Appendix — Willmut Gas & Oil Co. v. United Gas Pipe Line Co.

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APPENDIX I

IN THE SUPREME COURT OF MISSISSIPPI

No, 40,521

Unirep Gas Pipe Line Company

v.

Witumeut Gas anp O1n Company

Gittespir, Justice:

This suit was filed by Willmut Gas and Oil Company

(Willmut), appellee, against United Gas Pipe Line Com

pany (United), appellant, in the Chancery Court of Forrest

County, Mississippi, for allegedly unjust, unlawftal, exces

sive and diseriminatory rates charged Willmut by United

for natural gas sold and delivered for a six-year period

ending June 20, 1953. The complainant prayed that the

court “fix a just, reasonable, non-preferential and non.

diseriminatory rate for the intrastate gas delivered by

United to complainant and award a deeree to complainant

for the difference between said sum so fixed and the amount

actually paid by complainant.”’

Included in the answer of United was a motion to dismiss

the original bill because the Federal Power Commission

had full jurisdiction to regulate the rates involved and had

assumed jurisdiction and adjudicated the questions. United

also filed several pleas in bar. The motion to dismiss raised

the question of whether the chancery court had any power

or competence to hear and determine the question, ang

asserted that the fixing and regulation of the rates for the

sale of natural gas involved was vested exclusively in the

hederal Power Commission by the Natural Gas Act. At

tached to the motion to dismiss and the pleas in bar were

various proceedings had before the Federal Power Com

mission and the statement of faets next to be made is taken

trom these sources and from the bill of complaint.

Ye

mt

Willmut moved to strike the motion to dismiss and de

murred to the pleas in bar. A hearing was had on the

pleadings and the court overruled the motion of United to

dismiss the cause and sustained demurrers to United's

pleas in bar. An interlocutory appeal was granted by a

member of this Court to settle the prineiples of tue case.

There is no dispute as to the facts pertinent to our de-

cision,

United is a natural-gas company within the meaning of

the Natural Gas Aet, and the Federal Power Commise«ion

issued to United a certifieate of publie convenience and

necessity for the establishment of certain interstate pipe

lines for the transportation of patural gas. Its operation

extended from Texas through Louisiana into Mississippi

and other States to the east. Willmut és a franchised dis.

tributer of natural gas to consumers in East Jackson,

Rankin County, Mississippi, and in Hattiesburg, Forrest

County, Mississippi, and towns and communities Iving be

tween those places. Prior to August 19, 1943. Willmut

owned an eight-inch pipeline from Mast Jackson to Hatties

burg, and on that date it was taking delivery of natural «

at Mast Jackson and transporting the gas in its own trans

mission line to its several distribution points. ALL of the

vas purchased as of that date by Willmut from United was

produced either in Texas or Louisiana. On August 14,

1943, the Federal Power Coramission issued to United

certificate of public convenience and necessity under the

authority of which United purehased from Willmut. the

eight-inch transmission line running from East .lackson to

Hattiesburg. Willmut retained all of its local distribution

franchises and systems.

On August 20, 1943, United and Willmut entered inte a

contract under which United agreed to sell, and Willmus

agreed to purchase, a sufficient quantity of natural gas for

the latter to supply its customers for a period of 20 vears.

The contract provided for a rate of 2he per met for the

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first five vears. Thereafter the rate was either to be agreed

upon by the parties or fixed by arbitration. This contract

was filed with the Federal Power Commission and accepted

by the Commission as a rate schedule required by the Nat-

ural Gas Act. On January 8, 1947, United addressed a

letter to Willmut stating that the matter of rates could not

be submitted to arbitration because of the jurisdiction of

the Federal Power Commission, and United stated that i

intended to continue in effect the same price whieh was in

effect on that date. This letter, and another wherebs Will

mut agreed to the 25¢ per mef rate, was filed with and ae

cepted by the Federal Power Commission as a rate sehed

ule, and this has been the rate schedule on file with the

Commission for the period involved in this suit.

On October 10, 1941, United contracted to deliver natura!

vas at Plant Maton, located within one mile of Hattiesburg,

of the same kind and quality as that sold and delivered to

Willmut, at a rate of 11.5¢ per mef. On August 5, 1047,

United voluntarily put into effect a rate of 17.5¢ per met

for natural gas of the same kind and quality as that sold

and delivered te Willmut, for natural gas delivered to Mis-

sissippi Power & Light Company (now Mississippi Valles

fias Company) at Jackson, Mississippi, across Pearl River

from Fast Jackson, Mississippi. These rates charged Plant

Maton and Mississippi Power & Light Company form the

basis of the discrimination of which Willmut complains.

Until early in 1947, all of the natural gas sold and deliy

ered to Willmut by United was transported from the States

of Louisiana and Texas, and was therefore transported and

sold in iaterstate commerce for resale. United's svsten

included a network of pipelines in at least five states. In

cluded in that system was the eight-inch transmission line

running from Hast Jackson to Hattiesburg, formerly owned

by Willmut, and another line running parallel thereto be

tween East Jackson and Hattiesburg which wes used in

transporting natural gas to Mobile, Alabama. These two

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parallel lines between East Jackson and Hattiesburg were

connected in at least three places. There was a connection

at or near Fast Jackson to United’s Sterlington Jackson

eighteen-inch interstate line, the Jackson-Mobile sixteen

inch interstate line, a twelve-inch line from the 4iwinvill

Gas Field located in Mississippi, and a ten-inch line run

ning from near Collins, Mississippi to Bogalusa, Louisiana.

In the early part of the year 1947, United made certain

system changes for the avowed purpose of restricting the

passage and delivery to Willmut through the Mast Packsen

Hattiesburg line to intrastate gas. As a result of these

changes, United effected a discontinuance of the flow «a4

interstate gas into the East Jackson Hattiesburg tine,

through whien Willmut was served, except through th

connecting link at or near the southern terminus. A rele

tively smal! amount of interstate gas flowed into the line

serving Willmut after February 6, 1947. These system

changes did not entirely discontinue the flow of interstate

gas into the pipeline serving Willmut and a relatively smiail

amount of interstate gas continued to commingle with

locally produced gas into these pipelines. On seven oeea

sions between February 6, 1947 and April 22) 1952) va.

flowed from United's interstate lines into the Mast Jackson

Hattiesburg line-—five times because ef repairs on the lat

ter line and on two other oecastons for other reasons. A\4

fell below the pressure on Lonited’s interstate line, inte:

state natural gas would flow into the pipelines supplying

Witimut, and at all times there was sere commingling of a

relatively s.aall amount of interstate gas with the loeath

produced gas supplied Wiilmiut,

The system changes above referred to were made by

United without approval of the Federal Power Conunission

as required under Seetion 7(b) of the Natural Gas Net

(15 ULS.CLA., See. 717t(b) ).

oi

On Mareh 16, 1948, Willmut filed with the Federal Power

Commission an informal complaint, and a formal complaint

on December &, 1948. Therein Willmat invoked the juris

diction of the Federal Power Commission and prayed for

an order fixing a just and reasonable rate for natural gas

sold and deliverea by United to Willmut prior thereto and

for the future and for an award for reparations for rates

theretofore charged in oxcess of a just and reasonable rate.

Willmut’s complaint was, at its request, considered as an

imtervention ina general rate investgiation of United initi

ated hy the Federal Power Commission. Later it was sepa

rately heard and determined,

In that proceeding, Willmut contended that all of the

natural gas sold te it hy Lnited was subject to the juris

diction of the Federal Power Commission under the Nat

ural Gas Act. After the hearing, the Federal Power Com

missiow held that all the natural gas sold by United te

Willmut was ‘tin interstate commerce’? so as to be subject

to the provisions of the Natural Gas Act: that United had

heen charging Willmut a rate that was unjust. anreasen

ible, unduly diseriminatory and preferential.

The Commission held that it did not have the pewer to

award reparations for past diseriminatory charges but that

tdid have pewer to make findings as to the lawfulness of

past rates, but made no attempt to enforce its findings as

‘eo past rates. [tis coneeded that the Cominission did not

have the power te award reparations for excessive rates

harged in the past. The Commission's onder. entered

June 1, 1955, required United te file a schedule of rates

sequal to those charged Mississippi Valley Company (176

mromef). Tt also required United to undo the svsten

changes made in M47 when United attempted to ent off

rom Willmut all but loeal gas. Neither party appesled

rom the Commission's order, The present suif was filed

shortly after the Commission's order was entered.

