Petition — Mississippi Power & Light Co. v. United Gas Pipe Line Co.

Supreme Court brief1977

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Supreme Goud, U. 3,

FILED

DEC 13 1976

| MICHAEL RODAK, JR., CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM 1976

NO. —t6-796

MISSISSIPPI POWER & LIGHT COMPANY,

Petiticner

Vv

UNITED GAS PIPE LINE COMPANY,

PENNZOiL COMPANY,

Respondents

STATE OF MISSISSIPPI,

Plaintiff-Intervenor

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

SHERWOOD W. WISE

JOSEPH P. WISE

WISE, CARTER, CHILD,

STEEN & CARAWAY

925 Electric Building

Post Office Box 651

Jackson, Mississippi 39206

CLAYTON L. ORN

ANDERSON, BROWN, ORN & JONES

1122 Southwest Tower

Houston, Texas 77002

Attorneys for Petitioner

Mississippi Power & Light

Company

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Alpha Law Brief Co., One Main Plaza, No. 1 ‘ain St., Houston, Texas 77002

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Reasons for granting the writ ............ceccesceecees

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Appendix A — Opinion of Court of Appeals ..............

Appendix B — Order of Court of Appeals of May 28, 1975

Granting Leave To Appeal From Order of

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Appendix C -— Judgment of Court of Appeals ...........

Appendix D— Order of Court of Appeals Denying Peti-

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Appendix E— Order of District Court Denying Motions

to Dismiss and Granting Motions to Stay

Appendix F — Memorandum Opinion of District Court ...

Appendix G—-Complaint of Mississippi Power & Light

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Appendix H — Order of District Court Granting Motion of

State of Mississippi for Leave to Intervene

Appendix I— Complaint in Intervention of State of Mis-

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Appendix J— Motion of United Gas Pipe Line Company

To Dismiss or Alternatively To Stay All

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Appendix K — Motion of Pennzoil Company To Dismiss or

Alternatively To Stay All Proceedings ....

Appendix L— Answer of United Gas Pipe Line Company

Appendix M — Answer of Pennzoil Company ...........

Appendix N—FPC Order Partially Granting Petition for

Declaratory Order and Motion to Consolidate

A22

A23

A25

A27

A29

A32

A100

Al0l

A103

A107

All2

Al42

A154

II

Appendix O — Findings and Conclusions of The United

States Court of Appeals For the Fifth Circuit

in Southern Natural Gas Company et al v.

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Appendix P — F.P.C. Order Implementing Court Order and

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CITATIONS

: CASES

Bisso v. Inland Waterways Corp., 349 U.S. 85 ..........

Breen Air Freight, Ltd. v. Air Cargo Inc., 470 F.2d 767

Brown & Sons Lumber Co. v. Louisville & N. R. Co., 299

ks le DO 6 hne5h 606s 0h 0bedneedebtseesencendees

Civil Aeronautics Board v. Modern Air Transport, 179 F.2d

se eg an le ee ac rk

County of Allegheny v. Frank Mashuda Co., 360 U.S. 185,

POONE. 1ncd cde cecesecctececedndeseaeciccsdbeponss

Fairfax Gas & Supply Co. v. Hadary, 151 F.2d 939, 941

FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972)

Gordon v. New York Stock Exchange, 422 U.S. 659, 686-690

Great Northern Railway Co. v. Merchants Elevator Co., 259

a Bis SED nbdbeeccnccccdccgnsensscopsnacncecets

Gulf Oil Corp. v. American Louisiana Pipe Line Co., 282

Seee -dnucevdees det cheaducbeteadesdvekwan vesdex

International Paper Co. v. Federal Power Commission, 476

Sle Be. 006960 00ced000006nn Comeedsbetuanaseenesee

Landis v. North American Co., 299 U.S. 248, 265 .......

Louisiana Power & Light Co. v. Federal Power Commission,

ee Se Gy TE kvieucesesahes eévensndudeanedscac

Meat Cutters Union v. Jewel Tea Co., 381 U.S. 676, 684

Merle E. Rowan v. Allied Chemical Company, 39 FPC 64

Mississippi Public Service Commission v. Federal Power

Commmeianm, SOB FG BOGS ccccccdccesccccccscceses

Monsanto Company v. Federal Power Commission, 463 F.2d

TO, Geo cccvendisecedndstcenviass svescesantecsss

Nader v. Allegheny Airlines, Inc., 96 S. Ct. 1978, 48 L.Ed.

Be MD io cuckedhadece sl euessesaeesnbecéesceuneeeen’

Pan American P. Corp. v. Superior Court, 366 U.S. 656,

GD xv veticecesusece venseasenbetsneusdananaekar

Page

Al6l

A169

9,11

9,18

7,19

14, 18

6,7, 10

Ill

CASES Page

Panhandle Eastern Pipe Line Co. v. Public Service Commis-

et ee Ee ED 6 0caescd scenes cosscccess 7

Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 304 7,16

Sey Ge GR. TG. Fite GOO Pete BFE ccccccccccescccces 14

State of Louisiana v. Federal Power Commission, 503 F.2d

MEE Ken eeecnncedceccgsenesncdsecesecocece 9, 18

Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S.

SL EE snes néhedeeel ened uWkdenenenenrestecsesescs 14

Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S.

SP whnwhes 6dbbus 650 096666 6d06dRdR dese Sov eereeeece 10

United States v. Western P. R. Co., 352 U.S. 59, 69 ..... 13

Warren Petroleum Corp. v. FPC, 282 F.2d 312 ........... 14

World Airways, Inc. v. Northeast Airlines, Inc., 349 F.2d

PET co checccccecevccccdvenésaasasccececcooocccees 14

STATUTES AND REGULATIONS

Natural Gas Act, 52 Stat. 821:

NS IE SAE ED 2, 3,8

Sec. 21, 22, 15 U.S.C. 717(t), 717(u) ......eceeeeeees 15

wa eat 2

a caeeuiace’ 3

Constitution of the United States:

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Supreme Court of the United States

OCTOBER TERM 1976

NO.

MISSISSIPPI POWER & LIGHT COMPANY,

Petiiioner

Vv.

UNITED GAS PIPE LINE COMPANY,

PENNZOIL COMPANY,

Respondents

STATE OF MISSISSIPPI,

Plaintiff-Intervenor

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Mississippi Power & Light Company (MP&L) petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Fifth Circuit in

this case.

OPINION BELOW

The opinion of the Court of Appeals (App. A, infra,

pp. Al-A21) is reported at 532 F.2d 412.

2

JURISDICTION

The judgment of the Court of Appeals (App. C, infra,

pp. A23-A24) was entered on May 27, 1976. MP&L’s

timely petition for rehearing was denied on September 27,

1976. (App. D, infra, pp. A25-A26). The jurisdiction

of this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether a common-law action by an electric utility

against a jurisdictional gas pipeline for the tortious making

and breaking of a long-term contract for the direct (non-

jurisdiction) sale of natural gas should have been stayed

pending reference to the Federal Power Commission for

a determination whether the contract was tortiously made

and breached, and if it was whether the Commission

could approve a tariff filing by the pipeline which would

exculpate it from liability.

2. Whether the stay while the Commission decides “a

major part of the litigation”, and makes “all findings that

it believes will aid the prompt resolution of the dispute”

has been kept in the bounds of moderation, or is a denial

of that promptness of decision which in all judicial actions

is one of the elements of justice.

STATUTE INVOLVED

Section 1(b), 15 U.S.C. 717(b) of the Natural Gas

Act, 52 Stat. 821 (1938) which provides:

“The provisions of this act shall apply to the trans-

portation of natural gas in interstate commerce, to

the sale in interstate commerce of natural gas for

resale for ultimate public consumption for domestic,

commercial, industrial, or any other use, and to

3

natural gas-companies engaged in such transportation

or sale, but shall not apply to any other transpor-

tation or sale of natural gas or to the local distribu-

tion of natural gas or to the facilities used for such

distribution or to the production or gathering of nat-

ural gas.”

STATEMENT

Petitioner Mississippi Power & Light Company

(MP&L) brought this action on August 30, 1974 against

United Gas Pipe Line Company (United) and Pennzoil

Company (Pennzoil) to recover damages in the sum of

$160 million for United’s breach of a long-term gas sales

contract entered into on Decémber 28, 1967. MP&L

alleged that United represented that it would be able to —

perform its obligations under the contract; that the repre-

sentation was false, and that MP&L, believing it to be

true, expended large sums of money in constructing and

maintaining power plant facilities designed to burn natural

gas as a primary fuel. MP&L also alleged that Pennzoil,

the former parent of United, directed and induced United

to breach the gas sales contract (App. G, infra, pp. A32-

A90).

The State of Mississippi’s motion to intervene as a party

plaintiff was granted (App. H, infra, p. A100), and it

filed its complaint in intervention, adopting MP&L’s com-

plaint in its entirety (App. I, infra, pp. A101-A102).

Jurisdiction of the district court was invoked on the

ground of diversity of citizenship, 28 U.S.C. 1332(a)(1).

United and Pennzoil filed separate motions to dismiss

MP&L’s complaint, or alternatively to stay the action

(App. J, infra, pp. A103-A106; App. K infra, pp. AiO7-

A111). They gave as grounds for their motions that the

4

complaint raised numerous issues within the competency

and primary jurisdiction of the Federal Power Commis-

sion.

Following oral argument on the motions, the District

Court ordered United and Pennzoil to file answers, which

they filed on March 24, 1975 (App. L, infra. pp. A112-

Al41; App. M, infra, pp. Al42-A153). The District

Court thereafter in a memorandum opinion delivered on

April 2, 1975 denied the motions to dismiss, but granted

the motions to stay (App. F, infra, pp. A29-A31). It

accordingly entered an order to that effect on April 4,

1976 (App. E, infra, pp. A27-A28).

In the memorandum opinion the District Court stated

that MP&L’s common law action for damages was oc-

casioned and necessitated, according to MP&L’s conten-

tions, by the misfeasance of United and Pennzoil, in that

United knowingly and deliberately oversold its supply of

natural gas well knowing that the ultimate effect would

be an insufficient supply of gas to discharge its contrac-

tual obligations to MP&L. It concluded, though, that

the Federal Power Commission probably had jurisdiction

of MP&L’s action, and that for that reason the District

Court should defer to the Commission a decision of the

controversy. It stayed the action to await a decision of

the Commission as to its primary jurisdiction.

While the Court of Appeals held that the District Court

“acted properly in staying the procedures and in referring

the case to the Federal Power Commission so that that

agency might exercise primary jurisdiction” it also held

that on remand “the District Court should prepare an

order which outlines with some specificity both the pro-

ceedings before the Commission that should be con-

5

cluded before the damage litigation should continue and

the issues upon which the Commission’s opinion is sought”

(App. A, infra, p. A21; p. Al9). Consequently it re-

manded with direction the case to the District Court for

the limited purpose of that Court modifying its stay order

(id, p. A21). Even so, though, the Court said “For a

court to attempt to determine whether it or the FPC

had final authority over all aspects of the damage action

on the record before the District Court would be singularly

unwise”; (id. p. Al7) and that “By requiring the Dis-

trict Court to prepare an order in which certain issues are

referred to the FPC, we do not intend to unduly restrict

that agency’s ability to assist the District Court. The

agency is free to make all findings that it believes will aid

the prompt resolution of the dispute”. (id, p. A19, n.14).

The Court of Appeals, however, in attempting to deter-

mine the aspects of the damage action which it believed

an informed opinion of the Commission would be of ma-

terial aid to the District Court, discussed what it con-

sidered were five components of the dispute. (id, pp.

A16-Al7).

It held that the Commission could determine whether

a tariff provision, such as Section 12.3 proposed by United,

would immunize United from liability and provide it with

a defense to the action by MP&L. (id, p. A 16). It

pointed to its opinion in State of Louisana v. Federal

Power Commission, 503 F.2d 844, 865-868 (1974) where

it, in reversing a curtailment order of the Commission,

also reversed a holding of the Commission that the cur-

tailment order would provide an absolute defense to the

damage actions against United, rendering unnecessary an

exculpatory tarit, such as Section 12.3 proposed by

United. (id, p. A7).

6

The Court of Appeals referred to a petition for declara-

tory order filed by United with the Commission a day or two

before oral argument in the District Court on the motions

to dismiss or alternatively to stay. It concluded that the

Commission had not clearly articulated what, if any, its

action would be on United’s petition. (id, p. A8). The

Commission’s order clearly shows it will not determine

whether United’s shortage was caused by negligent or

willful misconduct on United’s part (App. N infra, pp.

A154-A160).

Other determinations which the Court of Appeals ex-

pressed the belief might be of aid to the District Court

will be discussed under reasons for granting the writ.

Suffice it to say the Court said that “referral encompasses

the major part of the litigation”. (App. A, infra, p. A20).

REASONS FOR GRANTING THE WRIT

1. The Court of ‘Appeals decided in a way in conflict

with the decision of this Court in Nader v. Allegheny

Airlines, Inc., U.S. ___. (1976), 96 S.Ct. 1978, 48

L.Ed.2d 643' an important federal question regarding

the primary jurisdiction of the Federal Power Commission

of a common-law action for fraudulent misrepresentations

which induced the plaintiff to enter into a long-term natu-

ral gas sales contract with the defendant.

Even if the Commission’s informed opinion might “be

of material aid in the resolution of the damage action”,

as the Court of Appeals opined, that is not adequate

grounds for referring this action to the Commission for

1. Although Nader was decided after the Court of Appeals de-

livered its opinion on May 27, 1976, MP&L in its motion for rehear-

ing, urged the Court to follow federal law laid down in Nader.

7

trial and decision. In Ricci v. Chicago Mercantile Ex-

change, 409 U.S. 289, 304 (1973) the majority of a

5-4 divided court said that although it need not finally

define the administrative jurisdictional issue, nevertheless

in order for a governmental agency to exercise primary

jurisdiction, there must be sufficient statutory support

for it to decide the issues referred to it. And in Meat

Cutters Union v. Jewel Tea Co., 381 U.S. 676, 684

(1965) it said that the primary jurisdiction doctrine

comes into play only when enforcement of the claim in

a court “requires the resolution of issues which, under a

regulatory scheme, have been placed within the special

competence of an administrative body.”

The Natural Gas Act has not placed within the special

competence of the Federal Power Commission a common-

law action involving the question whether a jurisdictional

pipeline falsely misrepresented its gas supplies in order

to induce an electric utility to enter into a long-term gas

sales contract. Indeed the Act does not even confer juris-

diction of the direct sale on the Federal Power Commis-

sion, Panhandle Eastern Pipe Line Co. v. Public Service

Commission, 332 U.S. 507, 516-517 (1947). Nor does

the Act abrogate state law claims, such as the claims of

MP&L. MP&L’s claims, as were those in Nader, and the

statute (here the Natural Gas Act) are not “absolutely

inconsistent.” They, too, may coexist.

MP&L has not sought to restrain the Commission or

United from curtailing deliveries of gas to it, nor has it

interfered with the Commission in the exercise of its

curtailment jurisdiction. The curtailment orders are not

the gravamen of MP&L’s claim. They were issued because

United could no longer meet its contractual obligations.

MP&L’s claim is for United’s false misrepresentations of

the adequacy of its gas supplies. Whether United falsely

misrepresented the adequacy of its gas supplies is not

an issue in the curtailment proceedings. The power of

the Commission to issue curtailment orders stems from

its transportation jurisdiction under Section 1(b). This

limited jurisdiction does not vest the Commission with

authority to determine whether false misrepresentations

were made in a nonjurisdictional sale of natural gas.

2. The Court of Appeals, in holding that the Com-

mission’s resolution of five specific components of the

dispute, will materially aid the District Court has so far

departed from the accepted and usual course of judicial

proceedings as to call for an exercise of this Court’s

power of supervision.

First, the Court of Appeals has incorrectly held that

a component of the dispute is the cause of United’s short-

age. Even if it were necessary to determine the facts and

circumstances giving rise to United’s gas shortage, a

determination could be made only on the basis of evidence

received at a public hearing; and this would be true

whether the determination was made by the Commission

or a District Court.* The Commission’s expertise would

not be a deciding factor. Courts have greater expertise

than the Commission in weighing conflicting testimony,

and in resolving common-law actions involving applica-

2. The Court of Appeals says that the Commission is reviewing

the facts and circumstances that resulted in the shortage in order

to determine what is a fair, equitable, permanent curtailment plan

(App. A, infra, pp. Al5-A16). The Court is mistaken. The Commis-

sion is engaged in determining, in context of a curtailment plan,

whether a curtailment plan is unduly discriminatory which does not

place in the lowest priority new and enlarged service initiated at a

time when United knew it would soon be curtailing (App. N, injra,

p. A158).

9

tion of state law. Moreover, courts are unbiased in actions

against regulated industries.°

The cause of United’s gas shortage in the context of

the damage suit is a matter for the courts, and in the end

must be determined by the courts, Gordon v. New York

Stock Exchange, 422 U.S. 659 (1975).

The Court of Appeals was mistaken when it said that

the Commission had not clearly articulated what, if any,

its action would be on United’s petition for declartory

order. The petition was filed in an effort to persuade the

Commission to decide MP&L’s claims (App. A, infra,

p. A8). The Commission declined to issue a declartory

order on three of the four issues, One of the issues it

refused to include in its order was whether United’s

shortage was caused by its willful misconduct. This is

unmistakably shown by the following concluding para-

graph: “Good cause has not been shown for granting

United’s petition for declaratory order and motion to

consolidate, except as to the consolidation of the issue

of the effect of United’s tariff Section 12.1 on its general

liability to curtail direct sales customers.” (App. N, infra,

p. A160).

