of the Commission's June 30, 1989 order. On October 19, 1990, the Commission issued an order granting in part and denying in part the requests for rehearing and granting clarifica

tion.

Rehearing Requests

Panhandle's request for rehearing of the Commission's October 19, 1990 Order is limited to the Commission's statement in that Order? that "Anadarko has shown that in October 1989 Panhandle scheduled transportation of nominated volumes of gas for Anadarko for November, but then curtailed some of the transportation as the result of a claimed oversubscription at Panhandle's Haven station." Panhandle contends that this statement is factually incorrect, that there has been no such showing and cannot be any. In support of its application for rehearing, Panhandle has submitted an explanation and affidavits.9

Accordingly, Panhandle requests that the Commission grant rehearing for the limited purpose of finding that there had been no showing that volumes were scheduled and curtailed, and that the Commission find that volumes were not scheduled because of the decisions of the shippers and their other transporters.

The instant petitioners, Indicated Parties and Independent Marketers (petitioners), raise several objections to the October 19 Order.

These petitioners contend that the Commission erred by approving on rehearing a price posting mechanism that violates the filed rate doctrine and that is not the product of reasoned decision making.

These petitioners also contend that the Commission erred in failing to find that Panhandle purchased spot market gas for resale in violation of its express representation that the program was for sales from long-term contracts for system supply.

These petitioners also state that the Commission erred in relying on evidence not in the (Footnote Continued)

account, Panhandle will absorb that amount. If there is an overcollection, Panhandle has stated that it will refund the balance plus interest from the date of the end of the program until the date the refund is made. 7 53 FERC 61,098 (1990), at p. 61,304.

8 The Haven station is located in Kansas.

9 Panhandle has submitted affidavits of Messrs. Wayne C. Templeton (who it states was in charge of scheduling transportation for Panhandle in November, 1989), and John C. Kelly (who it states is its Director, Gas Control, and was in charge of the dayto-day operations of Panhandle's pipeline system in November 1989).

10 In addition, they request that the date on which the rate must be filed prior to the period in

record and obtained in an ex parte inquiry and response.

These petitioners believe that the Commission erred in failing to act on either the filings of Anadarko or of Independent marketers.

Indicated Parties and Independent Marketers request that rehearing be granted, that the decision on rehearing be vacated in regard to the prior period in which the rate will apply, 10 that Panhandle be prohibited from purchasing spot market gas supply in contravention of its representation, that Panhandle be prohibited from denying access to interruptible transporters through its West End system through manipulation of its takes from Trunkline and from curtailing interruptible transportation on a discriminatory basis, that the Commission vacate that portion of the October 19 order on rehearing wherein ex parte communications were considered, and that the Commission initiate a show cause or establish another appropriate remedial proceeding to provide an opportunity for parties to obtain redress.

Discussion

A. Notice of applicable commodity rate

Indicated Parties and Independent Marketers contend that the Commission erred by approving on rehearing a price posting mechanism that is violative of the filed rate doctrinell and that is not the product of reasoned decision making.

In the June 30, 1989 order, we directed Panhandle to modify its proposal to post its price at least by the day before the beginning of the month it is to be effective, so that customers would know the price of Panhandle's gas before making a purchasing decision. 12 Panhandle sought rehearing of the Commission's requirement in that order that Panhandle post its commodity rate for the billing month by the

which the rate will apply be reconsidered, as requested by Anadarko and others.

11 Under the filed rate doctrine, a pipeline may charge only the rate on file with the Commission for that service during the period in question. See Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 578 (1981); and Columbia Gas Transmission Corp. v. FERC, 831 F.2d 1125 (D.C. Cir. 1987), modified on reh'g, 844 F.2d 879 (D.C. Cir. 1988).

12 The Indicated Parties had complained that the Commission allowed Panhandle to inform sales customers of the gas cost component after the time when competing merchants whose gas is being shipped on Panhandle have already had to establish their transportation arrangements with Panhandle, giving it the opportunity to engage in predatory pricing.

last day of the preceding month. 13 In our October 19 order, we granted that request, stating that the lag in the prior month's spot market price and its incorporation in Panhandle's commodity rate formula may distort the purchasing decisions of Panhandle's sales customers. The Commission concluded that Panhandle cannot manipulate its price and engage in predatory pricing because the market price component of its commodity rate formula is determined by the prices negotiated between producers and marketers and purchasers as reported by the three identified market publications.

