Utility Division of the City of Jackson, Tennessee, the City of Carrollton, Kentucky, and the City of Elizabethtown, Kentucky (the Cities). The Requests for Rehearing Memphis argues that the broad, flexible delivery point authority proposed by Texas Gas in sections 2.7, 10.2, and 10.3 of the General Terms and Conditions of its tariff is not supported by Commission precedent, which has granted flexible delivery point authority only under limited circumstances. Memphis avers that when the Commission has departed from its general policy against flexible delivery points, there have been significant countervailing circumstances that ensured that the first-come, first-served queue would not be disrupted.3 The Cities argue that the flexible delivery point authority sought by Texas Gas would 153 FERC 61,110 (1990). 2 Brownsville Utility Department, City of Brownsville Tennessee; City of Covington Natural Gas Department, Covington, Tennessee; Humboldt Gas Utility, Humboldt, Tennessee; City of Ripley Natural Gas Department, Ripley, Tennessee, and City of Dyersburg, Tennessee. 3 See e.g. Northwest Pipeline Corp. 51 FERC [61,067 (1990); Transwestern Pipeline Company, 47 FERC 61,340 (1989), reh'g den. 51 FERC ¶ 61,206 (1990); Columbia Gas Transmission 39 FERC 161,335 (1987), order on reh'g., 41 FERC 61,281 (1987). 4 Section 2.7 of Rate Schedule FT states in pertinent part: have an important impact on Texas Gas' capacity assignment (brokering) application filed on September 25, 1990 in Docket No. CP88-686-001 and request that the Commission convene a technical conference to consider various secondary delivery point issues including capacity allocation at secondary delivery points, affiliate use of secondary delivery points, and the impact of secondary delivery points on scheduling firm transportation and on capacity on the system. The Cities express concern that section 10.3 of the transportation terms and conditions, as proposed, states that firm transportation capacity at original delivery points shall be allocated pro rata in the event of a curtailment; however, Texas Gas has not stated how capacity is to be allocated among those using firm capacity at secondary delivery points. Discussion The Commission finds merit to the argument made by Memphis and the Cities that section 2.7 of Texas Gas' FT Rate Schedule in conjunction with section 10.3(b) of the General Terms and Conditions of Texas Gas' tariff5 could have been interpreted to permit flexible delivery points that could have altered the first-come, first-served queue if a shipper opted to utilize a new delivery point. However, under the Commission's first-come, first-served pol Customer may request that transporter deliver gas quantities to secondary delivery point(s) located on transporter's system directly upstream of customer's firm delivery point(s). Provided, however, that Transporter's ability to deliver gas quantities for customer to secondary delivery point(s) shall be subject to any other firm obligations at those deliv ery point(s). 5 That section of the tariff was eliminated in the compliance filing but previously stated that firm transportation pursuant to Rate Schedule FT utilizing secondary delivery points would fall behind other transactions involving firm sales and firm transportation. icy, when shippers have opted to utilize a new delivery point, service at the new delivery point has been treated as a request for new service, and as such, that request has been placed at the end of the first-come, first-served queue. Shippers have not been permitted to bump other shippers at the new delivery point based on the date of their original request for service at their primary delivery point.6 However, on November 30, 1990, Texas Gas submitted a compliance filing in Docket No. RP90-192-002 eliminating the language in section 2.7 of Rate Schedule FT that would have permitted flexible delivery points. Thus, the issue of flexible delivery points appears to be moot at this time with regard to section 2.7. However, another provision of Texas Gas' FT Rate Schedule, section 1.4 (which is renumbered as section 1.5 in its compliance filing in Docket No. RP90-192-002), contains similar provisions concerning changes in delivery points. Texas Gas must revise section 1.4 of its FT Rate Schedule (section 1.5 of its compliance filing) to be consistent with the Commission's policy that a change in delivery points represents a new transaction for purposes of the first-come, first-served queue. This clarification should obviate the need to convene a technical conference to consider the issues of capacity