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

MR. JUSTICE DOUGLAS, with whom THE CHIEF JUSTICE and MR. JUSTICE BLACK concur, dissenting.

This decision marks, I think, a retreat from our holding in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332. In every case, the facts are, of course, different from those in the precedents. But here, the difference does not seem to me to be fundamental. The contract rate in the Mobile case which was sought to be changed unilaterally was fixed in a service agreement. Here, the contract rate which was changed unilaterally was in the seller’s rate schedule on file with the Commission.{1}

I thought the essence of our ruling in the Mobile case was in the words: "the Natural Gas Act does not empower natural gas companies unilaterally to change their contracts." 350 U.S. at 344. That was emphasized over and again, especially in the discussion of when unilateral and bilateral changes in rates were permissible:

to establish ex parte, and change at will, the rates offered to prospective customers; or to fix by contract, and change only by mutual agreement, the rate agreed upon with a particular customer.

350 U.S. at 343.

Like the judges of the Court of Appeals, I thought that this meant that all § 4(d) rates had to be rates agreed upon by the parties to the contract. That is the reason, I thought, why Congress made the control of the Commission over such rates so slight. That the supervision is restricted is evidenced by two elements in § 4(e): first, the Commission can suspend those agreed-upon changes for no more than five months; second, no power of suspension whatsoever is given to rates "for resale for industrial use only."{2}

But now we are told that the requirement of bilateral ratemaking is satisfied by the provision in the contract that the controlling rate is the "effective" rate, and an "effective" rate is one which the selling company alone chooses to fix and file under § 4.

I find insuperable difficulties with that view. The contract does not say that the buyer will consent to any rate increase which the seller may file. It is an agreement to pay whatever may be the "effective" rate; it is not an agreement to the establishment of that new rate. The construction of this tariff is a question of law (see Great Northern R. Co. v. Merchants’ Elevator Co., 259 U.S. 285, 290) which we should resolve in light of the regulatory system that Congress has imposed on the industry.

The construction adopted by the Court has dire consequences. It makes a shambles of the Act so far as consumer interests are concerned; and they are the ones the Act was designed to protect.{3} The ruling sacrifices these interests in the cause of those who exploit this field. Now the regulatory agency is left powerless to prevent a selling company, after the 30-day waiting period, from making consumers pay immediately whatever rate the company fixes. There is power in the Commission to suspend the new rate for five months, but, in case of industrial rates, even that limited power of suspension is absent. If the Commission should ultimately decide in a § 4(e) proceeding that the new rates are not just and reasonable, the victory for the consumers may be an illusory one, for administrative difficulties make it doubtful that they will receive the benefit of any refunds.{4} And if the increases are in industrial rates, it appears that the Commission has no authority to require a refund of any unjustified increase collected before its order setting aside the increase. Even when the Commission catches up with the new high rate fixed by the selling company at its will and strikes it down, its action promises to have only a fleeting effect. The pipeline company can now in its unfettered discretion raise the rates again simply by filing a new rate, and, if it is an industrial rate, it cannot even be suspended.{5}

I would not construe the Act so as to produce such destructive consequences. I would allow the § 4 rates to embrace only the "rates agreed upon" by the pipeline and the customer, as we stated in the Mobile case, applying § 5 to all other cases. I fear that our failure to do so turns the real regulation over to the pipeline companies. I cannot imagine that the Congress that passed this Act envisaged any such tragic result for consumers, and we are not driven to it by unambiguous terms of the Act.

1. At the time the contract in Mobile was entered into, the industry practice was to set rates in the service contracts which were filed with the Commission as the rate schedules. But, in 1948, the Commission promulgated Order 144, requiring the conversion of all rate contracts into tariff and service agreement form. From that time on, rates have not been included in the service contracts; rather, they are included in rate schedules of general applicability on file with the Commission to which reference is made in the individual service agreements. See 18 CFR § 154.1 et seq. Hence, the difference in the price provision in the contracts involved here from that involved in Mobile.

2. Section 4(e) provides in part:

Whenever any such new schedule is filed, the Commission shall have authority, either upon complaint of any State, municipality, or State commission, or upon its own initiative without complaint at once, and if it so orders, without answer or formal pleading by the natural gas company, but upon reasonable notice, to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, upon filing with such schedules and delivering to the natural gas company affected thereby a statement in writing of its reasons for such suspension, may suspend the operation of such schedule and defer the use of such rate, charge, classification, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect: Provided, That the Commission shall not have authority to suspend the rate, charge, classification, or service for the sale of natural gas for resale for industrial use only. . . .

3. See Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591, 610. Protection of the consumer interest was to be done through occupying a field from which the States had been barred. H.R.Rep. No. 709, 75th Cong., 1st Sess., p. 2.

4. In its 1953 report to Congress, the Commission recognized that

the collection of higher rates under bond, while providing protection to the pipeline company against ultimate loss in revenues, is unsatisfactory, burdensome, and presents many difficult problems for the company, as well as for the distribution utilities which must pay the higher rates. The problem of distributing impounded funds to consumers in the event that proposed rate increases are denied even in part is time-consuming and expensive.

Report, Federal Power Commission, 1953, p. 101.

5. As stated by the State of Washington, amicus curiae,

By the legally available expedient of filing another schedule of increased rates under § 4(d), any relief obtained by a Commission order after review could be effectively nullified 30 days after it was obtained.