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It is contended by Willmut in the present suit that the

court has power to award reparations for the excessive an

discriminatory rates charged by United prior to the effee

tive date of the Federal Power Comunission’s order requir.

ing the rate to be reduced, but only as te that portion «;

the gas sold by United to Willmut which was produced,

transported and sold in the State of Mississippi. Willmuw

concedes in its complaint ini the present suit that becaus:

of the proceedings had before the Federal Power Conmuiis

sion, as to all interstate gas, the Court has no jarisdietion:

but contends, in effect, that it can separate the intrastar

vas from the interstate gas and recover in its common law

action reparations for ali excessive charges for iitrastat

vas made by Willmut prior to the reduction order by 4

Federal Power Comunission.

Wilimut states in its complaint that the suit is for th

benefit of its customers, to whom it will refund the amour

recovered after deducting all of its costs,

The Natural Gas Act defines a natural gas company a.

(6) *Natural-gas company’ means a person engaged |

the transpertation of natural gas in interstate commerce

or the sale in interstate commerce of sueh gas for resale”

There is no contention that United is not a natural vo.

company within the meaning of the Natural Gas Act.

Section 7(b) prohibits a natural gas company from aba:

donmng any portion of its facilities subjeet te the jurisd)

tion of the Cauimisston or any service rendered by Phheruys

of such faciities without first obtaining the permission ap

approval of the Commission.

The provisions of the Natural Gas Act *tshall apply 3

the transportation of natural gas in interstate comune re

to the sale in interstate commerce of natural gas for resal

for ultimate public consumption for domestic, commnereis

industrial, or other use and to matural-gas companies e

caved in such transportation or sale, but shall not apply t

any other transportation or sale of natural gas or to the

local distribution of natural sas or to the facilities used for

such distribution or to the production or gathering of nat.

ural gas.’’ Sec. 1, Natural Gas Act.

Section 4 of the Natural Gas Aet provides for the filing

of schedules with the Federal Power Commission showing

all rates and charges for any transportation or sale of

natural gas subject to the jurisdiction of the Commission,

and it is provided in Seetion 4(d) “unless the Commission

otherwise orders, no change shall be mace by any natural

fas company in any such rate, charge. Classifiention, or

serviee oo, except after 30 davs notice te the Cotimission

and to the publie.”’

Section 5 of the Natural Gas Aet Vests jurisdietion in the

Federal Power Commission to determine just and reason.

able rates **to be thereafter Observed and enforced.’

Under the rule-making power vested in the Commission

by the Act, the Commission adopted the following rule:

“No natural-gas company shall directly or indirectly de

mand, collect, or receive, for the transportation or sale of

natural gas subjeet to the Jurisdiction of the COMMISSION,

or for the lease or utilization of Ans tacilities subject te

the Jurisdiction of the Commission, any rate or charge dit

ferent from that preseribed in its rate schedule or schedules

actually on file with the commission, unless the comunission

shall, for good cause shown otherwise previded by order."

The first question for our decision is Whether the Federal

Power Commission had power to regulate the rates charged

by United for natural gas sold Willmut, both as te that

locally produced as well as that Trausported into the State,

nited operated a unified system enterprise which was

witerstaie im character. The Pipeline emploved to serve

Willmut with natural gas was an Inteyral part of United's

Mterconnected interstate system, all of which was duly

certificated by the Federal Power Commission, The un-

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authorized system changes made by United in 1947, whiel,

largely, but not entirely, restricted the flow of natural gas

to Willmut to local gas produced at the Gwinville Field,

was ineffectual insofar as the jurisdiction of the Federal

Power Commission was concerned. In addition to the fact

that some interstate gas continued to commingle with the

local gas supplied Willmut, the natural gas transported

from without the State was available at all times to cor

pletely or partially supply the natural gas requirements

Willmut when the locally produced gas became for any

reason unavailable or insufficient; and the pipes were. s

connected that such flow of interstate gas would aute

matically take place. There was but one sale by United to

Willmut under one contract covering all gas sold and ce

livered at one price schedule which was on file with tis

Federal Power Commission. The commingled natural esa.

thus sold and delivered to Willmut was ‘tin interstate eon,

merece’? subject to the regulating power of the Federa!

Power Cominission, Pennsylvania Water & Power Co. v.

Federal Power Commission, 3543 U.S. 414, 96 Lob. 1642.

72 S.Ct. S43: Connecticut Light & Power Co. vo Federa!

Power Commission, 824 U.S. 515, 89 L.Bd. 1150, 65 S.Ct.

749 Wisconsin- Michigan Power Co. ve Federal Power Corn

mission, 197 BL 2d 472 (COA 7). And at Willmut's reques:

the Federal Power Commission did assert its power oye:

the entire sale of natural gas to Willmut.

The second question is whether Willmut ea. maintain a

common law action for the recovery of the difference be

tween the diseriminatory rate charged by United and

just and reasonable and non-discriminatory rate for tha:

part of the natural gas sold which was produeed, tran:

ported and sold in the State of Mississippi. Willmaut eo:

tends that since the Federal Powe> Commission had ne

power to award reparations for past charges, and eoul

only require United to file a rate schedule thereafter to b:

charged, that the soversignty of the State te apply its ecm

9a

mon law and award reparations was not abrogated by the

Natural Gas Act. In effect, Willmut contends that. the

inatter of reparations was a field left open by Congress

when it failed to give the Federal Power Commission power

to award reparations for past charges.

We have concluded that all of the natural gas sold Will

mut was subject to the jurisdiction of the Federal Power

Commission; thus it was all ‘tin interstate commerce’? as

far as this second question is concerned. The problem is

whether it is open for the courts to determine what the

reasonable rates during the period prior to the Federal

Power Commission's order should have been. The Supreme

Court of the United States said in Montana-Dakota Util

ties Co, v. Northwestern Publie Service Co., 95 L. Kd. 912.

OAT ULS. 246;

“Petitioner cannot separate what Congress has joined

together, Tt cannot litigate in a judicial forum its general

right to a reasonable rate, ignoring the qualifieation that i!

shall be made specific only by exercise of the Commission's

judgment, in which there is some considerable element of

discretion, It can claim no rate as a legal right that i.

other than the filed rate, whether fixed or merely aceepted

by the Commission, and not even a court can authorize

commerce in the commodity on other terms,

"We hold that the right to a reasonable rate is the right

to the rate which the Commission files or fixes. and that,

except for review of the Commission's orders, the courts

ran assume no right to a different one on the ground that,

inn its opinion, it is the only or the more reasonable.”

The power of the Federal Power Commission to regulate

the price paid for natural gas transported and sold) for

resale in interstate commerce is exclusive, and such price

is not subject to state regulation. Natural Gas Pipeline

Co. of America ve Panoma Corp., et al, 99 1. Ed, 866, 349

US. 44.0 In Mississippi Power & Ligh; Company v. Mem

10a

phis Natural Gas Co., 162 F. 2d 388 (CCA 5), Mississippi

was entitled under its contract with Meinphis to a redue-

tion in rates. But Mississippi did not request the Federal

Power Comm 'ssion to require Memphis to file a new rate

schedule to operate prospectively. Thereafter Mississippi

filed suit te recover on its contract. It was held that under

the Natural Gas Act rate making is a legislative function

vested by Congress in the Federal Power Commission, and

that to give effect to the clause in the contract reducing the

rate as to past charges would operate to transfer the legis

lative function of rate making from the Commission to the

courts. In denying the right of Mississippi to recover, the

Court held that the contract clause (entitling Mississippi

to a reduced rate) became inoperative after passage of the

Natural Gas Act. The effect of the decision in the Missis-

sippi case is that the rate schedule on file with the Federal!

Power Commission is the only lawful rate insofar as pas!

rates are concerned. Cf. Glassburg v. Boyd, 116 Atl. 2d

711.

When a sale of natural gas is subject to the power of the

Federal Power Commission, or when the Commission exer-

cises its power in a ease where it has discretion, (ef Conn.

Power & Light Co. v. Federal Power Commission, supra)

its jurisdiction is full and exclusive. It is noi for a eourt

to say whether Congress gave the Federal Power Commis.

sion too much or too little power over the subject of rate

regulation, or whether the remedy afforded a party in a

given case is complete or inadequate, measured by judicial

standards.

The jurisdiction of the Federal Power Commission hav-

ing attached to all natural gas sold to Willmut, there is no

residual jurisdiction for independent court action. The

local component lost its intrastate character and there re

mained no power in the courts to apply the common !aw of

the State.

