Petition for Writ of Certiorari — Consolidated Gas Co. of Florida, Inc. v. Federal Energy Regulatory Commission

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BI-S IL |) me is igs

: WHOL, JR.

Mgnt CLERK 3 ‘

Supreme Court of the United States

OCTOBER TERM, 1989 7

CONSOLIDATED GAS COMPANY OF FLORIDA, INC.

Petitioner,

FEDERAL ENERGY REGULATORY COMMISSION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CiRCUIT

EUGENE E. THREADGILL

900 17th Street, N.W.

Washington, D.C. 20006

(202) 293-4344

Counsel for Petitioner

a

ALPHA PRINT, INC., e WASHINGTON, D.C. @ (262) 331-8101 ay)

QUESTION PRESENTED

Whether an administrative agency in making a decision,

and a court of appeals in approving that decision, must

address a district court’s opinion, issued while the admin-

istrative proceeding was in rehearing, in which the district

court made a factual finding that the agency’s conditions

created an unreasonable barrier to competition, and that

finding irreconcilably conflicts with the administrative

agency’s ultimate decision.

PARTIES TO PROCEEDING BELOW

In addition to Consolidated Gas Company of Florida,

Inc. and the Federal Energy Regulatory Commission,

Florida Gas Transmission Company (a subsidiary of So-

nat, Inc. and Enron Corp.) was a party in the District of

Columbia Circuit proceeding to which this petititon for

certiorari is directed.

~

TABLE OF CONTENTS

Page

QUESTION PRESENTED ...................008: i

PARTIES TO THE PROCEEDING BELOW ........ i

TABLE OF AUTHORITIES ................0000. iv

ee ccs cc ccceccccsccencsess 2

Nee cn pace pe secsccsecsenes 9

8 9

STATEMENT OF THE CASE .................05. 9

REASONS FOR GRANTING THE WRIT ........ 11

Ne kad oo ec paccccaccsccees 16

APPENDICES: (separate cover)

Appendix A—ORDER DENYING REHEARING—

United States Court of Appeals for

the District of Columbia

eke secs cnc A-1

Appendix B—MEMORANDUM OPINION AND

ORDER— United States Court of

Appeals for the District or Columbia

Circuit (March 8, 1989) ............ A-2

Appendix C—ORDER DENYING REHEARING—

Federal Energy Regulatory Commission

ES A-7

Appendix D—ORDER ON REMAND—Federal

Energy Regulatory Commission

SE, ave cnc ccs ccces A-13

iii

Appendix E—MEMORANDUM OPINION AND

ORDER-—United States Court of

Appeals for the District of Columbia

Circuit (March 4, 1986) ........... A-24

Appendix F—ORDER DENYING REHEARING—

Federal Energy Regulatory Commission

(November 19, 1984) ............. A-28

Appendix G—ORDER GRANTING CLARIFICATION

AND DENYING REHEARING—

Federal Energy Regulatory Commission

(September 20, 1984) ............. A-31

Appendix H—ORDER—Federal Energy Regulatory

Commission (November 21, 1983) . A-36

Appendix I—STATUES INVOLVED ........... A-61

iv

TABLE OF AUTHORITIES

Pa

UNITED STATES SUPREME COURT CASES: =

California v. FPC,

I i nc cua chcaectdscbecec 11, 12

FMC v. Svenske Amerika

ER Bre ie Ee CUO noc nc cccccccesccccs 11

Gulf States Utils. v. FPC,

ee ee ca ckweae 12

McLean Trucking Co. v. United States,

EE OL 11

United States v. El Paso Natural Gas Co..,

EE ee 11

United States v. First City Nat’l Bank of Houston,

ee es eneeceees 11

OTHER FEDERAL CASES:

Central Iowa Power Cooperative v. FERC,

606 F.2d 1156 (D.C. Cir. 1979) ................. i2

Consolidated Gas Co. of Fla., Inc. v. -

City Gas Company of Florida, Inc., 665

F.Supp. 1493 (S.D. Fla. 1987), appeal docketed,

No. 87-6108 (11th Cir. Dec. 30, 1987) ....... passim

Municipal Elec. Assn. of Mass.