allocation at secondary delivery points, affiliate use of secondary delivery points, and the impact of secondary delivery points on scheduling firm transportation and on capacity on the system. All issues relating to capacity assignment (brokering) shall be considered in the context of Docket Nos. CP88-686-000 and -001. The Commission finds that granting the Cities late intervention at this time would not unduly disrupt the ongoing proceedings since the Cities are already parties in Docket Nos. RP90-104-000, et al. and RP88-115-000, et al. Accordingly, the late motion of the Cities and of ANR to intervene is granted.? The Commission orders: (A) The late interventions of the Cities and ANR are granted. (B) Texas Gas must revise section 1.5 of Rate Schedule FT as set forth above. (C) The requests for rehearing are dismissed. [¶ 61,055] New England Power Company, Docket No. ER88-630-006 et al. Opinion No. 352-A; Order Denying Rehearing (Issued January 24, 1991) Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, [Note: Opinion and Order affirming Initial Decision issued July 26, 1990, appears at 52 FERC ¶ 61,090.] [Opinion No. 352-A; Text] I. Introduction On August 27, 1990, the Town of Norwood, Massachusetts (Norwood) filed a request for rehearing of the Commission's Opinion No. 352 issued in this proceeding on July 26, 1990.1 II. Background In the Initial Decision in this proceeding,2 the presiding judge approved proposals by New England Power Company (NEP) to: (1) adopt a forward-looking W-10M rate design based in part on long-run incremental costs (LRIC); and (2) recover costs that 6 Panhandle Eastern Pipe Line Company, 53 FERC 61,209 (1990). 7 On October 22, 1990, 12 days after the deadline for interventions, the Cities filed a motion to intervene out-of-time in which they requested a technical conference. 'New England Power Co., Opinion No. 352, 52 61,090 (1990). FERC 2 49 FERC 63,007 (1989). NEP estimated it would incur to comply with the New England Power Pool's Performance Incentive Program (PIP).3 In Opinion No. 352, the Commission affirmed the Initial Decision. III. Discussion A. Burden of Proof Norwood asserts that the Commission improperly shifted the burden of proof to Norwood to show that the proposed rate design is unjust and unreasonable. In support, Norwood relies on the Commission's statement that Norwood had not provided "credible counter-evidence to support its contention that NEP's W-10M rate design is unjust and unreasonable."4 We will reject this argument. As Norwood acknowledges, the Commission stated that NEP had the burden of proof to show that its proposed rate design was just and reasonable.5 The Commission weighed all of the record evidenceincluding NEP's evidence and Norwood's counter-evidence and, on balance, found that NEP had met its burden of proof to show that its proposed rate was just and reasonable. The use of the term "counter-evidence" in no way shifted the burden of proof to Norwood, but merely described the evidence that Norwood submitted, i.e., evidence to counter NEP's position that NEP's proposed rate was just and reasonable. Essentially, Norwood's evidence suggests that NEP's proposal is unjust and unreasonable because the proposal is either flawed or not sufficiently supported. With respect to the judge's finding that it was "not clear" that NEP's proposal was "unreasonable," there is no indication that the judge was reversing the burden of proof. In fact, the judge weighed the evidence and found that NEP's proposed rate design was appropriate, stating that "[t]he criticisms leveled at [NEP's] rate design proposal by Norwood, through its witness Towers, are not, in my judgment, sufficient to offset the benefits that implementation of that proposal appear to promise." Further, the judge stated that under the Federal Power Act, the Commission must find the rate design filed by a utility to be unjust, unreasonable, or otherwise unlawful in order to set aside the filed rate design and order the utility to adopt another rate form even though another rate design may be even better than the one filed by the utility.? Further still, the Commission independently found that NEP had met its burden of proof.8 B. Norwood's Assertion that Certain of Its Arguments Were Not Adequately Addressed in the Initial Decision or Opinion In Opinion No. 352, the Commission determined that the arguments raised by Norwood on exceptions had been adequately addressed in the Initial Decision. Thus, the Commission did not systematically address Norwood's exceptions to the Initial Decision. The Commission did address, however, three general issues which the Commission believed merited additional comment. Norwood now argues on rehearing that, contrary to the Commission's statements in Opinion No. 352, the arguments that Norwood raised on exceptions were not adequately addressed in the Initial Decision or Opinion No. 352. Again, we conclude that the arguments that Norwood makes on rehearing are largely reiterations of its arguments which were adequately addressed in the Initial Decision and in Opinion No. 352. Nonetheless, the Commission will further comment on certain issues. 