medium in the instant filing will be deleted from the Commission's data base. 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.21 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.22 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, in this case, the Commission will exercise its discretion to suspend the rates for a shorter period and permit the rates in Appendix A to take effect on March 30, 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 A23 of this order are accepted and suspended, subject to refund and to the conditions set forth in the ordering paragraphs and body of this order, to become effective March 30, 1991. (B) This proceeding in Docket No. RP91-98-000 is consolidated with that in Docket No. RP91-51-000, and all concerns raised by the protestors in this proceeding shall be addressed at the upcoming conference in Docket No. RP91-51-000. All parties should be represented at the conference by principals who can commit to a settlement of the issues presented by this filing. Staff is directed to report the results of the conferences to the Commission, within 120 days of the date of this order. 21 See Great Lakes Gas Transmission Co., 12 FERC 61,293 (1980) (five-month suspension). 22 See Valley Gas Transmission, Inc., 12 FERC $61,197 (1980) (one-day suspension). 23 The tariff sheets in Items No. (1) and (2) are accepted and suspended. The tariff sheets in Item No. (C) Acceptance of the tariff sheets filed in this docket is subject to CNG's tracking its upstream supplier take-or-pay costs, particularly, Texas Gas' costs included in Docket Nos. RP91-100-000, RP91-101-000, and RP91-102-000 and in the subsequent filing to be made by Texas Eastern to track these same costs, as discussed herein. (D) Acceptance of the tariff sheets is also subject to the outcome of CNG's upstream pipelines' Order No. 528 proceedings. (E) CNG is directed to file a small customer reallocation pursuant to Order No. 528-A and the Commission's March 1, 1991 order in Docket No. RP91-22-000 et al., within 30 days after similar filings by Texas Gas and Texas Eastern, as discussed in the body of this order. (F) CNG is directed to refile on electronic medium the two tariff sheets listed under Item No. (2) on the Appendix, and to files on electronic medium and hard copy, Sheet No. 212, to make the corrections discussed above, within 15 days of the date of this order. (G) Waiver of the Commission's 30-day notice requirement of section 4 of the Natural Gas Act is denied. (H) Requests for summary rejection or disposition of CNG's filing, or for maximum suspension and hearing, are denied. (I) The motions to intervene out-of-time filed by the parties so indicated in Appendix B of this order are granted subject to the rules and regulations of the Commission; provided, however, that participation of the intervenors shall be limited to the matters affecting rights and interests set forth in their motions to intervene; and provided, further, that the admission of such intervenors shall not be construed as recognition that they might be aggrieved by any order entered in this proceeding. Third Revised Sheet No. 48 First Revised Sheet No. 50 Sub. Second Revised Sheet. No. 52 Second Revised Sheet No. 53 First Revised Sheet No. 97 Original Sheet No. 212E City of Richmond, Virginia Columbia Gas of Pennsylvania, Inc. ++ Consolidated Edison Company of New York, Inc. Corning Natural Gas Corporation East Ohio Gas Company, The River Gas Com- Long Island Lighting Company National Fuel Gas Distribution Corporation New Jersey Natural Gas Company New York State Electric & Gas Corporation North Penn Gas Company Pennsylvania Office of Consumer Advocate✦ Process Gas Consumers Group and The American Iron and Steel Institute + Public Service Commission of the State of New Public Service Electric and Gas Company Texas Eastern Transmission Corporation * Protest Request For Summary Rejection or Summary Disposition + Comments ++ Motion For Consolidation Out-of-Time Intervention [¶ 61,360] North Penn Gas Company, Docket No. RP91-111-000 Order Accepting and Suspending Tariff Sheets, Subject to Refund and Conditions, and Establishing a Conference (Issued March 29, 1991) Before Commissioners: Martin L. Allday, Chairman; Charles A. Trabandt, On March 1, 1991, North Penn Gas Company (North Penn) filed tariff sheets1 proposing to modify its take-or-pay recovery mechanism pursuant to Order Nos. 528 [53 FERC 61,163] and 528-A [54 FERC [61,095]. North Penn proposes to recover 100 percent of the jurisdictional take-or-pay costs it 1 Fifth Revised Sheet No. 3A, Second Revised Sheet No. 15H, Third Revised Sheet No. 15H(1), and incurs from its upstream pipeline suppliers, Transcontinental Gas Pipe Line Corporation (Transco), CNG Transmission Corporation (CNG), and