ton's use of only sales quantities in determining the surcharge, as reflected in the primary proposal, is unacceptable. Accordingly, the Commission rejects Williston's primary proposal reflecting the use of sales volumes only, and accepts the alternate proposal which reflects the use of total throughput (sales and transportation) to calculate the volumetric surcharge.

As noted in the Commission's July 27, 1990 order in Docket No. RP90-137-000,15 the throughput used to calculate the volumetric surcharge is the volume which underlies a pipeline's most recent Commission-accepted rates. The order noted the 50,429,216 Dth figure is the total used in Docket Nos. RP89-257-000 and RP90-2-000. The rates in these dockets are subject to refund based on the outcome of the hearing proceedings. While the rates in effect subject to refund in both dockets are based on the same total throughput, this may not be true for the rates finally adjudicated. In light of this, the Commission will condition its acceptance of the alternate tariff sheets here upon Williston tracking the actual throughput level used in calculating the commodity surcharge to reflect the actual throughput level as finally determined in the above-described pending, as well as any future, proceedings.

The Commission finds that a true-up mechanism must be included as part of the proposed annual reconciliation procedures to prevent Williston's overrecovery of costs under its proposal and to ensure its equitable absorption of 25 percent of the total costs. Generally, the Commission does not use such true-up mechanisms in non-gas rates. As a general rule, nongas commodity rates are developed based on projections of costs and throughput and, to the extent actual throughput or costs are different, the pipelines may retain any overrecoveries but must absorb underrecoveries. 16 Up to now, the Commission has used that method in approving take-or-pay volumetric surcharges where the amount of costs is known (and not projected), but the throughput is projected. However, the Commission is now persuaded that in this context, where the pipeline is not recovering based on cost projections but is allowed to recover a definite amount, the pipeline should not have the potential to overrecover. In these circumstances, a form of trueup mechanism is appropriate. This true-up mechanism should correct for most of the overor underrecoveries of costs resulting from Williston's actual throughput being different from the projected throughput upon which the volu

15 52 FERC 61,096 (1990).

16 The Commission handles gas costs recovered through the PGA mechanism differently. It allows those costs to be tracked for accurate recovery of the exact cost paid by the pipeline.

metric surcharge is based, and ensures that Williston does not overrecover its costs. Thus, Williston will not overrecover its settlement costs because of an inaccuracy in the forecast of its throughput.

The true-up mechanism should not and may not correct for underrecoveries of costs resulting from Williston discounting its volumetric surcharge. Such underrecoveries would be the result not of inaccuracies in the projected throughput used to design the volumetric surcharge, but of market conditions preventing Williston from collecting the full amount of the volumetric surcharge. Consistent with the Commission's general policy that pipelines may not recover the value of transportation discounts given to one customer from their other customers, 17 Williston shall absorb the costs of any discount given of the take-or-pay surcharge and should not be permitted to shift those costs to its other customers through a true-up mechanism included in the volumetric surcharge. Thus, to the extent Williston discounted its volumetric surcharge during a particular year, it could not seek to recover the discounted amounts in the succeeding year by including them in its true-up. So that there will be no dispute concerning whether a particular discount relates to the volumetric surcharge or another part of Williston's rates, the Commission directs that all transportation discounts given must be attributed first to the take-orpay volumetric surcharge. To the extent discounts are in excess of the volumetric surcharge, the portion in excess of the volumetric surcharge will not be considered related to the volumetric surcharge.

Each year, as part of the proposed reconciliation, Williston is directed to compare actual volumes to projected volumes. Any revenue difference due to throughput volumes over or under projections is to be included in the remaining balance due Williston for the total amortization period. This total then is to be divided by the remaining number of years in the period to derive the next year's volume. During the fifth year, Williston will have the option to stop billing when it collects the total costs or to continue the surcharge through the final year and provide refunds. The parties should resolve the details for implementation of the true-up mechanism at the conference, including the disposition of the balance remaining in the fifth year.

Waiver Request

17 See 18 C.F.R. § 284.7(d)(5)(iii). The Commission has only permitted pipelines to recover from their customers the value of transportation discounts given to producers as a trade off for the settlement of takeor-pay claims or for contract reformation.

Williston requests waiver of the 30-day notice requirement to allow an effective date of January 1, 1991. Williston states this action is consistent with Commission policy allowing Order No. 500 filings to become effective the first day of the month following filing. Williston is correct in regard to Order No. 500 filings. However, the instant filing was made pursuant 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. 18 Accordingly, the Commission denies Williston's request for waiver of the 30-day notice requirement and accepts Williston's filing to be effective January 17, 1991.

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 suspensions 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 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 in light of changed circumstances resulting from a court remand. Accordingly, in this case, the Commission will exercise its discretion to suspend the rates for a shorter period and permit the rates to take effect on January 17, 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 described above and listed in Appendices B and C of this order are accepted for filing, subject to the outcome of the conference and the conditions set forth in Ordering Paragraph (C) below, to become effective January 17, 1991, subject to refund.

