United Gas Pipe Line Co. v. Memphis Gas Div.
358 U.S. 103 (1958)

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U.S. Supreme Court

United Gas Pipe Line Co. v. Memphis Gas Div., 358 U.S. 103 (1958)

United Gas Pipe Line Co. v. Memphis Light, Gas & Water Division

No. 23

Argued October 20-21, 1958

Decided December 8, 1958*

358 U.S. 103




A natural gas pipeline company regulated under the Natural Gas Act supplies gas to a number of distributing companies under long-term service agreements filed with the Federal Power Commission which were construed by the Commission as obligating the purchasers to pay for the gas during the terms of the agreements not at a single specified rate, but at the pipeline company's "going" rates as established from time to time in accordance with the procedures prescribed by the Act.

Held: under agreements so providing, nothing in the Natural Gas Act prevents the pipeline company, without further agreement with the purchasers, from changing its rates by filing new schedules under § 4(d) of the Act, subject to review by the Commission under § 4(e). Pp. 358 U. S. 104-116.

(a) United Gas Pipe Line Co. v. Mobile Gas Service Corp.,350 U. S. 332, distinguished. Pp. 358 U. S. 109-111.

(b) The procedures prescribed by § 4(d) and § 4(e) are not limited to instances where the parties have mutually agreed upon specific new rates. Pp. 358 U. S. 111-114.

(c) The Commission correctly determined the meaning of the service agreements here involved. Pp. 358 U. S. 114-115.

(d) Nothing in the agreements here involved, as interpreted to permit the pipeline company to change its rates under § 4(d) and § 4(e) procedures, is hostile to any of the provisions or purposes of the Act. P. 358 U. S. 115.

102 U.S.App.D.C. 77, 250 F.2d 402, reversed.

Page 358 U. S. 104

MR. JUSTICE HARLAN delivered the opinion of the Court.

We review a judgment of the Court of Appeals for the District of Columbia Circuit which directed the Federal Power Commission to reject certain rate schedules for

Page 358 U. S. 105

natural gas filed with it by petitioner United Gas Pipe Line Company (United) under § 4(d) of the Natural Gas Act of 1938, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq.

United, a regulated natural gas pipeline company, supplies gas to Texas Gas Transmission Corporation (Texas Gas), Southern Natural Gas Company (Southern Gas), and Mississippi Valley Gas Company (Mississippi) [Footnote 1] under a number of long-term service agreements made and filed with the Commission prior to September 30, 1955, each of which contains the following pricing provision: [Footnote 2]

"All gas delivered hereunder shall be paid for by Buyer under Seller's Rate Schedule [the appropriate rate schedule designation is inserted here], or any effective superseding rate schedules, on file with the Federal Power Commission. This agreement in all respects shall be subject to the applicable provisions of such rate schedules and to the General Terms and Conditions attached thereto and filed with the Federal Power Commission which are by reference made a part hereof."

(Italics supplied.)

Page 358 U. S. 106

On September 30, 1955, United, proceeding under § 4(d) of the Natural Gas Act, filed with the Commission new rate schedules, together with supporting data, increasing its prices for gas, as of November 1, 1955, by amounts estimated to yield total additional annual revenues of $9,978,000 from sales under the agreements here involved and from other sales also subject to the Commission's jurisdiction. Exercising its powers under § 4(e) of the Act, the Commission ordered a hearing as to the propriety of the new rates, and, except as to those relating to sales of gas for resale for industrial use only, suspended their effectiveness from November 1, 1955, to April 1, 1956, the maximum period of suspension authorized by the statute. [Footnote 3] Thereafter, Texas Gas, Southern Gas, Mississippi,

Page 358 U. S. 107

Memphis, and others claiming an interest in the proceedings were permitted to intervene, and on February 6, 1956, the Commission commenced the taking of evidence as to the lawfulness of United's new rates under the "just and reasonable" standard of § 4(e).

On February 27, 1956, this Court announced its decision in United Gas Pipe Line Co. v. Mobile Gas Service Corp.,350 U. S. 332, in which it was held that United could not escape a contract obligation to furnish Mobile with natural gas at a single specified price for a term of

Page 358 U. S. 108

years by unilaterally filing an increased rate schedule under § 4(d) of the Natural Gas Act. Following that decision, the respondents in the present case, for the first time, moved the Commission to reject United's new rate schedules, claiming that their filing constituted an attempt on the part of United to change unilaterally the terms of its service agreements with Texas Gas, Southern, and Mississippi, and that such an attempt ran afoul of our decision in Mobile. Construing these agreements as, in effect, constituting undertakings by the purchasers to pay United's "going" rates, as established from time to time in accordance with the procedures prescribed by the Natural Gas Act, the Commission refused to reject United's filings. It distinguished Mobile on the ground that the contract there involved specified a single fixed rate for the gas to be supplied under it which United was contractually foreclosed from changing without the agreement of the purchaser. 16 F.P.C. 19, 15 P.U.R.3d 279.

The Court of Appeals reversed. Accepting for the purposes of its decision the Commission's interpretation of United's service agreements, the Court of Appeals held that nonetheless the Commission lacked "jurisdiction" to consider under § 4(e) the lawfulness of United's new rate schedules. The court regarded Mobile as establishing that § 4(e) applies only to rate changes whose specific amount has been mutually agreed upon between a seller and purchaser, and that, where a purchaser has not so agreed, a rate change can be effected only by action of the Commission under § 5(a) of the Act. [Footnote 4] Since the rates

Page 358 U. S. 109

set forth in United's new schedules had not been agreed to by its customers, the Court of Appeals therefore held that the Commission had no jurisdiction to proceed under § 4(e) to examine them, and that, accordingly, United's filings under § 4(d) should have been rejected. 102 U.S.App.D.C. 77, 250 F.2d 402. We granted certiorari because of the claim that the Court of Appeals misinterpreted our decision in Mobile, and on the suggestion that its judgment seriously frustrates the proper administration of the Natural Gas Act. 355 U.S. 938.

It is apparent that the Court of Appeals misconceived the import of our decision in Mobile. The contract before the Court in that case required United to furnish natural gas to Mobile at a single fixed price of 10.7 cents per MCF (thousand cubic feet) for a period of 10 years. The contract contained no provision for any different rate, or for changing the agreed rate during the term of the agreement. It was argued by United that the Natural Gas Act gave it the right to abrogate this unqualified contract obligation and increase at will its price of gas to Mobile by filing new rate schedules under § 4(d), subject only to the Commission's approval of such schedules under § 4(e). In rejecting that contention, this Court held that the Natural Gas Act, unlike the Interstate Commerce Act, "evinces no purpose to abrogate private

Page 358 U. S. 110

rate contracts as such," that the Act did not "empower natural gas companies to change their contracts unilaterally," and that, in this respect, regulated natural gas companies stood in no different position under the Act than they would have in the absence of the Act. 350 U.S. at 350 U. S. 338, 350 U. S. 340, 350 U. S. 343. Since United had contractually bound itself to furnish gas to Mobile throughout the contract term at a particular price, we held that its obligation could be abrogated only by the Commission, in the exercise of its paramount regulatory authority under § 5(a). Ibid., 350 U.S. at 350 U. S. 344

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