# Amicus Curiae Brief — FPC v. Louisiana Power & Light Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0024%3A32 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1972 - **Citation:** 406 U.S. 621 ## Text ve ro % © < e @ 7. e . ® . a a - + : : . . ° € . ° . e . se . 7? ‘ e re 7 . é ‘ 2 z e ' ~ ene . - eh, b . } ‘ — r * > 1 ® Pd : . . » « ey gag Mn: . A ERB ITE F & . : .”™ . t a a ‘ ad . ~~ ‘ ® . @ ” t . . . . . * @ e - ae Supreme Coat The United States. OCTOBER TERM, 1971 - “y wr . : . .* ; No. 71-1016 . Sg TN 7 fo eae FEDERAL Power CoMMiIssIon, Petitioner a, -— F 7s ty LOUISIANA POWER & =o ET AL. ~w No. 71- 1040 . | UNITED Gas Prez Line CoMPANy AND > PENNZOT, . | Unrrep, INc., Petitioners: Vv. a * a ~~, 4 ~~ an s . XN ; LOUISIANA PowER & LIGHT CoMPANY ° 8 Ne “ON WRITS OF CERTIORARI TO THE UNITED STATES — _ COURT OF APPEALS FOR THE FIFTH CIRCUIT AMICUS CURIAE BRIEF FOR THE AS ARKAN — PUBLIC SERVICE COMMISSION _.@ “gs 8 an APPENDIX | | ARKANSAS ‘PUBLIC SERVICE COMMISSION IN THE MATTER OF INDUSTRIAL) CONTRACTS OF ARKANSAS yo ‘DOCKET 1 NO. : LOUISIANA GAS COMPANY ). U-2307 7 . OPINION AND ORDER s oe AL “PROCEDURAL HISTORY, - This proceeding commenced December be 1970, ‘when. * the Arkansas: Public Service Commission (The Commis- @ e 2 .* ee sion) issued a Show Cause Order to Arkansas Louisiana Gas Company: (Arkla)- and to each large industrial gas customer served by Arkla under sales contracts individual- ly negotiated between Arkla arid each industry and submit- - ted to.the Commission for approval. The Commission, with | a few exceptions, had approved these sales contracts, as re- , flected by an Order issued after a hearing on each applica- tion. SS | X "The Show Caust-Order directed Arkla and each Indus- ' trial Respondent to appear before the Commission for pub- . - lic hearing to show catiSe why the Commission should not set aside its Orders approving. each of the negotiated sales contracts. Arkla was required in the ‘same proceeding to show cause why it sHould not be ordered to file. General Industrial Tariffs with the Commission, -under. which all - industrial customers could receive natural gas service. The récitation -in the Commission’s Show: Cause Order . > of: those conditions, requiring it to commence the proceed- | ~ ing included: - | | | 1. The increasing ‘curtailments of natural gas ex- | | perienced by the large industrial customers and the prospects that such curtailments ‘would | -* grow in the immeédiate future; — 2. The threat that the'imbalance between gas de- - mand and supply would result in a rapid deple- tion of gas reserves which. might threaten the gas supply available for human needs; and, _t . | ; 3.. The absence of a coherent and equitable -cur- tailment policy on file with the Corimission. - | The Commission observed that these matters were of great moment to Arkansas and noted that-a reasonably forseeable — “ea . _— fp .: future increase in - Arkla’s gas costs made it incumbent to - decide whether such increased costs could be ratably“dis- - tributed to all classes of=gas customers. The.Commission | also noted the National concern over gas supplies and those calls by the Executive Branch of the United States Goverr- . rent for state and federal regulatory agencies with juris diction and responsibility in public energy distribution " systems to commence dealing with a energy aia pro * : lems. \ Arkla’s ‘Besporise to the Show Cause pare revealed its position to be that no cause could be demonstrated why the Commission’s Orders approving negotiated contracts. | “ should not be rescinded. Arkla further alleged that some | provisions of certain large volume industrial gas ‘sales con- __ tracts were injurious to its ability to acquire additional gas reserves and that these provisions made it. impossible. to establish reasonable curtailment. priorities ‘among large in- dustrial customers... Responses by the industrial buyers were generally consistent in questioning the Commission’s jurisdiction to amend ‘or rescind its prior Orders, of ap- ‘proval, and that.the Commission’s established procedure of private negotiation, submission of the resulting contract to. - the Commission, and Commission approval of same after hearing, was: satisfactory. The industrial buyers also as- serted that the composite and individual results of the pro- | cedure were desirable and in the public interest, and pro-- duced either no injury to Arkla or were insufficiently in- - jurious to Arkla to creaté a serious danger ‘to gas utility service needs of th€ people of Arkansas. Arkla served: its testimonye end exhibits on the Com- mission aigl the respondent industries. The direct’ testi- mony of Arkla’s witnesses, together’ with clarifying ques> tions and as aca during. the hearings totaled 223 pages | . es. ee ee | of transcript. The responding large. industrial customers Rs «requested additional time to file testimony and exhibits and to prepare for cross-examination of ‘Arkla’s witnesses. . The Commission granted this additional "time in the inter-- est of procedural fairness, in that Arkla’s. direct evidence ‘was uniquely at its disposal, since Arkla had familiarized. itself with muth of the relevant evidence in preparation — for recent proceedings before the Federal Power Commis- ° sion and also because many of the respondent large indus- trial customers could not fairly be expected*to speedily . prepare evidence for a hearing by a <—s"? tribunal before which they had not heretofore appeared. ~ | Cross-examination of Arkla’s” -witnedses commenced on * February 15, 1971, and, with, short recesses, concluded on March 18, 1971. This exhaustive cross-examination by 10 of the responding large industrial buyers and the Commis- sion’s staff,. together with questions fromthe bench by _ members of the Commission comprise approximately 2523 pages in the hearing transcript. Direct evidence was served | on April 1,74971, by some large industrial buyers which comprise approximately 250 pages with the entire. tran- - script totaling 4359 pages. Arkla and the Commission staff cross-examined the -industrial witnesses, from April 29th, | to May 5th, 1971, at which time the longest proceeding in , the history of ‘the Arkansas Public Service Comfnission concluded. Including ‘the briefs simultaneously filed on June 18, 1971, by those parties electing to do so, the sup- plemental. information required of various parties during the course of the proceedings, and the Commission records of earlier relevant cases which were incorporated by. * feference, the Commission had before it approximately ’ 10,000 pages of material pertaining to the case. . ° - EH portions twee h4 6 Me ate a ” PT ee ree nen Te . 4 . — - . ° ‘5. - + =: ia aa 8 -'B. THE CURRENT STATUS OF ARKLA’S , GAS SUPPLY a The supply, of natural gas available to Arkla is in- adequate - to take care of the requirements of its existing _ _ customers. The record shows that the volumes of gas which | Arkla can ‘obtain from its various production sources, pur-— chases from gas producers and pipeline companies is insuf- ficient to. meet the normal peak demands of its customers and their annual requirements necessitating curtailments ‘far in excess of those experienced’ during cold weather | | perigds in prior years. For its Ark-La-Tex integrated sys- tem, Arkla’s peak day deficiency is estimated to reach. 808 500 1 Mcf in the 1971/1972 and 849,600 Mcf in the -1972/ 1973 winter heating seasons. The estimated’ annual ‘de-_- ficiency of supply amounts - to 50,615, ‘for 1971, 114,594,000° Mcf for 1972 and 162,450,000 Mcf for 1973. ; ‘These annual deficiencies represent 10. 39%, 23.02%; and 32.16% respectively of the total requirements and 14.39%, 31.71% and 44.18% respectively of the requirements of _ Arkla’s main line industrial customers. No ‘convincing: ‘challenge has been made by any party to these proceedings to the evidence submitted by Arkla demonstrating that its existing gas supply is critically short and ‘incapable of supplying the requirements of the resi- dential, commercial and other human needs customers in the future without making drastic curtailments in the de- nee of gas to its industrial customers. The shortage of gas supply i is not unique to Arkla. It is © of national proportion; and is of such. magnitude and in- volves such dire consequences as to have, generated re- - medial action at both the federal arid state. levels. As the Commission pointed ‘out in its Order of December 11;' “1970, . the dimensions of the present-scarcity of natural gas was * x) ws — 7 . ° a . : 6 - not forecast until some two years ago. The, evidence shows that Arkla’s officials, while aware of the possibility of an impending shortage, did not récognize its depth and serious — consequences until sometime in 1970. Moreover, during — that, intervening period of time, the Company aggravated ‘tHe. ‘situation by attaching additional industrial customers _ to its system having total daily requirements of 34, 160 Mcf. On March 11, 1971, Arkla advised the Commission of its. - _ intention not to serve new indystrial customers either un- | der contract or presently, filed tariffs. . Arkla,. in May, 1970, filed an application with the —— Federal Power ‘Commission for a certificate to construct and operate a, large diameter natural gas pipeline into the Deep Anadarko Basin of Oklahoma and the Texas Pan- *handle to secure additional gas reserves for- customer re- . quirements. Arkla received a favorable decision from. the Presiding Examiner on. June 29, 1971, with respect to the first phase of the project. The Examiner’s decision is now © ; pending. before the’ full Fedéral Power Commission.* The = ‘Arkansas Commission, along with the regulatory commis- _ gions of othgr states served by Arkla, has supported ‘this © endeavor of Arkla to@ugment its- gas supply. A favorable decision by the Federal Power Comrnission in the near fu- . ture is hoped for by Arkla, this Commission, and Arkla’s | “customers... However, even assuming near term approval, ) . tis doubtful that the Anadarko gas will be available until the 1972/ 1973 heating season. In. the meantime, Arkla intends to > tech eich addi- _ tional gas reserves in itsvexisting supply areas as can-be , ~ secured. Arkla is in the process of developing the ‘Ruston | _ storage field which will provide an additional source of gas . — to meet its winter peak demands. It is also abs ead the | 1 FPC Docket No. CP70-276 a . wa. Ss i _ : a we o¢ . . . . ~~ , Federal Power Comniission to grant it relief from. its ‘con-- tractual commitments to supply gas to two interstate pipe- line companies. at tirnes when gas is needed to- ‘supply the | 7 human needs requirements ofits Arkansas customers.* Despité possible succéss of these several efforts, to. re the deliverability of the Arkla system so that it ‘ean supply the anticipated requirements of its customers, _ the magnitude of suclf possible improvements - in gas sup-. ply will be insufficient to avoid massive curtailments-dur- ing-the coming winter heating season. It is with the difficult problem inherent in curtailment priorities that the Com- . mission must’take action in order to protect the interests of Arkansas citizens who depend on a supply of gas for space heating, cooking, water heating, and other human needs requirements. _ COMMISSION JURISDICTION TO RESCIND OR ‘yAMEND PRIOR ORDERS: 8 2. By action of the Arkansas Legislature, the Public . ervice Commission was entrusted with the power and - jurisdiction to regulate and supervise public utilities serv- ing the people of Arkansas, and “. . .to do all things. . .that -may be necessary or expedient in the exercise of such pow- er and jurisdiction.’ "8 Specific authority, subject only’ to procedural fairness, was given the Commission to “. . .at ariy time, and from time to time, . . . rescind or amend any de- cision made by “it.”* The jurisdiction pf the Commission to amend or rescind apy prior order approving industrial gas 3 FPC Docket No. RP71-122 °° a 3 = Stat. Ann. 73-202 4 Ark. Stat. Ann. 73-280 SOL ELE LR OE LIA APE MGR . 