The Court of Appeals gives as a reason for referral,

“no federal policy or statute entrusts the decision to courts

in the first instance”, (App. A, infra p. Al7). The action,

in the constitutional sense, is a case or controversy within

the jurisdiction of the courts, Art. III Sec. 2 Cl. 1 Con-

3. In International Paper Co. v. Federal Power Commission, 476

F.2d 121, 125-126 (Sth Cir. 1973) and State of Louisiana v. Federal

Power Commission, 503 F.2d 844, 865-866 (Sth Cir. 1974) the court

reversed decisions of the Commission exonerating United from

liability on the ground of no record support, and further on the

ground that United might be liable for creating the need to curtail.

10

stitution of the United States. Courts have traditionally

exercised jurisdiction of actions for false representations.

It is not a question of whether a statute has entrusted a

decision to the courts in the first instance, but whether

a Statute has entrusted a decision to the Federal Power

Commission.

Second, the Commission cannot accept a tariff exculpat-

ing United from past liability for false misrepresentations.

The Natural Gas Act does not abrogate state-law or

common-law claims, nor does it authorize the Commission

to immunize a jurisdictional pipeline from claims arising

after, or even before the wrong was committed. No power

to immunize can be derived from the Commission’s au-

thority to curtail under its transportation jurisdiction.

The power to curtail is not coextensive with the right to

vindicate a wrong under state law. As was pointed out in

Nader, where Congress has sought to confer the power

to immunize “it was done so expressly.” It was there said:

The Court [Texas & Pacific R. Co. v. Abilene Cotton

Oil Co., 204 U.S. 426] conceded that a common-law

right, even absent a saving clause, is not to be

abrogated “unless it be found that the preexisting

right is so repugnant to the statute that the survival

of such right would in effect deprive the subsequent

Statute of its efficacy; in order words, render its

provisions nugatory.”

Whether the Natural Gas Act authorizes the Com-

mission to approve, as a part of a curtailment plan, a

tariff provision, such as proposed Section 12.3, which

would exculpate United from liability for state-law or

common-law claims is a question of law for the courts

and not the Commission.

11

The decision of the Court of Appeals is in conflict

with the principle announced in Gordon v. New York

Stock Exchange, 422 U.S. 659, 686-690 (1975). There

the Court held that in a treble damage antitrust suit

the question whether the system of fixed Commission

rates, over which the Securities and Exchange Commission

had active supervision under the Securities Exchange Act,

was beyond the reach of the antitrust laws, was a question

of law for the courts to decide, and in particular for the

court in which the antitrust claim was raised.

The decision of the Court of Appeals is also in conflict

with the principle enunciated in Breen Air Freight, Ltd.

v. Air Cargo, Inc., 470 F.2d 767 (2nd Cir. 1972) cert.

den. 411 U.S. 932 in which it was held that in a treble

damage antitrust suit where the issue was whether agree-

ments approved by the Civil Aeronautics Board (CAB),

immunized an air carrier from antitrust violations, the

courts would determine in the treble damage action

whether the agreements approved by the CAB met the

requirements of 49 U.S.C. Section 1384, which relieves

air carriers from antitrust laws on agreements between

air carriers approved by the CAB. It was there said at

p. 774

“Finally, we see no need to direct the district court

to stay, in its discretion, the proceedings in court

pending administrative action by the CAB. The issues

are not technical in nature, and there is no need

to seek uniformity. Compare Trans World Airlines,

Inc. v. Hughes, supra, with Pan American World

Airways, Inc. v. United States, supra. Furthermore,

the CAB cannot award damages, the only relief

which the plaintiffs request. Apgar Travel Agency

v. International Air Trans. Association, 107 F. Supp.

760, 711 (SDNY 1952); Slick Airways, Inc. v.

12

American Airlines, Inc., 107 F. Supp. 199, 211

(D.N.J. 1952). Whenever possible courts shoul

avoid duplicated or drawnout proceedings. The ef-

ficient administration of justice demands it. See

Allied Air Freight, Inc. v. Pan American World

Airways, Inc., supra, 393 F.2d at 445; Japan Line,

Ltd. v. Sabre Shipping Corporation, 407 F.2d 173

(2 Cir.), cert. denied, 395 U.S. 922, 89 S.Ct. 1774,

23 L.Ed.2d 239 (1969).

Likewise, whether the Commission can approve a tariff

provision exculpating United from past liability for false

misrepresentations is a question of law for the courts and

not the Commission. Public utilities cannot by tariff or

contract escape liability for their own negligence, false

misrepresentations or past wrongs. Bisso v. Inland Water-

ways Corp., 349 U.S. 85, 91-94 (1955); Fairfax Gas &

Supply Co. v. Hadary, 151 F.2d 939, 941 (4th Cir.

1945); 175 A.L.R. 38-74.

Nothing, therefore, would be gained by awaiting a

decision of the Commission on the proposed Section 12.3

tariff provision. Approval or disapproval of an exculpa-

tory tariff provision is not a matter within the discretion

of the Commission.*

Nor would anything be gained by awaiting a decision

of the Commission as to whether Section 12.1 of United’s

tariff exculpates United from liability for false misrepre-

4. In Pan American P. Corp. v. Superior Court, 366 US. 655,

665-66 the Court held that a pipeline company could recover an

overcharge under a gas purchase contract in an action filed in a state

court, even though the contract had been filed as the producer’s sate

schedule. It said that the rights under the contract were “traditional

common law claims” and they did not “iose their character because

it is common knowledge that there exists a scheme of federal regula-

tion of interstate transmission of natural gas.”

13

sentations. United must not believe that Section 12.1

exculpates it, otherwise it would not have urged the

approval of proposed Section 12.3.

Mr. Justice Brandeis, speaking for a unanimous court

in Great Northern Railway Co. v. Merchants Elevator

Co., 259 U.S. 285, 290 (1922), said: “Every question

of the construction of a tariff is deemed a question of

law; and where the question concerns an interstate tariff

it is one of federal law” (Emphasis added). He went on

to say at p. 294, that “The task to be performed is to

determine the meaning of words of the tariff which were

used in their ordinary sense and to apply that meaning to

the undisputed facts. That operation was solely one of

construction; and preliminary resort to the Commission

was, therefore, unnecessary.”

The rule laid down in Great Northern was reaflirmed

in United States v. Western P. R. Co., 352 U.S. 59, 69

(1956) and Brown & Sons Lumber Co. v. Louisville &

N. R. Co., 299 U.S. 393, 397 (1937). It was said in

Civil Aeronautics Board v. Modern Air Transport, 179

F.2d 622, 624 (2nd Cir. 1950), that “it has been con-

tinuously asserted that courts have original jurisdiction to

interpret tariffs, rules, and practices where the issue is one

of violation, rather than reasonableness.” The reasonable-

ness of Sections 12.1 and 12.3 is not an issue in MP&L’s

action.

Third, the gas sales contract, if it need be construed,

should not be referred to the Commission for construction,

but should be construed by the courts. It is a Mississippi

contract, and must be construed under the laws of that

State and in accordance with the canons of contract con-

struction. A construction of the contract by the Commis-

14

sion would not be binding on the courts.’ Moreover in

Merle E. Rowan vy. Allied Chemical Corp., 39 FPC 64

(1968) the Commission declined to decide contract ques-

tions referred to it by a federal district court on the ground

that it was not the policy of the Commission to decide

contract questions involved in a lawsuit being tried by a

court. The Court of Appeals clearly departed from the

accepted and usual course of judicial proceedings when

it held that questions regarding the interpretation of a

Mississippi contract for the nonjurisdictional sale of nat-

ural gas should be referred to the Commission.

Fourth, the Court of Appeals concluded that a fourth

component of the dispute which should be referred to the

Commission is MP&L’s request for compensation from

the customers of United who receive higher priorities. The

Court had reference to its opinion in Mississippi Public

Service Commission v. Federal Power Commission, 522

F.2d 1345 (Sth Cir. 1975) cert. den. 50 L.Ed. 149

(1976) where it held that the imposition of compen-

sation payments as a condition for the receipt of higher

priority gas is within the statutory power of the Commis-

sion over the movement of such gas in interstate com-

merce.

MP&L and the Mississippi Public Service Commission

have not asked that the compensation plan be made retro-

active. If a plan were adopted, as a part of a curtailment

program, it could not apply retroactively to curtailments

5. Texas Gas Transmission Corp. v. Shell Oil Co., 363 U.S. 263,

270 (1960); World Airways, Inc. v. Northeast Airlines, Inc., 349

F.2d 1007, 1011-1012 (1st Cir. 1965), cert. den. 382 U.S, 984;

Skelly Oil Co. v. FPC, 532 F.2d 177 (10th Cir. 1976); Gulf Oil

Corp. v. American Louisiana Pipe Line Co., 282 F.2d 401 (6th Cir.

1960); Warren Petroleum Corp. v. FPC, 282 F.2d 312 (10th Cir,

1960).

15

under prior plans because reparations are impermissible

under the Natural Gas Act.* A plan, if included in a

permanent curtailment program for United’s system, would

not immunize United from liability for accrued damages

suffered by MP&L. It might, at the most, reduce future

damages by the increased amounts paid by high priority

customers to United for the credit of MP&L and other low

priority customers. Consequently the trial of this action

for damages already suffered should not be stayed until

all of the issues in a permanent curtailment program are

tried and decided by the Commission and the courts on

petitions for review.

Fifth, the Court of Appeals would refer to the Com-

mission for determination whether the payment of dam-

ages for false misrepresentations might “significantly affect

the allocation decision.” There is no nexus between claims

for false misrepresentations and the Commission’s power

to curtail, or its power to determine the order of priority

of service. MP&L’s common-law claims should not be

extinguished on some theory that if United were held

liable it might violate the Commission’s curtailment orders

in an effort to mitigate the damages by delivering MP&L

greater volumes of gas than it was entitled to under

the curtailment orders. A reduction in liability to one

customer would expose United to liability to customers

who were excessively or unlawfully curtailed. Moreover,

a violation of the curtailment orders would expose United

to heavy criminal penalties under Sections 21 and 22, of

the Natural Gas Act, 15 U.S.C. 717t, 717u.

6. In F.P.C. v. Louisiana Power & Lighi Co., supra, the Court,

in upholding the curtailment jurisdiction of the Commission said in

406 U.S. at p. 644; “In addition a prescribed remedial order can

have only prospective application.”

16

3. The stay has not been kept within the bounds of

moderation. As was said in Landis v. North American

Company, 299 U.S. 248, 265 (1936) “The limits of a

fair discretion are exceeded.” The stay also, as was said in

County of Allegheny v. Frank Mashuda Company, 360

U.S. 185, 196-197 (1959) denies “that promptness of

decision which in all judicial actions is one of the elements

of justice”. In Ricci v. Chicago Mercantile Exchange,

supra Justices Marshall, Douglas, Stewart and Powell, in

their dissents, said in 409 U.S. at pp. 320-321 “And

surely the right to a ‘meaningful opportunity to be heard’

comprehends within it the right to be heard without un-

reasonable delay”.

It is self-evident that a referral of this action to the

Commission for it to determine “a major part of the liti-

gation” and make all findings “that it believes will aid the

prompt resolution of the dispute” will unduly delay a trial

in the District Court. First, the District Court, under the

opinion of the Court of Appeals, must prepare an order

which outlines with some specificity both the proceedings

before the Commission that should be concluded before

the litigation can continue, and the issues upon which

the Commission’s opinion is sought. Such an order could

be prepared only after an evidentiary hearing for the Court

of Appeals said that it would be singularly unwise for a

court to attempt to determine whether it or the FPC had

final authority over all aspects of the damage action on

the record before the District Court.

Second, the Commission would need to determine, after

notice and hearing, which of the issues referred to it by

the District Court it had an adequate staff and the ex-

pertise to make the determinations. It also would have to

determine whether there were other issues it could try

¥ one ainrenhCndll

17

where its findings might in its opinion aid the court in

resolving the dispute. Of even greater importance it needs

to decide whether the new issues could be determined

without unduly delaying a resolution of the issues for

which the proceedings were instituted.

Third, the Commission would have to find a time when

it could try the damage suit issues without interferring

with its statutory duties.

Fourth, the Commission would then have to try and

determine the damage suit issues.

Fifth, then there would be the delay incident to an

appeal to the court of appeals of the Commission’s find-

ings and order.

With all of this delay, still the Commission would not

have jurisdiction to right the wrongs done MP&L and its

customers. Moreover the District Court held in its memo-

randum (App. F, infra, p. A30) that the findings and

determination of the Commission would not be binding

on the courts in the damage suit actions.’ However the

Court of Appeals cautioned “We have been careful not

to articulate the exact effect of the findings of the Com-

mission upon the subsequent litigation. . . . We believe

that it is singularly inappropriate to determine at this

point in this complex litigation what the effect of the

Commission’s decision will be before the nature and

extent of the Commission’s action is ascertainable”, App.

A, infra, p. A20. Trial of the damage suit issues before

the Commission may, therefore, be an exercise in futility.

7. In Monsanto Company v. Federal Power Commission, 463 F.2d

799, 807 (D.C. Cir. 1972) it was held that the FPC’s determination

would only be “advisory”.

18

The Fifth Circuit in Louisiana Power & Light Com-

pany, supra, said in 526 F.2d at p. 910: “The Commis-

sion’s delay in acting on a permanent plan for the United

system is, of course, discouraging.” It also said in State

of Louisiana, supra, 503 F.2d at p. 864:

FPC should bear in mind that the question is not

whether United should ‘bear responsibility for the

shortage on its system’; rather it is who would get

the gas that is now available. FPC seems to have

been concerned with deciding the issue of United's

culpability. It would seem to us that that question

should be resolved in a damage suit.

The Federal Power Commission has not yet concluded

hearing commenced on December 21, 1970 for the pur-

pose of delineating a permanent curtailment plan for

United. Its curtailment orders have been reviewed and

reversed in International Paper Company v. Federal

Power Commission, 476 F.2d 121 (Sth Cir. 1973);

State of Louisiana v. Federal Power Commission, 503

F.2d 844 (Sth Cir. 1974); Mississippi Public Service

Commission v. Federal Power Commission, 522 F.2d

1345 (Sth Cir. 1975); and Louisiana Power & Light

Company v. Federal Power Commission, 526 F.2d 898

(Sth Cir. 1976). The failure of the Commission to obey

the mandate of the Fifth Circuit in Louisiana Power &

Light Company v. Federal Power Commission, supra,

resulted in the Court entering an order on November 13,

1976 modifying an interim curtailment plan for United’s

system, and directing obeyance of the Court’s mandate.

(App. O, infra, pp. A161-A168). The Commission by

order issued November 24, 1976 has taken steps to deter-

mine, as the Court had mandated, whether to continue in

RMS Eee ue io we

oa?

en ee

19

force the four-priority plan, which the Fifth Circuit held

had not been lawfully vacated, or to vacate the plan

(App. P, infra, pp. A169-A171). Referral to the Com-

mission of common-law damage action issues to be tried

and decided in the curtailment proceedings will further

delay the delineation of a permanent curtailment’ plan

for United’s system.

The Commission is understaffed and overworked.” The

need to expeditiously resolve the issues in this lawsuit

greatly outweighs any aid the FPC may be able to give

the District Court.’

This case has now been pending for more than two

years, and the curtailment proceedings for more than

six years, but the Commission is still attempting to deline-

ate a permanent curtailment plan for United. The evi-

dentiary record in the curtailment proceedings (RP71-29

et al Phase II) was recently closed on December 2, 1976.

The record contains 24,621 pages of testimony and 852

exhibits. Relatively short briefing schedules have been set

by the Presiding Administrative Law Judge. Obviously

8. The Chairman of the Commission in testifying before the

Senate Committee on Government Operations on May 27, 1976 said

that in January 1976 10,480 cases were pending before the Com-

mission; that the number had grown to 11,426 cases at the end of

February and to 14,454 cases at the end of March 1976. He testified

that the Commission was able to decide about 62 cases per week

or about 3,224 per year. He said the Commission was on a treadmill

and rapidly going backward; that the “system is in serious danger

of breaking down.” Obviously, the Commission is already four or

five years behind with its docket and getting further behind each

month.

9. The Courts must always balance the benefits of seeking agency’s

aid with the need to resolve disputes fairly yet as expeditiously as

possible. Meat Cutters Union v. Jewel Tea Co., 381 US. 676, 686

(1965).

20

the damage suit issues cannot be tried in that proceeding.

Trial of United’s petition for a declaratory order (Phase

III) has not commenced, but as pointed out earlier, supra,

p. 6, p. 9 the Commission has declined to issue a declara-

tory order on three of the four issues raised by United

(App. N, infra, pp. A154-A160), leaving only the ex-

culpatory tariff questions for determination. The stay

has not been kept within the bounds of moderation, and

MP&L has been denied promptness of decision which in

all judicial actions is one of the elements of justice.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

SHERWOOD W. WISE

JosEPH P. WISE

WIsE, CARTER, CHILD,

STEEN & CARAWAY

Post Office Box 651

925 Electric Building

Jackson, Mississippi 39206

CLAYTON L. ORN

ANDERSON, BROWN, ORN & JONES

1122 Southwest Tower

Houston, Texas 77002

Attorneys for Petitioner

Mississippi Power & Light

Company

Al

APPENDIX A

MISSISSIPPI POWER & LIGHT COMPANY,

Plaintiff-Appellant

v.

UNITED GAS PIPELINE COMPANY

et al., Defendants-Appellees,

STATE OF MISSISSIPPI,

Plaintiff-Intervenor.

No. 75-2316.