v. FPC, 414 F.2d. 1206 (D.C. Cir. 1969) ......... 11

Northern Natural Gas Co. v. FPC,

399 F.2d. 953 (D.C. Cir. 1968) .............. 11, 12

ADMINISTRATIVE CASES:

City of Florence, Ala. v. Tennessee Gas Pipeline

CH, Ae es WN MUUSE go ccc iccuceencess 13

Florida Gas Transmission Co.,

47 ELBC. 341 CIGTZ) nn cc cccccccccccccsccccees 13

STATUTES:

Administrative Procedure Act,

[8 Pe > T, . ee a

Federal Energy Regulatory Commission

Regulation, 18 C.F.R. § 154.39 (1988) .........-- 15

Natural Gas Act,

55 U.S.C. & FIT CISSZ) on wc ncccvescncees 9,11, 12

No.

IN THE

Supreme Court of the United States

OcTOBER TERM, 1989

CONSOLIDATED GAs COMPANY OF FLORIDA, INC.,

Petitioner,

Vv.

FEDERAL ENERGY REGULATORY COMMISSION,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

The Petitioner, Consolidated Gas Company of Florida,

Inc. (Consolidated) prays that a Writ of Certiorari be

granted to review the judgment and opinion of the United

States Court of Appeals for the District of Columbia en-

tered in Consolidated Gas Company of Fiorida, Inc. v.

FERC, No. 88-1321 (D.C. Cir. March 8, 1989) and the

denial of Consolidated’s Petition for Rehearing on May 17,

1989. This Petition requests review of the Court’s decision

approving the Federal Energy Regulatory Commission’s

(FERC) order requiring that Consolidated pay the cost of

construction for a lateral pipeline and meter station con-

necting Consolidated’s system with the Florida Gas

Transmission Company (FGT) pipeline, specifically the

failure of the Commission and the Court to address the

anti-competitive effect of imposing the cost of construc-

tion on Consolidated.

OPINIONS BELOW

The present case involves five agency decisions and

three court decisions.

(1) The Initial Decision of the Administrative Law Judge

—In the initial decision issued on November 21, 1983, 25

FERC { 63,039 (1983), the Administrative Law Judge

(ALJ) ruled that Consoiidated’s connection application

should be granted and that FGT should be required to

absorb the cost of the lateral line required to connect the

FGT pipeline to Consolidated’s system. The ALJ found

that the FGT tariff did not require a new customer to pay

the cost of a new lateral, and thus FGT’s tariff did not

comply with the Commission’s regulation which requires

that a tariff include a specific statement that full contribu-

tion is required from all customers, if that is the pipeline’s

policy.' The barrier to competition posed by the necessity

of obtaining agency authorization for Consolidated to ob-

tain a supply of natural gas, and the Commission’s failure

to set the application for a prompt hearing, allowed City

Gas Company of Florida, Inc. (City Gas) to invade Con-

solidated’s market. The issue of unfair competititon by

City Gas was brought to the attention of the ALJ, who

ruled:

Fleisher also testified that the application should

be granted so that the Commission does not “aid

and abet” the anti-competitive efforts of City

Gas (Ex. 1, p. 7, and Ex. 14, pp. 4-5). An acrimo-

nious dispute between Con Gas and City Gas at-

tributable to the loss by Con Gas of its 8 commer-

‘FERC regulations require an explicit statement in a tariff stating

“the company will not build or contribute to the cost of building any

sales lateral pipelines to resale customers.” 18 CFR 154.39(b)(2).

FGT’s tariff did not contain such a statement of policy.

cial customers and 70 residential customers to

City Gas culminated in pending litigation in

which Con Gas alleges that City Gas has violated

the ‘ederal antitrust laws. Violation of the poli-

cies underlying these federal laws is germane to

disposition of a section 7 application.

25 FERC # 63,039 at 65,105 (1983) (citations omitted).

The ALJ recognized the obligation of the Commission

to address anti-competitive aspects of agency action. By

issuing a prompt decision ordering FGT to provide Con-

solidated with a supply of gas, and to absorb the cost of the

connection into the pipeline’s investment rate base, the

ALJ opened the door to fair competition.