9 OR MEO EIEIO, AS ROR Ig’ «ON Se . ge FN contracts ‘was strongly challenged during the course of the hearing’ in this case and extensively argued in briefs. A “number | of large industrial customers argued that Act. 4 of 1965° (hereinafter “Act 4”) repealed, by. implication, the. - Commission’ Ss power to review its Orders and Findings in- - sofar as this particular ¢lass. of ‘utility consumers is con- _ cerned. Act 4, in it entirety, reads as follows: _ “Public utilities are authorized to contract for sale, on an interruptible basis, of utility Aervices at agreed prices for a: definite term not to ex twenty-five (25) ‘years with customers whost use of such service is, for manufacturing, generation, processing, prepara- | tion of products, or industrial purposes; provided that such contracts shall be subject to approval by the pub- lic Service Commission before becoming effective. * Such contracts, after approval by the Commission, ‘shall continue in full force: and effect for the“term thereof.” 7 rae ee. A. Na tll For the reasons set out: in the following discussion and _on the basis of its findings in this proceeding, the Commis- sion rejects the argument that the Legislature intended to, create a preferential class of' utility consumer who would be insulated “from regulatory scrutiny for as much as a ~ twenty-five year period. Accordingly, the Commission hereby asserts its statutory power to amend or rescind its \ _ prior: approval of long term industrial contracts upon a _” showing that the public interest so demands. - - It should be noted at the outset that Act 4 cannet be re- - Barded as applicable to all Commission Orders reviewed in- _ this proceeding. Those contracts entered into and approved 5 Ark. StatgAnn.'73-275° (1969 Supp.) 4 9 prior to the etfective date of’ Act 49 cannot. be deemed: ‘sub-— “ject to its alleged preferential effect. If: the Commission \ adopted. the argument of. the large industrial customers ° cs that once Commission action occurred, such agreements were sacrosanct for their entire term (which, as indicated, could be up to 25 years), then the Legislature manifestly _ could not. have intended to retroactively insulate. contracts — approved prior to Act 4, when the Commission was ‘un- aware of the long-term implication of its Orders. Another. category of large industrial customers are those custamers who shave renegotiated contracts since aos ap- 7 4 © Act 4, with its Emergency Claude, a effective Janyary 25, - 1965, with the signature of the. Governor. Orders a con- tracts prior to this date are: ae CUSTOMER . BS exer: NO. * oe Arkansas Chemicals, Inc. a * U-1673 ~ _ Arkansas Elec. Co-op Corp. . > oe, Augusta U-1819 - - Arkansas Elec. Co-op arta 2 4 Ozark . ; U-1583 - . Arkansas Power & Light Co. ° ' H. Spgs.,-NLR, Stamps, U-1443 . Helena . _ U-1383 « Columbian Carbon . ’ U-1476 Continental Oil Company . = U-1850 - Monsanto Company \. . - *U-1444 United States of Ame ; Pine Bluff Arsen U-1282 2 a . | 2 Sk a 10° . | | proval.’ Such renegotiated: contracts are not the same con- tracts approved earlier by the Commission, and, insofar as the Commission is —< ‘such contracts in their re- . ~ ens @ negotiated form are again subject to Commission scrutiny. | ‘Consequently, the following discussion of Act 4 relates essentially to those contracts negotiated and approved after the effectiveness of Act 4, which have not subsequently _ ¢ ; hy e- "2 Renegotiations have apparently taken place on contracts initially ‘ approved in the following Dockets: . ; feo _ DATE OF ., NAME OF COMPANY . DOCKET NO. | AMENDMENT Aluminum Co. of America U-1945 _ July 30, - 1970 . Ark. Elec.. Co-op Corp. . 4 ot Pode A _ Camden J-2070 _- June 9, 1970 Ark. Elec. Co-op Corp: ' uP ‘ > ° Ozark , U-2071 June 9, 1970 : Ark. Elec. | Co-op Corp. , a ' Augusta _. U-2072 - June.9, 1970 Arkia Chemical Corp. — se es ty cae Be -* Helena U-1891 «© October . 16, 1970~ ae -.. Arkla Chemical Corp. ; see oa - Gurdon - - - -U-1987 November 3, 1970 “Ark. Cement Corp. . U-1477. ~~ October 26, 1970 °° Ark. Chemicals, Ince. ..U-1673 ~ January 26, 1970 Benton Light Imp. Dist. }, U-1985 ‘December 16, 1969 Great Lakes Chem. Corp. U-1955 ~ ‘January 19; 1970 ~- Malvern Brick & Tile Co. ' U-1948 - January 23, 1970. Minn. Mining fg. Co. U-1949 . February 12, 1970 Nekoosa-Edwatds Paper Co. U-2036 May 20, 1970, ‘ y oe ’ ° g a 4 ® ~~ ‘ ' rer ; \ id , a, SS . eee ————— . * 11 been renegotiated, ie., doés this Commission have the jurisdiction to as We its, prior approval of such’ con- dracts? THE POLICE POWER OF’ THE STATE Iti i no ‘longer open to question, in the face of the con- sideration given the issue by nurherous. courts, that ‘a con- tract between a public utility: and a consumer is sibject to “ thé police power of the State, and must fall where the : pub- ty * lic interest so demands.* The United States Supreme’ Court . | “has long since ruled that a State. ‘may: ex ‘its police 3 power" to regulate public utilities and fix rates, notwith-: ~ standing thaf the" effect may be to modify. or abrogate pri- | % _ ” FOOTNOTE 8 . oe These contracts were approved by Orders j issued in the en Dockets: post : Date a aa Contrart APSC PSC CUSTQMER : "5 ‘Date Docket Order: - After Jatuary 25, 1965 ake: bi cea ee oF, - Acme Brick Company ~ wee 1-26-66 U-1961- 3-26-66 . Aluminum Co. ef America *» . 12-30-65 U-1945 —.2- 3-66 én “American Oil Company ' 2-28-66 U-2000. 7-14-66 — Ark. Electric Coop.. Corp. 7 Camden. ee Be 1267» U-2070 7-18-67. Ark. Electric Coop..Corp. Lk bie¥,. @ -Augusta ee Pas 6- 1667 U-2072. 7-18-67 . Ark. Electric Coop. Corp. 5 ® ie nara, Ozark o 6- 1-67 U-2071 ‘| 7-18-67 _ ‘Arkansas Kraft Corp.” *, 9627-65 ©U-1967 ° 3-22-66 * Ark. Lightweight Agere. Cexp. ‘ * 1-21-66 01900, 3-22-66 ¢ _» ‘Arkansas Power & Light Co. . aoe . _¢ ‘Helena , ois-es U-1892 5-19-65 , ‘Arkatisas Power & Light Co.” . Hot Springs N [0-13-66 U-$025 / 11-20-66 . _ , Arkansas Power & Light Co. oer ae : - Helena = 4-20-70, U-2272 9- 4-70 Arkansas Power & Light Co... : . Mabelvale ae " 4-20-70. U-2271,. _% ot. (FOOTNOTE 8 continued) _, Arkla Chemical Corp. X 8 * Gurdon : “S Arfla Chemical Corp. : Helena =... | - Baroid. Division, Nat’l. Lead Co. ‘Benton Light’ Impr. Dist. No. 1 Berry Petroleum Company , Stephens Berry Petroleum Company Waterloo - Bromet Company , ‘The Celotex Corporation. Conway Light, Power ‘& Water Cross Oil & Ref. Co. of Ark. Dierks Div., Weyerhaeuser. Co. ~ Pine Bluff & Perkins ¥ Dierks Div., Weyerhaeuser Co. Dierks § - Great Lakes Chemical Corp. A.P. Green: Refractories Co. — Ideal Cement Company — International Paper Company" Pine Bluff, Camden, Malvern MacMillan Ring-Free Oil Co. - Magnet Cove Barium (Dresser ‘ ‘Magcobar, Div. of Dresser, Inc.) - ‘Malvern Brick & Tile Co. ‘Minnesota Mining & Mfg. Co. . Monsanto. Company : Nekoosa Edwards Paper Co. ‘Olinkraft, Inc. ee : Humble Oil & Refining Co. . _+Phijllips Petroleum Co. . Remington Arms Co., Inc. © - _ Reynolds Metals Co. ; ‘Bauxite, Lake Catherine & HS. Reynolds Metals Co. ~ sot g Arkadelphia © Union Carbide Corp: 4- 6-66 12-29-65 3-15-66 "12-29-65 12-29-65 1-27-69 3-18-66 9-23-66 12-30-65, 3- 4-66 ~ 710-69 1-12-66 12- 9-65 12-15-69 1- 1-66 12-10-65 1-11-66 12-15-65 - "12-28-65. 12-16-66 12- 7-66 6-25-69 “41- 1-65 6- 4-69: U-1987 U-1891 U-1950 ‘U-1985 U-1952 , U-1951° U-2192 - U-1986. U-2032 U-1953_. U-1983 U-2223 U-1955 U-1963 ‘U-2269 U-1962 U-1947 U-1954 U-1948 U-1949 U-2038 U-2036 U-2221 U-1966 U-2222 U-1965 U-1964 U-2037 5-24-66 5-19-65 2- 3-66 5-24-66 2- 3-66 2- 3-66 6- 9-69 5-24-66 12-29-66 © 2- 3-66 . "5424-66 12- 5-69 3-22-66 -» 3-22-66. — — 9- 4-70. 5-24-60 2 3-66 2- 3-66 2- 3-66 > 2- 3-66 12-29-66 — 12-29-66 — 12- 5-69, 5-24-66 12- 5-69 —-§-24-66 §-24-66 12-29-66 ° Dein sty ne Raa i cal 4 “18 . ¢ vate contracts.® The Arkansas Supreme Court has charac-’ - er the power to regulate rates of pyblic utilities as: : | os an inherent attribute of police power or.sov- _ereignty existing in the State, which may be exercised at any time through any state agency for the purpose of establishing just, equitable and reasonable rates under such circumstances as may exist at the time., It is. an attribute of ‘sovereignty . . in, contemplation of which all contracts and agreements must be made, i THECOMMISSION’S OBLIGATION TO INTERPRET ITS ' LEGISLATION AS*CONSTITUTIONAL | ‘AND REASONABLE » 5 It is inevitable that where legislation could be constru- _ed, as some large industrial customers have so construed ~ Act 4; as yielding up a fundamental attribute of govern- mental sovereignty; the question of the constitutionality. of the legislation arises. This Commission has not had past | occasion to take a position on whether it should make a “de- termination of the constitutionality of legislative enact- - ments dealing with its duties. It is, however, the opinion of the Commission that it lacks both the power and the special — competence to rule on the constitutionality of legislation — and regards any effort to do.so by an agency which is a. creature of the legislature as a violation of the institu- - | tional proprieties of the relationship. 11 ® Producers Tramsp. Co. v. Raliread Colimissions, 251 US: 228; Union Dry Goods Co. v. Georgia Public Serv. Corp., 248 US 372; Pipe Line Cases, 234 US 548; Louisville & N.R. Co. v. Mottley, 219 US 467; Munn v. ‘Illinois, 94 US 11. 10 Camden v. Arkansas Power & Light. Co., 145 Ark. 205; Clear Creek Oil & Gas Co. v. Fort Smith Smelter Co.,,148 Ark. 200. on DAVIS, ADMINISTRATIVE LAW TREATISE, Vol.:1, Sec. 20.04 ae i eee However, two fundamental and interrelated principles of interprétation of legislation are here concerned. One, the “Golden Rule of Statutory Interpretation” is that where . alternative constructions of a statute are possible, the rea- sonable interpretation must prevail over the unreasonable. arid the constitutional alternative over the unconstitu- _ tional. The other principle is that an administrative agency has a duty to construe and determine the applicability of a statute so as to avoid attacks on both its reasonableness and its constitutionality..2 Applied to the, Commission’s inter- pretation of Act 4, these principles compel it to determine the’ most reasonable and least constitutionality vulnerable ~ - application. The interpretation pressed by the large indus- trial customers ‘is neither the most reasonable nor the most constitutionally ‘acceptable, and is rejected. To construe . Act 4 as repealing, by implication, the Cemmission’s powers _° to review its Orders would require the Commission ,to de- fend, as: “reasonable”, .a construction which places some — 70% of the.sales of Arkla beyond the continuing review essential to effective regulation. * The Commissiog finds that the General Assembly did not surrender its’ police - -power to regulate public utilities, nor curtail the Commis- -sion’s’ jurisdiction for any length of time or any term of _ years, by the enactment of Act 4 of 1965. | 12 DAVIS, ante. ° 4 - 13 ; - : ‘ For the Commission to presume the Legislature intended to cen- fer upon this class of utility consumers secial rights ‘might place Act 4 in conflict with specific provisions of the Arkansas Constitu- tion, ARK. CONST., Art. 17 established limitations on the General Assembly, with respect to its enactments relating to railroads, canals, and turnpikes, the ‘‘public_ utilities’ of the:-day. However, Sec.:9 of ° that article, prohibiting the. Legislature from abridging the State’s right of eminent domain, was assumed, by the Arkansas Supreme - Court to be applicable where the utility. in question was, a water company. City of Helena v. Ark. Utilities Co., 208 Ark. 443, 186 S.W. » —. ——__—__—_—-s — ° ° . - to public utilities as they 15 (FOOTNOTE. 13 continued) 2d 783 (1945). Article 17, ‘Sec on “10 (as amended by Amend. 