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on the purchase deficiency method, accepted as part of Northwest's fifth Order No. 500 filing in Docket No. RP90-118-000. Since Northwest has separately refunded, with interest, the amounts it actually collected through those fixed charges, it also seeks to recover $61,472 in interest on those take-or-pay costs accruing during the period July 1, 1990, through December 31, 1990. Northwest proposes to recover all these costs through a volumetric surcharge on all throughput. That volumetric surcharge, together with the presently effective volumetric surcharge, accepted as part of Northwest's fifth Order No. 500 filing, will result in Northwest recovering 75 percent of the costs included in that filing through a volumetric surcharge, and Northwest absorbing the remaining 25 percent.

Second, Northwest proposed to recover, also through a volumetric surcharge, $49,491 in additional take-or-pay settlement costs that Northwest had proposed to recover through a fixed charge based on purchase deficiencies in its November 30, 1990 filing in Docket No. RP91-42-000, but which the Commission rejected in its December 28, 1990 order. Since the December 28 order accepted Northwest's proposed volumetric surcharge to recover another 50 percent of the costs of these settlements, the volumetric surcharge proposed here will result in Northwest recovering 75 percent of the costs of the relevant settlements through a volumetric surcharge and Northwest absorbing the remaining 25 percent.

Third, Northwest proposed to recover, through a volumetric surcharge, 75 percent of the costs of three new take-or-pay settlements with its producer-suppliers that have not been the subject of any previous Northwest filing. The total amount to be recovered is $494,351. Northwest proposes to absorb the remaining 25 percent of the costs.

Finally, Northwest filed a revised tariff sheet to be effective April 1, 1990, to reinstate, as of that date, the fixed charges included in Northwest's first four Order No. 500 filings that the Commission held in an order issued December 14, 1990, are not subject to the stay ordered by Order No. 528.

6 53 FERC 61,453 (1990).

7 53 FERC ¶ 61,380 (1990).

849 FERC 161,056 (1989). In this order, the Commission accepted a quarterly SSP filing subject to Northwest recalculating its carrying charges on the SSP costs to exclude carrying charges on any SSP costs prior to the effective date of the tariff sheets containing such costs. On October 27, 1989, Northwest filed for rehearing, claiming that inclusion of the carrying costs was consistent with its FERC Gas Tariff.

Northwest states in its cover letter that the instant filing concludes Northwest's Order No. 500 settlement efforts with its producer/suppliers, since Northwest will implement its Gas Inventory Charge (GIC) effective January 1, 1991, and shall continue to update its volumetric surcharge on a quarterly basis, to reflect the calculation of interest on the unamortized principal and interest balances of the costs included in those surcharges.

Last, Northwest states the tariff sheets filed herein exclude carrying charges related to periods of time prior to the effective date of the tariff sheets in accordance with the Commission's order of October 12, 1989, in Docket Nos. RP89-219-001 and TM90-1-39-000 and -001.8 Northwest states it has not included alternate tariff sheets which include such carrying charges. However, in the event Northwest prevails on rehearing, Northwest states it will have to adjust the instant filing to reflect the inclusion of these carrying charges.

Public Notice, Interventions and Protests

Public notice of the instant filing was issued on January 4, 1991, providing for protests, motions or notices to intervene to be filed on or before January 11, 1991. Pursuant to Rule 214, timely filed motions to intervene are granted unless an answer in opposition is filed within 15 days of the date such motion is filed. 10 No protests to the filing were filed.

Discussion

The Commission accepts Northwest's filing, subject to refund and the other conditions set forth herein. Since no protests have been filed, it appears that Northwest's proposed allocation of these costs is acceptable to all its customers and other interested parties.

On December 31, 1990, under separate cover, Northwest filed the settlements supporting the new settlement producer/supplier costs. On January 3, 1991, Northwest filed proof of payment documentation. Northwest requests that these settlements and schedules be treated as confidential materials pursuant to section 388.112 of the Commission's regulations.11 As the Commission has not had time to review the settlements or supporting documen

9 In Northwest's quarterly filing in Docket Nos. RP90-50-000 and TM90-4-37-000, accepted by the Commission on December 29, 1989, Northwest filed primary (including such carrying charges) and alternate (excluding such carrying charges) tariff sheets. 49 FERC 61,433 (1989). The Commission rejected Northwest's primary sheets and accepted the alternate sheets.

10 18 C.F.R. § 385.214 (1990).

11 18 C.F.R. § 388.112 (1990).

tation, Northwest's filing is accepted subject to review of the supporting documentation and any other information the Commission may require as a part of that review.

