On January 22, 2010, the United States Court of Appeals for the D.C. Circuit (“DC Circuit”) remanded back to the Federal Energy Regulatory Commission (“FERC” or the “Commission”)  its final rule that adopted changes to the interstate natural gas pipeline reporting rules and financial reforms asserting that FERC failed to adequately respond to a dissenting commissioner in its order.

The rule at issue in this case is a March 2008 reporting rule issued under former FERC Chairman Joseph Kelliher and then-Commissioner Jon Wellinghoff, who is now the Commission’s chairman.  The rule requires gas pipeline companies to provide detailed information about costs related to system expansions, revenues, and information about negotiated rates with shippers.  Shippers’ challenges to pipeline rates usually clarify pipeline earnings, which helps FERC ensure that prices remain “just and reasonable.”  However, FERC said that shippers were not challenging pipeline rates, necessitating the additional reporting requirements.  Pipelines opposed the rules, arguing that FERC’s oversight responsibilities were met under the existing reporting requirements.  The American Gas Association (“AGA”) requested that FERC divide gas data by function in order to provide more clarity.  FERC denied AGA’s request, finding that they had to balance the need for transparency with the burdens placed on the pipelines.  Then-Commissioner Wellinghoff voted for the rule but also dissented in part, stating that FERC should adopt AGA’s suggestions.  He also supported the need for additional data disclosure to allow customers to determine whether they were overcharged. 

The AGA appealed FERC’s order adopting the new reporting rule and sought increased division of gas data and transparency about shipper-supplied gas costs in order to inform customers about inappropriate cross-subsidization or over-recovery of fuel costs.  The DC Circuit held that by rejecting AGA’s recommendations, FERC had “failed to engage in reasoned decision making.”  The court also said that FERC erred by failing to respond to then-Commissioner Wellinghoff’s dissent.  Though FERC argued that it addressed his dissent by considering AGA’s arguments, the DC Circuit did not accept this position.  The DC Circuit remanded the case back to FERC, requiring the Commission to again consider the burdens of additional reporting requirements against the benefit to customers, but to also acknowledge concerns raised by the dissenter. 

A copy of the DC Circuit’s opinion can be found at: http://pacer.cadc.uscourts.gov/docs/common/opinions/201001/08-1266-1226889.pdf.