2), di- rected the General Assembly; to “.: pass laws to correct abuses -and prevent unjust. discrimination and excessive charges .. .” of railroads, canals, and turnpilse companies, and to create “. . . such authority as shall be siieaaaa 4 to Sry into, effect the powers hereby conferred.’' ; ae iia ‘Early Arkansas veraluiney.« commissions wére duly establishe — See .Generally THE GROWTH OF UTILITY REGULATIONS IN ARKANSAS: A FUNCTIONAL SURVEY, 21 Ark, L. Rev. 539 (1968); - and in Helena Water. Co. v.' Helena, 140 Ark. 597, 216 SW 26 (1919), . an Act which expanded the ‘power of the Arkansas Corporation Com- mission. to regulate water, ‘gas, street car, and telephone companies, . was upheld as authorized | ‘under Sec. 10, and the new Commission was to apply the same power to correct abuses. A subsequent re- structuring of utility regulatory agencies, which specified’ that the - Commission should be empowered to regulate all public service cor- porations, companies, and utilities was deemed in Southeast Arkansas Freight Lines, Inc. v. Arkansas Corporation Commission, 204 Ark. 1023, 166 SW2d 262 (1942), as legislative response to the ‘‘pnstitu- tion mandate’ of Art. 17, Sec. 10 (as amended by Amend. 2). The principle established by these cases is that of judicial recogni- tion that the 1898 constitutiqral language, which listed those public utilities of the moment, estas a constitutional policy applicable ame identified as such, and that ‘‘. . . the rule of exclusion of those things not expressed does not apply.’ ” Helena Water Company, supra, at 605. For this Commission to construe Act @ as an effort by the General Assembly to withdraw from this administrative agency and future ‘ legislatures the power to correct abuses and discrimination would be -improperly assuming a legislative intent squarely emai to = sas constitutional policy. / i. ~~. | 16 _ THE REASONABLE AND. CONSTITUTIQNAL | « PURPOSE OF ACT 4 | . * The judicial’and legislative background against which™ Act 4’must be viewed demonstrates that the Arkansas General Assembly intended a measure which would. act intersticially to clatify a matter of interest to industries and gas companies alike. , . . » Early opinions ‘by the Arkansas Supreme Court raised serious questions as to the extent either party to a contract between an industry and’a public utility was bound by -the contracttial provisions. In Harrison Electric Company v. Citizens Ice & Storage Co., 149 Ark: 502, 232 SW 932 (1921), an industfial utility customer had executed a contract, with oa) a public utility with a specific rate. The utility subsequent- © ly and unilaterally filed a schedule with the Commission which increased this rate, giving no notice of the change to the customer. The Arkansas.Court held that filing with the Commission constituted adequate riotice, and that since the statute had been satisfied, the new rates superseded any contractual rates theretofore established wetween the par-' ties. The Court held, at p. 507, that “There could be no: valid contract as against the power of public control of the * Commission.” Other Arkansas cases, ‘with strong observations on the _ limitations ‘on the power of public utilities to make con- tracts have ‘left further doubt on whether such contracts. were worth anything.“* The issue came to national attention in United States "Gas Pipe Line Co. v. Mobile Gas Corporation, 350 US 331. . . 4 See, eg., Clear Oil & Gas Co. v. Fort Smith Smelter Co., 148 Ark. 260, where the Court held that contracts executed while the Seller even contemplated becoming a public utility “... _constituted, in effect, an invasion of the public right .. .”. GSMs sire oer r 5 ~ (1956) _ Federal Power Commission v. Sierra P. P. Co, 5 350 US 348 (1956). In Mobile, the question was whether, under the N atural i Gas Act, a regulated natural gas company furnishing ga gas — ‘under a long-term contract, could changé the rate by filing — anew rate schedule, against the protests of the purchaser. _ : The provisions of the Natural Gas Act, at issue in the Mobile Case, supra, were somewhat ‘similar to the Arkan- ‘ sas laws dealt with by the Arkansas Court in the Harrison Case, supra. The United States Supreme €ourt, however, — reachéd a somewhat different result. It held that the filing provisions in the Natural Gas Act did not confer new pow- - ers on gas companies which‘ enabled them to unilaterally _ . change contracts. The Court found that fio impairment of) ‘the regulatory power of the Commission was effected. By ‘preserving the integrity of\/contract to this extent the. Natural Gas Act, as eonstru€d, reached the objectives set - out in the Emergency Clause of Act 4; i.e., to permit the . Stability of supply arrangements and to allow industrial _ users to make substantial investments they would be un- willing to make without long-term commitments from the Seller. The Court observed that such commitments could -not be. made if the contracts ‘were subject to unilateral change by the natural gas company whenever its interest _ So dictated. However, the Court made it plain that denying to gas companies the power to unilaterally change contracts “in. "no way impairs the regulatory powers of the Commission, for the contracts remain fully subject to the paramount | power of the:Commission to modify them when necessary in the public interest. ” The relief avenue ‘for aa companies was held to be . Ma ” . 2 ae | | 18 could initiate proceedings to obtain relief from their own contracts and.furnish any relevant information showing the’: contract rates are so low as to be in conflict with the public interest. 5 ue we ~ ‘The parallel between the Mobile Case and the Arkansas ~ gpbractice is a reasonable explanation of why the Legislature . ©’ geemed Act 4 to be the method by which Arkansas cases . such as Harrison, supra, could be clarified, ‘and. industries given protection. Prior to Act 4, long-term contracts were of questionable value to the parties entering into ‘the con- tract, and a gas company conceivably could unilaterally change its contract rates. After Act 4, if the Commission approved a contract, it became binding and enforceable as_ between the parties. As the United States Supreme Court noted in the Mobile Case, supra, adequate certainty was , given’industry to enable it to make large investments by 7) ae this protection, and it was neither necessary, reasonable, . snor intended, that regulatory. agencies be bound by such contracts. 3 | a eA PGs THE SHORTCOMINGS OF NEGOTIATED CONTRACT RATE MAKING 7 There are presently 48 separately negotiated industrial. | ‘contracts on file with this Commission. The price, escala- -- tion clauses and other provisions in these contracts vary © _ widely ‘regardless of the fact that the service rendered is essentially the same. ‘The prices set forth in the contracts _ vary from .2675c per Mcf to .4025c per Mcf. Neither the | volume delivered; the end use of the gas purchased, nor the intetruptibility of deliveries explain these price variances. exacted from some industrial customers before they could . ° = __. through the Federal- Power Commission-The gas :companies oe Moreover, large contributions in aid of construction were _ Preller . “ i9ti ’ obtain service from Arkla, “as a matter of policy,” and with-- - oat a showing of the economic feasibility of the project.’ _ “Negotiation,” in the context of utility services, apparently .- - _ is a process whereby customers may ‘be treated differently. where no rational basis for such distinction is apparent. The Commission’s overriding obligation to the public is such that it can no longer assume that because Arkla and its industrial contract customers were at ong-time satisfied with the results of their negotiations, that the public in- terest is presently served by these contracts. The contracts, in the.main, were negotiated and approved when there was no thought by Seller, Buyer, or the Commission, that the~ apparent abundant supply of gas wpuld-not continue into the indefinite future. Decisions of Arkla’s management, it industrial, customers, and this ‘Commission were premised - on near-term facts as they then appeared and an assump- . tion of a never diminishing supply of natural gas. This | assumption is now conclusively proved to be erroneous. Under the aegis of negotiated contracts there is no . forum or procedure for the Commission or the Commission Staff to look at the entire picture and to take action when necessary to ‘protect the interest of other customers of the utility from adverse consequences which may be brought about by the negotiated contract terms under changing conditions and eircumstances. - For the Commission to stand idly by and | allow the "agreements between Arkla and its customers to dictate the extent to which the diminishing available supply of natural — _, gas for which there is no economic and practical alterna- tives, will be made available to the people of the State of Arkansas and the manner of its distribution would, in .our 1 An sani is the OlinKraft Contract dated June 25, 1969, and approved by; the Commission in Docket No. U-2221. e + \t \ . ‘ c ‘ . 620 7 judgment, be an’ abdication of the Commission’ ‘s responsi- bility which would lead to disaster. The obligation ahd re- sponsibility. of this Commission under the Arkansas Stat- utes forbids such nec on our part. D. ‘ARKLA’S PR OSAL TO ‘ADOPT A TARIFF IN LIEU OF IND VIDUAL INDUSTRIAL- ‘CONTRACTS AN filed a proposed tariff (Exhibit . 13) applicable . . to Large Industrial Customers designated as “P.S.C. Sched- ule Number 4” and consisting of Original Sheets 1-15 in-— -clusive. P.S.C. Schedule Number 4 provided for (a) State- | ment of Availability, (b) List of Customers, and (e) Form ~ \ of Service ‘Agreement. It also included the following: | \ RATE: “The unit price per Mcf for gas delivered here- under shall, as to each purchaser, be the unit price - per Mcf specified in that customer’s superseded contract previously in effect, complete ‘with -all price adjustments. applicable under the contract, except that there.shall be no price ‘adjustment, * penalty or payment of whatever kind for any = ; tailments of interruptions in the suppy ‘of gas.” Arkla’s proposed P.S.C. Schedule Number 4, as Arkla’s case was presented, would supersede the industrial con- tracts in their entirety in the event the. Commission “set aside” its prior approvals of said contracts, save for the - foregoing “rate” clause, which preserves existing unit _prices-and omits penalty provisions. ‘Specifics of gas de- livery for each customer > be set out in thé Service Agreement. _ When the Commission held in an sottioe case! that a: 3 Docket No. U-2297, In the Matter of the Application of Arkansas - Louisiana Gas Company for the Curtailment of the Supply of Gas to its Industrial Customers. STM IT TG. sis Pi Lastithe Ve e DES Paces dn EMU incase “curtailment, priority list iaoaed by Arkla was diserimina- tory on its face and that the prices in the contracts negotiat- ed between Arkla and its industrial customers did not pro- vide any necessary relationships between curtailment priorities and prices to be paid for -gas, it recognized that . @jpsome time prices\and supply priorities must be related. The instant proceeding fell short of acc plishing this goal, However, the record is complete as to provisions in : three of its existing industrial contracts which Arkla con- . _ tends‘ would’ represent a substantial financial burden in. . view of future anticipated curtailments of deliveries under such contracts.? y 4° . . Arkla’s proposed tariff to iotraaes the einen bills of its industrial customers above the levels provided in the individual industrial contracts. In addition, Arkla proposed _ to effect a uniform adjustment for the\heat content of the gas it delivers which represents a deviation from the exist- ing heat, content provisions of most industrial contracts. Based on consideration of the evidence, the Commis- sion concludes that justification has not -been- shown on . this record for increasing the minimum bills