Tennessee Gas Pipeline Company (Tennessee), through a volumetric surcharge applicable to all of North Penn's sales, transportation, and storage customers. First Revised Sheet No. 15H(1)(a) to FERC Gas Tariff, First Revised Volume No. 1. North Penn proposes an effective date of April 1, 1991. The Commission accepts and suspends North Penn's filing to be effective April 1, 1991, subject to refund and conditions and the outcome of a conference in this proceeding. Background In general, under Order No. 500 [FERC Statutes and Regulations 30,761], North Penn's three upstream pipeline suppliers billed to North Penn fixed take-or-pay charges allocated based on purchase deficiencies, and North Penn flowed through those costs to its customers on an as-billed basis. However, North Penn's flowthrough of take-or-pay costs under Order No. 500 was complicated by its relationship with a former customer, Corning Natural Gas Corporation (Corning). Corning once accounted for over 95 percent of North Penn's jurisdictional sales and about half of North Penn's overall sales. In November 1987, however, Corning departed from North Penn as a sales customer, and in June 1988, Corning replaced its North Penn purchases with direct purchases from CNG. Corning's departure led to the Commission's November 4, 1988 order requiring that CNG directly bill Corning for the Corning-related portion of CNG's costs that CNG would otherwise allocate to North Penn under the purchase deficiency allocation method.2 Consistent with the November 4, 1988 order concerning CNG's costs, the Commission on August 3, 1989, required Tennessee and Transco to reallocate to CNG their take-or-pay costs which were attributable to Corning's purchase deficiencies from North Penn.3 The Commission required that CNG, in turn, bill those amounts to Corning. North Penn and other parties have sought rehearing of the August 3 order. 2 CNG Transmission Corp., 45 FERC 61,223 (1988). The Corning-related take-or-pay costs were considered to be that portion of the amount otherwise allocable to North Penn that is attributable to Corning's purchase deficiencies with North Penn. 3 48 FERC 61,196 (1989). * Associated Gas Distributors v. FERC, 893 F.2d 349 (D.C. Cir. 1989) (AGD II), cert. denied, 59 U.S.L.W. 3271 (Oct. 9, 1990). 5 Mechanisms for Passthrough of Pipeline Takeor-Pay Buyout and Buydown Costs, 53 FERC On November 1, 1990, the Commission issued Order No. 528,5 in which it addressed the issue of the collection by interstate pipelines of the take-or-pay costs included in their fixed charges in light of the court's decision. Among other things, the Commission stayed the authority of all pipelines (except those specifically excluded) to collect fixed charges based on the purchase deficiency method, effective 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. Transco was listed on Appendix A to Order No. 528 as exempt from the stay established in that order, because its settlement in Docket No. RP88-68 et al. provides for it to recover take-or-pay costs on a purchase deficiency basis. The Transco settlement provides for an allocation of costs to North Penn consistent with the Commission's August 3, 1989 order, with the Corning-related costs to be direct billed to Corning via CNG, at least pending rehearing of the August 3, 1989 order. On rehearing of the order approving the Transco settlement, the Commission clarified that, while the settlement permits Corning to continue to contest the allocation of costs to it on rehearing of the August 3 order, the amount allocated to North Penn under the settlement is final and not subject to change as a result of any subsequent Commission or court action. Tennessee is subject to Order 528. Therefore, Tennessee can no longer use the purchase deficiency method to allocate its fixed take-or-pay costs. On December 14, 1990, the Commission issued an order in Docket No. RP91-29-000 accepting Tennessee's alternate Order No. 528 proposal, subject to refund and conditions, to revise the allocation of its fixed take-or-pay charges. Under that proposal Tennessee allocates the fixed take-or-pay charge to its sales customers, including North Penn, on the basis of those customers' 1988 Annual Quantity Limitations. On December 17, 1990, the Commission issued an order rejecting an earlier filing by Tennessee to comply with the Commission's August 3, 1989 order concerning the Corning ¶ 61,163 (1990), reh'g granted in part and denied in part, 54 FERC ¶ 61,095 (1991) (Order No. 528-A). 6 Transcontinental Gas Pipe Line Corp., 48 FERC 61,399 (1989), reh'g granted in part, 50 FERC ¶ 61,442, at pp. 62,356-7 (1990). 7 Tennessee Gas Pipeline Co., 53 FERC ¶ 61,379 (1990). 