Public Service Commission v. Federal Power Commission

543 F.2d 757, 43 A.L.R. Fed. 698, 177 U.S. App. D.C. 272, 46 Oil & Gas Rep. 515, 1974 U.S. App. LEXIS 9516

• Court: Court of Appeals for the D.C. Circuit
• Decided: March 25, 1974
• Docket: Nos. 24716, 24823 to 24825, 24836, 24846
• Status: Published

Opinions

SPOTTSWOOD W. ROBINSON, III, Circuit Judge:

We are called upon to review three orders promulgated by the Federal Power Commission in lengthy proceedings arising and conducted under the Natural Gas Act.¹ The Commission has granted four producers of natural gas leave to sell their leasehold interests in substantial proven reserves to an interstate pipeline, and the pipeline authority to construct and operate facilities enabling it to take gas therefrom. These grants have, however, been conditioned upon terms which are continuing subjects of complaint by the producers, the pipeline, and others as well.

The producers are Sun Oil Company, General Crude Oil Company, M. H. Marr and Continental Oil Company. The pipeline is Texas Eastern Transmission Cor-, poration (Texas Eastern).² Other litigants in this court are the Public Service' Commission of the State of New York (PSC) and the Philadelphia Gas' Works Division of UGI Corporation (PGW).³

The orders under attack emanate from a series of Commission proceedings extending over a period of more than thirteen years. But notwithstanding its longevity, the controversy arrived here in a posture far from a final resolution. We have painstakingly examined its diffuse history, analyzed its multifaceted issues and pondered the complex problems emerging. Then, finding and identifying error in their administrative treatment, we are led to a disposition which, fortu-. nately, will bring this long-standing litigation to a just and early end.

I. BACKGROUND OF THE LITIGATION

A. Producer-Pipeline Transactions

By contracts executed on February 1, 1957, the producers agreed to sell, and Texas Eastern to buy, their natural gas production in Rayne Field,⁴ in Southern Louisiana, at an initial price of 23.9 cents per Mcf.⁵ Shortly thereafter, the producers applied to the Commission for certificates of public convenience and necessity authorizing the sale,⁶ and Texas Eastern sought a certificate permitting construction of new pipeline facilities extending its system to Rayne Field.⁷ Because the unit price specified by the contract was high,⁸ the applications were opposed by PSC and nine distributor intervenors. Hearings were held and on April 15, 1958, the presiding examiner recommended that the sale and the construction be unconditionally certificated.⁹ Exceptions to the examiner’s decision were noted, but before the Commission ruled on them the Court of Appeals for the Third Circuit rendered its decision in the so-called CATCO litigation,¹⁰ reversing an earlier Commission order granting unconditional certification of gas sales at an initial price lower than the 23.9-cent price involved in the pending applications.¹¹ The Third Circuit’s decisional ground was that the applicants for certification had not discharged their burden of demonstrating that the sale price they proposed was justified in terms of public convenience and necessity.¹²

After that pronouncement, Texas Eastern and the producers renegotiated, and oh December 4, 1958, agreed upon another arrangement. Instead of a conventional well-head sale of the gas at a 23.9-cent price, the new plan provided for sales to Texas Eastern of the producers’ leasehold interests in the gas reserves in place.¹³ The aggregate sale price was some $134 million,¹⁴ which equated during the early years ¹⁵ to about 23.5 cents per Mcf for the gas, a figure out of line with prevailing prices.¹⁶ The producers terminated their original contracts with Texas Eastern and withdrew their applications for certification.¹⁷ Texas Eastern moved to amend its certificate application to reflect these developments, and to reopen the administrative hearing.

B. Opinion No. 322 And Its Demise

On June 23, 1959, the Commission overruled objections to the new proposal and, in its Opinion No. 322, awarded Texas Eastern an unconditional cerifícate to build and operate the facilities needed to effectuate the lease-sale.¹⁸ While the Natural Gas Act' gave the Commission regulatory authority over the sales of gas which Texas Eastern’s original contracts with the producers had contemplated,¹⁹ the Commission held that it lacked jurisdiction over sales of their gas leases,²⁰ and that for that reason it was under no obligation to determine, as a precondition to certification of pipeline construction related to those leases, whether the $134 million price was compatible with the public interest²¹ As a result, the producers’ gas soon began to flow through Texas Eastern’s pipelines for interstate distribution; and over the years ensuing, the flow has continued ’ and the out-of-line prices paid to the producers have, as cost-of-service items, been reflected in the rates Texas Eastern has charged its customers.

Opinion No. 322 was, however, brought to this court for judicial review, and was reversed.²² Our opinion predated the holding in United Gas Improvement Company v. Continental Oil Company²³ that the Commission possessed jurisdiction over the sale of the leasehold interests.²⁴ We stated that while the Commission was empowered to certificate the pipeline construction without passing on the financial merits of the lease-sale arrangement, its order indicated general approval of the terms of that arrangement; and that to the extent that the order purported to do so, it was unsupported by substantial evidence in the record.²⁵ We realized that a determination of the reasonableness of proposed rates is not an express statutory requirement in a proceeding seeking authorization to extend pipeline facilities,²⁶ but we also recognized that the economic fact of escalating natural gas prices “does make price a consideration of prime importance.” ²⁷ We read the Supreme Court’s CATCO decision “as holding that where a natural gas company seeks an unconditional certificate to make new sales of natural gas at proposed prices which are ‘out of line’ with existing prices, or which will tend to have an inflationary impact on the natural gas market, it is under an obligation to demonstrate upon the record the reasons why such increased prices are justified by the ‘public convenience and necessity.’ ” ²⁸ And we held that irrespective of whether the parties’ lease-sale was beyond the Commission’s regulatory jurisdiction, Texas Eastern’s pipeline construction and its sales of Rayne Field gas were jurisdictional matters, and the price paid by Texas Eastern to the producers was a factor demanding consideration since Texas Eastern’s acquisition costs would become relevant in the regulation of sales by Texas Eastern to its customers.²⁹ We remanded the case to the Commission with instructions to either disclaim any approval of the $134 million price or “reopen the record in the certificate proceeding to permit Texas Eastern to establish by adequate evidence that the asquisition costs which it proposes to incur will be consistent with the public convenience and necessity.” ³⁰

C. Opinion No. 378

On remand, the Commission took the latter course, and after further hearings, reached two conclusions. On February 6, 1963, in Opinion No. 378,³¹ it reversed its earlier position on jurisdiction over the lease-sale and held that it indeed did have jurisdiction.³² After discovering that power, however, the Commission recognized that the proceeding was not in a posture enabling final disposition. It was essential that the producers, who were not parties to the remanded proceeding, file an application for a certificate of public convenience and necessity for approval of their sale,³³ and the nature of the lease-sale transaction presented novel difficulties in the way of price regulation.³⁴ The parties were given six months to work out new arrangements and submit new filings.³⁵

Opinion No. 378 was subjected to judicial review in the Fifth Circuit, and the Commission’s jurisdictional determination was reversed.³⁶ On further review, however, the Supreme Court, limiting its consideration to that question, reversed the Fifth Circuit and sustained the Commission’s jurisdiction over the lease-sale.³⁷ Since no question as to the propriety of the Commission’s disposition was before the Court,³⁸ its action left Opinion No. 378 intact.

D. Opinion No. 565

In March, 1966, in response to Opinion No. 378, the producers filed applications for certificates of public convenience and necessity, and another round of hearings ensued. The presiding examiner split his initial decision into two parts, the first dealing with the question of payments to be remitted to producers in the future, and the second, made necessary by the first, with the question of refunds on account of payments to producers in the past. In his Phase I decision, issued January 23, 1968,³⁹ the examiner was of the view that the lease-sale did not meet the test of public convenience and necessity because uncertainties as to the volume of gas which would be produced entailed too great a risk for consumers,⁴⁰ and because the imbalance in payments during earlier years was not outweighed by countervailing benefits.⁴¹ The examiner recommended modifications of the transaction calculated to render it equivalent to a conventional sale of gas at 20 cents per Mcf after adjustments reflecting costs incurred and benefits obtained by Texas Eastern which normally would have accrued to producers.⁴² The examiner’s Phase II decision, issued on September 11, 1968,⁴³ and utilizing an in-line level of 20 cents per Mcf ⁴⁴ as the basis for computations, recommended that the producers refund to Texas Eastern, and that Texas Eastern in turn refund to its customers, excess collections estimated at $31.5 million through 1967.⁴⁵ The examiner further recommended reduction of Texas Eastern’s rates.⁴⁶

On August 6, 1969, the Commission issued its Opinion No. 565 and an order upholding in the main the examiner’s decision on both phases.⁴⁷ The Commission found that the lease-sale arrangement as formulated by the parties did not comport with the public convenience and necessity.⁴⁸ Even with a producer guaranty alleviating the possibility of payment for gas that did not exist,⁴⁹ the Commission concluded that other uncertainties generated too much risk.⁵⁰ Had the lease-sale agreement come before it in an unexecuted form, the Commission declared, it might well have been rejected,⁵¹ but since almost half of the total estimated volume of gas had already flowed through Texas Eastern’s pipelines, the Commission decided to modify the transaction in order to put it in its most palatable form.⁵² The Commission ordered Texas Eastern to limit further payments to producers to amounts not exceeding a just and reasonable rate of 18.5 cents per Mcf ⁵³ or any such superseding just and reasonable rate as might thereafter be established,⁵⁴ and to cease payments when the producers received the full $134 million contract price.⁵⁵ The Commission ordered the producers to refund to Texas Eastern the excess, after specified adjustments, of payments received above the 20-cent in-line level prior to October 1, 1968, and thereafter above the 18.5-cent or other applicable just and reasonable rate,⁵⁶ a total of $31.5 million through 19 67.⁵⁷ And the Commission directed Texas Eastern to refund about two-thirds of that amount — ' $19.9 million through 1967 — to its eustomers,⁵⁸ and to trim its rates to reflect a cost of 18.5 cents,⁵⁹ or a cost at any other area rate thereafter becoming applicable.⁶⁰

Opinion No. 565 was not a unanimous decision. Commissioners O’Connor and Bagge subscribed to it fully.⁶¹ In all respects save one, they were joined by Chairman White, who dissented solely as to the use of the 20-cent in-line rate partially, instead of the 18.5-cent just and reasonable rate exclusively, as the basis for computation of producer refunds.⁶² Commissioners Carver and Brooke expressed the view “for decisional purposes” that the 20- and 18.5-cent refund bases were correct⁶³ but, on the ground that the lease-sale might yet garner approval, they would have remanded for the development of additional data.⁶⁴

E. Opinion No. 565-A

It so happened, however, that Opinion No. 565 and its accompanying order were not effectuated in any meaningful way. Applications for rehearing were presented to the Commission, and by orders entered September 2 ⁶⁵ and 18,⁶⁶ 1969, the Commission granted rehearing, and by separate order on the latter date stayed, pending reconsideration, the certificate conditions formulated in Opinion No. 5 65.⁶⁷ On September 29, 1970, the Commission issued Opinion No. 565-A,⁶⁸ which purported to reaffirm many of the considerations underlying Opinion 565, but also to substantially modify the solution it presented.

The modifications proposed by Opinion No. 565-A are directly traceable to significant developments in producer-rate regulation in Southern Louisiana occurring contemporaneously with the proceeding under review. In 1960, the Commission inaugurated a series of proceedings to enable determination of maximum producers’ rates for major gas-producing areas and the regulation of such rates on an area-wide basis.⁶⁹ Southern Louisiana, in which Rayne Field is situated, was one of those areas. A final order in the Southern Louisiana proceeding — Docket No. AR 61-2 — was issued on September 25, 19 68,⁷⁰ establishing 18.5 cents per Mcf as the just and reasonable rate for gas of the Rayne Field vintage.⁷¹ On the same date, the Commission commenced a new proceeding — Docket No. AR 69-1 — to determine whether the Southern Louisiana rates set in Docket No. AR 61-2 needed modification in light of later circumstances. In the meantime, the Court of Appeals for the Fifth Circuit reviewed and sustained the Commission’s order in Docket No. AR 61-2,⁷² but petitions for writs of certiorari were presented to the Supreme Court.⁷³ On applications for rehearing, the Fifth Circuit adhered to its holding, but indicated that despite its affirmance the Commission might have power to reconsider the order.⁷⁴ The Commission then stayed its order in Docket No. AR 61-2 and consolidated that docket with Docket No. 69-1 for further hearing.⁷⁵ Thus, when Opinion No. 565-A was handed down, a Commission order establishing just and reasonable rates for Southern Louisiana gas had been affirmed but was pending application for further review, and from the Commission’s viewpoint the matter of rates for gas of Rayne Field vintage was still in flux.

Order No. 565-A reflects some shifting of positions among the Commission’s members.⁷⁶ A majority of the members⁷⁷ reaffirmed the basic conclusion that the lease-sale in original form did not serve the public interest.⁷⁸ A majority also felt, however, that the modifications imposed by Order No. 565 must undergo some changes.⁷⁹ Chairman Nassikas and Commissioner Bagge were of opinion, like Chairman White before them,⁸⁰ that the standard for producer refunds to Texas Eastern ⁸¹ should be the just and reasonable rate exclusively, rather than the 20-cent in-line rate, partially;⁸² but, arguing that a just and reasonable rate had not been finally determined, they voted to defer the question of amount of the refunds.⁸³ They also were of opinion that Texas Eastern’s payments to producers should not be limited to the contract price of $134 million,⁸⁴ but should continue until the field was exhausted.⁸⁵ These views collided with those expressed in Opinion No. 565 by Commissioner O’Connor,⁸⁶ who in Opinion No. 565-A adhered to them.⁸⁷ Commissioners Carver and Brooke, the dissenters in Opinion No. 565, would have granted the certificate unconditionally on the ground that the lease-sale met the requirements of public convenience and ■necessity,⁸⁸ but as the next best alternafive, concurred in deferment of refunds⁸⁹ and extension of payments to producers for the life of the field.⁹⁰

So it was that the Commission reached no decision as to the refund liability of either Texas Eastern or the producers, and that all issues in that regard were postponed.⁹¹ Thus the provisions of Opinion No. 565 respecting Texas Eastern’s prospective payments to producers,⁹² the producers’ refunds to Texas Eastern,⁹³ the latter's refunds to customers ⁹⁴ and its rates for the future,⁹⁵ together with the associated escrowing and accounting requirements,⁹⁶ were all postponed indefinitely pending a new round of hearings.⁹⁷ The certificates sought by Texas Eastern and the producers were issued, conditioned upon payment of an adjusted price of 20 cents per Mcf until such time as the area rate might be established.⁹⁸

Petitions seeking rehearing of Opinion No. 565-A were filed,⁹⁹ and on November 16, 1970, they were denied,¹⁰⁰ again with shifts in position. Chairman Nassikas and Commissioner Bagge voted for denial without further statement.¹⁰¹ Commissioner O’Connor voted to deny, but appended a statement arguing that the total to be paid under the lease-sale contract should be adjusted to reflect the time value of money payments to the producers which were delayed by reason of the order requiring refunds.¹⁰² Commissioners Carver and Brooke dissented, and announced withdrawal of their “reluctant concurrence” in Opinion No. 565-A “to the end that the producers can receive” payments “for the life of the field.” ¹⁰³ They reiterated their belief that the lease-sale contract should be approved as originally written.¹⁰⁴ The petitions for review by this court followed.

II. STATUS OF THE COMMISSION’S OPINIONS

The threshold question we confront is the current status of Opinions Nos. 565 and 565-A and the orders respectively accompanying them as exertions of the Commission’s adjudicatory authority. No one argues that either of these opinions or orders lacked a Commission majority when they issued. No one suggests that Opinion No. 565-A, when announced, did not effectively modify Opinion No. 565. Rather, the dispute relates to the impact upon the substantive and procedural aspects of those decisions which may have been made by the commissioners’ subsequent votes on the order denying rehearing of Opinion No. 565-A. The votes which Commissioners Carver and Brooke cast on that order are at the center of the controversy.

A. The Problem and Its Genesis

Opinion No. 565 and its companion order were supported by the majority votes of Chairman White and Commissioners O’Connor and Bagge in every aspect save one.¹⁰⁵ The one divergence was on the question whether the just and reasonable rate was to be utilized retroactively as well as prospectively as the basis for computing producer refunds to Texas-Eastern.¹⁰⁶ On that issue, Chairman White took the affirmative¹⁰⁷ and Commissioners O’Connor and Bagge the negative ¹⁰⁸ but they were joined by Commissioners Carver and Brooke “for decisional purposes,”¹⁰⁹ although the latter two dissented for other reasons.¹¹⁰

Similarly, Opinion No. 565-A and the order related to it were sustained, initially at least, by the unqualified votes of . Chairman Nassikas and Commissioner Bagge,¹¹¹ and by the votes which two of their disagreeing colleagues, Commissioners Carver and Brooke, “reluctantly” contributed to enable the disposition dictated by that opinion and order;¹¹² only Commissioner O’Connor voted against -that disposition.¹¹³ The order denying rehearing of Opinion No. 565-A was backed by a majority consisting of Chairman Nassikas and Commissioners O’Con-nor and Bagge,¹¹⁴ with Commissioners Carver and Brooke undertaking to “withdraw [their] reluctant concurrence” in that opinion ;¹¹⁵ and it was the purported withdrawal that bred the first controversy which we consider.

PSC,¹¹⁶ deeming the withdrawal effective, contends that the majority vote originally effectuating Opinion No. 565-A in its modification of Opinion No. 565 evaporated with the vote on the order refusing rehearing of Opinion No. 565-A In other words, PSC claims that when Commissioners Carver and Brooke retracted their joinder in Opinion No. 565-A, that opinion perished and Opinion No. 565 became automatically reinstated. Texas Eastern argues similarly, though more limitedly, that after the loss — because of the withdrawal — of a majority of the commissioners for Opinion No. 565-A, there could no longer be the certificate condition, fashioned in that opinion, converting the responsibility for producer payments from the contract total of $134 million to a liability for continuing payments until cessation of gas production in the transferred leasehold properties.

The Commission, on the other hand, eschewing the withdrawal, asserts that the majority vote for Opinion No. 565-A when issued was unaffected by the subsequent voting with respect to the applications for rehearing of that opinion, and in that position the producers unite. The issue thus boils down to whether the attempted withdrawal changed the 4-1 vote for Opinion No. 565-A and its suspension of the certificate conditions to a vitiating 3-2 vote against Opinion No. 565-A, thus restoring Opinion No. 565 as the final and only decision of the Commission. It is important to resolve the dispute at the outset so that we may know just what we are legitimately called upon to review.

B. The Governing Principles

The authority to entertain and dispose of applications for rehearing of Commission orders is defined by the Natural Gas Act. “Upon such application,” the Act provides, “the Commission shall have power to grant or deny rehearing or to abrogate or modify its order without further hearing.” ¹¹⁷ This grant, in terms, runs to the Commission as a governmental body. The Commission is an entity apart from its members, and it is its institutional decisions — none other — that bear legal significance.¹¹⁸ Only as an entity can the Commission formulate valid original decisions; by the same token, only in that character can it fashion new decisions remaking those which it has already promulgated.¹¹⁹ Collective action is prerequisite to any alteration of a preexisting order, whether a grant or denial of rehearing,¹²⁰ or a total abrogation or partial modification of that order.¹²¹

By institutional decisions, we mean, of course, a decision by a majority vote duly taken. That is the rule of the common law,¹²² which we have hitherto applied to administrative action,¹²³ and the rule by which, we notice judicially, the Commission has regularly functioned. There being no statutory specification to the contrary, we have no difficulty in accepting it as the governing rule here.¹²⁴ And since each of the five members of the Commission ¹²⁵ cast a vote toward each of the three decisions relevant here, it follows that a concurrence of at least three votes was essential to constitute any given feature of the voting an aspect of commission action.¹²⁶ It follows, too, that the efficacy of action taken by majority vote is in no wise affected by the fact that there is also a minority.¹²⁷ “ [A] dissent no more reduces the legal effect of [an agency’s] findings and order than does a dissenting opinion of a member of a court detract from the legal effect of the court’s judgment.” ¹²⁸

We perceive no incongruity with logic or precedent in these conclusions. On the contrary, neither the requirement of institutional action which Congress has imposed on the Commission nor the principle of majority rule which the Commission has itself impressed upon its decision-making processes could tolerate any other. Collective action, we repeat, is the only authorized means to a decision, including a decision to undo a prior decision. If an agency proceeding could be reopened by the unilateral action of a member who casts a vote for the majority, then, irrespective of the conviction of remaining members that the interest in repose outweighed their doctrinal differences, a single defection from the majority could thwart many a careful considered resolution, and wreak havoc on the stability of the agency's decisions. We have not been referred to nor have we found any authority for such a novel and frightening proposition.

We do not mean to suggest that a commissioner’s vote, once made, imprisons him in an intellectual straitjacket. The point is that an individual change of mind cannot change an institutional decision unless it gárners a majority vote to do so. Nor is there any requirement, statutory or otherwise, that members of administrative agencies maintain consistent positions throughout the course of lengthy proceedings. Commissioners, no less than judges,¹²⁹ may cast their votes solely to void an impasse,¹³⁰ or otherwise to draw the administrative phase to a close. Commissioners Carver and Brooke utilized their votes on Opinion No. 565-A to achieve an objective deemed more important than adherence to personal precept.¹³¹ Commissioner O’Connor voted against rehearing of Opinion No. 565-A despite his differences with that opinion because he felt that the litigation was ripe for judicial review.¹³² But, in each instance, what counted in the definition of agency action was the vote rather than the individual view.

In sum, a change of individual position, to affect the institutional decision, must occur as a part of a collective effort directed toward that decision. Once made, the decision remains the decision of the body, immune from alteration save by another collective effort of that body. Individual endeavor to modify an institutional decision, so long as it is only that, is of no consequence in the administrative process.

C. Application Of Doctrine Here

The petitions for rehearing of Opinion No. 565-A and its related order ¹³³ presented to the Commission the questions whether the petitions should be granted or denied, and whether the Commission should “abrogate” or “modify” that opinion.¹³⁴ The Commission plainly decided those questions in the negative. The order on rehearing declares the Commission’s “opinion” that “the questions raised by the Applicants are sufficiently covered by or are clear from the language of Opinion No. 565-A and order, so that further discussion is unnecessary.”¹³⁵ The order also sets forth the Commission’s finding that “[t]he assignments of error and grounds for rehearing set forth in the applications for rehearing . . . present no facts or legal principles which would warrant any change in or modification of Opinion No. 565-A and” its accompanying order.¹³⁶ The sole disposition effected by the order was that “[t]he applications for rehearing . . . [and] the motion for reconsideration . . . are denied.” ¹³⁷

It is also evident that the Commission’s decision to deny rehearing of Order No. 565-A was supported by the votes of a majority of the commissioners. Chairman Nassikas and Commissioner Bagge subscribed fully to the order of denial.¹³⁸ Commissioner O’Connor concurred in the denial,¹³⁹ and while he filed a statement expressing a change of view as to the amounts which the producers should receive from Texas Eastern,¹⁴⁰ he announced categorically his position that “[t]he granting of rehearing at this time would not serve any constructive purpose,”¹⁴¹ and that “an additional rehearing would not fee fruitful.”¹⁴² Only Commissioners Carver and Brooke dissented, adhering to their thesis that the lease-sale transaction should be approved as it was.¹⁴³

We hold, then, that Opinion No. 565-A was not abrogated or modified by the vote on the petitions to rehear it.¹⁴⁴ Three commissioners — a commission majority — concurred in refusing rehearing of Opinion No. 565-A, and that was the only action which commanded a maj'ority vote. Although the coalitions spawning Opinion No. 565-A were altered by the poll on the petitions for rehearing, the only proposal garnering a majority was the denial of rehearing; and the vote of the majority was, unequivocally, to leave Opinion No. 565-A intact. It bears repeating that the order recited the decision that “[t]he assignments of error and grounds for rehearing set forth” by the applicants for rehearing “present no facts or legal principles which would warrant any change in or modification of Opinion No. 565-A” or the order effectuating it.¹⁴⁵ Hardly could the Commissioners comprising the majority have made plainer their purpose not to change Opinion No. 565-A in any respect whatsoever.

In consequence, the matters before us for review are Opinion No. 565 as modified by Opinion No. 565-A, and Opinion ' No. 565-A without modification, and the orders respectively accompanying those opinions. To the issues tendered for review we now turn.

III. CONVENTIONALIZATION OF THE LEASE-SALE

Opinions Nos. 565 and 565-A each express the finding of a majority of the Commission¹⁴⁶ that the lease-sale transaction, in the form agreed to by the parties, did not survive the test of public convenience and necessity.¹⁴⁷ For that reason the Commission, in awarding the parties the certificates requested, conventionalized some aspects of the lease-sale to more nearly conform it to a normal gas-sale contract.¹⁴⁸ Both the producers and Texas Eastern contend that the Commission’s adverse finding on public interest is insufficiently supported by the evidence, and that the administrative ■ record demonstrates that the lease-sale is more favorable to consumers than a conventional sale could be.

The Commission faced a novel situation in the lease-sale arrangement presented to it, for the lease-sale was not readily amenable to administrative supervision in the Commission’s accustomed mode of regulating prices between producers and pipelines.¹⁴⁹ The problems which the lease-sale presented come into sharper focus when the process of certificating conventional sales of gas is first examined.

