of 1978. In addition, all customers presently expect that, during the effectiveness of this Agreeement, adequate supplies from Transco and other sources, including but not limited to emergency gas supplies, will permit service to all high priority consumers. Therefore, while this Agreement remains in effect under the terms of Article II hereof, the parties agree that no modifications of the curtailment plan embodied in this Agreement and, except for emergency relief as defined in Section 13.3 of the General Terms and Conditions of Transco's FERC Gas Tariff, no relief from the effect of the curtailment plan embodied in this Agreement shall be sought either under 2.78(b) of the Commission's General Policy and Interpretations promulgated under the Natural Gas Act or under Title IV of the Natural Gas Policy Act of 1978. (emphasis ours).

In sum, this provision has two components. It is intended to wipe the slate clean of all pending curtailment matters except those identified pertaining to compensation. The matters resolved by this part of Article VIII basically pertain to the Opinion No. 778 plan. The second aspect of this Article relates to the proposed plan and future conduct relating to it. In this latter area, the comments indicate that at least one basic purpose of the provision is to assure that the distribution companies who have received substantial additional gas under the settlement would not be able at a later date to submit requests for allocations under the NGPA which were intended to be covered by the settlement. Avoidance of a double recovery is Article VIII's aim.

The distinction made in Article VIII between parties and customers takes on significance when assessing the comments received on the proposed settlement. It appears to us that the customers about which Brooklyn Union is perhaps rightly concerned have responded in a manner consistent with the provision which states that to the extent dependent on the settlement, supplies received would be adequate to serve all high priority requirements-including those recognized under the NGPA. For example, North Carolina Natural indicated in its initial comments that the volumes allocated under the settlement agreement would be sufficient and that by utilizing its full storage capacity, it "should be able to serve under normal weather conditions its essential firm markets for both the winter periods and the annual periods, including the Farmers Chemical Association nitrogen fertilizer facility at Tunis, North Carolina."'1 On the other hand, Farmers Chemical, a party to the curtailment proceeding but not a directly-served customer of Transco, states that while it has no objection to the allocations, it is not waiving rights under the NGPA, including the right to have Transco's allocations to conform with the new law. But Farmers Chemical's assertion as to reservation of right under the NGPA is immaterial

since its supplier, North Carolina Natural, has indicated that it will have adequate supplies to meet Farmers Chemical's requirements.

North Carolina Natural, Public Service Company of North Carolina and Piedmont, however, do express a reservation about one aspect of Article VIII. Fundamentally, they note that the proposed plan could become a de facto permanent plan if Transco's future supplies continue as projected. They urge a limit on the time during which the plan would be impervious to change based on the NGPA. In addition, they suggest that it should not serve as a bar if circumstances arise which were not reasonably foreseeable. But all state, in essence, that it is not their desire that Article VIII be abolished or that its basic intent be distorted. Piedmont, for example, states that it "agrees that the allocations in the Settlement Agreement should be considered permanent except in the event of circumstances not presently reasonable foreseeable." We think that these are reasonable, responsible requests. We believe our interpretation of Article VIII and its relation to the NGPA adequately recognizes these concerns without sacrificing the benefits of certainty and stability which would otherwise accrue under the settlement.

One party who is not a customer-the State of North Carolina and the North Carolina Utilities Commission (filing jointly)—takes exception to Article VIII. This exception is mitigated somewhat by the statement that North Carolina is unable to waive for the indefinite future, whatever rights may be granted to it by the new statutes (referring to NGPA). We respect North Carolina's views as a representative of the ultimate consumer in the State of North Carolina. We are not certain, however, that North Carolina's reservation is material in light of the comments by distributors in the State of North Carolina who, as customers of Transco, offer representations more nearly in compliance with the spirit of Article VIII."

The views of another party-also not a customer-are pertinent. The New York Public Service Commission, by reply comments supporting the settlement, states:

We recognize that a number of parties otherwise supporting or not objecting to the Transco proposal have raised questions or caveats with respect to Article VIII. Since New York supports the Article as a necessary and integral part of any settlement, we wish to set forth our views thereon. We do not read Article VIII as binding upon the Commission in the event it determines that regulations adopted pursuant to Section 401-403 of the NGPA require modifications to an effective curtailment plan. We do understand Article VIII to reflect the understanding of the parties that the Transco plan was drafted in the light of the provisions of the NGPA and that accordingly they will not initiate action to upset the plan on grounds that they might be entitled to

In contrast to PSEG and Brooklyn Union, Elizabethtown Gas Company (Elizabethtown) and Philadelphia Gas Works (PGW) opposed the settlement from the start. Their objections appear to be for entirely opposite reasons.

Elizabethtown apparently objects to this settlement only because it does not provide for curtailment on a pro rata basis. Public Service Company of North Carolina, Inc.'s reply comments place this objection in context.

