United Gas Pipe Line Co. v. Memphis Light, Gas & Water Division
Headline: Decision lets a natural gas pipeline raise prices by filing new rate schedules under federal procedures, overturning a lower court and allowing supplier-initiated, contract-authorized rate increases affecting buyers and consumers.
Holding: The Court held that a pipeline may lawfully change prices by filing new rate schedules under the Natural Gas Act’s procedures when its service agreements permit charging the seller’s filed "effective" rates, and the Commission may review them.
- Allows pipelines to implement contract-authorized price increases by filing new rate schedules.
- Gives buyers and consumers risk of immediate higher gas charges pending Commission review.
- Commission can suspend rates up to five months and require refund bonds in some cases.
Summary
Background
United Gas Pipe Line Company, a regulated pipeline, supplied gas under long-term service agreements to several buyers including Texas Gas, Southern Gas, and Mississippi Valley Gas. United filed new rate schedules on September 30, 1955, that would raise prices starting November 1, 1955. The Federal Power Commission opened a hearing and suspended the new rates (except industrial resale rates) while reviewing them. After the Court’s earlier Mobile decision, the buyers moved to have the filings rejected as unilateral contract changes, and the Court of Appeals ordered rejection, prompting review by this Court.
Reasoning
The central question was whether a seller may raise prices by filing new rates when its service contracts refer to the seller’s filed rate schedules. The Court distinguished Mobile because that earlier contract fixed a single, unchangeable price; here the agreements were interpreted to permit charges at the seller’s current filed or "effective" rates. The Court said the Natural Gas Act requires timely filing and gives the Commission authority to review filings under §4(d)–(e), and that nothing in the statute limits §4 procedures to changes previously agreed to by buyers. The Court accepted the Commission’s factual finding that these service agreements reserved the seller’s right to file changed rates and reversed the Court of Appeals.
Real world impact
The ruling means pipelines that have contracts referring to filed rate schedules can implement price changes by filing new schedules, subject to Commission review and possible suspension (except for industrial resale). Customers and local distributors may face increased charges while the Commission decides lawfulness, and the dissent warned that limited suspension and refund powers could weaken consumer protections.
Dissents or concurrances
Justice Douglas (joined by two others) dissented, arguing the decision departs from Mobile, risks harming consumers by letting sellers impose new rates quickly, and that Congress did not intend such a result.
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