(C) Public Service Company's motion to reject is hereby denied.

(D) New England Power's request for waiver of notice requirements is hereby granted in part, to the extent discussed in the body of this order.

(E) New England Power's proposed Contract and Transmission Agreement are hereby accepted for filing and suspended, to be effective as of the date New England begins to provide service, subject to refund.

(F) Pursuant to the authority contained in and subject to the jurisdiction conferred upon the Federal Energy Regulatory Commission by section 402(a) of the Department of Energy Organization Act and by the Federal Power Act, particularly sections 205 and 206 thereof, and pursuant to the Commission's Rules of Practice and Procedure and the regulations under the Federal Power Act (18 C.F.R., Chapter I), a public hearing shall be held for the purpose of determining the appropriate interpretation of the rights and obligations of the parties under section VI of the 1981 Agree

ment.

(G) A presiding administrative law judge, to be designated by the Chief Administrative Law Judge, shall convene a conference in this proceeding to be held within approximately ten (10) days from the date of this order, in a hearing room of the Federal Energy Regulatory Commission, 810 First Street, NE., Washington, DC 20426. Such conference will be held for the purpose of establishing a procedural schedule. The presiding judge is authorized to establish procedural dates and to rule on all motions (except motions to dismiss) as provided for in the Commission's Rules of Practice and Procedure.

(H) Docket Nos. ER91-235-000, ER91-143-000, and EL91-15-000 are hereby consolidated for purposes of hearing and decision.

(I) New England Power is hereby informed of the following rate schedule designation:

hearing. I hold the New Hampshire Electric Co-operative (the Co-op) cannot now sever its contractual relationship with the Public Service Company of New Hampshire (PSNH). I concur in the hearing because the course we take at least freezes the status quo. It also does not foreclose us from reaching the right result later on. I write separately to give the parties the benefit of my current views and allow the litigants to address them.

PSNH And The Co-op Make A Deal

The background section of the order recites that the root of the dispute between PSNH and the Co-op (this being one of three cases the parties have brought here) lies in an agreement the parties executed to "establish their service relationship for the period after Seabrook Unit No. 1 (Seabrook) went into commercial operation." Slip op. at 1. In fact, this litigation goes back further.

The New England utilities involved in the project, including PSNH, encountered great difficulty in bringing their nuclear plant, Seabrook, from the drawing board into being (see, e.g., Canal Electric Company, 46 FERC

61,023 (1989) and my partial dissent, 46 FERC at pp. 61,133-61,134). As we saw in the first of these controversies, Public Service Company of New Hampshire (PSNH I), 54 FERC

61,106 (1991), petition for rehearing pending, somewhere along the way, to secure financing PSNH turned to the Co-op, which purchased a share in the unit.

Unable to use all of its entitlement, the Coop sold its Seabrook electricity to PSNH. The utility, in turn, contractually obligated the Coop to purchase electricity from Seabrook (because PSNH did not want to be saddled with the Co-op's entire share). Using industry parlance, the Co-op became a “partial requirements" customer of PSNH. In return, under a "sell back" agreement, PSNH undertook to buy what the Co-op could not use.

Today's order, under the heading "Relevant Contractual Provisions," also quotes section I and exhibit B of the original contract. Section I states that parties must give five-years' "written" notice “specifying a date of termination.” Exhibit B allows the Co-op to reduce service (by changing sources of supply) on two-years' notice but requires five-years' to cancel. (In PSNH I, which we have set for hearing, the utility claims and the Co-op denies that later amendments changed that to 10-years' notice.) The Co-op Wants Out

Those familiar with PSNH I know that in the intervening time, circumstances led PSNH to propose a large (182%) rate increase for the Co-op. That, naturally, induced the Co-op to seek a cheaper source of power to substitute for

PSNH. The Co-op found one, and now comes to us to approve the change. To get around the five-year notice provision, the Co-op points to section VI of the PSNH contract, which the order also quotes.

