Background

By order issued on May 1, 1990, the Commission directed Pacific Gas Transmission Company (PGT) and Altamont to file information identified in Appendix F to that order on or before May 15, 1990.2 The Commission stated that if the information was not filed in satisfactory form, the Director of the Office of Pipeline and Producer Regulation (OPPR) would reject their applications, without prejudice to their refiling new applications.

In response, on May 15, 1990, Altamont filed an amended application in Docket No. CP89-1851-002 which contained additional information regarding the Altamont Project and companion applications (including Altamont's application for an optional certificate). In the June 28 order, the Commission

1 Altamont Gas Transmission Company, 53 FERC 61,395 (1990)(denying rehearing of the Commission order issued on June 28, 1990, 51 FERC [61,365). The June 28 order rejected as incomplete Altamont Gas Transmission Company's applicationfiled on July 21, 1989, and amended on May 15, 1990

- for authority under section 7(c) of the Natural Gas Act (NGA) to build a new natural gas pipeline system with a daily capacity of 700 MMcf, which would interconnect with Kern River Gas Transmission Corporation to transport Canadian gas to Southern California.

2 Pacific Gas Transmission Company and Altamont Gas Transportation Project, 51 FERC 61,112 (1990). On December 20, 1988, PGT filed in Docket No. CP89-460-000 et al. an application, as subsequently amended, under section 7(c) of the Natural Gas Act (NGA) for authority to expand existing facilities which will interconnect with other pipelines to transport Canadian gas to the Pacific Northwest and to Southern California. On January 22, 1991 (54 FERC ¶ 61,035), the Commission made a preliminary determination in Docket Nos. CP89-460-000 and CP89-460-001 that PGT's requested expansion

rejected Altamont's amended application. The Commission stated:

The Altamont application, as amended, is patently deficient as to required information and supporting data necessary for the Commission to analyze the proposed project. Specifically, there is no showing of a downstream carrier or facilities which would transport the gas from Altamont's terminus in Opal, Wyoming to the California markets as proposed. Further, Altamont has not provided any realistic indications whatsoever as to when Kern River will be able to file its application with the Commission. In this connection, section 157.13(c) of the Commission's regulations provides that "[w]hen an application considered alone is incomplete and depends vitally upon information in another application, it will not be accepted for filing until the supporting application has been filed. When applications are interdependent, they shall be filed concurrently.

1

Thus, as filed, Altamont's application is incomplete and no determination of the public convenience and necessity can be made.

authorization, with modifications, is required by the public convenience and necessity.

3 Contemporaneously with the filing of the amendment, Altamont filed (1) an application in Docket No. CP90-1372-000 for a Part 284 blanket certificate, (2) an application in Docket No. CP90-1373-000 for NGA section 3 authority to construct pipeline facilities at the U.S.-Canada border for the purpose of importing natural gas into the United States from Canada, (3) an application in Docket No. CP90-1374-000 for a Presidential Permit for the construction, operation, connection, and maintenance of pipeline facilities at the U.S.-Canada border, and (4) an application in Docket No. CP90-1375-000 for an optional certificate under subpart E of Part 157 of the regulations to construct the same general facilities as proposed in Docket No. CP89-1851-000, as amended in Docket No. CP89-1851-002. By order issued on January 17, 1991 (54 FERC ¶ 61,028), the Commission made a preliminary determination that Altamont's requested authorizations, with modifications, are required by the public convenience and necessity.

(Emphasis in original and footnotes omitted.)4

On July 30, 1990, in Docket No. CP89-1851-003, Altamont filed a request for rehearing of the June 28 order. Among other things, Altamont argued that the June 28 order discriminated against Altamont by dismissing its amended application because of Kern River's failure to file a related expansion application while continuing to consider PGT's competitive application despite similar deficiencies. The December 18 order rejected that argument (mimeo, at 8) stating that:

[W]e do not agree... that the PGT expansion application should be dismissed for PG&E's failure to file its downstream expansion application with the Commission. PG&E, a nonjurisdictional local distribution company which is an affiliate of PGT and whose existing and planned expansion facilities are located entirely in the State of California, is not required to file its related expansion application with this Commission. The construction and operation of the PG&E expansion facilities involve intrastate services to be regulated by the CPUC. Coincidentally, on April 14, 1989, as amended October 2, 1989 in Docket No. A. 89-04-033, PG&E filed its related expansion application with the CPUC and subsequently forwarded a copy of the application to the Commission staff.