A major purpose of the filed rate doctrine is to ensure that customers have adequate notice of the rates they will be charged. Notice of the price formula used by Panhandle, which is comprised of the prices negotiated between producers and marketers and purchasers as reported by the three identified market publications, is provided under Panhandle's proposal. The Commission need not confine rates to specific, absolute numbers but may approve, as here, a tariff containing a rate "formula" or a rate "rule." 14 Further, while the notice requirement exists for the benefit of both customers and other parties, no customers complain about the pricing formula in issue, and Panhandle's competitors, who are challenging Panhandle's proposal, retain the option of utilizing the same formula as Panhandle.

B. Spot market purchases

Indicated Parties and Independent Marketers also contend that the Commission erred in failing to find that Panhandle's purchase of spot market gas for resale was inconsistent with its express representation that the program was for sales from long-term contracts for system supply.

The Commission rejects this argument. The Commission's approval of the SSP proposal was based, in part, on the assumption that Panhandle would rely primarily on its existing longterm contracts as the source for SSP gas. However, the Commission did not assume that Panhandle would not make any spot purchases to make SSP sales, and Panhandle never agreed to entirely forego spot purchases. In any event,

13 Panhandle contended that the requirement that Panhandle post changes in the commodity rate for the billing month by the last day of the preceding month might distort the purchasing decisions of Panhandle's sales customers and was not necessary to achieve the Commission's objectives. Panhandle also argued that it would not know the spot price for the billing month from independent publications by the time it must post the price pursuant to the terms of the Commission's June 30, 1989 order. After further consideration, we granted rehearing in our October 19, 1990 order.

information on the operation and status of the SSP provided by Panhandle in response to a February 8, 1990 letter signed by the Deputy Director of the Commission's Office of Pipeline and Producer Regulation, indicates that Panhandle made certain spot purchases. However, Panhandle has an obligation to meet its sales CD, and must purchase gas from any available source, including spot gas, in order to meet that obligation. In addition, December 1989 was one of the coldest months on record. These facts were known to the Commission without benefit of Panhandle's response to the February 8 letter, and were the basis of the Commission's decision. Panhandle's response to the February 8 letter only provides additional support for the findings made by the Commission in the October 19 order, which were fully supported in the absence of the February 8 letter and Panhandle's response.

C. The February 8, 1990 letter

Indicated Parties and Independent Marketers also state that the Commission erred in relying on evidence not in the record and obtained in an ex parte inquiry and response. The petitioners contend that the decision of the Commission allowing Panhandle to make spot market purchases of gas was based on information on the operation and status of the SSP in response to the February 8, 1990 letter and the Commission's reference to data in that response that supports Panhandle's arguments. The petitioners request that "[t]hose portions of the order on rehearing granting further concessions to Panhandle, including departure from the filed rate doctrine and the sanctioning of purchases of spot market gas should be vacated immediately." 15

The petitioners' possessive presumptions that the Commission's decision relied on the referenced submission and that the letter, before the Commission, could not be referenced are in error. Staff sent the data request on February 8, 1990. Data responses were received from Panhandle on March 14, 1990 and April 17, 1990.16 Staff's data request was entered into the official record of this proceeding on February 8, 1990, and Panhandle's data responses were entered on September 27, 1990.

14 Transwestern Pipeline Company v. FERC, 897 F.2d 570, 578 (D.C. Cir., 1990). Where the Commission, as here, explicitly adopts a formula and indicates it will take effect, courts may not (without invading the Commission's province) say that such a formula may never qualify as a "rate" within the meaning of §4 or § 5 of the Natural Gas Act. Id. at 578.

15 Petitioners' Request For Rehearing, p. 13.

16 In responding to the Deputy Director's February 8, 1990 letter, Panhandle should have made the

The order on rehearing issued on October 19, 1990.