Under that provision, if certain events occur, PSNH "shall thereafter cease to be required to offer such [partial requirements] services under this Agreement. . . . The SELLER shall offer contract demand service in lieu of partial requirements service which is offered under this Agreement ...." (Emphasis added). The Co-op claims that it may refuse what PSNH offers (contract demand service). Therefore, section VI overrides the five-year notice provisions. My colleagues find the contract ambiguous on this point.

For the reasons I set out in the next section, I do not.

Why I Would Not Allow That Now

To me, as the discussion section of the order points out, the parties have cast section VI in terms of a change in PSNH's obligation. The provision mentions nothing about changing the Co-op's. That means that just as without section VI the Co-op must buy from PSNH, once section VI comes into play it must continue to do so. The only change occurs in the type of service PSNH sells.

The majority, lending some credence to the Co-op's argument, finds that the phrase PSNH "shall offer contract demand service" negates any requirement for the Co-op to buy. I think that reads section VI out of context. We must read the word "offer" here in the same way as in the previous sentence. The wording there states that PSNH "shall cease to be required to offer [partial requirements] services . . . ."

If the parties meant "offer" not to bind the purchaser, then the Co-op need not buy even partial requirements service. The Co-op could break the contract without fulfilling the conditions bringing section VI into operation. The parties describe the arrangement preexisting section VI as PSNH "offer[ing partial requirements] services." Reading "offer" that way totally ignores the notice provisions and even the Co-op does not go that far.

I think, therefore, that the word "offer" means "provide." Moreover, requiring notice makes sense as well. First, the Co-op (Answer at 9) claims that it does not want to terminate the contract now. Rather, the Co-op wants to keep open the possibility of buying from PSNH if Seabrook electricity becomes cheaper than the alternative. To me, sound judgment dictates that if the Co-op wants to hold PSNH as a potential supplier, it should pay the utility for contract demand service. I would not relieve the Co-op of that obligation, thus arguably giving one side a "free ride."

Finally, I think in ruling on this dispute we must keep in mind the essence of the case: as part of financing Seabrook, the parties contracted to divide the Co-op's share of the unit's electricity. The Co-op would purchase some and PSNH would sell the excess. Part of that deal required the Co-op to give notice before cancelling the contract. I believe in keeping these parties to their bargain. Considering all that has happened with PSNH, we can do no less.

Nevertheless, I concur.

Background

On November 2, 1990, the presiding administrative law judge (ALJ) issued a Partial Initial Decision in Docket No. RP88-92-000 et al.,1 holding that United's rates must be adjusted downward as of January 1, 1991 to reflect the fact that United is no longer incurring costs for transportation on Northern Bor

153 FERC 63,008 (1990).

der Pipeline Company (Northern Border).2 The ALJ found that pursuant to the terms of United's tariff and the terms of United's comprehensive Settlement in Docket No. RP85-209 et al., the provision of United's tariff which provides for the passthrough to United's customers of any increases or decreases in costs related to United's agreement with Northern Border for transportation of Canadian gas (ANGTS tracker) is automatically reinstated as of January 1, 1991.3 The ALJ found that as a result of the reinstatement of the ANGTS tracker, United's rates should be reduced to reflect a reduction of $46.9 million in United's cost of service resulting from the abandonment of the Northern Border Agreement.4

On November 16, 1990, Entex, a division of Arkla, Louisiana Gas Service, and New Orleans Public Service, Inc. (Entex et al.) filed a joint complaint and settlement in Docket No. RP91-28-000.5 In the complaint, Entex et al., alleges that United's rates are unjust and unreasonable after the termination of the Settlement on December 31, 1990 because those rates do not reasonably reflect the greatly reduced level of costs being experienced by United. Entex asserts that United's cost of service includes costs associated with Northern Border, ANR storage, and other Account No. 858 costs which United no longer incurs and that, as a result, United is overcollecting its cost of service by some $450,000 per day. Entex states that the rates proposed in its settlement are just and reasonable. Since December 11, 1990, United has filed three settlement proposals, each superseding the prior proposal, to resolve both the Account No. 858 issues discussed above and other issues in these proceedings. On February 1, 1991, United made the subject tariff filing to revise its rates. United states that this filing supersedes

United's proposed settlement of January 15, 1991.