UNITED STATES COURT OF APPEALS

Fifth Circuit.

May 27, 1976

Utility brought action against pipeline company and its

former parent for breach of contract. The United States

District Court for the Southern District of Mississippi at

Jackson, William Harold Cox, J., granted stay of all pro-

ceedings to await response of the Federal Power Commis-

sion as to its primary jurisdiction of curtailment question

and utility appealed. The Court of Appeals, Lewis R.

Morgan, Circuit Judge, held that referral was appropriate

inasmuch as FPC was presently resolving issues related to

curtailment plans, FPC assistant would be of material

aid to the District Court and the resolution of damage

action and none of the factors mitigating applicability of

the primary jurisdiction doctrine were preseat; and that

District Court should have been more precise in its stay

order by outlining with some specificity both the proceed-

ings before the FPC that should be concluded before

the damage litigation should continue and the issues upon

which the FPC’s opinion was sought.

Remanded with directions.

A2

Appeal from the United States District Court for the

Southern District of Mississippi.

Before THORNBERRY, COLEMAN and MORGAN,

Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

This appeal involves another facet of the problems

created by the nationl energy shortage. Specifically, this

litigation was commenced by Mississippi Power and Light

Co. (MP&L) for breach of contract against one of the

major natural gas pipeline companies, United Gas Pipe-

line (United) and its former parent, Pennzoil Co. Al-

leging failure to supply the amounts of gas provided by

the contract and basing its action solely on state law,

MP&L brought a diversity action against United and

Pennzoil in the United States District Court for the

Southern District of Mississippi. After filing their answers,

United and Pennzoil asserted the primary jurisdiction of

the Federal Power Commission. The district court granted

a stay of all proceedings “to await the response of the

Federal Power Commission as to its primary jurisdiction

of this curtailment question. . . .”’ MP&L appeals’ the

1. The district court order states in relevant parts:

It is the opinion of this Court that under the Natural Gas

Act that the Federal Power Commission probably has jurisdiction

of this curtailment controversy, and that the Court at this time

should defer to its decision as to the authority of the Commission

in this controversy, which is in the process of being handled by

that agency; and while the agency’s decision is not final and

binding on the court, it must be sought at this time.*

The motion of the defendants to dismiss will be denied. The

motion to stay proceedings here to await response of the Fed-

eral Power Commission as to its primary jurisdiction of this

curtailment question will be granted. In the meantime, all other

and further processes of this Court will be stayed to await the

ultimate answer of the Commission as to this paramount and

controlling question of law.

* Federal Power Commission v. Louisiana Power & Light

A3

district court’s order basically arguing that the Federal

Power Commission does not have primary jurisdiction

over any of the issues raised in this action. MP&L argues,

moreover, that even if the FPC does have primary juris-

diction, the district court erred in not making its order

more specific by stating which issues should be referred to

the FPC. Finally, MP&L objects to the district court’s

stay of discovery. While we agree that the district court

order should be more specific, we hold that the court was

correct in staying the proceedings in order that the Federal

Power Commission may exercise primary jurisdiction in

this matter.

I. THE CURTAILMENT CONTROVERSY:

In order to more clearly understand the issues presented

by this complex litigation, a review of the natural gas

shortage controversy and the litigation accompanying it is

helpful.’

Company, et al, 406 U.S. 621, 92 S.Ct. 1827, 1842, [32 L.Ed.

2d 369] the Court among other things held: “In that circum-

stance, the District Court and the Court of Appeals were obliged

to defer to the FPC for the initial determination of its jurisdic-

tion. See Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41,

58 S.Ct. 459, 82 L.Ed. 638 (1938). The need to protect the

primary authority of an agency to determine its own jurisdiction

‘is obviously greatest when the precise issue brought before a

court is in the process of litigation through procedures originating

in the [agency]. While the [agency’s] decision is not the last

word, it must assuredly be the first.’ ”

2. This court granted leave to appeal from an interlocutory order

on May 28, 1975.

3. See, e. g., FPC v. Louisiana Power and Light Co., 406 U.S.

621, 92 S.Ct. 1827, 32 L.Ed.2d 369 (1972); Louisiana Power and

Light Co. v. FPC, 526 F.2d 898 (Sth Cir. 1976); Fort Pierce Utility

Authority of City of Fort Pierce v. FPC, 526 F.2d 993 (Sth Cir.

1976); Mississippi Public Service Commission v. FPC, 522 F.2d

1345 (Sth Cir. 1975); State of Louisiana v. FPC, 503 F.2d 844 (Sth

A4

By the spring of 1971, several pipeline companies, in-

cluding United, had notified the Federal Power Commis-

sion that their supplies were inadequate to meet commit-

ments to their customers. United, as well as other pipeline

companies, proposed to meet this shortage situation by

instituting curtailment plans that would allocate the avail-

able gas among their customers. Most of these plans had

been adopted by the pipelines during a temporary short-

age created by the Korean war. Needless to say, these

plans were often unsuitable as a method of curtailing

supplies during the present period of continual and severe

shortage. The FPC, in Order No. 431,* Statement of Gen-

eral Policy, ordered the pipelines to institute all necessary

steps to alleviate the shortage and to submit new tariffs

which would incorporate revised curtailment plans. Under

United’s temporary curtailment plan filed pursuant to

Order 431, MP&L, a utility who used natural gas as a

fuel to generate electricity, was placed in the category

to be curtailed first.’ Therefore, MP&L has been receiving

substantially less natural gas than it had before curtail-

ment.

The necessity for curtailment gave rise to two distinct

problems. The first question was how much of the avail-

able supply of natural gas each of the pipeline’s customers

Cir. 1974); Atlanta Gas and Light Co. v. FPC, 476 F.2d 142 (Sth

Cir. 1973); International Paper Co. v. FPC, 476 F.2d 121 (Sth Cir.

1973).

4. 49 FPC 85 (1973).

5. Originally, MP&L was given a preference over other customers.

The Commission, however, ordered that utilities like MP&L be placed

in the lowest priority for gas supplies. While this court has remanded

to the Commission for further evidence on this point, the court has

allowed United to operate through the present heating season under

a plan that denied MP&L any priority. See Louisiana Power and

Light Co. v. FPC, 526 F.2d 898 (Sth Cir, 1976).

AS

would receive. The second question was who would bear

the economic consequences of the shortage. Those cus-

tomers who were curtailed in whole or in part would have

to seek alternative sources of energy which would gene-

rally be available at significantly increased cost, and some-

how this additional cost would have to be allocated. The

various parties, therefore, sought to insure that others bore

the financial burden of curtailment.

United feared liability on two separate theories. First,

a curtailed customer might bring a general breach of con-

tract action alleging failure to deliver the amounts of gas

stated in the contract. Second, a customer could bring an

action under a specific clause—the substitute fuel clause—

contained in many of United’s contracts, including its

agreement with MP&L. That provision arguably requires

United to compensate a customer for the additional cost

of obtaining other types of fuel to meet the customer’s

energy needs. While United contended that the substitute

fuel clause did not apply in a general curtailment situation

and if it did the language of the clause limited liability to

the amount of fuel purchased by the customer for only

a few days, should these contentions fail, United faced

a possibility of over a billion dollars in liability.

Even before suit was instituted, United sought by means

of proceedings before the Federal Power Commission to

insure that it would not bear the financial cost of curtail-

ment. In 1970, United sought a declaratory order from

the Commission which would hold that § 12.1 of its

tariff on file with the Commission immunized United from

liability. That section provided that curtailment could

6. See United Gas Pipe Line Company, FPC Docket No. RP71-

29. MP&L has contended from the beginning that no tariff provision

can affect its agreements with United,

A6

be instituted “without liability.” United also sought to file

with the Commission proposed § 12.3 of the tariff that

stated in relevant part,

. nor shall seller (United) be obligated to pay

or credit such customers any sums with respect to

substitute fuels burned by such customers during

such a period of proration or interruption.

The Commission rejected United’s proposal in Opinion

606’ and stated that,

implementation of the curtailment plan itself, pur-

suant to our procedures, would be an absolute de-

fense for United against all claim for specific per-

formance, damages, or other requests for relief under

these contracts affected by curtailment that may be

initiated in the courts.

In /nternational Paper Co. v. Federal Power Commission,

476 F.2d 121 (Sth Cir. 1973), however, this court

vacated that statement in Opinion 606 as “mere dicta”

totally lacking evidentiary support. /d. at p. 125.

Subsequently, United resubmitted § 12.3, but in Opin-

ion 647-A* the Commission again rejected United’s pro-

posed exculpatory language. This time, the Commission

reasoned that United would only be vulnerable under a

general breach of contract theory if the curtailment had

resulted from its own negligence, bad faith, or other

wrongful conduct. The Commission had found, however,

that United had not acted “improvidently” and that it

would not therefore be held liable for damages. Next, the

7. 46 FPC 786 (1971); See also, Opinion Nos. 606-A, 46 FPC

1290 (1971).

8. 49 FPC 1211 (1973). See also, 49 FPC 179 (1973).

A7

Commission stated that substitute fuel clauses required

United at most to reimburse its customers the extra costs

of substitute fuels for only “a maximum of seven days.”

Then, the Commission opined that if a court found that

the clause created “open ended” liability, the FPC would

be “compelled to find such clauses are unduly preferential.”

The Commission reasoned that the prospect of open ended

liability might cause United to disobey FPC orders and

in some way favor customers who had substitute fuel

clauses in their contracts.

Once again, in State of Louisiana v. Federal Power

Commission, 503 F.2d 844 (Sth Cir. 1974), this court

vacated the FPC’s findings. The court pointed out that

the proper determination of whether United was liable

for breach of contract absent an exculpatory tariff such

as § 12.3 would be decided by a court in the contract

actions. Then, the court found the FPC’s interpretation

of the substitute fuel clauses to be an “assertion (which)

cannot stand without supporting reasons.” Jd. at 868.

Furthermore, the court instructed the FPC not to assume

that United was not liable for breach of contract but

to evaluate the proposed § 12.3 in light of possible con-

tract liability. The court stated at page 867:

We think the Commission should have determined

what would happen with the proposed change in

effect. Can a tariff provision remove general con-

tractual liability? If the provision would remove

liability, would the unavailability of damages subject

United’s curtailed customers to ‘any undue prejudice

or disadvantage?’ In short, since the Commission

cannot adjudicate contract liability, it should evalu-

ate section 12.3 on the assumption that United faces

possible liability—not on the assumption it is immune,

A8

In State of Louisiana, the court also reversed the Com-

mission’s decision on various other aspects of United’s

curtailment plan. On remand, the FPC established pro-

cedures to meet the objections of this court.’ Part of

these procedures, delineated Phase III by the Commission,

were specifically designed to determine the advisability of

adopting § 12.3 as a part of United’s tariff. At present,

hearings are being conducted as a part of these Phase III

proceedings.

United also filed with the Commission on March 3,

1975, a petition requesting a declaratory order. Under

United’s request, the Commission would determine, inter

alia, (1) whether the availability of damages to some of

United’s curtailed customers would create an undue prefer-

ence in violation of the Natural Gas Act, (2) whether

§ 12.1 of United’s tariff would preclude liability to certain

customers such as MP&L and (3) whether the shortage

was caused by the negligence or willful misconduct of

United. The Commission has not clearly articulated what,

if any, its action will be on United’s petition.’

On August 5, 1974, Mississippi Public Service Com-

mission (MPSC) filed a petition for extraordinary relief

before the Commission on behalf of MP&L and other

Mississippi utilities. In this petition, the utilities sought

9. Order on Remand Denying Motion for Immediate Modification

of Curtailment Plan, United Gas Pipe Line Company, FPC Docket

Nos. RP71-29 and RP71-120, March 7, 1975 on rehearing May 2,

1975.

10. See Order partially granting petition for declaratory order

and motion to consolidate, United Gas Pipe Line Company, (Phase

Ill) FPC Docket Nos. RP71-29, RP75-71, RP75-69, August 20,

1975; Supplemental Order modifying order issued December 9, 1975

and referring ruling to Commission for review, United Gas Pipe Line

Company, (Phase III) FPC Docket Nos. RP71-29, RP75-69 and

RP75-71, December 16, 1975.

A9

compensation from those customers of United who re-

ceived a higher preference for gas. Under their proposal,

a customer who received full gas supplies would have to

make payments to customers of United who had been

curtailed. In this way, the utilities sought to allocate

among all the customers of United the burden of cur-

tailment. The Commission denied MPSC’s petition on the

ground that it was without jurisdiction to require such

compensation. This court in Mississippi Public Service

Commission v. Federal Power Commission, 522 F.2d

1345 (Sth Cir. 1975), rejected the Commission’s jur-

isdictional argument and remanded for determination of

whether compensation payments should be a condition

for receipt of a higher priority in a gas curtailment plan.

On August 30, 1974, MP&L brought this present action

against United and its former parent Pennzoil. As has

been outlined above, MP&L sought damages of approxi-

mately $160,000,000 from United for breach of contract.

The district court stayed these proceedings pending the

exercise of primary jurisdiction by the Federal Power

Commission, and MP&L objects to that stay.

Il. PRIMARY JURISDICTION:

[1] The doctrine of primary jurisdiction has evolved as

a means of reconciling the functions of administrative

agencies with the judicial function of the courts.'' When

11. See generally, Travis, Primary Jurisdiction, A General Theory

and Its Application to the Securities Exchange Act, 63 Calif. L. Rev.

926 (1975); Jaffe, Primary Jurisdiction, 77 Harv. L. Rev. 1037

(1964); Handler Regulation v. Competition, 44 U. Conn. L. Rev.

191 (1975); King, The “Arguably Lawful” Test of Primary Jurisdic-

tion in Antitrust Litigation Involving Regulated Industries, 40 Tenn.

L. Rev. 617 (1973); Robinson, Antitrust Developments: 1973, 74

Colum. L. Rev. 163 (1974); Note, Primary Jurisdiction in Antitrust

Cases. Three recent decisions, 42 U. Cinn. L. Rev. 725 (1973).

Al0

legal disputes develop that directly affect an industry sub-

ject to regulation, the need arises to integrate the regula-

tory agency into the judicial decision making process.

One method to accomplish integration is to have the

agency pass in the first instance on those issues that are

within its competence. In short, the agency should have

the first word. Marine Engineers Beneficial Assn. v. Inter-

lake Steamship Co., 370 U.S. 173, 185, 82 S.Ct. 1237,

1243, 8 L.Ed.2d 418, 426 (1962).

Reference to administrative agencies was first estab-

lished in those cases where Congress by statutory pro-

vision had allocated to the agency the power to con-

clusively decide the contested issue. For example, the In-

terstate Commerce Commission is the exclusive agency

for determining the reasonableness of rates; therefore, a

court must defer to that agency when a party challenges

a rate in a legal proceeding. Texas and P. R. Co. v. Abi-

lene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51

L.Ed. 553 (1907). Under this methodology, before in-

voking the doctrine of primary jurisdiction it was impera-

tive that the court determine whether the agency’s deci-

sion would be definitive. There was the implication that if

the agency’s conclusion did not finally resolve the issue,

reference would not be warranted. Public Utilities Com-

mission v. United States, 355 U.S. 534, 539, 78 S.Ct.

446, 450, 2 L.Ed.2d 470, 475 (1958); Montana-Dakota

Utilities Co. v. Northwestern Public Service Co., 341 U.S.

246, 254, 71 S.Ct. 692, 696, 95 L.Ed. 912, 920 (1951).

Applying the doctrine of primary jurisdiction only in

those situations where the issue was solely within the

agency's competence created difficulties in integrating the

administrative agency’s position with the judicial process.

First, the court would have to determine, often on the

Al}

barest of pleadings and in the most complicated litigation,

to which decision making body—the court or the agency

—Congress had allocated the resolution of the issue. Ad-

ministrative jurisdiction, however, is difficult to determine

without some factual underpinnings and often depends

upon the particular context in which the issue arises. Cf.

Federal Power Commission v. Louisiana Power and Light,

406 U.S. 621, 647, 92 S.Ct. 1827, 1841, 32 L.Ed.2d 369,

388 (1972). This difficulty in determining jurisdiction is

particularly acute where the agency, such as the Federal

Power Commission, has only a limited grant of jurisdic-

tion from Congress. Compare Federal Power Commission

v. Panhandle Eastern Pipeline Co., 337 U.S. 498, 69 S.Ct.

1251, 93 L.Ed. 1499 (1949), with United Gas Improve-

ynent Co. v. Continental Oil Co., 381 U.S. 392, 85 S.Ct.

1517, 14 L.Ed.2d 466 (1965). Secondly, such limited

invocation of the doctrine of primary jurisdiction would

emasculate the agency’s ability to participate in those

cases where a final decision was left to the courts even

though the litigation had a profound impact on the regu-

latory process. Therefore, the courts have often required

the prior resort to an administrative agency before allow-

ing the litigation to proceed.”*

Recently, the Supreme Court has required reference to

the relevant regulatory agency without even deciding

whether that agency has jurisdiction to finally determine

the basic dispute in the case. In Ricci v. Chicago Mercan-

tile Exchange, 409 U.S. 289, 93 S.Ct. 573, 34 L.Ed.2d

525 (1973), the Court dealt with an antitrust complaint

attacking a commodity exchange’s decision to transfer a

membership of the exchange. The defendant had sought

12. Robinson, Antitrust Developments: 1973, 74 Colum. L. Rev.

163, 174-179 (1974).

Al2

reference to the Commodity Exchange Commission, but

there was considerable dispute over whether the Com-

mission had jurisdiction to resolve the contested issues.

