The U.S. Court of Appeals for the District of Columbia Circuit has upheld a ruling by the Federal Energy Regulatory Commission requiring an interstate pipeline company to sell excess low-cost storage gas supplies to its sales customers at cost, on the theory that ratepayers who bear risk for losses in industry restructuring should retain gains from the same process.
The pipeline, Williston Basin Interstate Pipeline Co., had found that excess gas was available after it had cut sales operations as part of the market restructuring ordered by the FERC. The pipeline wanted to sell the gas at market rates and retain the profits for shareholders. It argued that, as a general rule under cost-of-service regulation, shareholders have a right to the gain from the sale of assets held for providing service. Under that rule, the pipeline argued, customers pay for the services they receive and so have no legal interest in gains or losses when such assets are sold.