(2) The Commission’s Initial Decision— By Opinion and

Order No. 225, dated September 20, 1984, the FERC

ordered FGT to construct the connection, but the Com-

mission reversed the ALJ’s conclusion that FGT should

be required to pay for the lateral and ordered Consoli-

dated to reimburse FGT for the full cost of the lateral and

meter station to be constructed by FGT. 28 FERC 4 61,358

(1984). The Commission denied Consolidated’s petition

for rehearing in Opinion No. 225-A issued November 19,

1984, 29 FERC 4 61,205 (1984).

(3) The First Appellate Court Decision—In an un-

published opinion issued March 4, 1986, the United States

Court of Appeals for the District of Columbia Circuit

vacated the FERC orders, and remanded the case to the

FERC for an explanation of the condition imposed on

Consolidated. Consolidated Gas Company of Florida vy.

FERC, No. 85-1040 (D.C. Cir. March 4, 1986).

(4) The Commission’s Decision on Remand—In response

to the remand, on March 30, 1987, the FERC issued Order

225-B, in which it summarily reaffirmed the condition in

its initial order. 38 FERC 4 61,137 (1987). In its Applica-

tion for Rehearing filed April 29, 1987, Consolidated again

asserted that the Commission had failed to recognize the

anti-competitive impact of its order on Consolidated and

that to pay the cost of the lateral, when Consolidated’s

competitor, City Gas, had received numerous laterals at

FGT’s expense, would seriously jeopardize Consoli-

dated’s ability to compete with City Gas and to recover

the residential and commercial customers taken over by

City Gas while the FERC had blocked Petitioner’s access

to a natural gas supply. (JA 167, 171-2).

(5) The United States District Court Decision—On July

24, 1987 the United States District Court for the Southern

District of Florida, in a separate but related antitrust ac-

tion, found that the Commission’s order requiring Consol-

idated to pay for the cost of a direct connection to the FGT

system was anti-competitive. Consolidated Gas Com-

pany of Florida v. City Gas Company of Florida, 665

F.Supp. 1493 (S.D.Fla. 1987), appeal docketed, No.

87-6108 (11th Cir. Dec. 30, 1987). The district court stated:

during 1984, City Gas began providing service to

seven commercial accounts in a shopping center

adjacent to Consolidated’s service area. Thus, it

became crucial that Consolidated convert to natu-

ral gas for as low a cost as possible in order to be

able to offer rates that were competitive with those

City Gas could offer. In order to compete effec-

tively, Consolidated believed it was imperative

that FGT provide Consolidated with a first con-

nection to the natural gas pipeline at FGT’s cost.

The amortization of the estimated $250,000 capi-

tal cost of this lateral pipeline would have in-

creased Consolidated’s cost of securing natural

gas by approximately five cents per therm. [Tr.

6-91-92]. City Gas has already received approxi-

mately ten such connections with FGT at no-cost

and thus it did not have similar expenses driving

up its natural gas rates [Tr. 5-187-188].

Faced with these problems, Consolidated was

left with three potential courses of action if it was —

going to remain in business: (1) obtain a FERC

allocation and hope it could convince FGT to

pay for the lateral pipeline connection; (2) con-

nect a pipeline to City Gas’ pipe and purchase

gas directly from City Gas; or, finally (3) obtain a

FERC allocation, connect a pipeline to City Gas’

pipe, and pay City Gas the cost of transporting

gas through City Gas’ pipes. Two of these cours-

es of action required Consolidated to deal direct-

ly with its future competitor, and the third alter-

native, as the facts reveal, involved unreasonable

delays and uneconomically high expenses.

Id. (emphasis added).

We also find, significantly, that City Gas had mo-

nopoly power due to the presence of high barri-

ers to entry. Costs and delays imposed by the reg-

ulatory process are important barriers to entry.

Id. at 1520 (emphasis added).