The Supreme Court stated at page 304, 93 S.Ct. at page

582, 34 L.Ed.2d at page 537:

We need not finally decide the jurisdictional issue

for present purposes, but there is sufficient statutory

support for administrative authority in this area that

the agency should at least be requested to institute

proceedings.

The Court then went on to state that it was “very likely

that a prior agency adjudication of this dispute will be a

material aid in ultimately deciding” the issue. Jd. at 305,

93 S.Ct. at 582, 34 L.Ed.2d at 537.

Even before Ricci, this court had mandated referral to

the Federal Communication Commission even though

that agency decision might not have been “the end to the

matter.” Carter v. American Tel. & Tel. Co., 365 F.2d

486, 499 (Sth Cir. 1966). In Carter, we required that the

doctrine of primary jurisdiction be invoked where there

was only a “strong possibility” that the FCC decision

would resolve the dispute. Jd at 497. See also, Southern

Railway Co. v. Combs, 484 F.2d 145 (6th Cir. 1973).

Also, this court had referred to the very agency involved

in this litigation, the Federal Power Commission, the issue

of whether a particular dispute was encompassed by that

agency’s jurisdictional grant. J. M. Huber Corp. v. Den-

man, 367 F.2d 104 (Sth Cir.. 1966); see also, Agri-

cultural Trans. Assoc. of Texas v. King, 349 F.2d 873

(Sth Cir. 1965); Louisville and Nashville Railroad v.

Knox Home, 343 F.2d 887 (Sth Cir. 1965). See also,

A13

Monsanto Co. v. Federal Power Commission, 146 U.S.

App.D.C. 396, 463 F.2d 799 (1972).

[2] A court’s discretion to seek the administrative

agency’s input in those cases where the agency will be a

“material aid” to the ultimate decision is not unlimited. In

this period of expanding federal regulation, there are few

disputes in which reference to some federal or state

agency might not conceivably be of material aid to the

court."* As the Supreme Court stated in United States vy.

Western Pacific Railroad Co., 352 U.S. 49, 77 S.Ct. 161,

1 L.Ed.2d 126 (1956),

No fixed formula exists for applying the doctrine of

primary jurisdiction. In every case the question is

whether the reasons for the existence of the doctrine

are present and whether the purposes it serves will

be aided by its application in the particular litiga-

tion.

See also, Watts v. Missouri-Kansas-Texas Railroad Co.,

383 F.2d 571, 581 (Sth Cir. 1967); CAB v. Modern Air

Transp. Inc., 179 F.2d 622, 625 (2d Cir. 1950).

[3-10] The courts should be reluctant to invoke the

doctrine of primary jurisdiction, which often, but not al-

ways, results in added expense and delay to the litigants

where the nature of the action deems the application of

the doctrine inappropriate. While one cannot easily recon-

cile all the cases wherein referral was denied, there was a

few general situations in which referral is often unwar-

ranted. If, under no conceivable set of facts, the agency

could immunize what would be a clear violation of fed-

13. King, The “Arguably Lawful” Test of Primary Jurisdiction

in Antitrust Litigation Involving Regulated Industries, 40 Tenn. L.

Rev. 617, 657 (1974).

Al4

eral law, referral would be inappropriate. Federal

Maritime Board v. Isbrandtsen Co., 356 U.S. 481, 78 S.

Ct. 851, 2 L.Ed.2d 926 (1958). In implementing the na-

tional policy of free competition as embodied in the anti-

trust laws, the court normally should not defer where the

issue is not dissimilar from that encountered in nonregu-

lated industries. See United States v. Philadelphia National

Bank, 374 U.S. 321, 339, 83 S.Ct. 1715, 1728, 10 L.Ed.

2d 915, 930 (1963); California v. Federal Power Com-

mission, 369 U.S. 482, 82 S.Ct. 901, 8 L.Ed.2d 54

(1962). Deference is particularly inappropriate where the

litigation deals with a single event which requires no con-

tinuing supervision by the regulatory agency. Cf. Federal

Maritime Commission v. Seatrain Lines, Inc., 411 U.S.

726, 93 S.Ct. 1773, 36 L.Ed.2d 620 (1973). The nature

of relief sought, moreover, is also relevant consideration

in deciding whether to refer to the agency. The court in

instituting injunctive relief may be able to provide ade-

quate flexibility to coordinate its decision with subsequent

regulatory action. Otter Tail Power Co. v. United States,

410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973). In

addition, in those cases where Congress has determined

by statute that the courts should decide the issue in the

first instance, primary jurisdiction should not be invoked.

Mercury Motor Express v. Brinke, 475 F.2d 1086 (Sth

Cir. 1973). Likewise, when the agency’s position is suf-

ficiently clear or nontechnical or when the issue is peri-

pheral to the main litigation, courts should be very reluc-

tant to refer. Great Northern Railway Co. v. Merchants

Elevator Co., 259 U.S. 285, 42 S.Ct. 477, 66 L.Ed. 941

(1922); Shew v. Southland Co., 370 F.2d 376 (Sth Cir.

1966); Strickland Transportation Co. v. United States,

334 F.2d 172 (Sth Cir. 1964). Finally, the court must

Al5

always balance the benefits of seeking the agency’s aid

with the uced to resolve disputes fairly yet as expedi-

tiously as possible. Cf. Local 189, Amalgamated Meat

Cutters v. Jewel Tea Co., 381 U.S. 676, 686, 85 S.Ct.

1596, 1600, 14 L.Ed.2d 640, 647 (1965); Foremost In-

ternational Tours v. Quantas Airways Ltd., 525 F.2d 281

(9th Cir. 1975), petition for cert. filed, 44 L.W. 3533

(March 23, 1976).

Ill. THE PRESENT LITIGATION:

{11, 12] In this litigation, referral is particularly ap-

propriate. While the Federal Power Commission’s juris-

diction is somewhat limited, the Natural Gas Act, as in-

terpreted by the Courts, has provided the Commission

with the statutory basis for pervasive regulation of the

curtailment question. See Louisiana Power and Light v.

Federal Power Commission, supra; see also Fort Pierce

Utility Authority v. Federal Power Commission, 526 F.

2d 993 (Sth Cir. 1976); Consolidated Edison Co. v. Fed-

eral Power Commission, 168 U.S.App.D.C. 92, 512 F.2d

1332, modified, 171 U.S.App.D.C. 55, 518 F.2d 448

(1975). The Commission is presently involved in resolv-

ing issues which have a direct impact on civil litigation in-

volving curtailment plans. The advisability of invoking

primary jurisdiction is greatest when the issue is already

before the agency. Louisiana Power and Light v. Federal

Power Commission, supra, at 910; Industrial Communica-

tions System Inc. v. Pacific Tel. & Tel. Co., 505 F.2d

152, 157 (9th Cir. 1974); MCI Communications Corp.

v. American Tel. & Tel. Co., 496 F.2d 214, 223-24 (3rd

Cir. 1974). The Commission, moreover, is reviewing in

some detail the facts and circumstances that resulted in

the present shortage in order to determine what is a fair,

Al6

equitable, permanent curtailment plan. Indeed, this court

has already stated in a similar action that referral to the

FPC is preferred. Atlanta Gas and Light Co. v. Federal

Power Commission, 476 F.2d 142, 151 (Sth Cir. 1973).

[13, 14] There also can be no doubt that the Com-

mission’s informed opinion will be of material aid to the

district court in the resolution of the damage action. In

five specific components of the dispute the Commission’s

assistance would be significant. First, the Commission

can determine in detail the facts and circumstances that

resulted in the severe shortage United is experiencing.

Development of the factual context by those expert in the

area, is an established basis for primary jurisdiction. Far

East Conference v. United States, 342 U.S. 570, 72 S.Ct.

492, 96 L.Ed. 576 (1952). Second, the Commission

could determine whether to accept an exculpatory tariff

from United such as proposed § 12.3. In reaching this de-

cision, the Commission could also determine whether a

tariff provision can immunize United from liability and

particularly whether such a tariff would provide United

with a defense in this suit by MP&L. Certainly, the in-

terpretation and implementation of a tariff is a question

properly passed upon in the first instance by the Commis-

sion, and reference by a court to a regulatory agency may

not even be discretionary on such an issue. /nterstate

Commerce Commission v. Atlantic C.L.R. Co., 323 U.S.

576, 600-601, 86 S.Ct. 1000, 1014-1015, 16 L.Ed.2d

109, 126 (1966); United States v. Western P. R. Co.,

352 U.S. 59, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956);

Watts v. Missouri-Kansas-Texas Railroad Co., supra.

Third, the Commission’s interpretation of the United-

MP&L contract provisions that might possibly limit dam-

ages would aid a court in the ultimate decision. See, J. M.

Al7

Huber Co. v. Denman, supra. Fourth, the Commission

is presently reviewing a request by MP&L for compensa-

tion from the customers of United who receive higher

priorities. In that proceeding, MP&L seeks payment for

some of the very damages which it claims in this damage

action. Finally, the Commission could clearly articulate

whether in its view the presence or absence of damages

significantly affects the allocation decision. While the

Commission has at times stated that it believes such an

impact is evident, see, State of Louisiana v. Federal

Power Commission, supra, referral of this damage action

would give the Commission an opportunity to articulate

its rationale and support it with relevant findings of fact.

In short, there are several aspects of the damage action

that the Commission decisions may either resolve for or,

at a minimum, be of material assistance to the trial court.

See, Ricci v. Chicago Mercantile Exchange, supra; Carter

v. American Tel. & Tel. Co., supra.

None of the factors mitigating the applicability of the

primary jurisdiction doctrine are present. First, the cur-

tailment question is extremely complicated, affecting

energy policy throughout the entire nation. For a court

to attempt to determine whether it or the FPC has final

authority over all aspects of the damage action on the

record, before the district court would be singularly un-

wise. Second, here there are circumstances such as the

addition of § 12.3 to United’s tariff that might immunize

United from liability. Third, no federal policy or statute

entrusts the decision to courts in the first instance. Cer-

tainly, these curtailment damage actions are vastly dis-

similar to the bulk of federal diversity contract litigation.

Finally, the FPC has stated that damage actions could dis-

rupt its resolution of the curtailment problem—a problem

A18

which all parties agree is likely to be a continual difficulty

for quite some time. In balance, we believe that the Com-

mission’s assistance will be of “sufficient aid to the court

that the action should not go forward without making

reasonable efforts” to obtain the FPC’s assistance. Chicago

Mercantile Exchange v. Deaktor, 414 U.S. 113, 115, 94

S.Ct. 466, 467, 38 L.Ed.2d 344, 347 (1973).

MP&L’s reliance on our opinions in /nternational

Paper, supra, and State of Louisiana, supra, for the propo-

sition that no issue in this case is subject to the primary

jurisdiction of the FPC is misplaced. There the court

dealt with the Commission’s refusal to institute United’s

proposed exculpatory tariff. The Commission, acting upon

an inadequate evidentiary basis, had concluded that such

a tariff was unnecessary because United was immune from

damages. We vacated such statements by the Commission

because they lacked evidentiary support. We also stated

that the contractural liability of United, absent an excul-

patory tariff, should be finally determined in a court of

law. Nothing we said in either case, however, implied

that although a court will make the final determination,

that court could not and should not seek the Commission’s

assistance pursuant to the doctrine of primary jurisdiction

before resolving the litigation.

[15] While we agree that the district court properly

stayed proceedings pending the decision of the Federal

Power Commission, we believe the district court should

have been more precise in its order. The district court

simply stayed all proceedings pending future action by

the Federal Power Commission. In its present posture,

the United proceedings before the Commission could ter-

minate with several of the issues that might be relevant

to the damage action still unresolved. For example, the

Al19

Commission might determine that an exculpatory pro-

vision such as proposed § 12.3 could not immunize

United from liability and terminate all proceedings con-

cerning the damage question. In such a situation, it would

be even more important for the Commission to state

its interpretation of United’s contract provisions. In addi-

tion, the Commission is presently resolving the issues

concerning the facts underlying United’s shortage in pro-

ceedings intended to develop a permanent curtailment

plan. We believe it would be beneficial for the Commission

to address the issue of contract liability in a proceeding

where the damage action was clearly before it. Reference

by the district court of an order to the Commission which

specifically outlines those issues in which the courts seeks

assistance would provide the Commission with a context

to focus on the damage action. Part of the difficulty that

has resulted in the United litigation has been the tendency

of the Commission, in almost an aside, to resolve the

question of United contract liability while its focus has

been primarily on developing a curtailment plan. On

remand, the district court should prepare an order which

outlines with some specificity both the proceedings before

the Commission that should be concluded before the dam-

age litigation should continue and the issues upon which

the Commission’s opinion is sought.** See, International

Ass'n, Etc. v. United Contractors, Etc., 483 F.2d 384,

400-401, 404, modified 494 F.2d 1353 (3rd Cir. 1974).

[16] In its final contention, MP&L argues that the

district court erred in not allowing discovery to continue

14. By requiring the district court to prepare an order in which

certain issues are referred to the FPC, we do not intend to unduly

restrict that agency’s ability to assist the district court. The agency

is free to make all findings that it believes will aid the prompt

resolution of the dispute.

A20

and proceeding to trial on those issues which were not

referred to the Commission. While the district court

has an affirmative obligation to resolve those issues in

the litigation which, if they are sufficiently distinct, are

not referred to the Commission, Louisville and Nashville

Railroad Co. v. Knox Homes Corp., supra at 895 (Sth

Cir. 1965), in a suit such as this one where referral

encompasses the major part of the litigation the district

court has discretion to stay all proceedings.’® Chronicle

Publishing Co. v. NBC, 294 F.2d 744, 749 (9th Cir.

1961).

Finally, we add a note of caution. We have been care-

ful not to articulate the exact effect of the findings of

the Commission upon the subsequent litigation. The dis-

trict court stated in its order that the Commission’s de-

cision would not be binding upon the court. We believe

that it is singularly inappropriate to determine at this point

in this complex litigation what the effect of the Commis-

sion’s decisions will be before the nature and extent of

the Commission’s action is ascertainable. While, as we

have stated before, the court will finally determine United's

liability in the damage action, we express no opinion as

to the degree to which the trial court in reaching its

decision will be bound by prior agency determination.

Once the Commission decides the issues referred to it by

the district court, there will be adequate time to determine

the proper procedures for reviewing such findings and their

15. According to United’s brief, discovery is proceeding in various

other similar actions brought against United in federal and state

courts. Nothing we say here is meant to deny the district court the

power to allow discovery if after preparing a new order the court

believes that allowing discovery will aid in the resolution of the

dispute.

A21

effect on the subsequent litigation. Cf. Carter v. American

Tel. & Tel. Co., supra at 499-500.

In conclusion, we believe the district court acted prop-

erly in staying the procedures and in referring the case to

the Federal Power Commission so that that agency might

exercise primary jurisdiction. We also believe that the

district court should have been more precise in its order

staying the litigation. We therefore remand to the district

court for the limited purpose of modifying its order.

Remanded with directions.

A22

APPENDIX B

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 75-8134

(Filed May 28, 1975)

MISSISSIPPI POWER & LIGHT COMPANY, and

STATE OF MISSISSIPPI, Petitioners,

versus

UNITED GAS PIPE LINE COMPANY and

PENNZOIL COMPANY, Respondents.

On Application for Leave to Appeal from an

Interlocutory Order

Before THORNBERRY, MORGAN and RONEY Cir-

cuit Judges.

BY THE COURT:

IT IS ORDERED that leave to appeal from the inter-

locutory order of the United States District Court for

the Southern District of Mississippi entered on April 4,

1975, is

GRANTED.

A23

APPENDIX C

UNITED STATES COURT OF APPEALS

For The Fifth Circuit

October Term, 1975

No. 75-2316

D. C. Docket No. CA-J74-185(C)

MISSISSIPPI POWER & LIGHT COMPANY,

Plaintiff-Appellant,

versus

UNITED GAS PIPE LINE COMPANY, ET AL.,

Defendants-Appellees,

STATE OF MISSISSIPPI,

Plaintiff-Intervenor.

Appeal from the United States District Court for the

Southern District of Mississippi

Before THORNBERRY, COLEMAN and MORGAN,

Circuit Judges.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the

Southern District of Mississippi, and was argued by

counsel;

A24

ON CONSIDERATION WHEREOF, It is now here

ordered and adjudged by this Court that the order of the

District Court appealed from, in this cause be, and the

same is hereby, remanded to the said District Court with

directions in accordance with the opinion of this Court;

It is further ordered that plaintiff-appellant pay to

defendants-appellees, the costs on appeal to be taxed by

the Clerk of this Court.

May 27, 1976

Issued as Mandate:

A25

APPENDIX D

‘UNITED STATES COURT OF APPEALS

Fifth Circuit

Office of the Clerk

Edward W. Wadsworth Tel. 504-589-6514

Clerk 600 Camp Street

New Orleans, La. 70130

September 27, 1976

(Received October 1, 1976)

TO ALL COUNSEL OF RECORD

No. 75-2316—NMississippi Power & Light Co. vs.

United Gas Pipe Line Co., et al.; State

of Mississippi

Dear Counsel:

This is to advise that an order has this day been entered

denying the petition( ) for rehearing, and no member of

the panel nor Judge in regular active service on the Court

having requested that the Court be polled on rehearing

en banc (Rule 35, Federal Rules of Appellate Procedure;

Local Fifth Circuit Rule 12) the petition( ) for rehearing

en banc has also been denied.

See Rule 41, Federal Rules of Appellate Procedure for

issuance and stay of the mandate.

