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Midwestern Gas Transmission Co. v. Federal Power Commission

January 5, 1968

MIDWESTERN GAS TRANSMISSION COMPANY, NATURAL GAS PIPELINE COMPANY OF AMERICA, EAST TENNESSEE NATURAL GAS COMPANY, PETITIONERS,
v.
FEDERAL POWER COMMISSION, RESPONDENT. INDEPENDENT NATURAL GAS ASSOCIATION OF AMERICA, CITY OF CHICAGO, AMERICAN PUBLIC GAS ASSOCIATION, ARTHUR ANDERSEN & CO., INTERVENORS IN NO. 15941, KNOXVILLE ET AL., INTERVENORS IN NO. 16017



Hastings, Chief Judge, and Kiley and Cummings, Circuit Judges.

Author: Hastings

HASTINGS, Chief Judge.

We have before us three petitions to review and set aside orders of the Federal Power Commission.

This proceeding was instituted by the filing of a petition in No. 15941 by Midwestern Gas Transmission Company (Midwestern) pursuant to Section 19(b) of the Natural Gas Act, 52 Stat. 831, 15 U.S.C.A. ยง 717r(b), for the purpose of reviewing and setting aside the Federal Power Commission's orders dated July 15, 1966 (Opinion 497), and September 9, 1966 (Opinion 497-A, denying rehearing of the July 15, 1966 order).

In No. 15942, the same orders were sought to be reviewed by Natural Gas Pipeline Company of America (Natural).

A petition to review the same orders was filed by East Tennessee Natural Gas Company (East Tennessee) in No. 17543 in the United States Court of Appeals for the Sixth Circuit. This was subsequently transferred to our court and has been docketed here as No. 16017.

It is undisputed that the three petitioners are each a natural-gas company within the meaning of the Act and that their rates for the sale of natural gas in interstate commerce for resale are subject to the jurisdiction of the Commission.

The Commission initiated investigations into the rates, charges or classifications of Midwestern for its southern and northern systems, respectively, by orders issued February 13, 1961, 25 FPC 275, and May 28, 1962, 27 FPC 1041. These were subsequently consolidated, 29 FPC 320.

The Commission subsequently instituted an investigation into the rate design of Natural by an order issued February 25, 1963, 29 FPC 399. This was consolidated with the Midwestern proceedings.

The Midwestern proceedings, except for the depreciation issue now before this court, and the question of rate design, were terminated by Commission Opinion No. 444, issued October 13, 1964. Opinion No. 444, at Midwestern's request, remanded the depreciation issue to the examiner to afford Midwestern an opportunity to show why it had changed to straight-line depreciation and how it would be adversely affected by utilizing liberalized depreciation, 32 FPC at 996.

Midwestern proposed a settlement agreement in connection with its application for a rehearing of Opinion No. 444, which was accepted by the Commission with modifications, 32 FPC 1548. Midwestern's settlement proposal included its offer to refund to its ratepayers $3,569,600 in accumulated deferred taxes, which was accepted. Midwestern also proposed that further proceedings on the reserved depreciation issue be dismissed since it was no longer using liberalized depreciation. This part of the proposal, however, was rejected by the Commission, 32 FPC at 1549.

The rate design issues in Midwestern and Natural were determined by Commission Opinion No. 477, 32 FPC 973, and their rate designs were approved, 34 FPC at 984. The rate designs approved by Opinion No. 477 were challenged in this court by coal interests, but Opinion No. 477 was affirmed February 24, 1967, in Fuels Research Council, Inc. v. Federal Power Commission, 7 Cir., 374 F.2d 842.

By its Opinion No. 456, 33 FPC 574, the Commission computed Natural's cost of service on the basis of federal income taxes resulting from Natural's use of liberalized depreciation. Natural filed a petition for review in the Court of Appeals for the District of Columbia. In City of Chicago et al. v. Public Service Commission, and Natural Gas Pipeline Company of America v. Federal Power Commission, 128 U.S. App. D.C. 107, 385 F.2d 629 on September 8, 1967, the District of Columbia Circuit affirmed "the Commission's policy use of the 'flow through' of the current tax reduction resulting from the use of liberalized depreciation and its application of that policy in limitation of Natural's rate increase." 128 U.S. App. D.C. 107, 385 F.2d 629, at 638. However, on one aspect of that case relating to a settlement agreement, with which we are not concerned here, the case was remanded for further proceedings.

The East Tennessee proceeding, with the exception of the depreciation issue, was determined by Commission Opinion No. 488, 35 FPC 534, issued April 19, 1966. The liberalized depreciation issue was severed and reserved for ...


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