A. Certification of Conventional Natural Gas Sales

A conventional gas-sale contract sets a price for each unit — each Mcf — of gas to be supplied, frequently with a provision escalating the price. When a sale is sought to be certificated, the price is subject to scrutiny by the Commission in the exercise of its authority, under Section 7 of the Natural Gas Act,¹⁵⁰ to attach such conditions to the certificate as are necessary in the public interest.¹⁵¹

The Supreme Court’s decision in Phillips Petroleum Company v. Wisconsin ¹⁵² opened the door to Commission regulation of sales by producers to interstate pipelines, and Sections 4¹⁵³ and 5 ¹⁵⁴ of the Act armed the Commission with general authority to establish just and reasonable rates for the gas sold. But full-fledged rate proceedings are, by their very nature, unsuited to the needs of price review when a producer seeks certification of a sale.¹⁵⁵ Such proceedings are extraordinarily time-consuming,¹⁵⁶ and any relief from excessive rates emanating from those under Section 5 is prospective only.¹⁵⁷ Consumers were thus exposed to irremediable excessive charging while rate-reform proceedings were pending.¹⁵⁸ Even when area rate proceedings came into vogue as the preferred method of setting producer rates,¹⁵⁹ the exigencies of interim price protection remained.¹⁶⁰

In the CATCO litigation,¹⁶¹ the Supreme Court focused on the problem, emphasizing the vital importance of price regulation under Section 7:

[T]he inordinate delay presently existing in the processing of § 5 proceedings requires a most careful scrutiny and responsible reaction to initial price proposals of producers under § 7. . . The fact that prices have leaped from one plateau to the higher levels of another . . . [makes] price a consideration of prime importance. This is the more important during this formative' period when the ground rules of producer regulation are being evolved. . . . The Congress, in § 7(e), has authorized the Commission to condition certificates in such manner as the public convenience and necessity may require. Where the proposed price jg not in keeping with the public interest because it is out of line or because its approval might result in a triggering of general price rises or an increase in the applicant’s existing rates by reason of “favored nation” clauses¹⁶² or otherwise, the Commission in the exercise of its discretion might attach such conditions as it believes necessary.¹⁶³

Following CATCO, the Commission undertook to assure that the prices at which producer sales were certificated did not exceed in-line prices — the field prices at which the bulk of contemporaneous gas transactions not “suspect” took place.¹⁶⁴ The Supreme Court, in turn, approved the practice as a means of holding the line on prices in the interest of consumer protection until the Commission could determine just and reasonable rates for the gas.¹⁶⁵ This technique streamlined the Section 7 certification process, and the Commission was enabled to certificate sales on the basis of comparative pricing alone, without need to delay the process by indulgence in orthodox rate-making.¹⁶⁶

The Act spells out the processes by which producer rates set at in-line levels may be altered. After Section 7 certification, a producer may, under Section 4, vie for a higher price by the simple expedient of a 30-day notice to the Commission and the public.¹⁶⁷ The Commission may, however, suspend the proposed increase for a maximum period of five months while it investigates and acts on the application.¹⁶⁸ Before it may finally approve the increase, the Commission must find that it does not exceed the just and reasonable rate for gas of its vintage,¹⁶⁹ and the burden of proof on that issue is on the applicant.¹⁷⁰ Pending the outcome of the proceeding, the producer remains under a liability to refund the excess of any increase above the eventual just and reasonable price.¹⁷¹ And should the Commission see a need to launch its own investigation of a producer’s initial rates, it may institute a proceeding for that purpose under Section 5 of the Act.¹⁷²

Case-by-case determination of just and reasonable producer rates on the traditional cost-of-service basis, however, proved to be an intractable process which threatened to inundate the Commission’s regulatory function.¹⁷³ The solution which the Commission eventually devised was the previously-mentioned scheme of area-wide rate determinations.¹⁷⁴ The scheme won Supreme Court approval in the Permian Basin Cases ¹⁷⁵ and, in the Court’s words, “began a new era in the regulation of natural gas producers.”¹⁷⁶ The Commission’s regulatory effort with respect to Rayne Field, as we have seen, was destined to reach that era.¹⁷⁷

B. The Lease-Sale Contrasted

Upon a conventional gas-sale transaction, then, the ratemaking aspect of a Section 7 certification proceeding has as its purpose the fixing of an initial price in line with prices in other jump-free transactions pending the establishment of a just and reasonable rate.¹⁷⁸ The Rayne Field lease-sale transaction, however, could not easily be subjected to the in-line price concept. Although the total price which Texas Eastern was to pay to the producers was fixed by the contract, the eventual volume of gas which the field would produce was necessarily an estimate, and so also any cost per Mcf of the gas which would be extracted. Nonetheless, it was clear that until the late years of production from the producers’ holdings in Rayne Field, the price to be paid would exceed the in-line cost of gas actually delivered.¹⁷⁹ Since the purchase price of $134 million was to be remitted in full by 1975 but production was expected to continue until 19 86,¹⁸⁰ the parties and the Commission alike were seemingly reconciled to the conclusion that the price of the gas would run considerably higher than the 20-cent in-line price during most of the production period.¹⁸¹

Adherence to the Supreme Court’s CATCO 182 ruling demanded that the Section 7 certification process not develop into a protracted affair bogged down in the mire of intricate cost calculation.¹⁸³ The in-line price measure was an available index of price trends, and so a ready reference to a price that might shield consumers against exorbitance.¹⁸⁴ Producers could secure reasonable protection under Section 4 by immediately filing for rate increases, subject to refunds contingent upon the just and reasonable rate ultimately determined.¹⁸⁵ Consumers, on the other hand, got no refund protection under Section 5 against the contingency that the initial price might turn out to be too high.¹⁸⁶ It was against this . need to safeguard the interest of consumers that the Commission was summoned to determine whether the lease-sale merited unconditional certification.

■ C. The Decision to Conventionalize

In reviewing action by the Commission within its jurisdiction under the Natural Gas Act, we exercise an “essentially narrow and circumscribed” function.¹⁸⁷ The Act provides unequivocably that “[a] finding of the Commission as to the facts, if supported by substantial ■evidence, shall be conclusive.”¹⁸⁸ And, equally plainly, a Commission ruling on a nonfactual question is to be sustained if there is a rational basis for the conclusion it achieves.¹⁸⁹ It is by these standards that we must test the Commission’s decision to condition the certificates of public convenience and necessity awarded Texas Eastern and the producers so as to conventionalize some of the features of the lease-sale.

As early as 1963, when Order No. 378 ¹⁹⁰ addressed the requests for certification of the lease-sale, it was “clear” to the Commission “from the record of this ease that it is not in the public interest for this Commission to certificate a transaction such as the one presented to us on.this record.” ¹⁹¹ And as the presiding examiner observed in his Phase I decision in 1968, “[t]he reason . was that it would be impossible to regulate, or even ascertain, what the producers were getting for the gas or what the cost to the pipeline would be.” ¹⁹² For, in the beginning, a major unknowable was the volume of gas which the transferred reserves would ultimately yield, and consequently the eventual unit price which Texas Eastern would pay for the yield.¹⁹³

After Opinion No. 378 was announced, the producers sought to eliminate the risk of possible overestimation of the reserves by guaranteeing that they would supply Texas Eastern with a designated minimum volume of gas.¹⁹⁴ With this single change in the transaction, the parties again presented the lease-sale to the Commission with requests for unconditional certification.¹⁹⁵ The examiner decided that certification should be accompanied by an imposition of conditions,¹⁹⁶ and the Commission adopted and has consistently adhered to' that position.¹⁹⁷

Like the examiner, the Commission in Opinion No. 565 was of the view that the reserve guaranty did not reduce much of the cost-price hazard inherent in the lease-sale.¹⁹⁸ “[Tjhere are,” the Commission said, “numerous other factors which can have a substantial impact upon the cost of the gas to Texas Eastern and its customers under the lease-sale, such as the value and quantity of the liquids, the rate of production of the gas and liquids, the rate of return Texas Eastern is entitled to throughout the life of the wells, and associated taxes, variations in operating expenses and uncertainty of delivery.”¹⁹⁹ So great was the peril that the Commission felt that were the lease-sale still executory, it might well reject it.²⁰⁰

When, however, the Commission came in Opinion No. 565 to again consider the lease-sale on its merits, it had long since ceased to be entirely executory. By the end of 1968, almost half of the estimated recoverable gas had been taken, and most of the contract price had been paid to the producers.²⁰¹ In this milieu, the Commission deemed it “appropriate to compare the estimated cost of the lease-sale as a whole to Texas Eastern and its customers with the cost of a conventional gas purchase arrangement.” ²⁰² The Commission admonished that “[i]n making this comparison, however, we must keep in mind the continuing substantial uncertainties as to the lease-sale arrangement and could only find it is required by public convenience and necessity, as contrasted with a conventionalized sale, if the comparison were significantly in its favor.” ²⁰³ And on scrutiny the Commission found that “the comparison is not favorable to the lease-sale, even without considering the uncertainties thereof.”²⁰⁴

Opinion No. 565, as we read it, predicated that finding on two bases. One was a cost comparison of the lease-sale with a conventional gas-sale, which disclosed a difference of some $6 million in favor of the latter.²⁰⁵ To the purchase price of $134,395,700 the Commission added Texas Eastern’s other net Rayne Field costs and, using the producers’ estimates of gas and liquid takes, computed a total cost to Texas Eastern of $168,900,-000 over the expected life of the reserves.²⁰⁶ On the other hand, the Commission ascertained that a conventional sale of the gas priced at 20 cents per Mcf from the start of the flow until October 1, 1968,²⁰⁷ and at 18.5 cents thereafter, would cost Texas Eastern a total of $186,537,000.²⁰⁸ But when these two totals were discounted at 5 percent for the time value of Texas Eastern’s advances to the producers, the Commission learned that the effective cost was $122,-403.000 under the lease-sale and $116,-270.000 by a conventional approach.²⁰⁹ As the Commission noted, the difference would be greater if a discount rate of 6 percent were employed.²¹⁰

This difference in cost was not, however, the only consideration motivating the Commission to disapprove the lease-sale as presented. A second factor which loomed large was the Commission’s belief that despite the reserve guaranty, the lease-sale was fraught with uncertainties which precluded a confident evaluation of its economic impact, and that the public interest would hardly be served by thrusting the risk of an excessive price on consumers. Opinion No. 565 set forth a summary of the uncertainties, to which we have adverted,²¹¹ and the Commission’s overall conclusion:

[T]he lease-sale arrangement produces a lack of certainty over the life of the field and, as the record indicates, a higher cost than a conventional sale at 20 cents per Mcf. Because of these features of the lease-sale transaction, it is imperative for the Commission to take steps within its jurisdiction, which will protect consumers from paying excessive rates. This can be done, we believe effectively, through regulating the payments made by Texas Eastern to the Producers by conditioning the lease-sale arrangement.²¹²

The uncertainty factor reappeared as a topic of discussion in Opinion No. 565-A. The producers contended that uncertainty is an element in many projects submitted for Commission approval, and that the uncertainties remaining in the lease-sale transaction after the reserve guaranty was made did not exceed reasonable bounds. The Commission disagreed, responding:

While, of course, there is always uncertainty, more is involved here, for the proposal is to commit Texas Eastern to a fixed price of $134,395,000 for the life of the field, and that is not true in the conventional certificate proceeding where the price is subject to regulation. The essence of our objection to the lease-sale transaction is its inflexibility. If the price turns out to be too high in the light of changing circumstances, it fails to protect the consumers; if it is too low the producers will not receive an adequate return and this, in turn, may affect their ability to serve the market.²¹³

Before the Commission the producers also argued, as they have here, that the advantageous features of the lease-sale demanded consideration conjunctively with cost data in determining whether it was that arrangement or a conventionally-converted sale that best served the public convenience and necessity.²¹⁴ We agree that the price of the Rayne .Field gas was not the only relevant criterion, and that the Commission was required “to evaluate all factors bearing on the public interest,”²¹⁵ but we cannot agree that the Commission was derelict in that duty. On the contrary, the Commission, in both of its opinions on the subject of conventionalization,²¹⁶ addressed the noncost factors which the producers advanced and found them insufficient to warrant unconditional approval of the lease-sale ²¹⁷ In addition to the reserve guaranty,²¹⁸ the producers pointed out that Texas Eastern and its customers obtained a large supply of gas in a single package close by its pipeline, with resultant savings in gathering and transportation costs. The Commission felt that that did not make for a unique situation, since large and well located reserves are features of many conventional sale transactions.²¹⁹ The producers pointed to the further fact that Texas Eastern secured the Rayne Field gas at a firm price, and to the potential saving from the absence of price escalations; but, as the Commission responded, the price was in any event subject to the Southern Louisiana area rate.²²⁰ The producers also called attention to the flexibility of operations — another cost saver — which Texas Eastern gained under the lease-sale arrangement. As the Commission responded, however, Texas Eastern was taking the gas at a normal rate, and would be required to continue to do so in the future.²²¹ “These factors,” said the Commission, “do not justify the price of gas to Texas Eastern under the contract which may be excessive even on the basis of the entire life of the field.” ²²²

When this litigation was previously before this court, we extended to the Commission the option to “reopen the record in the certificate proceeding to permit Texas Eastern to establish by adequate evidence that the acquisition costs which it proposes to incur will be consistent with the public convenience and necessity.” ²²³ And when the Com- ' mission elected to do so and properly asserted jurisdiction over the lease-sale,²²⁴ it concluded that the public interest would be ill-served by certification of a transaction in which the unit cost of the involved gas could not be accurately determined.²²⁵ Conventionalization of the lease-sale developed for the Commission as the appropriate, and we think as a rational, method of enabling the Commission to discharge its statutory responsibilities.

In reviewing the Commission’s decision to conventionalize, we have remained advertent to the difficulty of the problem which it faced and to the appeal which some of the parties’ arguments had for a minority of its members.²²⁶ Those arguments, in large measure, have been repeated here in a forceful effort to persuade us to a result opposite to that thrice reached by a Commission majority.²²⁷ But “Congress has entrusted the regulation of the natural gas industry to the informed judgment of the Commission, and not to the preferences of reviewing courts.” ²²⁸ And “[a] presumption of validity ... attaches to each exercise of the Commission’s expertise, and those who would overturn the Commission’s judgment undertake ‘the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences.’ ” ²²⁹ We have witnessed ample support in' the evidence for the Commission’s factual findings,²³⁰ and ample support in reason for its nonfactual conclusions.²³¹ We hold that the Commission’s action on this branch of the litigation must stand.

IV. SALE PRICE OF THE GAS

A. The Price Adjustments

In Opinion No. 565, the Commission effectuated its decision to equate the lease-sale to a conventional gas sale by attaching to the certificates of public convenience and necessity which it awarded a set of conditions designed to achieve that end.²³² The Commission’s central effort in the formulation of the conditions, as it would have been had the gas been conventionally sold, was the setting of an initial unit price which would serve the public interest until such time as a just and reasonable rate might be established.²³³ The conditions we consider now are those which concern pricing. We will have occasion to examine others later.

Utilizing as a base price the area rate of 18.5 cents per Mcf effective October 1, 1968,²³⁴ which was to remain subject to change in any future area rate proceeding,²³⁵ the Commission subtracted the costs assumed by Texas Eastern which normally are borne by producers and added the economic advantages which normally accrue to producers.²³⁶ Since under the lease-sale arrangement Texas Eastern was paying royalties and state taxes, and was making capital investments and incurring expenses in developing and operating the field,²³⁷ the Commission directed that these outlays be deducted from the 18.5 cent unit price.²³⁸ These adjustments, the Commission ordained, would continue in effect until Texas Eastern paid the $134 million purchase price in full.²³⁹ On the other hand, since producers selling gas conventionally ordinarily realize the benefit of liquid revenues and salvage, which under the lease-sale contract inured to Texas Eastern, the Commission specified that after payment of the purchase price the 18.5 cent price would be increased by those items.²⁴⁰ The Commission also imposed conditions calculated to afford the producers protections which they would have enjoyed under a conventional arrangement.²⁴¹

In conventionalizing the lease-sale, the Commission felt it unnecessary to reject all of its features, some of which the Commission felt had tax advantages for the contracting parties.²⁴² One of the features retainable, the Commission held, was the $134 million price specified in the lease-sale contract as the total of the consideration to be paid to the producers by Texas Eastern. The Commission proposed, in that connection, to “require that the payments to be made by Texas Eastern for the Rayne Field gas until the purchase price of $134,395,700 has been paid be the equivalent of a purchase of gas under a conventional contract.”²⁴³ The Commission elucidated:

[W]e shall adjust the arrangement so that, up until the entire purchase price of $134,395,700 is paid by Texas Eastern, it will be equivalent in economic effect to a conventional sale at the just and reasonable price of 18.5 cents per Mcf. After that, as proposed by the Applicants, Texas Eastern would^ make no further payments, for if we required continued payments until the Field was exhausted the lease-sale would be, in effect, converted into a conventional sale, presumably with the corresponding tax consequences. To accomplish these ends will clearly involve a reduction of the payments for gas and an extension of the paying period, but the Producers would eventually receive the full purchase price of $134,395,700, although over a longer period, even after making the refunds which [Opinion No. 565 directed].²⁴⁴

And the Commission further explained:

After the end of the production payment until the entire purchase price is paid, the price should continue to be reduced by royalties, state taxes, investments and expenses, but should be increased by liquid revenues and salvage, for the Producers in a conventional sale would receive the benefit of both of these items.

Eventually, even though the payments are reduced, as long as gas continues to flow from the Rayne Field, Texas Eastern will pay the full purchase price of $134,395,700 albeit over a longer period of time. In our opinion the Producers, providing there is sufficient gas, should receive the full amount for which they contracted even though they have been required to make a refund for the period prior to this order. After the full payment has been completed Texas Eastern will pay the Producers no more for gas taken from the Rayne Field. Since it will then have fully paid for the properties, transferred, Texas Eastern, alone, should bear the cost of the royalties, state taxes and costs of operating the Field, but it should receive the benefit of all liquid revenues. Texas Eastern, however, should pay the Producers for any salvage realized on property installed before the purchase price has been fully paid, since the cost of such property under the opinion and order will be deducted from the price of gas of 18.5 cents per Mcf. Of course, salvage realized from property installed after the payments have been completed and not charged against the Producers should benefit Texas Eastern.²⁴⁵

In Opinion No. 565-A, however, the Commission changed its treatment of the purchase price completely. The producers had contended that Opinion No. 565, in partially conventionalizing the lease-sale, had unfairly and confiscatorily placed burdens on them without conferring the benefits of a conventional sale.²⁴⁶ Attention was directed particularly to the provision that after Texas Eastern paid the $134 million contract price, it would get any additional gas and liquids free of charge.²⁴⁷ Attention was also called to the fact that while under the lease-sale agreement the entire purchase price would be remitted during the first 16 years of production, Opinion No. 565 enlarged the payment period to the extent required to absorb the $134 million at the adjusted 18.5 cent rate.²⁴⁸

The Commission was persuaded by these arguments. In Opinion No. 565-A, it declared that “while the Producers, under the arrangement we prescribed, [in Opinion No. 565] will be getting the contract price it will not be of the same value because they will receive it over a much longer period, and they will not receive the benefit of all the gas and liquids produced by the Field as they would under a conventional contract.” ²⁴⁹ In these circumstances, the Commission felt “that it is only equitable that they be paid for the gas and receive credit for the liquids produced until the Field is exhausted.” ²⁵⁰ The Commission add-, ed:

Texas Eastern will retain the leases conveyed to it, and will continue to be responsible for operating expenses and necessary investments.

This means that the conditions prescribed in this Opinion and order with respect to future pricing of the gas from the Rayne Field will be extended until the exhaustion of the field. Thus Texas Eastern shall pay the Producers the appropriate area rate for the gas produced less royalties, state taxes and investments and expenses for the development and operation of the Field. Under the lease-sale arrangement before the termination of the production payments revenues from liquids are used to reimburse Texas Eastern. Therefore, the area price should be reduced only by unreimbursed investments and expenses, and, after the termination of the production payment, the price should be increased by the liquid revenues.²⁵¹

This modification of Opinion No. 565 was supported in Opinion No. 565-A by four of the five members of the Commission²⁵² and when rehearing of Opinion No. 565-A was sought, the Commission adhered to that position.²⁵³

The Commission’s reversal of position as to the continuing efficacy of the $134 million contract price as a ceiling on Texas Eastern’s payments to the producers for Rayne Field gas engendered an issue which is hotly contested in this court. Texas Eastern argues that the condition extending its payments over the life of the field will compel an expenditure of many millions of dollars over the maximum price agreed to by the producers, and that the Commission exceeded its authority in imposing that requirement. The producers and the Commission, with equal vigor, defend the requirement as a lawful and appropriate exercise of regulatory power under Section 7 to condition certificates of public convenience and necessity. Our starting point will be a comprehensive analysis of the Natural Gas Act in its relation to the Commission’s authority to alter contract prices to which the parties have voluntarily subscribed.²⁵⁴ The remaining point we will consider is the Commission’s power to effect the alteration of which Texas Eastern complains.²⁵⁵

B. The Power to Change Contract Prices

Two decisions of the Supreme Court, read conjunctively, make it crystal clear that the Commission possesses only limited power to raise prices for natural gas above those contractually fixed by the parties. In United Gas Pipe Line Company v. Mobile Gas Service Corporation,²⁵⁶ a regulated pipeline supplying natural gas to a distributor filed with the Commission a new rate schedule purporting to increase the price of its gas above that specified in its contract with the distributor. The Commission rejected the latter’s complaint but, on review, the Court held that the Act did not empower the pipeline to unilaterally change the contract rate.²⁵⁷ The Act, the Court stated, “evinces no purpose to abrogate private rate contracts. To the contrary, by requiring contracts to be filed with the Commission,²⁵⁸ the Act expressly recognizes that rates to particular customers may be set by individual contracts.” ²⁵⁹ Rejecting the contention that Sections 4(d) and (e) ²⁶⁰ and 5 (a)²⁶¹ are alternative rate-changing procedures, the Court said:

These sections are simply parts of a single statutory scheme under which all rates are established initially by the natural gas companies, by contract or otherwise, and all rates are subject to being modified by the Commission upon a finding that they are unlawful. The Act merely defines the review powers of the Commission and imposes such duties on natural gas companies as are necessary to effectuate those powers; it purports neither to grant nor to define the initial rate-setting powers of natural gas companies.²⁶²

Section 5(a), authorizing the Commission to set aside or modify any rate found to be “unjust, unreasonable, unduly discriminatory, or preferential [,]” the Court continued, “is neither a ‘rate-making’ nor a ‘rate-changing’ procedure. It is simply the power to review rates and contracts made in the first instance by natural gas companies and, if they are determined to be unlawful, to remedy them.” ²⁶³ And since the Act does not define the power of natural gas companies either to make or change rates and contracts,²⁶⁴ “[t]he obvious implication is that, except as specifically limited by the Act, the rate-making powers of natural gas companies were to be no different from those they would process in the absence of the Act: to establish ex parte, and change at will, the rates offered to prospective customers; or to fix by contract, and change only by mutual agreement, the rate agreed upon with a particular customer.” ²⁶⁵ So, the Court concluded, “there is nothing in the structure or purpose of the Act from which we can infer the right, not otherwise possessed and nowhere expressly given by the Act, of natural gas companies unilaterally to change their contracts.” 266

In Mobile, the Court also noted, however, “that this interpretation, while precluding natural gas companies from unilaterally changing their contracts simply because it is in their private interests to do so, does not deprive them of an avenue of relief when their interests coincide with the public interest.” ²⁶⁷ The Court explained:

Section 5(a) authorizes the Commission to investigate rates not only “upon complaint of any State, municipality, State commission, or gas distributing company” but also “upon its own motion.” Thus, while natural gas companies are understandably not given the same explicit standing to complain of. their own contracts as are those who represent the public interest or those who might be discriminated against, there is nothing to prevent them from furnishing to the Commission any relevant information and requesting it to initiate an investigation on its own motion. And if the Commission, after hearing, determines the contract rate to be so low as to conflict with the public interest, it may under § 5(a) authorize the natural gas company to file a schedule increasing the rate.²⁶⁸

On the same day Mobile was decided, the Court announced its opinion in Federal Power Commission v. Sierra Pacific Power Company.²⁶⁹ The question there was whether the Commission could increase the rate specified in a contract by which an electric utility agreed to supply power to a distributor. The Commission allowed the increase solely on the ground that the contract rate yielded less than a fair return on the utility’s net invested capital.²⁷⁰ The asserted basis for the increase was Section 206(a) of the Federal Power Act²⁷¹ which, similarly to Section 5 of the Natural Gas Act, authorizes the Commission to fix the just and reasonable rate for electricity if the existing rate is “unjust, unreasonable, unduly discriminatory, or preferential.” ²⁷² The Court pointed out that “while it may be that the Commission may not normally impose upon a public utility a rate which would produce less than a fair return, it does not follow that the public utility may not itself agree by contract to a rate affording less than a fair return or that, if it does so, it is entitled to be relieved of its improvident bargain.” ²⁷³ “In such circumstances,” said the Court, “the sole concern of the Commission would seem to be whether the rate is so low as to adversely affect the public interest — as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.” ²⁷⁴ Observing that “the purpose of the power given the Commission by § 206(a) is the protection of the public interest, as distinguished from the private interests of the utilities,” ²⁷⁵ the Court deemed it “clear that a contract may not be said to be either ‘unjust’ or ‘unreasonable’ simply because it is unprofitable to the public utility.”²⁷⁶

These decisions furnish the standard by which the administrative action under scrutiny must be gauged. In recent years, the Supreme Court has applied them to uphold the Commission’s refusal to fix minimum area rates for producers at levels above their contract prices.²⁷⁷ “The regulatory system created by the Act,” the Court declared, “contemplates abrogation of these agreements only in circumstances of unequivocal public necessity.” ²⁷⁸ We ourselves have applied the Mobile-Sierra doctrine,²⁷⁹ and the Commission has relied on it to justify its refusal to override Southern Louisiana producers’ contract prices with higher minimum area rates.²⁸⁰

C. The Purchase Price Adjustment

The plan by which the Commission conventionalized the lease-sale arrangement involved contractual deviations of three major types. The first was the substitution of an initial unit price for the original price which the parties had fixed at the lump-sum figure of $134,395,700.²⁸¹ The second consisted in a series of requirements, to which the parties had not themselves previously agreed, which implemented the unification of the initial price.²⁸² The third was the elimination, in Opinion No. 565-A, of the $134 million contract price as the amount to be remitted to the producers by Texas Eastern, and the direction that Texas Eastern pay a to-be-established just and reasonable area rate for all gas realized from the beginning to the end of production.²⁸³ As is evident, each of these changes portended a problem in terms of the Mobile-Sierra doctrine.²⁸⁴

—The Unit Price

We may readily resolve any problem arising from the setting of the initial unit price for the gas. As we have seen, the restriction on contract-alteration by the Commission is not total; the Commission is authorized — indeed, is required — -“to review” the parties’ “rates and contracts . . . and, if they are determined to be unlawful, to remedy them,” ²⁸⁵ and to change them “in circumstances of unequivocal public necessity.” ²⁸⁶ This is the power which the Commission exercises when it imposes upon a Section 7 certificate of public convenience and necessity a condition that a designated initial price be observed.

