Opinion for the court filed by Circuit Judge J. SKELLY WRIGHT.
J. SKELLY WRIGHT, Circuit Judge:
The issue presented in this petition for review is whether the Federal Energy Regulatory Commission (FERC) has offered sufficient justification for failing to hold an evidentiary hearing, upon the request of General Motors Corporation (GM), prior to granting Michigan Wisconsin Pipe Line Company (Michigan Wisconsin) a certificate of public convenience and necessity authorizing Michigan Wisconsin to construct additional pipeline facilities and to deliver increased amounts of natural gas to some of its customers on "peak" demand days. We conclude that the Commission did not adequately explain its denial of GM's hearing request. Accordingly, we remand the case to the Commission for reconsideration and the opportunity to provide further explanation.
Michigan Wisconsin is a natural gas company regulated by FERC. The company sells natural gas to various wholesale distribution customers (distributors), which in turn sell natural gas to end users. The volume of natural gas that distributors may purchase from Michigan Wisconsin, under contract, is subject to two important limitations approved by FERC. First, the amount of natural gas a distributor may purchase in the course of a year is limited to the distributor's "annual entitlement." Second, the amount of gas that may be purchased on any one day cannot exceed the "peak day entitlement" for the distributor.
This case involves an increase in peak day entitlements. On April 30, 1979 Michigan Wisconsin filed an application with FERC, pursuant to Section 7(c) of the Natural Gas Act, 15 U.S.C. § 717f(c) (1976), for a certificate of public convenience and necessity authorizing Michigan Wisconsin to increase peak day entitlements for 20 of its distribution customers and also to construct additional pipeline facilities necessary for increased deliveries. In explaining its request Michigan Wisconsin noted that "[b]ecause of conservation efforts * * * and the shifting of some industrial loads to alternate fuels," some of its distribution customers were "unable to utilize fully the annual gas supplies available to them under their service agreements with Michigan
In response to Michigan Wisconsin's application GM, which purchases gas from several distribution customers of Michigan Wisconsin for which no increases in peak day entitlements were sought, moved to intervene in the proceedings and requested a formal evidentiary hearing on several issues. On November 1, 1979 the Commission issued an order in which it allowed GM to intervene, but denied the company's request for an evidentiary hearing and granted Michigan Wisconsin the certificate of public convenience and necessity it sought.
The principal claim GM makes in this petition for review is that the Commission, in violation of the Natural Gas Act and its governing regulations,
As we read the Commission's orders, FERC offered two reasons
The Commission's first ground for denying GM's hearing request — that Michigan Wisconsin did not seek an increase in annual entitlements — not only trivializes the Commission's decision to increase peak day entitlements; it attributes continuing validity to earlier adequacy-of-supply showings. The Commission, in holding that adequacy-of-supply hearings are unnecessary where annual entitlements remain unaltered, seems to assume that the validity of the previous adequacy-of-supply showings continues uneroded by the passage of time. But in this case all of the current annual entitlements for Michigan Wisconsin's distribution customers were certificated by FERC no later than 1975.
What makes the Commission's justification even more troubling is that in 1977 the Commission's predecessor, the Federal Power Commission, denied, after evidentiary hearing, Michigan Wisconsin's application seeking an increase in peak day entitlements but no increase in annual entitlements. As the Federal Power Commission then noted:
Michigan Wisconsin Pipe Line Co., Federal Power Commission Opinion No. 810 (July 7, 1977), at 23-24 (emphasis added). In other words, despite the previous adequacy-of-supply showings that demonstrated Michigan Wisconsin's ability to supply the volumes of natural gas specified in its annual ceilings, the Commission refused to approve an increase in peak day entitlements not exceeding those annual ceilings, on the ground that Michigan Wisconsin's supply situation was inadequate. Without further explication the Commission's action in Opinion 810 must be read as casting doubt on the continuing validity of the prior adequacy-of-supply showings that supported the annual ceilings.
It is true that the Commission, in the orders under review, attempted to distinguish Opinion 810 on the ground that Michigan Wisconsin was in curtailment in 1977, and even overruled Opinion 810 to the extent it is inconsistent with the orders.
FERC's second ground for denying GM's hearing request was that at the time each of the orders was issued the record
We cannot accept the reasons FERC offered in its orders for denying GM an evidentiary hearing on the issue of Michigan Wisconsin's long-term supply situation. We therefore remand this case to the Commission so that it may reconsider its decision not to conduct an evidentiary hearing on that issue. We remind the Commission, however, that it bears a weighty burden in justifying a denial of an evidentiary hearing.
General Motors does raise three other issues, which it conceded at oral argument are "subsidiary" to the principal one discussed in text: (1) what impact will the increased entitlements have on existing end users?; (2) is natural gas economically preferable to alternative fuels for high-priority end users?; and (3) what impact will the increased entitlements have on oil imports? Issue (1) is, in our view, subsumed in the principal issue concerning Michigan Wisconsin's supply situation, which we address in text. See also note 11 infra. As to issue (2), we agree with the Commission that no evidentiary hearing was required. The issue, presenting a matter of local public interest, is one that FERC, not improperly, has in the past left for resolution to state commissions. See, e. g., Blue Ridge Gas Co., 19 F.P.C. 1120 (1958). An evidentiary hearing was also unnecessary with respect to issue (3). As the Commission noted, the only material issue of fact raised by issue (3) is whether Michigan Wisconsin's supply of natural gas is sufficient for it to perform the proposed services. Since the adequacy-of-supply issue is separately raised, as GM's principal basis for a hearing, issue (3) did not require an evidentiary hearing.
Order Denying Rehearing, supra note 4, at 5, JA at 17 (emphasis added).