J

Va

The chancery court erred in not sustaining the motion to

dismiss the bill for want of jurisdiction to determine the

issues presented, and its order is therefore reversed. On

interlocutory appeal we ordinarily remand the case to the

trial court, but in this case no additional or amended plead-

ing could enable Willmut to maifitain its suit. It would

serve no purpose to remand the cause, and final Judgment

will be rendered here dismissing the bill. Parker v. Board

of Supervisors, 125 Miss. 617, 88 So. 172.

Reversed and Bill Dismissed.

All Justices Concur.

APPENDIX II

IN THE SUPREME COURT OF MISSISSIPPI

No. 40,521

Usirep Gas Purr Lixe Company

Vv.

Wittmur Gas & Om Company

On Suggestion of Error

Haws, Justice, Dissenting:

The suggestion of error in this case is directed solely to

the action of the Court in entering a final judgment, which

point is covered only in the last paragraph of the opinion

originally entered herein which has been reported in 97

So. 24 530, 536, and I respectfully dissent from the action

of the Court in overruling the suggestion of error.

It must be remembered that the lower court decided

this case on a inotion filed by United to dismiss the bill.

whieh motion was overruled, and this Court reversed that

action holding that the motion should have been sustained,

but the Court went further and instead of remanding the

cause, it rendered a final judgment without giving Willmut

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an opportunity to amend {js bill in an effort to obviate

the holding of this Court. The case was never tried on

the merits and the result is that this Court has entered

a final judgment against the original complainant without

any hearing on the merits. This is contrary to every eon-

veept of fairness and justice and contrary to what this

(‘ourt said in the case of Ascher & Baxter v. Moyse &

(onxpany, LOL Miss. 36, 56, 57 So. 299:

“The lower court declined to enter into a consideration

of the merits, but dismissed the bill solely upon the ground

that th» complainants did not have the right to sue, upon

the idea that the provisions of the Code of 1906 were re-

peated by the act of 1908. This court is strictly a court

of review, and it is only in rare instances where the court

will consider the merits of any controversy, unless passed

upon in the lower court. Thompson v. Bank, S85 Miss.

POL, 37 South, 645; Rdwards ve. Lumber Co., 02 Miss. 598,

4; South 69. A imoment’s reflection will at once demon-

strate the soundness of this rule. The parties to any

litieation have the right to have matters of fact submitted

te and passed upon hy the jury or the chancellor, in what.

ever forum the eause is being tried, and the finding of

facts in the court below by the prover authority will not

he disturbed in this court unless i is manifestly wrong.

The opportunities afforded to the lower court are so mueh

better for the correct conclusions and findings upon all

questions of\fact than in this court. Here we have noth

‘ny bat the naked record before us; there, in usost cases,

ie parties themselves are in the presence of the eourt

and testifving, The manner of testifving, and their appear-

ance upon the witness stand, and many other things, are

influential in determining the triers of fact.”’

The holding of the majority is also contrary te what

was said in Town of Utica v. State, ex got Rice, Attorney

Gieneral, 166 Miss. 565, 579, 148 So. 655, ow suggestion of

error as follows: **On a former day of this term the judy

13a

nent of the court below in this eause was reversed, and

the cause was remanded to the eireuit court for trial de

novo, The appellant now suggests that upon reversal of

the judgement of the circuit court « final judgment in its

favor should have been entered in this court. This exact

point was recently deeided adversely to appellant’s eon-

tention in the ease of MeIntosh v. Munson Road Machinery

Co. (Miss.), 145 So. 731: and consequently the suggestion

of error, or motion to Correct the judgment as it is errone.

ously styled, must be overruled.”’

It is also contrary to what was said by Judge Griffith

in the case of Brock, State Bank Commissioner vy. Adler,

IS) Miss, 126, 128, 178 So. 593, as follows: “Much as

Wwe sympathize with appellee as a result of the decision

in Adler v. Interstate Trust & Banking Co., 166 Miss. 215,

IO So, 167, 87 ALL.R. 347, followed in the opinion de.

livered on December 13, 1927, 177 So, 523,°we are bound

to held now that the controversy is at an end on its merits,

We remanded the case that the trial eourt might adjndi-

cate the damages on the injunction. Appellant now appears

and expressly waives any claim for damages: and upon

that basis a final decree will be entered here for appellant

but expressly disallowing damages for the wrongful js.

stance or the writ of injunciion, Otherwise we eould net

enter any final deeree as appellant has requested us to do.”

Willmut proposes certain alegations whieh it mich

make in the amendment whieh it desires to make and sets

out these allegations in detail at pp. 17, 43 and 44. of its

suggestion of error, There are many thousands of peonle

iInccreetly interested in this case and over a million dollars

as sned for, and T feel that in view of the number of people

mvelved and the amount involved Willmut. is entitled to

its day in eourt and should not be kieked out on a final

ndcment based upon the pleadings,

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APPENDIX III

UNIa“D STATES OF AMERICA

FEDERAL POWER COMMISSION

Before Commissioners: Jerome Wk. Kuykendall, Chair-

man; Dale BE. Doty, Claude L. Draper, Nelson Lee Smith

and Harrington Wimberly.

Opinion No. 252

Docket No, G-1158

In the Matter of

Witumer Gas & Om Comrany, ef al

v.

Unirrep Gas Pire LIne Company

Opinion and Order Modifying and Affirming as Modified

Decision of Presiding Examiner

APPEARANCES

Mor Wilhnut Gas & Gil Company

Garner W. Green, Sr, Esq.

Garner W. Green, Jr. Esq.

James Simrall, Jr, Esq.

Mor City of Tlattiesburg, Mississtpypt

Hlonorable Mdward J. Currie, Mayer

For United Gas Pipe Line Company

C. Huffinan Lewis, Esq.

W. Scott Wilkinson, Eesv.

Vernon W. Weods, fesq.

W. 0). Crain, Esq.

Kd. Freiberg, sey.

kor the Stat) of the Federal Power (omitnission

Louis L. Da Pra, Bsa,

loa

Opinion

This matter is before the Commission on appeal from

the initial decision of the Presiding Examiner.

Subject to review by the Commission, the Examiner

found that United Gas Pipe Line Company (United) by its

failure to make natural gas available to Willront Gas & Oi

Company (Willmut) at the same rates or charges volun.

tarily established and made available to Mississippi Valley

Gas Company (MVG) and its predecessor, Mississippi

Power & Light Company (MPL), is subjecting Willmut to

nidue prejudice and disadvantage, and is granting undue

preference and advantage to MVG, and that such practices

by United are unjust, unres sonable, unduly discriminatory

and preferential, and unlawfal, in violation of the provi

sions of the Natural Gas Net (Net). Aceording!y, he di

rected United to file rate schedules for all sales of natural

gas by United to Willmut containing rates and charges

based on the rates and charges contained in United's Rate

Schedule FPPC No. 95, as supplemented, whieh became eee

tive on July 26, 1947 66 FPO 982)) and under whieh vas

was sold to MPL. and is now sold to MVG. Also. the Ey

aminer denied United's motion to disriss the complaint

filed herem by Willmiut and (itv ef Hattiesburg, Mix<sis

ostppl (Hattiesburg).

The proceodine Wiis initisaterdt4 bh the filing ist thre caus

paint by Willmiut and Hattiesburg ander Seetion dob) ane

Ha) of the Act against United. Among other things.

Willmiut and Hattiesburg alleged therein that the contract

rates at which United sels natural gas te Willmut ar

unjust and unreasonable and, in addition. unduly diseriny|

iOMecial Hotes ja taker that the rate aehed le }:m hewn: eta pwe pres ; i f

Seheetyp les Th ty. 6th 7 TN) 1] inef f° t at Penne I '. . Ey 42

Tar:fl, Original Volume N :, Which rate schedules, ymors others. wer

Sint. 4 bi. eff mvt @ 4 are

te Sehecty le bye \ ' } t i - - y

the tariff, | sant ¢ i py? ‘ es

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natory and preferential, Complainants prayed, among

other things, that the Commission fix just, reasonable,

nondiseriminatory and nonpreferential rates for gas deliv.

ered by United to Willmut during the period January 1,

1940, *funtil final hearing’’, award reparations accord

ingly, and fix for the future a rate at which Willmut may

purchase gas from United. In its answer, United moved

that the complaint be dismissed on the grounds that, with

the exception of deliveries made in Hast Jaekson, Missis-

sippi, ‘the natural gas delivered and sold to Willmut has

heen and is now wholly preduced, transported and eon.

sumed within the Sate of Mississippi’? and hence bevend

the reach of the Aet. In addition, United denied the alleged

discrimination; asserted that its return is less than a just

and reasonable return amd that its deficloney in earnings

Wil increase ©) subsequent vears: and contended that the

Commission is without authority under the Aet to award

reparations,

A public hearing upon the complaint and answer was

held in May, 1992. and after the filing of briefs and oral

argument before the Fxaminer, the initial decision was

served upon the parties, Exceptions thereto were filed by

United, Willmut, and counsel for the Staff of the Commis

<10n. Thereatter, oral argument wes heard by the Com

misston on the matters and issues raised by the exeeptions.