[T]he fact [is] that the Settlement has no material adverse impact upon Elizabethtown. Elizabethtown's central contention, for example, is that cutailment on the Transco system should be carried out, to the extent possible, on a proportionate basis. However, a review of the Elizabethtown's own proffered "Statement of Thomas F. Withka" and attached Appendices shows that (1) for the 1978-79 annual period, Elizabethtown's proportionate allocations is an insignificant 118 Mdt (0.7%) greater than under the Settlement (Appendix B) and (2) for the 1979-80 annual period, Elizabethtown's proportionate allocation is 178 Mdt less than under the Settlement (Appendix C). Thus, Elizabethtown would be in a generally better position as to the allocation of volumes if the settlement were accepted. (PSNC reply comments, pp. 4-5.)

It appears, therefore, that Elizabethtown would not be aggrieved by the settlement. Philadelphia Gas Works. v. F.P.C., et al., 557 F. 2d 840 (D.C. Cir. 1977).

Unlike Elizabethtown, PGW is a leading proponent of the end-use concept embodied in the Opinion No. 778 plan. Under the proposed settlement, PGW would receive 39,186 Mdt in 1978-1979; under the Opinion No. 778 plan, 40,809 Mdt. However, PGW's basic point appears to be that the settlement should be rejected because its adoption would be contrary to the remand in State of North Carolina which requires reexamination (rather than abandonment) of the Opinion No. 778 plan. We cannot agree that we are limited solely to consideration of the existing plan." Moreover, assuming a return to hearings for that purpose, it is uncertain how well PGW would fare. The court observed that in accordance with the October 1976 tariff filing, PGW was a "favored" customer who also has access to other pipelines supplies (besides Transco's). The court's remand, of course, would require that we consider whether adjustments should be made in that circumstance based on an examination to determine whether:

without the shift effected in the name of end use by the 778 plan, any of the five favored customers would have insufficient pipeline gas to serve high-priority uses which could be served by the disfavored customer absent the transfer. (Slip Op. 24, emphasis added).

Transco, in its reply comments, provides the follow

ing information which would appear to effectively negate PGW's opposition to the settlement.

With respect to Philadelphia Gas Works, staunch and consistent advocate of the Opinion No. 778 plan despite the fact that it has been remanded by the Court of Appeals (footnote omitted) no contention is made by PGW that the basic allocations provided by the settlements will not permit PGW to serve fully its markets without resort to emergency gas. Indeed, as shown by the attached statement by Mr. Miller, PGW would be receiving this winter from its pipeline sources substantially more gas than it received last year and it is Mr. Miller's opinion that PGW will be able to serve its markets under the offer of settlement without acquiring emergency gas." (Transco Answer at page 2, emphasis ours).

PGW also argues that the impact assessment requirement of State of North Carolina has not been met. Considerable information has been submitted which addresses this concern (e.g., EIA Form 50 material provided by the staff and the comments of the parties on the proposed settlement). However, additional information as to the impact of the proposed plan on end-use is desirable. Accordingly, we are directing that each of Transco's customers file an affidavit with the Commission on this subject by January 11, 1979. What we desire, given the brief time period allowed, is each customer's best available assessment of the plan's impact. We do not specify a rigid format. However, each affidavit must include a discussion of the distributor's ability to serve its residential, commercial and industrial customers as a result of deliveries contemplated under the settlement through October 31, 1979. Impacts such as potential shut-down of industrial facilities should also be noted.

B

Transco's affidavit attached to its November 22 Answer states that different levels of supply would be applicable to the existing Opinion No. 778 plan and the proposed settlement. A comparison was provided for both plans for the 1978-1979 Winter Period as well as to the 1978-1979 Annual Period. 30

Brooklyn Union by telegram of December 18, 1978 stated it has been advised by Transco "that Transco's supply available for market this winter will increase by approximately eleven billion cubic feet over the supply previously projected to be available in Transco's September Form 16." Brooklyn Union urges that this matter is material to full consideration of the settlement.

The Commission desires to have the matter of available supplies clarified. Accordingly, Transco is directed to file a statement of its current supply situation by January 9, 1979. If that evaluation differs from that contained in Transco's November 22 statement, the reasons for and the significance of

those changes-as to both the existing Opinion No. 778 plan and the settlement plan-shall be discussed in detail"

C

We now ask the parties, in light of our construction and interpretation of the settlement and other comments herein, to provide their present view on the proposed settlement." The parties shall advise us of their conclusions in this regard (including consideration of Transco's January 9, 1979 submittal dealing with supplies) by January 11, 1979. Oral arqument will then be heard, Friday, January 12, 1979." We expect to act on the settlement expeditiously thereafter.