In addition, First Revised Original Sheet No. 15 is paginated incorrectly. Although Northwest has paginated Sheet No. 15 to Second Revised Volume No. 1, 2nd Revised Volume No. 1 did not become effective until November 25, 1990. Th. "efore, the sheet filed should refer to First Revised Volume No. 1 which was in effect on April 1, 1990. Also, Northwest has not filed tariff sheets to be effective subsequent to April 1, 1990, to reflect the revised rates. Accordingly, Northwest must file substitute tariff sheets for each effective tariff sheet subsequent to April 1, 1990, to reflect the revised

rates.

Waiver

In the instant filing, Northwest requests waiver of the 30-day notice requirement of section 4 of the NGA to allow an effective date of January 1, 1991, with the exception of First Revised Original Sheet No. 15, which has a proposed April 1, 1990 effective date. The Commission denies waiver of the notice requirements (with an exception for First Revised Original Sheet No. 15) and accepts the instant filing to be effective January 31, 1991. The instant filing reflects costs subject to Order No. 528. The Commission stated in Order No. 528 that it did not intend to waive the 30-day notice requirement for filings pursuant to that order. 12 However, the Commission grants waiver to permit Revised Original Sheet No. 15 to be effective April 1, 1990, with the conditions as stated above.

Suspension

Based upon a review of the filing, the Commission finds that the proposed tariff sheets have not been shown to be just and reasonable, and may be unjust, unreasonable, unduly discriminatory, or otherwise unlawful. Accordingly, the Commission shall accept the tariff sheets for filing and suspend their effectiveness for the period set forth below, subject to the conditions set forth in this order.

The Commission's policy regarding rate suspension is that rate filings generally should be suspended for the maximum period permitted by statute where preliminary study leads the Commission to believe that the filing may be unjust, unreasonable, or that it may be inconsistent with other statutory standards. See Great Lakes Gas Transmission Co., 12 FERC ¶ 61,293 (1980) (five-month suspension). It is

12 See Order No. 528, 53 FERC 61,163, at p. 61,595 (1990).

recognized, however, that shorter suspensions may be warranted in circumstances where suspension for the maximum period may lead to harsh and inequitable results. See Valley Gas Transmission, Inc., 12 FERC ¶ 61,197 (1980) (one-day suspension). Such circumstances exist here where the pipeline is filing because of changed circumstances resulting from a court remand as recognized by the Commission in Order No. 528. Accordingly, the Commission will exercise its discretion to suspend the rates for a shorter period and permit the rates to take effect on January 31, 1991, subject to refund and subject to the conditions set forth in the body of this order and in the ordering paragraphs below.

The Commission orders:

(A) The tariff sheets listed in Appendix A to this order are accepted and suspended, subject to refund and the conditions of this order, and subject to review of the supporting documentation, to be effective (with the exception of First Revised Original Sheet No. 15) January 31, 1991. First Revised Original Sheet No. 15 is accepted to be effective April 1, 1990, subject to any action on rehearing of Order No. 528.

(B) Except as to First Revised Original Sheet No. 15, waiver of the 30-day notice requirement of section 4 of the NGA is denied.

(C) Waiver of the 30-day notice requirement of section 4 of the NGA is granted to permit First Revised Original Sheet No. 15 to be effective April 1, 1990, with the conditions as stated in this order.

(D) Within 15 days of issuance of this order, Northwest must refile to repaginate First Revised Original Sheet No. 15 to conform to Northwest's FERC Gas Tariff, and at the same time, file substitute tariff sheets for each subsequent effective tariff sheet reflecting the revised rates.

Appendix A

Filed: December 31, 1990 Second Revised Volume No. 1 Fourth Revised Sheet No. 10 Fourth Revised Sheet No. 11 First Revised Sheet No. 13 First Revised Original Sheet No. 15 First Revised Sheet No. 100 First Revised Sheet No. 139 First Revised Sheet No. 140 First Revised Sheet No. 141 First Revised Sheet No. 144 First Revised Sheet No. 145 First Revised Sheet No. 146

First Revised Volume No. 1-A
Third Revised Sheet No. 201
First Revised Sheet No. 435

First Revised Sheet No. 438

Original Volume No. 2

Twentieth Revised Sheet No. 2.3

First Revised Sheet No. 436

First Revised Sheet No. 437

[¶ 61,076]

Mechanisms for Passthrough of Pipeline Take-or-Pay Buy-Out and Buy-Down Costs, Docket No. RM91-2-002;

Mississippi River Transmission Corporation, Docket Nos. TA88-2-25-006, RP88-146-004, TA88-3-25-005, RP89-12-007, RP89-13-004, RP89-158-003, TQ89-4-25-001, TQ89-5-25-001, TQ90-1-25-003, TA90-1-25-002, TM90-5-25-001, TM90-4-25-001, TQ90-3-25-001, TM90-6-25-001, TQ90-4-25-001, TM91-2-25-001, and TQ91-2-25-001

Order Denying Motion for Clarification and Denying Rehearing

(Issued January 30, 1991)

Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt,
Elizabeth Anne Moler, Jerry J. Langdon and Branko Terzic.