of ‘industrial customers to the level proposed by Arkla, nor does the evi-. dence support any ea elt in the minimum bill level. While a uniform heat conten adjustment provision is desirable, it is deemed that because of the relationship between this proposed adjustment and the prices per Mcf set forth in’ . ' the contracts to which it is appli¢able, no sound basis exists in this record for Commission. — thereof. © -* The. purported rate parma provision in the ‘Continentai Oil Company Contract was not filed with or approved by the Com- mission, thus only two existing contracts with’ Arkansas Power. & Light Company contain a rate provision’ requiring payments to Arkla in the event of curtailments renin Selecta a annual — ‘ | ; 22° The evidence submitted by Arkla as to the potential efféct of ‘the : price adjustment clause due to curtailment of © deliveries of gas to Arkansas Power &. Light Company at that company’s: Helena No. 2,and Lake Catherine No. 4 _ steam electric plants below 97% of the gas requirements of guch plants, con¢lusively shows that the large curtailments which Arkla claims will occur in the future would serious- ly impair, if not destroy, the ability of Arkla to attract the capital necessary ‘to provide the additional gas. supply essential to the welfare of the people of Arkansas:* More- over, such price adjustment clause is unduly discriminatory and preferential as regards to other customers of Arkla. _ Therefore, dominant considerations of the public: interest | impel the Commission to exercise the police power delegat- ed to it by the Legislature and to set aside = nullify such - _ price adjustment provisions. | Arkla has. submitted a eurtaihnenti program as a com-— ponent part of its proposed General Terms and Conditions. Its curtailment plan for large” industrial customers differs in several respects, from the curtailment plan submitted to_ the Commission in Docket No. 2297 and also from the pro-. visions incorporated in most of the special industria} con- tracts which typically read as follows: “This, service is interruptible to the exent neces- sary to supply human needs domestic. and com- mercial consumption and such small industrials as cannot practically be interrupted without inter- rupting a parity, insofar as parity can practically , : be obtained, ‘with ‘service to Seller’s other indus- 3 For the 1971/ 1972 nonting, this payment is estimated at. $8,918,000 - ‘based on the difference. between the cost of gas and. the cost of fuel oil. The payment: would reach mutch higher levels. ‘in future _ unless Arkla is able to. —" its gas ites = eae Ware trial pur rs of Buyer’s class served undér sub- ; tify similar terms and conditions.” © es to supersede the contract’ curtailment provision by a four step formula based on load classifica- . * tions. In the first category (A) to be curtailed would be. large. users of gas. for boiler fuel where an alternate fuel cai™be used. After this .load classification had\ been fully ' curtailed, category (B) loads would be curtailed. This >. category consists of large’ users of gas for fuel or as: a raw material where an alternate fuel cannot be used and curs tailment would require plant production to be curtailed or completely shut down. A third category (C) includes - deliveries to small industrials, regular ‘commercial loads and gas for pilot lights or accessory or auxiliary equipment _ _ essential to avoid serious damage to, industrial plants. The — final category (D) includes the human need users of gas for residences, ‘schools, hospitals, churches and other human needs customers. It is not contemplated that this - classification will be curtailed absent ‘a ‘Force Majeure © -catastrophy.” Bo. While the industrial customer respondents fully rec- | ognized the priority: of human needs over their use of gas for industrial purposes, a number of objections were made - to Arkla’s curtailment proposal. In genera] these objections centered.on Arkla’s past administration of the existing con- tract : ‘provisions as to interruptibility and their fear. that with massive curtailments in the offing, Arkla’s curtail- . ments would not be made on a parity basis. Criticism was’ made of Arkla’s failure to curtail its deliveries to Mississippi River Fuel Corporation and Cities Service Gas Company to the extent permitted by its. contracts. with the two inter- — _ State pipeline companies to the detriment of Arkansas in- dustry. As mentioned earlier, sia — curtail . —soaptnptznti ys oe 58 gm LOE IO DI IIE LITE LINE NOLEN LL ARE ERY LEVEL ELON D AGE \ ‘ a ‘ & 24 ments of such deliveries are presently subject to a proceed- ing before the Federal Power Commission, and the curtail-_ ment. policy laid down by this Commission in the instant Order requires, to the limited extent possible under the _ ‘Commission’s' jurisdiction, fairness to all of Arkla’s cus- tomers. - Reference was also made in the record to- Arkla’s" failure in the past to curtail at all or to curtail on a parity basis certain industrial ‘concerns owned by Arkla or its \subsidiaries. However, the most serious issue concerning kla’s curtailment proposal involves its application to Ar Power and Light-‘Company which is Arkla’s | | large single, customer, buying approximately 40% of the . - plants’(11 units) kilowatts and represe Compan = et sales of gas for industrial use, Most ofthe gas purchased by AP&L from Arkla is burned under boilers to generate electric énergy in four ing an installed capacity of 2,056,000 ing approximately 87% of its: total generating capability. A Small portion is utilized in two gas turbine’ generating plants haying an installed capacity % of 91,000 kilowatts. In 1970 appteximately 907% of the’ Company’s electric ‘energy output was~generated. in its ; ’ own plants, the balance being purchased from.affiliated ‘and non-affiliated utilities. . | — es oe _ ‘Arkansas Power & Light has installed equipment ‘to . ‘burn No. 6 oil as standby fuel at all of its steam electric plants which are now using gas-supplied by Arkla and has provided- limited fuel storage ‘facilities. These alternate : -pany, hydro generating plants of 69,000 kw installed capacity and. - a diesel plant of 6,000 kw installed capacity (AP&L Exhibit No... RS ee, . & ® . . ° . ‘ e e ee | fuel : installations have — adequate j to take care of the short term curtailments imposed by Arkla during the past winter heating seasons when the demands for gas for space heating purposes has- required curtailment of ‘industrial customers. The growth in the burning of fuel oil by AP&L inthe past six years because of’ curtailments has been | phenomenal, as is illustrated in footnote No. 5 — Evidence was offered by AP&L that the alternate fuel equipment presently installed in the generating stations supplied by Arkla is not designed for continuous long term ‘operations, that its prolonged use. results in the aceumula- tion of soot with consequent reduction in boiler efficiency and increases in operation and maintenance costs,:and re- quires more frequent shutdowns of ‘boilers and generating - Itis alleged by AP&L that it would require two years’ time to install oil burning equipment designed for contin-' uous long term, use at a cost of approximately $50,000,000 and would involve extensive plant down-time. AP&L has under construction a nuclear. generating plant near. London, _ Arkansas, with two units having an aggregate capability of 1 780, 000 kilowatts. The, first unit is estimated to be _ placed in service in 1973 and the second unit in 1975. While this nuclear installation will reduce AP&L’s dependence _ on natural gas for generating the bulk of its electric energy supply, .it does not solve the immediate aru of gas . curtailments facing AP&L. _ AP&L Exhibit No. 27: 1965 or 1,746 barrels 2 | : 1966 ae. ae ‘ 1967 26,567” Lo 1968' 128,548.” 1969 , ” : 1970 $41,276” 12 months ended _ ¥ 3 " ‘Feb. 1971 . 1,000,000 —” (approximately) “ 26 | Arkansas Power & Light Company: takes the position that since approximately 58% of its energy .requirements are to supply the human needs requirements of its cus- | tomers which are just as essential as the human needs re- quirements of Arkla’s customers, it should be given a higher priority of service than other industrial customers: when gas curtailments become necessary: The 58% as determin- ed by AP&L is based on the requirements of its own retail domestic and commercial customers (41.5%) and its ‘esti- _ mate concerning the same class of customer supplied with ' power sold to its resale customers (16.1%). The. responsibility of this Commission to protect the interest of ultimate consumers of utility services.is not con-~ fined to gas customers as Arkla seemed to assume through- out this proceeding. On the other hand, “fairness in rates - and conditions of service” is not to be construed as a.stan- dard which favors a utility customer over other vital _ industries. — It is no answer to thé problem faced by AP&L. fro _ Arkla’s estimated massive curtailments to point to the in-- - terconnettions which AP&L has with other utilities and.to simply assume that large volumes of electric energy will _ flow to AP&L whenever it desifes to purchase same. AP&L * will purchase energy to the extent it is available but the ° record does not show the existence of any excess firm — capacity on the systems of such interconnected utilities Ps which would permit AP&L to secure power whenever ~” Arkla curtailed its supply of gas. Moreover, the evidence ‘ reveals the great difficulty inherent in the present highly : competitive. market of securing large quantities of low sulphur fuel oil at any price. The problems of transporta- — ‘tion and of oil storage faced by AP&L is also acute. -- The above evidence makes it: clear that the:utmost con- » | Sideration must be given to the proposal of AP&L for assur- _ ‘ing continuous service to human needs requirements of its © ~ residential and commercial customers. Arkansas Power & Light ‘Company experiences its peak demand for electric energy in the summer months, due to its air-conditioning load, while Arkla’s peak demand fér gas occurs in the win- ter months. For the five months May through September, — 1970, AP&L experienced an average maximum demand of 2,162,200 kilowatts compared with an average maximum . if demand for the other seven months of 1,545,600 kilowatts. | ; . The kilowatt hours of energy output follow a similar pat- gi ne ee a In 1970, curtailments of gas supply in Mcf by months as determined by AP&L and percent of annual curtailment by months are as.follows: | January 3,209,140 22.76 - July None - 0.00 February . 2;108,057 14.95 August © None - 0.00 March’ ~—_-- 668,892 4.74 September 281,135 1.99 April... 221,943. 