First City Gas, a monopolist, controlled an es-

sential facility—a pipeline that transported

wholesale gas. Prior to 1984, when Consolidated

received a FERC allocation, Consolidated could

not have purchased wholesale gas from anyone

except City Gas. After 1984, Consolidated could

have purchased from City Gas or FGT, but would

have encountered a prohibitive transportation

problem if it had chosen the latter. A lateral pipe-

line connecting Consolidated facilities to the FGT

main would have cost $250,000, or approximately

five cents per therm. There is grave doubt as to

whether Consolidated could have effectively com-

peted with City Gas based on these additional ex-

penses, and there is also a serious question as to

whether the FPSC would have approved such an

increased cost based on an uneconomical dupli-

cation of City Gas’ existing line.

This concern leads us to the second part of the

MCI Communications Corp. test— whether Con-

solidated could practicably or reasonably dupli-

cate the essential facility. In the AT&T line of

cases, duplication of the local exchange facilities

would obviously be much more expensive than

duplication of City Gas’ lateral pipe. In Otter

Tail, a casc which is factually more similar to this

case than are the AT&T cases, however, the

Court did not even suggest that the municipali-

ties should attempt to duplicate the electric

transmission lines. Although the Court did not

indicate the cost involved, we believe this to be

highly supportive of a finding that such facilities

cannot be reasonably duplicated. In Aspen Ski-

ing Co., the Tenth Circuit found that duplication

was unreasonable “due to regulatory restric-

tions, and delays, and the expense and time re-

quired.” 738 F.2d at 1521. The same is true here.

ot

Consolidated should not have had to wait two-

years to get FERC approval for a natural gas allo-

cation. Additionally, it would have been unreason-

able to require Consolidated to spend $250,000,

which would potentially have made it uncompeti-

tive with City Gas, to duplicate City Gas’ lateral

pipe. “To be ‘essential’ a facility need not be in-

dispensable; it is sufficient if duplication of the

facility would be economically infeasible and if

denial of its use inflicts a severe handicap on po-

tential market entrants.” Hecht v. Pro-Football,

Inc., 570 F.2d 982, 992 (D.C. Cir. 1977), cert. de-

nied, 436 U.S. 956, 98 S.Ct. 3069, 57 L.Ed.2d.

1121 (1978) (footnote omitted). We find that such

duplication would have been impractical and un-

reasonable and would have severely, if not fatal-

ly, handicapped Consolidated’s potential entry

into the natural gas market.

Id. at 1534 (emphasis added).

(6) The Commission’s Final Decision—The FERC de-

nied Consolidated’s Petition for Rehearing on March 2,

1988 in Opinion No. 225-C, 42 FERC 4 61,271 (1988), and

refused to address the anti-competitive aspect of the or-

der. Because the district court’s decision was issued after

Consolidated’s Petition for Rehearing was filed, and the

Commission’s Rules of Practice do not authorize filings af-

ter a Petition for Rehearing has been filed, the district

court’s decision was not formally before the Commission,

but copies of that decision were provided to the Commis-

sion’s Staff, at the Staff's request, shortly after its issu-

ance in July, 1987.

(7) The Court of Appeal’s Second Decision—A second

appeal was then heard by the United States Court of Ap-

peals for the District of Columbia Circuit. Consolidated

Gas Company of Florida, Inc. v. Federal Energy Reguia-

tory Commission, No. 88-1321 (D.C. Cir. March 8, 1989).

In an unpublished opinion, the Court rejected the Com-

mission’s argument that to treat Consolidated differently

under Tariff II amounted to presumptive discrimination.

The Court noted: /

This position contradicts, without explanation,

the one set forth in the Commission’s Statement

of Lateral Line Policy in Rate Schedules Filed by

Natural Gas Pipeline Companies, which asserts

that ‘[t]here is nothing inherently objectionable

in a policy statement which creates separate sets

of criteria with respect to new and existing pur-

chasers .. .” 40 FP.C. 46, 48 (1968).

Consolidated v. FERC, No. 88-1321, slip op. at 4 (D.C.

Cir. March 9, 1989). Nevertheless, the Court accepted a

rationale offered by FERC counsel at oral argument that

only in a period of expansion should a transmission

pipeline pay for the necessary lateral construction in seek-

ing additional customers. If the pipeline was functioning

at capacity, said Commission Counsel, then a new custo-

mer would not bring any benefit to the system, therefore

the costs should be borne by the customer even though

the pipeline’s tariff did not impose such a requirement. /d.

