Southern California Edison Co. v. Federal Power Commission

524 F.2d 409, 173 U.S. App. D.C. 248

• Court: Court of Appeals for the D.C. Circuit
• Decided: December 4, 1975
• Docket: Nos. 74-1043, 74-1046
• Status: Published

Opinions

MacKINNON, Circuit Judge:

Petitioners Southern California Edison Company (Edison) and Department of Water and Power of Los Angeles (DWP) appeal the dismissal by the Federal Power Commission (FPC) of their joint petition for extraordinary relief from curtailment of their natural gas deliveries under an interim curtailment plan of the El Paso Natural Gas Company. The Commission ruled that the petitioners’ complaint was essentially a matter of “local concern, which should properly be resolved by the Public Utilities Commission of the State of California.” ¹ We affirm the FPC’s dismissal of the petition, in part because we agree that the gravity of the energy shortage which prompts such petitions for extraordinary relief requires users of scarce fuels to exhaust their intrastate remedies before they seek assistance from the FPC. We also note that petitioners’ challenges basically go to the fairness of the existing El Paso curtailment plan, which in its permanent version is currently the subject of another appeal in this court designated City of Willcox v. FPC.2 Since all parties concerned will have an opportunity to test the validity of the permanent plan in that litigation, we decline to afford petitioners the opportunity for a collateral attack at this juncture. For both reasons we conclude that petitioners have not demonstrated circumstances sufficiently urgent to justify a grant of extraordinary relief, and that the Commission’s dismissal of their petition was proper.³

I

Edison and DWP are the two primary customers of the Southern California Gas Company (SoCal), a distributor of power which in turn purchases much of its supply from El Paso.⁴ Both Edison and DWP are suffering severe gas shortages, in part because of market conditions and in part due to the operation of the El Paso curtailment plan. That plan derives from the Commission’s Opinion No. 634, prescribing an interim emergency curtailment plan for the period November 1, 1972, through October 31, 1973, to be extended until the date of a final Commission prder. Several parties sought extraordinary relief in the form of exemptions from the El Paso plan, but their petitions were uniformly denied.⁵

This court had occasion to consider the operation of the interim plan in American Smelting and Refining Company v. FPC, 161 U.S.App.D.C. 6, 494 F.2d 925 (1974). We concluded that certain aspects of the plan should be remanded to the Commission for its reconsideration prior to promulgation of a permanent plan, but allowed the interim plan to remain in effect pending that ultimate determination. On June 14, 1974, in Opinion No. 697, the FPC prescribed a permanent curtailment plan for El Paso embodying certain modifications required by our American Smelting decision. On December 19, 1974, the Commission issued Opinion No. 697-A to “clarify and modify” its earlier opinion and to provide for operation of the proposed permanent plan pending decision on a limited remanded issue. As noted, numerous petitions for review of those orders have been lodged with this court. Recital of the claims on which the instant petition for extraordinary relief is based indicates that petitioners’ challenge goes to the merits of certain aspects of the permanent plan which we considered in the American Smelting decision and which we shall doubtless consider again in City of Willcox v. FPC.

Petitioners advance several sources of dissatisfaction with the operation of the plan on their supply of natural gas from SoCal and El Paso. They note their “vigorous protests” over the assignment of boiler fuel to the lowest priority in the El Paso plan. They dispute the Commission’s decision to build the plan around historical usage rather than contractual entitlement, arguing that their inability to secure adequate gas supplies during the time which serves as the base period for the plan gives them an unduly low supply of gas under the historical usage standard. They allege discrimination in the operation of the plan, which by their account affords East-of-California (E-0—C) customers using gas for similar purposes a greater percentage of their total requirements, simply because they encountered less difficulty in securing gas supplies during the base period.⁶ Petitioners complain of their need, under stringent environmental regulations,⁷ to purchase great volumes of costly low-sulfur fuel oil as substitute boiler fuel, and simultaneously assert that they are unable to locate and contract for sufficient fuel oil of requisite quality to compensate for their natural gas curtailment. Finally, they contend that the FPC has an obligation to grant their petition for extraordinary relief, since the Commission itself caused the shortage they suffer by frustrating their attempts to secure alternative sources of gas⁸ and by ignoring the de facto curtailment which took place in Southern California before the plan was imposed.