As the Supreme Court said in CATCO,

The purpose of the Natural Gas Act was to underwrite just and reasonable rates to the consumers of natural gas ²⁸⁷ .... As the original § 7(c) provided, it was “the intention of Congress that natural gas shall be sold in interstate commerce for resale for ultimate public consumption for domestic, commercial, industrial, or any other use at the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest²⁸⁸ .... The Act was so framed as to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges. The heart of the Act is found in those provisions requiring initially that any “proposed service, sale, operation, construction, extension, or acquisition . . . will be required by the present or future public convenience and necessity,”²⁸⁹ . and that all rates and charges “made, demanded, or received” shall be “just and reasonable” ²⁹⁰ ... . The Act prohibits such movements unless and until the Commission issues a certificate of public convenience and necessity therefor²⁹¹ .... Section 7(e) vests in the Commission control over the conditions under which gas may be initially dedicated to interstate use.²⁹²

Moreover, said the Court in CATCO, “[i]n view of [the statutory] framework in which the Commission is authorized and directed to act, the initial certificating of a proposal under § 7(e) of the Act as being required by the public convenience and necessity becomes crucial.” ²⁹³ This is partly “because the delay incident to determination in § 5 proceedings through which initial certificated rates are reviewable appears nigh interminable.” ²⁹⁴ Undeniably, “the Act does not require a determination of just and reasonable rates in a § 7 proceeding as it does in one under either § 4 or § 5,” ²⁹⁵ nor is “a ‘just and reasonable’ rate hearing ... a prerequisite to the issuance of producer certificates.” ²⁹⁶ But “the inordinate delay presently existing in the processing of § 5 proceedings requires a most careful scrutiny and responsible reaction to initial price proposals of producers under § 7,” ²⁹⁷ and “[t]heir proposals must be supported by evidence showing their necessity to ‘the present or future public convenience and necessity’ before permanent certificates are issued.” ²⁹⁸ And “[w]here the application on its face or on presentation of evidence signals the existence of a situation that probably would not be in the public interest, a permanent certificate should not be issued.” ²⁹⁹

The certificate-conditioning power of the Commission exercisable upon a Section 7 producer application is the vehicle by which the Commission is summoned and enabled to protect the public interest.³⁰⁰ It is the “method by which the applicant and the Commission can arrive at a rate that is in keeping with the public convenience and necessity.” ³⁰¹ For “[t]he Congress, in § 7(e), has authorized the Commission to condition certificates in such manner as the public convenience and necessity may require;”³⁰² and “[w]here the proposed price is not in keeping with the public interest . . . the Commission in the exercise of its discretion might attach such conditions as it believes necessary.” ³⁰³

From the regulatory scheme, thus analyzed, it is apparent that the establishment of an initial price in a Section 7 certificate proceeding does not ordinarily implicate the Mobile-Sierra rule. As in CATCO the Court explained:

This is not an encroachment upon the initial rate-making privileges allowed natural gas companies under the Act, . . . ³⁰⁴ but merely the exercise of that duty imposed on the Commission to protect the public interest in determining whether the issuance of the certificate is required by the public convenience and necessity, which is the Act’s standard in § 7 applications. In granting such conditional certificates, the Commission does not determine initial prices nor does it overturn those agreed upon by the parties. Rather, it so conditions the certificate that the consuming public may be protected while the justness' and reasonableness of the price fixed by the parties is being determined under other sections of the Act. Section 7 procedures in such situations thus act to hold the line awaiting adjudication of a just and reasonable rate. Thus the purpose of the Congress “to create a comprehensive and effective regulatory scheme,” ³⁰⁵ . . is given full recognition. And § 7 is given only that scope necessary for “a single statutory scheme under which all rates are established initially by the natural gas companies, by contract or otherwise, and all rates are subject to being modified by the Commission. . ” ³⁰⁶ . . . . On the other hand, if unconditional certificates are issued where the rate is not clearly shown to be required by the public convenience and necessity, relief is limited to § 5 proceedings, and . . . full protection of the public interest is not afforded.³⁰⁷

In Opinion No. 565, the Commission found that the lease-sale, even as amended by the reserve guaranty,³⁰⁸ did not comport with the public convenience and necessity ;³⁰⁹ and that, in order that it might do so, it was essential that it be altered in certain respects.³¹⁰ In Opinion No. 565-A, the Commission adhered to that finding.³¹¹ In Opinion No. 565, the Commission fixed an initial price,³¹² and in Opinion No. 565-A, though it abrogated that price, it specified that the future area rate would become the initial price between Texas Eastern and the producers.³¹³ In Opinion No. 565, the Commission imposed a set of additional requirements to adjust the lease-sale arrangement to the pricing prescribed.³¹⁴ While in Opinion No. 565-A, the Commission suspended some of those requirements, it was not because they lacked an intimate connection with the initial price which Opinion No. 565 had set.³¹⁵ To the extent that these specifications changed the parties’ lease-sale contract, they were manifestly designed to serve the public convenience and necessity ³¹⁶ — a necessity born of the great difficulty, if not the impossibility, of otherwise ascertaining and effectuating an initial price for the gas, and consequently of protecting consumers against excessiveness.³¹⁷ In these modifications, we perceive no impingement upon the Mobile-Sierra doctrine.

—The Total Price

As we have stated, Texas Eastern argues strenuously that the Commission’s decision to eliminate the $134 million lease-sale contract price as the ceiling of its monetary liability to the producers for their Rayne Field gas stands on entirely different ground. We find, upon careful examination of this particular change, that Texas Eastern’s position is well taken. We accordingly hold that the Commission’s action in that . regard cannot be supported as an appropriate exercise of its contract-revision authority under the narrow exception to the Mobile-Sierra rule.

Before elucidating the reasons persuading us to that conclusion, we pause to address two preliminary considerations. The producers and the Commission point to the uncertainties as to the volume of gas in the field, the quantity and value of liquids that may be extracted, the amount of future state taxes and the size of salvage recoveries; and on that basis they argue that the displacement of the contract price by a unit price payable throughout the life of the field does not absolutely forebode an increase of the cost of the gas to Texas Eastern. In the view of three members of the Commission- — a majority in Opinion No. 565-A, in which the displacement was directed^ — such an increase would indeed follow. Commissioner O’Connor estimated that the producers would gain “an additional $52,141,000.”³¹⁸ Commissioners Carver and Brooke put the gain in current dollars at between $17,637,-000 and $25,912,000.³¹⁹ All three commissioners recognized that these figures would go higher if the area rate for Southern Louisiana producers were raised prospectively above 18.5 cents per Mcf.³²⁰ Neither of the two remaining Commission members indicated in Opinion No. 565-A any belief that the linking of Texas Eastern’s payments to the full period of productive activity was not an extracontractual financial boon to the producers.³²¹ Moreover, the Section 7 certification proceeding does not tolerate the kind of cost figuring which a more solid determination on the matter of increase, if possible at all, would unavoidably necessitate.³²² In these circumstances, we feel bound to accept the premise that the contract price was substantially raised.

Beyond that, the fundamental teaching of Mobile and Sierra is that the parties’ agreement, and not the Commission’s bent, sets the price of gas for purposes of administrative regulation unless overriding considerations of public convenience and necessity unmistakably appear.³²³ . We deem this the governing rule not only where, in consequence of the Commission’s action, a raising of the contract price of gas is evident but also where it is reasonably likely. For. it is the prerogative of each contracting party to seek protection in a firm price, and to insist upon it if it becomes a term of the contract. Texas Eastern and the producers stipulated such a price in their lease-sale contract, and Texas Eastern is free to demand the financial security which it provides. Like any other estimate, the views that elimination of the contract price inexorably increased Texas Eastern’s gas costs cannot rise to the level of complete certainty. But it cannot be gainsaid that, at the very least, eradication of the contract price poses the serious threat that Texas Eastern may have to pay the producers much more. That, we think, is enough to give substance to Texas Eastern’s complaint, and to bring the Mobile-Sierra restriction into play.

There is another preliminary matter which the producers’ position presents. They contend also that because the applications to the Commission invoked its Section 7 power to confer certification, and not its Section 5 authority to review rates for their reasonableness, the Mobile-Sierra doctrine does not apply. Like the Third Circuit, however, we deem this “an immaterial difference.” ³²⁴ Mobile and Sierra together ordain that a party to a gas contract may not unilaterally increase the contract price,³²⁵ and they also specify the only condition under which the Commission can elevate that price.³²⁶ We cannot read either of those decisions as a holding that, absent an exigent public interest, the Commission can exercise a prerogative which the parties contractually denied to themselves. Nor do we find in Section 7 a grant to the Commission of greater power over contract prices than it possesses under Sections 4 and 5. On the contrary, it is our clear understanding from the Supreme Court’s CATCO decision,³²⁷ which we have already extensively analyzed,³²⁸ that the Mobile-Sierra rule applies full force to Section 7 proceedings.³²⁹ We conclude that the Commission was as much bound to preserve the integrity of the contract price in this case as in any other.

This brings us to a consideration of the propriety of the Commission’s holding in Opinion No. 565-A that instead of discharging the fixed purchase-price obligation defined in the lease-sale contract, Texas Eastern must continue its gas-purchase payments to the producers until the transferred reserves are exhausted. The majority vote ³³⁰ to make that change was predicated upon a single ground: that “it appears that while the Producers, under the arrangement we prescribed [in Opinion No. 565], will be getting the contract price it will not be of the same value because they will receive it over a much longer period, and they will not receive the benefit of all the gas and liquids produced by the Field as they would under a conventional contract.” ³³¹ For that reason alone, it was concluded “that it is only equitable that they be paid for the gas and receive credit for the liquids produced until the Field is exhausted.” ³³²

We think it clear that the Commission’s direction to that end does not survive the Mobile-Sierra test. That test, as we have seen, is not whether a contractual provision seems to be equitable to the contracting parties but whether it is detrimental to the public interest.³³³ It bears repeating that “[t]he regulatory system created by the Act is premised on contractual agreements voluntarily devised,” ³³⁴ and that “it contemplates abrogation of these agreements only in circumstances of unequivocal pub-h'c necessity.” ³³⁵ Unlike the conventionalizing provisions of Opinion No. 565 responsive to the dire public need to establish an initial unit price for the gas,³³⁶ the Commission’s alteration of the stipulated aggregate price has not been shown to serve any facet of the public interest at all.

The Commission did not find that the $134 million contract price was “so low as to adversely affect the public interest.”³³⁷ It did not find “financial or other difficulties that required the Commission to relieve the producers . . . from the burdens of their contractual obligations.” ³³⁸ Nor did it find that the apparent enlargement of Texas Eastern’s ultimate financial liability was essential to conventionalization of the lease-sale arrangement.³³⁹ It simply felt it “only equitable” to lift the $134 million ceiling on the total consideration the producers were to receive in order to adjust the difference in time value of the money and to assure remuneration for all gas and liquids yielded. It may be that, as things turned out, the producers would have been better off had the parties not substituted the lease-sale for the original gas-sale transaction, but “the Commission may not, absent evidence of injury to the public interest, relieve a” contracting party “of ‘its improvident bargain.’ ” ³⁴⁰ It follows that the Commission’s attempt to extend Texas Eastern’s payments over the life of Rayne Field must be set aside.

That is not to say, however, that its counterpart in Opinion No. 565 is invulnerable. Except as the exigencies of the public interest demanded, the Commission was no more at liberty to alter the lease-sale contract to the prejudice of the producers than to do so in their favor. Opinion No. 565, by limiting Texas Eastern’s financial liability to the contract price and simultaneously spreading its discharge over a longer period of time, would cause the producers to receive less than the quid pro quo for which they contracted. That is because the value to the producers of the money to be paid over the longer time span would be less than its value by the payment schedule embodied in the lease-sale arrangement.³⁴¹ The Commission, in conventionalizing the lease-sale in the public interest³⁴² was virtually compelled to change that schedule, and we have sustained its action in doing so;³⁴³ but in the process the producers were deprived of a part of their bargain.

Every member of the Commission has come to recognize the producers’ plight demands rectification,³⁴⁴ but we see no need for a remand to the Commission for its accomplishment. A ma-. jority of the Commission has held on five occasions that the public convenience and necessity would not be served by certification of the lease-sale as a lease-sale,³⁴⁵ and on two occasions that conventionalization was necessary in the public interest,³⁴⁶ with a linking of Texas Eastern’s gas-purchase payments to gas deliveries.³⁴⁷ With these holdings, which the Commission deems unavoidable and which we have no basis for disturbing, the only alternative legally available to the Commission is an increase in Texas Eastern’s payments beyond the aggregate $134 million contract price by an amount equal to the time value of the money to be paid on the Commission-rearranged payment schedule.³⁴⁸ That would confer on the producers the full equivalent of their contract price, and would impose on Texas Eastern no more than the equivalent of its contract cost; and the economic positions of both parties would then be harmonized with Mobile-Sierra requirements.³⁴⁹ Our judgment on this review will, in lieu of a remand for the purposes, incorporate such a modification in the Commission’s disposition.

V. PRODUCER RATES AND REFUNDS

Having decided to conventionalize the lease-sale transaction,³⁵⁰ with a view to establishment of an initial unit price for the producers’ gas as the major product of conventionalization,³⁵¹ the Commission then embarked upon achievement of that goal. The task which the Commission undertook may be defined quite simply. An initial price for the gas, geared to actual deliveries, would fix a ceiling on the payments which Texas Eastern would thereafter make to the producers. It might also serve as the point of reference for financial adjustments between the parties, which past remittances on the schedule of the lease-sale purchase-price payments would almost certainly make inevitable. In addressing these matters the Commission was, however, to travel a long and tortuous path to an inconclusive end.

In Opinion No. 565, a majority of the Commission held that the certificates issued to Texas Eastern and the producers should be conditioned upon an initial price of 20 cents per Mcf for gas delivered to October 1, 1968, and at the price of 18.5 cents on deliveries thereafter.³⁵² The 20-cent price was the inline price, as determined by the Commission.³⁵³ The 18.5-cent price was the just and reasonable area rate which the Commission had recently set in the Southern Louisiana Area Rate Proceeding.³⁵⁴ The changeover date was the date on which the area rate took effect.³⁵⁵ The order accompanying Opinion No. 565 directed Texas Eastern to make payments to the producers, and the producers to make refunds to Texas Eastern, in accordance with that formula.³⁵⁶ Chairman White was of the view that the price should have been fixed at the 18.5-cent just and reasonable rate from the time the flow of the gas commenced in 1959.³⁵⁷

In Opinion No. 565-A, however, this disposition was changed radically. A majority of the Commission rallied to the position expressed earlier by Chairman White,³⁵⁸ who no longer was a member of the Commission, but concluded that no just and reasonable area rate had been finally determined.³⁵⁹ On that ground, the majority held that Texas Eastern should pay the producers the 20-cent in-line rate on future gas deliveries until a firm area rate was forthcoming.³⁶⁰ On the same ground and others, the majority also held that producer refunds should be deferred until then.³⁶¹ The Commission subsequently denied a rehearing of that decision.³⁶²

We find the resolutions of the Commission majorities in Opinions Nos. 565 and 565-A legally unacceptable. We hold that, as a matter of law, the Commission was compelled to utilize the previously ascertained 18.5-cent just and reasonable' area rate both as the unit price for the gas deliveries to be made and as the basis for refunds by the producers on account of deliveries already made. We further hold that the Commission was legally obliged to order the producers to make those refunds to Texas Eastern immediately.

A. The General Standard For Producer Rates

“The purpose of the Natural Gas Act,” the Supreme Court instructs, “was to underwrite just and reasonable rates to the consumers of natural gas.”³⁶³ Its “primary aim . . . was to protect consumers against exploitation at the hands of natural gas companies.” ³⁶⁴ Section 4(a) of the Act specifies that “[a] 11 rates and charges ... by any natural-gas company” ³⁶⁵ on the “sale of natural gas” regulable by the Commission “shall be just and reasonable” ;³⁶⁶ and by that section, “any such rate or' charge that is not just and reasonable is declared to be unlawful.” ³⁶⁷ Nowhere does the Act in terms condone any rate or charge other than the one that would be just and reasonable. Nowhere does the Act suggest that a rate or charge above that which would be just and reasonable is not unlawfully excessive. Nor can it be gainsaid that “[t]he Act was so framed as to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges.” ³⁶⁸

The Commission’s responsibility to hearken to these policies attaches at the very moment it is requested to certificate activities within its regulatory domain. Section 7(e) imposes upon it the duty to determine whether a “proposed service, sale, operation, construction, extension, or acquisition . will be required by the present or future public convenience and necessity.”369 By the same token, that section “vests in the Commission control over the conditions under which gas may be initially dedicated to interstate use.” ³⁷⁰ That authority extends indubitably to a determination as to whether the charges which a producer proposes to make for his gas are in the public interest.³⁷¹ Indeed, Section 7(c) of the Act itself originally articulated “the intention of Congress that natural gas shall be- sold in interstate commerce for resale for ultimate public consumption . . . at'the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest.” ³⁷² That objective, though no longer expressly stated, stands as a major congressional concern today.³⁷³

To be sure, “the Act does not require a determination of just and reasonable rates in a § 7 proceeding as it does in one under either § 4 or § 5,” ³⁷⁴ nor is “a ‘just and reasonable’ rate hearing . a prerequisite to the issuance of producer certificates.” ³⁷⁵ The setting of the producer’s initial price at the just and reasonable rate, were that course feasible, would, of course, contribute handsomely to the consumer-protection goal of the Act. But as we have seen, the exigencies of prompt initial certification of gas sales and pipeline extensions preclude, within the certification proceedings themselves, fullfledged investigations worthy of a “just and reasonable” appellation.³⁷⁶ That is not to say that the Commission need not bend its best efforts to achieve an equitable price arrangement when it awards certification under Section 7. On the contrary, the very delay incidental to just-and-reasonable-rate investigations “requires a most careful scrutiny and responsible reaction to initial price proposals of producers under § 7.” ³⁷⁷ “[P]rice [is] a consideration of prime importance” ³⁷⁸ in the certification process, and “if unconditional certificates are issued where the rate is not clearly shown to be required by' the public convenience and necessity, . . . full protection of the public interest is not afforded.” ³⁷⁹

B. The Treatment Of Producer Rates

In Opinion No. 565, a majority of the Commission decided that the price to be paid to the producers for gas deliveries to Texas Eastern after the effective date of the Commission’s decision in Southern Louisiana Area Rate Proceeding ³⁸⁰ should be set at the just and reasonable rate of 18.5 cents ascertained therein.³⁸¹ Said the Commission:

Here we are issuing a certificate under Section 7 of the Natural Gas Act. Section 7(c) provides that we have power to attach to the certificate “such reasonable terms and conditions as the public convenience and necessity may require.” ³⁸² We think it reasonable to require that the Producers reduce their rates prospectively to an effective 18.5 cents per Mcf in accordance with [the area rate determination] ,³⁸³

In Opinion No. 565-A, the Commission majority held similarly that the just and reasonable rate should govern the initial price for prospective gas deliveries.³⁸⁴ The Commission concluded, however, that the area rate for Southern Louisiana producers had not been finally resolved.³⁸⁵ So, with respect to the future pricing of the gas, the Commission said:

Since we have stayed this rate as a result of the court’s review of our area decision ³⁸⁶ and the appropriate rate is still subject to further proceedings, we shall require that the producer rate schedule filing be on the basis of 20 cents per Mcf, the in-line price in Southern Louisiana as found in our original opinion. When the Southern Louisiana rate is finally determined, we shall require that this basic producer rate be modified accordingly.³⁸⁷

The challenge we are now summoned to resolve is to the Commission’s substitution by Opinion 565-A of the in-line rate for the just and reasonable rate employed in Opinion No. 565 as the measure of the initial price to be paid by Texas Eastern to the producers for future deliveries of natural gas.

—(1) The Choice Of The In-Line Price

The unfeasibility of establishing a just and reasonable rate within the framework of a Section 7 certification proceeding ³⁸⁸ ofttimes forces resort to some other means of fixing an initial price for newly certificated gas in the public interest. So it is that the in-line price frequently becomes the criterion— simply because it is the only point of reference extant. ³⁸⁹ Where that' is so, it is settled that the in-line price may legitimately be utilized as the initial price imposed as a condition qualifying the certificate issued.³⁹⁰ The in-line price thus functions as the ceiling on the price at which the gas may be sold pending ascertainment of the just and reasonable rate.³⁹¹

It is evident, however, that use of the in-line price as the yardstick for the initial-price determination on certification cannot be justified in situations where a just and reasonable area rate for gas of the vintage in question has already been established. The goal of gas-pricing to which the Act emphatically speaks is the just and reasonable rate,³⁹² for which the in-line price is not a reliable substitute. As the Supreme Court has pointed out, where the Commission has decided “to rely solely upon contemporaneous contract prices in setting initial rates, there can be no assurance that an initial price arrived at by the Commission will bear any particular relationship to the just and reasonable rate.” ³⁹³ Rather, as we have explained, adoption of the in-line price as the initial price is merely an interim measure designed to hold the line until the just and reasonable rate for the gas can be ascertained.³⁹⁴ If that rate, by reason of a past determination, is already available, its use as the initial price for future gas sales follows logically and, we think, legally as a normal concomitant of certification.

Just and reasonable rates for jurisdictional gas, we repeat, are the end and aim of price regulation under the Act.³⁹⁵ They are the ultimate in the pricing of the natural gas over which the Commission exerts its authority. That the Section 7 proceeding is directed primarily at certification rather than ratemaking does not diminish the Commission’s duty to fix initial prices which are calculated to best serve the public weal. The congressional intent underlying Section 7 is that jurisdictional gas shall, from the very beginning, “be sold at the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest.” ³⁹⁶ Ordinarily that policy is frustrated by selection of an in-line price over a just and reasonable price that is for the asking.

As we see it, only the presence of an overriding consideration promoting an identifiable legislative purpose can justify administrative displacement of the just and reasonable rate through approval of another rate for gas to which the Act applies. The need for prompt setting of an initial price in a Section 7 certification proceeding becomes such a consideration where there is no just and reasonable rate as yet.³⁹⁷ But where, on the other hand, the just and reasonable rate has been established when the Commission comes to fix an initial price for gas, there is simply no need to resort to any other rate.

Two courts, for the purpose of computing producer refund liabilities in Section 7 proceedings, have passed over the in-line price for natural gas in favor of the just and reasonable area rate which had become available.³⁹⁸ It is even plainer to us that, absent unusual circumstances, that course must be pursued when the Commission is called upon to set initial prices prospectively. In our view, the Commission is legally compelled to peg a producer’s initial price at a previously ascertained just and reasonable rate unless some consideration effectuating a countervailing congressional policy is shown on balance to outweigh the congressional interest in “just and reasonable rates to the consumers of natural gas.” ³⁹⁹

—(2) The Status of the Southern Louisiana Area Rate Proceeding

On September 25, 1968, the Commission capped a seven-year-old rate investigation with its Opinion No. 546 in Docket No. AR61-2 — the Southern Louisiana Area Rate Proceeding⁴⁰⁰ By that dereasonable price ceilings, including 18.5 cents for onshore natural gas of the Rayne Field vintage, for the Southern Louisiana production area.⁴⁰¹ The orders effectuating Opinion No. 546 soon came under review in the Fifth Circuit.⁴⁰² Producers and pipelines challenged the rates as too low, while consumer interests argued that they were too high. On March 10, 1970, the court sustained the orders “in full”.⁴⁰³

In the meantime, the Commission, on March 20, 1969, had issued its Opinion No. 546-A in response to applications for rehearing of Opinion No. 546.⁴⁰⁴ In Opinion No. 546-A, the Commission modified Opinion No. 546 in some respects, but refused to reopen the investigation or to readjust the price levels set.⁴⁰⁵ The Commission felt, however, that the importance of an additional supply of gas from the offshore areas of Southern Louisiana warranted the commencement of another proceeding looking forward to possible revision of the area prices for such gas.⁴⁰⁶ The Commission rejected suggestions that the new proceeding — Docket No. AR69-1 — should embrace a further inquiry into the ade-, quacy of the rates promulgated in Opinion No. 546 for gas produced on shore in the Southern Louisiana area.⁴⁰⁷ Within nine months, however, the Commission changed its mind as to the scope of the new investigation. On December 15, 1969, the Commission issued an order enlarging the proceeding to include the entire geographical area of Southern Louisiana, onshore as well as offshore,' and to provide for a review of the just and reasonable rates for all vintages of gas therefrom.⁴⁰⁸

The order expanding the investigation in Docket No. AR69-1 came shortly prior to oral argument in the Fifth Circuit on its review of Opinion No. 546, the original Southern Louisiana area rate proceeding, occasioning a pause to consider the impact of that investigation on the pending review.⁴⁰⁹ The court agreed with the parties that it had no effect,⁴¹⁰ pointing out that

The maximum rates that the Commission has set . . are to remain in effect throughout the new proceeding, which may last for years. Moreover, it was never contemplated that there should be a single area proceeding setting rates once and for all; rather the Commission has always made it clear that it intended to review the rates it had set whenever the circum- . stances made it advisable to do so.⁴¹¹

And in upholding the orders under review, the court stated:

The mandate of this Court should not, however, be interpreted to interfere with Commission action that would change the rates we have approved here. We specifically and emphatically reject the contention . . . that the Commission has no power to set aside rates once determined by it to be just and reasonable when it has reason to believe its determinations may have been erroneous.⁴¹² In fact, the existence of the new proceedings, which as we understand will take into account many of the issues whose absence has concerned us here, has been one of the factors we have considered in deciding to affirm the Commission’s decisions.⁴¹³

Such was the history of the Southern Louisiana area rate inquiry at the time the Commission handed down Opinion No. 565-A. We cannot agree with the Commission that the events we have recited rendered Opinion No. 546 so tentative in character as to support the Commission’s refusal in Opinion No. 565-A to employ the 18.5-cent just and reasonable rate as the initial price to be paid to the producers for gas delivered after the effective date of that rate. By Opinion No. 546 and its related orders, which came long prior to Opinion No. 565-A, the Commission had fixed the just and reasonable rate for Southern Louisiana gas of the Rayne Field vintage at 18.5 cents per Mcf. On review of that rate and others promulgated in Docket No. AR61-2, the Fifth Circuit had affirmed the Commission’s orders.⁴¹⁴ In the process of doing so, the court had ruled that the reviewability of the orders accompanying Opinion No. 546 were unaffected by the pendency of Docket No. AR69-1 — the new Southern Louisiana area rate investigation.⁴¹⁵ We think that the 18.5-eent rate established by those orders was no less definitive and definite in its role as the legally appropriate criterion for the initial price which Rayne Field producers would be permitted to charge.

It is true that the Fifth Circuit, in affirming Opinion No. 546, spoke to the Commission's authority to reopen the orders accompanying it. We read that reference as no more than a recognition of the Commission’s prerogative — and duty — to revise rates when they are found to be inconsistent with the public interest. Section 16 of the Act expressly empowers the Commission to “amend [] and rescind . . . orders ... as it may find necessary or appropriate to carry out the provisions of this [Act]”.⁴¹⁶ That power undoubtedly extends to alteration of an existing rate upon a determination that it does not subserve the legislative objective of fair and equitable charges for natural gas.⁴¹⁷ But surely a rate is no less final, in terms of its operating capability, merely bebeeause it is subject to future revision. A fundamental precept of ratemaking is that rates may and should be changed whenever the exigencies of the public interest demand. And a vital function delegated to the Commission by the Natural Gas Act is the maintenance of the balance between producer, pipeline and consumer interests at the point of just and reasonable rates.⁴¹⁸ If the view espoused by the Commission in Opinion No. 565-A ⁴¹⁹ were carried to its logical end, no rate set by the Commission could ever attain finality.

The 18.5-cent just and reasonable rate was established in Opinion No. 546 after a long and comprehensive exploration ⁴²⁰ It earned, as we have said, full judicial approval.⁴²¹ Neither in Opinion No. 546-A nor in Opinion No. 565-A did the Commission find that the 18.5-cent area rate arrived at in Opinion 546 was unjust or unreasonable, or gravely doubtful in that respect. Rather, the investigation set in motion by Opinion 546-A and subsequently enlarged sought simply to determine what the just and reasonable test might require, if anything, in the way of modification of that rate.

In sum, the 18.5-cent rate differs little if any from any other rate that is inherently subject to change upon a suitable showing. The Commission’s authority to alter or discard its prior rate orders is limited to changes which “it may find necessary or appropriate to carry out the provisions of” the Act.⁴²² In our view, the Commission is not free to disregard a rate competently determined in the past to be just and reasonable unless and until it finds that the rate is unjust or unreasonable in the present, or seriously suspect on that score. The Commission’s revision power enables no more, and the legislative mandate for just and reasonable pricing ⁴²³ demands no less. We hold that neither the susceptibility of the 18.5-cent area rate to modification upon such a finding nor the ongoing administrative inquiry into the propriety of such a finding was adequate justification for the Commission’s decision in Opinion No. 565-A to ignore it.