Very truly yours,

EDWARD W. WADSWORTH, Clerk

By /s/ CLARE S. SACHS

Deputy Clerk

A26

cc: Messrs. Sherwood W. Wise

Joseph P. Wise

Mr. Clayton L. Orn

Messrs. W. DeVier Pierson

Peter J. Levin

Mr. E. L. Brunini

Mr. Alvin M. Owsley, Jr.

Mr. Joe H. Daniel

Messrs. Giles W. Bryant

Marshall G. Bennett

A27

APPENDIX E

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

CIVIL ACTION NO. J74-185(C)

(Filed April 4, 1975)

(Received April 8, 1975)

MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff

and )

STATE OF MISSISSIPPI, Plaintiff-Intervenor

vs.

UNITED GAS PIPE LINE COMPANY and

PENNZOIL COMPANY, Defendants

ORDER

This cause having come on for hearing on the separate

motions of the defendants to dismiss this civil action, or,

in the alternative, to stay this civil action until further

order of the Court, and the Court with the consent of all

parties having retained jurisdiction of said motions for

tiie purpose of ruling thereon, and the Court having

received oral and documentary evidence, having received

the briefs of the parties, having heard the argument of

A28

counsel, and being fully advised in the premises, is of the

opinion that the motions to dismiss should be denied and

that the motions to stay should be granted for the reasons

set forth in the Court’s April 2, 1975, opinion.

It is, therefore, ordered and adjudged that the separate

motions of the defendants to dismiss this civil action

should be and the same are hereby denied.

It is further ordered and adjudged that the separate

motions of the defendants to stay these proceedings should

be and the same are hereby granted, and it is further

ordered and adjudged that all other and further processes

of this Court will be and they are hereby stayed until

further order of the Court.

IT IS SO ORDERED AND ADJUDGED, this the 4th

day of April, 1975.

/s/ HAROLD COX

United States District Judge

A29

APPENDIX F

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

CIVIL ACTION J74-185(C)

(Received April 3, 1975)

MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff

v.

UNITED GAS PIPE LINE COMPANY and

PENNZOIL COMPANY, Defendants

The plaintiff instituted this diversity suit to recover

damages for the alleged breach of a contract to supply

it with natural gas. This is basically an action to recover

actual damages for the alleged breach of a contract to

sell and deliver to the plaintiff natural gas for its use and

consumption.

The defendants have answered and both contend in

effect that they have no liability for the present allotments

of natural gas which are supplied under curtailment orders

of the Federal Power Commission, and in strict compliance

with its mandate. The plaintiff contends that this action

‘is one at common law for damages and was and is oc-

casioned and necessitated by misfeasance of the defend-

ants in that the defendants knowingly and deliberately

A30

oversold its supply of natural gas well knowing and

understanding the ultimate effect to be that it lacked

sufficient natural gas to comply with their contract re-

quirements and obligations.

The defendants first seck a dismissal of this suit for

lack of jurisdiction, or alternatively, for a stay of this

proceeding to await a decision by the Federal Power

Commission as to its primary jurisdiction or not of this

controversy. A detailed discussion of the myriad orders

and opinions of the Commission in its exercise of primary

jurisdiction is not necessary or helpful to a disposition of

the motions here.

It is the opinion of this Court that under the Natural

Gas Act that the Federal Power Commission probably

has jurisdiction of this curtailment controversy, and that

the Court at this time should defer to its decision as to

the authority of the Commission in this controversy, which

is in the process of being handled by that agency; and

while the agency’s decision is not final and binding on the

Court, it must be sought at this time.’

The motion of the defendants to dismiss will be denied.

The motion to stay proceedings here to await response

of the Federal Power Commission as to its primary juris-

1. Federal Power Commission v. Louisiana Power & Light Com-

pany, et al, 406 U.S. 621, 92 S.Ct. 1827, 1842, the Court among

other things held: “In that circumstance, the District Court and the

Court of Appeals were obliged to defer to the FPC for the initial

determination of its jurisdiction. See Myers v. Bethlehem Shipbuilding

Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938). The need to

protect the primary authority of an agency to determine its own

jurisdiction ‘is obviously greatest when the precise issue brought

before a court is in the process of litigation through procedures

originating in the [agency]. While the [agency’s] decision is not the

last word, it must assuredly be the first.’ ”

A3i

diction of this curtailment question will be granted. In

the meantime, all other and further processes of this #.

Court will be stayed to await the ultimate answer of the

Commission as to this paramount and controlling question

of law.

The defendants may present an appropriate order to

the Court consistent with such views within five days

after this date.

April 2, 1975

/s/ HAROLD COX

United States District Judge

A32

APPENDIX G

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI

JACKSON DIVISION

CIVIL ACTION NO. J74-185(C)

JURY TRIAL REQUESTED

(Filed August 30, 1974)

MISSISSIPPI POWER & LIGHT COMPANY, Plaintiff

v.

UNITED GAS PIPE LINE COMANY and

PENNZOIL COMPANY, Defendants

COMPLAINT

1. The Plaintiff, Mississippi Power & Light Company

(MP&L), is a corporation incorporated under the laws

of the State of Mississippi having its principal place of

business in the State of Mississippi; Defendant, United

Gas Pipe Line Company (United), is a corporation in-

corporated under the laws of the State of Delaware having

its principal place of business in a state other than the

State of Mississippi; and Defendant, Pennzoil Company

(Pennzoil), is a corporation incorporated under the laws

of the State of Delaware having its principal place of

A33

business in a state other than the State of Mississippi.

The matter in controversy exceeds, exclusive of interest

and costs, the sum of $10,000.00.

2. MP&L is engaged in generating, transmitting and

distributing electricity, principally in the western half of

the State of Mississippi where it serves approximately

273,000 retail customers and 62 wholesale customers.

The Defendant United is engaged in transporting and

selling natural gas. MP&L has purchased natural gas for

use as a boiler fuel at its Rex Brown Steam Electric

Station in Jackson, Mississippi, and its Baxter Wilson

Steam E'ectric Station in Vicksburg, Mississippi, from

United as hereinafter appears. The Defendant Pennzoil

was, at all relevant times, the parent corporation of

United and was in control of United and directed its ac-

tivities in United’s dealings with MP&L.

3. On or about December 8, 1967, United and MP&L

entered into a contract denominated a “Gas Sales Agree-

ment” a copy of which is attached hereto as Exhibit “A”

and made a part hereof. The Gas Sales Agreement was

subsequently amended by United and MP&L as follows:

(a) by a Letter Agreement dated December 8,

1967, a copy of which is attached hereto as Exhibit

“B”;

(b) by an Amendatory Agreement dated January

15, 1969, a copy of which is attached hereto as

Exhibit “C”;

(c) by an Amendatory Agreement dated April

29, 1969, a copy of which is attached hereto as

Exhibit “D”;

A34

(d) by a Letter Agreement dated June 19, 1969,

a copy of which is attached hereto as Exhibit “E”;

(e) by an Amendatory Agreement dated March

12, 1970, a copy of which is attached hereto as

Exhibit “F”; and

(f) by a Letter Agreement dated March 12, 1970,

a copy of which is attached hereto as Exhibit “G”.

The Gas Sales Agreement, as amended, imposes upon

United the firm obligation to deliver up to 190,000 Mcf

of gas to MP&L each day for use as boiler fuel at its

Rex Brown and Baxter Wilson Steam Electric Stations

referred to above. MP&L may receive the entire maximum

daily delivery obligation of 190,000 Mcf at its Baxter

Wilson Steam Electric Station, or it may elect to take up

to 80,000 Mcf per day at its Rex Brown Steam Electric

Station, so long as the aggregate at both stations does

not exceed the maximum daily obligation of 190,000 Mcf.

COUNT ONE

4. In negotiating the Gas Sales Agreement of Decem-

ber 8, 1967, and the amendments thereto, United repre-

sented to MP&L that it had the ability to perform its obli-

gations pursuant to such Agreement. As a consequence,

MP&L, in reliance upon the Gas Sales Agreement and

United’s representations, expended substantial sums in

constructing and maintaining power plant facilities de-

signed to burn natural gas as a primary boiler fuel. United

has breached the Gas Sales Agreement of December 8,

1967, as amended, and failed to furnish MP&L with all

of the gas which it is obligated to furnish to MP&L pur-

suant to said Agreement. As a result of the breach of

<n

A35

said Agreement and as a result of United’s misrepresenta-

tion to MP&L of its abilities to perform said Agreement,

MP&L has been, or will be, damaged in an amount in

excess of $67,750,000 in converting its power plant facili-

ties so as to enable them to use fuel oil as a primary

boiler fuel, for all of which United is indebted to MP&L

because of the breach of the Gas Sales Agreement and

United’s misrepresentation of its abilities to perform its

Obligations.

COUNT TWO

5. As a further result of the breach of the Gas Sales

Agreement of December 8, 1967, as amended, and as a

result of United’s misrepresentation to MP&L of its abili-

ties to perform said Agreement, MP&L has been damaged

by the loss of capacity of its power plant facilities de-

signed to use natural gas. In order to restore its lost

capacity, MP&L has installed replacement capacity at a

cost of $42,450,000 for which United is indebted to

MP&L because of the breach of the Gas Sales Agreement

and United’s misrepresentations of its abilities to perform

its obligations.

COUNT THREE

6. In the Gas Sales Agreement of December 8, 1967,

as amended (more particularly Article XVI of said Agree-

ment), United agreed that it would reimburse MP&L the

difference in cost between natural gas sold by United

pursuant to the Gas Sales Agreement and fuel oil which

MP&L would use as a substitute fuel for natural gas when

requested by United or under certain other conditions.

United agreed that it would reimburse MP&L for the use

A36

of such substitute fuel for any period in which substitute

fuel was used by MP&L not exceeding seven (7) days.

United has refused and continues to refuse to perform its

obligations to reimburse MP&L for the use of substitute

fuel and has breached the Gas Sales Agreement to that

extent. Consequently, United is indebted to MP&L for

such breach in the amount of $6,250,000 down through

July 31, 1974, and for additional sums which have been

or may be accrued subsequent to such date, which amount

MP&L seeks to recover to refund to its customers.

COUNT FOUR

7. As a consequence of its misrepresentations of its

ability to perform and of its breach of the Gas Sales

_ Agreement dated December 8, 1967, as amended, United

has failed to supply MP&L with all of the gas that it

required for its operations and which MP&L was entitled

to expect to receive from United. In addition to fuel oil,

for which MP&L is entitled to reimbursement pursuant

to the substitute fuel clause referred to in paragraph 6

above, MP&L has been and continues to be required to

purchase power and addition] fuel oil as a result of

United’s breach of contract and misrepresentation, and

has been damaged by United’s breach and misrepresenta-

tion, to the extent of $43,750,000 down through July

31, 1974, and for additional sums which have been or

may be accrued subsequent to such date, which amount

MP&L seeks to recover to refund to its customers.

COUNT FIVE

8. At all times relevant hereto, Pennzoil was the

parent corporation of United and knew, or should have

known, of the Gas Sales Agreement between United and

A37

MP&L. Pennzoil has directed and controlled the activities

of United for the sole profit and benefit of Pennzoil,

without regard to the contractual obligations of United.

Pennzoil, with the intention of reducing or discontinuing

United’s sales of natural gas to MP&L pursuant to the

Agreement, interfered with MP&L’s contractual rights with

United, which interference was a proximate cause of

MP&L’s damages described above, all of which is here

incorporated by reference. Pennzoil is therefore liable for

the damages which MP&L has experienced or will experi-

ence as a result of United’s breach of contract and mis-

representations.

COUNT SIX

9. In the alternative, at all times relevant hereto,

Pennzoil was the parent corporation of United, and

Pennzoil and United conspired with each other, with the

intention of reducing or discontinuing United’s sales of

natural gas to MP&L pursuant to the Agreement, for

United to breach the Gas Sales Agreement in the manner

described above, all of which is here incorporated by

reference. By reason thereof, Pennzoil and United are

jointly and severally liable for the damages which MP&L

has experienced or will experience as a result of United’s

breach of contract and misrepresentation.

WHEREFORE, Plaintiff demands judgment in the

amount of $160,200,000 and other relief against the

Defendants as follows:

(a) for the cost of converting its facilities so as

to enable such facilities to use fuel oil as an exclu-

sive fuel, in the amount of $67,750,000, and such

other amounts as MP&L may be entitled to receive;

A38

(b) for damage for loss of capacity in its Gerier-

ating Plants in the amount of $42,450,000 and such

other amounts as MP&L may be entitled to receive;

(c) for reimbursement for the use of substitute

fuel as provided in the Gas Sales Agreement of

December 8, 1967, as amended, in the amount of

$6,250,000 through July 31, 1974, and for such

other amounts as MP&L may be entitled to receive,

and for a deciaration of rights that MP&L is entitled

to continue to receive reimbursement from Defend-

ants pursuant to the substitute fuel clause for the

first seven days of any period in which MP&L is

required to use a substitute fuel for the remaining

period of time covered by the Gas Sales Agreement

of December 8, 1967, as amended, and

(d) for power and fuel oil in the amount of

$43,750,000, which MP&L has been required to

purchase down through July 31, 1974, and for such

other amounts as MP&L may be entitled to receive,

and a declaration of MP&L’s rights that it is entitled

to continue to receive an amount from Defendants

as damages for United’s continuing breach of the

Gas Sales Agreement of December 8, 1967, as

amended, for the remaining period of time covered

by said Agreement,

A39

together with interest and all costs of this action and all

other relief to which the Plaintiff is entitled.

SHERWOOD W. WISE

THOMAS G. LILLY

"RICHARD B. WILSON, JR.

Post Office Box 651

925 Electric Building

Jackson, Mississippi 39205

CLAYTON L. ORN

122 Southwest Tower

Houston, Texas 77002

By: /s/ S. W. WISE

| Attorneys for Plaintiff

WISE CARTER CHILD STEEN & CARAWAY

Post Office Box 651

925 Electric Building

Jackson, Mississippi 39205

ANDERSON, BROWN, ORN & JONES

122 Southwest Tower

Houston, Texas 77002

OF COUNSEL

A40

EXHIBIT “A”

GAS SALES AGREEMENT

Between

UNITED GAS PIPE LINE COMPANY

and

MISSISSIPPI POWER & LIGHT COMPANY

Dated 12-8-67

United Gas Pipe Line Company

CONTENTS

ID gk yo oc see ce see casee:

ARTICLE I—Definitions .................

ARTICLE II—QUALITY ..............

ARTICLE III—MEASUREMENT .........

ARTICLE IV—-MEASUREMENT EQUIP-

So 4's ws eN SECURES HEES CRORES EEN ORAS

ARTICLE V—BILLINGS AND PAYMENTS

ARTICLE VI—POSSESSION OF GAS ......

ARTICLE VII—WARRANTY ............

ARTICLE VIII—FORCE MAJEURE ......

ARTICLE [IX—IMPAIRMENT OF DELIVER-

Pere error rer ere

ARTICLE X—PERIODIC REQUIREMENTS

AND NOTIFICATION OF CHANGES ....

ARTICLE XI—SCOPE AND QUANTITIES .

wow NN

A4l

ARTICLE XII—DELIVERY POINTS AND

Ee a

ARTICLE XIV—RATES ................

ARTICLE XV—TAX REIMBURSEMENT ..

ARTICLE XVI—USE OF SUBSTITUTE

aa Ble I, Leanne Mad ig Riek oie

a cadaauly skew os coos wks ho WG

ARTICLE XVIII—DULY CONSTITUTED

EE oh 'n.k sou os CARE RIES

I cid ie i dla wn ise n

ARTICLE XX—SUCCESSORS AND ASSIGNS

ARTICLE XXI—DESCRIPTIVE HEADINGS

ATS, ee ke

EXHIBITS

Exhibit “A”—Boyle’s Law Deviation Multipliers

Exhibit “B”—United Gas Pipe Line Company

Area Map

16

17

17

23

24

28

29

29

29

30

31

THIS AGREEMENT made and entered into this

Eighth day of December 1967, by and between UNITED

GAS PIPE LINE COMPANY, a Delaware corporation,

hereinafter called “Seller”, and MISSISSIPPI POWER &

LIGHT COMPANY, a Mississippi corporation, herein-

after called “Buyer”;

A42

WITNESSETH:

WHEREAS, under the terms of that certain agreement

dated June 14, 1963, as amended, Seller is selling and

delivering to Buyer and Buyer is purchasing and receiving

from Seller natural gas for all of the fuel requirements of

Buyer’s Rex Brown Power Plant located at Jackson, in

Hinds County, Mississippi and Buyer’s Baxter Wilson

Power Plant located near Vicksburg, in Warren County,

Mississippi;

WHEREAS, Buyer has notified Seller that it proposes

to construct an additional generating unit at Buyer’s Bax-

ter Wilson Power Plant, which unit will have a nameplate

rating of 750,000 KW;

WHEREAS, Buyer has notified Seller that it will re-

quire substantial additional quantities of gas in the opera-

tion of said unit which is to be placed in operation ap-

proximately October 1, 1971, and desires to purchase

such gas from Seller; :

WHEREAS, Seller is agreeable to providing such great-

er quantities of natural gas for Buyer’s said increased re-

quirements; and,

WHEREAS, Seller and Buyer desire to terminate the

above mentioned agreement as hereinabove mentioned and

to enter into the within agreement;

NOW, THEREFORE, in consideration of the mutual

covenants and obligations herein contained and assumed

by each party, the parties hereto covenant and agree as

follows:

ee Se ee

when Oar ew a

A43

I.

DEFINITIONS

The following terms, when used in this agreement, shall

have the following meaning;

1. The term “day” shall mean a period of 24 consecutive

hours beginning as nearly as is practicable at 7:00

a.m. or at such other time as may be mutually agreed

to by Buyer and Seller.