The Commission orders:

(A) Transco shall submit the information on supplies discussed in Section IV B of this order by January 9, 1979.

(B) All parties wishing to file comments on the settlement as construed and interpreted in the body of this order and the information on supplies provided by Transco shall have until January 11, 1979 to do so.

(C) Each customer shall file the affidavit on end-use impact described in the text of the order at page 18 by January 11, 1979.

(D) Oral argument in this proceeding shall be held in Hearing Room A, 825 North Capitol Street, N.E., Washington, D.C. at 1:30 p.m. on January 12, 1979. Requests to participate in the oral argument shall be filed with the Secretary on or before close of business January 10, 1979.

-Footnotes

'State of North Carolina v. F.E.R.C., No. 76–2102, et al. (D.C. Cir. July 13, 1978). All references herein are to the Court's July 13 slip opinion without renumbering of footnotes to reflect the one added (footnote 20, p. 21) by the per curiam order issued August 29, 1978.

2 Transcontinental Gas Pipe Line Corporation, Docket No. RP72-99, Opinion No. 778 (October 8, 1976, 56 FPC 2134) and Opinion 778-A (December 8, 1976, 56 FPC 3470).

3 State of North Carolina at 31.

• Id. at 26.

5 Id. at 31.

The October 31, 1978 Offer of Settlement deals only with allocations. The issue of compensation is reserved for hearing.

Transco is to provide additional information on supplies by January 9, 1979 (infra, p. 19) so that the parties may also consider it in their January 11, 1979 comments. Article VII of the Settlement Agreement. Article VIII also excludes an earlier appeal relating to compensation, Transcontinental Gas Pipe Line Corporation, et al. v. F.E.R.C., No. 74-2036 (D.C. Circuit).

* Transco's Answer and attached Affidavit of November 22, 1978 emphasize that different levels of supply (for the larger customers) will pertain as between the settlement offer and under the existing Opinion No. 778 plan, if it is continued.

The Affidavit of H. J. Miller, Jr. states at page 2:

5. As requested by the Staff, the following data show a comparison between the quantities (Mdt's) available for sale to the CD, and ACQ and firm direct customers extrapolated from the Form 16 filed October 2, 1978 and those contained in the offer of settlement.

In order to arrive at the above comparison, the October (Affidavit, p. 2) [sic.] The source of additional supplies for this winter is "banked" gas which Transco would have to repay next summer. This amounts to approximately 4,000 Mdt which would be retained in storage under the Opinion 778 plan. 6,265 Mdt is obtained based on the assumption that "normally anticipated producer outages" do not occur. The affidavit further states:

In the event that the above possibilities of additional gas do not yield sufficient quantities to make up for the difference between the Form 16 and settlement allotments, Transco would acquire the necessary gas under FERC's emergency rules to satisfy the deficiency. Should it be necessary for Transco to purchase emergency supplies, there is an abundance of such supplies available from intrastate sources. (p. 2).

Article V of the Settlement Agreement provides that "the Commission is requested to provide assurance to Transco and the other parties that if, and only if, emer

gency gas volumes are required to be obtained under the Natural Gas Act in order that Transco will be enabled to protect the annual period entitlements and winter season allotments for the first curtailment year Transco will be permitted to obtain such emergency gas volumes." The Staff opposed this provision on the grounds it impermissibly sought advance approval of the rate treatment of emergency purchases. However, Transco in its November 22, 1978 Answer advised that the section was intended to deal only with eligibility for purchase of such supplies and noted that this concern would effectively become moot if we adopted the then existing proposed regulations on this subject. These regulations were, in essence, adopted and will apply for a limited term. It is therefore unnecessary for us to consider the waiver requested in Article V.

10 The revisions also contemplate some adjustments potentially flowing from the remand in State of North Carolina.

"These include the State of North Carolina and the North Carolina Utilities Commission (filing jointly); The

City of Danville, Virginia; North Carolina Natural Gas Corporation; Piedmont Natural Gas Company, Inc.; and Public Service Company of North Carolina, Inc. In addition, Elizabethtown Gas Company and Philadelphia Gas Works oppose the settlement outright.

12 Brooklyn Union Gas Company, Public Service Electric and Gas Company and Pennsylvania Gas and Water Company.

"At the same time, the Commission emphasizes that it makes no present judgment as to the merits of the proposed settlement as interpreted herein.

"Initial Comments, North Carolina Natural Corporation, November 13, 1978, at 1.