C. The Standard For Producer Refunds

In 1959, after the Commission announced its ill-fated Opinion No. 322 certificating the extension of Texas Eastern’s pipeline to Rayne Field,⁴²⁴ deliveries of gas from the producers’ holdings therein commenced, and Texas Eastern began the purchase-price payments called for by the lease-sale contract. This court set Opinion No. 322 and it's accompanying order aside in I960,⁴²⁵ and in Opinion No. 378 in 1963, the Commission asserted jurisdiction over the producers’ sale.⁴²⁶ In Opinion No. 565 in 1968, the Commission conventionalized the sale and directed producer refunds,⁴²⁷ and in Opinion No. 565-A in 1969, the Commission deferred the refunds for an indefinite period.⁴²⁸

Throughout this lengthy period — a decade — the gas continued to flow through Texas Eastern’s pipeline en route to consumers, and Texas Eastern continued its payments to producers on the schedule specified by the lease-sale contract. Since those remittances, as the Commission found in Opinion No. 565, greatly exceeded the amounts which Texas Eastern would have paid for the gas had it been delivered pursuant to a conventional sale arrangement,⁴²⁹ the Commission’s power to order producer refunds was incontestable. We realize, of course, that the early administrative treatment of the parties’ transaction contributed to the occasion for financial adjustments between Texas Eastern and the producers, but the Commission’s authority to require them nonetheless remained unimpaired.⁴³⁰ “An agency, like a court, can undo what is wrongfully done by virtue of its order,” ⁴³¹ and “the Commission could properly conclude that the public interest required the producers to make refunds for the period in which they sold their gas at prices exceeding those properly determined to be in the public interest.” ⁴³² The problem for the Commission, rather, was the standard by which the amounts of the refunds were properly to be fixed, and that we must first define.

The Natural Gas Act, we have noted, mandates just and reasonable rates for jurisdictional gas and declares that any other rate is unlawful.⁴³³' As the Supreme Court has said,

Logically, this would seem to imply that to assure the “complete, permanent and effective bond of protection” [which the Act affords consumers “from excessive rates and charges”],⁴³⁴ any rate permitted to be charged during the interim period before a just and reasonable rate can be determined must be accompanied by a condition rendering the producer liable for refunds down to the just and reasonable rate, should that rate prove lower than the initial rate specified in the certificate.⁴³⁵

Although, as the Court acknowledged, the Commission apparently does not impose such a condition and reviewing courts have not insisted that it do so,⁴³⁶ the need for a comparable course here seems irrefutable. If, at the time the refunds are to be made, the just and reasonable rate is readily available, there is hardly room for argument that some other criterion is ordinarily to be taken as the basis for computing the refunds. We have reasoned that absent an extraordinary situation, the in-line price cannot be utilized consistently with the Act as the initial price on a certificated sale when the just and reasonable rate for the gas has already been ascertained.⁴³⁷ Since refunds serve the purpose of correcting prices which were too high, it follows that the excess over a predetermined just and reasonable rate is normally to be refunded. Only in the most unusual situation could a departure from that course be logically or legally justified.⁴³⁸

We are mindful of considerations which superficially might indicate a preference for the in-line price over the just and reasonable rate as the predicate for calculating refunds, but on analysis they do not support such a preference. Refunds must be made on the basis of the in-line price in lieu of a wait for the just and reasonable rate,⁴³⁹ but because the consumer’s interest in speedy refunding — possible only on the basis of the inline rate — predominates.⁴⁴⁰ Initial pricing permissibly done at the in-line figure sets that figure as the refund base,⁴⁴¹ but because that is the preferred interpretation of the Act.⁴⁴² The use of inline prices for purposes of refunds has been judicially approved, but in cases where no just and reasonable rate was extant.⁴⁴³ On the other hand, where the just and reasonable rate has already been found, two courts have held that it might be employed.⁴⁴⁴

We have concluded that only a consideration subserving an overriding aspect of legislative policy affords adequate justification for a selection of the in-line price over an existing just and reasonable rate as the initial price at which a proposed gas sale is to be certificated.⁴⁴⁵ No more can lesser considerations justify a refund base at the in-line price where the just and reasonable rate is at hand. We hold that an already established just and reasonable rate must be accepted as the foundation for producer refunds in the absence of paramount countervailing circumstances.

D. The Treatment of Producer Refunds

In Opinion No. 565, a majority of the Commission decided that the 18.5-cent rate set in the Southern Louisiana Area Rate Proceeding⁴⁴⁶ should serve as the basis for refunds by the producers on account of payments made to them by Texas Eastern after the date on which that rate went into effect.⁴⁴⁷ The Commission majority further decided that the foundation for producer refunds to Texas Eastern because of deliveries prior to the effective date of the area rate should be the 1959 in-line price of 20 cents ⁴⁴⁸ — the price in vogue at the commencement of the deliveries.⁴⁴⁹ The Commission reasoned:

[Ujnless we are to treat the present sale in the same manner as those contemporaneously contracted for and certificated at the in-line price of 20 cents per Mcf, we will in effect be punishing the producers for litigating their by no means frivolous legal and policy claims in the courts and before this Commission. This in our view would not only be inequitable, but would necessarily lead to unnecessary producer uncertainty when they choose to dedicate gas to the interstate market. Obviously, where their claims to special consideration are rejected they should not benefit by the passage of time in the course of their litigation. But where contemporary sales in the same area have been permanently certificated at in-line prices, approved by the courts, and used for both in-line and refund purposes, we do not believe that the exigencies of the timing of litigation on similar sales should lead to a different result.⁴⁵⁰

In Opinion No. 565-A, however, the majority position of the Commission shifted; all payments above the just and reasonable rate, that opinion held, should be refunded.⁴⁵¹ But on the premise that the rate promulgated in the Southern Louisiana Area Rate Proceeding remained open to change, the Commission deferred producer refunds pending the establishment of a firm area rate.⁴⁵² The Commission explained: ■

[T]he just and reasonable rates applicable to the Southern Louisiana area in which the Rayne Field is situated have not been fully determined, nor has it been determined whether refunds should be made by the producers in that area either for the periods before or after October 1, 1968. In these circumstances it is our opinion that the public interest precludes our ordering refunds to be paid by the Rayne Field producers at this time. The myriad problems confronting the Commission in coping with producer regulation render our task difficult and complex, at best. However, the one objective that must always be kept in sight is the need to provide fair and equal treatment for all of those regulated. It is essential, therefore, that the four producers involved in this proceeding should be afforded the same treatment as will be given to all other producers in Southern Louisiana. In this regard, we believe that the just and reasonable rates which ultimately flow out of any settlement, or any further proceedings in [the Southern Louisiana, Area Rate Proceeding], should govern the level of payments in this case prior to October 1, 1968, as well as after that date.⁴⁵³

We cannot embrace fully the course of reasoning which the Commission majorities pursued in either of the two opinions. The standard for producer refunds, we have said, is the just and reasonable rate where that rate is available and use of another rate is not vindicated by some overriding facet of congressional policy.⁴⁵⁴ Consequently, we have no difficulty with the holding in Opinion No. 565 that the producers must refund the excess of Texas Eastern’s future payments over and above the just and reasonable rate determined in the Southern Louisiana Area Rate Proceeding,⁴⁵⁵ nor with so much of the holding in Opinion No. 565-A as would constitute an established just and reasonable rate the basis for any and all producer refunds.⁴⁵⁶ Since, however, as we have held, the Commission was not at liberty to discard the just and reasonable rate promulgated in the Southern Louisiana Area Rate Proceeding,⁴⁵⁷ and as well for other reasons to be discussed,⁴⁵⁸ we cannot accept the Commission’s decision in Opinion No. 565-A to postpone refunding to such time as the area rate for Southern Louisiana producers might be reformulated. We conclude, too, that the considerations advanced in Opinions Nos. 565 and 565-A are legally insufficient to justify a refusal to employ the existing just and reasonable rate as the predicate for the producers’ refunds.⁴⁵⁹

—(1) The Deferral Of Producer Refunds

Even assuming the nonexistence of any just and reasonable rate which might function as the basis for immediate refunds by the producers, that office could readily have been performed by the in-line price, which the Commission ascertained in this very proceeding.⁴⁶⁰ The Supreme Court has made plain the Commission’s authority to direct refunds predicated on the inline price pending determination of the just and reasonable rate for the gas in question.⁴⁶¹ The Court has also made it clear that producer refunds, when found due, are to be ordered promptly, and are not to be postponed for a retroactive application of a just and reasonable rate yet to be determined.

In United Gas Improvement Company v. Callery Properties,⁴⁶² the Commission ordered producers to refund the difference between prices they charged and in-line prices at which the sales should originally have been conditioned. On review, the Fifth Circuit held, just as the Commission did in Opinion No. 565-A, that the measure of the refunds should have been the difference between the contract price and the just and reasonable rate subsequently to be fixed, and that refunds should be delayed until the latter was fixed.⁴⁶³ The Supreme Court reversed the Fifth Circuit, stating:

We have said elsewhere that it is the duty of the Commission, “where refunds are found due, to direct their payment at the earliest possible moment consistent with due process.”⁴⁶⁴ . . . These excessive rates have been collected since 1958; under the circumstances, the Commission was not required to delay this refund further ⁴⁶⁵

The considerably longer period over which the producers here have collected above the in-line price can hardly escape notice.⁴⁶⁶

We are mindful of the fact that in Callery and other cases it was the Commission that ordered refunds based on the in-line price, while in Opinion No. 565-A the Commission did just the opposite : it reversed the direction in Opinion No. 565 to that effect. We deem this difference insufficient to remove the case from the purview of the Callery ruling. The Commission was not merely at liberty to require immediate refunds but, where refunds are due, it also had “the duty ... to direct their payment at the earliest possible moment consistent with due process.” ⁴⁶⁷ That duty charts the only course in keeping with the purpose of the Act “to afford consumers a complete, permanent and effective bond of protection from excessive rates and charges.”⁴⁶⁸ No more than the Fifth Circuit in Callery could the Commission defer refunds demanded in the public interest to the uncertain time at which a just and reasonable rate might be forthcoming.

In his Phase II decision, the presiding examiner found that through 1967 Texas Eastern had paid the producers $21.8 million more than gas deliveries at the in-line price would have brought — a figure which with interest increased to $31.4 million.⁴⁶⁹ In Opinion No. 565, the Commission adopted the examiner’s finding and directed refunds,⁴⁷⁰ and nothing in Opinion No. 565-A is at variance with that finding. Beyond that, the refund liability ascertained in Opinion No. 565 had endured, on a gradually increasing scale, over an eight-year period during which Texas Eastern had passed the greater portion of the price excesses on to consumers as a part of its cost of service.⁴⁷¹ These circumstances support vividly the Commission’s resolve in Opinion No. 565 to direct refunds, and point convincingly to the error in the Commission’s decision in Opinion No. 565-A to postpone the long overdue refunds even longer.

The Commission assigned two reasons for its decision to put off all producer refunds while the area rate for Southern Louisiana was undergoing further investigation. The first was the recurring thesis that the 18.5-cent area rate for Rayne Field gas had not been finally determined.⁴⁷² We have already examined that premise and found it to be erroneous.⁴⁷³ And with the just and reasonable area rate — at least for the time being — available, and the gross excess in producer receipts above that rate evident,⁴⁷⁴ it is clear enough that the Commission’s concern that the producers might not have to make refunds⁴⁷⁵ was unfounded.

The Commission’s second reason was that a deferral of refunds would foster equality of treatment among Southern Louisiana producers,⁴⁷⁶ presumably because all producers under an obligation to refund would do so on the basis of the area rate which the Commission would eventually formulate. But, obviously, with a just and reasonable rate of 18.5 cents already in being,⁴⁷⁷ the highly desirable goal of equal treatment could have been achieved simply by enforcing it uniformly among the producers.⁴⁷⁸ Moreover, we can perceive no significant difference between the Commission’s action here and the Fifth Circuit’s postponement of producer refunds in Callery⁴⁷⁹ to the day that a just and reasonable rate would become established.⁴⁸⁰ Such a postponement might give the assurance the Commission sought,⁴⁸¹ but sacrifices the superior interest of consumers in prompt refunds.⁴⁸² By its decision to delay refunds here, the Commission misconceived its consumer-protection functions under Section 7 as enunciated by the Supreme Court in CATCO.483 We can no more condone the deferral here than the Supreme Court could in Callery ⁴⁸⁴

■ — -(2) The Amounts Of Producer Refunds

The Commission, then, should have directed immediate producer rate refunds in Opinion No. 565-A, as it had earlier done in Opinion No. 565. That is not to say that Opinion No. 565 employed the correct standard for measuring the amounts of the refunds. We are satisfied that in part it did not.⁴⁸⁵

It will be recalled that in Opinion No. 565 the Commission selected the 20-cent in-line price as the foundation for refunds on payments to producers prior to October 1, 1968, the effective date of the 18.5-cent just and reasonable area rate, and at the 18.5-cent rate on payments made thereafter.⁴⁸⁶ The problem, as we see it, is with the use of the in-line rate at all. As we have said, an existent just and reasonable rate furnishes the exclusive basis for producer refunds unless the use of another basis is indicated by some overriding consideration of legislative policy.⁴⁸⁷ The Commission endeavored to justify utilization of the in-line rate for the period prior to establishment of the just and reasonable rate on the ground that it would enable an equitable treatment of all Southern Louisiana producers and promote certainty as to the initial price at which they might dedicate their gas to the interstate market.⁴⁸⁸ But as we have previously pointed out, equality of treatment among producers could have been achieved as readily by uniform application of the just and reasonable rate to Southern Louisiana producers.⁴⁸⁹ And to the extent that stability of the initial price obtainable by producers pondering a choice between interstate and intrastate markets was legitimately a competing consideration,⁴⁹⁰ it would have been as fully assured by adoption of the just and reasonable rate as the initial price payable on certification ⁴⁹¹

We cannot accept the grounds the Commission put forth in Opinion No. 565 as considerations of a caliber sufficient to outweigh the clear congressional preference for just and reasonable rates when available as indices for initial pricing in Section 7 certification proceedings. Nor can we accept the reasons advanced in Opinion No. 565-A as adequate justification for the Commission’s decision to defer refunding by the producers. We hold that the Commission was legally bound to order the refunds forthwith, and to predicate them upon the just and reasonable rate of 18.5 cents previously established in the Southern Louisiana Area Rate Proceeding.

VI. FLOW-THROUGH OF RATE REDUCTIONS AND REFUNDS

The issues remaining for our determination concern the extent to which rate reductions and refunds required of the producers in Texas Eastern’s favor should be passed on to its customers,⁴⁹² including the treatment, in relation to refunds, that should be given to Texas Eastern’s investment in Rayne Field.⁴⁹³ The Commission -dealt with and disposed of these matters in Opinion No. 565,⁴⁹⁴ but by Opinion No. 565-A deferred them for future consideration because their decision depended both upon the fact and the size of producer reductions and refunds, which Opinion No. 565-A left unsettled.⁴⁹⁵ We have discussed and resolved the latter problems, concluding that the producers must reduce their rates for the future and must refund the amounts charged above just and reasonable rates in the past.⁴⁹⁶ The flow-through question thus returns to the fore.

In his Phase II decision, the presiding examiner directed Texas Eastern to deposit the customer refunds which he ordered⁴⁹⁷ in escrow pending their disposition by the Commission in a later proceeding.⁴⁹⁸ In consequence of the reduction of producer rates,⁴⁹⁹ the examiner also directed Texas Eastern to lower the commodity charge in its systemwide rates by 0.2 cents per Mcf.⁵⁰⁰ In Opinion No. 565, the Commission deviated from the examiner on both counts, on .grounds now to be discussed.

A. The Treatment of Rate Reductions in Opinion No. 565

Before the Commission, Texas Eastern argued that the Commission had no authority under Section 7 of the Act⁵⁰¹ to revise systemwide rates which previously had been found to be just and reasonable.⁵⁰² The Commission deemed it unnecessary to address that contention. Texas Eastern had filed in another docket, under Section 4(a),⁵⁰³ a rate increase which included as a predicate its Rayne Field costs, and that filing was then in hearing before an examiner.⁵⁰⁴ The Commission felt that in those circumstances Opinion No. 565 “may properly provide, the basis for interim action in” the other docket.⁵⁰⁵ Accordingly, the Commission ordered “Texas Eastern to file substitute rates to reflect any reduction in costs arising from these proceedings and in accordance with this opinion.”⁵⁰⁶ The Commission specified that

As long as Texas Eastern is paying the producers for the gas and until the purchase price of $134,395,700 has been paid, and from then until complete amortization of the Rayne Field balances on Texas Eastern’s books,⁵⁰⁷ Texas Eastern’s rates shall continue to reflect the cost of the Rayne Field gas at the applicable area rate, now 18.5 cents per Mcf. However, when the amortization of the Rayne Field balances has been completed, Texas Eastern, providing it is still selling gas from Rayne Field, shall file new rates to reflect the fact that it is no longer paying the producers but is merely paying royalties and other expenses.⁵⁰⁸

B. The Treatment of Refunds in Opinion No. 565

On the subject of producer refunds, the examiner had felt bound by the Commission’s Opinions Nos. 540 and 540-A, rendered in earlier litigation involving Texas Eastern.⁵⁰⁹ Producers had collected rate increases from Texas Eastern but they were subsequently disallowed by the Commission, and a producer refund of some $10 million was generated as a result. Texas Eastern had not passed the increases on to its customers in the form of higher rates of its own. Texas Eastern sought the refund for itself, but the Commission held that the refund should flow through to Texas Eastern’s distributor-customers for the ultimate' benefit of the consuming public.⁵¹⁰ Reversing past practice,⁵¹¹ the Commission established prospectively the principle that unless a pipeline filed a rate increase⁵¹² tracking a supplier increase, it could not later assert a claim to a refund created by disallowance of the supplier increase.⁵¹³ Because of the prospectivity of this new requirement, it did not apply to Texas Eastern; but because Texas Eastern had nonetheless earned more than a reasonable margin of return,⁵¹⁴ the Commission directed a flow-through of the entire $10 million to its customers.⁵¹⁵

In the proceeding now before us, Texas Eastern did not file a tracking rate increase. The examiner found that Texas Eastern “earned a fair return despite having paid too much for Rayne Field gas,” ⁵¹⁶ and held that “[t]he reduction in its cost of gas should go to its customers.”⁵¹⁷ The examiner further concluded that Texas Eastern’s net investment of more than $20 million in Rayne Field⁵¹⁸ should be charged off to surplus.⁵¹⁹ In Opinion No. 565, however, the Commission deemed Opinions Nos. 540 and 540-A distinguishable:

There is no supplier rate increase involved here, the annual expense of which Texas Eastern could have passed on to its customers through a rate increase filing, had it believed the rate increase could be justified. Instead, under the lease-sale (which will remain in existence, though gas payments therefrom are conventionalized), the down payment, note payments and most of the other capital expenditures were reasonably treated by Texas Eastern as a capital investment, and as such in any rate case Texas Eastern could not have recovered anything more than the approved rate of annual return on such expenditures, depreciation, depletion and amortization, and certain expenses and taxes.⁵²⁰

In consequence, the Commission held that it “should not prescribe a complete flow-through by Texas Eastern of the refunds from the Producers.” ⁵²¹ On the-other hand, to the Commission it was “clear that Texas Eastern could have filed rates including Rayne Field costs on the above basis ⁵²² for the entire refund period.” ⁵²³ The Commission reasoned :

A complete flow-through of the producer refunds would put Texas Eastern in the position of paying too much for part of the Rayne Field gas without any relief and then paying the just and reasonable price for additional gas until the Producers shall have received the full purchase price of $134,395,700, so that Texas Eastern would end up paying some $21,000,-000 more than it had originally contracted to pay. However, to the extent the excessive payments in the years from 1959 to the present have fallen on its customers, Texas Eastern has already been reimbursed and the customers should receive a flow-through refund of that amount.⁵²⁴

Looking then to the evidence, the Commission found that, on the basis of the excess of the actual per-Mcf cost of the gas, by virtue of the lease-sale arrangement, over an in-line price of 20 cents per Mef,⁵²⁵ Texas Eastern’s customers had paid $13,848,919 of its Rayne Field costs through 1967.⁵²⁶ To this the Commission added $6,080,371, representing an allocable part of the interest which the producers were to pay Texas Eastern,⁵²⁷ making a refund to its customers of $19,929,290 as of the end of 1967.⁵²⁸ The amount of the refund, the Commission ruled, was to be brought up to date on the basis of 20 cents per Mcf of gas to October 1, 1968, and 18.5 cents thereafter, together with added interest.⁵²⁹ The Commission directed Texas Eastern to calculate the total amount of the refund, subject to its approval, and to hold that amount for flow-through on the Commission’s further order.⁵³⁰

Thus the Commission arrived at the point at which it was able to address the investment which Texas Eastern had made in Rayne Field while the lease-sale arrangement was in vogue. At the end of 1967, the net investment was $20,882,-996,⁵³¹ which Texas Eastern proposed to recoup in its entirety from the amount of the producers’ refund.⁵³² The Commission accepted neither this proposal nor the examiner’s conclusion that Texas Eastern should lose the whole investment through a charge-off to surplus.⁵³³ Instead, the Commission took the view that the balance of the refund remaining after customer flow-through should be used to reduce the investment on Texas Eastern’s books.⁵³⁴ After flow-through to customers of $19,929,290 ⁵³⁵ of the $31,-449,000 refund, principal and interest,⁵³⁶ there remained $11,5 19,710 ⁵³⁷ for that application, with a consequent reduction of the net investment to $9,303,286.⁵³⁸ That amount, the Commission said, Texas Eastern might keep on its books, other than as a rate-base asset,⁵³⁹ for amortization from Rayne Field gas sales to the extent possible after Texas Eastern completes payment to the producers of the $134 million contract price.⁵⁴⁰

C. The Impact of Opinion No. 565-A

Such was the Commission’s analysis and disposition of the flow-through issue in Opinion No. 565, but in Opinion No. 565-A it was completely discarded. Since, in the latter opinion, a 4-1 majority of the Commission ruled that no rate reduction or refund by the producers to Texas Eastern should be ordered before the area rate for Southern Louisiana underwent further consideration,⁵⁴¹ there was, of course, no reduction or refund to be passed along.⁵⁴² For the same reason, neither a decision on flow-through nor a concomitant ruling on the investment balance was deemed-possible.⁵⁴³ So, over Commissioner O’Connor’s dissent,⁵⁴⁴ definitive action on these matters was deferred,⁵⁴⁵ and the deferral was left standing by the order denying rehearing of Opinion No. 565-A.⁵⁴⁶

D. The Present Problems

There is, in the litigation before us, no demurrer to the Commission’s jurisdiction to deal, as between Texas Eastern and the customers to which Opinion No. 565 applies, with any rate reductions or refunds receivable by Texas Eastern from the producers.⁵⁴⁷ The gas in question entered Texas Eastern’s pipeline at Rayne Field in Louisiana, and was transmitted and sold to distributors in other states for purposes of resale to the public.⁵⁴⁸ No less than the producers’ sales of the gas to Texas Eastern⁵⁴⁹ were Texas Eastern’s sales of the gas to those distributors activities within the regulatory domain of the Commission.⁵⁵⁰ No narrower than the Commission’s jurisdiction to prescribe rate reductions and refunds in the one case⁵⁵¹ was its jurisdiction to allocate the resulting benefits in the other.⁵⁵² And no less potent than the Commission’s authority to allocate such benefits in ratemaking proceedings ⁵⁵³ was its authority to do so in Section 7 proceedings.⁵⁵⁴ The questions we encounter in connection with such allocations are not questions of Commission power, but are of an entirely different order.

We have held that the Commission cannot defer longer the rate reductions and refunds by the producers to Texas Eastern which conventionalization of the parties’ lease-sale agreement demands.⁵⁵⁵ In consequence, we have rejected the directives of Opinion No. 565-A and its accompanying order that disposition of reduction and refund issues be postponed.⁵⁵⁶ We have also held that the producer refunds are to be computed on the basis of the just and reasonable rate of 18.5 cents per Mcf from the time at which Texas Eastern began to transmit the gas it drew from Rayne Field.⁵⁵⁷ For that reason, we have disapproved so much of Opinion No. 565 as would have predicated the refunds on the 20-cent in-line price for slightly more than, the first nine years of the production period.⁵⁵⁸ These adjudications necessitate resolution of the problems related to allocation of the benefits of the rate reductions and refunds as between Texas Eastern and its customers.

We do not approach these problems on the broad premise that invalidity of an administrative decision undertaking to change an earlier administrative decision invariably reinstates the earlier decision. We realize that the agency may legally have a choice as to the action it will take in the matter, and that a court may not be able to say that the agency, had it known that the later decision would not pass judicial muster, would have left the earlier decision as its final action. On the other hand, it is obviously unnecessary to indulge further administrative consideration of problems as to which but one solution is legally open.

The Commission’s power to modify its prior orders, we have said, is confined to changes which “it may find necessary or appropriate to carry out the provisions” of the Act.⁵⁵⁹ Save as to the amounts of the allocations,⁵⁶⁰ Opinion No. 565’s treatment of flow-through of the rate reductions and refunds, we find, is fully consistent with policies fundamental to the Act.⁵⁶¹ On the other hand, deferment of flow-through issues — like deferment of the rate-reduction and refund issues themselves — which the Commission majority decreed in Opinion No. 565-A, we further find, in no way serves to foster the provisions or purposes of the Act.⁵⁶² We ultimately conclude, then, that Opinion No. 565, insofar as it effectuates legal mandates, is to be sustained as the Commission’s action in this litigation; and in remaining respects we remand to the Commission for further consideration in accordance with this opinion.

E. The Standards for Flow-Through of Rate Reductions and Refunds

The principles governing flow-through by a pipeline of rate reductions and refunds by its suppliers trace their origin to policy ingrained in the regulatory scheme of the Natural Gas Act. Since we have already had occasion to discuss that topic in another context,⁵⁶³ a brief highlighting will suffice here. The great objective of the Act was the underwriting of “just and reasonable rates to the consumers of natural gas.” ⁵⁶⁴ The clear “intention of Congress” was “that natural gas shall be sold in interstate commerce for resale for ultimate public consumption ... at the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest.”⁵⁶⁵ The design of the Act is to “afford consumers a complete, permanent and effective bond of protection from excessive rates and charges.” ⁵⁶⁶ It is the Commission’s responsibility in Section 7 proceedings to exercise “control over the conditions under which gas may be initially dedicated to interstate use,” ⁵⁶⁷ to the end that “full protection of the public interest” ⁵⁶⁸ will be afforded.

The import of these considerations for flow-through of rate reductions and refunds to pipelines is evident. The rightful beneficiaries of such reductions are consumers when the prices they pay reflect excessive prices paid suppliers by the pipeline. To be sure, pipelines are entitled to charge their customers just and reasonable rates for gas sold them,⁵⁶⁹ and a pipeline has a legitimate claim to retention of a rate reduction where it is absorbing excessive supplier-charges from revenues generated by just and reasonable rates of its own ;⁵⁷⁰ but no more than other natural gas entities subject to the Act can pipelines exact from their customers rates which are either unjust or unreasonable.⁵⁷¹ Retention by a pipeline of supplier-rate reductions is tantamount to overcharging customers when the pipeline is already enjoying a fair margin of return.