Together with its unmerons exceptions, United filed a

motion requesting: the Conmission (1) te eaneel and. set

aside the deepen +2>+teremove the fixamiier in this mat

ter, appoint another hoxamiiner an) consider the record ana

determine the issues involved, or (3). in the alternative.

to omit the intermediate deeision procedure and deetsion

and set this matter for argument to and deeision hy th.

Commission. Also United requested that, if the motion

is tet wratited, the matters submitted in support thereat

be treated as an eee ption to the decision,

17a

Motion To Cancel The Initial Decision

We consider first United’s motion to cancel the decision

and for other relief. Patently, the Commission may not

properly entertain a motion for the omission of the inter-

mediate decision procedure at a time subsequent to the

rendition of the initial decision. In the first place, the

motion is not timely within the purview of Seetion

L380(e) (5) of the Commission’s Rules of Practice and Pro-

cedure. Moreover, no useful purpose would be served by

the waiver of the initial decision proceedure under these

circumstances, The motion to eaneel and set aside the

initial decision is subject to similar defects. Under See.

tion S(a) of the Administrative Procedure Act as imple.

mented by Seetion 1.30(d)(3) of our Rules, the initial deci-

sion, in the absence of either an appeal to the Commission

or review upon our motion within the time provided by the

Rules, without further proceeding then becomes our final

decision, Where, as here, exceptions to the initial decision

have been timely filed, Seetion S(a) of the Administrative

Procedure Aet makes it clear that we have all the powers

we would have in making the initial decision. We retain

complete freedom of decision as though we had heard the

evidence ourselves, To that end, we may affirm, modify, or

sefastde the initial decision in whole or in part, Orderly

procedure obviously requires that United, if it deems itself

adversely alfeetod hw the initial decision, seek redress

through exeeptions filed pursuant to Seetion E31 of the

Rutes. ;

We find no warrant whatever in the reeord for United ’*s

request for the removal of the Examiner or for its charge

that the decision is “infeeted with bias and prejudices"

Preliminarilv, we note that United does not allege that it

has not had a gull, fair. and impartial hearing, Nor does

it silege that the Examiner cisplaved personal bias or

pregudioe, either against United orin faver of the Opposite

party, during the hearing by reason of which the lxarminer

18a

is unable to exercise impartially his functions in the case.

It may be presumed that, if such personal bias or preju-

dice had occurred, United would have filed a timely and

sufficient affidavit pursuant to Section 7 of the Administra-

tive Procedure Act for the Examiner’s disqualifieation.

It may correspondingly be presumed that United would not

have requested, as it did, oral areument before the Ex-

aminer, The sequence of events suggests that this belated

and unfounded charge stems merely trom United ’s dissatis

faction with the result reached by the Examiner.

We are satistied that all parties were afforded a full and

fair hearing. We specifically find, upon careful considera.

tion of the entire record, that the Examiner conducted the

hearing Ina steictly impartial manner and whelly in accord

with all the requirements of fundamental law as well as the

Administrative Procedure Act. Likewise, an objective

reading of the decision discloses that it is free of bias and

prejudice. In view of the foregoing, the motion of United

should be denied as herematter ordered

The Issues

We turn next to a consideration of th ‘ceptions filed,

Pn the main, they pose the same issues previeusiv raised

in the proceeding and whieh have been fairiv and fulls

tated by Examiner. First, is United ’s sale of natura! gas

to Woillmuat ‘tin interstate commerce’? so as to be stb teet

to regulation under the Net?) Seeond. is United unduls

discriminating awninst Wioillrnit hy charging MPL (Thaw

MIVGi) a rate of 1756 peer Met for cdlomestie was While at the

same time exacting a Loe rate for such vas tron, Willmut?

Third, dees the Comission have power to award repara

,

tices? hourth, does the Comiunission tuave the power fa

4° 7 P 1 1 i re

matke findings as to the lawtulness ot past rates? Plies,

Wee shall treat in the order ~tuted,

The fats are daryely without dispute. The Examin

has ineluded on the deerron a full and fair statement ol

19a

the relevant facts involved. We shall allude from time to

time to the facts to the extent necessary to pass upon the

exceptions,

United is a ‘‘natural-gas company’? within the meaning

of the Act. It is engaged in the transportation and. sale

for resale of natural gas in interstate commerce, It (rans-

ports by means of its integrated pipe-line system natural

gas produced from fields in Texas, Louisiana, and Missis

sippl and delivers and sells it to industrials, other pipe-

lines, and distribution companies, including Willmut, in the

foregoing States and also in Alabama and Florida. It is a

holder of numerous certificates of publie convenience and

necessity granted by the Commission under the terms of

Section 7 of the Act authorizing those activities subject to

regulation by the Commission, One of the certifieates,

vranted at Docket No, G-478 in 1943 62 FLP.C. 551). au

thorized United to acquire from Willmut and operate the

Jackson tlattiesburg line as an integral part of its natural-

vis pipeline sysiem.,

Jurisdiction

The jurisdictional dispute here is whether United ’s sale

to Willmiut is now and has been sinee Pebruary 6, 1047,

rewulable by the Commission. The Examiner found that

the sale is not removed from our jurisdiction by the cir

cumstances under which it is now made. Firstly, the Ex

ariner found that United made certain system operational

chatieres Without the permission of the ¢ ‘OPNIMIASTOn reuired

by Seetion (Ob), and, therefore, has failed to remove itself

from reyulation under the Aer. Secondly, bier heeled that

the relatively stnall amount of interstate gas involved since

that date is ne bar to Commission regulation. Thirdly, he

pointed out that the present plan of operation for the

Jackson-Hattiesburg fine shows that it Is not to he re

warded as am tsolated: seument, separate ated distinet fram

i onited’s transmission network, but rather as an iInterral

20a

part of such network. For all these reasons, he concluded

the Commission is empowered to regulate the rate for the

Willmut sale.

United concedes that, until February 6, 1947, the sale

made to Willmut from the Jackson-Hattiesburg line was

regulable by the Commission. It challenges the jurisdie-

tion of the Commission since that date. Its challenge is

predicated upon an assertion that the gas transported

through the Jackson-Hattiesburg line is produced, trans-

ported, and sold within the State of Mississippi, and the

contention that the system operational changes made by

United do not constitute an abandonment of serviee or

facilities within the meaning of Section 7(b). We do not

agree, We find no support for the contention, either in

the plain words of the statute or in its legislative history.

Prior o February 6, 1947, United delivered and sold to

Willmut natural gas produced primarily from fields in

Texas and Louisiana and brought into Mississippi and to

Will) ut by means of United's certificated Sterlington-

Jackson 18-inch, Jaeckson-Mobile 16-inch, Bogalusa 10-inch,

and the Jackson-Hattiesburg S-inch pipe lines. In 1947,

United commenced to take gas from the Gwinville Field,

which is located in Mississippi midway between Jackson

and Hattiesburg, over a certificated 12-inch pipe extending

easterly from the field to the Jackson-Hattiesburg and

Jackson-Mobile lines, which run parallel to each other.

The Gwinville tie-line was certificated in 1946 at Docket

No, G-724 (5 FPC 628).