8 Tennessee Gas Pipeline Co., 53 FERC ¶ 61,385 (1990). related costs. That order stated that the appropriate forum in which to address the Corningrelated issues is Tennessee's Order No. 528 proceeding. Therefore, the ultimate allocation of Tennessee's Corning-related take-or-pay costs will be determined by the outcome of further proceedings in Tennessee's Docket No. RP91-29-000. The Commission has exempted CNG from Order No. 528, with respect to its producersupplier take-or-pay costs and fixed charges billed to it by Transco on the ground that CNG's settlement in Docket No. RP88-217 et al.9 permits it to recover those costs on a purchase deficiency basis. 10 However, CNG is not exempt from Order No. 528 with respect to fixed charges billed to it by its other upstream suppliers, since its settlement requires it to flowthrough those costs on an as-billed basis and CNG's other upstream suppliers must revise their allocation methods pursuant to Order No. 528. CNG's settlement also provides that CNG's take-or-pay costs which are attributable to Corning's purchase deficiencies from North Penn will be allocated in accordance with subsequent Commission and court decisions on the Corning issue. Therefore, CNG's allocation of its Corning-related costs is still unresolved. On January 16, 1991, in Docket No. RP91-51-000, the Commission issued an order accepting and suspending, subject to refund, conditions, and the outcome of a hearing, CNG's proposal to recover take-or-pay costs incurred from Tennessee from CNG's customers, including North Penn, on the basis of the customers' annual billing determinants in effect on July 1, 1988.11 Details of North Penn's Proposal North Penn proposes to recover 100 percent of the jurisdictional take-or-pay costs it incurs from its upstream pipeline suppliers through a volumetric surcharge applicable to all of its jurisdictional customers, including sales, storage, and transportation customers. North Penn proposes to recover the cost over a four-year amortization period. For sales and transportation, 12 the volumetric surcharge will be applied to each Mcf of service. For contract storage, the volumetric surcharge will be applied to each Mcf of gas injected. The instant filing includes jurisdictional take-or-pay costs billed by upstream pipelines 'CNG Transmission Corp., 49 FERC 61,034 (1989). 10 See Mechanism for Passthrough of Pipeline Take-or-Pay Buyout and Buydown Costs, 53 FERC [61,380 (1990). 11 CNG Transmission Corp, 54 FERC 61,025 (1991), reh'g pending. of $4,030,766. The initial proposed surcharge is $.1652 per Mcf based on the total company annual throughput of 14,410,175 Mcf for the calendar year 1990, except that the throughput that relates to FERC storage customers is an average of such throughput for the last four calendar years. On or before March 1 of each of the following three years, North Penn will submit a filing to the Commission to adjust the surcharge. North Penn will develop a new surcharge based on the projected throughput for the upcoming 12-month period. The surcharge will include an adjustment or "trueup" to prevent over- or underrecovery of takeor-pay costs arising from variations between actual throughput and the throughput level underlying the surcharge imposed during the prior 12-month period. North Penn states its proposal meets the criteria of Order 528 in the following ways: (1) take-or-pay costs are allocated based upon a current measure; (2) the use of actual throughput distributes take-or-pay costs in the widest manner possible; (3) a severe impact on North Penn's captive customers is avoided; and (4) the proposal is the same recovery method used for North Penn's nonjurisdictional customers. North Penn states that it currently has only two jurisdictional sales customers, Columbia Gas of New York, Inc. and Kane Gas Light & Heating Co. These are both small customers, accounting for only two percent of North Penn's total volumes. It asserts that any attempt to passthrough the $4,030,766 included in this filing on an as-billed basis solely to these two sales customers would cause severe hardship. North Penn notes that an important related consideration is that North Penn will shortly file a request for abandonment authority for all FERC jurisdictional sales services and a request for a companion blanket certificate to render any FERC jurisdictional transaction pursuant to 18 C.F.R. § 284.224. Under the blanket certificate, rates would be developed using North Penn's nonjurisdictional rates. North Penn states that it has recently received authority from the Pennsylvania State Regulatory Commission to recover take-or-pay costs from its nonjurisdictional retail customers through a volumetric surcharge mechanism which is essentially the same as the mechanism proposed in the instant filing. North Penn 12 North Penn does have a transportation