El Paso's request for rehearing

In support of its request for rehearing, El Paso states that the jurisdictional conclusion quoted above is in error and does not address the central issue on rehearing, i.e., whether, in conjunction with facilities subject to PGT expansion filing in Docket Nos. CP89-460-000 and CP89-460-001, the Commission also has jurisdiction under the NGA over certain integrally related pipeline facilities to be constructed and the services to be provided from such facilities by PG&E. El Paso contends that PG&E should be required to obtain authorization from this Commission to construct, own and operate the proposed facilities between Malin, Oregon and the Kern River Station in California. El Paso contends that this jurisdictional action is required, among other things, because:

(1) the PGT-PG&E expansion project involves the construction of extensive, interconnected interstate pipeline facilities and contemplates the long-term transportation in

* June 28 order, 51 FERC at pp. 62,182-62,183.

5 Specifically, Altamont argued that, despite the June 28 order's dismissal of Altamont's application, the Commission continued to consider PGT's competi

interstate commerce of significant quantities of gas from Canada to Southern California; (2) the precedent agreements and other information furnished by PGT and PG&E reflect that both companies jointly determined which shippers would obtain capacity on the expansion project, based on the highest relative present value of the reservation charge each shipper was willing to pay for capacity on the expansion project from the U.S.-Canada border to Southern California, with the project being considered as a single entity; and

(3) one PG&E witness, a Vice-President of PGT, testified at the PG&E expansion proceeding before the CPUC that PGT and PG&E will jointly establish a single project organization to direct the entire expansion project.

In the alternative, El Paso requests that the Commission on rehearing vacate the quoted portion of the December 18 order and defer consideration of the issue to the PGT expansion proceeding, where the record contains substantial pertinent material. If the Commission does not defer consideration of this issue to the PGT expansion proceeding, El Paso asks that the material appended to the request for rehearing and drawn from the records of the Commission and the California Public Utilities Commission be incorporated into the record of Docket No. CP89-1851.

Discussion

The jurisdictional issue of whether, in conjunction with the PGT expansion facilities, the Commission also has NGA jurisdiction over PG&E's proposed expansion facilities was never raised by Altamont on rehearing in Docket No. CP89-1851-003. Our mention of PG&E's nonjurisdictional status in the December 18 order was solely for the purpose of explaining why the June 28 order's dismissal of Altamont's section 7(c) application and our refusal to dismiss the PGT expansion application, as amended, did not constitute undue discrimination, as Altamont had argued. In essence, El Paso's request for rehearing and its alternative motions are nothing more than a request for rehearing of a previous rehearing order, i.e., the December 18 order.

In any event, the arguments advanced by El Paso are more appropriately raised on rehearing in the PGT expansion proceeding, where (as El Paso notes) the record contains substantial pertinent material relating to the PG&E

tive application even though Pacific Gas & Electric Company (PG&E) had failed to file its expansion application which is inextricably related to PGT's expansion proposal.

tive December 16, 1990. The Commission permitted pipelines subject to Order No. 528 to file new tariff provisions to replace the stayed provisions, and set forth certain guidelines under which those proposals would be evaluated.

The Commission exempted from the Order No. 528 stay, pipeline filings accepted by Commission orders that have become final and nonappealable, or filings subject to take-or-pay settlements which the Commission has approved and which have become effective. The Commission listed on Appendix A to Order No. 528 those pipeline proceedings which it had been able to identify as falling into these categories. In addition, the Commission invited any pipeline that believed other proceedings fell into the exempt categories to file with the Commission indicating the basis for its position.

Southern was listed on Appendix A to Order No. 528 as exempt from the stay by virtue of its settlement in Docket No. RP86-63-000.5 Neither TETCO, nor its other two upstream pipelines, United and Texas Gas, were included in Appendix A.

