Commissioner James Danly Concurrence Regarding Eastern Gas Transmission and Storage, Inc.

Commissioner James Danly Statement
October 29, 2021
Docket No. RP21-1187-000

I write separately to express my misgivings with the directive that Eastern Gas Transmission and Storage, Inc. (EGTS) show cause why section 45 of its General Terms and Conditions (GT&C) of its tariff remains just and reasonable and not unduly discriminatory or preferential.[1]

The Commission undoubtedly has authority under the Natural Gas Act (NGA) to order hearings to determine whether a pipeline’s tariff is unjust or unreasonable and to direct pipelines to submit information necessary for the Commission to make its determination.[2]  However, in order to direct EGTS to revise GT&C section 45, the Commission must meet its burden of showing that the existing term is unjust or unreasonable and its replacement is just and reasonable.[3]  Based on the support cited in today’s order, I am not confident that the Commission can meet its burden.[4]  I am submitting this concurring statement to provide guidance to the parties as to what I believe would be helpful to address in their submissions.

First, the order finds “EGTS’ [sic] tariff does not contemplate how it would handle the unlikely, but possible, situation in which there was also an outage exactly one year prior.”[5]  Then, quoting the recent Texas Eastern case, the order states “[a]s a general matter, ‘it is unjust and unreasonable for a pipeline to calculate credits based on usage levels that have been constrained by previous outages.’”[6]  The order cites to no other cases.  Texas Eastern also cites to no other cases and made that determination without conducting a hearing—a statutory requirement under NGA section 5.[7]  I would like to hear from the parties as to whether the Commission can meet its burden that GT&C section 45 is unjust or unreasonable based on Texas Eastern.

Further, the Texas Eastern case discussion on the requirement is as follows: 

In addition, we agree with Northeast LDCs that Texas Eastern should be required to eliminate periods in which shippers’ use of the system was constrained in its calculation of historical usage.  We find that it is unjust and unreasonable for a pipeline to calculate credits based on usage levels that have been constrained by previous outages.[8]

          I would find it helpful if parties addressed whether the Commission supported its finding with substantial evidence as required by NGA section 19.[9]

There are also many Commission cases regarding a pipeline’s methodology for calculating usage that state “[a]ny inaccuracies in the estimate produced by [a pipeline’s] proposed methodology should even out over time, because that methodology could as easily overestimate, as underestimate, a shipper’s need for . . . service during the outage”[10] and “there is no perfect method of estimating that usage.”[11]  I would like to hear from the parties on whether this precedent, and the fact that the situation the Commission seeks to address is “unlikely” to occur,[12] weighs against a finding that GT&C section 45 is unjust or unreasonable.[13]

Second, the order requires EGTS to show cause on GT&C 45.1.B.3, which provides that reservation credits “shall be applied to: . . . if quantities are nominated on a Day in which Pipeline has provided Customer with . . . advance notice of the unavailability of service . . . .”  The order states “requiring nominations . . . becomes unreasonable during a pre-announced, outage, when shippers know that none of their nominations will be honored.”[14]  In support, the order cites the recent Texas Eastern case, which states, “[t]he Commission determined that shippers that have notice of an outage should be permitted to focus on obtaining alternate supply routes, and not compelled to submit nominations that they do not reasonably expect the pipeline to honor.”[15] 

This statement originates from a Rockies Express Pipeline LLC (Rockies Express) case, which provided, “[t]he use of the ‘lesser of’ tariff language would unnecessarily require shippers to submit scheduling nominations in the situation where the pipeline has given advance notice of an outage so as to ensure that it would receive credits at the level of its average usage during the preceding seven days.”[16]  The Commission in the Rockies Express case required the pipeline to revise its tariff without a hearing or finding the existing tariff provision was unjust or unreasonable—whether the tariff “unnecessarily requires” an action is not the standard.  I would like to hear from the parties as to whether the Commission can meet its burden that GT&C section 45 is unjust or unreasonable based on Rockies Express or other relevant Commission precedent.[17]

Based on today’s order, and the orders upon which it relies as Commission policy, I am concerned that the Commission is frequently not meeting its statutory burden under section 5 of the NGA.  While some of these policies may seem like good ideas, appear to take minimal effort on the pipeline’s part, and have not been contested by a pipeline, that does not change our obligations under NGA section 5.  The Commission bears the burden of demonstrating that the existing tariff is unjust or unreasonable and to set forth a just and reasonable replacement. 

Moreover, perhaps instead of serial adjudications, the Commission should initiate a generic proceeding to determine whether these types of reservation credit terms and conditions are unjust or unreasonable.  That way, all interested stakeholders can participate in what becomes policy rather than be subjected to the policy at the Commission’s convenience. 

For these reasons, I respectfully concur.