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04/20/82 Consolidated Edison v. Federal Energy Regulatory

April 20, 1982

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION, RESPONDENT; PUBLIC SERVICE ELECTRIC AND GAS COMPANY, LONG ISLAND LIGHTING



Before ROBINSON, Chief Judge, and WALD and GINSBURG, Circuit Judges.

UNITED STATES COURT OF APPEALS, DISTRICT OF COLUMBIA CIRCUIT

COMPANY, PHILADELPHIA GAS WORKS, BAY STATE GAS COMPANY, ET

AL., BROOKLYN UNION GAS COMPANY, GENERAL MOTORS

CORPORATION, TEXAS EASTERN TRANSMISSION CORPORATION,

CONSOLIDATED GAS SUPPLY CORPORATION, PUBLIC SERVICE

COMMISSION OF THE STATE OF NEW YORK, INTERVENORS

No. 81-1082 1982.CDC.101

Petition for Review of an Order of the Federal Energy Regulatory commission.

APPELLATE PANEL:

Opinion for the Court filed by Circuit Judge WALD.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WALD

Petitioner, Consolidated Edison ("Con Ed") challenges the Federal Energy Regulatory Commission's ("FERC" or "Commission") approval of an end use curtailment plan for natural gas that does not require customers who undergo below average curtailment to compensate those who are curtailed more than the average customer. *fn1 Con Ed argues that FERC's action constitutes a taking of property without just compensation, and is thus in violation of the fifth amendment. It also argues that FERC's rejection of a compensation scheme was not a product of reasoned decisionmaking and was arbitrary and capricious. For the reasons set forth below, we affirm the Commission. I. BACKGROUND

A. History of Curtailment Plans

Following natural gas shortages on a number of pipelines in 1970, the Commission *fn2 issued Order No. 431, 45 F.P.C. 570 (1971), directing each interstate pipeline company to report to the Commission stating whether it expected to experience natural gas shortages. Those companies that anticipated shortages were required to submit a revised tariff outlining their plans for allocating short supplies. Pipeline companies filed two types of curtailment plans: "pro-rata" plans and "end use" plans. Under a pro-rata plan, all customers would receive the same proportion of the natural gas they contracted for. The worse the shortage, the smaller that proportion would be; but no customer would receive a greater percentage of his contract than any other customer. In contrast, an end use plan would allocate gas according to the use to which that gas would ultimately be put. Under an end use plan, the contracts providing gas to the highest priority end users must be performed before any gas is allocated to the next highest user. *fn3

Two years after it first solicited curtailment plans, the Commission issued a policy statement stating its preference for end use curtailment plans. Order No. 467, 49 F.P.C. 85 (1973). As modified by a subsequent order, *fn4 this policy statement established nine priority rankings for end users. These rankings are:

(1) Residential, small commercial (less than 50 Mcf on a peak day).

(2) Large commercial requirements (50 Mcf or more on a peak day), firm industrial requirements for plant protection, feedstock and process needs, and pipeline customer storage injection requirements.

(3) All industrial requirements not specified in (2), (4), (5), (6), (7), (8), or (9).

(4) Firm industrial requirements for boiler fuel use at less than 3,000 Mcf per day, but more than 1,500 Mcf per day, where alternate fuel capabilities can meet such requirements.

(5) Firm industrial requirements for large volume (3,000 Mcf or more per day) boiler fuel use where alternate fuel capabilities can meet such requirements.

(6) Interruptible requirements of more than 300 Mcf per day, but less than 1,500 Mcf per day, where alternate fuel capabilities can meet such requirements.

(7) Interruptible requirements of intermediate volumes (from 1,500 Mcf per day through 3,000 Mcf per day), where alternate fuel capabilities can meet such requirements.

(8) Interruptible requirements of more than 3,000 Mcf per day, but less than 10,000 Mcf per day, where alternate fuel ...


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