United is a primary pipeline that passes through to TETCO both take-or-pay costs paid directly to its producer suppliers and those costs allocated to United by Sea Robin Pipeline Company (Sea Robin), its upstream pipeline supplier. While the Commission did not include United in Appendix A to Order No. 528, the Commission subsequently, by order issued December 14, 1990, deferred the application of the Order No. 528 stay to United's recovery of the costs of take-or-pay settlements with its producers, until 30 days after the Commission issues a final order on United's pending November 1988 global settlement in Docket No. RP85-209-020 et al. The Commission exempted from Order No. 528 United's passthrough in Docket No. RP89-147-000 of fixed charges billed to it by Sea Robin. Accordingly, United

5 See 46 FERC ¶ 61,336 (1989).

6 53 FERC 61,380 (1990).

7 54 FERC 61,097 (1991).

8

Texas Gas also made an adjustment on behalf of its small customers. Instead of using the actual D-1 quantity of its SG customers, Texas Gas calculated an equivalent daily quantity by dividing annual D-2 quantities by 365.

9 Texas Eastern Transmission Corp., 44 FERC ¶ 61,413 (1988), reh'g denied, 47 FERC 61,100 (1989), remanded sub nom. Tejas Power Corp. v. FERC, 908 F.2d 998 (D.C. Cir. 1990), order on remand, 53 FERC ¶ 61,105 (1990).

is currently continuing to bill fixed charges to TETCO that are allocated based on the purchase deficiency method.

Texas Gas is currently subject to Order No. 528. Texas Gas passes through take-or-pay costs paid to its producer suppliers, as well as costs from its upstream pipeline suppliers, United, Sea Robin, and Tennessee Gas Pipeline Company (Tennessee). To date, Texas Gas has filed a new allocation method only for the recovery of its take-or-pay costs paid directly to its producers, and not for the recovery of take-or-pay costs billed to it by its upstream pipeline suppliers. Thus, Texas Gas' collection of costs billed to it by its upstream pipeline suppliers is currently stayed, and those costs are not currently being billed to TETCO by Texas Gas. In Docket No. RP91-61-000, Texas Gas filed its new allocation method to pass through the costs it paid directly to its producers, which, by order? issued January 31, 1991, the Commission accepted and suspended, effective February 1, 1991, subject to refund and conditions. Texas Gas' proposed methodology reallocates costs using the customers' peak-day contract demand (D-1) and nominated annual (D-2) quantities which were in effect for each firm sales and converted firm transportation customer on the effective dates of each of Texas Gas' Order No. 500 filings.8

On November 9, 1990, TETCO filed a motion to be included in the category of pipelines not subject to Order No. 528. TETCO argued that, based on pro forma tariff language approved as part of its May 1988 gas inventory charge settlement in Docket No. RP85-177-000 et al., its customers have agreed to TETCO's allocation of upstream pipeline supplier takeor-pay costs on a purchase deficiency basis. 10 By order issued December 14, 1990,11 the Commission denied TETCO's motion, finding that the May 1988 settlement did not authorize TETCO to recover upstream take-or-pay costs using the purchase deficiency methodology. On

tory reservation charge mechanism, Seller will file to recover such costs based on an appropriate allocation methodology to be determined at the time but which recognizes and takes into account the responsibility of all sales customers during the relevant time periods for the "take-or-pay costs" which were incurred by Seller's pipeline suppliers and the relevant time period during which Seller's pipeline suppliers entered into contracts to serve particular sales customers.

Texas Eastern FERC Gas Tariff, Fifth Revised Volume No. 1, First Revised Sheet No. 472, General Terms and Conditions, section 28.6.

11 53 FERC 61,375 (1990).

the same date as the instant order, the Commission issued an order12 denying rehearing of its December 14, 1990 order.