Petitioner’s arguments that the Commission’s order was

anti-competitive, Petitioner’s Opening Brief at 26-30, and

Petitioner’s Reply Brief at 15-17, Consolidated Gas Com-

pany of Florida, Inc. v. Federal Energy Regulatory Com-

mission, No. 88-1321 (D.C. Cir. March 9, 1989), were ig-

nored by the court of appeals although the issue was

before the court.

Consolidated’s Petition for Rehearing was denied with-

out opinion on May 17, 1989.

JURISDICTION

The judgment of the United States Court of Appeals for

the District of Columbia Circuit was entered on March 9,

1989. Consolidated’s petition for rehearing, filed April 24,

1989, was denied without opinien on May 17, 1989. This

petition for a writ of certiorari was filed within 90 days of

the latter date. The Court’s jurisdiction is invoked under

28 U.S.C. § 1254(1).

STATUTES INVOLVED

This case arises under the Natural Gas Act §§ 4, 7 and

19, 15 U.S.C. § 717 (1982); the Commission’s Regulation

General Terms and Conditions § 154.39, 18 C.F.R. §

154.39 (1988), and the Administrative Procedure Act, 5

U.S.C. § 706 (1982). The statutory provisions are included

in Appendix I to the petition.

STATEMENT OF THE CASE

The underlying factual issue in the instant case is a

dispute over who should be required to pay for a connect-

ing, or “lateral,” natural gas pipeline between the supplier,

FGT, and the wholesale purchaser, Consolidated. Consol-

idated has consistently argued throughout the proceed-

ings that for Consolidated to pay for the lateral would be

unduly burdensome and anticompetitive. The FERC has

nevertheless required Consolidated to pay the cost of the

lateral, even though this cost amounts to nearly half of

Consolidated’s net investment in its plant and would be

beyond Consolidated’s ability to support.

10

As aresult of this condition imposed upon Consolidated

by FERC, Consolidated has been denied access to natural

gas. This denial has forced Consolidated to continue to

distribute high-cost propane gas to its customers, which

must be shipped to Consolidated by truck. Under these

circumstances, Consolidated has lost a significant portion

of its customers to its competitor, City Gas. City Gas has

eleven laterals with FGT, all of which have been provided

at FGT’s expense.

‘ Indeed, City Gas intervened in the administrative pro-

ceeding between Consolidated and the FERC, and argued

that Consolidated should be denied access to natural gas,

that City Gas should be allowed to take over Consoli-

dated’s customers, and that Consolidated should either

sell its system to City Gas at a fraction of its value, or

simply be driven out of business. City Gas then extended

its line through Consolidated’s territory, captured all of

Consolidated’s commercial, as well as some of Consoli-

dated’s residential, customers, and City Gas further re-

fused to transport natural gas for Consolidated at a rea-

sonable price.

In response to City Gas’ actions Consolidated initiated

a separate action in the United States District Court for

the Southern District of Florida against City Gas, in which

Consclidated asserted that City Gas’ actions violated the

Sherman Act. The district court held that City Gas was in

violation of the Sherman Act, and, in addition, the court

found that the FERC’s conditions imposed upon Consoli-

dated created an insurmountable barrier to access to a

natural gas supplier, and was therefore anticompetitive.

Despite the district court’s findings, the FERC has re-

fused to acknowledge the antitrust implications of its posi-

tion with respect to Consolidated, and, in upholding the

11

commission, the United States Court of Appeals for the

District of Columbia Circuit also has failed to acknowl-

edge the irreconcilable conflict between the district courts

finding and the FERC’s condition.

REASONS FOR GRANTING THE WRIT

The essential issue in this case is that a district court’s

‘finding of fact, in an opinion*after a full trial, that an

administrative agency’s position is in violation of Federal

antitrust law, must be addressed by the agency in making

any further decisions in the maiter, and the appellate

courts in reviewing those decisions cannot ignore the

district court’s findings.

