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United Gas v. Callery Properties, 382 U.S. 223 (1965)

United Gas Improvement Co. v. Callery Properties, Inc.

No. 21

Argued October 18-19, 1965

Decided December 7, 1965*

382 U.S. 223


Following this Court's decision in the CATCO case, 360 U. S. 378, and its vacation of a judgment upholding initial natural gas prices of 21.4 to 23.8 per Mcf. for numerous gas producers in southern Louisiana, the Federal Power Commission (FPC) instituted an area rate proceeding, from which the present applications were severed for a separate hearing. The producers were advised that they would have to refund amounts ultimately found inconsistent with the public interest and necessity requirements of § 7 of the Natural Gas Act. Following the hearing, the FPC imposed conditions on the certificates granted, viz., that (1) the producers start service at 18.5 per Mcf., plus 1.5 tax reimbursement where applicable -- the "in-line" price for FPC-certificated gas sales for the contracts here involved, and (2) the producers should not, before establishment of just and reasonable area rates or July 1, 1967, whichever should be earlier, file rates above 23.55, the level at which the FPC found filings might trigger other producers' increased rates under contract escalation clauses with the pipelines here involved. The FPC also ordered refunded the excess of charges under the original certificate, over the proper initial prices. The Court of Appeals held on review that (1) the producers should not have been limited to an initial "in-line" gas price without the FPC's considering evidence of what would be a just and reasonable price; (2) the FPC lacked power to fix a producer's maximum future rates; and (3) the measure of the refunds should have been the difference between the original contract price and the ultimate just and reasonable price.


1. The FPC had ample power under § 7 of the Natural Gas Act to protect the public interest by requiring as an interim

Page 382 U. S. 224

measure that interstate gas prices be no higher than existing levels under other contemporaneous certificates, i.e., the "in-line" prices, without considering the extensive evidence under which just and reasonable rates are fixed under § 5. Pp. 382 U. S. 227-228.

2. It was a proper exercise of its administrative expertise for the FPC to fix the 23.55 rate limit, beyond which it found that a general price rise might be triggered by escalation during the interim period. Pp. 382 U. S. 228-229.

3. In the exercise of its authorized power to order that refunds be paid as promptly as possible, the FPC could properly measure the refunds due by the difference between the original contract rates which it had erroneously sanctioned and the "in-line" rates; and the FPC was justified in imposing interest to prevent unjust enrichment. Pp. 382 U. S. 229-230.

335 F.2d 1004 reversed.

Page 382 U. S. 225

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