9 Norwood argues that a proposed rate design must be shown to be just and reasonable when compared to alternative rate designs. However, as we stated in the opinion, a proposed rate design need only be shown to be just and reasonable, not superior to all alternatives. 10 The suspension order directed that the hearing address a comparison of the accuracy of cost tracking between the proposed rate design and average embedded cost rate design; it did not require such a comparison with other rate designs.11 Following that direction, the Initial Decision discussed at length a comparison of the proposed rate design with the existing average embedded cost rate design, which would remain in place if the proposed rate design were not approved.12 C. Norwood's Arguments Concerning the Theoretical Support for NEP's Proposed Rate Design Norwood disputes the judge's finding that long-run incremental costs more accurately track costs and send more accurate price signals than average embedded costs. It argues that: (1) the company could use time-of-day rates which charge more at peak than off-peak using embedded costs; (2) NEP's price signal rationale is weakened because a portion of NEP's proposed rates were below the average embedded demand cost; (3) under W-10M, Norwood subsidizes the other customers; and (4) the record evidence in this case, largely from staff witness Wentworth, is that in order for electricity rates to capture the theoretical benefits of marginal cost pricing, those rates must be based on short-run marginal costs (SRMC), and not the LRIC that NEP uses as the basis for its W-10M rate.13 All four of Norwood's arguments are adequately addressed in the Initial Decision and Opinion No. 352.14 However, we wish to comment further on Norwood's fourth argument. Norwood argues that the sole basis for staff's acceptance of NEP's W-10M rate is staff's contention that the W-10M rate tail block component is closer to SRMC than NEP's alternative average embedded cost rate is to SRMC. That is, having set SRMC as the theoretical standard to evaluate whether a rate is efficient or not, staff found the W-10M rate "good enough" because it is close enough to the standard.15 9 Norwood Rehearing at 9. 10 See 52 FERC at p. 61,336 n.35 and the cases cited therein. In addition, the Commission need not find that the existing rate design is unjust and unreasonable before permitting the utility to adopt a new rate design. See, e.g., American Electric Power Corp., Opinion No. 311, 44 FERC ¶ 61,206, at p. 61,749 and n.59, Order Denying Rehearing, Opinion No. 311-A, 45 FERC 61,408 (1988), Order Denying Rehearing and Clarification, Opinion No. 311-B, 46 FERC 61,382, at p. 62,195 (1989). 11 New England Power Co., 45 FERC ¶ 61,354, at p. 62,132 (1988). 12 49 FERC 63,007, passim. 13 Norwood Rehearing at 21-23. 14 With respect to the first and second issues, the judge found, and the Commission affirmed, that longrun incremental costs give superior price signals to average embedded costs. 49 FERC at pp. 65,032-34; 52 FERC at p. 61,335. The third issue was addressed at 49 FERC at p. 65,033; 52 FERC at p. 61,335. The fourth issue was addressed at 49 FERC at pp. 65,035-36, 52 FERC at pp. 61,335-36. 15 Norwood Rehearing at 29. Norwood sought to submit, at the briefing stage of the proceeding, calculations that it claimed contradicted staff witness Wentworth's position that any differences between rates calculated using NEP's rate design and his preferred methods were likely to be small. The judge rejected that evidence as having been presented too late in the proceeding. 49 FERC at p. 65,036 n.22. Norwood does not expressly seek reversal of the judge's determination but appears to do so, at least implicitly. We agree with the judge's decision to reject Norwood's untimely submission of an alternative rate design. In light of that holding and staff's endorsement of NEP's proposed rate design, the judge correctly concluded that a rate design based on short-run incremental costs was not at issue in this proceeding. |