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PENNSYLVANIA PUBLIC UTILITY COMMISSION v. PROCESS GAS CONSUMERS GROUP (08/23/83)

decided: August 23, 1983.

PENNSYLVANIA PUBLIC UTILITY COMMISSION, APPELLANT,
v.
PROCESS GAS CONSUMERS GROUP, APPELLEE



No. 2 M.D. Misc. Docket 1983, Application for Review of a Commonwealth Court Order in No. 3113 C.D. 1982, Staying an Order of the Pennsylvania Public Utility Commission, entered November 3, 1982, in Commission Docket No. I-79110324, Fs. 1-16

COUNSEL

James P. Melia, Lee E. Morrison, Daniel P. Delaney, Charles F. Hoffman, Middletown, for petitioner.

Stephen A. George, Geen S. Howard, Pittsburgh, for respondent Process Gas Consumers Group.

Maurice A. Frater, Harrisburg, for Carnegie Natural Gas.

Martha W. Bush, Harrisburg, for Office of Consumer Advocate.

Robert E. Kelly, Jr., Harrisburg, for Hospital Assn. of Pa.

Rodney G. Hoffman, John Winship Read, Pittsburgh, for Allegheny Ludlum Steel Corp.

Roberts, C.j., and Larsen, Flaherty, McDermott and Zappala, JJ. Nix, J., did not participate in the consideration or decision of this case. Hutchinson, J., did not participate in the consideration or decision of this case. Zappala, J., filed a concurring and dissenting opinion.

Author: Larsen

[ 502 Pa. Page 547]

OPINION

In 1978, the United States Congress enacted into law the Natural Gas Policy Act of 1978 (NGPA).*fn1 Under the provisions of the NGPA the Federal Energy Regulatory Commission (FERC) is charged with the duty of prescribing and making effective an incremental pricing plan designed to provide for the passthrough of the costs of natural gas incurred by federally regulated interstate pipelines.*fn2 The NGPA mandates incremental pricing of natural gas to industrial boiler fuel facilities where the boiler fuel use*fn3 of

[ 502 Pa. Page 548]

    natural gas exceeds 300,000 cubic feet a day. This statutory scheme provides for certain exemptions,*fn4 and it does not apply to industrial consumers whose natural gas use is in non boiler fuel uses.

The operation of the incremental pricing plan established by the NGPA was succinctly explained in the opinion and order of the Pennsylvania Public Utility Commission (PUC) adopted on August 13, 1982 and entered on November 3, 1982 from whence this appeal comes.

In essence, NGPA requires that interstate pipelines and local distribution companies pass through certain portions of their total natural gas acquisition costs to non-exempt industrial users (large industrial facilities which burn natural gas for boiler fuel use), in the form of surcharges. These surcharges plus the standard tariff charges constitute the "incremental" price of gas to such customers. These surcharges may not, however, raise the ultimate cost of gas, to the user, above the cost of fuel oil which could be used as an alternative to natural gas.

Federal regulations provide the framework for calculation and billing of incremental pricing surcharges to customers subject to the incremental pricing program. The basic mechanism of incremental pricing contained in those regulations is a reduced "purchased gas cost adjustment rate" (PGA), which will operate as follows:

The Federal Energy Regulatory Commission (FERC) has established a gas price which will be an "incremental pricing threshold." Each interstate pipeline will be required to file a revised PGA tariff. Prior to filing that tariff, each pipeline will estimate the total gas acquisition costs it expects to incur in the prospective period to which the revised PGA tariff will apply. The estimated total gas acquisition costs which exceed the "incremental pricing threshold" price will be recorded in ...


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