15 Comments of Farmers Chemical Association, Inc., November 13, 1978, at 1.

16 Initial Comments of Piedmont Natural Gas Company, Inc., November 13, 1978, at 1.

"There may be an exception. The sole entity, who is both a customer and a party, to register unqualified opposition to Article VIII is the City of Danville, Virginia. Danville in its initial comments stated: "Danville supports the settlement plan with the following qualifications. The allocated volumes are not sufficient to serve the City's high priority markets, but at least the allocations are better than under the Opinion No. 778 plan. We cannot possibly agree, as Article VIII requires, to waive any right of the City has under law, i.e., the Natural Gas Policy Act of 1978." (Comments of the City of Danville, Virginia, filed November 14, 1978, at p. 4.) Transco, by reply, states that "The winter and annual allocations to the City of Danville in the first year, when combined with the available supplies of gas under FPC Order No. 533 and FERC Order No. 2 will provide more than enough gas for Danville to serve its residential and commercial customers and industrial customers utilizing natural gas for feedstock, process and plant protection purposes." Transco, (Miller Affidavit at p. 3.) Danville received 2697 Mdt in 1977-1978. Under Opinion No. 778, in 1978-1979, they would receive 3170 Mdt; under the settlement they will receive 4167 Mdt. It is thus clear Danville will receive a significant increase under the settlement relative to its size. The question of possible additional allocations may be moot since Danville in Reply Comments filed November 24, 1978 states:

Apparently some parties were concerned that Danville's reservation about Article VIII indicated acceptance of the curtailment plan's volumes, along with an intent to see additional volumes because of rights under the [NGPA]. In clarification, Danville's reservation on Article VIII simply means that the Commission cannot be prohibited by a settlement agreement among Transco's customers from carrying out its responsibilities under the Natural Gas Act, the [NGPA] or any other law.

Danville continues to support the settlement agreement as a long-term plan (Reply Comments, pp. 1-2)

18 Some elements of Article VIII are analogous to provisions which have previously been approved by this Commission. For example, the settlement in Southern Natural, Opinion No. 5, Opinion And Order Approving Settlement Describing Permanent Curtailment Plan, Docket No. RP74-6, et al. (November 17, 1977, 1 FERC 61,144) approved a provision which provides that plan may not be contested for a period of two years. (Slip Op. at 22).

"Proposed regulations dealing with § 401 will issue very shortly.

20 At the same time, proponents of Article VIII must recognize that the settlement would not be considered to be inviolate. In the past, the FPC and this Commission have attempted to recognize unique load characteristics, customer blend and operating requirements of individual pipelines in the formulation of curtailment plans. In promulgating rules for the implementation of Title IV of the NGPA, the Commission will continue to adhere to that policy. Indeed, Section 502(c) of the NGPA contemplates such exceptions to our rules "as may be necessary to prevent special hardship, inequity, or on an unfair distribution of burdens."

21 We assume ultimate consumers who are neither parties nor customers would not be directly affected by the provision. It does not bar such rights as they may have under the NGPA, but rather appears to re-direct them, at least in the first instance, to the distributor-customer.

22 Transco's Answer also includes this pertinent statement: "If the Commission should approve the settlement embodied in the offer, it would be the intent of Transco to strive to protect the integrity of this settlement, including the provisions of Article VIII, based upon circumstances existing at the present time and reasonably foreseeable for the future. While we would not expect the Commission to attempt to waive any of its statutory responsibilities and while it is always possible that unforeseen changed circumstances could intervene Transco would expect that any private party and any state and local governmental body would have an extremely heavy burden of persuasion if such party accepts the present fruits of the settlement and later attempts to overcome any essential feature of the settlement." (Id. pp. 3-4) The standard announced above in the text of this order should not necessarily be equated with that of "an extremely heavy burden of persuasion." However, the Commission would accommodate the settlement solution where possible.

23 NGPA §§ 401-402. See also, H. R. Rep. No. 95-1752, 95th Cong., 2d Sess. 112-115 (October 19, 1978).

24 Miller affidavit attached to Transco Answer, November 22, 1978 at p. 2. This affidavit also states at p. 1:

2. The "Offer of Settlement" *** was developed as a means of allocating the available supplies on the Transco system for the next several years in a manner which protects actual high priority markets on the system without the necessity of a lengthy data collection and hearing process. One indication that the settlemen will actually protect the high priority markets on th system is the fact that, as a result of a recent survey of i customers, Transco has determined that, barring som unforeseen extraordinary circumstance, the allocatio procedures set forth in the settlement will enable all of i distribution customers to serve their high priority ma kets without the necessity of those customers acquiri emergency supplies for this coming winter. The sponses of the customers in this regard have b specifically conditioned upon approval of the settlem

25 Pennsylvania Gas and Water Company, in re comments of November 22, 1978, voices essentially same concerns. However, that Company, somewhat Elizabethtown, would not appear to be aggrieved sin would receive the same volume in 1978-1979 under plans.

26 We perceive concern over the integrity of settlement to be Brooklyn Union and PSEG's prin concern based on analysis of their reply comments. W not think that allocations under the proposed plan ar problem since neither party opposed the plan in their