2. The term “billing month” shall mean the calendar

month.

3. The term “cubic foot of gas”, for the purpose of meas-

urement of the gas delivered and for all other pur-

poses, unless otherwise specifically provided, is the

amount of gas necessary to fill a cubic foot of space

when the gas is at an absolute pressure of fourteen and

nine-tenths (14.9) pounds per square inch and at a

base temperature of sixty (60) degrees Farenheit.

4. The term “Mcf” which is the sales unit hereunder,

shall mean one thousand (1,000) cubic feet of gas.

5. The term “Maximum Daily Delivery Obligation” shall

mean the maximum volume of gas deliverable by Sel-

ler to Buyer hereunder in any one day.

Il.

QUALITY

The gas deliverable hereunder shall be natural gas as

produced in its natural state from the wells, except that

Seller may extract or permit the extraction of any of the

A44

constituents of said natural gas; provided that Seller shall

not subject said gas nor permit said gas to be subjected to

any treatment in the extraction of any of the constituents

of said gas which shall substantially change the chemical

composition of any of the component parts of said gas. Seller

is to tender delivery to Buyer of natural gas which is of

merchantable quality only and reasonably free from water

and other objectionable liquids, reasonably free from sand

and other objectionable solids and which contains not

more than forty (40) grains of sulphur or twenty (20)

grains of hydrogen sulphide per thousand (1,000) cubic

feet.

Il.

MEASUREMENT

1. Assumed Atmospheric Pressure—The average atmos-

pheric pressure shall be assumed to be fourteen and

sevent-tenths (14.7) pounds per square inch, irrespec-

tive of actual elevation or location of the point of de-

livery above sea level or variations in such atmos-

pheric pressure from time io time.

2. Orifice Meters—When orifice meters are used for the

measurement of gas, the computations of the volumes

of gas measured shall be made in accordance with the

following sub-sections (a) to (h) inclusive:

(a) The orifice coefficient for each meter shall be

calculated at the base pressure and base tempera-

ture set forth in Section 3 of Article I hereof, at

a flowing temperature of sixty (60) degrees Far-

enheit and for gas of six hundred thousanths

(.600) specific gravity.

pt lita — ns eae a om + ot

nn

A45

(b) The temperature of the gas shall be determined

(c)

by a recording thermometer so installed that it

may record the temperature of the gas flowing

through the meter or meters. The average of the

record obtained shall be deemed to be the gas

temperature for the period under consideration,

and the orifice coefficient as calculated in (a)

above shall be corrected for each degree varia-

tion in the average temperature from sixty (60)

degrees Farenheit.

The specific gravity of the gas shall be deter-

mined by a recording gravitometer so installed that

it may record the specific gravity of the gas flowing

through the meter or meters; provided, however,

if Seller does not consider the installation of such

recording gravitometer necessary, Seller shall

make spot tests with an Edwards or other stand-

ard type specific gravity balance. If the record-

ing gravitometer is used, the average of the re-

cord obtained shall be deemed to be the specific

gravity of the gas for the period under considera-

tion and the orifice coefficient as calculated in

sub-section (a) above shall be corrected for each

one-thousandth (.001) variation from six hun-

dred thousandths (.600). If the spot test method

is used, the specific gravity of the gas delivered

hereunder shall be determined once monthly on

a day as near the first (1st) of the billing month

as is practicable, or as much oftener as is found

necessary in practice. The result obtained from

the test made on or near the first (1st) of the

billing month shall be deemed to be the specific

gravity of the gas during that billing month and

(d)

(e)

(f)

(g)

A46

the orifice coefficient as calculated in subsection

(a) above shall be corrected accordingly for each

one-thousandth (.001) variation from six hun-

dred thousandths (.600). Any special test which

~is made shall be applicable from the day made

until the next regular test or other special test is

made.

Exact measurements of inside diameters of pipe

runs and orifices shall be obtained to the nearest

one-thousandth (.001) inch, which measure-

ments shall be used in computation of coeffi-

cients.

Pressure taps for meter installations shall be

taken from pipe runs two and one-half (2-2)

inside pipe diameters upstream and eight (8)

inside pipe diameters downstream from the ori-

fice.

All orifice meter computations required in this

Section 2 shall be made in accordance with for-

mulae and tables contained in Metric Metal

Works Bulletin E-2 (Revised 1931). In the com-

putations of the orifice coefficient, the calcula-

tion of “X” shall be carried to six (6) decimals

and “C” shall be determined to three (3) deci-

mal places by interpolations from tables on Pa-

ges 76 and 77 in Metric Metal Works Bulletin

E-2 (Revised 1931). The pressure base, flowing

temperature and specific gravity factors used

shall consist of four (4) significant figures, un-

less the first digit is “1”, in which case five (5)

significant figures shall be used.

In determining the volume of gas delivered

through the orifice during a period, either the

ee ee ow wad

(h)

A47

observation method or the orifice chart integra-

tor shall be used in reading the meter chart. The

sum of the extensions obtained from the reading

or integration of the meter chart shall be multi-

plied by the orifice coefficients, corrected in ac-

cordance with subsections (b) and (c) above,

to obtain the gas volume for that chart.

The volumes of gas as determined in the manner

described above shall be adjusted to give effect ©

to the deviation of such gas from Boyle’s Law,

as follows:

(1) There shall be determined the average pres-

sure (gauge) at which the gas was metered

during the period under consideration.

(2) The average temperature for the period un-

der consideration shall be determined as pro-

vided in sub-section (b) above.

(3) There shall be selected from the table of

multipliers, attached hereto and made a

part hereof and identified as Exhibit “A”,

the multiplier corresponding to the average

pressure and the average temperature as de-

termined in (1) and (2) above; provided,

however, that if at any time the composition

of the gas delivered shall have materially

changed so that said multipliers are no long-

er reasonable, Seller shall substitute appro-

priate multipliers.

(4) The corrected volume of gas for the period

under consideration shall be the result ob-

tained by multiplying the volume of gas de-

A48

termined in the manner hereinabove set

forth by the multiplier selected in (3)

above. :

3. Positive Meters—When positive meters are used for

the measurement of gas, the flowing temperature of

the gas metered shall be assumed to be sixty (60) de-

grees Farenheit, and no correction shall be made for

any variation therefrom; provided, that Seller shall

have the option of installing a recording thermometer,

and if Seller exercises such option and installs such

thermometer, correction shall be made for each de-

gree variation in the average flowing tempezature for

each positive meter chart.

The volumes of gas determined shall be adjusted

to give effect to the deviation of such gas from Boyle’s

Law, as follows:

(a) There shall be determined the average pressure

(gauge) at which the gas was metered during the

period under consideration.

(b) The average temperature for the period under

consideration sha!l be determined as provided

above.

(c) When the flowing temperature of the gas metered

is assumed to be sixty (60) degrees Farenheit,

there shall be selected from the table of positive

meter multipliers, shown in sub-section (e) be-

low, the multiplier correspond to the average

pressure as determined in (a) above; and, when

the flowing temperature of the gas metered be

recorded as provided above, the multiplier shall

be obtained by squaring the appropriate multi-

one ne oe meee tenetanlil se

*

ee eee ee

ee

A49

plier selected from the table of said Exhibit “A”;

provided, however, that if at any time the com-

position of the gas delivered shall have materially

changed so that said multipliers are no longer

reasonable, Seller shall substitute appropriate

multipliers.

(d) The corrected volume of gas for the period under

consideration shall be the result obtained by mul-

tiplying the volume of gas hereinabove deter-

mined by the multiplier selected in (c) above.

(e) Boyle’s Law Deviation Multipliers for Positive

Meters:

Average Pressure Assumed Temperature

PSIG 60° F.

0-49 1.006

50-99 1.016

100-149 1.025

150-199 1.033

200-249 1.042

250-299 1.051

300-349 1.061

350-399 1.070

400-449 1.079

450-499 1.088

4. Determination of Heat Content—The Btu content of

the gas delivered, when required to be determined un-

der the provisions of this agreement, shall be deter-

mined for a cubic foot of gas at a temperature of sixty

(60) degrees Fahrenheit, at an absolute pressure of

fourteen and nine-tenths (14.9) pounds per square

inch, and at the moisture content of the gas delivered.

Such total heating value of the gas delivered shall be

A50

determined by Seller, using a Thomas or other stand-

ard type calorimeter, either by taking a spot sample

or by using a record from a recording calorimeter.

The spot sample shall be taken as often as is found

necessary in practice, and such sample shall be taken,

or the recording calorimeter shall be located at a suit-

able point on Seller’s line so that the heating value of

the gas delivered may be obtained. The moisture con-

tent of the gas delivered shall be determined at a suit-

able point by Seller as often as is found necessary in

practice.

IV.

MEASUREMENT EQUIPMENT .

. Ownership and Operation — Seller shall furnish, in-

Stall, operate and maintain, at its Own expense at

the point(s) of delivery, the meters, instruments and

equipment of standard type necessary to measure

properly, in accordance with Article III hereof, the

gas to be delivered. Seller shall likewise furnish,

install, operate and maintain, at its own expense,

such instruments and equipment as may be necessary

at points other than the point(s) of delivery to obtain

the information to measure properly, in accordance

with Article III hereof, the gas to be delivered. The

metering and other equipment installed, together with

any buildings erected by it for such equipment, shall

be and remain the property of Seller.

Either party shall have access to the metering

equipment of the other at all reasonable times, but the

reading, calibration and adjustment thereof and chang-

A51

ing of charts (unless otherwise mutually agreed upon)

shall be done only by the employees or agents of

the owner thereof. Charts and records from such meter-

ing equipment shall remain the property of the owner

thereof. Upon request of the other party, the requested

party will submit its records and charts from its meter-

ing equipment, together with calculations therefrom,

for the requesting party’s inspection and verification,

subject to return within ten (10) days after receipt

thereof, after which return they shall be kept on file

by the owner thereof for the mutual use of both parties

for a period of one (1) year.

. Buyer’s meters — Buyer may, at its option and ex-

pense, install and operate meters, instruments and

equipment of standard type at or near any point of

delivery to check Seller’s meters, instruments and

equipment, but the measurement of gas delivered

shall be by Seller’s meters only, except in cases herein

provided to the contrary. The meters, instruments and

equipment installed by Buyer shall be subject at all

reasonable times to inspection or examination by

Seller, but the reading, calibration and adjustment

thereof and changing of charts (unless otherwise

mutually agreed upon) shall be done by Buyer.

. Notice of Meter Tests — Each party shall give to the

other party notice of the time of all tests of meters

sufficiently in advance of the holding of the test so

that the other party may conveniently have its repre-

sentatives present; provided, however, that if either

party has given such notice to the other party and

the other party is not present at the time specified,

then the party giving the notice may proceed with the

test as though the other party were present.

A52

At least once each thirty (30) days, on a day as

near the first (1st) of each month as practical, each

party shall calibrate its orifice meters and appurtenant

instruments, and-at least once each ninety (90) days,

on a day as near the first (1st) of the month as prac-

tical, each party shall calibrate its positive displace-

ment meters, all in the presence of representatives of

the other, as hereinabove provided in this Section, and

the parties shall jointly observe any adjustment made.

. Correction for Errors of Meters — If, upon any test,

the percentage of inaccuracy of any metering equip-

ment is found to be in excess of two per cent (2%),

registrations thereof shall be corrected for a period

extending back to the time such inaccuracy occurred,

if such time is ascertainable, and if not ascertanable,

then back one-half of the time elapsed since the last

date of calibration. If for any reason meters are out

of service or out of repair, so that the amount of gas

delivered cannot be ascertained or computed from the

readings thereof, the gas delivered during the period

such meters are out of service or out of repair shall

be estimated and agreed upon by the parties hereto

upon the basis of the best data available, using the

first of the following methods which is feasible:

(a) By using the registration of any check meter or

meters if installed and accurately registering.

(b) By correcting the error if the percentage of error

is ascertainable by calibration, test or mathe-

matical calculation.

(c) By estimating the quantity of delivery by deliv-

eries during preceding periods under similar con-

ditions when the meters are registering accurately.

A53

V.

BILLING AND PAYMENTS

. Billing Date— On or before the tenth (10th) day

of each calendar month Seller shall render to Buyer,

at such office as Buyer may designate, statements

showing the calculation of the monthly bill for gas

delivered by Seller to Buyer during the preceding

billing month.

. Payment Date — On or before the twentieth (20th)

day of each calendar month Buyer shall make pay-

ments to Seller, at such office as Seller may designate,

of amounts due Seller as shown by statements fur-

nished Buyer in accordance with the foregoing Sec-

tion 1. ¢

. Late Payment — In the event Buyer shall fail to pay

any amount due Seller when the same is due, then

interest thereon shall accrue at the rate of six per

cent (6%) per annum from the date when such

amount is due until the same is paid. If such failure

to pay continues for sixty (60) days, Seller may

suspend deliveries of gas, and the exercise of such

right shall be in addition to any and all othe: remedies

available to Seller.

. Error in Bills —In the event an error is discovered

in the amount billed in any statement rendered by

Seller, such error shall be adjusted promptly.

. Late Billing —If presentation of a bill to Buyer is

delayed after the tenth (10th) day of the month,

then the time of payment shall be extended accord-

ingly unless Buyer is responsible for such delay.

AS54

6. Access to Billing Data — Buyer and Seller shall have

the right to examine the books, records and charts

of the other party at all reasonable times to the extent

necessary to verify the accuracy of any statement,

charge or computation made pursuant to the pro-

visions of any article of this agreement.

VI.

POSSESSION OF GAS

Seller shall be in exclusive control and possession of

the gas deliverable and responsible for any damage or in-

jury caused thereby until the same shall have been de-

livered to Buyer, after which delivery Buyer shall be in

exclusive control and possession thereof and responsible

for any injury or damage caused thereby.

Vil.

WARRANTY

Seller warrants generally the title to all gas delivered,

and agrees to indemnify Buyer from all suits, actions,

debts, accounts, damages, costs, losses and expenses arising

from or out of adverse claims of any or all persons to said

gas or to royalties or charges thereon.

Vill.

FORCE MAJEURE

1. Definition of “Force Majeure’”—The term “force

majeure” as employed herein shall mean acts of God,

ASS

strikes, lockouts, or other industrial disturbances, acts

of public enemy, wars, blockades, insurrections, riots,

epidemics, landslides, lighting, earthquakes, fires,

storms, floods, washouts, arrests and restraints of gov-

ernments and people, civil disturbances, explosions,

breakage or accident to machinery or lines of pipe,

the necessity for making repairs or alterations to

machinery or lines of pipe, freezing of wells or lines

of pipe, partial or entire failure of wells, and any other

causes, whether of the kind herein enumerated or

otherwise, not within the control of the party claiming

suspension and which by the exercise of due diligence

such party is unable to prevent or overcome; such

term shall likewise include (a) in those instances

where either Buyer or Seller is required to obtain

servitudes, rights of way grants, permits or licenses

to enable such party to fulfill its obligations under

this agreement, the inability of such party to acquire,

or the delays on the part of such party in acquiring,

at reasonable cost, and after the exercise of reasonable

diligence, such servitudes, rights of way grants, permits

or licenses and (b) in those instances where either

Buyer or Seller is required to furnish materials and

supplies for the purpose of constructing or maintaining

facilities or is required to secure permits or permission

from any governmenial agency to enable such party to

fulfill its obligations under this agreement, the inability

of such party to acquire, or the delays on the part of

such party in acquiring, at reasonable cost and after

the exercise of reasonable diligence, such materials

and supplies, permits and permissions.

. Limitations on Obligations —In the event of either

Buyer or Seller being rendered unable wholly or in

A56

part by force majeure to carry out its obligations

under this agreement, other than to make payments

due hereunder, it is agreed that on such party giving

notice and full particulars of such force majeure in

writing or by telegraph to the other party as soon as

possible after the occurrence of the cause relied on,

then the obligations of the party giving such notice

so far as they are affected by such force majeure, shall

be suspended during the continuance of any inability

so caused but for no longer period, and such cause

shall as far as possible be remedied with all reasonable

dispatch.

3. Strikes and Lockouts — The settlement of strikes or

lockouts shall be entirely within the discretion of the

party having the difficulty, and the above requirements

that any force majeure shall be remedied with all

reasonable dispatch shall not require the settlement of

strikes or lockouts by acceding to the demands of op-

posing party when such course is inadvisable in the

discretion of the party having the difficulty.

1X.

IMPAIRMENT OF DELIVERIES

Buyer specifically recognizes the fact that Seller delivers

gas: (i) to gas utilities for resale to domestic consumers,

and (ii) to public utility power plants for generation

of electricity which is sold to domestic consumers. In the

event a shortage of gas renders Seller unable to supply

the full gas requirements of all its consumers, then it is

mutually agreed that the gas requirements of (i) gas

utilities selling gas to domestic consumers, and (ii) pub-

AS7

lic utility power plants using gas for generation of electri-

city which is sold to domestic consumers, shall first be

supplied by Seller, and the remaining available gas shall

be prorated by Seller among its other consumers.

X.

PERIODIC REQUIREMENTS AND

NOTIFICATION OF CHANGES

All gas taken hereunder sshall be taken in equal daily

and hourly quantities as nearly as operating conditions will

permit.

Buyer and Seller will notify each other from time to

time as necessary of expected changes in the rates of daily

delivery or takings of gas under this agreement, or in the

pressures or other operating conditions, and the reasons for

such expected changes as soon as such reasons come to

the knowledge of either Buyer or Seller to the end that

the other party may be prepared to meet or to take ad-

vantage of such expected changes when, as and if they

occur.

XI.