The February 1, 1991 Filing

In this filing, United proposes changes to its FERC Gas Tariff, Second Revised Volume No. 1.6 United states that in submitting this filing, it seeks to effectuate reduced rates and revenue responsibility for all jurisdictional customers on its system for the six-month period April 1 through September 30, 1991. United states further that the proposed rate levels, when compared to United's currently effective rates under its Base Stipulation and Agreement in Docket No. RP85-209 et al., provide for substantial reductions in the rate levels and revenue responsibility of United's firm sales customers served under Rate Schedules PL, DG and G, and a rate decrease for United's firm and interruptible transportation customers. United proposes that the rate levels shall become United's Base Tariff Rates for all jurisdictional services rendered, and shall remain United's Base Tariff Rates through September 30, 1991. In addition, United states that its filing provides for the cancellation, effective January 1, 1991, of the ANGTS tracker.

United's filing was conditioned upon the following events occurring on or before February 15, 1991: (1) Entex had to conditionally withdraw its complaint and settlement in Docket No. RP91-28-000 and conditionally request that the Commission terminate the proceeding with prejudice; (2) all of United's City Gate Customers and Texas Eastern Transmission Corporation (Texas Eastern) had to conditionally withdraw any pleading they filed in support of the Entex complaint and settlement and conditionally request that the Commission terminate the proceeding; (3) all of United's City Gate customers and Texas Eastern had to

ment of a record sufficient to determine whether the Settlement achieves the goals of the Rate Design Policy Statement. The Partial Initial Decision discussed above was issued in that proceeding. In addition, on December 20, 1990, the ALJ issued an expedited Initial Decision in the proceeding finding that United's rates are not consistent with the Rate Design Policy Statement and directing United to make certain changes in its rate design. 53 FERC ¶ 63,019 (1990). Exceptions to both Initial Decisions are pending before the Commission.

5 On February 8, 1991, Entex filed a conditional withdrawal of its complaint. On February 25, 1991, Air Products filed a motion in opposition to Entex's withdrawal and noted that in its motion to intervene in that proceeding, Air Products had requested that the motion to intervene be treated as a separate complaint.

6 See Appendix A for a complete list of proposed tariff sheets.

file a motion to intervene in support of Commission acceptance of the subject rate filing in its entirety; and (4) all of United's City Gate customers and Texas Eastern had to file with the Commission a written notice in Docket No. RP88-92 et al., stating that they conditionally waive and relinquish any and all rights to a reduction in rates or any refunds which may be attributable to the termination of United's Northern Border agreement, or as a result of any Commission action on the "Partial Initial Decision" issued November 2, 1990 by the administrative law judge in Docket No. RP88-92 et al.; and that they conditionally waive and relinquish any and all rights to receive the benefit of any reduction resulting from any Commission action on the "Expedited Initial Decision" issued December 20, 1990 by the administrative law judge in Docket No. RP88-92 et al. [53 FERC ¶ 63,019]. The parties have made these filings and, therefore, United's preconditions have been met. United's filing provides that, in addition to these four conditions, the Commission must accept the tariff filing without material modification or condition on or before March 28, 1991.

United has not filed the supporting schedules that are required by the Commission's regulations to accompany a filed rate decrease. Moreover, United did not file any work papers in support of the rate reduction, nor did United identify the amount of the reduction or the allocation of the reduction among services. United requests that the Commission waive the regulations as necessary to permit this abbreviated filing and to permit United to render services at the reduced rate levels provided in the instant filing, effective April 1, 1991. United clarifies that this filing is not intended to trigger a new three-year filing period and states that on or before March 31, 1991, United shall file with the Commission a fully supported general rate case, to be effective October 1, 1991.

