A federal appeals court yesterday ordered the Federal Energy Regulatory Commission to reexamine its decision concerning allegations that Columbia Gas Transmission Corp. paid too much money for natural gas between March 1981 and February 1982 and passed those expenses on to customers.
The court order raises the possibility that FERC could order the pipeline to make refunds to customers for the high-priced gas, said Ed Rothschild, director of the Citizen/Labor Energy Coalition, a Washington advocacy group.
The U.S. Court of Appeals also rejected FERC's definition of abuse, or corporate misconduct, as it is applied to the natural gas industry and directed the federal agency to redefine the term.
In January 1984, FERC concluded that Columbia had "recklessly disregarded" its legal mandate to provide gas at the lowest possible costs in 1981 and 1982. But the commission concluded there was no abuse because there was no evidence of an "adverse impact" on consumers.
Because FERC did not conclude there was abuse, Columbia Gas could not be ordered to pay refunds for higher gas charges to customers such as Washington Gas Light Co.
Yesterday, the federal court said "FERC will be required to reconsider its interpretation of abuse and construct a new test" that ensures that higher charges for gas be denied when a company violates rules that direct it to purchase the least costly gas available.
The court told FERC to consider what remedies the federal agency could take against the pipeline and directed FERC to examine claims by customers that Columbia bought more natural gas than it needed and reduced its purchases of lower priced gas.
FERC yesterday said it does not know what actions it could take to remedy the situation and said customers would "not necessarily" see refunds.
"We don't know what options to take, it's up in the air," said Rachelle Patterson, a commission spokeswoman. "We thought we did right, now we'll have to rethink it."
Columbia Gas System Inc., the Wilmington, Del., holding company for Columbia Gas Transmission, said the ruling in no way touches a settlement agreement reached in 1985 with 71 gas companies that had accused Columbia of overcharging them beween 1982 and 1985.
Columbia said it believes the agreement "remains in effect." The agreement "specifically limits the liability of Columbia Gas Transmission for any refunds ultimately ordered for that period March 1981 through February 1982 to $1 million," the company said.
Under the 1985 agreement, Columbia agreed to reduce gas prices to customers, a move that will cost the company $1 billion over two years.
Stanley W. Balis, an attorney who represents the Cities of Charlottesville and Richmond, said, "The cities believe their original protest . . . of Columbia's activities has been vindicated, and the court was absolutely right that FERC had set up too onerous a standard regarding the definition of abuse."