Each of these complaints is inextricably bound up with consideration of the merits of the permanent El Paso curtailment plan. One of the issues we remanded to the Commission in American Smelting bears on this proceeding: the relegation of boiler fuel uses to the two lowest priorities in the interim curtailment schedule. Because the Commission advanced “no specific findings or reasoning in support of the . . . decision,” 161 U.S.App.D.C. at 25, 494 F.2d at 944, we required a “proper and definitive determination” below to support the Commission’s position that “boiler fuel uses of natural gas are per se inferior to all other uses, for purposes of curtailment, regardless of the particular circumstances.” Id. at 27, 494 F.2d at 946. In Opinion No. 697, the FPC has reiterated the findings of fact which led to the decision to accord boiler fuel the lowest priority,⁹ and those findings will surely be challenged and considered on appeal in City of Will cox.10 The propriety of the Commission’s boiler fuel classification has not been shown to be relevant to consideration of the instant petition for extraordinary relief.

In promulgating the permanent El Paso plan in Opinion No. 697, the FPC paid particular attention to the inadequacy in recent years of Southern California natural gas supplies, the central basis for petitioners’ request for extraordinary relief. The Commission noted that the decline in California source supplies is a “fact of record,” as is the growth of the gross industrial market for natural gas in Southern California.¹¹ The Commission considered the possibility of “preferential treatment” to rectify the “current imbalance,” but found “the evidence necessary to support a preference lacking.”¹² The FPC found that there had been no positive showing that the ability of Southern California industrial customers to secure alternative fuels is less than that of E-O-C customers.¹³ Its judgment did rest on the specific finding that historical takes and contractual entitlements had been “substantially the same” in California during the relevant time period¹⁴; thus the historical usage method of determining a curtailment base volume was no less fair or more discriminatory than the contractual entitlement standard.

Opinion No. 697-A, clarifying and modifying Opinion No. 697, was largely concerned with the accuracy and fairness of the base year computation by which curtailed entitlements would be ascertained. The Commission adjusted its' base year approach “to reflect recent growth in high-priority loads in the EO-C market.” ¹⁵ It explicitly noted the likelihood of claims of discrimination by California customers as the E-O-C service based expanded, but insisted that its seasonal base volume formula represented the fairest method of allocating supplies between Southern California and E-O-C customers.¹⁶ As a safeguard against unanticipated curtailment of “existing requirements of high priority loads,” the Commission required El Paso to “construct an end-use profile for the market of each customer, ... to determine the allocation of El Paso’s available gas supply in accordance with the priorities of the permanent curtailment plan.” ¹⁷

Clearly the permanent curtailment plan, as set forth in Opinion No. 697 and clarified in No. 697-A, has attempted to deal with the precise issues petitioners seek to raise in their petition for extraordinary relief. Petitioners express their willingness to accept arguendo the validity of the interim and permanent plans, but insist that their grievances stem entirely from the way “those plans uniquely affect DWP and Edison due to extraordinary circumstances” set forth in their briefs.¹⁸ We cannot agree that their allegations of unexpected discrimination in the operation of the plan go beyond issues explicitly considered by the Commission when it adopted and promulgated Opinions 697 and 697-A. The Commission noted the potential for discrimination against Southern California customers caused by that state’s expanding industrial market and decreasing intrastate gas supplies, but found this risk, which inheres in the historical usage standard, to be tolerable in light of the increasing high priority needs of El Paso’s customers. Thus it tacitly rejected the contentions petitioners advance here. We perceive no justification for prematurely passing upon issues almost certain to arise in the scheduled appeal of the permanent plan.

