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Consolidated Edison Co. v. Federal Power Commission

decided: November 3, 1959.

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., PETITIONER,
v.
FEDERAL POWER COMMISSION, RESPONDENT. CITY OF NEW YORK, PETITIONER, V. FEDERAL POWER COMMISSION, RESPONDENT. TRANSCONTINENTAL GAS PIPE LINE CORPORATION, PETITIONER, V. FEDERAL POWER COMMISSION, RESPONDENT, NATIONAL COAL ASSOCIATION, UNITED MINE WORKERS OF AMERICA, FUELS RESEARCH COUNCIL, INC., INTERVENORS, SOUTHERN CALIFORNIA GAS COMPANY AND SOUTHERN COUNTIES GAS COMPANY OF CALIFORNIA, INTERVENORS.



Author: Goodrich

Before GOODRICH, STALEY, and HASTIE, Circuit Judges.

GOODRICH, Circuit Judge.

We have before us three cases which were consolidated for argument. The main case is a petition by Transcontinental Gas Pipe Line Corporation (Transco) to set aside an order of the Federal Power Commission which refused to issue it a certificate of public convenience and necessity. Another case is a petition by Consolidated Edison Company of New York, Inc. (Con Edison) seeking the same relief. The same is true of the petition brought by the City of New York. Joining with the Commission are intervenors National Coal Association, United Mine Workers of America and Fuels Research council, Inc. Filing a brief also as amici curiae are Southern California Gas Company and Southern Counties Gas Company of California. For the opinion and order below see Transcontinental Gas Pipe Line Corp., 21 F.P.C. 138, rehearing denied 21 F.P.C. 399 (1959).

The essential facts can be briefly stated. Con Edison went into Texas and made a contract with producers for the purchase of natural gas in the Texas field. Then it made an agreement with Transco providing for what is called "X-20 service." Transco agreed to transport the gas to New York and deliver it there to Con Edison. Included in the agreement was a provision for a sixty-day-a-year service which Transco agreed to render Con Edison from its own gas reserves and during the time this service was furnished the Con Edison supply from Texas would not be used. Con Edison agreed with the producers not to sell this gas at retail in New York. It is to be used to fire two of the ten boilers in Con Edison's Waterside plant near 42nd Street and East River in New York City. The City of New York is interested in the litigation because by the substitution of gas for coal, now being used to fire the boilers which Con Edison has at this plant, the very considerable amount of fly ash and the very considerable amount of sulfur dioxide poured into the air in this densely populated portion of New York City will be greatly reduced.

In the opinion and order denying the certificate the Commission agreed that the "conventional requirements" of public convenience and necessity had been satisfied by the showing made.*fn1 The matter of markets, facilities, gas supply and rates*fn2 are included in these "conventional requirements." The Commission, however, overruling its presiding examiner, denied the certificate and gave five policy reasons for doing so. Since the soundness of these reasons is the heart of the controversy, we set them out in full in the Commission's language. Here they are:

1. "Certainly, if we were to grant this request we would soon be confronted with many requests of the same general character; and granting the X-20 proposal, we would have no fair or rational basis for denying similar such requests."

2. "Likewise, the authorization of this and like proposals would preempt for this usage capacity which would otherwise be available to meet more urgent and widely beneficial public needs*fn3 even though the bare authorization here sought would not of itself entirely nullify the Leidy Storage project."

3. "The impact of large demand on relatively limited supply is certain enough to raise rates and field prices if only one bidder is bringing that demand to bear on the supply. How much more serious is that impact when it is in the form of multiple bidders, each attempting to reserve to itself a firm supply. Inevitably, there would be upward pressure on rate levels in the fields. We do not believe we ought to encourage such when it is unnecessary."

4. "Large purchasers of gas, like Consolidated Edison, can readily compete with pipelines for gas purchases. * * * But the smaller purchaser may not be as fortunate. He will have to rely on the pipeline supplier. And how long the pipeline can continue to buy in competition with nonjurisdictional, large volume purchasers, or indeed, how willing it might be to undertake such less desirable service, is at least a question."

5. "These are all factors that weigh against the grant. They would confound and make more difficult a decision in such a case as this even if the gas were to be used for a demonstrably superior use. But when the purpose for which the sale would be made is something less than desirable, they take on more serious, even controlling, significance."*fn4

When the basis of the controversy is understood it gets down to a point which is easily stated although difficult to answer. It is agreed by all parties that the purchase by Con Edison of the gas in Texas is not subject to the jurisdiction of the Commission. Con Edison can buy as much gas as it can pay for in Texas and there is nothing the Commission can do about it. The same is true of the use which Con Edison makes of this egas when it gets to New York. Since it is not to be the subject of re-sale in that state, the Commission has nothing to say about its use either.

Section 1(b) of the Natural Gas Act*fn5 sets out specifically its coverage as follows:

"The provisions of this chapter shall apply to the transportation of natural gas in interstate commerce, to the sale in interstate commerce of natural gas for resale for ultimate public consumption for domestic, commercial, industrial, or any other use, and to natural-gas companies engaged in such transportation or sale, but shall not apply to any other transportation or sale of natural gas or to the local distribution of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas." 15 U.S.C.A. ยง 717(b).

As the presiding examiner pointed out in his opinion,*fn6 if Con Edison could liquefy this gas and transport it by truck or by ship to New York City there would be nothing for the Commission to take hold of. The question, therefore, comes down to the scope of the authority of the Commission given by Section 7 of the Act which provides for the ...


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