The Commission possesses Section 7 authority to condition any certificate of public convenience and necessity which a pipeline seeks by an imposition of requirements designed to serve the public interest⁵⁷² A requirement that a pipeline flow through reductions in its suppliers’ rates, certainly where the pipeline does not claim that its own rates are too low, is an eminently reasonable condition in the public interest. Should either the pipeline or the Commission feel a need to reexamine the pipeline’s rates, the remedies conferred by Sections 4 and 5 are available.⁵⁷³ In the meantime, the flow-through gives consumers the protection which the Section 7 certification process is designed to extend.⁵⁷⁴

Entitlement to refunds of excessive rates charged pipelines by suppliers rests upon similar considerations. The only real difference in principle results from the difference in character of a rate reduction as remediation for the future and a rate refund as restitution for the past. A pipeline does not merit a supplier refund rectifying exorbitance in a supplier rate .simply because it was the pipeline that directly paid the supplier that rate.⁵⁷⁵ “The aim of the Act was to protect ultimate consumers of natural gas from excessive charges. They were the intended beneficiaries of rate reductions ordered by the federal commission, though state machinery might have to be invoked to obtain lower rates at the consumer level.”⁵⁷⁶ If the pipeline’s rates to its customers were pushed below a just and reasonable level by the pipeline’s absorption of the supplier’s excessive rates, the pipeline’s claim, of course, commands respect.⁵⁷⁷ But when, on the other hand, the supplier’s overcharge has already been recouped by the pipeline through higher charges to customers, there is no foundation upon which such a claim can validly be asserted. In sum, the responsibility to dispose of a refund “plainly cannot be discharged by payment of the fund to those who show no loss.” ⁵⁷⁸

F. Flow-Through of Rate Reductions

The presiding examiner concluded that in consequence of the reduction, through conventionalization of the lease-sale, of the rate which producers could obtain from Texas Eastern, the commodity charge in the latter’s systemwide rates should be lowered.⁵⁷⁹ In Opinion No. 565, the Commission did not reach Texas Eastern’s contention that Section 7 did not authorize that course because it felt that another treatment would in any event be appropriate.⁵⁸⁰ Since Texas Eastern had pending before the Commission a Section 4 proceeding for a rate increase, sought partly on the basis of its Rayne Field costs, the Commission settled on a reduction of Texas Eastern’s rates as an interim step for the Section 4 proceeding.⁵⁸¹ Accordingly, the Commission ordered Texas Eastern to file substitute rates reflecting cost shrinkage arising from the instant proceeding, and to continue in effect rates reflecting costs at the applicable area rate until full payment to producers of the $134 million purchase price and amortization of the balance of the Rayne Field investment on its books, and thereafter to file new rates.⁵⁸²

The Commission’s general authority to issue interim rate orders is beyond question.⁵⁸³ And indubitably, an interim order may decrease existing rates which are excessive.⁵⁸⁴ The Commission might have entered an interim rate-reduction order in Texas Eastern’s pending Section 4 proceeding on a finding that its rates were too high.⁵⁸⁵ We see no infirmity in the action here arising simply from the fact that the Commission chose to promulgate such an order, on such a finding, in the Section 7 proceeding as a step promoting the public interest in the Section 4 proceeding.⁵⁸⁶ We accordingly accept the Commission’s rate-reduction order for what it purports to be.

We hasten to add, however, that the Commission might also have passed the order as an exertion of its Section 7 authority.⁵⁸⁷ Texas Eastern’s sole challenge before the Commission to the examiner’s method of rate-reduction flow-through was that the Commission lacked power in a Section 7 proceeding to revise systemwide rates previously found to be just and reasonable.⁵⁸⁸ The Commission met that objection by issuance, for Texas Eastern’s rate-increase proceeding, of the order on an interim basis upon a finding essentially that without flow-through of the reductions Texas Eastern’s charges to customers would not remain reasonable. The Commission was equally free to flow through the reductions by an exercise of its Section 7 powers without encountering the criticism Texas Eastern offered. The methodology of Section 7 flow-through is an imposition of certificate conditions pending any formal rate investigation that might be in order.⁵⁸⁹ The very purpose of Section 7 certificate conditions is protection of consumers while the normally lengthy rate investigation is proceeding.⁵⁹⁰ The mechanism of Section 7 condition-imposition is not ratemaking; indeed, ratemaking incidental to a levy of such conditions is unnecessary and inappropriate.⁵⁹¹ Texas Eastern’s point fails both as to the avenue the Commission took and the one it could have taken.

The woes of rate-reduction flow-through do not end at this point, however, for the disposition ordained in Opinion No. 565 was soon cast aside. In Opinion No. 565-A, the Commission substituted the 20-cent in-line price for the 18.5-cent area rate as the basis for a producer rate-schedule filing to reflect what the Commission then deemed the appropriate producer reduction.⁵⁹² The Commission also concluded that “it would not be in the public interest to require” a new rate filing by Texas Eastern to track the 20-cent producer rate for the stated reason that such a filing “might result in only a temporary reduction to its customers, and thus would bring about only a condition of instability without commensurate benefits.” ⁵⁹³ Instead, the Commission levied on Texas Eastern a contingent liability to make refunds in the future to the extent that its actual rates exceed rates reflecting a 20-cent producer rate.⁵⁹⁴

We have seen that the objective of initial gas-pricing in Section 7 certification proceedings must constantly be protection of consumers against exorbitance during the period prior to establishment of firm prices by the ratemaking process.⁵⁹⁵ We have held that the initial price which Texas Eastern should have been directed to pay its Rayne Field producers was the 18.5-cent just and reasonable rate then prevailing.⁵⁹⁶ The exemption of Texas Eastern from a reduction of customer rates and the displacement of the 18.5-cent rate by the 20-cent rate are totally at war with these vital considerations. Leaving Texas Eastern’s too-high rates operative obviously sacrifices the interest of its customers in “the lowest possible reasonable rate consistent with the maintenance of adequate service in the public interest,” which was, we have said, their due.⁵⁹⁷ No more with respect to Texas Eastern than to the producers was the Commission’s apprehension of “a condition of instability” sufficient justification for diluting that interest.⁵⁹⁸ Nor is a refund liability an adequate substitute for the rate reduction which the Commission spurned.⁵⁹⁹

In this posture of the case, it is clear that as a matter of law Opinion No. 565-A is erroneous and Opinion No. 565 is right in its treatment of rate-reduction by Texas Eastern. We must, then, set Opinion No. 565-A aside on that score. By the same token, since the Commission had no perceivable legal alternative to the disposition it assigned that matter in Opinion No. 565, we sustain the Commission’s position in that respect.

G. Flow-Through of Rate Refunds

For some time the Commission appears to have allocated supplier refunds between pipelines and their customers by application of a simple principle. Entitlement depended upon whether the pipeline had increased its rates to accommodate the increase in the supplier rates. If it had, customers got the refund ; if it had not, the pipeline was preferred.⁶⁰⁰ That rule, so far as it goes, plainly harmonizes with the aims and philosophy of the Act,⁶⁰¹ and we encounter no difficulty in sustaining it as a major thesis in the allocative process.

In 1968, in its Opinions Nos. 540 and 540-A, as we have explained, the Commission superimposed upon that principle the requirement that a pipeline contending for a refund resulting from a supplier-rate increase later disallowed must have filed a tracking rate increase of its own.⁶⁰² The justification for this requirement is that the effect of absorption of the supplier increase on the pipeline’s earnings position, and consequently on the relative equities of the pipeline and its customers in respect to the refund, can be suitably ascertained only when subjected to close scrutiny.⁶⁰³ The Commission held that Texas Eastern, the pipeline there involved, could not retain a supplier refund where it had not filed a tracking rate increase and did not show that it had earned less than a reasonable margin of return during the period in question.⁶⁰⁴

On review of that ruling in the Fifth Circuit, the Commission was sustained.⁶⁰⁵ The court rejected Texas Eastern’s primary argument that it was entitled to the refund as restitution for the sum it paid, as an increased cost, to its suppliers without passing that cost on to its customers:

Our view is that the Commission was authorized to see to disposition of the refunds in question on the basis of the purpose of the Act to protect ultimate consumers of natural gas. It must be borne in mind that the Commission created the refunds by disallowing supplier rate increases and by requiring that the sums in question be retained by the suppliers pending determination of entitlement. Texas Eastern could have filed rate increases ¿to track the supplier increases. It chose not to do so for reasons of its own. One reason, no doubt, was that the Commission could have investigated the rates in the light of Texas Eastern’s earnings.

Here the Commission afforded Texas Eastern the opportunity of justifying its entitlement to the refunds on a earnings basis without the concomitant risk of an investigation of its rates as would have been the case in the event of rate filings. This procedure was adopted to protect Texas Eastern in the face of the change in Commission policy as to disposition of refunds. This was a fair approach from the standpoint of protecting the interest of Texas Eastern and the consumer. To adopt Texas Eastern’s position that it is, ipso facto, entitled to the refunds by virtue of having paid and absorbed them would be to countenance rate making by the producer-suppliers and Texas Eastern outside the protective ambit of § 4(e). This approach would do violence to the statutory scheme by avoiding, to the extent the refunds exceed a fair return to Texas Eastern, any rate regulation whatever except under § 5 of the Act.⁶⁰⁶

We agree with the Fifth Circuit that the requirement of a tracking rate increase is amply supported by the goals sought by the Act. In Opinion No. 565, however, the Commission held that the fact that Texas Eastern did not file such an increase did not totally bar it from sharing in the refunds ordered by the producers. Disagreeing with the examiner, the Commission distinguished Opinions Nos. 540 and 540-A on grounds hardly characterizable as irrational. Instead of a supplier-rate increase which might have been tracked by a pipeline increase filing, there was a lease-sale transaction involving a large capital investment which was not itself susceptible of tracking.⁶⁰⁷ The conventionalization of the lease-sale upon which the Commission decided was partial only — for purposes related to payment for Rayne Field gas, but not for all others.⁶⁰⁸ With the Rayne Field investment remaining a capital item because unconventionalized, Texas Eastern could have tracked only the expense by-products of the investment — depreciation, depletion and amortization — together with Rayne Field expenses and taxes which were not capitalized.⁶⁰⁹ Beyond that, the evidence, by the Commission’s appraisal, established that Texas Eastern had passed on to its customers less than $14 million of some $76 million in Rayne Field expenditures — the excess of the actual per-Mcf cost of the gas under the lease-sale formula over a 20-cent in-line unit price.⁶¹⁰

On this analysis, the Commission in Opinion No. 565, required Texas Eastern to flow through nearly $14 million of the producers’ refund, together with an aliquot portion of the interest thereon charged the producers,⁶¹¹ and permitted Texas Eastern to apply the remainder of the refund in reduction of its investment.⁶¹² This disposition of the refund issue encounters opposition from both pipeline and consumer viewpoints, and on divergent grounds. Texas Eastern, claiming the entire refund, asserts that capitalization of the bulk of its Rayne Field expenditures was not only a prudent decision ⁶¹³ but also a sound accounting practice, particularly because of the resemblance of those expenditures to prepayments for gas in conventional purchases,⁶¹⁴ and that no part of the investment could have been passed on to customers through the medium of a tracking rate increase. PSC, on the other hand, claiming all of the refund for consumers, argues that as a matter of accounting capitalization of the expenditures was unauthorized by the Commission’s regulations,⁶¹⁵ and that the Commission’s computation of the amount of the customer overcharge was of dubious validity because no cost of service for the period in question was ever found.⁶¹⁶

By our assessment, we cannot compel the Commission to accept any of these claims. The question is not how we ourselves would dispose of these arguments but whether the disposition the Commission chooses is arbitrary or otherwise inconsistent with law.⁶¹⁷ Factual findings by the Commission, when supported by substantial evidence on the record as a whole, are conclusive upon the courts.⁶¹⁸ And “[t]he judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.”⁶¹⁹ We see nothing that would exempt this case from those rules.

Looking first to Texas Eastern’s contentions, we start from the premise that a public utility’s investors have a general right to recoup from consumers the full amount of the capital outlay they have devoted to the public service.⁶²⁰ But investors have no right to a second recovery of so much of their investment as consumers have already repaid.⁶²¹ Here the Commission, in Opinion No. 565, found that Texas Eastern’s customers had been charged nearly $14 million of its net investment balance of some $20 million through rates that were higher than they should have been.⁶²² The Commission also found that some of Texas Eastern’s expenditures were expense items ⁶²³—and not prepayments treatable as capital items⁶²⁴—for which a tracking rate increase might have been sought,⁶²⁵ and allowed if the sought-after increase survived the test of reasonableness.⁶²⁶

Our examination of the administrative record convinces us that these facts, upon which the Commission mainly rested the refund flow-through framed in Opinion No. 565, are well supported. Our appraisal of the conclusions' which the Commission drew from those facts is that they are neither arbitrary nor unreasonable. We therefore are not at liberty to direct action which is at variance with the Commission’s decision in Opinion No. 565 to require Texas Eastern to flow through to its customers a portion of the refund equal to the amount of Texas Eastern’s investment recovery in the form of customer charges which were higher than they otherwise would have been. We recognize, of course, that the refunding aspects of Opinion No. 565 may have lost their vitality by reason of supersession by the suspension proviions of Opinion No. 565-A, notwithstanding the invalidity of the latter.⁶²⁷ But the fact remains that as a court we cannot assume the Commission’s prerogatives by ordering a course of action it is not legally obliged to take.⁶²⁸

For similar reasons, and contrary to PSC’s position, we cannot disregard the Commission’s determination in Opinion No. 565 that the residue of the refund should be applied to reduce the net balance of Texas Eastern’s investment in Rayne Field. Given the breadth of administrative authority to set practices which are matters purely of desirable accounting,⁶²⁹ we perceive no basis for disturbing the Commission’s conclusion that some $20 million of Texas Eastern’s unrecovered Rayne Field expenditures have been properly capitalized. And given the expert testimony underlying the Commission’s finding that a substantial portion of those expenditures had not been passed on to Texas Eastern’s customers,⁶³⁰ we are unable to say that ascertainment of Texas Eastern’s cost of service was prerequisite to allocation to it of an equitable share of the refund.⁶³¹ As Commissioner O’Connor was later to observe, “[t]o flow through the entire amount of the refund would preclude Texas Eastern from recovering its costs,” ⁶³² and “[t]he effect would be that consumers for the past ten years would receive gas at a price below its cost to the pipeline and below the just and reasonable rate.” ⁶³³ “This,” he declared, “to me is unconscionable,”⁶³⁴ and it may well be to other commissioners too.

Were the only issue emerging the legal vulnerability of Opinion No. 565, we would affirm its treatment of refund flow-through. The litigation, however, is further complicated by the course the Commission subsequently took in Opinion No. 565-A. Producer refunds were deferred pending reconsideration of the area rate for Southern Louisiana, leaving nothing to flow through to Texas Eastern’s customers.⁶³⁵ The legal effect of that action is our final inquiry.

As we have previously ruled, the Commission erred in postponing refunds by the producers to Texas Eastern.⁶³⁶ We need not duplicate our earlier analysis and discussion of relevant legislative policy, or of the substantial body of judicial precedent, demanding speedy refunding by natural gas companies for the protection of consumers. It suffices to point simply to the Supreme Court’s admonition, specifically referable to customer refunding, that the Commission had the duty, “where refunds are found due, to direct their payment at the earliest possible moment consistent with due process.⁶³⁷ The postponement of producer refunds and, in consequence, of refund flow-through by Opinion No. 565-A was plainly a default in that responsibility and it follows that that facet of Opinion No. 565-A must be disapproved. In the case at bar, there must be producer refunds ; ⁶³⁸ and with no apparent justification for total retention by Texas Eastern, its customers must share in them.

But -notwithstanding that, and though we leave untouched the flow-through principles which the Commission applied in Opinion No. 565, we must reject the amounts -which that opinion would have respectively allotted to Texas Eastern and its customers from the producer refund. The Commission, for part of the relevant period, calculated the refund on the basis of the in-line unit price of the gas delivered to Texas Eastern.⁶³⁹ Since we have held that the proper basis for computation was the just and reasonable rate throughout that period.⁶⁴⁰ the refund will be larger than the Commission believed it to be.⁶⁴¹ We must, then, remand the case to the Commission in order that the amount of the producers’ refund and the portions thereof to be retained and to be flowed through by Texas Eastern, may be recalculated.

VII. THE SECOND SOUTHERN LOUISIANA AREA Rate proceeding

After this litigation made its appearance in this court, the Commission ¿nnounced Opinion No. 598 and an effectuating order, by which the maximum rates chargeable for gas produced in the Southern Louisiana area were revised upward.⁶⁴² That-decision does not, however, alter the conclusions we have expressed as to the basis for computation of producer refunds due Texas Eastern,⁶⁴³ and of flow-through of those refunds by Texas Eastern,⁶⁴⁴ prior to August 1, 1971, the effective date of the increases permitted by Opinion No. 598.⁶⁴⁵ In that view, this latest promulgation of area rates for Southern Louisiana does not affect our ruling respecting the treatment of those matters in the Commission’s pre-1971 Opinions Nos. 565 and 565-A.

Of course, by the terms of Opinion No. 565, the maximum price which Texas Eastern could pay the producers for gas extracted from Rayne Field rose to the applicable new area rate on the date it took effect.⁶⁴⁶ That rise, in turn, had obvious implications, from that time onward, for the rates which Texas Eastern could charge its customers,⁶⁴⁷ for refunds by the producers to Texas Eastern,⁶⁴⁸ and for flow-through of such refunds by Texas Eastern,⁶⁴⁹ matters as to which we are not now summoned to express any opinion. We think, however, as we have held,⁶⁵⁰ that producer refunds and pipeline flow-through up to the operative date of the new area rates must be calculated on the basis of the original 18.5-cent just and reasonable area rate established in the Commission’s first Southern Louisiana Area Rate Proceeding.⁶⁵¹

During the pendency of the proceeding leading to Opinion No. 598, a settlement conference was convened by the Commission, and eventually a settlement proposal was submitted by 32 major producing companies.⁶⁵² The proposal envisioned higher ceiling prices for gas whether sold under contracts dated before or after October 1, 1968,⁶⁵³ and a total of $150 million in refunds — a reduction from $375 million — from sales subject to scrutiny in specified Commission dockets.⁶⁵⁴ The Commission approved the proposal,⁶⁵⁵ and adopted for the Southern Louisiana area the price ceilings and refund bases which it advanced.⁶⁵⁶

Very importantly, however, neither the settlement proposal, nor Opinion No. 598 or its related order embraced the refund questions presented in the case at bar. The settlement proposal explicitly admonished -that “[t]he terms hereof do not dispose of any issues in the Rayne Field (Docket No. G-12446, et al.) . . . proceedings” ⁶⁵⁷ — the litigation now before us — and its refund provisions were expressly made subject to that exclusion.⁶⁵⁸ In turn, the Commission, in its words in Opinion No. 598, “adopt [ed] those provisions of the settlement proposal which prescribe[d] the refund provisions for deliveries made.”⁶⁵⁹ And just as the settlement proposal defined the transactions subject to refund in terms excluding the gas sales involved here, so did the order accompanying Opinion No. 598.⁶⁶⁰

We need not, in these circumstances, consider whether Opinion No. 598 could in any event affect the refund and flow-through issues which the Commission was called on to resolve several years previous to its promulgation. The critical fact is that Opinion No. 598 left those issues untouched. For that reason, we have concluded that our disposition of the refund and flow-through questions presented on this review must remain uninfluenced by Opinion No. 598.

VIII. SUMMARY AND DISPOSITION

The Commission’s action in the controversy we have reviewed is incorporated in Opinion No. 565 as changed by Opinion No. 565-A, in Opinion No. 565-A, and in the orders emanating from those opinions.⁶⁶¹ We sustain (a) the Commission’s decision, in both opinions, to conventionalize some features of the lease-sale arrangement in the public interest; ⁶⁶² and (b) the Commission’s authority, exercised in the two opinions, to displace the lump-sum lease-sale contract price with an initial unit price for the gas sold Texas Eastern by the producers, and to appropriately implement that unification.⁶⁶³ We accordingly affirm these aspects of Opinions Nos. 565 and 565-A and their accompanying orders.

We hold, however, that the Commission’ erred (a) in eliminating, by Opinion No. 565-A, the lease-sale contract price as the ceiling for the aggregate of Texas Eastern’s payments to the producers; ⁶⁶⁴ (b) in adopting, at least to some extent by both opinions, the 20-cent in-line price as the initial unit price for gas delivered prior to August 1, 1971; ⁶⁶⁵ and (c) in deferring, by Opinion No. 565-A, rate reductions ⁶⁶⁶ and refunds⁶⁶⁷ by producers to Texas Eastern, and flow-through of the reductions ⁶⁶⁸ and refunds ⁶⁶⁹ by Texas Eastern after taking into consideration its investment in Rayne Field.⁶⁷⁰ We reverse Opinion No. 565 and its companion order in these respects.

Our rulings necessitate a remand of the cases under review to the Commission. We instruct the Commission, on remand, (a) to increase, beyond the lease-sale contract price, the aggregate amount which Texas Eastern is to pay the producers by a sum equal to the time value of the monies otherwise to be paid;⁶⁷¹ (b) to compute, utilizing the then existing 18.5-cent just and reasonable area rate as the basis, refunds by the producers to Texas Eastern on account of gas deliveries prior to August 1, 1971; ⁶⁷² (e) to compute, after due regard for Texas Eastern’s Rayne Field investment,⁶⁷³ the amount to be flowed through by Texas Eastern, on account of producer refunds prior to August 1,1971, on the basis of the 18.5-cent just and reasonable area rate in operation during the period; ⁶⁷⁴ (d) to suitably update all rate-reduction, refund and flow-through computations;⁶⁷⁵ and (e) to order all proper rate reductions and refunds to be made and flowed through at the earliest practicable times.⁶⁷⁶ It goes without saying that the Commission will conduct all further proceedings consistently with the holdings and principles articulated in this opinion.

So ordered.

ORDER

PER CURIAM.

Upon consideration of the petitions of the Federal Power Commission, Continental Oil Company, Sun Oil Company, M. H. Marr and General Crude Oil Company for rehearing, it is

Ordered by the Court unanimously that the petitions be and hereby are denied.

Before FAHY, Senior Circuit Judge, and TAMM and ROBINSON, Circuit Judges.

1 . Act of June 21, 1938, ch. 556, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq. (1970).

2 . Texas Eastern operates a pipeline system extending from Texas to the Northeast. Its principal markets are in New England and the Middle Atlantic region.

3 . PGW, a customer of Texas Eastern, operates under contract the municipally-owned gas facilities serving some 600,000 consum-' ers in Philadelphia.

4 .At the time, Rayne Field was a large and fully developed gas reserve uncommitted to serving a market. It was only 22 miles distant from one of Texas Eastern’s major pipeline systems, with which it could be connected at relatively small cost.

5 . The price included 1.8 cents for reimbursement of state taxes. The contracts provided for escalations during future years.

6 . See Natural Gas Act § 7(c), 15 U.S.C. § 717f (c) (1970) ; Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 74 S.Ct. 794, 98 L.Ed. 1035 (1954).

7 . See Natural Gas Act § 7(a), 15 U.S.C. § 717f (a) (1970) ; Ohio Fuel Gas Co. v. FPC, 111 U.S.App.D.C. 337, 296 F.2d 594 (1961).

8 . See text infra at note 11.

9 . Texas Eastern Transmission Corp., 21 F. P.C. 869 (1959) (examiner’s decision).

10 . Public Serv. Comm’n v. FPC, 257 F.2d 717 (3d Cir. 1958), aff’d sub nom., Atlantic Ref. Co. v. Public Serv. Comm’n, 360 U.S. 378, 79 S.Ct. 1246, 3 L.Ed.2d 1312 (1959).

11 . The CATCO initial price was 22.4 cents per Mcf, including tax.

12 . Public Serv. Comm’n v. FPC, supra note 10, 257 F.2d at 722-723.

13 . By that agreement, Texas Eastern acquired the producers’ entire working interest in Rayne Field gas, with an exception not here material. Assignment and conveyance of the leasehold interests was expressly made subject to four conditions. See Texas Eastern Transmission Corp. (Opinion No. 322), 21 F.P.C. 860, 864 & n. 5, 865 & n. 6 (1959). For a succinct summary of other salient features of the lease-sale arrangement, see Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 396-397 & n. 5, 79 S.Ct. 1246.

The lease-sale agreement was made between the producers and Louisiana Gas Corporation, a subsidiary of Texas Eastern incorporated for the purpose of transacting the sale. See Texas Eastern Transmission Corp. (Opinion No. 322), supra, 21 F.P.C. at 864, 865. The Commission has consistently recognized Texas Eastern as the real party in interest, and has treated the agreement as though Texas Eastern was the direct purchaser thereunder. We do the same.

14 . The exact price was $134,395,700. Of that sum, $12,420,500 was to be paid in cash and the balance in installments spread over a 16-year period ending in 1975, notwithstanding an anticipated lifetime of the field to 1986. After 1975, Texas Eastern would obtain the gas by payment of royalties, severance taxes and operating expenses. Texas Eastern was also required to remit to the producers, until production of some 600 million Mcf of gas, the proceeds of condensate liquids less costs for operating the field.

15 . The years 1959-67. The equated per-Mcf cost stated in text includes only the $134 million purchase price, and not other costs falling upon Texas Eastern.

16 . The in-line price, see note 44, infra, for gas sold under 1958 contracts was 20 cents per Mcf, as the Commission was later to determine. Texas Eastern Transmission Corp. (Opinion No. 565), 42 F.P.C. 376, 384 (1968). See also Texas Eastern Transmission Corp., 42 F.P.C. 446, 448-49 (1968) (examiner’s initial decision).

17 . Three of the producers did so promptly, and the fourth somewhat later. The producers’ theory was that, with a sale of the gas leases rather than the gas itself, Commission approval of the sale, as distinguished from Texas Eastern’s proposed construction, was unnecessary. But see text infra at notes 22-29.

18 . Texas Eastern Transmission Corp. (Opinion No. 322), supra note 13. An application by PSC for rehearing was subsequently denied. Texas Eastern Transmission Corp., 22 F.P.C. 451 (1959) (order denying rehearing).

19 . Natural Gas Act §§ 4, 5, 15 U.S.C. §§ 717c, 717d (1970). In Phillips Petroleum Co. v. Wisconsin, supra note 6, 347 U.S. at 676-685, 74 S.Ct. 794, the Court held that the Commission had jurisdiction over wellhead sales of natural gas to interstate pipelines for resale in interstate commerce.

20 . Texas Eastern Transmission Corp. (Opinion No. 322), supra note 13, 21 F.P.C. at 864. The Commission relied on FPC v. Panhandle Eastern Pipe Line Co., 337 U.S. 498, 69 S.Ct. 1251, 93 L.Ed. 1499 (1949), wherein it was held that a transfer of undeveloped leases of gas reserves by an interstate pipeline to a production company fell within the provision of § 1(b) of the Act, 15 U.S.C. § 717(b) (1970), excluding “[the] production or gathering of natural gas” from the jurisdiction of the Commission.

21 . Texas Eastern Transmission Corp. (Opinion No. 322), supra note 13, 21 F.P.C. at 864.

22 . Public Serv. Comm’n v. FPC, 109 U.S.App.D.C. 289, 287 F.2d 143 (1960).

23 . 381 U.S. 392, 85 S.Ct. 1517, 14 L.Ed.2d 466 (1965).