II

The fact that the validity of the permanent El Paso plan will soon be tested on a record more complete than the one before us here does not deprive this court of jurisdiction to grant petitioners the extraordinary relief they seek. The imminence of that litigation is a factor in our determination concerning the urgency of their predicament, but we emphasize that on a compelling showing of need for extraordinary relief we would not delay judgment on their request in the name of judicial efficiency. Our decision to uphold the Commission is largely premised on petitioners’ failure to assert that they had fully explored the various avenues by which they might secure alternative fuels without recourse to the FPC.

Central to the FPC’s ruling was the fact that the Public Utilities Commission of California “did not indicate that it has taken or contemplates any action as a result of the investigation nor is there any indication that Petitioners have sought relief within California.”¹⁹ The FPC noted petitioners’ allegation that “despite extensive inquiries, they [had] not located substantial uncommitted supplies of domestic low-sulfur fuel oil which would be available for the years 1974 through 1976,”²⁰ but found this claim to be inadequate evidence that alternative intrastate remedies had been exhausted. A collection of E-O-C interests designated the Nevada Industrial Customers intervened in proceedings before the Commission and in this appeal to suggest the nature and extent of those alternative sources. In particular the Nevada parties argued that petitioners should seek “additional natural gas deliveries from Pacific Gas and Electric Company, additional oil and gas available from sources within the City of Los Angeles itself, and, finally, additional oil and gas from sources in the State and Federal offshore areas outlying the California coast.”²¹ They pointed out that according to recent Monthly Fuel Availability Reports filed by both DPW and SoCal, substantial purchases of hydroelectric energy and low-sulfur residual fuel oil acquired after petitioners sought assistance from the FPC had greatly eased the fuel shortage in Southern California and perhaps even mooted consideration of the joint petition for extraordinary relief.²²

The Nevada Industrial Customers are not disinterested parties in this controversy; the precise figures they offer concerning the availability of alternative fuels within California cannot be credited without the scrutiny and corroboration afforded by an adversary proceeding. Nevertheless we find it significant that petitioners, who rarely venture into the realm of statistical evidence concerning the dearth of fuel in Southern California, have not contradicted the allegations advanced by the Nevada Industrial Customers. In their Reply Brief they merely reemphasize their claim that they suffer unwarranted discrimination under the El Paso plan.

The Nevada Customers’ brief repeatedly refers to “emergency” relief, and the entire brief is framed as though an emergency were the sole basis for the subject petition for extraordinary relief. A thorough examination of either the petition or the petitioners’ opening brief would reveal that not once does the word “emergency” appear. What counsel for the Nevada Customers apparently fails to comprehend is that DWP and Edison are seeking relief from curtailment provisions which—because of the unique situation of DWP and Edison vis-a-vis El Paso, the interstate pipeline, and SoCal, the distributing company—unduly discriminate against them in violation of Section 4(b) of the Natural Gas Act.²³

Confronted with specific figures suggesting the availability of alternative fuels, petitioners thus make explicit that their petition is based not on an emergency shortage of energy, but rather on their disagreement with the provisions of the El Paso curtailment plan. They have not examined potential sources of substitute fuels and come away empty-handed—they allow that alternatives may be available, but protest the “burdensome differential costs of burning fuel oil in place of the ever-decreasing supplies of natural gas to which they are entitled from the El Paso system.”²⁴

The salient lesson of the current energy shortage and the curtailment litigation it has spawned is that users of scarce fuels such as natural gas must not expect to receive their customary entitlements, but must be prepared to search far and wide for replacement supplies of alternative fuels, possibly of lower quality and probably of greater cost.²⁵ The Commission has made plain, in this case and in others, that it will require such exhaustive preliminary investigations before it will consider augmenting regular allotments on the basis of petitions for extraordinary relief.²⁶ The existence of an emergency, threatening either the functional reliability or economic viability of a user of scarce fuels, is not an absolute precondition to a grant of extraordinary relief. The Commission has asserted that interim extraordinary relief in the nature of equitable intervention does require satisfaction of an emergency standard—for example, proof that denial of such a grant will result in “severe local economic dislocations and irreparable losses.”²⁷ But the agency has entertained petitions for permanent extraordinary relief on a showing of less exigent circumstances.