rate schedule on file with the Commission, but has no certificate authority to provide such service. The transportation rate schedule was used solely to provide a certificated standby service to North Penn's former sales customer, Corning. See 37 FERC 61,251 (1986). argues that acceptance of its proposal would ensure rate stability for its present jurisdictional customers if the blanket certificate is granted. North Penn contends that imposing a fixed charge on its storage customers would guarantee either an overrecovery or underrecovery of costs when the certificate is granted. Public Notice, Interventions, and Protests Public notice of North Penn's filing was issued on March 6, 1991, providing for protests, motions and notices to intervene to be filed on or before March 13, 1991. Timely motions to intervene were filed by Transco and CNG. Pursuant to Rule 214 (18 C.F.R. § 385.214), any timely filed motion to intervene is granted unless an answer in opposition is filed within 15 days of the date such motion is filed. Timely filed motions to intervene not listed here are also granted in accordance with the conditions of Rule 214. Transco's filing included a protest. Transco, a contract storage customer of North Penn, raises the following issues: (1) whether the proposal improperly fails to flowthrough fixed take-or-pay charges to their customers on an "as-billed" basis; (2) whether the proposal is consistent with Commission policy that a pipeline can recover through a volumetric surcharge only 50 percent of the take-or-pay costs previously included in its Order No. 500 filings; (3) that a volumetric surcharge on Rate Schedule SS service is inappropriate and will prevent Transco from recovering the fixed costs associated with its own Rate Schedule SS-1 service; and (4) whether the proposal results in inconsistent treatment between present and former sales customers of North Penn. Discussion The Commission accepts and suspends North Penn's filing to become effective April 1, 1991. The Commission also directs staff to convene a conference at which parties should be prepared to discuss settlement. As Transco points out, the Commission in Order No. 528-A established a policy of limiting the use of volumetric surcharges to recover take-or-pay costs included in previous Order No. 500 filings. However, North Penn's situation appears to present unique circumstances. Because of Corning's departure, North Penn currently has only two jurisdictional sales customers - both small LDCs accounting for only two percent of North Penn's total throughput and North Penn has no firm or interruptible jurisdictional transportation customers. Yet it 13 See the Appendix for a list of tariff sheets North Penn proposes to cancel. is currently being billed over $4 million in jurisdictional take-or-pay costs by its upstream suppliers. These unique circumstances may require some flexibility in the application of the Commission's policies established in Order Nos. 528 and 528-A in order to achieve the Commission's overriding objective of an equitable sharing of take-or-pay costs. Accordingly, the Commission will permit North Penn to put its proposal into effect, pending the settlement conference directed by this order. At that conference, the concerns of the interested parties may be considered, together with all the issues raised by Corning's departure, as set forth by the Commission's August 3, 1989 order. 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 discussion, it might, among other things, convene conferences. As discussed above, a conference will provide a forum in which the parties may discuss and resolve the issues raised in the protest to North Penn's filing. Accordingly, consistent with Order No. 528, the Commission directs that staff convene a conference at which all issues raised by the filing may be addressed. All parties should be 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. In view of the conference to discuss settlement, the Commission will not further address the individual issues raised by the filing at this time. Tariff Sheets North Penn's inclusion of parentheses around components in the tariff sheet designation causes software problems with the Commission's electronic tariff sheet system. The parentheses cause North Penn's tariff sheet identification characters to exceed the space allotted by the software. Therefore, acceptance of this filing is conditioned on North Penn's refiling the instant tariff sheets without the parentheses within 15 days of the issuance of this order. Finally, North Penn states in its cover letter that it proposes to eliminate certain tariff sheets.13 North Penn's instant filing does not include a tariff sheet to cancel these sheets. Therefore, acceptance of the filing is condi |