24 . See text infra at note 37.

25 . Public Serv. Comm’n v. FPC, supra note 22, 109 U.S.App.D.C. at 291, 287 F.2d at 145.

26 . Id. See Natural Gas Act § 7, 15 U.S.C. § 717f (1970).

27 . Public Serv. Comm’n v. FPC, supra note 22, 109 U.S.App.D.C. at 291, 287 F.2d at 145.

28 . Id.

29 . Id. at 292, 287 F.2d at 146. The producers had “insist [ed] that their gas ha[d] only been committed to Texas Eastern on the basis of the proposed rates and state [d] that, if conditions are attached, consideration will be given to the disposition of the Rayne Field gas in markets not subject to th[e] Commission’s jurisdiction.” Texas Eastern Transmission Corp. (Opinion No. 322), supra note 13, 21 F.P.C. at 874. We held that the Commission could not “abdicate its responsibilities simply because the parties tell it that the whole transaction will collapse unless the full price asked is approved.” Public Serv. Comm’n v. FPC, supra note 22, 109 U.S.App.D.C. at 291, 287 F.2d at 145. Accord, Public Serv. Comm’n v. FPC, supra note 10, 257 F.2d at 722-723.

30 . Public Serv. Comm’n v. FPC, supra note 22, 109 U.S.App.D.C. at 292, 287 F.2d at 146.

31 . Texas Eastern Transmission Corp. (Opinion No. 378), 29 F.P.C. 249 (1963).

32 . Id. at 252-56.

33 . Id. at 256.

34 . Id. at 256-57.

35 . Id. at 257, 258. By Opinion No. 378-A, the Commission denied rehearing of Opinion No. 378, Texas Eastern Transmission Corp. (Opinion No. 378-A), 30 F.P.C. 153 (1963), with a modification extending the filing period for producers to six months after completion of any judicial review, id. at 157.

36 . Marr v. FPC, 336 F.2d 320 (5th Cir. 1964), rev’d sub nom., United Gas Improvement Co. v. Continental Oil Co., supra note 23, 381 U.S. 392, 85 S.Ct. 1517, 14 L.Ed.2d 466 (1965).

37 . United Gas Improvement Co. v. Continental Oil Co., supra note 23. The Court distinguished FPC v. Panhandle Eastern Pipe Line Co., supra note 20, on the grounds that in the latter the transferred leases were undeveloped, and the transfer was to a production company in contemplation of sales of gas in intrastate commerce. Id. at 403-404, 85 S.Ct. 1517.

38 . Id. at 399, 85 S.Ct. 1517.

39 . Reported at 42 F.P.C. 446.

40 . Id. at 451.

In March, 1967, while the applications were pending, Texas Eastern and the producers formalized an agreement obligating the latter to reimburse Texas Eastern at the rate of 20.625 cents per Mcf for any amount beneath 814,339,000 Mcf that their holdings in Rayne Field might fail to produce. This guaranty was deemed insufficient to dispel the uncertainty because reliance on it depended on other assumptions which were equally risky: the ability of producers individually to meet the financial demands in the future; the cost to Texas Eastern of realizing upon it; and the estimates as to production of liquids, the revenues from which would- accrue to Texas Eastern and would be unaffected by any deficiency in gas output. Id.

41 . Id. at 453.

42 . Id. at 448-52.

43 . Reported at 42 F.P.C. 455 (examiner’s Phase II decision).

44 . The in-line price is the field price in a given time period at which the bulk of proper sales of gas have been made. We have already noted that the in-line price was 20 cents per Mcf when the lease-sale agreement was made. See note 16, supra. The examiner recommended that the in-line price be supplanted by just and reasonable prices as they become available. Id. at 458, 461, 467. See note 53, infra, and accompanying text.

45 . Id. at 461, 463, 464.

46 . Id. at 466.

47 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16. The principal difference between . the Commission and the examiner related to the amount of producer refunds which Texas Eastern should immediately flow through to its customers. Compare text supra at note 45 and infra at note 58. See also Part VI, infra.

48 . Id. at 382-90.

49 . See note 40, supra.

50 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-83. See note 40, supra.

51 . Id. at 383.

⁵²

53 . After issuance of the examiner’s Phase II decision but before rendition of Opinion No. 565, the Commission had set a just and reasonable rate of 18.5 cents per Mcf for Southern Louisiana gas of the Rayne Field vintage. Southern Louisiana Area Rate Proceeding (Opinion No. 546), 40 F.P.C. 530 1968), on rehearing, (Opinion No. 456-A), 41 F.P.C. 301 (1969), aff’d sub nom., Austral Oil Co. v. FPC. 428 F.2d 407 (5th Cir.), on rehearing, 444 F.2d 125, cert. denied, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257 (1970). See text infra at notes 69-75.

54 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390, 403. The figure derived by application of this formula would be increased by the addition of Texas Eastern’s net receipts from sales of liquids after completion of the producer payments, and by the addition of salvage realized by Texas Eastern under certain conditions, and decreased by the amounts of royalties, state taxes and specified development and operating expenses. Id. at 403.

55 . Id. at 404. Producers would, however, receive additionally the amount of any salvage which Texas Eastern might realize from investments made before the final payment. Id.

56 . Id. at 404-05.

⁵⁷

58 . Id. at 398-99, 405. The Commission also required Texas Eastern to compute and escrow the amount of customer refunds, id. at 405-06, to shape its accounting practices to exclude the producer refunds from its rate base, id. at 406-07, and to amend its rates to reflect reductions in costs made possible by Opinion No. 565, id.

59 . Id. at 401, 407.

60 . Id. at 401.

61 . Id. at 354, 407.

62 . Id. at 417.

63 . Id. at 438.

64 . Id. at 422-23.

65 . Texas Eastern Transmission Corp. (F.P.C. Sept. 2, 1969) (unreported).

66 . Texas Eastern Transmission Corp. (F.P.C. Sept. 18, 1969) (unreported).

67 . Texas Eastern Transmission Corp., 42 F. P.C. 684 (1969) (order granting stay).

68 . Texas Eastern Transmission Corp. (Opinion No. 565-A), 44 F.P.C. 1079 (1970).

69 . Phillips Petroleum Co., 24 F.P.C. 537, 547 (1960) ; Statement of General Policy Xo. 61-1, 24 F.P.C. 818 (1960). See also Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), 390 U.S. 747, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968).

70 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53. Docket No. AR 61-2 awaited developments in Docket Xo. AR 61-1, related to the Permian Basin in Texas. See Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 758-760, 88 S.Ct. 1344.

71 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53, 40 F.P.C. at 648.

72 . Austral Oil Co. v. FPC supra note 53.

73 . The petitions were denied, 400 U.S. 950, 91 S.Ct. 241, 27 L.Ed.2d 257 (1970), but more than two months after Opinion No. 565-A was issued.

74 . Austral Oil Co. v. FPC, supra note 53, 444 F.2d at 126-127.

75 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53.

76 . Chairman Nassikas and Commissioner Bagge joined positions. Texas Eastern Transmission Corp. (Opinion Xo. 565-A), supra note 68, 44 F.P.C. at 1080-89. Commissioners Carver and Brooke joined in different positions, but voted with Chairman XTassikas and Commissioner Bagge to enable a disposition. Id. at 1098. Commissioner O’Connor stood on his position in Opinion No. 565. Id. at 1092. Chairman White had left the Commission.

77 . Chairman Nassikas and Commissioners O’Connor and Bagge.

78 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-86, 1092.

79 . See text and notes infra this part.

80 . See text supra at note 62.

81 . See text supra at notes 48-57.

82 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1084, 1088.

83 . Id. at 1087-88.

84 . See text supra at notes 52-55.

85 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1081.

86 . See text supra at notes 61-64.

87 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1098-1107.

88 . Id. at 1097.

89 . Id. at 1098.

⁹⁰

91 . Id. at 1081, 1087-88, 1089,1097-98.

92 . See text supra at notes 53-55.

93 . See text supra at notes 56-57.

94 . See text supra at note 58.

95 . See text supra at notes 59-60.

96 . See note 58, supra.

97 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1091.

98 . Id. at 1089-90.

99 . The applicants íor a rehearing of Opinion No. 565-A were Texas Eastern and three of the four producers. PGW, the intervenor here, submitted an application for rehearing which the Commission rejected as untimely by one day, but accepted it as a motion for reconsideration. Texas Eastern Transmission Corp., 44 F.P.C. 1471 (1970) (order denying rehearing). PSC, a petitioner here, did not seek rehearing of Opinion No. 565-A. See note 116, infra.

100 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

101 . Id. at 1471.

102 . Id. at 1472.

103 . Id. at 1474.

¹⁰⁴

105 . See text supra at notes 61-62.

¹⁰⁶

¹⁰⁷

108 . See text supra at notes 56-57, 61.

109 . See text supra at note 63.

110 . See text supra at note 64.

111 . See text supra at notes 80-85.

112 . See text supra at notes 88-90.

113 . See text supra at notes 86-87.

114 . See text supra at notes 101-102.

115 . See text supra at notes 103-104.

116 . PSC sought rehearing of Opinion No. 565 but not Opinion No. 565-A, and on that account Texas Eastern and Continental have moved to dismiss PSC’s petition for review to the extent that it complains of the order accompanying Opinion No. 565-A. Texas Eastern contends that Opinion No. 565 was-so drastically altered by Opinion No. 565-A that an application for a rehearing of the latter opinion was prerequisite to judicial review. Continental argues additionally that in Opinion No. 565-A the commission met the objections PSC registered against Opinion No. 565, and that in consequence PSC is no longer aggrieved thereby. For reasons following, we deny the motions to dismiss.

Section 19(a) of the Natural Gas Act, 15 U.S.C. § 717r(a) (1970), provides that “[n]o proceeding to review any order of the Commission shall be brought by any person unless such person shall have made application to the Commission for a rehearing thereon.” Thus an application for rehearing is a jurisdictional prerequisite to judicial review. Dayton Power & Light Co. v. FPC, 102 U.S.App.D.C. 164, 165, 251 F.2d 875, 876 (1958) ; Michigan Consolidated Gas Co. v. FPC, 83 U.S.App.D.C. 395, 167 F.2d 264 (1948) ; Pan American Petroleum Corp. v. FPC, 268 F.2d 827 (10th Cir. 1959). Moreover, § 19(b) of the Act provides that “[n]o objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do.” See also, e. g., FPC v. Colorado Interstate Gas Co., 348 U.S. 492, 497-501, 75 S.Ct. 467, 99 L.Ed. 583 (1955) ; Panhandle Eastern Pipe Line Co. v. FPC, 324 U.S. 635, 649, 65 S.Ct. 821, 89 L.Ed. 1241 (1945). We find, however, that PSC satisfied these demands.

The obvious purpose of the statutory requirements is to afford the Commission the first opportunity to consider, and perhaps dissipate, issues which are headed for the courts. See Dayton Power & Light Co. v. FPC, supra, 102 U.S.App.D.C. at 165, 251 F.2d at 876; City of Pittsburgh v. FPC, 99 U.S.App.D.C. 113, 121, 237 F.2d 741, 749 (1956). We have consistently held that our authority to review actions of the Commission is unaffected by events — even irregularities — which do not hamper attainment of that objective. See Michigan Consolidated Gas Co. v. FPC, 108 U.S.App.D.C. 409, 430-431, 283 F.2d 204, 225-226 (1960) ; Dayton Power & Light Co. v. FPC, supra, 102 U.S.App.D.C. at 165-166, 251 F.2d at 876-877; City of Pittsburgh v. FPC, supra, 99 U.S.App.D.C. at 121, 237 F.2d at 749. Surely a modification of a prior administrative decision or rehearing does not generate a need to request another rehearing where the litigant has already presented his point to the Commission for decision. Here PSC submitted an application for rehearing of Opinion No. 565 on specified grounds, and in Opinion No. 565-A the Commission disdained PSC’s positions and denied the application. The grounds which PSC advanced to the Commission match or subsume the contentions PSC now wishes to litigate in this court with respect to both opinions. We cannot say that PSC was obliged to do more before the Commission than it did.

As Continental says, judicial review is reserved by § 19(b), 15 U.S.C. § 717r(b) (1970), to a “party to a proceeding under [the Actj aggrieved by an order issued by the Commission in such proceeding. . . . ” But contrary to Continental’s assessment, we are satisfied that the effect of Opinion No. 565-A was to intensify rather than ameliorate PSC’s complaints as to Opinion No. 565. Put another way, PSC remains “aggrieved” — as much by the one decision as by the other.

117 . Natural Gas Act § 19, 15 U.S.C. § 717r (1970).

118 . See Braniff Airways v. CAB, 126 U.S.App.D.C. 399, 405-406, 410-411, 379 F.2d 453, 459-460, 464-465 (1967). See also WIBC v. FCC, 104 U.S.App.D.C. 126, 127-128, 259 F.2d 941, 942-943 (en banc), cert. denied, 358 U.S. 920, 79 S.Ct. 290, 3 L.Ed.2d 239 (1958) ; Olsen Co. v. State Tax Comm’n, 109 Utah 563, 168 P.2d 324, 328 (1946) ; Adkins v. Citizens’ Bd., 112 W.Va. 171, 163 S.E. 853, 854 (1932).

119 . In Braniff Airways v. CAB, supra note 118, three members of the five-member Civil Aeronautics Board participated in and agreed unanimously upon a decision, but on a motion for reconsideration two of four participating members voted to deny and the remaining two to grant. The two members voting to grant filed a statement which contained findings additional to the earlier findings of the board. We held that the additional findings could not validly supplement or buttress the original findings because

. . . they were the findings of only two out of four members. Even though these two members were among the three who concurred in the [earlier] decision, we are concerned with reviewing institutional decisions. Despite their personal connection with that opinion the statement of two members of an equally divided regulatory agency possesses no authoritative significance.

126 U.S.App.D.C. at 411, 379 F.2d at 465. See also Sperry Gyroscope Co. v. NLRB, 129 F.2d 922, 924 (2d Cir. 1942).

120 . See text supra at note 117.

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122 . Baltimore & O. R.R. v. United States, 298 U.S. 349, 362, 56 S.Ct. 797, 80 L.Ed. 1209 (1936) ; Plymouth Coal Co. v. Pennsylvania, 232 U.S. 531, 547, 34 S.Ct. 359, 58 L.Ed. 713 (1914) ; ICC v. Delaware, L. & W. R.R., 220 U.S. 235, 248-251, 31 S.Ct. 392, 55 L.Ed. 448 (1911) ; Brown v. District of Columbia, 127 U.S. 579, 586, 8 S.Ct. 1314, 32 L.Ed. 262 (1888) ; Cooley v. O’Connor, 79 U.S. (12 Wall.) 391, 398, 20 L.Ed. 446 (1871) Railroad Comm’n v. Louisville & N. R.R., 140 Ga. 817, 80 S.E. 327, 335-336 (1913) ; Codman v. Crocker, 203 Mass. 146, 89 N.E. 177, 180 (1909) ; Re State Treasurer’s Settlement (Bartley v. Meserve), 51 Neb. 116, 70 N.W. 532, 534-536 (1897) ; State ex rel. Clausen v. Hartley, 144 Wash. 135, 257 P. 396, 400 (1927).

123 . In WIBC v. FCC, supra note 118, where the votes of six of seven members of the Federal Communications Commission present were equally divided, we rejected the contention that the vote of the seventh commissioner, which broke the tie, was not decisive. 104 U.S.App.D.C. at 128, 259 F.2d at 943. It was argued that since by statute four members of the Commission constituted a quorum, 47 U.S.C. § 154(h) (1970), three votes would control irrespective of the number present and voting. Id. at 127-128, 259 F.2d at 942-943. We said that “[w]hen a quorum is present, the . . . Commission may act, but only on the vote of a majority of those present,” id. at 128, 259 F.2d at 943, and, quoting Adkins v. Citizens Bd. supra note 118, 163 S.E. at 854, that “[i]t is the common law that where joint authority is involved, a quorum being present, legal action can be taken by a majority and by none less,” id. We concluded that “when six voted, it took four to control,” id., and that when the seventh commissioner voted, “there were seven participants and it still took four to control; hence his vote was decisive,” id. See also Greater Boston Television Corp. v. FCC, 143 U.S.App.D.C. 383, 403, 444 F.2d 841, 861 (1970), cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 2233, 29 L.Ed.2d 701 (1971).

124 . FTC v. Flotill Prods., Inc., 389 U.S. 179, 183-185, 88 S.Ct. 401, 19 L.Ed.2d 398 (1967).

125 . See 16 U.S.C. § 792 (1970).

126 . In this view, we have no occasion to consider whether action of a majority of a quorum of three commissioners, see 16 U.S.C. § 792 (1970), as distinguished from a majority of the full Commission, is prerequisite to the promulgation or modification of an opinion or order. See FTC v. Flotill Prods., Inc., supra note 124, 389 U.S. at 181-186 & nn. 4, 9, 88 S.Ct. 401, and cases there cited.

127 . Sperry Gyroscope Co. v. NLRB, supra note 119, 129 F.2d at 924.

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129 . Compare Screws v. United States, 325 U.S. 91, 113, 134, 65 S.Ct. 1031, 89 L.Ed. 1495 (1945) (concurring opinion of Justice Rutledge).

130 . Compare Greater Boston Television Corp. v. FCC, supra note 123, 143 U.S.App.D.C. at 403, 444 F.2d at 861.

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132 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471-73 (order denying rehearing).

133 . These included applications for rehearing by Texas Eastern and the producers and a motion for reconsideration by PGW. PSC. did not seek rehearing or reconsideration of Opinion No. 565-A. gee notes 99, 116, supra.

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135 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

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139 . Id. at 1471-73.

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143 . Id. at 1473-74.

144 . So concluding, we do not reach the question whether an agency opinion or order can be rescinded .or amended without a prior vote to reconsider it.

145 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

146 . As to Opinion No. 565, Chairman White and Commissioners O’Connor and Bagge; as to Opinion No. 565-A, Chairman Nassikas and Commissioners O’Connor and Bagge. See text supra at notes 61-62, 78-79, 86-87.

147 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-85.

148 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390-93; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 P.P.C. at 1085-87.

149 . See Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 380; Texas Eastern Transmission Corp. (Opinion No. 378-A), supra note 35, 30 F.P.C. at 256; Texas Eastern Transmission Corp. (Opinion No. 378), supra note 31, 29 F.P.C. at 156.

150 . 15 U.S.C. § 717f (1970).

151 . Natural gas companies must obtain certificates of public convenience and necessity prior to engaging in sales of natural gas subject to the Commission’s jurisdiction. Natural Gas Act § 7(c), 15 U.S.C. § 717f(c) (1970). Notice to interested parties and hearing are prerequisite to the issuance of a permanent certificate, but not to the issuance in a case of emergency of a temporary certificate pending application for a permanent certificate. Id. Another prerequisite to issuance of a permanent certificate is a finding by the Commission that the sale “is or will be required by the present or future public convenience or necessity,” id. § 7(e), 15 U.S.C. § 717f (e) (1970), and the Commission may qualify the certificate by “such reasonable terms and conditions as the public convenience and necessity may require.” Id. See FPC v. Sunray DX Oil Co., 391 U.S. 9, 16-19, 88 S.Ct. 1526, 20 L.Ed.2d 388 (1968) ; United Gas Improvement Co. v. Gallery Properties, 382 U.S. 223, 227-229, 86 S.Ct. 360, 15 L.Ed.2d 284 (1965) ; Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391-392, 79 S.Ct. 1246.

152 . Supra note 6.

153 . 15 U.S.C. § 717c (1970).

154 . 15 U.S.C. § 717d (1970).

155 . See the discussion in FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 16 — 20, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 227-228, 86 S.Ct. 360; Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388-391, 79 S.Ct. 1246.

156 . See Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 389-391, 79 S.Ct. 1246. See also FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 17-18, 88 S.Ct. 1526.

157 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 389, 79 S.Ct. 1246. See also FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 17, 88 S.Ct. 1526.

158 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 389, 79 S.Ct. 1246. See also FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 17, 88 S.Ct. 1526.

159 . See text supra at notes 69-75.

160 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 16-19, 88 S.Ct. 1526.

161 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10.

162 . “Favored nation” clauses assure producers that they will receive the highest price currently being paid in the same area by their own purchasers or, as it may be provided, by any purchaser. See FPC v. Sun-ray DX Oil Co., supra note 151, 391 U.S. at 18 n. 2, 88 S.Ct. 1526.

163 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391, 79 S.Ct. at 1255. See also FPC v. Hunt, 376 U.S. 515, 84 S.Ct. 861, 11 L.Ed.2d 878 (1964).

164 . In ascertaining the in-line price, the Commission and the courts have usually excluded or discounted certain prices which for one reason or another might reflect impermissible price jumps. See FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 19, 88 S.Ct. 1526.

165 . Id. at 21-36, 88 S.Ct. 1526. See also United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 226-229, 86 S.Ct. 360.

166 . United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 327-328, 86 S.Ct. 360.

167 . Natural Gas Act § 4(d), 15 U.S.C. § 717c(d) (1970). The notice is given by filing with the Commission and keeping open for public inspection new schedules specifying the rate changes and the time they are to go into effect. Id.

168 . Natural Gas Act § 4(e), 15 U.S.C. § 717c(e) (1970).

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171 . Id. But the initial rate established by an unconditional permanent certificate issued under § 7 represents a firm floor below which refunds cannot subsequently be required. FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 23-24, 88 S.Ct. 1526. See also United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 227, 86 S.Ct. 360. The Court has indicated, however, that the Commission might, as a condition to certification, require the producers to assume liability for refunds measured by the difference between the inline price and the just and reasonable rate subsequently established should the latter prove to be lower. FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 36-37, 88 S.Ct. 1526.

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173 . See Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 755-758, 88 S.Ct. 1344.

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175 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69.

176 . Id. at 755, 88 S.Ct. at 1353.

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178 . See Sunray DX Oil Co. v. FPC, supra note 151, 391 U.S. at 25-26, 88 S.Ct. 1526.

179 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 380.

180 . Id. at 379.

181 . Id. at 380.

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183 . 360 U.S. at 389-391, 79 S.Ct. 1246. Accord, FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 17-18, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 227-228, 86 S.Ct. 360.

184 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 25-26, 88 S.Ct. 1526.

185 . See text supra at notes 167-172.

186 . See note 171, supra, and accompanying text.

187 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 766, 88 S.Ct. 1344.

188 . Natural Gas Act § 19(b), as amended, 15 U.S.C. § 717r(b) (1970).

189 . Atlantic Ref. Co. v. FTC, 381 U.S. 357, 367, 85 S.Ct. 1498, 14 L.Ed.2d 443 (1965) ; Gilbertville Trucking Co. v. United States, 371 U.S. 115, 126, 83 S.Ct. 217, 9 L.Ed.2d 177 (1962) ; Rochester Tel. Corp. v. United States, 307 U.S. 125, 146, 59 S.Ct. 754, 83 L.Ed. 1147 (1939) ; Mississippi Valley Barge Line Co. v. United States, 292 U.S. 282, 286-287, 54 S.Ct. 692, 78 L.Ed. 1260 (1934) ; Brotherhood of Ry. Clerks, Freight Handlers, Express & Station Employees v. Railroad Retirement Bd., 99 U.S.App.D.C. 217, 224, 239 F.2d 37, 44 (1966) ; American Airlines v. CAB, 97 U.S.App.D.C. 324, 327, 231 F.2d 483, 486 (1956) ; Namekagon Hydro Co. v. FPC, 216 F.2d 509, 512 (7th Cir. 1954).

190 . Texas Eastern Transmission Corp. (Opinion No. 378), supra note 31.

191 . 29 P.P.C. at 256.

192 . Texas Eastern Transmission Corp., supra note 16, 42 P.P.C. at 447 (examiner’s decision).

193 . Texas Eastern Transmission Corp. (Opinion'No. 378), supra note 31, 29 P.P.C. at 256-57.

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195 . Texas Eastern Transmission Corp., supra note 16, 42 P.P.C. at 447 (examiner’s decision).

196 . Id. at 447-53.

197 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-85; Texas Eastern Transmission Corp., supra note 99 (order denying rehearing).

198 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 383.

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204 . H.

205 . Id. at 387.

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207 . This was the effective date of the Commission’s decision in the Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53.

208 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 E.P.C. at 387.

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211 . See text supra at notes 190-200.

212 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389.

213 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1088.

214 . The producers also contend that one of the modifications effected by Opinion No. 565-A so undermined one of the assumptions underlying the decision in Opinion No. 565 to conventionalize as to leave it without sufficient evidentiary support. As we have seen, one of the factors contributing to that conclusion in Opinion No. 565 was the Commission’s finding that the lease-sale would ultimately involve a cost of some $6 million more than a conventional sale of the Rayne Field gas. See text supra at notes 205-210. In so finding, the Commission calculated gas costs at the in-line price of 20 cents per Mcf to October 1, 1968, and at the just and reasonable rate of 18.5 cents thereafter. See text supra at notes 207-208. In Opinion No. 565-A, however, the Commission held that producer refunds should be computed from the beginning on the basis of the just and reasonable rate to be established in the ongoing investigation in the Southern Louisiana area. See text supra at notes 80-83. The producers argue that this change of position upset the earlier position on conventionalization. We think it does not.

The higher cost of lease-sale gas which the Commission found in Opinion No. 565 was not the only reason for the Commission’s refusal to unconditionally certificate the arrangement ; another was the grave uncertainty as to just what the gas would eventually cost under that arrangement. See text supra at notes 211-213. Whatever may he said as to the effect on Opinion No. 565 of the refund-base change made in Opinion No. 565-A, it is clear that the Commission had no intention of altering its decision on conventionalization. Opinion No. 565-A not only confirms the Commission’s resolve in Opinion No. 565 to conventionalize, but also modified Opinion No. 565 in several particulars “so as to bring it closer to a conventional sale.” Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1081. We have no warrant to set aside a Commission determination simply on the thesis that it rests on one valid ground instead of two.

215 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391, 79 S.Ct. at 1255.

216 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-85.

217 . In so concluding, the Commission discounted testimony by three witnesses offered by the producers in an attempt to demonstrate financial advantages for the lease-sale. Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 388; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1084-85. The Commission pointed out that one of the witnesses failed to take into account about $18 million in severance taxes which Texas Eastern would pay over the life of the field, Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C.at 388; that another failed to take into account the time value of Texas Eastern’s advance payments to producers, id.; and that, the third omitted that factor and other costs to Texas Eastern as well, id.; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085. In these circumstances, we have no occasion to disturb the Commission’s action in that respect.

218 . As we have stated, the Commission in Opinion No. 565 concluded that the reserve guaranty, standing alone, did not eliminate the objectionable uncertainty in the lease-sale arrangement. See text supra at notes 194-200. And in Opinion No. 565-A, the Commission expressed the view that the guaranty “should not be considered of much weight for it guarantees the amount of the reserves, but not the rate at which the gas may be taken and therefore takes no account of the time value of money.” Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1084.

219 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389.

220 . Id.; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F. P.C. at 1084.

221 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389. See note 241, infra. And in Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-84, the Commission stated that “ [i] t is impossible on this record, and it would be extremely difficult on any record, to appraise the advantage to Texas Eastern of large daily swings,” and that in any event that opinion would require a take at a lower level and limits on downward swings. Compare Phillips Petroleum Co. v. FPC, 405 F.2d 6, 9-10 (10th Cir. 1969).