Public Notice and Intervention

Public notice of United's filing was issued on February 6, 1991, with comments and protests due by February 15, 1991. Motions to intervene were filed by the parties listed on Appendix B. The City Gate Customers, Escambia County Utility Authority (Escambia), Mississippi River Transmission Corp. (MRT), City of New Orleans (New Orleans), and Texas Eastern Transmission Corporation (Texas Eastern) filed comments in support of United's proposal. Protests were filed by Air Products and Chemicals, Inc., American Cyanamid, Inc., and Courtaulds Fibers, Inc. (Air Products); Amoco Production Company (Amoco); Chevron

718 C.F.R. § 154.63.

U.S.A., Inc. (Chevron); Indicated Shippers; Marathon Oil Company (Marathon); Pennzoil Exploration and Production Company and Pennzoil Gas Marketing Company (Pennzoil); and Southern Natural Gas Company (Southern).

Generally, the parties supporting the rate filing are sales customers of United and the protesters are transportation customers. The protesters assert that the proposed rate reduction is discriminatory because it provides for rate reductions of 40 to 50 percent for sales customers, but only 4 to 5 percent for transportation customers. They assert that the record in Docket No. RP88-92-000 shows that United's rates overcollect its costs, and that acceptance of this filing would perpetuate that overcollection. They also complain that United has submitted no explanation, justification, or supporting data with its filing, and urge the Commission to issue decisions on the ALJ's decisions in Docket No. RP88-92-000 and Entex's complaint in Docket No. RP91-28-000.

Transcontinental Gas Pipe Line Corporation (Transco) does not protest the filing, but asserts that because of the lack of documentation, United should be permitted to reduce its rates only in equal proportions among classes of customers. Southern states that it does not object to the City Gate Customers and Texas Eastern forgoing their rights to refunds, but asserts that it wants any refunds due if the Commission finds refunds are required in other proceedings. In addition, the Process Gas Consumers Group states it has no objection to receiving interim lower transportation rates, provided the instant filing does not affect in any way the relief requested in the Entex complaint in Docket No. RP91-28-000.

Indicated Shippers requests that the Commission consolidate this proceeding with the pending rate design proceeding in Docket No. RP88-92-000 and the complaint proceeding in Docket No. RP91-28-000. The protesters also argue that if the Commission accepts United's proposed rates, they should be accepted subject to refund down to the just and reasonable level from January 1, 1991 forward, as determined in Docket Nos. RP88-92-000 and RP91-28-000.

On March 4, 1991, United filed an answer to the motions of Indicated Shippers, Transco, and Air Products. In its answer, United opposes the consolidation of this proceeding with the proceedings in Docket Nos. RP88-92-000 and RP91-28-000 and argues that these parties cannot pursue a section 5 complaint on their own. To the extent that United's pleading also attempts to refute the substantive arguments of these transportation

customers, it is an answer to a protest which is not permitted under the Commission's regulations and is, therefore, rejected.9

Discussion

The Commission finds that acceptance of United's proposed rate decrease, subject to refund, and subject to the outcome of the pending rate design proceedings in Docket No. RP88-92-000 et al., and the complaint proceeding in Docket No. RP91-28-000 is in the public interest. Under the filing, all of United's customers will receive a rate decrease, although some will receive a greater decrease than others. Acceptance of United's filing will permit the customers to receive the benefits of the rate decrease. The transportation customers argue that they should receive an even greater decrease than that proposed by United. However, acceptance of this rate decrease filing does not deprive the transportation customers or Southern of any rights they may have to such further reductions of their rates. United conditioned its filing upon certain sales customers relinquishing certain rights in other Commission proceedings. Transportation customers and other sales customers were not required to relinquish any rights and have not done so.

Waiver. The Commission grants United's request for waiver of section 154.63 of the regulations10 to permit United to submit an abbreviated filing.

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 by 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 the maximum period may lead to harsh and inequi

8 18 C.F.R. § 385.213(a)(2).

9 On March 13, 1991, Air Products filed a motion to reject United's unauthorized answer or, in the alternative, to accept Air Products' reply to United's