In addition, the Commission's October 19, 1990 order did not rely upon Panhandle's response to the February 8 letter. The discussion above indicates that this is certainly the case concerning the spot purchases issue. With regard to the issue of the appropriate notice for the applicable commodity rate, the Commission noted that based upon information filed by Panhandle in its response to the February 8, 1990 data request, the difference between the compliance price and the spot market price has ranged from three cents per MMBtu to fifteen cents per MMBtu.17

However, as with the Commission's determinations concerning the spot purchases, the Commission's reference to the February 8, 1990 letter is not critical to the Commission's finding that Panhandle's SSP pricing proposal is reasonable, although it does tend to support the finding.

There was ample reason for the Commission to conclude that rehearing should be granted concerning Panhandle's proposed pricing provision. As Panhandle argues, which Anadarko does not dispute, and as discussed in the October 19 order, the SSP is designed to preclude Panhandle from exercising any discretion over the market price component of its commodity rate formula 18 The prices which Panhandle uses to derive the SSP rates are the average of the prices reported by three independent industry publications. The SSP commodity rate will, in this manner, be determined by the prices negotiated between producers and marketers and the purchasers. Panhandle will not know the spot price for the billing month from independent publications by the time it must post the price pursuant to the terms of the Commission's order.

In the October 19 order, the Commission also referred to the February 8, 1990 letter in the (Footnote Continued)

filing in accordance with § 385.2001 et seq. of the Commission's regulations.

17 53 FERC 61,098 (1990), at p. 61,302.

18 Id. 19 Id. at p. 61,304.

20 As noted by Panhandle, Anadarko and Independent Marketers attempted to supplement their previously filed requests for rehearing, which is not allowed under the Commission's regulations.

21 53 FERC 61,098 (1990), at p. 61,304.

22 On January 12, 1990, Anadarko filed a motion for leave to lodge documents relevant to its request for rehearing. It contended that the documents showed that Panhandle was purchasing gas for system supply on the spot market for resale under the SSP. Anadarko argued that this practice was contrary to

portion of the discussion captioned "Requests for leave to lodge documents and to expedite rehearing." "19 Anadarko and Independent Marketers filed submissions that the Panhandle Customer Group and Panhandle argued were improperly filed motions to augment Anadarko's and Independent Marketers' then pending requests for rehearing.20 In rejecting both Anadarko's and Independent Marketers' motions in the October 19 order, the Commission determined that Anadarko had not met its burden of showing a direct link between the spot purchases and Panhandle's failure to transport Anadarko's gas.21 The Commission found that Anadarko had not supported its claim that Panhandle's spot purchases were made to take the place in the sales market of the gas that Panhandle did not transport because Anadarko did not show that Panhandle did, in fact, make sales in the markets in which Anadarko was selling and for which the untransported gas was intended. Nor did it identify the customers that Panhandle purportedly sold to in lieu of transporting gas for Anadarko. Anadarko's failure to meet its burden cannot be attributed to the Commission's reference to the February 8, 1990 letter, which, in any event, was not the basis for the Commission's decision.

Finally, in any event, by making public the data request and responses thereto, all parties were fully notified of the information in the official record. The information was therefore available to all interested persons who could have commented on the information in their rehearing petitions or in other pleadings.

D. Filings submitted by Anadarko and Independent Marketers

Indicated Parties and Independent Marketers also contend that the Commission erred in failing to act on either the filings of Anadarko22

Panhandle's express representation that it would not purchase gas on the spot market for the program. It maintains that these purchases change the economic considerations purportedly underlying the SSP. It asserts that spot market purchases do not enhance production of pipeline dedicated supplies in order to retain supply, achieve optimum purchasing levels, and reduce inventory-related costs. It also contended that spot market purchases do not eliminate take-orpay liability. As we previously noted, the gravamen of Anadarko's complaint is that Panhandle obtained undue competitive advantages because of its SSP by making major spot market sales. It claims that Panhandle has been able to frustrate the ability of other merchants to compete meaningfully for gas sales during the months of peak demand. 53 FERC ¶ 61,098, at p. 61,303 (1990).