222 . See Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389-90 (footnote omitted).

223 . See text supra at note 30.

224 . See text supra at notes 31-35.

225 . See text supra at notes 194-200.

226 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 435-38, 439 — 40; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1097-99, 1102-09; Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1473-74 (order denying rehearing).

227 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-84; Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

228 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 767, 88 S.Ct. at 1360. For the same reason, we put aside the suggestion of Commissioners Carver and Brooke that “[i]f the Court of Appeals decided [that the lease-sale] must be rewritten in some fashion, it may tell us how it believes it should be done.” Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1474 (order denying rehearing).

229 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 767, 88 S.Ct. at 1360, quoting FPC v. Hope Natural Gas Co., 320 U.S. 591, 602, 64 S.Ct. 281, 88 L.Ed. 333 (1944).

230 . See text supra at notes 198-225.

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232 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390-407.

233 . Id. at 390-93.

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235 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390.

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237 . Id. at 390. The lease-sale contract provided that until 613,406,700 Mcfs of gas were produced, revenues from liquids would be used to reimburse Texas Eastern for part of the production investments and expenses. The reduction of the 18.5 cent price on account of these items was accordingly limited to the amount of unreimbursed investments and expenses. Id.

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239 . This aspect of the matter will shortly be addressed extensively.

240 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390-91.

241 . These included a requirement that Texas Eastern remove the gas at a specified minimum pace over a 20-year maximum period, id, at 391; and a provision giving the producers the right of prior approval of Texas Eastern’s expenditures for royalties and developmental expenses, id. at 392.

242 . Id. at 389. So, in addition to the total price ceiling soon to be discussed, the Commission decided not to amend the notes evidencing the unpaid installments of purchase price, and observed that any change as to them should be made by the parties or other holders. Id. at 391. The Commission also declined to make provision for periodic price increases, reimbursement for new taxes, take-or-pay or the buyer’s bearing cost of compression, stating “that if the Producers for their own purposes including possible tax advantages, entered into a lease-sale arrangement, they are not entitled to claim the benefit of provisions found in a conventional sale.” Id. at 393.

243 . Id. at 390.

244 . Id. at 389.

245 . Id. at 390-91 (footnote omitted).

246 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085.

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251 . Id. at 1085-86.

252 . Chairman Nassikas and Commissioners Bagge, Carver and Brooke. Id. at 1081, 1098.

253 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

254 . Part IV (B), infra.

255 . Part IV(C), infra.

256 . 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956).

257 . Id. at 344, 76 S.Ct. 373.

258 . See Natural Gas Act § 4(d), 15 U.S.C. § 717c(d) (1970).

259 . United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., supra note 256, 350 U.S. at 338, 76 S.Ct. at 378.

260 . 15 U.S.C. § 717c(d) and (e) (1970).

261 . 15 U.S.C. § 717d(a) (1970).

262 . United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., supra note 256, 350 U.S. at 341, 76 S.Ct. at 379.

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264 . Id. at 343, 76 S.Ct. 373.

265 . Id. (emphasis in original).

266 . Id. at 343-344, 76 S.Ct. at 380.

267 . Id. at 344, 76 S.Ct. at 381.

268 . Id. at 344-345, 76 S.Ct. at 381 (footnote omitted). Compare, however, United Gas Pipe Line Co. v. Memphis Light, Gas & Water Div., 358 U.S. 103, 79 S.Ct. 194, 3 L.Ed. 2d 153 (1958), where a pipeline’s service agreements with distributors were construed as fixing, not a single specified rate, but rather the going rate as periodically established through proceedings under the Act, with the result that Mobile was inapplicable to an increase effected unilaterally by the pipeline’s filing of new rate schedules under § 4(d), subject to commission review under § 4(e). There the pipeline sought “simply to assert, in accordance with the procedures specified by the Act, rights expressly reserved to it by contract.” Id. at 112, 79 S. Ct. at 199.

269 . 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956).

270 . Id. at 354-355, 76 S.Ct. 368.

271 . 16 U.S.C. § 824e (1970).

272 . FPC v. Sierra Pac. Power Co., supra note 269, 350 U.S. at 353, 76 S.Ct. at 372.

273 . Id. at 355, 76 S.Ct. at 372 (emphasis in original).

²⁷⁴

²⁷⁵

²⁷⁶

277 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 820-822, 88 S.Ct. 1344.

278 . “The regulatory system created by the Act is premised on contractual agreements voluntarily devised by the regulated companies ; it contemplates abrogation of these agreements only in circumstances of unequivocal public necessity.” Id. at 822, 88 S.Ct. at 1388 (citation omitted).

279 . See Portsmouth Gas Co. v. FPC, 101 U.S.App.D.C. 99, 102-103, 247 F.2d 90, 93-94 (1957) ; Cincinnati Gas and Elec. Co. v. FPC, 101 U.S.App.D.C. 1, 6, 246 F.2d 688, 693 (1957). See also Richmond Power & Light v. FPC, 156 U.S.App.D.C. 315, 481 F.2d 490, cert. denied, sub nom., Indiana & Michigan Elec. Co. v. Anderson Power & Light Co., 414 U.S. 1068, 94 S.Ct. 578, 38 L.Ed.2d 473 (1973).

280 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53, 40 F.P.C. at 624.

281 . See text supra at notes 53-55, 80-83, 232-241.

282 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 398-400, 404-07.

283 . See text supra at notes 84-87, 242-253.

284 . See Part IV(B), supra.

285 . See text supra at note 263.

286 . See text supra at note 278.

287 . Citing FPC v. Hope Natural Gas Co., supra note 229.

288 . Citing 52 Stat. 725 (1938). In its footnote to text at this point, the Court observed :

The 1942 amendments to § 7, 56 Stat. 83, were not intended to change this declaration of purpose. See Hearings, .House Interstate and Foreign Commerce Committee, on H.R. 5249, 77th Cong., 1st Sess. 18-19; H.R.Rep.No.1290, 77th Cong., 1st Sess.; S.Rep.No.948, 77th Cong., 2d Sess.

Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388 n. 7, 79 S.Ct. at 1253.

289 . Citing Natural Gas Act § 7(e), as amended, 15 U.S.C. § 717f(e) (1970).

290 . Citing Natural Gas Act § 4, 15 U.S.C. § 717c (1970).

291 . Citing Natural Gas Act § 7(c), 15 U.S.C. § 717f(c) (1970).

292 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388-389, 79 S.Ct. at 1253.

293 . Id. at 389, 79 S.Ct. at 1254.

294 . Id. The Court pointed out that “long delay, without the protection of a refund, as is possible in a § 4 proceeding, would provide a windfall for the natural gas company with a consequent squall for the consumers,” id. at 390, 79 S.Ct. at 1254, and that “the fact that the Commission was not given the power to suspend initial rates under § 7 makes it the more important, as the Commission itself says, that ‘this crucial sale should not be permanently certificated unless the rate level has been shown to be in the public interest.’ ” Id., citing Continental Oil Co. v. FPC, 17 F.P.C. 563, 575 (1957).

295 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 390, 79 S.Ct. at 1254.

296 . Id. at 390-391, 79 S.Ct. at 1255.

297 . Id. at 391, 79 S.Ct. at 1255.

298 . Id. See also text supra at notes 162-163.

²⁹⁹

300 . See text supra at notes 150-163.

301 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391, 79 S.Ct. at 1255.

³⁰²

303 .. Id.

304 . Citing United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., supra note 256.

305 . Quoting Panhandle Eastern Pipe Line Co. v. Public Serv. Comm’n, 332 U.S. 507, 520, 68 S.Ct. 190, 92 L.Ed. 128 (1947).

306 . Quoting United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., supra note 256, 350 U.S. at 341, 76 S.Ct. 373.

307 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391-392, 79 S.Ct. at 1255.

³⁰⁸

309 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-90. See also Part III(C), supra.

³¹⁰

311 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1081, 1083-85. See also text supra at note 213.

312 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 P.P.C. at 383-87.

313 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085-87.

314 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390-400.

315 . Texas Eastern Transmission Corp. (Opinion No. 565 — A), supra note 68, 44 F.P.C. at 1085-89.

316 . See text supra at notes 285-307.

317 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083.

318 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1096.

319 . Id. at 1103.

320 . Id. at 1096 n. 11, 1103.

321 . See id. at 1085-1086.

322 . Compare United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. , 86 S.Ct. 360. There the Court reversed a holding that the Commission could not utilize the in-line price as the initial price in a Section 7 certification proceeding without canvassing evidence as to what a just and reasonable price would be. “To consider in this § 7 proceeding the mass of evidence relevant to the fixing of just and reasonable rates under § 5 might in practical effect render nugatory any effort to fix initial prices.” Id. at 227-228, 86 S.Ct. at 363. See also text supra at notes 155-163.

³²³

324 . Natural Gas Pipeline Co. v. FPC, 253 F.2d 3, 7 (3d Cir.), cert. denied, 357 U.S. 927, 78 S.Ct. 1372, 2 L.Ed.2d 1370 (1958).

325 . See Part IV (B), supra.

³²⁶

³²⁷

328 . See notes 161-163, 304-307, supra.

329 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391-392, 79 S.Ct. 1246, quoted in text supra at notes 304-307.

330 . We remind that Opinion No. 565-A gained a majority only because Commissioners Carver and Brooke joined Chairman Nassikas and Commissioner Bagge to make possible a disposition more palatable to them than the disposition proposed in Opinion No. 565. See text supra at notes 76-90, 111-113.

331 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085.

332 . U.

³³³

334 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 822, 88 S.Ct. at 1388.

³³⁵

336 . See text supra at notes 285-317.

337 . FPC v. Sierra Pac. Power Co., supra note 269, 350 U.S. at 355, 76 S.Ct. at 372.

338 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 822, 88 S.Ct. at 1389.

339 . Counsel for the Commission argue that the scrapping of the $134 million contract price was a necessary step in conventionalization of the lease-sale so as to make it regulable. The Commission, however, did not rely on that ground, see Part III(C) supra, and rationalizations by counsel which were not reasons for the agency decision are unacceptable on judicial review. Burlington Truck Lines v. Unites States, 371 U.S. 156, 168-169, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962) ; Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S. 263, 270, 80 S.Ct. 1122, 4 L.Ed.2d 1208 (1960) ; SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947). Furthermore, the transaction could readily have been conventionalized without elevation of the contract price. See text supra at notes 242-245, 246-249.

340 . Permian Basin Area Rate Cases (Continental Oil Co. v. FPC), supra note 69, 390 U.S. at 821, 88 S.Ct. at 1388, quoting FPC v. Sierra Pac. Power Co., supra note 269, 350 U.S. at 355, 76 S.Ct. 368.

341 . See, e. g., the discussion in Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471-73 (separate opinion of Commissioner O’Connor) (order denying rehearing) .

342 . See Part III (C), supra.

343 . See text supra at notes 308-317.

344 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 436 (Commissioners Carver and Brooke; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085 (Chairman Nassikas and Commissioner Bagge) ; id. at 1098 (Commissioners Carver and Brooke) ; Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1472 (Commissioner O’Connor) (order denying rehearing) ; id. at 1473 (Commissioners Carver and Brooke).

345 . Texas Eastern Transmission Corp. (Opinion No. 378), supra note 31, 29 F.P.C. at 256-57; Texas Eastern Transmission Corp. (Opinion No. 378-A), supra note 35, 30 F.P.C. at 156; Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-83, 387-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-85; Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

346 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 389-90; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1083-85.

347 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 390-91; Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085-86.

348 . Texas Eastern seems also to recognize the need for this adjustment. In its reply brief (p. 11), it agreed that the elimination in Opinion No. 565-A of the $134 million price ceiling was unnecessary since, as an alternative its payments to producers could he adjusted upward to take account of the time value of the money paid on the plan of conventionalization set forth in Opinion No. 565, and the producers would thereby realize the same consideration as they would have under the lease-sale contract.

349 . We disagree with the Commission’s conclusion in Opinion No. 565-A that the $134 million price ceiling could be dissolved in order to require Texas Eastern to pay for all of the gas and liquids produced over the life of the field. See text supra at notes 250-251. By the parties’ contract, payment of the $134 million purchase price entitled Tex- ■ as Eastern to all of the gas in place in the producers’ Rayne Field holdings and to all liquids extracted from the gas. In no way did Opinion No. 565 undertake to change this feature of the contract, see text supra at note 245, nor was the Commission free to do so in Opinion No. 565-A. The Commission has pointed to no “circumstances of unequivocal public necessity,” see text supra at note 335, which would warrant that treatment consistently with the Mobile-Sierra rule.

350 . See Part III(C), supra.

351 . See Part IV(A), (C), (2), supra.

352 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 383-93.

353 . Id. at 384. See also Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1086-87.

354 . (Opinion No. 546), supra note 53.

355 . See Southern Louisiana Area Rate Proceeding (Opinion No. 546-A), supra note 53, 41 F.P.C. at 309, 341.

356 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 403-05.

357 . Id. at 417-22.

358 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1085-86.

359 . Id. at 1086.

360 . Id. at 1087.

³⁶¹

362 . Texas Eastern Transmission Corp., supra note 99, 44 F.P.C. at 1471 (order denying rehearing).

363 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. at 1253.

364 . FPC v. Hope Natural Gas Co., supra note 229, 320 U.S. at 610, 64 S.Ct. at 291.

365 . The producers are “natural gas compan [ies]” within the meaning of the Act. Natural Gas Act § 2(6), 15 U.S.C. § 717a (6) (1970) ; Phillips Petroleum Co. v. Wisconsin, supra note 6, 347 U.S. at 676-677, 74 S.Ct. 794.

366 . “All rates and charges made, demanded, or received by any natural-gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is declared to be unlawful.” Natural Gas Act § 4(a), 15 U.S.C. § 717c(a) (1970).

367 . See note 366, supra.

368 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. at 1253.

369 . Natural Gas Act § 7(e), 15 U.S.C. § 717f(e) (1970). See also Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. 1246.

370 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 389, 79 S.Ct. at 1254.

371 . See text supra at notes 263, 278, and Part IV(C) (1), supra.

372 . 52 Stat. 825 (1938).

373 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. 1246.

374 . Id. at 390, 79 S.Ct. at 1254 (emphasis supplied). See Natural Gas Act §§ 4, 5, 15 U.S.C. §§ 717c, 717d (1970).

375 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 390-391, 79 S.Ct. at 1255.

376 . See Part III (A) supra.

377 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391, 79 S.Ct. at 1255. See also FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 17-18, 88 S.Ct. 1526.

378 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 391, 79 S.Ct. at 1255.

379 . Id. at 392, 79 S.Ct. at 1255.

380 . (Opinion No. 546), supra note 53. See text supra at notes 69-75.

381 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 383-93.

382 . 15 U.S.C. § 717f (c) (1970).

383 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 385.

384 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F. P.C. at 1085-86.

³⁸⁵

386 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53. See text supra at notes 69-75.

387 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1086 (Footnote omitted).

388 . See Part III (A), supra.

389 . See FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 18-20, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 226-228, 86 S.Ct. 360.

390 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 18-20, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 226-228, 86 S.Ct. 360.

391 . F.P.C. v. Sunray DX Oil Co., supra note 151, 391 U.S. at 21-22, 25-26, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 226-228, 86 S.Ct. 360.

392 . See Part V (A), supra.

393 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 25, 88 S.Ct. at 1535. The Court added :

Any such assurance would necessarily be based on a belief that the current contract prices in an area approximate closely the “true” market price — the just and reasonable rate. Although there is doubtless some relationship, and some economists have argued that it is intimate, such a belief would contradict the basic assumption that has caused natural gas production to be subjected to regulation and which must have underlain this Court’s OATCO decision — namely, that the purchasing pipeline, whose cost of purchase is a current operating expense which the pipeline is entitled to pass on to its customers as part of its rates, lacks sufficient incentive to bargain prices down.

391 U.S. at 25-26, 88 S.Ct. at 1535 (footnotes omitted).

394 . See text supra at notes 388-391.

³⁹⁵

396 . See text supra at note 372 (emphasis supplied).

397 . See FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 25-26, 88 S.Ct. 1526.

398 . Hunt Oil Co. v. FPC, 424 F.2d 982, 986 (5th Cir. 1970) ; Phillips Petroleum Co. v. FPC, supra note 221, 405 F.2d at 9. See also Part V(C), infra.

399 . See text supra at note 363.

400 . (Opinion No. 546), supra note 53. The proceeding had been instituted by an order issued May 10, 1961. Southern Louisiana Area Rate Proceeding, 25 F.P.C. 942 (1961) (order instituting proceeding).

401 . Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53, 40 F.P.C. at 544, 636, 648.

402 . Southern Louisiana Area Rate Cases, (Austral Oil Co. v. FPC), supra note 53.

403 . 428 F.2d at 444.

404 . Southern Louisiana Area Rate Proceeding (Opinion No. 546-A), supra note 53.

405 . Id. at 306-42.

406 . Id. at 306-07. The new investigation, Docket No. AR69-1, was launched immediately. Southern Louisiana Area Rate Proceeding, 41 F.P.C. 378 (1969) (order instituting proceeding).

407 . Id. at 307-08.

408 . Southern Louisiana Area Rate Proceeding, 42 F.P.C. 1110, 1111, 1113 (1969) (order enlarging proceeding).

409 . Southern Louisiana Area Rate Cases . (Austral Oil Co. v. FPC), supra note 53, 428 F.2d at 421.

⁴¹⁰

411 . Id. at 421 n. 27. In the Southern Louisiana Area Rate Proceeding (Opinion No. 546), supra note 53, 40 F.P.C. at 644, the Commission had stated that area rates “will be modified if a showing is made that unit costs — reflecting amounts spent and reserves found — have increased to such an extent that an increase in area rates is required.”

412 . In a footnote at this point, the court noted that “Section 16 of the National Gas Act, 15 U.S.C. § 717o (1963), gives the Commission power to ‘perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders as it may find necessary or appropriate to carry out the provisions of this chapter’.” Southern Louisiana Area Rate Cases (Austral Oil Co. v. FPC), supra note 53, 428 F.2d at 445 n. 124 (emphasis added).

413 . Id. at 444 — 445. Subsequently, on rehearing, the court further explained:

At the same time, we emphasize that our judgment is an affirmance and not a remand. The appropriate place for originally considering what parts of the orders must be reopened in light of new evidence is before the Commission. It may be that the Commission will decide that the refunds it has ordered are just and reasonable or at least that their significance to the public interest is outweighed by the confusion and delay that would result from their reopening. In this event, the Commission will allow its refund orders to stand as they are. Or it may be that the refunds are too burdensome in light of new evidence to be in the public interest. In that case, it is our judgment that the Commission shall have the power and the duty to remedy the situation by changing its orders.

Southern Louisiana Area Rate Cases (Austral Oil Co. v. FPC), supra note 53,444 F.2d at 127.

414 . And the Supreme Court subsequently denied all applications for review of Opinion No. 546 on certiorari. See note 53, supra.

415 . See text supra at notes 409-415.

The act does not expressly confine judicial review in natural gas cases to final orders. Rather, it provides that “[a]ny party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order. . . .” Natural Gas Act § 19(b), U.S.C. § 717r(b) (1970). Construed in context, however, that provision requires a substantial degree of finality in an order of which review is sought. Its exact counterpart in the Federal Power Act “relates to orders of a definitive character dealing with the merits of a proceeding before the Commission and resulting from a hearing upon evidence and supported by findings appropriate to the case.” FPC v. Metropolitan Edison Co., 304 U.S. 375, 384, 58 S.Ct. 963, 967, 82 L.Ed. 1408 (1938). We have given the review provision in the Natural Gas Act the very same constructions. Texas Gas Corp. v. FPC, 102 U.S.App.D.C. 59, 61-62, 250 F.2d 27, 29-30 (1957) ; United Gas Pipe Line Co. v. FPC, 86 U.S.App.D.C. 314, 316-317, 181 F.2d 796, 798-799, cert. denied, 340 U.S. 827, 71 S.Ct. 63, 95 L.Ed. 607 (1950) ; see also City of Chicago v. FPC, 147 U.S.App.D.C. 312, 321-333, 458 F.2d 731, 740-741 (1971), cert. denied, 405 U.S. 1074, 92 S.Ct. 1495, 31 L.Ed.2d 808 (1972). Other courts have done so as well. Algonquin Gas Transmission Co. v. FPC, 201 F.2d 334, 337-338 (1st Cir. 1953) ; United Gas Pipe Line Co. v. FPC, 206 F.2d 842, 844-845 (3d Cir. 1953) ; Amerada Petroleum Corp. v. FPC, 285 F.2d 737, 739 (10th Cir. 1960).

In the Southern Louisiana Area Rate Cases, the Fifth Circuit, with the concurrence of all parties, concluded that the area rates fixed by Opinion No. 546 and its related orders were reviewable notwithstanding that the rate investigation in Docket No. AR69-1 “will probably result in substantial modifications on the rates set in this case,” 428 F.2d at 421, that it “may affect rates for all vintages,” id., and that “the data the Commission has called for reflects the possibility of a radical change in approach,” id. We accept that conclusion as a holding that, despite the susceptibility of the area rates to change, they retained a good deal of finality, for such an “order to be reviewable must be administrative action of a substantial character approaching some degree of finality.” Algonquin Gas Transmission Co. v. FPC, supra, 201 F.2d at 337.

416 . Natural Gas Act § 16, 15 U.S.C. § 717o (1970).

⁴¹⁷

418 . See Part III(A), supra.

419 . See text supra at notes 885-387.

420 . Compare City of Chicago v. FPC, supra note 415, 147 U.S.App.D.C. at 321-322, 458 F.2d at 740-741.

421 . See text supra at notes 400-403.

422 . See text supra at note 416.

⁴²³

424 . Texas Eastern Transmission Corp. (Opinion No. 322), supra note 9. See Part 1(A), supra.

425 . Public Serv. Comm’n v. FPC, supra note 22. See Part. 1(B), supra.

426 . Texas Eastern Transmission Corp. (Opinion Xo. 378), supra note 31, 29 F.P.C. at 252-57. See Part 1(C), supra.

427 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 382-95. See Part III (D), supra.

428 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1087-88. See Part III(E), supra.

429 . Texas Eastern Transmission Corp. (Opinion Xo. 565), supra note 16, 42 F.P.C. at 387. See text supra at notes 205-10.

430 . In United Gas Improvement Co. v. Callery Properties, supra note 151, the court stated:

While the Commission “has no power to make reparation orders,” Federal Power Comm’n v. Hope Natural Gas Co., 320 U. S. 591, 618 [64 S.Ct. 281, 295, 88 L.Ed. 333], its power to fix rates under § 5 being prospective only, Atlantic Refining Co. v. Public Service Comm’n, supra, 360 U.S. at 389 [79 S.Ct. 1246 at 1254] it is not so restricted where its order, which never became final, lias béen overturned by a reviewing court. Here the original certificate orders were subject to judicial review; and judicial review at times results in the return of benefits received under the upset administrative order. See Securities & Exchange Comm’n v. Chenery Corp., 332 U.S. 194, 200-201 [67 S.Ct. 1575, 1579-1580, 1760, 91 L.Ed. 1995],

382 U.S. at 229, 86 S.Ct. at 364.

431 . United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 229, 86 S.Ct. at 364. See also Democratic Cent. Comm. v. Washington Metropolitan Area Transit Comm’n, 157 U.S.App.D.C. 7, 45-46, 485 F.2d 786, 824-825 (1973) ; Williams v. Washington Metropolitan Area Transit Comm’n, 134 U.S.App.D.C. 342, 362-363, 415 F.2d 922, 942-943 (1968), cert. denied, 393 U.S. 1081, 89 S.Ct. 860, 21 L.Ed.2d 773 (1969).

432 . United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 229 — 230, 86 S.Ct. at 364 (footnote omitted).

⁴³³

434 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. 1246.

435 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 36, 88 S.Ct. at 1540.

436 . Id. at 37-40, 88 S.Ct. 1526.

437 . See Part V (A) (1), supra.

438 . We recognize that an initial price may serve both as a ceiling for future transactions and as a floor for refunds on account of the past, and that the price ceiling and the refund floor “conceivably may serve significantly different ends.” FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 21-23, 24, 88 S.Ct. at 1534. As an example, that case pointed out that “in some situations a relatively high initial price might be thought desirable to encourage producers to develop new reserves but a lower refund floor might be deemed necessary to protect consumers.” Id. at 24 n. 11, 88 S.Ct. at 1534. At no time during this litigation has the Commission suggested that a properly set initial price for the producers’ gas would not serve appropriately as the bench mark both for a reduction of rates to be charged and for refunds of excessive rates already paid, and, with the Commission’s problem essentially a rectification of the past rather than a formula for the future, we perceive no basis upon which it could have.

439 . United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 229-230, 86 S.Ct. 360. See also FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 37, 88 S.Ct. 1526.

440 . See Part V (D) (1), infra.

441 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 22-24, 88 S.Ct. 1526.

442 . Id. at 24, 88 S.Ct. 1526.

443 . E. g., FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 36-40, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 230, 86 S.Ct. 360.

444 . Hunt Oil Co. v. FPC, supra note 398, 424 F.2d at 986; Phillips Petroleum Co. v. FPC, supra note 221, 405 F.2d at 9.

⁴⁴⁵

446 . Supra note 53. See text supra at notes 69-75.

447 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 383-84.

448 . Id. at 384-87.

449 . See text supra at note 355.

450 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 385. The Commission added :

Certificates in this proceeding cannot be is-, sued without doing justice to all parties, including the consumers of gas, and this requires consideration of what lias already happened. The first time this proceeding was before us in 1959 we approved the transaction; the second time it was before us after remand in 1963 we condemned its form but 'afforded the parties opportunity to file new arrangements, and, on rehearing, denied we were requiring the parties to execute any particular kind of contract. In the present proceeding the lease-sale has again been presented to us. By this time a large part of the gas has been delivered and payment made. Various advantages are available to the parties— among others, tax benefits to the Producers, a flexible supply of gas for Texas Eastern, and as provided below, if there is sufficient gas in the Field, a benefit to the consumers in purchase price free gas after the purchase price has been paid and Texas Eastern has been compensated for its outlays of funds. We have been partly responsible for this extended consideration of the lease-sale arrangement. When it first came before us, we might have denied it finally or conditioned it in such a way that our action would have'satisfied the Court. Our original failure to consider the problem fully led to the first remand. On review of this history and the present relations of the parties we think it equitable to treat the Producers as though they had been granted a certificate when the delivery of gas commenced at the in-line price of 20 cents per Mcf.

Id. at 386.

451 .Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F. P.C. at 1081, 1087-88.

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⁴⁵³

454 . See Part V (B), supra.

455 . See text supra at note 447. While that holding was superseded by the decision in Opinion No. 565-A to defer all producer refunds, see Part II, supra, it was the only holding open to the Commission under the principles we have discussed. See Part • V(C), supra.

456 . See text supra at note 451.

457 . See Part V(B) (2), supra.

458 . See Part (V) (D) (2), infra.

⁴⁵⁹

460 . See text supra at note 353.

461 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 37-38, 40-47, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 226-228, 86 S.Ct. 360.

462 . Supra note 151.

463 . Callery Properties v. FPC, 335 F.2d 1004, 1018-1020 (5th Cir. 1964), cert. denied sub nom., Frankel v. FPC, 382 U.S. 985, 86 S.Ct. 527, 15 L.Ed.2d 474 (1966).

