On April 3, 2019, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) issued an unpublished opinion dismissing challenges to three FERC orders that granted certificates of public convenience and necessity to Transcontinental Gas Pipe Line Company, LLC (“Transco”) for three interstate pipeline projects: the Virginia Southside Expansion Project, the Dalton Expansion Project, and the Atlantic Sunrise Project (see previous reports on challenges to the Atlantic Sunrise Project in the December 12, 2017 edition of the WER and the September 12, 2018 edition of the WER). The D.C. Circuit found that the North Carolina Utilities Commission (“NCUC”) and the New York State Public Service Commission (“NYSPSC”) lacked standing to challenge FERC’s orders because they did not show a “substantial probability” that gas transported by the Atlantic Sunrise Project would flow to their states, and did not provide any evidence of injury resulting from the Dalton Expansion and Virginia Southside Expansion Projects.
NCUC and NYSPSC based their challenge in part on a FERC policy that, they argued, permits pipelines to negotiate individualized rates with shippers so long as pipelines permit shippers to choose the traditional, cost-of-service recourse rate as an alternative to the negotiated rate. According to NCUC and NYSPSC, the policy is intended to prevent pipelines from exercising market power during rate negotiations. The state commissions argued that the 15.34% pre-tax return, established by Transco’s last stated rate case in 2001, was not reflective of current market conditions and that FERC’s failure to re-calculate it resulted in an inflated recourse rate that would not adequately check Transco’s ability to exercise market power during rate negotiations.
NCUC argued that it had standing to petition for review of FERC’s orders because the facilities at issue would be constructed and provide service in North Carolina, and stated its assumption that North Carolina ratepayers would use the Atlantic Sunrise Project facilities. Similarly, NYSPSC provided evidence through a declaration from the Deputy Director for Natural Gas and Water within the Office of Electricity, Gas, and Water at the New York State Department of Public Service stating that the Atlantic Sunrise project shippers would “almost certainly” ship at least some of their gas to New York. NYSPSC argued that it had standing because New York ratepayers would be harmed by an inflated pre-tax return that distorts the recourse rate and results in excessive charges.
The D.C. Circuit rejected NCUC’s and NYSPSC’s standing arguments and dismissed the petition for review for lack of jurisdiction. The D.C. Circuit found that neither NCUC nor NYSPSC showed a “substantial probability” that any gas from the Atlantic Sunrise Project will ultimately flow into their states nor that any consumers in their states will pay higher rates as a result of the project. In addition, the court found that the commissions offered no evidence of injury from the Dalton Expansion or Virginia Southside Expansion Projects and thus concluded any harm from the projects is either non-existent or “conjectural or hypothetical.”
The D.C. Circuit’s order is available here.