1.57 October 3,800 0.03 May - 28,190° 0.20 November 2,749,683 19.50 June’ None _ 0.00 December 4,829,002 34.26 Total curtailments represent 13.74% of desired annual = requirements in 1970, however, of the total annual curtail- ments, only 2.19% occurred in the months of May through . September..The evidence for the year 1971-indicates annual -curtailments will aggregate 37.87%. During the 1971/ 1972 heating season, normal peak day curtailments of industrial load is estimated to reach 80% of requirements. The evidence is convincing that it is necessary in the public interest to place the curtailments of AP&L’s gas sup- ply on a more restricted basis than other boiler fuel cus- - tomers who can ‘use alternate fuels. In coming to, this con- 30 informed of his daviictiee classification at to. be placed _ in a position to compare his classification with the classifi-- cations determined by Arkla for other customers. To ac- _ complish these objectives, the prescribed curtailment rule provides that relevant information will be made available to Arkla, to the customers and to the Commission. Customer ‘information on which curtailment classifications will be - made must be furnished to the Cornmission as well as to ‘the Seller. The Seller will give to the customer and tothe Commission a copy of its determination of each customer’s « load classifications, and the amount of daily load required 7 ‘by such customer in each such classification. The Commission recognizes that the day-to-day ad-. ministration of a curtailment schedule must depend on’ Arkla’s managerial judgment consistent’ with policies set > forth herein, However, it is incumbent on Arkla’s manage- ° ment to exercise such judgment on the basis of objective . criteria to the end that. the public interest will be served. _ ‘The Commission intends to exercise its prerogative to re- ‘view management judgments in this.area and to aid it in doing so, Arkla must maintain certain records and make aia reports ‘of curtailments to the Commission. ‘Aside from the matter of curtailment priorities, the evidence submitted by Arkla and other Respondents con- _ cerning Arkla’s proposed General Terms and ‘Conditions necessitates certain modifications and amplifications there- of. These changes are necessary to achieve the desired ob- - jectives of clarity, simplicity, completeness, and technical accuracy. It was recognized by Arkla’s witness, J. N. Clay- - - tor? that certain modifications of the proposed General Terms and Conditions could be ap roprenaly made by the = Commission. | Because of the various and differing provisions of the 9 31: o 49 large industrial tariffs the Commission found it most difficult to achieve absolute uniformity without impinging, to some degree, upon substantive related pricing provi- — sions of the Tariffs. In two instance$: “such provisions ap- peared ta be of such importance to the Buyers and, so — intimately related to the pricing provisions, as to warrant — exemptions pending further order of the Commission in a subsequent proceeding. However, the Commission is of ~ the opinion that the General: Terms and Conditions, herein- after prescribed, are fair, reasonable and non-discrimina- tory in respect to all Large Industrial Customers and to -Arkla, insofar as it is practical to achieve the same based on the evidence in this proceeding. In order that Large Industrial ‘Customers may be in- formed of their right to secure a review by the Commission _ : ; concerning Arkla’s administration of the: prescribed Gen- : eral Terms and Conditions in instances where a dispute may arise, we have included in such General Terms and ~ Conditions a notification in respect to such right. | a E. COST: OF SERVICE EVIDENCE AND FUTURE GAS | COSTS | ‘Throughout the course of these proceedings and in its . Brief, Arkla has stressed ‘the necessity of securing higher _ prices for the gas sold ‘to industry to overcome the higher © ‘unit cost of gas to be secured from its proposed Anadarko _ pipeline project. For the purpose of demonstrating the sub- ' stantially higher unit cost of gas that must be paid by Ar-.. karisas-rate payers, Arkla witness Edward N. Henderson ~ sponsored Exhibit 19. This Exhibit shows the basis for an — _ estimated increase in the average weighted field cost of gas ‘from the 1969 level of 18.8c by 4.25¢ per Mcf in 1971, with - additional increases to 11.21¢ per Mcf in 1974. Estimated © 32 ” maximum increases for the industrial customers above the 1969 level range from 9.88c in‘1972 to 12. 58c per Mcf in “1974. P ‘The 1969 level of cost is based on a cost allocation by Arkla’s witness D. L. Nicol," which was designed ‘to develop the 1969 total cost of service for the Ark-La-Tex system and the allocated cost of service for the Arkansas. industrial | customers. The cost of serving -the industrial customers was determined by Mr. Nicol to be 25. 46c per Mcf against an average revenue from Arkansas ‘industrial. customers of 26.62c per Mcf, or 1.16c¢ over the cost of service. _. An examination of the evidence concerning the cost : allocation presented by Mr.‘ Nicol and rebuttal -evidence . presented by witnesses for industrial respondents reveals - flaws in certain aspects of the former. In error is the use of an average of the winter and summer peaks of Arkla for the purpose of determining the demand allocation factors. This procedure is contrary to the logic and ration- ale of the peak responsibility allocation method, and " Arkla failed to demonstrate why this method should be’ rejected by the Commission. In. the Commission’s prior decisions? concerning the. rates of Arkla, we have used the peak responsibility method, with modifications, to reflect . a 50-50 division of the transmission fixed costs between the .demand and commodity function. Such division is. coupled with ‘the utilization of the coincident maximum T Arkla Exhibit 12 2 ‘See Re: Arkansas Louisiana Gas Company, PSC Docket No. U-1016 * (1955), reported at 10 PUR3d 407; and Re: Arkansas Louisiana Gas PSC Docket No.: U-1311 (1961), reported at 40 PUR3d 209." The Commission’s. decision in’ the first of thése. cases — was upheld by the Arkansas Supreme Court in Acme Brick Com- ae Public Service Commission, 227 Ark. 486, 299 Swad 206 1 ° j 33 demand of the system which occurred in the winter months. This method reflects the. utilization of most of the system’ capacity for human needs. requirements, since the indus- trial sales were being heavily curtailed at that time. | The Commission has not been required, in earlier pro- | ceedings, to deal with costs associated with underground ' Storage. Since all storage costs are ‘properly assignable to the demand function and are allocated on the basis of the : peak responsibility of ‘each customer class, storage costs should be assigned to industrial service only to.the extent. that such service was not curtailed during the peak period. _ Utilization of the summer peak as well as the winter peak - | has resulted in a large share of underground sforage costs — heing assigned to the industrial loads which. are curtailed during the winter peak periods and thus can make no ‘use of stored gas. The result of this procedure has been an over-’ assignment of costs to the industrial customer classification. | In addition to the foregoing deficiencies, ‘industrial Re- spondents allege other errors in the cost allocation, prin-— cipally Arkla’s treatment of the Federal. income tax al- lowance, inclusion of distribution system purchased gas, . inclusion of distribution system losses, use of an excessive: rate of return for equity capital, use of an excessive amount . for capitalization applicable to the Ark-La-Tex system and the determination of the unit value of ‘ company produced gas. The Commission finds no reason to evaluate all of such purported deficiericies since it is not necessary for the ‘pur- . pose of this decisiori to make final judgments, reduced to specific dollar amounts, on cost allocation results. It is suf- - ficient justification’ for the instant Order ‘that the record conclusively demonstrates that cost’ allocation principles should have been but were not observed in negotiating industrial contracts, hat the impact of costs shifts with: 34 " time and unforeseen developments, and the failure of con-* _ tract terms to reflect this consideration makes discrimina- tion between industrial and other customers inevitable. As — gas costs increase, as. they almost certainly will, this dis-~ crimination will be ‘pronounced. A proper’ cost allocation study .will be essential at some time in the future, when — "the Commission is faced with the problem of dealing with the justness and reasonableness of all of Arkla’s rates. : ' The evidence establishes that Arkla has been engaged in renegotiating upward the. prices set forth in most of its industrial contracts (many successfully). and that such _. renegotiations have proceeded along the ‘line of securing. _ price increases for the purpose of defraying costs attributa- ble to the Anadarko project. These costs appear principally . to be those incurred by Arkla’s producing subsidiary Arkla Exploration Company in developing ‘gas reserves in the © Deep Anadarko Basin. Inasmuch as the gas expected to be purchased by Arkla from Arkla Exploration Company will undoubtedly. reflect all of the latter’s costs, oF the fair market value, or the FPC area price, no.compelling reason ; ' was given in this proceedings for the recovery of such cogts: - or a portion thereof through sales being made to Arkla’s ‘customers prior to gas from: the project being delivered to . them. Nor is there évidence that the industrial customers are unwilling to shoulder their fair share of the cost of. the Anadarko gas whenever it is made available to them. On ". the other hand, the Commission must-be in-a position to | ~ ‘insure that they do. Beh ae ‘ ~ Te chould ‘also be emphasized that only the rates. set out in the Large Industrial Tariffs hereinafter specified charged by Arkla. Hereafter, “will be the lawful rates to be ‘such tariff rates may be charged only in strict compliance 25 t ad ss 4 ° : L ; ‘ m ed , o 4 . . g / +t) : Nee er er cree) 35 with the Laws of Arkansas and the Rules and Regulations ‘of this’ Commission. : : Unreasonable discrimination presently exists in the industrial contracts with respect to prices and other pro- visions. By this Order, the Commission commences to eliminate’ those discriminatory results of negotiated con- . tracts which the record reveals to be injurious to the public : interest. Other adjustments appear to be required, and the ‘Commission intends to institute formal ‘Proceedings for - the purpose ° determining just and reasonable rates for gas supplied to. industrial customers under the Large In- dustrial Tariffs of Arkla, and 'to' thereafter prescribe uni- ' form rates for gas sold by Arkla to industrial customers _with similar’ service characteristics and appropriate and fair additions to the Terms rp Conditions oe such - gervice. a . a ae In addition. to the conclusions heretofore expressed a . the Commission further finds: 1. It is in the public interest ‘that the alates gas : available to Arkla for sale to the people of Arkansas be. utilized for the greatest good of the greatest number. of | aa people. To secure this objective, the Commission must ex: | _ ercise continuing surveillance of all of Arkla’s gas sales. 2. After examination of the individual and collective impact on Arkansas’ people and industry of the Commis- sion’s procedure whereby ‘Commission approval. was given, . by Order, to contracts privately negotiated between Arkla — and large industrial gas customers, the Commission a that such procedure:- . (a). has been, is } TOW, and will be,- fatally fee r st 36 and unresponsiye to changes which vitally affect the public interest; . 4 ae ; : :(b) precludes continuing regulatory surveillance and — * . review of the manner in which one ‘of Arkansas’. largest public utilities. sells some 70% of its in- “. : creasingly scarce natural gas; and, . . mt ‘ ‘ . (e) would, unless changed,. impose future cost in- : "Greases on: certain of Arkla’s’ customers which should be fairly distributed among all customers. 