In particular the FPC requires “a sufficient showing of the specific individualized ‘extraordinary circumstances’ to support the grant of relief.”²⁸ Generally “loss of revenues or profits is not the type of injury warranting extraordinary relief.”²⁹ And only on a “particularly exemplary showing of compelling public interest” will the Commission grant extraordinary relief “on the basis of end product social utility.”³⁰ Most important for this litigation, the Commission requires that proof of extraordinary circumstances be supplemented with a demonstration that local remedies have been exhausted.

A showing of extraordinary need does not automatically entitle a curtailed customer to a grant of relief. The petitioner is also required to show that all available sources of natural gas and alternative fuels have been exhausted, and that due diligence has been exercised in converting gas processes to other fuels.³¹

This policy, like the Commission’s refusal to engage in the balancing of relative social utilities, is grounded in “basic considerations of administrative convenience,” ³² notably the agency’s inability to conduct an independent investigation of alternative sources for every petition for extraordinary relief.

We find eminently reasonable the agency’s determination to grant extraordinary relief only in the last resort, and approve its refusal to consider such petitions absent a showing “that all other avenues of potential relief have been investigated . . . .”³³ The petitioners in this case clearly fell short of that standard.

Ill

The Commission’s conclusions are not beyond judicial scrutiny. DWP and Edison are parties to the pending appeal on the merits of the El Paso plan, and will have an opportunity to challenge the reasonableness of the FPC’s decision that customers in Southern California could properly be curtailed on the basis of possibly unrepresentative historical usage. Failing vindication in that litigation, petitioners have another avenue open to' them. In Opinion No. 697 the FPC announced that “El Paso should continue to grant emergency relief by special exemption from curtailment in order to protect electric reliability and to respond to emergency situations (including environmental emergencies) during periods of curtailment where supplemental deliveries are required to forestall irreparable injury to life or property.”³⁴ Upon a sufficient allegation, petitioners might qualify for an emergency exemption under this provision of the curtailment plan. Finally, the possibility remains that they might properly frame a petition for extraordinary relief in terms different from those considered by the Commission in adopting the plan. But we are convinced that the grounds on which they base the petition we consider here do not justify the unusual remedy they seek. Accordingly, the dismissal of the petition by the Commission is

Affirmed..

1 . El Paso Natural Gas Company, 50 F.P.C. 1239, 1240 (1973).

2 .City of Willcox and Arizona Electric Cooperative, Inc. v. FPC, No. 74—2123, and consolidated cases (D.C.Cir., appeal filed Dec. 23, 1974). In these consolidated cases, some of which were transferred to this court by the Ninth Circuit pursuant to an order of February 27, 1975, we are asked to review the FPC’s Opinion No. 697 (Docket No. 72-6, issued June 14, 1974) and Opinion No. 697-A (Docket No. 72-6, issued December 19, 1974), prescribing a permanent curtailment plan for the El Paso system to replace an interim plan in effect since October 21, 1972. In addition to the parties named in the caption, parties to this case include intervenors Navajo Tribal Utility Authority, the Department of Water and Power of Los Angeles, The People of the State of California, Tucson Gas & Electric Company, Pacific Gas and Electric Company, Southern California Edison Company, Nevada Power Company, Southwest Gas Corporation, Southwest Natural Gas Consumers, Arizona Fuel Users Association, San Diego Gas & Electric Company, American Smelting and Refining Company, Southern Union Gas Company, General Motors Corporation, El Paso Natural Gas Company, and Pioneer Natural Gas Company.

3 . Since we conclude that extraordinary relief is inappropriate in this case because of petitioners’ failure to allege exigent circumstances and exhaustion of local remedies and because of the similarity of their claims here and the challenges to the permanent plan which the FPC considered in Opinions 697 and 697-A, we do not reach another question presented by the Commission’s dismissal of the petition, i. e., whether it is empowered to entertain and grant relief on a petition filed by an intrastate and therefore nonjurisdictional purchaser and distributor of natural gas.

