Process Gas Consumers Group v. Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (the commission) (defendant) issued Order No. 636, which required natural-gas-pipeline companies to unbundle sales of pipeline capacity for delivery of natural gas from sales of the natural gas. The order required natural-gas-pipeline companies to make regulatory filings for compliance (tariff filings). The commission then determined the adequacy of the companies’ energy-load-management plans. In 1992, Texas Eastern Transmission Corporation (Tetco) made one such tariff filing. Tetco’s tariff filing provided two exceptions to pro rata capacity curtailment (i.e., proportional reductions in use of the pipeline) for Tetco’s customers. First, customers with high-priority end uses would be protected from pro rata capacity curtailment. Second, emergency situations in which natural gas was required to avoid irreparable injury to life or property could be excepted from curtailment. NUI Corporation, Elizabeth Gas Division (NUI) (plaintiff) commented on Tetco’s tariff filing. The commission rejected the first exception. The commission allowed the second exception to stand with a revision. The final tariff filing also called for compensation to be paid by customers who were exempt from curtailment to customers who were deprived beyond their proportional share of capacity. However, the amount to be paid in compensation was calculated using a formula that did not fully account for lost profits or expenses from the curtailment. NUI petitioned the commission for review of its order, suggesting that compensation be either set at the amount of actual damages or calculated as a percentage above the current market price of natural gas. The commission rejected both suggestions. It found that the existing compensation scheme was an adequate remedy and that no party had offered a plausible compensation scheme that was able to be monitored adequately by the commission. However, the commission did not explain why either of NUI’s proposals were inappropriate or deficient. NUI appealed.