3. The rates, charges, terms\and conditions of service fo MO y ‘dividually and collectively in this \proceedings are unjust, “preferential and unduly’ discriminatory, fail to provide . . reasonable and non-discriminatory ‘urtailment priorities, Ke and expose residential and commercial customers to prob- \ able unjust and disproportionate future’ rate increases. ‘4 Protection of the rights of Arkansas citizens who depend upon Arkla for a supply of gas for domestic, com- mescial and industrial use under conditions of gas short- “— ages necessitating curtailment of deliveries from time to - time; requires the adoption and administration by Arkla of reasonable and uniform terms and condjtions including a ‘schedule of non-discriminatory and equitable curtail- 5. The proposal of Arkla to supersede the 48 individ- - ual industrial, contracts listed on Arkla’s Exhibit 13, _ - Original Sheets 9-12, inclusive, with a Tariff designated as P'S.C. Schedule 4) applicak le to Large Industrial Customers ~ ‘would, if adopted, ‘result in unjust, unreasonable and un- duly discriminatory rates, charges, terms and conditions of service including priorities of curtailment and should — therefore be rejected. “< C4 eP contained in the industrial co ccs deel «87 6. It: furthers: the public’ interest to designate each sey " industrial céhtgact individually and collettively re-examin-. ed in this proceedings as a Large Industrial Tariff; subject — to the continuing jurisdiction of this Commission. — \ | ' 4... The service rendered~under each of said Tariffs should be subject to the General Terms and Conditions . Applicable to Large Industrial Customers; appended here- © to and. made apart hereof as Appendix A, and all provisions . of Large Industrial Tariffs should be supersede and re- _ Placed by said General Terms and Conditions to the extent that they are inconsistent therewith or contrary thereto. — _ 8, The provision in Sectiorf 15 of the Tariffs applic- able to the Helena No. 2 unit and the Lake Catherine No. 4 unit of Arkansas Power & Light Company requiring pay- ments to be made by Arkla to AP&L of the differences be- . tween the weighted average price per Mcf paid by Buyer - to Seller for gas purchased. under each Tariff- and the weighted average cost of fuel oil burned by Buyer due to curtailments imposed by Seller in excess of three (3) per- . : _ cent of the volumes of gas that would have been delivered - during the year if curtailment had not occurred, is unfair _to the other industrial customers of Arkla, would Seu . | affect the ability of Arkla to attract’ the Gapital necessary - for it to perform“‘its: public service obligation and is . preferential and unduly discriminatory and should not be ae provision with a similar effect in a “Supplemen-- tal Letter” between Arkla and ‘Continental Oil. Company was never revealed to the Commission’ nor submitted for _ approval, and insofar as the Commission is concerned, is therefore illegal and: of no effect. Curtailments to Con- : tinental Oil Company should be made subject to this Order . _ and the Appendix -thereto. Payments, if any, made by ~ ple Ve 2 Ms . . . 1 ? . ; - @. . - . f : . . ‘~ - \ oan P "oe . .- .. . / . = . . . 2 ‘ . ‘ . ov . Ay . / ‘ : , . * . j A . : : e “€ . _ : ws ot\ P : / . . / \ . < . 38 .* é ‘. / * \ f 7 Set! ; Ma ‘s H \ . \ * Arka} sess to said undisclieed. agreement should: be a and: ‘identified. separately by Arkla in, its reports ©. a. to the. . Commission, ‘and should not be considered a cost - . ‘attributable to\Arkla’s utility. business. making principles in’ that they do not provide uniform ‘Yates or the: ‘same service nor do the level.of the rates in : : ‘the individual Tariffs reflect any appropriate relationship _ to, curtailinent pees or to the cost of" at Providing the ~Service. “a. ihe ‘fecord: dote not contain Ane iisitinie of es- Ne ai sential evidence which would permit the Commission to - dustrial. rates. ‘and charges for’ Arkla and such determina- Xs tions should. be deferred toa subsequent proceeding. | “12: It is necessary and appropriate for the purpose of _ the Commission’s performance of its duties and obligations Ae prescribe ' all just, teasonable ‘and non-discriminatory in-. \ 10. The rates and charges set. fort}s-iw: the ahneten- ot A+ ioned Large Industrial” Tariffs fail to comport with.sound _; that ‘detailed. records of: Arkla’s reserves, deliverability, . and the causes, duration, and identification of those cur- VS ~ tailed be available to the nen s watt, — cus- tenes sa Hoe public Steg tN 2% ‘ts addition | to: these guidelifies and divéctions hereto- ae fore expressed, the Commission further orders: : re OS _ Effective today, the’Orders issued approving con- ‘ | ieee in the © Docket Numbers identified below, are oe ; ™ A ‘ ° i t 1 Saas eae — Ss : epee: | x > ~~ * / + eee Beis Company, eh ee oe i snesranssn of America” Hoe ar Se en ee D 4 * at ort wl RED on aston ations Td '. American Oil Company : | Arkarisas' Chemicals,- Inc. a . Arkansas Elec. Coop. Corp. (Augusta) Arkansas Elec. Coop. Corp. (Augusta) - _ Arkansas Elec. Coop. Corp. (Camden) . Arkansas Elec. Coop. Corp. (Ozark): Ns ae | \; Wes 2 | _\-1967 Arkansas Elec. Coop. Corp. rgd Arkansas Kraft Corp. ; Arkansas Power & Light Company, H. Springs, NLR, Stamps | aero Power & Light Cotapany Helena a | Arkansas" Power & Light Company Helena: Arkansas Power & shew: Company Helena Arkansas ‘Power & ‘Light Company Hot Springs .- - Arkansas Power’ & Light Company ‘Mabelvale | Ark: Lightweight Agures, Corp. Arkia Chemical Corp. _ ’ Gurdon ; _ Arkla Chemical Corp. ' “Helena... Baroid Div., ‘Nat’l. Lead Co. ’~ Benton. Light Impr. Dist. No. 1 ’ Berry Petroleum Co. (Stephens) . Berry Petroleum Co. cane) Bromet Company The Celotex Corporation ‘Columbia Carbon - - ; Continental Oil Co. Conway Light, Power & Water - v-2000 ech U-1673 U-1819 —U-2072. > u-2070 U-2071 - ‘ U-1443 U-1892 U-1383 U-2272 U-2025. U-2271 ‘U-1960 U-1987 U-1891 U-1950 U-1985 U-1952 U-1951 U-2192 U-1986 U-1476 U-1850 U-2032 Cross Oil & Ref.Co.of Ark. | U-1953 Dierks Div., Weyerhaeuser Co. — , «fe Fle. -+ Pine Bluff & Perkins - Y-1983 : Dierks Div., Weyerhaeuser Co. = _— oe as Dierks 7 | U-2223 Elk Roofing . 984 Great Lakes Chemical Corp. of ee ts U-1955 AP. Green Refractories Co. — . U-1963 . “Ideal Cement Company — -U-2269 ‘International Paper Company ~ A a Pine Bluff, Camden, Malvern ~ 3 U-1962 MacMillan Ring-Free Oil Co. . | U-1947 | Magnet Cove Barium (Dresser Magcobar, -— 7 Div. of Dresser Inc.) | - os UH1954 * Malvern Brick & TileCo. - e U-1948 Minnesota Mining &Mfg.Co. , U-1949. _- Monsanto Company — | OK — U-1444" Monsanto Company - \. U-2038 Nekoosa Edwards Paper Co. - Gs U-2036 . Olinkraft, Inc, __ 2221 Phillips Petroleum -Co. ‘and: Bh , : Humble Oil &RefiningCo. . U-1966 Remington Arms Co., Inc. — 7" U-2222 Reynolds Metals Co. nate ' . _. Bauxite, Lake Catherine & Hot Springs - —U-1965 . Reynolds Metals Co: . , ae '— Arkadelphia = * ye, U-1964 _Union Carbide-Corp. — . — U-2037 United States*of America , | | | - Pine Bluff Arsenal, Ot tes | U-1282 _and each and every. industrial gas coun contract subject to this Order, not limited to the list above, is: s hereby aes - edasa Large Industrial Tariff: . . 2 Carn ad SER eA ee AE a OE _ hereafter have no force and effect. . 41. | '2. Each industrial gas sales contract shall hereinafter | _ be ‘identified by that designation, followed by the Docket ‘Number, if any, assigned by the Commission to that Order, . if any, issued when the neepecrite ner contracts were approved. 3. Service cnaier such Tariffs shall be subject to thé — . General Terms and Conditions Applicable to Large Indus-. trial Customers appended hereto and made a-pert hereof - as Appendix A, and _ also subject to other conclusions, . - guidelines, and findings in this Order. 4. The subject matter: contained in said General: Terms and Conditions shall supersede and replace the pro- visions in each Large Industrial Tariff to the extent that the latter are inconsistent with or — to the ns Terms and Conditions. 5. The provisions in Section 15 of the Tariffs _ae | ble to the Helena No. 2 unit and the ‘Lake Catherine No. 4 unit of Arkansas Power & Light Company requiring pay- ments to be made by Arkla to-AP&L of the difference be- tween the weighted average price per Mcf paid by Buyer to Seller for gas purchased under each.tariff and the weighted average cost of fuel oil burned by Buyer due to curtailment imposed by Seller in excess of. three (3) per- - cent of the volumes of gas that would have been delivered during the year if, curtailment -* not. occurred, shall “@.-. 6.. Arkla shall maintain for a onal of not ie than five (5) years following the end of a perticular calendar - year the following records: (a) Dispatchers daily log ink showitig hourly re- Woy Ports of pressures and volumes. - (b) ‘Dispatchers curtailrnent work sheets foreachday —- | _ showing curtailments ordered with respect to - o. each customer. — Papi bo has . (c) Curtailment. date for each day ‘showing for each customer (1) notifications, (2) date and time . curtailment started and stopped, (3) percent: of - curtailment, and. (4) ‘Mcf per hour curtailed. 7. Arkla shall hereafter submit to the Commission. no later than the 15th day of each month a report for the preceding month which will include the following infor- mation applicable to (a) the total Ark-La-Tex integrated _ system, and (b) the individual non-integrated systems © located in the State of Arkansas: © er a 2 (1) Total, volume (Mcf) of curtailments occurring iad each day of the month (7 a.m, to 7 a.m.) for each | 2 ‘ load _ classification ‘specified in Section 12 of. > General Terms and Conditions appended hereto. 4 (2) Names of customers curtailed in each load classifi- cation, their daily volumetric requirement (Mcf) ro and volume (Mcf) curtailed for each day and. total curtailment (Mcf) formonth. -— (3) Reason for daily curtailment; ie., (a) shortage + of supply at source, (b) lack of main line or lateral t ansmission line capacity to serve all . customer requirements due to low temperatures '. - or other condition on.system or specific portion — q thereof, (c) necessity to fill “storage reservoirs and (d) Force Majeure. In case of Force Majeure. - describe in detail the cause and general effect of _ service interruption, the extent of curtailment ; necessary, the number of customers affected and : the time span of iriterruption. ! te (4) System oe: in Mcf for each day. | (SEAL) BY ORDER OF THE COMMISSION This 9th day of August, 1971. . - /s/ Pat Moran,. Chairman /s/ Robert C. Downie, Commissioner as ee _/s/ Don S. Smith, Commissioner — /s/ Robert M. Vaughan, Secretary cna Ets atop ae a on _ APPENDIX A GENERAL TERMS AND CONDITIONS: — “APPLICABLE TO LARGE _ | INDUSTRIAL CUSTOMERS 1. DEFINITION OF TERMS : _. The: following terms when -used in these . General ‘Terms and Conditions ‘and in each Large Industrial Tariff ~ ghall be construed to have the following meaning, except where the context of their use in an Industrial Tariff clear- ly indicates another meaning: — : | (a) The term “day” or “daily” shall ‘mean a period of - (b): twenty-four (24) consecutive hours, beginning ‘and ending as near as’ practicable to 7:00 a.m., Standard or Daylight time, at the point at which delivery of gas is made. _ tar ie The term “month” or “monthly” shall mean the period beginning at or ‘as near as practicable to 7:00 a.m., Standard or Daylight.time, on the first ‘day of the calendar month and ending as near aS practicable to 7:00 am., on the first day of the — next succeeding calendar month. / > (c) The term “year” shall mean a period of three hundred. sixty-five (365) ‘consecutive days be- ginning on the date specified in the Industrial Tariff as the commencement of the termis of serv- -. i¢e or initial delivery of gas thereunder or any anniversary thereof; provided, however, that any. - year which contains a date of February 29 shall consist - of ‘three hundred sixty-six (366) con- secutive days. -(@) The term:“‘cubie foot” shall mean the volume of - v gas which occupies one (1) cubie foot when said gas is at a temperature of sixty degrees roe \ \ | . Fahrenheit, and at a pressyre of 14.9 — square inch absolute. — (e) The term “Mcf” sHanl mean ‘one thousand (1, 000) 2 rae _ cubic feet of gas. ‘(f) The term “BTU” is the asbbeatiniion einployed to denote a British Thermal Unit. ( g) The term “Large Industrial Customer” shall mean those ‘industrial customers which consume gas for manufacturing, generation of power, proces- sing, preparation of product or. other industrial _ ‘purpose and are — under ee saree In- - dustrial Tariffs. — 2. USE OF GAS Gas delivered by Seller to aver is for a s own "use and shall not ke resold. Hage 3. BILLING AND.PAYMENT - Seller’s monthly bills will be Bae sae promptly after the close of each calendar'‘month and shall: be paid within 15 days after the date of which the bill was rendered at the address designated under Section 13 hereof. Upon default _in payment for .a period in excess of 30 days after pay- ‘ment is due, Seller may suspend delivery of gas until satis- factory credit arrangements have been. made. Seller may require as a condition of commencement: or continuation of service a reasonable refundable deposit or bond or in- — crease in an existing deposit or bond at any time to sécure payment of bills, such deposit nat to exceed an amount equivalent to two estimated maximum bills. Interest ‘at the rate of six percent (6%) per annum or as may be other-. 