Description of the Filings

TETCO made the instant four tariff filings on January 15, 1991, to become effective on February 15, 1991. Where the upstream pipeline has not filed to revise its allocation method, TETCO filed primary and alternate tariff sheets. In those cases, the primary sheets would recover the costs using the upstream suppliers' purchase deficiency allocation method. The alternate tariff sheets would allocate the take-or-pay costs among TETCO's customers based on each customer's annual contractual quantities at the time of TETCO's original filing to recover the upstream pipelines' take-or-pay costs. However, in Docket No. RP91-72-000, concerning TETCO's flowthrough of costs Texas Gas paid directly to its producers for which Texas Gas has proposed a new allocation method, TETCO filed a single set of proposed tariff sheets tracking Texas Gas' new allocation method.

I. Docket Nos. RP91-73-000, RP91-74-000, and RP91-75-000

A. Primary Tariff Sheets

Since United and Southern are not subject to the Order No. 528 stay and have not been required to refile new tariff provisions, TETCO has filed, as its primary proposal, to continue to recover its upstream supplier costs using the purchase deficiency allocation method. In addition, despite the fact that Texas Gas' collection of upstream pipeline supplier costs is currently stayed, so that Texas Gas is not currently billing TETCO for those costs, TETCO nonetheless has filed tariff sheets (both primary and alternate) in Docket No. RP91-75-000 to recover the fixed charges through which Texas Gas recovers those upstream costs, and the primary sheets propose to allocate those costs based on purchase deficiencies.

TETCO submits that its primary as-billed method conforms to the Commission's direction in Order No. 528 to minimize the effect of allocation methodologies on small, captive customers, and results in fewer distortions in the ultimate recovery of take-or-pay settlement costs as downstream pipelines flowthrough the

12 54 FERC ¶ 61,151 (1991).

13 TETCO, however, recognizes that the Commission denied its motion for inclusion on Appendix A to Order No. 528, and rejected its argument that the settlement provision authorized TETCO to utilize a purchase deficiency methodology.

14 TETCO filed its "Motion for Deferral of Filing Requirement Pending Final Commission Order on

costs. In addition, TETCO argues that its proposal is consistent with the provision of its May 1988 gas inventory charge settlement stating that TETCO would file to recover upstream pipeline supplier costs based on an allocation methodology that "recognizes and takes into account the responsibility of all sales customers during the relevant time periods for the 'takeor-pay costs' which were incurred by [TETCO's] pipeline suppliers and the relevant time period during which [TETCO's] pipeline suppliers entered into contracts to serve particular sales customers." 13 TETCO states that with its primary proposal, it seeks to abide by the requirements embodied in the settlement tariff provision.

In addition, as a result of the Commission's deferring application of the Order No. 528 stay to United, TETCO has conditioned its primary filing in Docket No. RP91-73-000 upon the Commission's approval of United's pending settlement, so that if United ultimately is required to utilize an allocation method other than the purchase deficiency method, TETCO, too, will use that other method. TETCO also has contemporaneously filed a separate motion seeking authority to defer its obligation to refile tariff sheets for its flowthrough of United's take-or-pay costs and to continue deficiency-based flowthrough of fixed charges from United pending final Commission action on United's settlement. 14 This motion, and the answers filed in response to it, are addressed below in our discussion.

B. Alternate Tariff Sheets

Under its alternate proposals, TETCO proposes to allocate the relevant Southern, Texas Gas, and United costs among its firm sales and converted transportation customers based on each customer's annual contractual quantities at the time of TETCO's original filing to recover these costs. TETCO calculates the allocated percentage for each sales customer and each customer served under Rate Schedule FT-1 (firm transportation service resulting from the conversion of sales service) by dividing each customer's annual contractual quantities as of the date of TETCO's original Order No. 500 filings by the total amount of firm sales service and converted Rate Schedule FT-1 firm service on the system as of the date of the respective filings. For Rate Schedule SGS cus

United Gas Pipe Line Company Settlement" on January 15, 1991, in Docket Nos. RM91-2-000, RP88-80-015, RP89-153-004, RP89-154-003, RP90-96-003, TM89-6-17-000, TM89-10-17-000, TM90-7-17-000, TM90-11-17-000, TM90-14-17-000.