SCOPE AND QUANTITIES

Subject to the terms, conditions, and limitations hereof,

Seller agrees to sell and deliver or cause to be delivered

to Buyer, and Buyer agrees to purchase and receive from

Seller and pay Seller for, natural gas for all of the fuel

requirements of Buyer’s said Rex Brown Power Plant,

Hinds County, Mississippi, and Buyer’s said Baxter Wilson

AS58

Power Plant, Warrent County, Mississippi, and all exten-

sions and enlargements of said plants.

During the period commencing with the date of execu-

tion hereof and extending to October 1, 1971, or such

earlier date as Buyer places into operation its said new

proposed 750,000 KW generating unit, Seller shall not

be required to deliver to Buyer and Buyer shall not be

required to purchase and receive from Seller hereunder

at said Baxter Wilson Power Plant, more than a total

maximum of 110,000 Mcf of gas in any one day.

During the period commening October 1, 1971, or

such earlier date as Buyer places into operation its said

new 750,000 KW enit at said Baxter Wilson Plant, Seller

shall not be required to deliver to Buyer and Buyer shall

not be required to purchase and receive from Seller here-

under for the total requirements of said Baxter Wilson

Power Plant, more than a total of 275,000 Mcf of gas

in any one day.

Seller shall not be required to deliver to Buyer and

Buyer shall not be required to purchase and receive from

Seller hereunder at said Rex Brown Power Plant, more

than the total maximum of 80,000 Mcf of gas in any

one day.

The above mentioned quantities for the periods indi-

cated, unless and until changed as hereinafter provided,

shall be the Maximum Daily Delivery Obligation.

If Buyer should, from time to time, require daily quan-

tities of gas in excess of the Maximum Daily Delivery

Obligation then in effect, Buyer shall notify Seller in

writing, at least twelve (12) months in advance, of the

daily quantity of gas by which Buyer’s requirements will

A59

exceed said Maximum Daily Delivery Obligation then in

effect, stating in such notice the date on which such

increase will occur. Within ninety (90) days after receipt

of such notice, Seller shall elect, and so notify Buyer,

whether Seller is agreeable to so increasing said Maximum

Daily Delivery Obligation by the amount so requested by

Buyer. In the event Seller elects to deliver such additional

daily quantity of gas, the Maximum Daily Delivery Obli-

gation then in effect shall be increased, on the date so

specified in said notice or the first anniversary of the

date on which said notice was given, whichever date is

the later, by the additional quantity of gas required by

Buyer as specified in said notice. In the event Seller does

not elect to deliver such additional quantity of gas, Buyer

shall thereafter have the right to make other arrangements

or agreements for fuel for that portion of Buyer’s daily

requirements which is in excess of the Maximum Daily

Delivery Obligation then in effect.

XI.

DELIVERY POINTS AND PRESSURES

The points of delivery for all gas to be delivered by

Seller to Buyer hereunder for said (i) Rex Brown Power

Plant shall be at the outlet side of a metering and regulat-

ing station as now installed by Seller and located on the

site of Buyer’s said Rex Brown Power Plant, located at

Jackson, Hinds County, Mississippi and for said (ii)

Baxter Wilson Power Plant shall be at the outlet side of

a metering and regulating station as now installed by

Seller and located on the site of Buyer’s said Baxter

Wilson Power Plant, located near Vicksburg, Warren

County, Mississippi.

A60

In the event any of Seller’s facilities required to make

deliveries of gas to Buyer hereunder are or will be located

on the premises of Buyer then, and in such event, Buyer

agrees to furnish to Seller, free of charge, the use of the

premiises so occupied or to be occupied by any of Seller’s

facilities which may be located on Buyer’s premises, with

the right of ingress and egress at all times for the purposes

of installation, operation, repair and removal of said fa-

cilities.

The gas shall be delivered hereunder at such pressures

as may be necessary to meet Buyer’s requirements at each

point of delivery; provided, however, that Seller shall not

be obligated to maintain a pressure in excess of 50 pounds

per square inch gauge at Buyer’s Rex Brown Power Plant

or 125 pounds per square inch gauge at Buyer’s Baxter

Wilson Power Piant.

XII.

TERM

Subject to the other terms and conditions hereof, this

agreement shall become effective on the date of execution

hereof and extend to January 1, 1993, at 7:00 a.m.

XIV.

RATES

Subject to the adjustments hereinafter provided, the

price to be paid by Buyer to Seller for all gas sold and

delivered to Buyer at each separate point of delivery

hereunder shall be as follows: |

Aél

(A) For the period commencing on the date of execu-

tion of this agreement and extending to January 1, 1973,

for all gas delivered by Seller to Buyer at Buyer’s Rex

Brown Power Plant and for gas delivered in quantities

each day of 110,000 Mcf or less at Buyer’s Baxter Wilson

Power Plant, the following monthly rate for all gas shall

apply:

MONTHLY RATE

76.25¢ per Mcf when total deliveries are between

0 and 150 Mcf

35.75¢ per Mcf when total deliveries are between

151 and 300 Mcf

32.75¢ per Mcf when total deliveries are between

301 and 1,500 Mef

27.75¢ per Mcf when total deliveries are between

1,501 and 5,000 Mcf

25.75¢ per Mcf when total deliveries are between

5,001 and 10,000 Mcf

25.25¢ per Mcf when total deliveries are between

10,001 and 50,000 Mcf

24.75¢ per Mcf when total deliveries are between

50,001 and 85,000 Mcf

23.75¢ per Mcf when total deliveries are between

85,001 and 125,000 Mcf

22.75¢ per Mcf when total deliveries are between

125,001 and 160,000 Mcf

21.75¢ per Mcf when total deliveries are between

160,001 and 400,000 Mcf

21.25¢ per Mcf when total deliveries are over

400,000 Mcf

provided, however, that the above prices shall be increased

or decreased, by the amount by which Seller’s weighted

average purchase price of gas for the preceding billing

month in the Jackson Area exceeds or is less than 15¢

A62

per Mcf; provided, further, that the maximum amount

payable in each of the above steps shall never be more

than the minimum amount which would be payable in

the step next below. Weighted average purchase price of

gas in the Jackson Area, or any other area, as outlined

in Exhibit B attached hereto, shall be determined by:

(1) adding together all the volumes of gas which Seller

purchased in the area and transferred into the area during

the preceding billing month; (2) adding together the cost

payable by Seller for the gas it purchased in the area

and the cost assignable to the gas transferred into the

area during the preceding billing month, and (3) dividing

the total of said costs payable by the total of said volumes

purchased in and transferred into the area. The resulting

quotient shall be the weighted average purchase price of

gas in the area. In computing weighted average purchase

price, costs as used in the steps outlined above shall be:

(a) Cost assignable to gas transferred into an area

shall be the result obtained by multiplying the weighted

average purchase price of gas in the area, from which the

gas is transferred, by the volume of gas transferred.

(b) Cost of gas purchased on the seaward side of the

shorelines of Florida, Alabama, Mississippi, Louisiana,

and Texas, under contracts executed after January 1,

1968, shall be the amount payable to the producer, pipe-

line or other seller thereof, plus the amount, if any, pay-

able by Seller to others for delivery of the gas onshore;

or, if Seller’s facilities are used to deliver such gas onshore,

an amount obtained by (i) dividing 1/12th of 25% of

the depreciated investment, at the beginning of the preced-

ing billing month, in Seller’s facilities used to deliver such

gas on shore by the total volume of gas delivered through

ne Ae ede eC game 4

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A63

such facilities during said billing month, and (ii) multiply-

ing the result so obtained by the volume of gas purchased

under contracts executed after January 1, 1968, and

deliverec through such facilities during said billing month.

(c) The cost of any other gas purchased by Seller

Shall be the amount payable by Seller to the producer,

pipeline or other seller thereof; provided, that in the

computation of the weighted average purchase price for

the Jackson area neither the cost nor volumes of gas

purchased by Seller from Tennessee Gas Pipeline Com-

pany for sale in nothern Mississippi shall be included in

the computation.

(d) For the purpose of determining weighted average

purchase price there shall be included as part of the cost of

gas, all taxes (as hereinafter defined) which may be levied

upon and paid by Seller, or which Seller under contractual

or legal obligation pays to or for the person or company

on which such taxes are levied, on or with respect to

such gas prior to the receipt thereof by Seller in its Main

Pipe Line System, but shall not include any deductions

for compression of such gas or any payments for special

services which may be provided for in Seller’s gas pur-

chase contracts.

(B) If, during the period hereof prior to January 1,

1973, Seller delivers gas to Buyer at said Baxter Wilson

Power Plant in excess of 110,000 Mcf on any day, for

the period beginning on the day Seller delivers such ex-

cess gas to the Baxter Wilson Power Plant and ending

365 days therefrom but in no event beyond January 1,

1973, the price for such excess gas shall be as set forth

in (A) above. For the period beginning 365 days from

the day Buyer first exceeds 110,000 Mcf on any day,

A64

but in no even for a period extending beyond January 1,

1973, the price for such gas in excess of 110,000 Mcf

on any day during such period shall be as set forth in (A)

above except that each step of the monthly rate shall be

increased by .75¢ per Mcf.

(C) During the period commencing January 1, 1973,

and extending to January 1, 1978, the price for all gas

delivered hereunder shall be the same rate as set forth in

(A) above except that each step of the monthly rate shall

be increased by 1.25¢ per Mcf.

(D) During the period commencing January 1, 1978,

and extending to January 1, 1983, the price for all gas

delivered hereunder shall bc the same rate as set forth in

(A) above except that each step of the monthly rate shall

be increased by 1.75¢ per Mcf.

(E) During the period commencing January 1, 1983,

and extending to January 1, 1988, the price for all gas

delivered hereunder shall be the same rate as set forth

in (A) above except that each step of the monthly rate

shall be increased by 2.25¢ per Mcf.

(F) During the period prior to January 1, 1973, as

to quantities of gas delivered by Seller to Buyer at Buyer's

Baxter Wilson Power Plant in excess of 110,000 Mcf

each day, and after January 1, 1973, as to all quantities

of gas delivered by Seller to Buyer hereunder, the pro-

visions of the next succeeding paragraph hereof shall

apply.

During the respective periods and as to quantities pro-

vided for in the next above paragraph hereof, should Seller

during any billing month deliver to Buyer gas hereunder

containing a monthly average of less than 1,000 Btu per

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A65

cubic foot, then Seller’s weighted average purchase price

of gas as hereinabove defined in Section (A) of this

article, shall be decreased 0.1% for each Btu that such

monthly average is below 1,000 Btu per cubic foot.

(G) During the period commencing January 1, 1988,

and extending to January 1, 1993, a price determined in

the manner hereinafter provided in this subdivision (G).

At least ninety (90) days, but not more than 180 days,

prior to the beginning of said period Seller shall determine

and submit to Buyer in writing a new monthly rate for

the gas deliverable hereunder during such period.

In the event the new monthly rate submitted by Seller

represents an increase over the rate which is then in effect

under the provisions of the preceding subdivision (E)

hereof, Buyer shall notify Seller in writing at least thirty

days prior to the beginning of the period to which such

new monthly rate shall apply whether or not Buyer is

agreeable to such new monthly rate so submitted by Seller;

it being understood that if such rate does not represent

any increase over the rate which is then in effect under

the provisions of the preceding subdivision (E) hereof

then such new monthly rate so submitted by Seller shall

be in effect hereunder for the five-year period in question

and Buyer shall not have the right to terminate this

contract. If such new monthly rate should represent an

increase over the rate which is then in effect under the

provisions of the preceding subdivision (E) hereof and

Buyer notifies Seller that it does not agree to such new

increased monthly rate, Seller shall have the right at any

time within ten days after receipt of Buyer’s notice to

continue the contract in force throughout the five-year

period in question by notifying Buyer that it will continue

A66

deliveries of gas through such period at the rate which

is then in effect under the provisions of the preceding

subdivision (E) hereof. However, if such new monthly

rate should represent an increase over the rate which is

then in effect under the provisions of the preceding sub-

division (E) hereof and Buyer notifies Seller that it does

not agree to such new monthly rate and Seller does not

exercise its right in accordance with the foregoing to

continue the contract in force, such contract shall, unless

Buyer exercises its right to purchase gas during the period

and on the conditions set forth in the next suceeding

paragraph hereof, automatically terminate on the date

of expiration of the period next preceding the period for

which such new monthly rate is applicable. Should Buyer

exercise the right set forth in the next succeeding para-

graph hereof, this cortract shall automatically terminate

on the expiration of the right so granted to Buyer.

If Buyer does not agree to any such new monthly rate

and Buyer has not made arrangements for ‘ts fuel re-

quirements prior to the beginning of the period for which

such new monthly rate is applicable, Buyer shall, upon

giving Seller notice prior to the commencement of such

period, have the right to continue to purchase gas from

Seller during the period Buyer is making any necessary

physical changes or arrangements for its fuel requirements

on the same terms and conditions as set forth herein ex-

cept that the price to be paid for gas delivered shall be

in accordance with said new monthly rate so determined

by Seller for the period under consideration and to which

such monthly rate Buyer did not agree; provided, how-

ever, that Buyer shall notify Seller immediately upon the

completion of such arrangements for supplying its said

requirements at which time the right granted to Buyer

A67

in this paragraph shall terminate and provided further that

under no conditions shall this right extend beyond one

year from the date this contract is subject to termination

as hereinabove provided in the preceding paragraph here-

of.

(H) If during any billing month Buyer uses fuel oil

in lieu of the quantities of gas up to but not in excess

of the Maximum Daily Delivery Obligation then in effect

hereunder, which Seller is obligated to deliver to Buyer

for Buyer’s fuel requirements, either at Seller's request

or in the event Seller is excused by reason of force majeure

or proration of impaired deliveries from delivering such

gas to Buyer for Buyer’s fuel requirements hereunder

(whether or not payments for the gas equivalent of such

fuel oil so used shall be made by Buyer to Seller as

provided in Article XVI), the gas equivalent, up to the

Maximum Daily Delivery Obligation then in effect, of

such fuel oil so used by Buyer during such billing month

shall be determined in the same manner as set out in

Article XVI, and the quantity of such gas equivalent

shall be added to the total quantity of gas actually de-

livered and the sum of such two quantities shall be

deemed to be the total gas deliveries during such month

for the sole purpose of arriving at the rate per Mcf of

gas, under the rate schedule provided for in this Article

XIV, to be paid by Buyer to Seller for all gas delivered

by Seller to Buyer during the month in question.

XV.

TAX REIMBURSEMENT

Buyer agrees to reimburse Seller for all taxes which

may be levied upon and paid by Seller, or which Seller

A68

under contractual or legal obligation pays to or for the

person or company on which such taxes are levied on or

with respect to the gas delivered hereunder; provided,

however, that no reimbursement shall be made to Seller

under the provisions of this article for any taxes which

* were included in the weighted average price of gas under

the provisions of the above Monthly Rate.

The term “taxes” as used herein shall mean any tax

(other than ad valorem, income or excess profits taxes),

license, fee or charge now or hereafter levied, assessed or

made by any governmental authority on the gas itself,

or on the act, right or privilege of production, serevance,

gathering, transportation, handling, sale or delivery of

gas which is measured by the volume, value or sales price of

the gas in question; provided, however, that the term

“taxes” shall not be deemed to include any general

franchise tax imposed on corporations on account of their

corporate existence or on their right to do business within

the State as a foreign corporation.

XVI.

USE OF SUBSTITUTE FUEL

It is recognized by Buyer that in the pipe line opera-

tions of Seller it is desirable to relieve as far as possible

conditions which cause excessive or peak demands of gas,

and it is recognized by Seller that in the plant operations

of Buyer it is desirable to eliminate any shutdowns caused

by failure of the gas supply from whatsoever cause. Ac-

cordingly, in order to enable both Seller and Buyer to

eliminate the above-described conditions, it is agreed that

Buyer shall furnish or cause to be furnished at Buyer’s

sole cost and expense proper and adequate facilities (in-

A69

cluding oil storage tanks, fuel lines, oil meters and oil

burning equipment) necessary to enable Buyer to use

Number 2 grade fuel oil, to be purchased and supplied

by Buyer in lieu of gas for Buyer’s fuel requirements, up

to the Maximum Daily Delivery Obligation then in effect,

under the conditions hereinafter set forth; and that pay-

ments with reference to such fuel oil so used by Buyer

shall be made between the parties hereto on the basis

of Bunker “C” grade fuel oil as hereinafter specifically

provided. All fuel oil so used by Buyer for its fuel re-

quirements shall be accurately metered by Buyer as it is

used.

If so requested by Seller at any time and from time to

time, Buyer agrees that it will use Number 2 grade fuel

oil purchased and supplied by Buyer, as above set forth,

in lieu of gas for Buyer’s fuel requirements hereunder

during the period or periods of time so requested by Seller.

In the event Seller is prohibited by governmental action

or excused by reason of force majeure or proration of im-

paired deliveries from delivering gas to Buyer for Buyer’s

fuel requirements hereunder, up to the Maximum Daily

Delivery Obligation then in effect, and Buyer uses Num-

ber 2 grade fuel oil for its fuel requirements, even though

not so requested to do by Seller, during the period Seller

is so prohibited or excused from delivering gas hereunder,

all such fuel oil so used by Buyer during any period

of not more than seven consecutive days shall be deemed

to have been used by Buyer at Seller’s request; provided,

that during the time Seller is so prohibited or excused

Seller shall have no bligation to pay for fuel oil used by

Buyer after expiration of any such seven day period.

Payments with reference to fuel oil which is used by

Buyer for its fuel requirements at Seller’s request, up to

A70

the Maximum Daily Delivery Obligation then in effect,

as provided in the next preceding paragraph, shall be

made between the parties on the basis on Bunker “C”

grade fuel oil as hereinafter set forth.