Mississippi River Transmission Corporation (MRT) has filed a motion for clarification and request to be included on Appendix A of the Commission's Order No. 528 [53 FERC [61,163]. MRT has also filed a request for rehearing of the Commission's order of November 30, 1990, rejecting its tariff sheets designed to recover take-or-pay costs billed to it by its upstream suppliers using the cumulative purchase deficiency methodology.1 Because the two pleadings involve substantially the same issues, the Commission is addressing them in the same order. For the reasons discussed below, MRT's requests for clarification and rehearing are denied.

I. Background

MRT currently is directly billed fixed takeor-pay charges by three pipeline suppliers, Natural Gas Pipeline Company of America (Natural), Trunkline Gas Pipeline Company (Trunkline), and United Gas Pipe Line Company (United). Trunkline is a primary pipeline that passes through only take-or-pay costs paid to its producer-suppliers. Natural passes through to MRT both the costs of its settlements with its producer-suppliers and take-orpay costs billed to it by Colorado Interstate Gas Company and Northwest Pipeline Company. United passes through to MRT both the

153 FERC 61,283 (1990).

2 The Commission rejected MRT's alternative proposal to allocate its upstream pipelines' take-orpay costs based on D-1 billing determinants.

3 MRT has no direct take-or-pay liability to any producer-suppliers, but only flows through take-orpay costs allocated to it by its pipeline suppliers.

costs of its own settlements with producers and take-or-pay costs billed to it by Sea Robin Pipeline Company (Sea Robin). The Commission has accepted pre-Order No. 528 proposals by MRT to flowthrough the fixed charges billed by its three suppliers using the same purchase deficiency allocation method used by the upstream suppliers.2

A. MRT's Tariff Filing

On October 31, 1990, MRT filed both a quarterly purchase gas adjustment (PGA) filing and revised take-or-pay tariff sheets tracking changes in the fixed take-or-pay charges billed to MRT by its three upstream pipelines.3 MRT's tariff sheets included take-or-pay costs incurred directly by United in settlements with its own producer suppliers and indirectly from its upstream pipeline supplier, Sea Robin Pipeline Company (Sea Robin). MRT allocated the costs among its customers using the same purchase deficiency methodologies that its upstream pipeline suppliers had used in allocating their take-or-pay costs to MRT.

The purchase deficiency method of allocating fixed take-or-pay charges has been found by the United States Court of Appeals for the D.C. Circuit to violate the filed rate doctrine.4 Therefore, by order issued November 30, 1990, the Commission rejected MRT's filing as perpetuating the now unlawful purchase defi

4 Associated Gas Distributors v. FERC, 893 F.2d 349 (D.C. Cir. 1989), cert. denied, FERC v. Associated Gas Distributors, 59 U.S.L.W. 3271 (Oct. 9, 1990) (AGD II).

TABLES OF

ciency allocation method because it sought to revise direct billing amounts based on purchase deficiencies. MRT filed a request for rehearing of this order on December 31, 1990.

B. Order No. 528

On November 1, 1990, the Commission issued Order No. 528 in response to the remand of AGD II by the Court of Appeals. In Order No. 528, the Commission addressed the issue of the collection by interstate pipelines of the take-or-pay costs included in their fixed charges. Among other things, the Commission stayed the authority of all pipelines to collect fixed charges based on the purchase deficiency allocation method, effective 30 days after publication of Order No. 528 in the Federal Register. In addition, the Commission permitted pipelines subject to Order No. 528 to file new tariff provisions to replace the stayed provisions, and adopted principles under which those proposals will be evaluated. Appendix A to Order No. 528 identified certain pipelines that are not subject to the stay, including those pipelines with recovery mechanisms that have become final and nonappealable. Neither MRT nor its three pipeline suppliers were included in Appendix A. In footnote 8 of Order No. 528, the Commission invited pipelines that were not included in Appendix A as exempt from that order's stay provisions to inform the Commission if they believe that they should be added to Appendix A.