The following are the system operational changes made

by United for the avowed purpose of restrieting the pas-

sage to Willmut through the Hlattiesburg-Jaekson line of

intrastate gas only, for which chonges it neither sought nor

obtained Commission approvai: It caused check valves to

he installed and so locked as to obstruet the flow of inter-

state gas from the Jackson-Mobile line to the Jackson-

hattiesburg line by the means of the then newly-constructed

2la

Giwinville tie-line. It inserted a solid steel blind plate in

the orifice flange of the meter station at the connection of

the Bogalusa and Jackson-Hattiesburg lines, preventing

thereby the passage to Willmut of gas from southeastern

Louisiana, It severed and removed the connection between

the Jackson-Hattiesburg line and Jackson compressor sta-

tion, preventing the flow to Willinut of gas purchased in

Texas and Louisiana and transported to it by means of the

Sterlington-Jackson and Jackson-Mobile lines. It further

severed and removed the connection between the Jaeckson-

Hattiesburg and the Sterlington.Jackson lines at a point

afew miles west of the Jackson compressor station, which

was used when Willmut first commenced to take interstate

gas from United in 1940. When United acquired the

sackson-Hattiesburg line in 1943 and. installed the con-

necting link with the Jackson-Mobile line near the compres-

sor station, the connection was used for emergency pur-

poses until its severance, -As a result of. the foregoing

iistallations, severanees, and removals, all accomplished

without the permission of the Commission first had and

obtained, United effected a discontinuance of the flow of

interstate gas from the Jackson-Mobile line into the Jack-

von-Hattiesburg line except through the connecting link

at or near the southern terminus of the latter line. Only

a relatively small amount of interstate gas has flowed into

such line through the link since February 6, 1947,

We hold that by its removal of segments of pipe lines

operated under certificates of publie convenience and ne-

cessity United has physically abandoned facilities within

the meaning of the plain words of Section 7(b). The see-

tion prohibits a natural-gas company froin abandoning

‘all or any portion of its facilities subject to the jurisdic.

tion of the Commission. *? Unquestionably the segments of

pipe fines are “ facilities’? within the meaning of the sec.

tien, There een be no doubt that thece segments, at the

time of their severance and removal, were “subject to the

jurisdiction of the Commission’? within the meaning of

22a

the section. These conclusions are fortified by the legisla-

tive history of Section 7(b), particularly the failure of

adoption of an industry amendment designed to give

natural-gas companies ‘‘the right to make temporary aban-

donments, changes in equipment, substitution of pipe lines,

and short-distances and loops’’ without the consent of the

Commission under Section 7(b) where no effect on service

would result (House Hearings on H,. R. 4008, 75th Cong.,

Ist Sess., p. 127). Failure of United to seeure permission

for the foregoing severances and removals in the face of

the mandatory provisions of Section 7(b) precludes it from

validly asserting that it has negated the Commission’s

jurisdiction over the Willmut sale.

We further hold that United’s discontinuance of inter.

state natural-gas service rendered to Willmut by means of

certificated facilities, including those which it removed or

which it disabled from performing the operations for which

certificates were issued, by the installation of check valves,

a blind plate, and other contrivances, is an abandonment of

service within the meaning of the plain words of Section

7(b). And this conclusion is not affected by the incidental

fact that United has replaced that service by intrastate

service in a manner satisfactory to it. For Section 7{b)

also prohibits a natural-gas company from abandoning

‘‘any service rendered by means of** facilities subject to

the Commission's jurisdiction.

But for the foregoing installations, severances, and re-

movals, United today would undoubtedly be rendering in-

terstate service to Willmut in accordance with the terms and

provisions of its certificate at Docket No. G-478, Plainly,

United has abandoned interstate service to Willmut almost

completely. A reduction in interstate service by the instal.

lation of controls being an abandonment of service within

the meaning of Section 7(b), as the United States Court of

Appeals for the Sixth Circuit said in Punhandle Eastern

Pips Line Company ¥. Michigan Conselidated Gas Com-

pany, 177 BF, 2d 942, 945, a fortior?, an almost complete

vessation of interstate service is an abandonment.

SRE aL SET SR eee

23a

This principle is equally true whether the abandonment

is effected by a severance «f facilities or by manipulation

of valves.

The legislative history of Section 7(b) includes a reeogni-

tion that one of the purposes of the section was to ferbid

a company, once embarked upon interstate operation, to

change its mind and become an intrastate operator exeept

after proceedings contemplated by the section. (House

Hearings on H. R. 5423, 74th Cong., Ist Sess. pp. 437, 438).

Whatever freedom United may have had prior to the

passage of the Act to switch from interstate to intrastate

service vanished when it became subject to regulation by

this Commission and when it applied for and received ce:

tifieates of public convenience and necessity under which it

transported and sold gas in interstate commerce and used

therefor facilities subject to the jurisdiction of the Com-

mission,

An examination of the duties voluntarily undertaken by

United when it initiated operations o»thorized by certifi-

sites of public convenience and necessity further fortifies

this conclusion, Whatever its duties may have been prior

operations under the G-47S certificate, it is amply clear

that, once United aequired the Jackson-Hattiesburg line

from Willmut and commenced operating it as ar inteeral

art of its transmission network, there was impressed

upon United the duty to use those facilities for the trans-

mortation and sale of natural gas in interstate commerce

in the manner specified in the certificate. This is of course

a continuing responsibility until proper authorization for

abandonment is obtained. And it is a corollary of United's

aweceptance and enjoyment of the privileges “ranted by the

Commission under the Act.

Nifective administration of the provisie . of the Act

requires that the Commission insist on proper discharge

of those duties. If departure therefrom becomes neces-

4a

sary, United may so show as required by Seetion 7(b).

Otherwise, the fundamental purpose of the Act to protect

ultimate consumers served by certificated facilities ts

frustrated,

Under the provisions of Section 7(b) a natural-gas com.

pany may apply to the Commission for permission to

abandon facilities or serviee subject to its Jurisdiction.

After due hearing, the Commission may grant sueh per-

mission but only if it finds that the available supply of

natural gas is depleted to the extent that the continuance

of service is unwarranted, or that the present or future

public convenience and necessity permit such abandonment.

Here, instead of following the preseribed procedure, United

wrongfully arrogated unto itself the basic decision. (Cf.

Pennsylvania Water & Power Co. vy. Federal Power Com-

mission, 343 U.S. 423-24). As was said by the Kansas

Supreme Court in State v. Missourt, K. & T. R. Co., 232

P. 1088, 1029 (1925) ‘tin no event may public utilities

arrogate the right to determine for themselves the fune-

tions and powers conferred upon tae Commission.’’ Nor

does the failure of United to secure permission for the

abandonment of interstate, even though it substituted intra-

state, natural-gas service nullify the Coinmission’s juris

diction over the Willmut sale.

United seeks support for its position from language /n

the Matter of The Connection Light and Power Company,

Docket No. IT-5665, 6 FPC 104 (1947). But there, prior

io the effective date of the Federal Power Act, the com-

pany, for the avowed purpose of avoiding anticipated fed-

eral regulation, severed interstate connections and discon-

tinued its one interstate sale for resale. Here, United,

after the effective date of the Natural Gas Act, submitted

itself to regulation thereunder.

Secondly, the Federal Power Act does not contain. the

certificate provisions found in the Natural Gas Act. More

-pecifically, it contains no section similar to Seetion 7(b).

Joa

United coneedes that it made the system operational

changes without filing a ‘formal petition’? for abandon-

ment. Bat it argues that it formally’? advised the Com-

mission of these changes by its letter of September 10,

1946, fled at Docket No. G-708. United seems toe think the

letter sanctioned the system rearrangements. The claim

is palpably invalid.

Ii is predicated upon the following circumstances : arly

in 1946 United filed ay application for a certificate at

Docket No. G-708 authorizing the extension of the Jackson-

Hattiesburg line from the Jackson compressor station to

Philadelphia, Mississippi. Subsequently, United filed a

motion to withdraw the application for the reason it had

concluded that the commanities along the Philadelphia

extension would be served with Mississippi eas. It said

in its motion that before commencing construction it wouid

advise the Commission how the aforesaid service would

be provided. After the application had been permitted to

be withdrawn, United transmitted to the Commission the

letter of September 10.

It is to be observed thar: »owhere in the letter did United

state that it proposed to sever the G-478 facilities, Nor’

did it mention a proposal to seal off the flow of interstate

vas from the Bogalusa line. No mention was made ‘hat

it proposed to sever the Sterlington-Jaeckson line fromm

the Jackson-Hattiesburg line at a point a few miles west

of the compressor station. The letter stated that rhe

Philadelphia extension would be connected to the Jackson-

Hattiesburg line at the Jackson compressor station. The

changes referred to were characterized by United as ‘minor

construction changes.’’ In eonelusion, United said that

after such construction ‘‘it will be pbysicaliy impossible

for any interstate natural gas to move through the Dro-

posed 6-inch line extending to Philadelphia.’’ No sug-

gestion was made that Willmut would not be served with

interstate gas. In fact, no mention is made at all of service

to Willmut.

