GARZA, Circuit Judge:
The issue presented in this case is whether the Federal Energy Regulatory Commission
Intervenor United Gas Pipe Line Company is a major interstate pipeline company with purchase and delivery facilities located in Texas, Louisiana, Mississippi, Alabama, Florida and adjacent offshore waters. Its customers may be generally categorized as (1) direct sale customers — industrial and electric generation customers which consume the gas they purchase from United and (2) resale customers — the city gate and pipeline customers which resell their United purchases for ultimate consumption by residential, commercial, industrial and electric generation users. Under United's curtailment plan, a significant portion of United's resale jurisdictional customers are entitled to first priority with respect to United's sale of its natural gas. Conversely, a significant number of United's nonjurisdictional direct sale customers possess low priority under the curtailment plan. Petitioner Laclede Gas Company asserts that United has used its rolled-in costing methodology to enlarge its nonjurisdictional, direct sales at the expense or subsidization, through its tariff-filed purchase gas costs adjustment clause (PGA clause)
According to Laclede, United can purchase large volumes of expensive, short-term gas
This proceeding was instituted on May 31, 1978, when United filed in Docket No. RP78-68 to increase the rates it charged for
A Commission order of May 30, 1980, approved settlement of most issues in the case. The order, however, initiated an investigation under Section 5 of the NGA
United then petitioned this Court to review the Commission's orders alleging that FERC's decision to undertake an investigation into United's purchased gas costs allocation procedures was improper. After Laclede Gas Company was granted permission to intervene in this case, Laclede filed a petition for review of FERC's orders in the United States Court of Appeals for the District of Columbia Circuit. Laclede argued that the Commission's decision to investigate United's PGA tariff provisions solely under Section 5 of the NGA, rather than concurrently under Sections 4 and 5, was improper. Laclede objected to FERC's refusal to exercise its Section 4 authority because such precluded the Commission from ordering United to refund any amounts charged which might subsequently be found to have been unjustly or unreasonably assessed. By order of January 9, 1981, Laclede's appeal was transferred to the Fifth Circuit, and that case was consolidated with United's appeal. Following submission of briefs, United moved to withdraw its petition for review and such motion was granted August 3, 1981. Thus, the only issue before this Court on appeal is that raised by Laclede concerning the propriety of the Commission's decision to investigate the purchased gas costs allocation of United pursuant to Section 5 of the NGA and to effect any changes prospectively rather than to exercise its alleged Section 4 authority to order refunds.
It is Laclede's position that when United filed for a rate change in RP78-68 pursuant to Section 4(d) of the Natural Gas Act, the Commission had the authority, and the duty, to require refunds under the parallel provisions of NGA Section 4(e) if it determined that the allocation to jurisdictional customers of United's cost of service,
United, on the other hand, argues that the Commission's investigation can only be conducted, if at all, under Section 5 of the NGA. United contends that Section 4 governs investigations only into tariff provisions which are modified by a rate filing. An investigation into approved tariff provisions which are not modified by a pipeline's Section 4 filing may only proceed under Section 5 of the NGA. United argues that because it has not proposed any change in the PGA procedures contained in its tariff, the Commission is only authorized to act under Section 5.
On appeal, the Commission has taken the position that it has discretionary authority under Sections 4 and 5 to consider the reasonableness of United's PGA mechanism. In this case, however, the Commission elected to act prospectively under Section 5 only since the Commission had previously accepted United's "typical" PGA provision and, therefore, the Commission reasoned that United should not be penalized for its reliance on the Commission's acceptance.
The relationship between Sections 4 and 5 of the NGA was described by the Supreme Court in United Gas Pipe Line Co. v. Mobile Gas Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956). In the words of Justice Harlan writing for the unanimous court,
Id. at 341, 76 S.Ct. at 379, 100 L.Ed. at 385.
The extent to which the filing for an increase in rates under Section 4 opens up a pipeline's rate structure or schedules to Commission scrutiny was reflected upon by the Supreme Court in FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 83 S.Ct. 211, 9 L.Ed.2d 199. The Court stated,
Id. at 152, 83 S.Ct. at 215, 9 L.Ed.2d at 204-05. We hold that when United filed pursuant to Section 4 to increase its rates, it assumed the hazard and opened to Commission scrutiny the propriety of the PGA clause contained within its rate schedule.
The PGA mechanism is a time saving method allowing pipelines to generally increase rates to reflect the increased costs of purchased gas. Twice a year, United is permitted to adjust its rates to reflect prior and projected increased gas costs; and in so doing, avoid the necessity of filing a full
Having found that the Commission was empowered to consider the reasonableness of United's PGA clause under Section 4 when United filed for its general rate increase, we must now determine if the Commission properly elected to act pursuant to its prospective Section 5 authority only. In its order, the Commission articulated the following reasons for its decision to proceed prospectively:
Whether the Commission decides to exercise its Section 4 refund authority is determined by the agency's consideration of the equities. Estate of French v. FERC, 603 F.2d 1158, 1163 (5th Cir. 1979); Gillring Oil Co. v. FERC, 566 F.2d 1323, 1325-26 (5th Cir. 1977). In this case, the record reflects that United's PGA clause was a "typical" tariff provision within the industry. Furthermore, the Commission had permitted United to use such a provision since 1972. As we read the Commission's order, it is apparent that the Commission believed that United should not be penalized for its allocation of costs according to its accepted "typical" PGA clause and that a Section 5 investigation was more equitable to all parties involved. Accordingly, we find no error in the Commission's decision to proceed pursuant to Section 5 of the NGA only.