C. MRT's Motion for Clarification

In response to the Commission's invitation, MRT filed on December 28, 1990, a motion for clarification and request to be listed in Appendix A. MRT asks that its take-or-pay flowthrough filings be exempt from the Commission's Order No. 528 stay provision. In support of its request, MRT asserts that no party in any of its flowthrough take-or-pay dockets has protested the filings or sought rehearing of the orders accepting the filings on the grounds that the purchase deficiency methodology violated the filed rate doctrine. MRT states that, although it has itself consistently objected to the application of the purchase deficiency methodology on the MRT system as failing to link cost causation with cost incurrence, neither it nor any other party has preserved the legal issue that the purchase deficiency methodology violated the filed rate doctrine.

Timely answers in opposition to MRT's motion were filed by Illinois Power Company

5 Order No. 528 was published in the Federal Register on November 16, 1990. 55 Fed. Reg. 47,863 (1990). Accordingly, the stay became effective on December 16, 1990.

(Illinois Power), the Missouri Public Service Commission (MPSC), St. Louis Gas Users (St. Louis), and Laclede Gas Company (Laclede). Illinois Power objects to MRT's motion on the grounds that MRT does not have an approved settlement (or one pending Commission approval) or have final and nonappealable recovery mechanisms. MPSC opposes MRT's request because, with the exception of United's recovery of Sea Robin's take-or-pay charges, MRT's upstream suppliers are not exempt from the Order No. 528 stay. St. Louis argues that MRT's flowthrough of its upstream pipelines' take-or-pay charges was conditioned on MRT's revising its tariff sheets to track any modifications the Commission may accept or order with response to take-or-pay charges imposed on MRT by its upstream pipeline suppliers. Laclede opposes MRT's request for the same reason. A timely answer in support of MRT's request was also filed by the Small General Service Municipal Group.

II. Discussion

A. MRT's Motion for Clarification

The Commission has permitted downstream pipelines to be exempt from the Order No. 528 stay provisions only when both: 1) its own methodology is subject either to an approved settlement or to final and nonappealable Commission orders, and 2) its upstream suppliers are exempt from the stay. MRT's motion must be denied because its use of the purchase deficiency allocation method is not final and nonappealable with respect to any of the costs billed by its upstream suppliers.

Although no party in any of MRT's take-orpay passthrough dockets sought rehearing on the grounds that the use of the purchase deficiency methodology to allocate the costs violated the filed rate doctrine, Illinois Power has consistently protested and sought rehearing on the issue of the propriety of the purchase deficiency methodology, arguing on policy grounds that costs should not be allocated based on purchase deficiencies. Furthermore, Illinois Power has sought judicial appeal on this issue. Laclede, while generally accepting the purchase deficiency methodology, consistently argued that costs should be allocated to MRT's interruptible sales customers as well as its firm customers. Following the Commission's denial of its rehearing requests, Illinois Power filed an appeal with the D.C. Circuit Court of Appeals in which it argued that the Commission erred

6 For MRT's list of take-or-pay flowthrough dockets, see Appendix A to this order.

in requiring MRT to use the purchase deficiency allocation methodology.

On January 7, 1991, following Order No. 528, the U.S. Court of Appeals for the D.C. Circuit remanded to the Commission the pending MRT appeals, including that filed by Illinois Power, and expressly directed that the Commission "conduct further proceedings consistent with this court's mandate in [AGD II].”7

Because the MRT passthrough dockets have been remanded to the Commission for further action consistent with the AGD II mandate, MRT's passthrough proceedings are not final and nonappealable on the issue of the use of the purchase deficiency methodology for allocating upstream take-or-pay costs. We therefore deny MRT's request for exemption from the Order No. 528 stay.

B. MRT's Order No. 528 Tariff Filing to Revise Its Allocation of Take-or-Pay Charges Billed to It by Natural

Pursuant to Order No. 528, MRT filed tariff sheets on December 10, 1990, to revise its allocation of the fixed take-or-pay charges billed to it by Natural. Under MRT's primary proposal, take-or-pay costs billed to MRT by Natural would be allocated to MRT's firm sales customers under Rate Schedules CD-1 and SGS-1 on the basis of those customers' contract demands on June 1, 1988, the effective date of MRT's first Natural flowthrough filing. On January 9, 1991, the Commission accepted and suspended the primary tariff sheets subject to refund and conditions and established a conference. The Commission specifically made its acceptance of MRT's primary tariff sheets subject to the Commission's determinations on MRT's motion for clarification. Because the Commission is denying MRT's exemption request, the tariff sheets in RP91-46 are now subject only to the other conditions in the January 9, 1991 order. C. MRT's Request for Rehearing

In its request for rehearing, filed on December 31, 1990, MRT asks the Commission to reconsider its November 30, 1990 Order

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