4 . Specifically, SoCal supplies DWP and Edison with the preponderance of their gas fuel requirements, Brief for Petitioners at 7; that gas is furnished at the lowest priority under the El Paso scheme. SoCal supplies DWP and Edison on an interruptible basis, but they in turn sell power to their customers on firm contracts. Id. at 5-7.

5 . In Opinion No. 697 at pages 27-29, the FPC disposes of the Applications for Extraordinary Relief of the City of Willcox, Arizona, Arizona Electric Cooperative, and the City of Mesa, Arizona.

6 . In particular, petitioners claim that because they receive a smaller percentage of their requirements than E-O-C customers, the plan contravenes § 4(b) of the Natural Gas Act, 15 U.S.C. §§ 717-717W (1963), which provides in part:

(b) No natural-gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service.

15 U.S.C. § 717c(b).

7 . The joint petition states that applicable air pollution regulations require that all oil burned in electric generation facilities must contain no more than 0.5 percent sulfur. Petitioners state that such low sulfur oil is in extremely short supply.

50 FPC 1239.

8 .As part of an undertaking known as the Gulf Pacific Project, Edison and DWP attempted to secure an independent, assured supply of gas in the volume of 6.4 trillion cubic feet of proven reserves over 20 years, principally from the Katy Field in Texas. The Presiding Examiner recommended authorization of appellants’ proposal, but in July 1966, in Opinion No. 500, Re Transwestern Pipeline Co., the Commission rejected his recommendation and allowed the gas to be devoted principally to the Texas intrastate market. See 36 F.P.C. 176 (1966).

9 . FPC Opinion No. 697 at 14-15.

10 . See note 2 supra.

11 . FPC Opinion No. 697 at 19.

12 . Id.

¹³

14 . Id. at 20.

15 . FPC Opinion No. 697-A at 3-4.

16 . Id. at 4-5.

17 . Id. at 7.

18 . Reply Brief for Petitioners at 20.

19 . 50 F.P.C. at 1240.

20 . Id. at 1239.

21 . Brief for Nevada Industrial Customers at 2.

22 . Id. at 7-11.

23 . Reply Brief for Petitioners at 21.

24 . Id. at 22.

25 . A press release issued by the Federal Energy Administration on July 1, 1975, illustrates the scope and importance of the search for alternative fuels. Pursuant to authority conferred by section 2 of the Energy Supply and Environmental Coordination Act of 1974, 15 U.S.C.A. § 791 et seq. (1975 Supp.), FEA has issued proposed “conversion orders” to 32 generating stations supplied by 74 power plants. Each of these installations currently burns “natural gas or petroleum products as its primary energy source,” 15 U.S.C.A. § 792(a)(2); following a finding by the Environmental Protection Agency that these plants can burn coal without violating applicable environmental standards, each will be required to acquire an adequate supply of coal and to bum that fuel exclusively in its future power generation. Twelve of the 32 generating stations covered by the FEA’s action are in the Mid-West (Region 7); eight fall within the Mid-Atlantic area (Region 3); no stations in the regions designated West, Far West and Pacific Northwest (Regions 8-10) have been affected.

26 . See, e. g., Texas Eastern Transmission Corporation, - F.P.C. - (Docket No. RP7439-8, issued February 26, 1975); Panhandle Eastern Pipe Line Company, 50 F.P.C. 961 (Docket No. RP71-119, issued September 28, 1973).

27 . Northwest Pipeline Corporation, - F.P.C.-(Docket No. RP75-31-1, issued December 23, 1974), at 3.

28 . Texas Eastern Transmission Corporation, supra note 26, at 2.

29 . Monsanto Co. v. FPC, 149 U.S.App.D.C 396, 402, 463 F.2d 799, 805 (1972), citing United Gas Pipeline Co., 47 F.P.C. 196, 197 (Docket Nos. RP71-29, RP71-120, issued January 28, 1972).

30 . Texas Eastern Transmission Corporation, supra note 26, at 8.

31 . Id. at 8-9 (citations omitted).

32 . Id. at 8.

33 . Brief for FPC at 23.

34 . FPC Opinion No. 697 at 21.