18 53 FERC at p. 61,595.

(B) The tariff sheets listed in Appendix A are rejected.

(C) Acceptance of Williston's alternate tariff sheets is subject to the final outcome of proceedings in Docket Nos. RP89-257-000 and RP90-2-000 with respect to throughput, subject to the outcome of the review of Williston's compliance filings in Docket Nos. RP90-137-001 and -003 filed August 22 and 28, 1990, respectively and, further, subject to Williston filing, within 15 days of the issuance of this order, revised tariff sheets correcting the error described herein.

(D) Williston's request for waiver of the 30-day notice period is denied.

(E) The Commission Staff is directed to convene a conference within 45 days of issuance of this order to discuss the details of the true-up mechanism as discussed in the text above. Staff shall report the results of the conference to the Commission within 90 days after issuance of this order.

Commissioner Trabandt concurred with a separate statement attached.

Appendix A

Primary Tariff Sheets

First Revised Volume No. 1
Thirty-first Revised Sheet No. 10
Third Revised Sheet No. 123
Original Sheet Nos. 123A-123H
Original Volume No. 1-A

Twenty-fourth Revised Sheet No. 11
Thirtieth Revised Sheet No. 12
Original Volume No. 1-B

Nineteenth Revised Sheet No. 10
Nineteenth Revised Sheet No. 11
Original Volume No. 2

Thirty-second Revised Sheet No. 10
Twenty-fifth Revised Sheet No. 11B

Appendix B

Alternate Tariff Sheets

First Revised Volume No. 1

Alternate Thirty-first Revised Sheet No. 10
Alternate Third Revised Sheet No. 123
Alternate Original Sheet Nos. 123A-123H

Original Volume No. 1-A

Alternate Twenty-fourth Revised Sheet No. 11
Alternate Thirtieth Revised Sheet No. 12
Original Volume No. 1-B

Alternate Nineteenth Revised Sheet No. 10
Alternate Nineteenth Revised Sheet No. 11
Original Volume No. 2

file new tariff provisions to replace the stayed provisions, and the Commission prescribed certain principles under which those proposals would be evaluated. Trunkline's instant filing represents its attempt to comply with the D.C. Circuit's interpretation of the filed rate doctrine and with the goals of Order No. 528 by revising the allocation method for the costs included in its existing fixed take-or-pay charges established in its four previous Order No. 500 filings.

Details of Trunkline's Proposal

Trunkline proposes to absorb 50 percent of the take-or-pay settlement costs and recover the other 50 percent through a fixed charge to be effective January 17, 1991.4

Thus, Trunkline has proposed to continue to absorb the same percentage of its costs which it absorbed in its Order No. 500 filings. However, the filing also states Trunkline reserves its right to seek recovery of the absorbed costs through some other mechanism.

Under Trunkline's proposal, the fixed charge would be allocated to each firm sales customer and each firm transportation customer served under Rate Schedule PT-Firm, its open-access transportation rate schedule, which converted to transportation from sales. The costs included in each of the four previous Order No. 500 filings would be allocated based upon the relevant customer's contract demands as of the date of the Order No. filing in which the costs were originally included. Specifically, this reallocation for each of Trunkline's customers is calculated as follows. The numerator for each customer's allocation fraction is the level of annualized sales and firm transportation contract demand for that customer in effect as of the date of the relevant Trunkline Order No. 500 filing. The denominator is the system total amount of sales contract demand and Rate Schedule PT-Firm contract demand. Trunkline states that in order to mitigate the impact of costs allocated to small general service customers, it has adjusted the numerator of the allocation fraction of each such customer to reflect its actual load factor. Trunkline proposes to reduce the fixed charge amounts allocated to each customer by the amounts already collected from those customers. The total net lump sum of the fixed charges included in this filing is $197.4 million.

Trunkline states the entire amount allocated to a customer with respect to all four of the

4 Payment is to be in one lump sum or, at the customer's election, over a 36-month amortization period.

5 Panhandle will actually bill the revised amounts reflected herein, but each customer need only pay the

previous Order No. 500 filings here at issue is due within ten days of receipt of the invoice, but Trunkline will permit a customer to amortize that lump sum billing over a thirty-six month period. Trunkline proposes to require that any customer electing to use the 36-month amortization period must agree to continue making such payments, with interest, upon the termination of such customer's contract with Trunkline, without condition or qualification. Carrying Charges

Trunkline states that because of the change in the allocation method and the aggregation of costs from the four underlying filings so that now they will all be recovered under the same 36-month amortization period, it is proposing to change its previous method of collecting carrying charges. Trunkline is proposing to calculate carrying charges by reflecting the carrying charges on the outstanding balance in each monthly invoice. Trunkline states that this obviates the necessity for the multiple annual true-up filings previously provided for and therefore such provisions have been removed from its tariff.

