Process Gas Consumers Group v. Pennsylvania Public Utility Commission

480 A.2d 1273, 84 Pa. Commw. 76, 1984 Pa. Commw. LEXIS 1595
Commonwealth Court of Pennsylvania·Decided July 19, 1984·No. Appeal, No. 3113 C.D. 1982·Published·Cited by 2 cases

Opinion

Opinion by

Judge Rogers,

The Process Gas Consumers Group (“PGCG” or “Consumers Group”), an association of industrial consumers of natural gas including the corporate owners of gas consuming facilities located in this Commonwealth, here seeks review of an Order of the Pennsylvania Public Utility Commission (“PUC” or “Commission”) entered November 3, 1982 and requiring each of the Commonwealth’s sixteen jurisdictional gas utilities to “submit for [Commission] approval a residential conservation program funded by [the utility’s] portion of the accumulated BFR.”1 A description of the general goals to be achieved by the required residential conservation program is contained in the opinion accompanying the Commission’s order. The BFR [79] referred to is a Boiler Fuel Eider required by Commission Order entered and adopted on December 7, 1979 and applicable to large industrial users of gas as a boiler fuel. Tbe BFE is a species of surcharge and has the effect of raising the cost of gas to industrial gas users to the cost of the least expensive alternative boiler fuel — No. 6 high sulfur fuel oil. Funds produced by the imposition of the BFE have been held in escrow by each utility pursuant to the December 7, 1979 Order pending investigation and decision by the Commission as to the appropriate disposition of those funds. We were informed at argument that approximately fifteen million dollars have been, thus far, produced by operation of the BFE.

As indicated, the Commission, in the order here challenged, has determined that the fund produced by the BFE should be expended by each utility in the creation and operation of a program of residential conservation. The consumers group contends that the 'Commission is without statutory power to require expenditures for such a purpose and that the fund should instead be distributed to the small industrial, commercial, agricultural, and residential gas users unaffected by the BFE.2 Before commencing our analysis of this contention, we will describe the factual and legal circumstances that prompted the Commission to promulgate the BFE and to determine the disposition of BFE funds described above.

The National Gas Policy Act of 1978

One of five statutes relating .to the consumption of sources of energy enacted by the United States Con[80] gress in 1978, The National Gas Policy Act,3 mandates, inter alia, a system of incremental pricing intended to ameliorate some of the anticipated adverse effects of federal price deregulation of natural gas producers. Specifically, Title II of the Act4 requires the Federal Energy Regulatory Commission (FERC) to promulgate by rule a .system designed to pass through to large industrial users the increased cost of deregulated gas at the well head. The means by which this goal is accomplished includes surcharges assessed by interstate pipelines and local distribution companies which are calculated to produce a gas cost to the industrial customer no greater than the cost of alternative low grade fuel oil. All such surcharges received by the pipelines and distribution companies are required to be used to offset anticipated increases in the cost of gas to so-called “exempt” or “high priority” gas consumers including residential, commercial, and agricultural users.

As indicated, a fundamental tenet of the federal incremental pricing program is the recognition that the natural gas supplied to industrial boiler fuel users cannot be raised in price beyond that of alternative fuel oil. For this reason, the rate of surcharge collected from each industrial consumer is limited by regulation to no more than the difference in cost of natural gas and No. 6 high sulfur fuel oil, the product of which quantity multiplied by the consumer’s energy usage by volume5 is called the consumer’s “maximum surcharge absorption capability” or M.SAC.

As a consequence, a non-exempt consumer subject to a state approved tariff which prices natural gas at [81] the equivalent alternative fuel cost before the imposition of any surcharge has no capacity to absorb any price increment and is denominated a “zero MSAC.”

The FERC regulations called for by the NGPA were issued on September 28,1979. As we have noted, approximately ten weeks later, on December 7, 1979, the Commission initiated the Boiler Fuel Rider. The eff ect of the BFR was to ensure that all large industrial gas consumers in Pennsylvania are zero-MSAC thereby preventing any surcharge under the NGPA from “flowing back” to out-of-state pipeline companies. As the Commission candidly wrote:

The Commission believes that the interest of all gas consumers in Pennsylvania can best be achieved by Commission regulatory action directing the establishment of rates, in a uniform fashion, within the existing Pennsylvania regulatory framework, which will enable gas distribution companies to report zero MGAC’s. Thus, Pennsylvania can, in effect, “exempt” itself from the Federal incremental pricing program by having gas distribution utility rates which conform the effective rate charged nonexempt industrial boiler fuel load customers to the alternate fuel price established by FERC. Through the establishment of such rates, which would meet the specific characteristics of this state, the Commission estimated that about $10 million dollars, which would otherwise flow back to interstate natural gas pipeline companies, would be retained within the state.6

[82] . With respect to disposition of the funds produced by operation of the BFR, the matter here directly at issue, the Commission in December, 1979, ordered an investigation and the receipt of proposals formulated by interested parties. Hearings were conducted in May and .June, 1980 before Administrative Law Judge (ALJ) Charles F. Hoffman and proposals were submitted, most notably, by the Governor’s Energy Council,7 the Commission’s trial staff, the Hospital Association of Pennsylvania, and a number of gas consumers including the PGCG.

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Process Gas Consumers Group v. Pennsylvania Public Utility Commission, 480 A.2d 1273, 84 Pa. Commw. 76, 1984 Pa. Commw. LEXIS 1595 (Pa. Ct. App. 1984).

480 A.2d 1273 (Process Gas Consumers Group v. Pennsylvania Public Utility Commission) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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