46 wise cine wa law or this Commission shall be paid - ‘on such deposit amount. — ‘4. MEASUREMENT . | pera Except as may be otherwise sgecitically ‘eeuetend by , law, the measurement and testing of gas delivered and © ing: received hereunder shall be in accordance with the follow- © @) The unit of ‘volume shall be 1,000 welts feet of gas (Mcf) at a temperature ‘base of 60° Fahren- heit and at -a pressure base of 14.9 pounds per ' square inch absolute. Whenever the actual condi- _ tions of pressure and temperature of the particu- lar gas stream being measured differ from the above ‘standard, conversion of the volume from such actual conditions to the above standard con- ditions shall be made in accordance with the Ideal Gas Laws, corrected in every instance for super- compressibility in accordance with the method - customarily used by | Seller in computations which’ are subject to the. Standard Gas Measurement Law of the state in which the gas is delivered. (b) Measurements of gas shall always be in accor- dance with the requirements of law, and if the procedures, bases, or standards herein contemplat- ed to be used in the determination of gas volumes are changed by law or regulatory action, then the applicable rates shall be appropriately modified ~ y and adjusted to the extent necessary to’ the end ee that calculations to determine sums‘of money due +, Seller for the gas after.the change: will reach the - same end result in dollars and cents as would: have been reached in the absence of such — ¢ * S . *: Pita AaRet ave ny Pee Ne all ecole waht BI altel “i Petey weeeerere . . NERS . ©) 7 a7 | Seller shall install, operate and maintain at its own expense. appropriate equipment’ at or near ‘point of delivery to measure and determine volumes. delivered. Orifice | meters, if used, shall be installed and operated, and volumes computed, - in accordance with the American Gas Association Gas Measurement Committee Report No. 3, dated April, -1955,. and Appendices thereto and —- . ments thereof. (d) The temperature of the gas at each point of de-. livery shall be, (i) determined by taking the aver- - age of the ‘hourly. readings of an indicating ther- mometer; or (ii) assumed by mutual. agreement -. to be 60° Fahrenheit,. or. (iii) determined by re- - (e) . (f) cording thermometer, provided that, if Seller is - not using a recording thermometer, Buyer shall have the ‘right, by reimbursing Seller the cost of* the equipment and its installation, to require the use of a recording thermometer, the equipment to be. owned and operated by Seller. The specific gravity of the| gas shall be determin- ed for each point of delivery in accordance with © good engineering practice as often as ccc neces- : sary in actual operation. ‘Seller shall install, own, aia wid maintain . standard type measuring and testing equipment necessary hereunder and shall keep same accurate and in repair: Readings, calibrations, tests, repairs and adjustments of said equipment, and changing © of charts, shall be done only by employees. or - _ agents of Seller and-in accordance with good engi-. - . | _. neering practice as often as found ‘necessary in . actual operation. Buyer shall have access to Sell- re. see ! aes A i er’s measuring ‘and testing eq igment including ; recordigg calorimeters at any rease able time, and shall have the right to have a representative present at tests,. calibrations and adjustments thereof. Upon request by Buyer for a special test . - of any meter or auxiliary equipment, Seller shall — . promptly verify the accuracy of same, provided that the cost of such special test shall be borne by . Buyer unless the percentage. of inaccuracy is . . found to be more than two percent (2%). If upon -. any test the total inaccuracy resulting from meter errors and errors in auxiliary equipment, includ- ing recording calorimeters exceeds two percent (2%), then previous readings shall be corrected to zero error for the period of time during which . the equipment was knowr to be inaccurate, or if not known then not beyond the close of’ the pre- ing accounting month; if said total inaccuracy is not more than two percent (2%), then previous . (g) reading shall be considered correct but the equip-. | ment shall be adjusted to read correctly. Seller .° ghall not be required to verify the accuracy of such equipment more than once in any 90 day If any meter or auxiliary equipment, is out of - service oF out of repair for a period of time so that the amount of gas delivered: cannot be ascertained or computed from the reading thereof, then the | gas-delivered’ ‘during such period shall be estimat- ed upon the basis of the best data available, using. "the first of. the following methods which is feasi- ble: (i) by..correcting the error if the percentage . of error is ascertainable by calibration, test, or © ~~ mathematical calculations; (ii) by using the. a ee eee . ” . . ' S fo ah 8E dE ARRAN AR UNE ered WRIA ROP, TSI Grit ci itr NE 49 ‘ ‘registration ts any check achat installed and oF accurately registering; or (iii) by estimating the volume on the basis of deliveries: ‘duririg preced- ing periods under similar. conditions when the _ equipment was registering accurately. - (b) Upon. request, Seller shall submit its ‘measure- . counting month shall be conclusively presumed ment charts and records to Buyer for examination, e the same to be returned within 20 days. Seller’s . measurement charts and records for a given ac- correct if no written objection thereto is served - on Seller within the 12-month period following (i) the given accounting month. Seller shall preserve. - for a period of at ledst three years all er data, meter charts and other similar records. ° Buyer may install, operate and maintai LY Buy- er’s own cost, risk and expense; but in the same manner as is required for Seller’s equipment here- under, check measuring and testing equipment of standard type, provided that the same does not interfere with the operation of Seller’s equip- ment, but the measurement and testing gas for purposes of this rate schedule shall y be by Seller’s equipment. Seller shall have @he same - rights with Tespect to check equipmertt as Buyer has with respect to —— s equipment. 5. WARRANTY OF TITLE TO GAS | Seller warrants that it will at the time of delivery have - . good title to all gas delivered by it to Buyer, free and clear of all liens, encumbrances and claims. whatsoever, that it. will at such time of delivery have good right and title to . ; sell said gas as aforesaid, and that it will indemnify Buyer: r. y ry _ “ * ¢ - a . ain Sh I SOOT Gg RRR Tre Pt Arh Se. . allt & Save ‘it hatjnless. from all suits, actions; debts, accounts, damages, fosts, losses, and! expenses arising from or.out of © adverse claims ‘of any or all persons‘to said gas. or to Toyal- = ties, taxes, license fees or charges therefor, which ‘ QFe wp- - ne : ‘plicable before the beaces tothe gas: passes. to Buyer. 6. DELIVERY. POSSESSION OF GAS AND — RESPONSIBILI TY es (a). .The point of delivery. where title to and responsi- . bility for the gas shall pass to Buyer, shall be at . the outlet of Seller’s metering facilities to be in- y: Ss _ Stalled and operated by Seller at the point desig- . nated .in the Tariff: Seller shall have access to « Buyer’s premises at any reasonable: time for any purpose ‘goonegied y with this service. >) Seller shall install, operate arid maintain vital: * .. evér facilities are necessary to deliver the gas at ~ ‘the point .of delivery and. shall indemnify Buyer — claims, ‘actions, ' ‘suits, damages, liabilities, costs * “presence of the gas. before it passes the point of . . delivery. For a new service, coristruction of Sell- 7 er’s delivery. ‘facilities shall commence as soon as the necessary materials and rights of; sway: are — available and ajl regulatory approvals and auth- - orizations required by law, if any,bave. beerr ob- — tained on conditions satisfactory to Seller. | - (ec) Buyer shall install, operate and maintain at. its - £ own expense whatever facilities are ‘necessary.to . _- safely Teceive and utilize the gas at-and beyond _“°. the point of delivery, and. shall indemnify Seller oe and hold it less from and against any and all - ‘and hold it harmless from and against any and all. *. and expenses: arising ‘out. of ‘use, possession. or ~ : e ~ j . . ; ee a ° . . ’ ef . \ . “4 ‘ . e . i 7 . . 2 e aa . . 7 + o . 7 ° - Pema aieitia tne deat acetate Br Tecoma ei tO ae om emp nts Re aus Reet Senies» > wey % nyo . : ; . : . ' A . - . ‘ 7 , =f ~~ aL INS, Teale LAA Ligh 0 Tbs ROTA te 7 . Se a rt ee - * tract, or: contiguous tracts, of land or elated sotins: suits,: peederen liabilities, costs : and expenses’ arising out of the use, possession, or presence of the gas after it Passes the point. ‘of ' delivery. 7. SEPARATE PREMISES |. ‘es " Separate customer premi ed separately even under comm ed metering or billing shall not ises shall be considered separate when not on the same shall:be metered and bill- plete “unit”, not physically integrated with or essentially en. each is a com-. ownership, and combin-.. | . permitted. Such prem-- _- "a part of the other, or others,. atid each renders a completes yar service or produces a finished preduct. Tracts of land sep ” arated by public streets, roads, or r alleys are: — to. be non-contiguous’ tracts. —~fe DELIVERY PRESSURE ae Gas will be delivered at: the point of delivery at ‘site pressure as may be niutually agreed upon but not greater ~ than line pressure and such pressure shall be stated in the Tariff.,,.The Customer agrees to properly handle and regu- | “late the pressure of the gas after delivery to it by the Com-. " pany at the point of saad 9. pies Ae ) (a) Heating Valué of Gas 5 ~Gas delivered will contain, ted ee than 950 aii ey ‘Thermal Units (BTU) per cubic foot. Buyer shall not ‘be required to aecept natural gas having a unit heating value of: less than 900 BTU. The average heating value « oF the gas delivered by Seller shall be determined. by + the use of a reliable calorimeter located ‘at such place or places on its transmission system. as Seller may ° ; i r ‘: a 3 G Ee 1 ‘ me a Ps oreo 2 ; ‘ < > Ss =" a ; eos : fated ‘select. Adjustments) if any, for deviation from 950 “BTU will be made in accordance with Tariff provi-. siéns, pending further order of the Commission. 7 (b) Other Quality Requirements > | | ee gas delivered must. contain not more than ee grain ofghydrogen sulphide per 100 cubic feet and not .. moré than 20 grains of total sulphur per 100 cubic feet: The gas must be clean, dry, and merchantable and com- _, mercially free of dust ‘or other solid or liquid matters, which might cause injury to or interference with prop- ‘er operation of the customers’ appliances. Seller shall . use its best efforts consistent with the prudent opera- - -.____ tion of its pipeline system to deliver gas meeting the _ foregoing specifications, but Seller does not undertake - _ to guarantee the. supply to Buyer of -gas meeting the requirements of this paragraph and shall not be liable ~~ _ in daMfages for failure todo so. oS same ~ (ce) Buyer shall not, be obligated to receive any gas -- tendered for delivery which does not meet the | foregoing specifications and shall have the right | - . ¢9 terminate its obligations to take service if Seller . does not bring the gas up to specifications within- ' 30 days after written nétice from Buyer that itis ~ “below specification; provided, however, that Seller an will honor quality provisions of existing Tariffs - ( - that are more favorable to Buyer pending further , . ° Order of the Gemmission.. - ie ee ORR es, : tis not contemplated or inténded that Buyer. will use . gas-for any purpose requiring. odorization under State or — - Federal laws. Buyer shall be responsible for any such other | use of the gas requiring odorization and for. compliances: : F . : 3 i= ‘ . . 