464 . Quoting FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 155, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962).

465 . 382 U.S. at 230, 86 S.Ct. at 364.

466 . Compare also FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 154, 83 S.Ct. 211.

467 . FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 155, 83 S.Ct. at 216. Accord, FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 37, 88 S.Ct. 1526; United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 230, 86 S.Ct. 360.

468 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. at 1253. See also Part V (A), supra.

469 . Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 460-61 (examiner’s Phase II decision).

470 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 393-405.

471 . See Part VI (G), infra.

472 . See text supra at note 453.

473 . See Part V (B) (2), supra.

474 . See text supra at note 469. There we point out the large excess of payments to producers over the in-line rate. That excess, of course, is even greater in reference to the 18.5-cent just and reasonable area rate.

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⁴⁷⁶

⁴⁷⁷

478 . Any inequality of which the Commission speaks is manifestly the result of suspensions of the 18.5-cent just and reasonable rate pending completion of its reexamination of that and other area rates, a course upon which we do not put the stamp of approval. See Part V (B) (2), supra.

479 . United Gas Improvement Co. v. Callery Properties, supra note 151.

480 . See text supra at notes 462-65.

481 . The extent to which it could do so might depend in part upon whether initial prices allowed producers were all fixed at the same level, since those prices established refund floors. See note 171, supra.

482 . At best, the refunding process is “somewhat illusory in view of the trickling down process necessary to be followed, the incidental cost of which is often borne by the consumer, and in view of the transient nature of our society which often prevents refunds from reaching those to whom they are due”. FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 154-155, 83 S.Ct. at 216 (footnote omitted).

483 . Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 338-392, 79 S.Ct. 1246. See Part III (A), supra, and text supra at notes 278-303.

484 . See text supra at notes 462-465.

485 . For the purpose, we assume, without deciding, that so much of Opinion No. 565 was not nullified by the supersession of that opinion by Opinion No. 565-A.

486 . See text supra at notes 446-450.

487 . See Part Y (C), supra.

⁴⁸⁸

489 . See text supra at notes 477-78. In Opinion No. 565-A, the Commission recognized as much but erroneously decided that the just and reasonable rate was yet to be finalized. See text supra at note 453.

490 . FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 44-46, 88 S.Ct. 1526.

491 . Nor can we accept the Commission’s reasoning that the in-line price should operate as the basis for refunds on payments prior to establishment of the just and reasonable rate to avoid “punishing the producers for litigating their” claims. See text supra at note 450 and accompanying note. The difficulty arises, not because the producers engaged in litigation, but because they engaged in field operations before the litigation ended. The hazards of commencing operations on the strength of a contested certification that had not run its course through the court is obvious. See United Gas Improvement Co. v. Callery Properties, supra note 151, 382 U.S. at 225, 229-230, 86 S.Ct. 360. Compare FPC v. Sunray DX Oil Co., supra note 151, 391 U.S. at 44-46, 88 S.Ct. 1526; FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 146-147, 83 S.Ct. 211.

492 .See note 552, infra.

493 . The investment consists in unrecovered amounts which Texas Eastern spent to acquire the working interest in Rayne Field pursuant to the lease-sale contract. See Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 461-62 (examiner’s Phase II decision). After consummation and certification of the lease-sale transaction in 1959, Texas Eastern treated its payments to producers partly as capital items and partly as expenses as the field produced gas. Id. From December 1, 1959, onward, the rates at which Texas Eastern supplied gas to its distributor-customers reflected some of this expense as a part of its cost of service. Id. As of December 31, 1967, Texas' Eastern had recorded on its books a gross investment of $76,665,683 and a net investment of $20,882,996 in Rayne Field. Id. at 562. Texas Eastern also asserts that it expended an additional $3,040,821 in connection with the Rayne Field leaseholds for which it has not been reimbursed. Id.

494 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 395-402, 405-06.

495 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1088-89, 1091.

496 . See Part V, supra.

497 . See Texas Eastern Transmission Corp., supra note 43. 42 F.P.C. at 464, 467 (examiner’s Phase II decision).

498 . Id. at 464-65, 467.

499 . It will be recalled that the reduction envisioned by the examiner and by the Commission in Opinion No. 565 was to 20 cents per Mcf from the beginning of production until establishment of the initial area rate for Southern Louisiana, and thereafter at the just and reasonable rate for the area, Texas Eastern Transmission Corp., supra note 16, 42 F.P.C. at 447-52 (examiner’s initial decision), Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 393-95; and that we have held that, for purposes of computing producer refunds, the reduction should have been to the just and reasonable rate throughout. See Part V, supra.

500 . Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 465-66 (examiner’s Phase II decision).

⁵⁰¹

502 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 400.

503 . 15 U.S.C. § 717c (a) (1970).

504 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 400.

⁵⁰⁵

506 . Id. at 400-01.

507 . See note 493, supra.

508 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 401.

509 . Texas Eastern Transmission Corp. (Opinion No. 540), 39 F.P.C. 630 (1968), rehearing denied, (Opinion No. 540-A), 40 F.P.C. 62 (1969), aff’d sub nom., Texas Eastern Transmission Corp. v. FPC, 414 F. 2d 344 (5th Cir. 1969). See also Texas Eastern Transmission Corp. v. FPC, 357 F.2d 232 (5th Cir. 1966).

510 . Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 634-48; Texas Eastern Transmission Corp. (Opinion 540-A), supra note 509, 40 F.P.C. at 63-65.

511 . Previously, on disallowance of a supplier-rate increase, the Commission had permitted pipelines to retain the refunds unless they had increased their own rates in response to supplier increases. In the latter event, the Commission required the pipelines to flow the refund through to customers. See Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 646-47; Texas Eastern Transmission Corp. (Opinion No. 540-A), supra note 509, 40 F.P.C. at 63-64.

512 . Pursuant to § 4(c), (d) of the Act, 15 U.S.C. § 717c(c), (d) (1970).

513 . Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 638-43.

514 . Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 642-43; Texas Eastern Transmission Corp. (Opinion No. 540-A), supra note 509, 40 F.P.C. at 64.

515 . Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 642-43, 648-49.

516 . Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 463 (examiner’s Phase II decision).

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⁵¹⁸

519 . Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 462-63 (examiner’s Phase II decision).

520 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 395.

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522 . The reference here is obviously to “depreciation, depletion and amortization, and certain expenses and taxes.” See text supra at note 520.

523 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 395. The Commission pointed out, id. at 395-96, that at the beginning of Texas Eastern’s Bayne Field operations on July 27, 1959, there were effective settlement rates in Docket No. G-12706, arising from a filing on May 10, 1957, which rates were not, but could have been, supported by Rayne Field costs; that from December 1, 1959, until January 1, 1964, there were in effect rates derived by a settlement in Docket No. G-18841, on the basis of computations which did include Rayne Field costs, of Texas Eastern’s rate-increase filing of May 28, 1959, Texas Eastern Transmission Corp., 25 F.P.C. 172 (1961) ; that on January 1, 1964, there became effective a voluntary rate reduction filed by Texas Eastern in Docket No. FP64-36 to reflect a decrease in corporate income tax; and that still another change in Texas Eastern’s rates became effective on June 1, 1965, as a result of conferences with the Commission’s staff in Docket No. RP65-59, and Rayne Field costs were again included, see Texas Eastern Transmission Corp., 34 F.P.C. 98, 100 (1965) ; Texas Eastern Transmission Corp., 34 F.P.C. 732, 733 (1965).

524 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 396.

525 . It will be remembered that in Opinion No. 565 the Commission held that producer refunds should be based on the in-line price of 20 cents per Mcf, a conclusion with which we disagree. See Part V(C), (D)(2), supra.

526 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 E.P.C. at 396 — 98.

527 . See text supra at notes 469-70.

528 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 398.

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⁵³⁰

531 . Id. at 398. See also note 493, supra.

532 . Id. See also note 538, infra.

533 . See text supra at notes 516-19.

534 . Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 399-400.

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536 . See Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 460-61 (examiner’s Phase II decision).

537 . Broken down, this figure represents the residue of $8,005,081 in principal and $3,514,629 in interest due from the producers. Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 399.

538 . Id. In addition to the investment balance of $20,882,996, Texas Eastern also sought reimbursement out of producer refunds of $3,040,821 in previously unrecovered and uncapitalized expenditures. Id. at 398. See also note 493, supra. The Commission found that this additional sum “results principally from the facts that amounts expended in connection with the Rayne Eield were not included among the costs underlying Texas Eastern’s rates prior to December 1, 1959, when'the settlement rates in Docket No. G-18841 became effective, [Texas Eastern Transmission Corp., supra note 523,] 25 F.P.C. 172.” Id. at 399. To the Commission, it was “clear that Texas Eastern cannot now claim costs that were not covered by rates filed on May 10, 1957, in Docket No. G-12706, effective as its filed rates until December 1, 1959, and eventually covered by the settlement of January 25, 1961 ([Texas Eastern Transmission Corp., supra note 523,] 25 F.P.C. 172).” Id. See note 523, supra.

539 .On this score the Commission said

The balance of $9,303,286 brought up-to-date, may remain on Texas Eastern’s books if the company desires, but it shall be recorded in other than “rate base” accounts. In some ways this represents a prepayment for gas, and we have allowed pipelines to earn a return on prepayments. See Michigan Wisconsin Pipe Line Company, 27 F.P.C. 449, 455 (1962), cited by Texas Eastern and [Transwestern Pipeline Co. (Opinion No. 500)], 36 F.P.C. 176, 216 (1966). However, prepayments ordinarily occur where the pipeline under a conventional contract has taken less than the required quantity of gas. Here we have an uncommon situation involving large payments, as part of the basic transaction calling for such payments in the early years of the contract. We think, therefore, that the cost of Rayne gas which will be reflected in future rates to Texas Eastern’s customers should not be increased above the 18.5 cent just and reasonable- level by permitting Texas Eastern to add tiie Rayne Field balances to its rate base and earn a return on them.

Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 399.

540 .The Commission elucidated :

[W]e do not think Texas Eastern should be penalized for entering into this transaction if it can be made whole without loss to its customers. Therefore it may compute a return on the Rayne Field balances and accumulate it each year. As already discussed, Texas Eastern on the basis of the 18.5 cent price per Mcf shall complete paying the full purchase price of $134,395,700, including the return to the Producers of the refunds they have made ($21,854,000 brought up-to-date). At that point, provided the Field is still productive, we shall require that Texas Eastern use the difference between what it then must pay for gas (royalties, taxes, and other costs less credits) and what it would have to pay under the applicable area price to amortize the balance. Texas Eastern will incur the risk that there will not be enough gas from the field to enable it to completely amortize the balance, but this is a consequence of the lease-sale type of contract. It may be protected, in part, by the Producers’ reserve guarantee if the certificate issued by us is satisfactory to the Producers.

Id. at 399-400.

541 . See Parts V(B), (D), supra.

542 . The Commission held, moreover, that “it would not now be in the public interest to require Texas Eastern to file new rates to track the producer rate filing here ordered.” Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1089. “To require Texas Eastern to make a filing now,” the Commission said, “might result in only a temporary reduction to its customers, and thus would bring about only a condition of instability without commensurate benefits.” Id. “However,” the Commission added, “in deferring any rate filing by Texas Eastern to track the producer rate filing we shall require that Texas Eastern be subject to refund to the extent its present rates are higher than they would be if they reflected a 20-cent Rayne Field producer rate. . . . Texas Eastern, of course, would also remain subject to our requiring a flow-through of producer refunds if that should be deemed appropriate.” Id.

543 . Id. at 1088.

544 . Id. at 1091-96.

545 . Id. at 1088-89, 1091.

546 . Texas Eastern Transmission Corp., supra note 99 (order denying rehearing).

547 . While Texas Eastern has a minuscule group of nonjurisdictional customers of Rayne Field gas, it seems clear that the refunding directives of Opinion No. 565 were not intended to affect them. See Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 643 — 45 ; Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 464 (examiner’s Phase II decision).

548 . See Texas Eastern Transmission Corp., supra note 9, 21 F.P.C. at 872-73, 880-81 (examiner’s decision) ; Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 P.P.C. at 643-45.

549 . See Parts 1(B), (C), supra.

550 . Natural Gas Act §§ 1(b), 2(6)-(7), 15 U.S.C. §§ 717(b), 717a(6)-(7) (1970). See also FPC v. Amerada Petroleum Corp., 379 U.S. 687, 85 S.Ct. 632, 13 L.Ed.2d 605 (1965) ; California v. Lo-Vaca Gathering Co., 379 U.S. 366, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965) ; FPC v. Interstate Natural Gas Co., 336 U.S. 577, 580-581, 69 S.Ct. 775, 93 L.Ed. 895 (1949) ; Illinois Natural Gas Co. v. Central Ill. Pub. Serv. Co., 314 U.S. 498, 502-509, 62 S.Ct. 384, 86 L.Ed. 371 (1948). See also Central States Elec. Co. v. City of Muscatine, 324 U.S. 138, 65 S.Ct. 565, 89 L.Ed. 801 (1945).

551 . See Parts V(A), (C), supra.

552 . The Commission’s authority over flow-through of rate reductions and refunds extends only to those to be made by pipelines to jurisdictional customers. Those to be made by distributor-customers to ultimate customers are matters for state regulation. See FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 155 n. 9, 83 S.Ct. 211; FPC v. Interstate Natural Gas Co., supra note 550, 336 U.S. at 580-581, 69 S.Ct. 775; Central State Elec. Co. v. City of Muscatine, supra note 550, 324 U.S. at 144-146, 65 S.Ct. 565. This the Commission has realized, but it has assumed, properly we think, that state regulatory agencies will discharge their own responsibilities to benefit ultimate consumers. Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P.C. at 638. As the Fifth Circuit has stated:

The Commission’s view [is] that it [is] serving the statutory purpose of the Act of benefiting ultimate consumers by placing the refunds within the jurisdiction of the state regulatory authorities so as to place them in position to benefit the ultimate consumers. The Commission could not guarantee benefits for the ultimate consumers but absent its new policy there would be no way to benefit the ultimate consumers. . . . [This is] an approach to effective Federalism within the framework and dictates of the Act.

Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 350.

553 . E.g., FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 151-155, 83 S.Ct. 211.

554 . Although § 7, unlike §§ 4(e) and 5(a), does not expressly confer upon the Commission authority to reduce unjust or unreasonable rates, we have seen that the Commission’s power to condition § 7 certificates of public convenience and necessity upon specified maximum rates is well established. See Parts III (A), V(A), supra. And an exercise of the conditioning authority with respect to the certificate sought by Texas Eastern was undoubtedly as much the Commission’s prerogative as was its exercise with respect to the certificate requested by the producers. E. g., Central Illinois Pub. Serv. Co. v. FPC, 338 F.2d 682 (7th Cir. 1964). Similarly, while § 7, like § 5(a) but unlike § 4(a), contains no provision specifically referable to refunds, we are satisfied that that makes no difference. Just as the Commission may, in § 7 proceedings, demand refunds by producers to pipelines, see Part V(C), supra, it may exert the same power against pipelines in favor of their customers. FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 146-47, 154-155, 83 S.Ct. 211; Texas Eastern Transmission Corp. v. FPC, 470 F.2d 757, 759-760 (5th Cir. 1972) ; Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 347-349.

The basis of the Commission’s § 7 power in each situation — rate reductions and refunds — is its responsibility to foster, through invocation of its authority to condition certificates in the public interest, see note 151, supra, “the overriding purpose of the Natural Gas Act to protect consumers in their purchase of gas to the end of keeping rates as low as possible.” Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 347. See also Part V(A), supra. “The history of the Natural Gas Act is one of interstitial construction,” id. at 348, and in no small measure the filing of the interstices within the outer limits of the Act brightens the prospect that it will achieve the goals Congress envisioned. See Phillips Petroleum Co. v. Wisconsin, supra note 6; Atlantic Ref. Co. v. Public Serv. Comm’n,. supra note 10; FPC v. Sunray DX Oil Co., supra note 151.

555 .See Parts V(A), (B)(2), (C), (D)(1), supra.

556 . See Parts V(C), (D) (1), supra.

557 . See Parts V(C), (D) (2), supra.

558 . See Part V (D) (2), supra.

⁵⁵⁹

560 . See Parts VI (E), (F), (G), infra.

561 . See Parts VI(E), (F), infra.

562 . See Parts VI (E), (F), infra.

563 . See Part V(A), supra.

564 . See text supra at note 363, quoting Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. at 1253.

565 . See text supra at note 372, quoting 52 Stat. 825 (1938). See also text supra at note 373.

566 . See text supra at note 368, quoting Atlantic Ref. Co. v. Public Serv. Comm’n, supra note 10, 360 U.S. at 388, 79 S.Ct. at 1253.

567 . See text supra at note 370, quoting id. at 389, 79 S.Ct. at 1254.

568 . See text supra at note 379, quoting id. at 392, 79 S.Ct. at 1255.

569 . See text supra at notes 365-366.

570 . See text infra at notes 575-578.

571 . See text supra at notes 365-368.

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⁵⁷³

⁵⁷⁴

575 . FPC v. Interstate Natural Gas Co., supra note 550, 336 U.S. at 581, 69 S.Ct. 775.

576 . Id. (citation omitted). See also note 552, supra.

577 . “The rates charged a wholesaler are part of its costs, reflected in its rate base. Reduction of those costs normally will lead in due course to reduction in its resale rates, unless we are to assume that the passage of the Natural Gas Act was an exercise in futility. It is of course conceivable that a wholesaler might be warranted in keeping all or a part of the rate reduction under the standards of reasonableness prescribed by the Act. But a court would not be warranted in assuming that the rates which have been charged are so low as to be unreasonable. No such presumption attends rates which have been fixed pursuant to rate orders of the commission. Nor can we make any such presumption as respects rates fixed by the utilities themselves without the compulsion of a rate order. For experience does not indicate that utilities are wont to charge themselves out of business.” Id. at 581-582, 69 S.Ct. at 778.

578 . Id. at 582, 69 S.Ct. at 778.

579 . See text supra at note 500.

580 . See text supra at notes 501-502.

581 . See text supra at notes 503-505.

582 . See text supra at notes 506-508.

583 . FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 150, 83 S.Ct. 211; FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 583-585, 62 S.Ct. 736, 86 L.Ed. 1037 (1942).

584 . FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 151, 83 S.Ct. 211; FPC v. Natural Gas Pipeline Co., supra note 583, 315 U.S. at 583-585, 62 S.Ct. 736.

585 . FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 150-155, 83 S.Ct. 211.

586 . While the order in question looks rather far into the future, we accept it as the interim measure the Commission says it is — to be continued or superseded according to the outcome of the Section 4 proceeding.

587 . See Part VI (E), supra.

588 . Texas Eastern Transmission Corp. (Order No. 565), supra note 16, 42 F.P.C. at 400.

589 . See Part III (A), ««pro.

⁵⁹⁰

591 . FPC v. Interstate Natural Gas Co., supra note 550, 336 U.S. at 583, 584, 69 S.Ct. 775.

592 . See Part VI(C), supra.

593 . See note 542, supra.

⁵⁹⁴

595 . See Parts III(A), V(B), supra.

596 . See Part V(B) (1), supra.

597 . See text supra at notes 372-373.

598 . See discussion in Parts V(B)(1), (2).

599 . See FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 154-155, 83 S.Ct. 211.

600 . See the discussion in Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 346-347.

⁶⁰¹

602 . See Part V(B), supra.

603 . Texas Eastern Transmission Corp. (Opinion No. 540), supra note 509, 39 F.P. C. at 638-41.

604 . The new requirement of a tracking rate increase filing was adopted prospectively, and the Commission gave Texas Eastern an opportunity to establish factually its entitlement to the refund. Id. at 641-43.

605 . Texas Eastern Transmission Corp. v. FPC, supra note 509.

606 . 414 F.2d at 348.

607 . See text supra at note 520.

608 . See text supra at notes 520.

609 . See text supra at notes 522-524.

610 . See text supra at notes 525-526.

611 . The amount to be flowed through, as to both principal and interest, was to be updated. See text supra at note 529.

612 . See text mirra at notes 531-540.

613 . Opinion No. 565 so stated. See text supra at note 520.

614 .The examiner concluded that under the circumstances Texas Eastern could not be permitted to treat any of its Rayne Field expenditures as prepayments. Texas Eastern Transmission Corp., supra note 43, 42 F.P.C. at 462-63 (examiner’s Phase II decision). A majority of the Commission in Opinion No. 565 concluded similarly, Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 399, see note 539, supra, as did two commissioners in Opinion No. 565-A. Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F.P.C. at 1088. See Public Serv. Comm’n v. FPC, 151 U.S.App.D.C. 307, 467 F.2d 361 (1972).

615 . See note 539, supra.

616 . In finding the amount of Rayne Field costs which Texas Eastern had already imposed on its customers, the Commission examined the testimony of three expert witnesses, each of whom had made computations on the basis of the costs of the Rayne Field gas to Texas Eastern. The Commission accepted the testimony of one of the three witnesses who made his calculations on the basis of the costs used to compute Texas Eastern’s successive rate settlements, see note 523, supra, an approach which the Commission deemed the most accurate reflection of Rayne Field costs. Texas Eastern Transmission Corp. (Opinion No. 565), supra note 16, 42 F.P.C. at 396-98.

617 . United States v. Pierce Auto Freight Lines, 327 U.S. 515, 535-536, 66 S.Ct. 687, 90 L.Ed. 821 (1946) ; Rochester Tel. Corp. v. United States, supra note 189, 307 U.S. at 139-140, 59 S.Ct. 754; ICC v. Union Pac. R. R., 222 U.S. 541, 547-548 (1912). See also Mississippi Valley Barge Line Co. v. United States, supra note 189, 292 U.S. at 286-287, 54 S.Ct. 692.

618 . Natural Gas Act § 19(b), 15 U.S.C. § 717r(b) (1970).

619 . Rochester Tel. Corp. v. United States, supra note 189, 307 U.S. at 146, 59 S.Ct. at 765, quoting Mississippi Valley Barge Line Co. v. United States, supra note 189, 292 U.S. at 288-289, 54 S.Ct. 692; Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 349-350.

620 . FPC v. Hope Natural Gas Co., supra note 229, 320 U.S. at 606-607, 64 S.Ct. 281; FPC v. Natural Gas Pipe Line Co., supra note 583, 315 U.S. at 593, 62 S.Ct. 736; Lindheimer v. Illinois Bell Tel. Co., 292 U.S. 151, 168-169, 54 S.Ct. 658, 78 L.Ed. 1182 (1934).

621 . E. g., Williams v. Washington Metropolitan Area Transit Comm’n, supra note 431, 134 U.S.App.D.C. at 374-376, 415 F.2d at 954-956; Washington Gas Light Co. v. Baker, 88 U.S.App.D.C. 115, 125, 188 F.2d 11, 21 (1950), cert. denied 340 U.S. 952, 71 S.Ct. 571, 95 L.Ed. 686 (1951).

622 . See text supra at note 526.

623 . See text supra at notes 520-523.

624 . See notes 539, 614, supra.

⁶²⁵

626 . See Texas Eastern Transmission Corp. v. FPC, supra note 509, 414 F.2d at 348.

627 . See Part VI (D), supra.

628 . Ohio Fuel Gas Co. v. FPC, supra note 7, 111 U.S.App.D.C. at 338, 296 F.2d at 595; Michigan Gas & Electric Co. v. FPC, 110 U.S.App.D.C. 183, 185, 290 F.2d 374, 376, cert. denied, 368 U.S. 897, 82 S.Ct. 177, 7 L.Ed.2d 95 (1961) ; Battle Creek Gas Co. v. FPC, 108 U.S.App.D.C. 209, 213, 281 F.2d 42, 46 (1960).

629 . See FPC v. East Ohio Gas Co., 338 U.S. 464, 474-476, 70 S.Ct. 26. 94 L.Ed. 268 (1950) ; United States v. New York Tel. Co., 326 U.S. 638, 654-655, 66 S.Ct. 393, 90 L.Ed. 371 (1946) ; Northwestern Elec. Co. v. FPC, 321 U.S. 119, 123-124, 64 S.Ct. 451, 88 L.Ed. 596 (1944) ; American Tel. & Tel. Co. v. United States, 299 U.S. 232, 236-237, 57 S.Ct. 170, 81 L.Ed. 142 (1936).

630 . See note 616, supra.

⁶³¹

632 . Texas Eastern Transmission Corp. (Opinion No. 565-A), supra note 68, 44 F. P.C. at 1093 (separate opinion).

⁶³³

⁶³⁴

635 . See Part VI (C), supra.

636 . See Parts III (A), V(C), (D), supra.

637 . FPC v. Tennessee Gas Transmission Co., supra note 464, 371 U.S. at 155, 83 S.Ct. 211.

638 . See Parts V (D) (1), (2), sxipra.

639 . See Part V(D) (2), supra.

⁶⁴⁰

641 . The increase in the amount of the refund will result from the difference between the 20-cent in-line price, which the Commission used, and an 18.5-cent just and reasonable-rate as the measure of the amount properly payable by Texas Eastern to the producers for the gas delivered.

642 . Southern Louisiana Area Rate Proceeding (Opinion No. 598), 46 F.P.C. 86 (1971), aff’d sub nom., Placid Oil Co. v. FPC, 483 F.2d 880 (5th Cir. 1973).

643 . See Parts V(C), (D) (1), (2), supra.

644 . See Parts VI (E), (G), supra.

645 . Southern Louisiana Area Rate Proceeding (Opinion No. 598), supra note 642, 46 F.P.C. at 142.

646 . See text supra at note 56.

⁶⁴⁷

⁶⁴⁸

649 . See Part VI (G), supra.

650 . See Parts V(A), (B)(2), VI (E), (G), supra.

651 . Supra note 53.

652 . Southern Louisiana Area Rate Proceeding (Opinion No. 598), supra note 642, 46 F.P.C. at 103-10, 153-64.

653 . Id. at 155-60.

654 . Id. at 160-63.

655 . Id. at 103-10.

656 . Id., passim.

657 . Id. at 155.

658 . Id. at 160.

659 . Id. at 140.

660 . Id. at 145. The order specifies the proceedings, by docket references, in which the refunds provided were due, and the proceedings we now review were not included.

661 . See Part 11(C), supra.

⁶⁶²

663 . See Part IV (C) (1), supra.

664 . See Part IV (C) (2), supra.

665 . See Parts V (B) (1), (2), VII, supra.

⁶⁶⁶

667 . See Part V (D) (1), supra.

668 . See Part VI(F), supra.

⁶⁶⁹

⁶⁷⁰

671 . See Parts IV(B), (G) (2), supra.

672 . See Parts V (C), (D) (2), VII, supra.

673 . See Part VI(G), supra.

674 . See Parts VI(G), VII, supra.

675 . See Part VII, supra.

676 .See Parts V(B)(2), (D)(1), VI(F), (G), supra. We have also indicated our approval of rate-reduction flow-through, as decided by the Commission in Opinion No. 565. See Part VI (F), supra. New area rates for Southern Louisiana, however, are now in effect, see Part VII, supra, which by force of Opinion No. 565 govern the prices Texas Eastern must pay the producers. See Parts V(A), (B)(1), supra. The Commission will, of course, be guided on remand by the views we have expressed in that connection.