Optional Deferred Payment

Trunkline states it recognizes the proposed allocations will raise the charges to some customers when compared to the deficiency-based method and Trunkline believes the best method of resolving the question of the recovery of these costs is by means of a settlement between Trunkline and its customers. Therefore, Trunkline proposes that for a ninety-day period its customers be afforded the opportunity to limit their actual monthly payments to what their obligations would have been if the deficiency-based method continued to be used.5 Trunkline believes this will facilitate settlement discussions, permit a more orderly transition, and mitigate the immediate cost shifting established by the instant proposal.

Allocation to Mississippi River Transmission Corp.

In Trunkline's previous Order No. 500 filings, the Commission required Trunkline to allocate costs included in its fixed charge to Mississippi River Transmission Corp. (MRT), an intrastate pipeline which had sought authorization under NGA section 7 to abandon its obligation to make purchases from Trunkline. Accordingly, in this filing, Trunkline has allocated costs to MRT by imputing to it the level of contract demand

amount previously allocated it under the purchase deficiency method. The difference between the amount billed and the amount paid, including carrying charges, would be reamortized for the remainder of the amortization period at the end of the 90 days.

which it had before the abandonment authorized by the Commission.

Waiver Request

Trunkline requests that the Commission waive the filing requirement of section 154.63 of the Commission's regulations requiring cost and revenue support for the instant filing. Since the instant filing relates only to the costs which were in the earlier take-or-pay filings, Trunkline asserts good cause exists for the Commission to waive its regulations to the extent necessary to permit the rates in its pending rate case in Docket No. RP89-160-000 to be the base rates underlying the instant filing.

Public Notice, Interventions, and Protests

Public notice of the instant filing was issued providing for protests, motions, or notices to intervene to be filed on or before December 27, 1990. Timely notices or motions to intervene were filed by the parties indicated in the Appendix to this order. Pursuant to Rule 214, 18 C.F.R. § 385.214 (1990), any timely filed motions to intervene are granted unless an answer in opposition is filed within 15 days of the date such motion is filed. Any timely filed motions not listed in the Appendix are also granted in accordance with the conditions of Rule 214. Also, motions to intervene out-oftime were filed by the persons indicated in the Appendix. Pursuant to 18 C.F.R. § 385.214(d), the Commission finds that at this early stage of the proceeding the late interventions will not disrupt this proceeding of place additional burdens on existing parties. Accordingly, late filed protests and motions to intervene are granted.

As further indicated in the Appendix, a number of the intervenors included protests in their filings, outlining numerous objections to Trunkline's proposed allocation method. Major issues raised include: (1) whether Trunkline's proposal is consistent with the Commission's equitable sharing policy in Order Nos. 500 and 528, (2) whether the proposed allocation method used violates the filed rate doctrine or the prohibition on retroactive ratemaking; (3) whether the take-or-pay costs were prudently ncurred; (4) whether the method of refund is unjust; (5) whether costs should be allocated to MRT in spite of its abandonment; (6) whether the new allocation is not spread to all customers; and (7) whether the refunds and payments do not coincide.

Discussion

The Commission accepts and suspends Trunkline's filing to be effective January 17,

6 Natural Gas Pipeline Company of America v. FERC, 765 F.2d 1155, 1163-1164 (D.C. Cir. 1985).

1991. The Commission also directs staff to convene a conference at which parties should be prepared to discuss settlement.

In Order No. 528, the Commission sought to encourage pipelines and their customers to reach settlements concerning revised methods for allocating the settlement costs included in their fixed charges. Furthermore, the Commission stated that in order to accommodate settlement discussions, it might, among other things, convene conferences to discuss the possibility of settlement. A number of interveners have either requested, or expressed a willingness to participate, in a conference to discuss settlement.

Accordingly, consistent with Order No. 528, the Commission directs staff to convene a conference at which all issues raised by the protesters may be discussed. All parties should attend the conference prepared to discuss settlement and the parties should be represented by principals who have the authority to commit to a settlement. Staff is directed to report the results of the conference within 120 days of the issuance of this order. Thereafter, the Commission will take such further action as may be appropriate.

In view of the conference to be held to discuss settlement, the Commission will not establish a hearing on prudence or address the individual issues raised by the parties at this time, with the exception of one issue concerning equitable sharing. In Order No. 528, the Commission stated that, consistent with the principle that all segments of the industry should share in paying the costs of resolving the take-or-pay problem, interstate pipelines also must share in paying a portion of the costs. Thus, Order No. 528 required that, absent agreement with their customers and all other affected parties, pipelines must continue to absorb costs as provided in Order No. 500 and the cases decided after Order No. 500.

In its transmittal letter, Trunkline reserves its right to seek recovery of the absorbed costs through some other mechanism. Some protesters contend that this reservation is inconsistent with the Commission's equitable sharing policy. The Commission agrees. As the Commission observed in Order No. 528, the court of appeals has stated in a case where the Commission disallowed a pipeline's recovery of the costs of a failed gas supply project:6

We therefore assume that the natural gas pipeline and its ratepayers were equally blameless for the losses at issue. That assumption, however, need not lead to the conclusion that Natural's ratepayers must,