2 > i J. . : - : . é . . . . “ = * 2. ~ ye oR rs "with any and all laws and rules and regulations ‘of regula: : Xe _tory authorities with. jurisdiction regarding. odorization. Me Se 4 Buyer shall indemnify Seller and hold Seller harmless from* S ¢ and ‘against any .and all: damages, liabilities, ‘and claims .. ‘ arising.out of Buyer’s failur ure to cataply with the. — * takings of this, paragraph. = i. FORCE MAJEURE The- obligations of the parties (other than to make ° payments, due) shall be. suspended so long as and to the . extent that performance is prevented by fire, labor dis- putes, acts of God; the elements, wars; epidemics, riots, . civil disturbances, explosions, breakgge of, accident to or repairs, tests, or alterations-on machinery, equipment, or pipelines, freezing of wells or pipelihes, temporary failure — ‘of gas supply, and-gny other cause, similar or dissimilar, : ~not-within the reasonable-control_of the party claiming re- lief, provided that notice and full particulars of the event’ relied on will be given in writing or by telegraph to the | other party as soon as possible. The party affected. shall remedy the cause of suspension with reasonable dispatch, feta ots such party unqualified discretion in _——s labor = utes. 12. CURTAILMENT AND PRIORITY OF SERVICE on -(a) GENERAL — | Soh et. ®t _ (A). Seller recognizes its ,public serice obliga- tion to maintain gas service +o domestic, _ commercial and other customers. for the pri- mary benefit of human needs. In the event en | Seller may find it necessary, from time to. | , in the operation of its systems to cur- = \F _ » tai} or: interrupt the delivery of ‘gas to its ee scare sige customers nis Teason of Force ° ; i re Re es ee Sree teerenegpeeneerneeereesemeesreeenemeernrceroriencanenstenneeeeeenegeemtiaent an lenasnnnet nee ctetmmmeneterepemeeceneeaaammmmeannsaaee, ets , os ? : 4 * ‘ oe . , ‘5 P vs ——: ee re "Majeure or in codes to supply: human need : _.._-yequirements, curtailment shall be made -—... 7 ap ae without liability to Buyer in the oon | ee :, load: classifications set forth in -paragrap ~ (b) Below. - ef (2), ‘100 percent ‘eurtatnante will ee made . is so 4 " \ Category I loads before any curtailments are | | “a | - made to Category A loads. 100-percent cur-'-" v ) ee ' tailments willbe made to Category A loads - before any curtailments are miade to Cate- gory B loads; and etc. Within a Category, . curtailments of load will be instituted ina ' simultaneous, fair and equitable manner to * the extent. practicable based on parity with deliveries to all customers in the. same _cate- = ae ‘gory, with due regard to localized conditions = | a of supply and pressure and.to the efficient == Af operation of Seller’s system. _—s oan a (3) “Daily load requirements”, as that term is - ysed in the several Load - Classifications, oe ; _... means the normal load .requirements ‘of the : ee _ Dagar fin she corasiomy adore br a aipticber 1 | (4) Curtailments . to “Arkansas industrial cus- a Yo, - ~.temers must, insofar as Seller js able, be on eo: ~_-a parity with all customers of Seller in like __ ee Se categories. | os. @), LOAD CLASSIFICATIONS | eae | | CATEGORY I 2 Customers who purchase gas which is subject to cur- tailment or interruption at Seller’s sole discretion under : a. an WA : eee Oe. cee roe Tariff provision which does not. impose # an obligation: on - Seller to sell or on- we ta hai at any time a fixed vorene ‘of | gas. “ e: - 1 CATEGORY A oe . fuels can be used, subject to conditions (1) and (2) below. * Curtailment percentages will be ‘applicable to 100 percent _ * ‘of. the daily load requirements © sodustrial.. custome ‘in this category. eh | ‘Ciediad who use gas. for boiler fuel where ‘initiate (1) Customers in this cnet and nat subject to. condition (2) who. have neither -completed nor suk- oa "stantially - completed installation on_of “alternate” fuel burning equipment arid— fuel storage facilities with. __ ~~" capacity adequate to meet their daily load. require- . '.. ments at the effective date of this Order, will be classi- fied in _ Category C during the period September 1, 197 August 31, 1972, provided that: such customers submit a written agreement to Seller and to the Com- . mission within 30 days’ from date hereof to install such oe and facilities within the above. specified —— = . Failure to submit such agreement will immedi- suly result in placement of customer in Load Classifi- _cation A. ; (2) Public utility customers using gas for boiler fuel to generate electricity for’ sale will be curtailed only to the extent of 25 percent of their daily load-re- | ‘quirements during the. months of May through Sep- tember. For the months of October through April, such . customers will be curtailed no more than that. partion © : = demand adequate to generate “electric energy for its omers whose use of electricity. most: nearly ¢cor- respond to the uses of natural gas described, $e. Cate- . . . $. FE gi al - : ; ee 5 : is ; ; . : J oe and’ “E” herein. This proportion shall be - ’ (» - . presumptively 50% of their. daily . load “requirements Le | — the, months of October aie April. es : _ Cees a) ‘Public ‘utility_eustomers: wie: use gas. for: * boiler fuel-where, alternate. fuels can be uséd which __»—-——hhave been. already curtailed by 25 or 50 percent of | their daily requirements under Category A: eo (2) ‘Public utility, ‘customers. ‘who. use gas. for eA ee engine or. turbine driven generators = an alternate ne Sa < fuel can be used. mater. , i NS ee ‘ CATEGORY ee SS ~ Customers who% ‘use gas for fuel or raw material’ or for ; or manufacturing a product and -for generating | os electricit kwh an. alterna.e fuel cannot be used and- opera= ag . ©. tions and j pt t production would be reduced or shut down’ .. : completely when - ‘gas deliveries are curtailed. = CATEGORY D At ee Contemnaie whose use of gas in industrial plants bie space and water heating, pilot lights or for operating ac- '. “oessory or. auxili equipment is essential to avoid serious “ae is _ Gamage te plank tompetiations: ae . Ce | ve CATEGORY E - Residential and commercial Va use of : gas is for. space heating and cooling, water heating, cook- : -ing, lighting, refrigeration and other human nega purposes. os. _ CUSTOMERS WITHIN TWO OR “MORE ee _ CATEGORIES. _ = * “If gas. delivered toa particular customer is used. for - < ~:# ‘ . . + : me E — . ‘ ‘ ne -| ~~ : eats 2 Se ae ’ ' ° : go gS ee } oe nv ‘ oO A 4 -* eet t e of J z '‘ eo aw : 4 : < \ ea - oe? ak . e “3 . 7 Nee et > 4 ° ‘ . po a te : ° . Be ; rage, 2 ss ‘ — 4 aes a ois , ee NS Bee ed r- ‘ ahoag _two-Gr more of the herein specified load: classifitations, > _—= _=—~* curtailment of such deliveries will be based on the require- ‘ments of each individual load classification, to the extent oe practicable. re, ae ME A BOE ee _ (@). OBLIGATION OF BUYER cat ¢, nie a at * _ foré seryice cornmences, or when subsequent anges are _ {made in requirements for -gas, all customers subject to and D will furriish Seller the information reasonably. re- _ . quired by. Seller with regard to gas usage at the facilities in’ order that Seller may determine the propor-_ _ tionate parts, if any, of the usage falling in the above cur- . tailment categories. Failure to furnish such informatiop ' Seller in Load Classification Category , ae i se a vided for in these General Terms and Conditions and the. * contracts to which they apply, or any notice which either the Company or the. customer may desire to, give to the © _ other, shall be in writing and if delivered shall be consider- . “ed as duly delivered when mailed by registered mail to the - Post Qffice address of the Company or the Clstomer or at such other address as either shall designate by formal writ- ten notice:. Routine communications, including monthly statements and payments if delivered, shall be considered . _ as duly delivered when mailed by either registered or . te ES ‘ _ .. Within 30 days after the effective date hereof; or be-- curtailm t under Load Classifications Categories A, eo: “. will automatically result in the customer being placed ae hes ‘ ‘ ge oS adic _ Any notice, request, demand, statement or ‘bill pro- “ae %. ; 58 2 nee 14: -OPERATING INFORMATION AND FORECASTS. f The Buyer, u upon request, shall furnish. Seller such ’ as reasongble data, in Seller’s judgment, as are necessary for - the proper analysis of the daily and annual gas load — ments of Customer. : be ae ‘Annually, by Septenber 1 “- sok year, Save shall — : >. submit ‘to Seller, by letter, Buyer’s best estimate of its 4 - daily and arinual requirements for’ the industrial facility, ee “ by months, for the following.calendar year, for Seller’s use. in managing its system and forecasting | its. réquirements. In turn, Seller will give-Ruyer a letter*by October, 1 of each f year containing Sin estimate of deliverability sof. | ee —. s pescongammanti: tee curtailments, if, any s ae 15. ‘COMPANY FACILITIES ON CUSTOMER'S : PREMISES , . "When gas is BES Fe to a new initial plant, Buy- ) iS er will purchase from Seller at its cost all facilities on Cus- _.* tomer’s premises necessary to effect deliveries to Buyer's . plant within 30 days after. receipt, of Seller’ s statement fol- —~ lowing completion of installation. “The ‘term “facilities” in-- "|: eludes the pipeline, the connecting meter run, separatof, Wis regulator and all related’ facilities necessary to. move the | gas from the company’s pipeliié at the property line to the ~ point of delivery and deliver it in accordance with the pro-, visions hereof. The term: “cost” includes the cost of pipe, : materials, equipment ‘and other facilities, and cost of in- -. » .gtallation and other related costs. The title’ to all meters — .. and’ ‘other facilities and. equipment, etc., placed on Buyer’ s. _ premises, and not paid for by Buyer, shall remain in Seller, with right of removal, ‘and no charge shall be made. by © Buyer for-use°ot premises occupied by same. ° * . * Se ee ee ee cecil ~ Pa . _e . . oe ; co ts enema Mba a een ent le — as e - mee . : . System to furnish ‘service to a pr Customer or. to enlarge: its pipeline system to provide for - ’” ah ‘appreciable i increase in the demand ‘ofan existing Cus- — _, tomer unless it deems such extension or enlargement to: be. | age GOVERNMENTAL Beye AND “16. LATERAL LINE POLICY ae ‘The’ Seller will not be required rd intend its a pipeline: 4 e Industrial economically feasible in terms of receiving .a reasonable _ " return on its expenditure. aed Oe oe, ‘ _ AUTH ORIZATIONS (a) The sale, and delivery ‘of, gas ‘‘- Seller is : "subject to the’ orders, ules and regulations: of duly | constituted authorities. having jurisdiction over either . - os or both seller-and Buyer. te + .° (b) Seller’s obligations to render’ servieg are subject to its obtaining within a reasonable time an ap- propriate order op certificate from ‘the Féderal Power .-- Commission, when such- order or-certificate is required to be obtained, ‘on conditions. acceptable’ to Seller, authorizing the co ction and operation of the facili-- ties necessary to effect sale of gas to Customer. —«'18. RIGHT: TO SECURE COMMISSION REVIEW OF ADMINISTRATION OF GENERAL TERMS. , - AND CONDITIONS Zee = , "Buyer may ‘submit. to the Commission, ‘es its con-- siderationjand decisien, ‘the subject matter of any dispute. ..' concerning the administration” af — r of — —— a Terms and Condffions. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386414_0024%3A32. Public record. Not legal advice.