26a

In any event, it is clear that United did not in thas

letter seek Commission approval for the acts described

therein, Nor might it or was it construed to be an appli.

cation under Seetion 7(b) for permission to abandon. Fur-

thermore, there is a fatal absence of the hearing and find.

ings mandatory under that section. As we said in 1942

In the Matter of United Gas Pipe Line Company, Docket

No. G-216, 3 FPC 3, at page 9:

* * * nor would United be justified in assuming that,

ii: the face of the mandatory provisions of section

i(b) of the Aet, either (a) the facilities, or (b) the

service rendered by means of such facilities could be

abandoned in the absence of the approval of the Com-

mission, ¢fter a hearing or hearings, and the produe-

tion of requisite evidence justifying the finding or find-

ings prescribed by said section. Seaboard Air Liane

Railway Recewers’ Proposed Abandonment, 202 LC.C.

543, 553,

The case of In the Matter of United Gas Pipe Lane Com-

pary, Docket No. G-556, 7 FPC 646 (1948) cited by United

is not in point. There, we merely dismissed United's

application for a certificate upon motion by United. In

eortrast to the situation here, United had not there em-

barked upon the transportation and sale of aatural gas in

interstate commerce pursuant to a certificate issued after

due notice and hearing.

Turning to another point, United misreads into the Ex-

aminer’s decision a purpese to extend the jurisdiction of

the Commission to the production and gathering of natural

gas contrary to Section 1(b). No such inference can be

reasonably drawn from the decision. The Examiner deals

with facilities used in the transportation of natural gas

in interstate commerce and the sale of natural gas to

Willmut in interstate commerce for resale for ultimate

publie consumption. Those activities are clearly within

the ambit of the Commission’s jurisdiction expressly

STO We eee

TU a aed abe

a eee Fc ee

eee

Ss) eee

27a

granted by the Aet. And that grant is of eourse not

nullified by United's wrongful acts,

United excepts to the finding of the Examiner that the

small amount of natural gas which has flowed into the

Jackson-Hattiesburg line from the Jackson-Mohile line since

February 6, 1947 is no bar to federal regulation.

As we have seen, United coneeded that the sale to

Willmut was one ‘in interstate commerce”? for resale and

subject to regulation prior to that date. The cireumstance

that only a relatively small amount of gas has moved in

the line since then is a direet consequence of the system

rearrangements made by United without the permission

required by Section 7(b), The Commission’s plenary juris-

diction over the Willmut sale is unaffeeted by those unau-

thorized syste n rearrangements. The quantity of interstate

gas delivered under presently existing conditions is there-

fore immaterial, In any event, as Pennsylrania Water

Power Co. v. Federal Power Commission, 343 U. 8. 414,

cited by the Examiner, holds, federal rate authority applies

to all electricity sold despite the fact that it is made up of

interstate energy, together with that locally produced.

We turn next to Staff counsel’s exception to the Exam-

iner’s failure to require United to restore the facilities

so that full interstate service to Willmut may be resumed.

The contention is made that there is ample authority within

the framework of the Act for the Commission so to order.

Counsel points to the Examiner’s assertion that United's

unauthorized rearrangement of its system operations may

be ecrreeted by order of the Commission directing the

establishment of system operations existing prior to Feb-

ruary 6, 1947. The Examiner stated that power to take

such action is granted by the provisions of Section 16 of

Act authorizing the Commission to perform any act and

to issue any order which it may find necessary or appro-

priate to carry out the provisions of the Aet. Ti is plain,

however, that Section 16 does not grant the Commission

28a

any power to issue an order which does not have its genesi-

elsewhere in the Aet (Cf. “ederal Power Commission vy.

Panhandle Eastern Pipe Line Company, 337 U.S, 498, 908).

Turning to the Act we find that Sections 4(b) and 5(a)

grant the Commission power to regulate interstate service

(Michigan-Consolidated Gas Company v. Panhandle East-

ern Pipe Line Company, 173 F. 2d 784, 789). Seetion 7(e)

erants the Commission power to issue certificates of public

convenience and necessity to any qualified applicant there-

for, if it is found that the applicant is able and willing

properly to do the acts and to perform the service pro-

posed and to conform to the provisions of the Act and

the requirements, rules, and regulations of the Commis-

sion thereunder; and that the proposed service, sale, oper-

ation, construction, extension, or acquisition, to the extent

authorized by the certificate, is or will be required by the

present or future public convenience and necessity. That

section also grants the Commission power to attach terms

and conditions to the issuance of the certificate and to

the exercise of the rights granted thereunder. Section 7(b),

as we have seen, prohibits the abandonment of interstate

facilities or service. And this prohibition plainly requires

a continuation of service until abandonment is authorized.

Finally Section 16, authorizes the Commission to do all

acts reasonably necessary and fairly appropriate to make

the grant of these powers, which Congress has expressly

conferred upon the Commission, fully efieacious (Colorado

Tuterstate Gas Company vy. Federal Power Commission, 142

#, 2d 943, 952). Otherwise, these provisions, which are

integral parts of the broad and comprehensive scheme pro-

viled by the Act for t'.e regulation of the wholesale dis-

trikntion to public service companies of gas moving in

interstate commerce, would be deprived of significant

meaning.

It must also be remembered that when the Commission

granted United the G-478 certificate, it found that the

294

acquisition and operation proposed was required by the

publie convenience and necessity. Also, the Commission

found that United was ‘table ard willing’? properly to

de the acts and perform the service proposed, and to con-

form to the provisions of the Act and the regulations of

the Commission. By its initiation of service authorized by

the certificate United undertook the duty of continuing to

perform the service and of satisfying the demands of the

public convenience and necessity. And until and unless

a satisfactory showing is made pursuant to the provisions

of Section 7(b) that the available supply of natural gas

is depleted to the extent that the confinuance of such

service is unwarranted, or that the present or future public

convenience and necessity permit United to lay aside that

obligation so voluntarily assumed, that duty must continue

to be discharged.

Against the background of the particular grant of powers

noted and the duties voluntarily assumed by United when

it initiated serviee under the G-478 certificate, Section 16,

as a necessary corollary, authorizes the Commission to

order restoration of the certifieated facilities and the re-

sumption of the certifieated service which United abandoned

without the approval of the Commission,

It may be noted that the evidence shows that the facilities

may be restored in a matter of hours. Also, as one of the

largest natural-gas companies, United would presumably

have no financial ciffeulties in making such restoration.

In view of all of the foregoing, we shall require United

to restore the certificated facilities and interstate service

abandonment of which has never been authorized, as here-

inafter ordered.

Discrimination

After eareful consideration of the entire record, we find

no reason to depart from the Examiner’s finding that, by

its failure without lawful justification to make natural gas

30a

available to Willmut at the same rates or charges volun

tarily established and made available to MVG and its pred

ecessor, MPL, United is unlawfully subjecting Willmut to

undue prejudice and disadvantage; and unlawfully grant-

ing undue preference and advantage to MVG; and that

such practices by United are unjust, unreasonable, unduly

discriminatory and preferential, and unlawful, in violation

of the provisions of the Act. The evidence conclusively

demonstrates that United is unduly discriminating against

Willmut by charging MPL (now MYG) a rate of 17.5¢ per

Mef for domestic gas under its Rate Schedule FPC No. 95

while at the same time exacting a 25¢ rate for such gas

from Willmut under its Rate Schedule FPC No. 732

In passing, we note that the Examiner has not, as United

contends, misrepresented the contentions of Willmut and

Hattiesburg. Plainly, this part of the proceeding is 2

‘discrimination case.’? Complainants plead undue dis-

crimination. Alleged discrimination has been denied by

United. And we are satisfied that undue discrimination

has been shown to exist.

Numerous of United’s rate schedules in the Jackson rate

zone are of record. The Jackson rate zone embraces the

territory from the Mississippi River east to Pensacola,

Florida, but excluding the New Orleans area. It includes

Jackson, Mississippi; Mobile, Alabama; and Pensacola,

Florida. The ecity-gate rates prescribed in such schedules

are applicable to the sale and delivery of natural gas for

resale for domestic and commerciai use only. With respect

to the sale for resale of gas for industrial use, the evidence

shows that United customarily entered into certain per-

centage arrangements with each distributor. We are coi-

cerned here with the discrimination shown in the rates for

2 Official notice is also taken that in 1952 United filed a propesed notice of

cancellation of that portion of tb:s rate schedule relating to the saie of

natural gas to Willmut except ai East Jackson. The proposed notice was

shspended, along with other matters, at Docket No. G-2019 by order of the

Commission issued August 1, 1952.

sla

resale of gas for domestic purposes between Willmiut and

MVG. Such gas will be identified here as ‘*domestice gas’’.

An unreasonable difference in rates for domestie gas an-

der substantially similar conditions of service has been

shown. Willmut and MVG are both located in United's

Jackson rate zone, ‘‘a stone’s throw’? from each other.