An agency, and a court reviewing an agency decision,

cannot ignore a relevant ruling ih an antitrust case holding

that the agency decision is an insurmountable obstacle to

competition. The Supreme Court has consistently held

that Federal regulatory agencies must consider anti-trust

policy in rendering decisions to evaluating public conve-

nience and necessity or the public interest. McLean

Trucking Co v. United States, 321 U.S. 67 (1944); Califor-

nia v. FPC, 369 U.S. 482 (1962); United States v. El Paso

Natural Gas Co., 376 U.S. 651 (1964); FMC v. Svenske

Amerika Linien, 390 U.S. 238 (1968); Northern Natural

Gas v. FPC, 399 F.2d. 953 (D.C. Cir. 1968). If the matter

pending before the agency has serious anti-competitive

effects, that aspect must be outweighed by compelling

public interest factors before the agency can issue a cer-

tificate or license authorizing or requiring an action to be

taken. Northern Natural Gas Company v. FPC, 399 F.2d.

953, 960-1, 977 (D.C. Cir. 1968); and see Municipal Elec.

Ass’n of Mass. v. FPC, 414 F.2d. 1206 (D.C. Cir. 1969); cf

United States v. First City Nat’! Bank of Houston, 386

U.S. 361, 369 (1967). This obligation extends to FERC

which is mandated in administering § 7 of the Natural Gas

Act, 15 U.S.C. § 717 (1982), to give consideration to the

12

policies of the Clayton and Sherman Anti-Trust Acts.

California v. FPC, 369 U.S. 482; Northern Natural Gas v.

FPC, 399 F.2d. 953. The FERC must examine the implica-

tions of its approval of any pipeline expansion or tariff to

ascertain whether the ultimate effect of that action is anti-

competitive. Central lowa Power Cooperative v. FERC,

606 F.2d. 1156, 1162, 1163 (D.C. Cir. 1979). If the action is

evaluated as anti-competitive, then it cannot be approved.

In Gulf States Utilities v. FPC, 411 U.S. 747, 760 (1973),

the Court stated:

Consideration of antitrust and anticompetitive

issues by the Commission moreover, serves the

important function of establishing a first line of

defense against those competitive practices that

might later be the subject of antitrust proceed-

ings.

Had the Commission been mindful of this threshold re-

sponsibility, the ultimate monopolistic damage quantified

in Consolidated Gas Company of Florida, Inc. v. City Gas

Company of Florida, Inc., 665 F.Supp. 1493 (S.D. Fla.

1987), might not have occurred and most certainly would

have been mitigated.

But in this case, FERC not only failed to carry out its

mandated role, it affirmatively violated statutory stan-

dards by incorporating an anticompetitive condition in its

order. By imposing the heavy cost of the lateral upon Con-

solidated, the Commission severely prejudiced Consoli-

dated’s efforts to regain customers lost to its competitor,

City Gas, during the prolonged administrative proceed-

ing. The Commission’s action in imposing the cost of the

lateral upon Consolidated instead of FGT, failed to protect

Consolidated as required by Northern Natural, thereby

enabling City Gas to maintain its virtual monopoly power

in the relevant market area.

13

The Commission alluded to an illusory anti-competitive

dilemma in its opinion No. 225-C and Order Denying Re-

hearing stating:

We need not inquire into potential damages to

Consolidated’s competitors because the discrim-

ination would be patent on its face.

42 FERC § 61,271, at 61,854 (1988). But the Commission

failed to consider the very real anti-competitive effects of

its own order imposing the heavy burden of the lateral cost

on Consolidated.

The Commission’s action of imposing the cost of the

connecting lateral on Consolidated, when the competing

dominant seller in the area, City Gas, had received numer-

ous supply laterals at the pipeline’s expense, severely

prejudiced Consolidated’s competitive position. Under

the Commission’s order Consolidated would have to pay

not only the cost of its own lateral, but also its share of the

cost of City’s numerous laterals which are incorporated in

FGT’s cost of service. Therefore Consolidated’s competi-

tor was put at a distinct advantage; its rates do not reflect

the construction cost for the laterals it received nor will its

customers have to shoulder the burden of the system’s

cost of a new lateral, whereas Consolidated’s customers

must bear both.