On or before the fifth day of the month following any

month hereunder during which Buyer used fuel oil for

which payments are to be made between the parties as

above provided, Buyer shall furnish to Seller a statement,

together with supporting computations, calculations and

determinations, showing:

(a) The number of barrels of fuel oil used by

Buyer during the preceding billing month for its fuel

requirements in lieu of the quantities of gas which

Seller failed to deliver during such month up to but

not in excess of the Maximum Daily Delivery Obliga-

tion in effect hereunder on any day.

(b) The weighted average (expressed in cents per

barrel) of the purchase price of Bunker “C” grade

fuel oil Buyer would have purchased, per barrel,

f.o.b. Buyer’s plant, for equivalent quantities of fuel

oil in Buyer’s storage facilities during the preceding

month; such weighted average price shall not include

any storage and handling costs and expense for such

fuel oil at Buyer’s plant, and shall not take into

consideration any volumetric losses or gains resulting

from the storage and handling of such fvel oil. Such

weighted average price shall be determined as follows:

(1) Buyer shall at any time a purchase of

Number 2 fuei oil is made, obtain a written

quotation of the price of Bunker “C” fuel oil in

the same quantity as the quantity of Number 2

fuel oil that Buyer purchases at such time.

A7l1

(2) The sum of such quotation for Bunker

“C” fuel oil plus the delivery charge incurred

by Buyer for delivery into Buyer’s tanks of the

Number 2 fuel oil purchased shall be used by

Buyer in determining such weighted average

price.

(c) The amount of money due Buyer by Seller

for such fuel oil so used by Buyer for its fuel require-

ments hereunder during such preceding month, which

amount shall be determined by multiplying the

number of barrels of fuel oil so used by Buyer during

such preceding month as provided for in subpara-

graph (a) above, by the weighted average purchase

price per barrel of Bunker “C” grade fuel oil as

provided for in subparagraph (b) above.

Upon receipt of each such statement from Buyer, Seller

shall determine the gas equivalent of such fuel oil so used

by Buyer for its fuel requirements hereunder during such

preceding month; such determination to be made on the

basis of one barrel of Number 2 grade fuel oil being the

equivalent of 6,000 cubic feet of gas. The total quantity of

such gas equivalent, so determined, shall be added to the

total quantity of gas actually delivered by Seller to Buyer

hereunder during such preceding month in order to arrive

at the Monthly Rate per Mcf to be paid by Buyer to Seller

for such gas equivalent during the month in question.

Such monthly rate per Mcf, so arrived at, shall be multi-

plied by the total quantity of such gas equivalent, so de-

termined for the month in question as above provided,

and the result of such multiplication, without any ad-

justment thereof for Btu, shall be the amount of money

due Seller by Buyer for such gas equivalent during the

month in question.

A72

Proper adjustment shall be made on the bill to be ren-

dered by Seller to Buyer for gas delivered by Seller to

Buyer during the preceding month, to give effect to the

amount of money due Buyer by Seller as above provided,

for fuel oil so used by Buyer during such preceding month,

and to the amount of money due Seller by Buyer, as above

provided, for the gas equivalent of such fuel oil.

It is recognized that Buyer plans to use Number 2

grade fuel oil at Baxter Wilson Power Plant and Bunker

“C” grade fuel oil at Rex Brown Power Plant. It is the

intention of the parties hereto that the provisions of this

Article apply to the use of Bunker “C” grade fuel oil

the same as Number 2 grade fuel oil, by substituting the

designation “Bunker ‘C’ " for “Number 2” when and where

appropriate.

XVIL.

REGULATORY REQUIREMENT

It is expressly recognized that before Seller may pro-

ceed with the construction of any necessary facilities to

enable Seller to make deliveries of the additional quanti-

ties of gas contemplated to be delivered hereunder to

Buyer's Baxter Wilson Power Plant, Seller must apply to

the Federal Power Commission for a Certificate of Public

Convenience and Necessity, authorizing the construction

of said facilities and delivery of natural gas to Buyer.

Seller and Buyer agree to proceed with reasonable dili-

gence with the filing and prosecution of applications for

such governmental authorizations as may be respectively

required of them for the construction of the facilities

which each is required to construct under the provisions

hereof and for the sale and purchase of gas hereunder,

A73

Each party reserves the right to pursue its applications in

such manner as it deems to be in its best interest, includ-

ing the right to file whatever pleadings and motions it

deems desirable. Neither party shall be obligated to accept

any authorization which contains, in the opinion of the

party receiving such authorization, unreasonable or oner-

ous terms and conditions. In the event that Seller and

Buyer have not by July 1, 1970, obtained such authoriza-

tions upon terms and conditions which are not unreason-

able or onerous to the party receiving such authorization,

then Seller or Buyer shall have the right at any time there-

after, but prior to the parties having been issued such au-

thorization, to cancel this agreement by giving the other

party written notice of such cancellation, Upon such can-

cellation both parties shall be relieved of any liability

hereunder.

XVIII.

DULY CONSTITUTED AUTHORITIES

This agreement is especially made subject to all present

or future valid rules, regulations or orders of any com-

mission or regulatory body having jurisdiction.

XIX.

SUPERSEDING OF PRIOR AGREEMENT

This agreement supersedes, cancels and terminates, as

of the effective date hereof, as set forth in Article XIII

hereof, the above mentioned agreement dated June 14,

1963, covering the sale and delivery of natural gas to

Buyer for the purposes herein set forth. Both parties shall

on said effective date be released from any and all obliga-

tions under said agreement of June 14, 1963, except as

A74

to the obligation of Buyer to pay for all gas delivered to

Buyer by Seller prior to said effective date and for which pay-

ment has not been made. Notwithstanding the provisions

of this article, should this contract be canceled pursuant

to the provisions of Article XVII, the contract of June 14,

1963, shall thereupon be reinstated and shall continue in

effect according to its terms.

XX.

SUCCESSORS AND ASSIGNS

This contract shall be binding upon and inure to the

benefit of the respective heirs, representatives, successors

and assigns of the parties hereto,

If all or any part of Buyer's plants, facilities, and/or

other property, into which the gas sold hereunder is re-

ceived and/or utilized, are voluntarily sold or exchanged

by Buyer, then, and in such event, Buyer agrees that it

will cause the person, firm or corporation so acquiring

such property to take and hold the same subject to this

agreement and subject to the obligation to fully and faith-

fully perform all of the obligations created by this agree-

ment, and Buyer further agrees that it will incorporate

appropriate covenants to this effect in any act or convey-

ance or instrument of transfer which may be executed by

it.

If all or any part of Seller's pipe line system through

which the gas sold hereunder is delivered to Buyer is

voluntarily sold or exchanged by Seller and Seller will

thereby be rendered unable to supply to Buyer any gas

which it is obligated to supply hereunder, then, and in

such event, Seller agrees that it will cause the person,

firm or corporation so acquiring such property to take

A75

and hold the same subject to this agreement and subject

to the obligation to fully and faithfully perform all of the

obligations created by this agreement applicable to the

property so sold or exchanged and Seller further agrees

that it will incorporate appropriate covenants to this effect

in any act of conveyance or instrument of transfer which

may be executed by it.

XXI1.

DESCRIPTIVE HEADINGS

The descriptive headings of the provisions of this agree-

ment are formulated and used for convenience only and

shall not be deemed to affect the meaning or construction

of any such provisions.

IN WITNESS WHEREOFP, the parties hereto have

caused this agreement to be executed by their respective

corporate officers thereunto duly authorized and their re-

spective corporate seals to be hereunto affixed in two (2)

counterparts, each of which shall constitute an original,

on the day and year first above written.

MISSISSIPPI POWER & UNITED GAS PIPE

LIGHT COMPANY LINE COMPANY

By /s/ R. B, WILSON By /s/ SIGNATURE IL-

President LEGIBLE

President

ATTEST: ATTEST:

SIGNATURE ILLEGIBLE /s/ R. B. BERRYMAN

Secretary Secretary

A76

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A77

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A78

EXHIBIT “B”

UNITED GAS PIPE LINE COMPANY

Shreveport, Louisiana

December 8, 1967

Mississippi Power & Light Company

Electric Building

Jackson, Mississippi 39205

Gentlemen:

We have, as of even date herewith, entered into a Gas

Sales Contract with you relating to the sale and purchase

of gas for the fuel requirements for your Rex Brown

plant at Jackson, Mississippi, and the Baxter Wilson plant

near Vicksburg, Mississippi.

The hereinabove described contract provides for a

monthly “step rate” which is computed on the basis of

the monthly quantities of gas delivered at each delivery

point. The lowest rate available at any delivery point is

during months in which the volumes delivered exceed

400,000 Mcf. You have advised that you will have peri-

odic shutdowns for inspection and maintenance of your

machinery so as to properly maintain all of your equip-

ment as well as minimize the possibilities of any break-

downs, and you have inquired as to whether such events

are covered under the provisions of Article VIII (force

majeure) of our contract so as to assure you of the same

rates you would have had if such shutdowns had not oc-

curred. We are of the opinion that these events do not

come within the provisions of Article VIII of our con-

tract. However, we are willing, in computing the monthly

rate provided for in Article XIV of the contract, to give

you credit for the down time occasioned by such inspec-

tions and shutdown periods so that when the monthly rate

is computed you will pay for gas on the same basis as you

would have paid if the plant had been operating during

A79

such shutdown periods, provided that you give us proper

notice relating to such shutdowns in the same manner as

provided in said Article VIII. You will then be assured

that such shutdown periods will not in anywise increase

the price to be paid by you for gas delivered under the

contract.

If the above is satisfactory with you, please signify your

acceptance on the duplicate originals hereof in the space

provided below and return one of the duplicate originals

to us, thus constituting this letter an agreement between

us. This letter shall be considered a part of the contract

between us of even date herewith.

Yours very truly,

UNITED GAS PIPE LINE

COMPANY

By SIGNATURE ILLEGIBLE

President

Accepted and agreed to:

MISSISSIPPI POWER & LIGHT COMPANY

By /s/ R. B. WILSON

President

A80

EXHIBIT “C”

AMENDATORY AGREEMENT

Between

UNITED GAS PIPE LINE COMPANY

and

MISSISSIPPI POWER & LIGHT COMPANY

Dated January 15, 1969

THIS AGREEMENT made and entered into this 15th

day of January, 1969, by and between UNITED GAS

PIPE LINE COMPANY, a Delaware corporation, here-

inafter called “Seller”, and MISSISSIPPI POWER &

LIGHT COMPANY, a Mississippi corporation, herein-

after called “Buyer”;

WITNESSETH:

WHEREAS, Seller is selling and delivering to Buyer

and Buyer is purchasing and receiving from Seller natural

gas for all of the fuel requirements of Buyer’s Rex Brown

Power Plant located at Jackson, in Hinds County, Mis-

sissippi, and Buyer’s Baxter Wilson Power Plant located

near Vicksburg, in Warren County, Mississippi, under

the terms and conditions of that certain agreement dated

December 8, 1967, between Seller and Buyer;

WHEREAS, the above mentioned agreement of De-

cember 8, 1967, provides that in the event Seller and

Buyer have not by July 1, 1970, obtained the necessary

governmental authorizations either Seller or Buyer shall

have certain cancellation rights; and

A81

WHEREAS, Seller and Buyer desire to amend Article

XVII, Regulatory Requirement, of the above mentioned

agreement to reflect more fully the understanding be-

tween Seller and Buyer in connection with the filing and

prosecution of the necessary governmental applications;

NOW, THEREFORE, in consideration of the mutual

covenants and obligations. herein contained and assumed

by each party, the parties hereto covenant and agree as

follows:

1.

From and after the date of execution hereof, Article

XVII, Regulatory Requirement, of the above mentioned

agreement of December 8, 1967, shall be changed and

amended so that said Article shall thereafter, in its en-

tirety, read as follows:

“XVII.

“REGULATORY REQUIREMENT

“It is expressly recognized that before Seller may pro-

ceed with the construction of any necessary facilities to

enable Seller to make deliveries of the additional quanti-

ties of gas contemplated to be delivered hereunder to

Buyer’s Baxter Wilson Power Plant, Seller must apply

to the Federal Power Commission for a Certificate of

Public Convenience and Necessity, authorizing the con-

struction of said facilities and delivery of natural gas to

Buyer.

“Seller and Buyer agree to proceed with reasonable

diligence with the filing and prosecution of applications for

such governmental authorizations as may be respectively

required of them for the construction of the facilities

A82

which each is required to construct under the provisions

hereof and for the sale and purchase of gas hereunder;

provided, however, that shouid Seller not have filed with

the Federal Power Commission an application for a Cer-

tificate of Public Convenience and Necessity on or before

May 1, 1969, Buyer shall have the right, upon written

notice delivered to Seller before Seller should have filed

such an application, to cancel this contract. Each party

otherwise reserves the right to pursue its applications

in such manner as it deems to be in its best interest,

including the right to file whatever pleadings and motions

it deems desirable. Neither party shall be obligated to

accept any authorization which contains, in the opinion

of the party receiving such authorization, unreasonable

or onerous terms and conditions. In the event that Seller

and Buyer have not by January 1, 1970, obtained such

authorizations upon terms and conditions which are not

unreasonable or onerous to the party receiving such au-

thorization, then Seller or Buyer shall have the right at any

time thereafter, but prior to the parties having been issued

such authorization, to cancel this agreement by giving

the other party written notice of such cancellation. In

the event Buyer exercises its option to cancel this contract

because Seller has not timely applied to the Federal Power

Commission for a Certificate of Public Convenience and

Necessity, as provided above, or in the event either party

exercises its option to cancel this contract because either

party has not timely received acceptable regulatory au-

thorization, as provided above, then, and in any such

event, both parties and either party shall be relieved of all

liability hereunder, including liability for damages, if

any, incurred by the other party as a result of the can-

cellation.”

A83

2.

Except as herein specifically changed and amended

the above mentioned agreement of December 8, 1967,

shall remain in full force and effect as written.

IN WITNESS WHEREOF, the parties hereto have

caused this agreement to be executed by their respective

corporate officers thereunto duly authorized and their

respective corporate seals to be hereunto affixed in two

(2) counterparts, each of which shall constitute an origi-

nal, on the day and year first above written.

UNITED GAS PIPE

ATTEST: LINE COMPANY

/s/ Signature Illegible By /s/ Signature Illegible

Assistant Secretary President

MISSISSIPPI POWER &

ATTEST: LIGHT COMPANY

/s/ Signature Illegible By /s/ R. B. WILSON

Secretary Vice President

AB4

EXHIBIT “D”

AMENDATORY AGREEMENT

Between

UNITED GAS PIPE LINE COMPANY

And

MISSISSIPPI POWER & LIGHT COMPANY

Dated April 29, 1969

THIS AGREEMENT made and entered into this 29th

day of April, 1969, by and between UNITED GAS

PIPE LINE COMPANY, a Delaware corporation, here-

inafter called “Seller”, and MISSISSIPPI POWER &

LIGHT COMPANY, a Mississippi corporation, herein-

after called “Buyer”;

WITNESSETH:

WHEREBAS, Seller is selling and delivering to Buyer

and Buyer is purchasing and receiving from Seller natural

gas for all of the fuel requirements of Buyer's Rex Brown

Power Plant located at Jackson, in Hinds County, Mis-

sissippi, and Buyer's Baxter Wilson Power Plant located

near Vicksburg, in Warren County, Mississippi, under

the terms and conditions of that certain agreement dated

December 8, 1967, as amended, between Seller and

Buyer; and

WHEREAS, Seller and Buyer desire to amend Article

XIV, Rates, of the above mentioned agreement to reflect

more fully the understanding between Seller and Buyer;

NOW, THEREFORE, in consideration of the mutual

covenants and obligations herein contained and assumed

by each party, the parties hereto covenant and agree as

follows:

a A lta:

A85

From and after the date of execution hereof, Article

XIV, Rates, of the above mentioned agreement of De-

cember 8, 1967, shall be changed and amended so that

said Subsection (A) of Article XIV shall thereafter read

as follows:

“(A) For the period commencing on the date of exe-

cution of this agreement and extending to January 1,

1973, for all gas delivered by Seller to Buyer at Buyer's

Rex Brown Power Plant and for gas delivered in quantities

each day of 110,000 Mef or less at Buyer's Baxter Wilson

Power Plant, the following monthly rate for all gas shall

apply:

“MONTHLY RATE

76.25¢ per Mc! when total deliveries are between

0 and 150 Mef

35.75¢ per Mcf when total deliveries are between

151 and 300 Mef

32.75¢ per Mcf when total deliveries are between

301 and = 1,500 Mef

27.75¢ per Mcf when total deliveries are between

1,501 and 5,000 Mef

25.75¢ per Mcf when total deliveries are between

5,001 and 10,000 Mef

25.25¢ per Mcf when total deliveries are between

10,001 and 50,000 Mef

24.75¢ per Mcf when total deliveries are between

50,001 and 85,000 Mef

23.75¢ per Mcf when total deliveries are between

85,001 and 125,000 Mef

22.75¢ per Mcf when total deliveries are between

125,001 and 160,000 Mef

21.75¢ per Mcf when total deliveries are between

160,001 and 400,000 Mef

21.25¢ per Mcf when total deliveries are over

400,000 Mef

A86

provided, however, that the above prices shall be increased

or decreased, by the amount by which Seller's weighted

average purchase price of gas for the preceding billing

month in the Jackson Area, as outlined in Exhibit B

(Drawing UB21566 1-1-69) attached hereto, exceeds

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