For many years, United extended a uniform rate for do-

mestic gas to all customers in the zone. In 1947, it extended

a lower rate to MPL for such gas. Diseovery of gas in

Mississippi was given as the reason for the change, but in

fact MPL and later MVG at all times here in question have

been served with interstate gas. At the time of the change,

United recognized that the rate voluntarily extended to

MPL was lower than its other rates for *‘ similar service in

the same territory’, a recognition adverted to by the Ex-

aminer. Both Willmut and MVG are in the same class,

wholesale customers of United purchasing gas for resale.

United classifies them as town-border customers. Admit-

tedly, they are located in the same territory. The domestic-

gas service rendered to them admittedly is simiiar. The

cities and towns served by them are similar, except for dif-

ferences of population. There is a substaniial similarity of

conditions under which Willmut and MVG receive natural

gas. Thus, there is a close similarity between them with

respect to the pressure at which gas is delivered, seasonal

characteristics thereof, load factor, facilities utilized in

serving them, type of metering facilities, and delivery

points. Nor is there substantial variation in service con-

ditions or in the characteristics of delivery and sale of

domestic gas. “° -

We are convinced that United has not established sub-

stantial differences in conditions of domestic-gas service

to Willmut and MVG justifying it to require Willmut to

pay an approximately 50% higher price for such gas than

is charged MVG. There is nothing in the record tending

to indicate that cost per Mef to United of transporting and

32a

delivering domestic gas to Willmut is more than the cost of

transporting and delivering such gas to MVG. The differ-

ences shown by United do not affect our decision that undue

discrimination exists with respect to domestic-gas service,

such as the fact that MVG’s consumption is predominantly

industrial, Willmut’s predominately domestic; that MVG’'s

over-all load factor is higher than Willmut’s; that the sea-

sonal characteristics of industrial gas served is different

from that of domestic-gas service; and that the average

unit cost of all gas delivered to MVG is not identical to the

average unit cost of all gas delivered to Willmut. The only

material difference United has established is that it sells

domestic gas to MVG at a lower rate than it sells such

gas to Willmut.

An unreasonable difference in rates under substantially

similar conditions of service constitutes unjust discrimina-

tion. Western Union Telegraph Company vy. Call Publish-

ing Company, 181 U.S. 92. United concedes that, under

this definition, unjust discrimination exists if Willmut is

required to pay a higher price for gas under like conditions

of service. The premise upon which the right to the same

price stands is, as the Supreme Court said, ‘‘like conditions

of service.’’ These conditions have been shown. And since

‘fall individuals have equal rights both in respect to service

and charges’’, which was also said in the Western Union

case, the logical consequence is that Willmut ts entitled to

the same rate as MVG, as the Examiner properly found.

For United to charge one customer approximately 50%

more for gas delivered under substantially similar condi-

tions is to require such customer to pay an unreasonable

and unduly discriminatory rate.

It will be recalled that, in answer to the complaint, United

alleged that its return is less than a just and reasonable

return and that its deficiency in earnings will increase in

_ subsequent years. The allegation was unsupported by evi-

dence. United also asserted that its rates over which the

Commission has jurisdiction will of necessity have to be

substantially increased. At no time subsequent to duly 26,

1947, the effective date of Rate Schedule FP'C No. 95, how-

ever, has United sought an increase in such rate.

We take official notice of the fact that in 1952 it filed

applications for increases in rates for sales to five natural

gas companies and one sale to United Gas Corporation, its

parent, as well as in rates for certain transportation serv

ices. These rates are currently effective under bond pend

ing decision at Docket Nos. G-2019 and G-2074. But. it

has not sought to exercise its privilege under the Aet to

file an inerease in the 17.5¢ city-gate rate to MVG.

The Supreme Court has said thai ‘‘experienee does not

indicate that utilities are wont to charge themselves out of

business’? (Federal Power Commission y. Interstate

Natural Gas Co., 336 U.S. 577, 582, unless taere are **ex-

traordinary circumstances making submission to the loss

expedient’? (Dayton Power and Light Co. v. Public Utilities

Commission, 292 U.S. 290, 312), which cases are also cited

by the Examiner.

Upon consideration of the foregoing, we are of the

opinion that the 17.5¢ per Mef rate to MVG must be deemed

to be just and reasonable in the absence of evidence to

the contrary. The Examiner’s order that United file rate

schedules for its sale to Willmut containing the rates and

charges set forth in Rate Schedule FPC No. 95, is therefore

determined to be proper and reasonable.

There is no basis for United’s assertion that the Com-

mission’s action in permitting the 17.5¢ per Mef rate to

become effective removed the area served by MPL from

the Jackson rate zone. No such intent was expressed in

the order. Nor can any be implied therefrom, particularly

in the light of United’s representations made to the Com-

mission as to the reasons for such ehange.

Jj4a

Reparations

The Examiner correctly disposed ef the contention of

Willhnut relating te reparations. The terms of the Aet

and the authorities cited by him firmly establish the faci

that we do not have the power to grant reparations.

Lawfulness of Past Rates

No substantia! reasons have heen advanced for us to

depart from the Examiner’s finding as to lawfulness of

past rates, "

Other Matters

We turn now to the other exceptions filed by United and

Staif counsel.

The exception by United to references in the initial deeci-

sion to orders of the Commission issued subsequent to

hearing is not well taken. !f an Examiner may take official

notice of reports filed with the Commission subsequent to

hearing, as was held in Wisconsin v. Federal Power Com-

mission, 201 F. 2d 206, unquestionably he may take notice

of orders of the Commission itself.

It seems to us that the Examiner did not err in eoneluding

that United rearranged its system operations ‘‘in an effort

to avoid Commission regulation of the Wiilmut rate.’’

That conclusion may be reasonably inferred from the evi-

dence adduced in light of the history of relations between

United and Willmut. No pretense was made by United

at the hearing that such rearrangement was done to im-

prove operating conditions or was required by any operat-

ing exigencies. It was done admittedly ‘‘on advice of

counsel.’’ United contends now that such rearrangement

was necessary to insure the passage of intrastate gas to

the Philacelphia extension. That circumstance was an

effect, not the cause, of the arrangement. If what is econ-

tended now were the cause of the arrangement, no justifiea-

joa

tion for the obstruction of che flow of literstate gas to

Wilimut through the Bogalusa line is apparent. In “ny

event, whatever motivated United te cause the rearrange-

ment, whether beneficial or not, cannet obviate the necessity

for it to secure the requisite approval under Section 7(b).

We think, however, that there is not an adequate hasis

for an inference that United, by the conduct reflected in

this record, intended to squeeze Willmut out of the retail

gas business. References thereto in the Kxaminer’s deci-

sion should be deleted.

No prejudicial error is caused United by the Examiner’s

reference to letters written by Willmut to the Commission

in 1948. Those portions appearing in the initial decision

recite facts contained in other exhibits admitted ir evidence

in this proceeding.

The initial decision should be modified to show that

Willmut commenced to take gas from United at a point on

the Sterlington-Jackson line, a few miles west of the Jack.

son compressor station, rather than as inadvertently stated

by the Examiner. The north end connection between the

Jackson-Hattiesburg line and the Jaekson-Mobile line re-

ferred to by him was at the compressor station, and it was

made in 1943 subsequent to the issuance of the G-478

certificate.

The Commission, having considered tae entire record

with respect to the matters involved and the issues pre-

sented, including the complaint, the answer thereto, the

evidence adduced at the public hearing, the briefs filed.

the oral argument before the Examiner, kis initial decision

and exceptions thereto, and the oral argument before the

Commission, further finds:

(1) The initial decision and accompanying order filed by

the Presiding Examiner cn November 26, 1952,

should be modified to conform to the views expressed

herein and to correct the minor errors, and as so

36a

modified, should be affirmed as the Commission’s final

decision, as hereinafter ordered.

(2) To the extent that the exceptions filed to such de.

cision are inconsistent with any statement, finding,

conclusioa, or ordering paragraph contained herein,

such exceptions should be denied as hereinafter

ordered.

(3) The motion filed by United on December 15, 1922, to

cancel and set aside the initial decision and for

other relief should be denied, as hereinafter ordered.

Pursuant to the provisions of the Natural Gas <Aet,

particularly Sections 4(b), 5(a), 7(b), 7(e), 14 and 16,

the Commission orders:

(A) The initial decision of the Presiding Examiner filed

on November 26, 1952, in this proceeding, as here-

inafter modified, shall become cffective as the deci-

sion of the Commission as of the date of issuance of

this order.

