Appeal from the United States District Court for the Middle District of Pennsylvania (Civ-85-1514)
Before: SEITZ, HIGGINBOTHAM, and BECKER, Circuit Judges.
The Kentucky West Virginia Gas Company ("Kentucky West") and the Equitable Gas Company ("Equitable Gas") appeal from a final order of the district court dismissing their complaint for declaratory and injunctive relief. The district court held that Burford v. Sun Oil Co., 319 U.S. 315, 87 L. Ed. 1424, 63 S. Ct. 1098 (1943), and Younger v. Harris, 401 U.S. 37, 27 L. Ed. 2d 669, 91 S. Ct. 746 (1971), mandated that it abstain from reaching the merits of the companies' complaint. Subject matter jurisdiction in the district court was premised on 28 U.S.C. §§ 1331 and 1337.*fn1 This court has jurisdiction by virtue of 28 U.S.C. § 1291.
A. The Pennsylvania Statutory Framework
In 1984, Pennsylvania modified the procedures by which natural gas distribution companies establish rates for the retail sale of gas to Pennsylvania consumers. See Act of May 31, 1984, Act No. 1984-74 ("Act 74"), codified at 66 Pa. Cons. Stat. Ann. §§ 1307(f), 1317-1319 (Purdon Supp. 1985). Under the Act 74 framework, "[n]atural gas distributors with gross intrastate annual operating revenues in excess of $40,000,000 may file tariffs reflecting increases or decreases in their natural gas costs . . ., but no such natural gas utility shall voluntarily file more than one such tariff in a 12-month period." Id. § 1307(f)(1).
Before a proposed tariff can become effective, however, the PUC must conduct an investigation to determine whether the proposed rates are "just and reasonable." See id. §§ 1307(f)(2), 1318. And "[n]o rates for a natural gas distribution utility shall be deemed just and reasonable unless the commission finds that the utility is pursuing a least cost fuel procurement policy, consistent with the utility's obligation to provide safe, adequate and reliable service to its customers." Id. § 1318(a) (emphasis added). When making this determination, the PUC must make specific findings that:
(1) The utility has fully and vigorously represented the interests of its ratepayers in proceedings before the Federal Energy Regulatory Commission.
(2) The utility has taken all prudent steps necessary to negotiate favorable gas supply contracts and to relieve the utility from terms in existing contracts with gas suppliers which are or may be adverse to the interests of the utility's ratepayers.
(3) The utility has taken all prudent steps necessary to obtain lower cost gas supplies on both short-term and long-term bases both within and outside the [state of Pennsylvania] . . .
(4) The utility has not withheld from the market . . . any gas supplies which should have been utilized as part of a least cost fuel procurement policy.
Id. § 1318(a)(1)-(4). In addition, if the utility purchases all or part of its natural gas from an affiliated interest, the PUC must make specific findings with regard to the justness and reasonableness of such purchases, including findings:
(1) That the utility has fully and vigorously attempted to obtain less costly gas supplies on both short-term and long-term bases from nonaffiliated interests.
(2) That each contract for the purchase of gas from its affiliated interest is consistent with a least ...