The concept of a “‘levei playing field” on which competi-

tors can compete on equal terms has been adopted time

and again by the Commission. The Commission, in the

past, has found some of FGT’s tariff provisions to be in

conflict with basic anti-trust acts. Florida Gas Transmis-

sion Co., 47 F.P.C. 341, 377-8 (1972). Where a pipeline’s

tariff contains a provision that unduly restricts the market

area of a local distributor the Commission has ordered

such a provision stricken from the tariff. City of Florence,

Ala. v. Tennessee Gas Pipeline Co., 24 FERC 4 61,395

(1983). Yet the Commission’s ruling in this case tipped the

14

playing field radically against Consolidated and gave its

competitor an unfair advantage. Far from demonstrating

that allowing Consolidated to receive its lateral at the

pipeline’s expense would grant a cost advantage to Con-

solidated and do competitive harm to City Gas, the facts

demonstrate that imposing the cost of the lateral on Con-

solidated will inflict significant competitive harm on Con-

solidated.

These anti-competitive implications have been ignored

by FERC and the U.S. Court of Appeals for the District of

Columbia in refusing to directly address or rule on these

grounds. However, in the related case, Consolidated v.

City Gas, 665 F.Supp. 1493, the Court expressly and une-

quivocably determined that Consolidated fell victim to

anti-competitive practices as a direct result of the Com-

mission’s order.

In failing to address the issue of competititon, both the

Court of Appeals and FERC have not only encouraged

prohibited anti-competitive activity, but have also placed

themselves in direct conflict with the findings of the Flor-

ida federal court.

Although the anti-competitive aspect of requiring Con-

solidated to pay for the connecting lateral and meter sta-

tion was raised before the Commission and the Court in

the initial and the second appeal, the primary argument

was addressed to the tariff itself. Very simply, FGT’s basic

tariff, Section 5, stated that FGT would install, own and

operate the meter station at the point of delivery (else-

where defined as the “city gate’) “except as provided in

Section 14.” The referenced Section 14 specifically re-

quired only “existing customers” to pay for any new later-

als that they receive. FGT’s witness testified that the “in-

tention” was to require all customers to pay the cost of lat-

erals and speculated that a new tariff sheet was required to

express that intention. (JA 30-33). Consolidated argued

throughout that the express tariff language was control-

eT TS

15

ling and did not require Petitioner to pay for the lateral to

the city gate and the meter station, and that the tariff could

not be “interpreted” to require all customers to pay for lat-

eral costs because the FGT tariff did not contain the lan-

guage expressly required by § 154.39(b) of the Commis-

sion’s Regulation General Terms and Conditions, 18

C.F.R. § 154.39(b) (1988), if that was FGT’s intended

policy.

This Honorable Court is not asked to review the issue of

interpretation of the tariff, nor the complex issue of undue

discrimination. The sole question to this Court is: Under

prevailing law, if a U.S. District Court in a litigated anti-

trust proceeding between two competing retailers finds

that an agency action creates such an obstacle to one re-

tailer’s access to a supply of the product it requires that it

is compelled to seek its supply through its competitor,

which then demands a monopolistic price for the product,

is the agency required to re-examine its action and to find

that an overwhelming public necessity justifies imposing

the anticompetitive condition in the order?

The answer, under long standing precedent is that the

agency must weigh the anticompetitive impact of its order

and find that some dominant public necessity requires the

action. No such consideration was given by the Commis-

sion.

16

CONCLUSION

' Wherefore, the Court should order that the Commis-

sion’s decision be vacated and the matter remanded with

instructions that the Commission consider the anticom-

petitive effect of its order, as determined by the United

States District Court in the related case of Consolidated

Gas Company of Florida, Inc. v. City Gas Company of

Florida, Inc., 665 F.Supp. 1493.

Respectfully submitted,

Consolidated Gas

Company of Florida, Inc.

Eugene E. Threadgill

Eugene E. Threadgill

900 17th Street, N.W.

Washington, D.C. 20006

(202) 293-4344