(B) The initial decision be and it is hereby modified in

its narrative parts to conform with our views ex-

pressed herein and to correct the minor errors noted.

(C) The following finding be and it is hereby added to

the Examiner’s decision:

**(28) It is just and reasonable and appropriate in

carrying out the provisions of the Natural

Gas Act, that United should be required to

restore and reestablish the facilities and re-

sume the interstate service as rendered to

Willmut prior to February 6, 1947.”’

(D) The following paragraph be and it is hereby added

to the order accompa: .ng the Examiner’s decision,

to be designated as paragraph (B) and substituted

for the paragraph so designated in the decision:

(a

(3)

4

(4)

37a

“(B) Within 30 days after the date of issuance of

this order United shall:

) Restore and re-establish the connections

which existed prior to February 6, 1947

between (a) its Jackson-Hattiesburg line

and its Jackson-Mobile line at the Jackson

Compressor Station, and (b) its Jackson-

Hattiesburg line and the Sterlington-

Jackson line at a point approximately

three miles west of the aforesaid eom-

pressor station.

Remove the steel (blind) plate from the

orifice meter flange of the meter station

located at or near the point where its

10-inch Bogalusa line comnects with its

Jackson-Hattiesburg line, and restore and

re-establish the orifice plate which had

been removed;

Make any other appropriate and necessary

changes in the aforesaid facilities, which

may be required to fully restore and re-

establish the facilities to the arrangement

existing prior to February 6, 1947;

Resume the full operation of the natural-

gas transmission pipe-line facilities au-

thorized, by and in aceordance with the

provisions of, the ecrvificate of public

convenience and necessity granted, by

Opinion No. 101 and accompanying order

entered August 19, 1943, In the Matter of

Umted Gas Pipe Line Company, Docket

No. G-478, 3 FPC 551, in conjunction with

its other natural-gas transmission pipe-

line facilities, for the transportation and

sale for resale of natural gas, subject to

jSa

the jurisdiction of the Commission, al!

as more fully deseribed in its application

therein, and in the aforesaid Opinion

No. 101, and accompanying order; and

in accordance with the provisions of the

rate schedules required to be filed pursu.

ant to the provis‘ens of paragraph ((C)

hereof ;

(5) Continue the operations of such facilities

in accordance with the provisions of the

Natural Gas Act, av well as applicable

rules, regulations, and orders of the Com-

mission thereunder; and

(6) Immediately upon completion of the acts

deseribed in subparagraphs (1), (2), and

(3), above, and upon fuil resumption of

the operation required by subparagrap)

(4), above, file with the Commission, in

writing and under oath, an original and

four conformed copies, notice of the date

or dates of such completion and resump

tion.’’

(EK) Paragraph (B) sppearing in the Examiner’s deci-

sion be and it is hereby redesignated Paragraph ((C).

(KF) To the extent that the exceptions filed by United,

Willmut, and Staff counsel are inconsistent with

the opinion and order of the Commission herein, such

exceptions be and the same are hereby denied.

(G) The motion filed by United on December 15, 1952 to

cancel and set aside the initial decision and for

other relief be and it is hereby denied.

(H) Nothing contained in this order is to be construed

as a waiver of any penalties or sanctions which may

be imposed pursuant to the provisions of the Natural

Gas Act against United, its agents, or officers, or any

39a

of them, for any unauthorized action disclosed by

the record herein.

By the Commission. Chairman Kuykendall not participat

ing. Commission Draper dissenting.

Leon M. Fvevay,

Secretary.

Adopted: May 26, 1953

Issued: June 1, 1953

Docket No. G-1158

In the Matter of

Wiumer Gas & On. COMPANY, ET AL.

Vv.

Unrrep Gas Pirk Lixe Company

Drarer, Commissioner, dissenting:

I regret that I cannot subseribe to the opinion of the

majority in this case. That opinion is based on the premise

that this Commission has jurisdiction to consider and ad-

judicate certain rate questions arising from transactions

which have been shown to be intrastate in character.

The fact that these transactions were formerly interstate

is not disputed. The fact that their conversion to an intra-

state status by United is a fait accomplis is not disputed.

The fact that this conversion without authorization from

this Commission is a violation of Section 7(b) of the

Natural Gas Act is affirmatively asserted, yet nowhere is

it suggested tliat Section 20 of the Act might apply to

the situation.

The subject matter of proceedings of this nature must

be either interstate or intrastate. How it came to be so

40a

cannot affect that basic fact. If there is no transportation

in interstate commerce and no sale for resale in interstate

commerce, there is na jurisdiction vested in this Commis-

sion. The apparent gheory that violation of Section 7(b)

by United converts non-jurisdictional matters to jurisdic-

tional is one I cannot follow. If there is such violation, the

Act prescribes the clear course to be taken, and that course,

it seems to me, is not to ignore the existing state of facts

by proceeding as though the violation had not oceurred and

we were still faced with a situation which the reeord shows

to have ended in 1947.

Incidentally, counsel for United made the foilowing state-

ment at the oral argument:

“The Examiner declared United’s rearrangement of

its system operation evidenced ‘an effort to avoid

Commission regulation of the Willmut Rate.’ The

only evidence on this point in the record is United’s

unquestioned proof that these rearrangements were

made in order to transport intrastate gas to United’s

newly constructed ‘Philadeiphia extension’ and that

the Commission was fully advised of the changes.”

(Emphasis supplied.)

If the Commission had been so advised without taking steps

under Section 20, it would almost appear that we had for

years condoned the acts which the majority now seeks to

order undone.

Had United sought and reccived authorization to do the

acts which have made these transactions intrastate, I

doubt that anyone would maintain that the rate issues

could legally be considered and decided by this Commis-

sion.

I believe that we should be realistie and recognize that

if a violation has occurred appropriate action should be

instituted under Section 20. Further, it is my belief that

1 (Transcript, Page 706)

4la

we cannot now deal wiih the merits of these complaints

against the level of United’s rates.

With regard te United’s motion to set aside the Exam-

iner’s decision to omit the intermediate decision procedure,

ete., I agree that it should be dismissed on the grounds

stated in the majority opinion.

CLaupe L. Draper, Commissioner

filed: May 29, 1953

Issued: June 1, 1953

APPENDIX IV

The following portions of the Constitution of the United

States and the Natural Gas Act are relevant:

The Constitution of the United States

ARTICLE V.

No person shall... be deprived of life, liberty, or prop-

erty, without due process of law; ...

ArticLe X.

The powers not delegated to the United States by the

Constitution, nor prohibited by it to the States, are re-

served to the States respectively, or to the people.

Articte XIV.

Section 1... . No State shall make or enforce any law

which shall abridge the privileges or immunities of citizens

of the United States; nor shall any State deprive any

person of life, berty or property, without due process

of law; nor deny to any person within its jurisdiction the

equal protection of the laws,

Natural Gas Act.

See. 4. (a) All rates and charges made, demanded, or

received by any natural-gas company for er in conneciion

42a

~

with the transportation or sale of natural gas subject to

the jurisdiction of the Commission, and all rules and regula-

tions affecting or pertaining to such rates or charges, shall

be just and reasonable, and any such rate or charge that

is not just and reasonable is hereby declared to be unlawful.

(b) No natural-gas company shail, with respect to any

transportation or sale of natural gas subject to the juris-

diction of the Commission, (1) make or grant any undue

preference or advantage to any person or subject any

person to any undue prejudice or disadvantage, or (2)

maintain any unreasonable difference in rates, charges,

service, facilities, or in any other respect, either as be-

tween localities or as between classes of service.

See. 5. (a) Whenever the Commission, after a hearing

had upon its own motion or upon complaint of any State,

municipality, State commission, or gas distributing com-

pany, shall find that any rate, charge, cr classification de-

manded, observed, charged, or collected by any natural-gas

company in connection, with any transportation or sale of

natural gas, subject tw the jurisdiction of the Commission,

or that any rule, regulation, practice, or contract affecting

such rate, charge, or classification is unjust, unreasonable,

unduly diseriminatory, or preferential, the Commission

shall determine the just and reasonable rate, charge, classi-

fication, rule, regulation, practice, or contract to be there-

after observed and in force, and shall fix the same by order:

See. 7. (b) No natural-gas company shall abandon all

or any portion of 7#s facilities subject to the jurisdiction

of the Commission, or any service rendered by means of

such facilities, without the permission and approval of the

Commission first had and obtained, after due hearing, and

a finding by the Commission that the available supply of

natural gas is depleted to the extent that the continuance

of service is unwarranted, or that the present or future

pubhe convenience or necessity permit such abandonment.