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Utility NGV Programs Lose Anti-trust Exemption

Fortnightly Magazine - December 1996

The U.S. Court of Appeals for the Ninth Circuit has ruled that natural gas local distribution companies (LDCs) in California are no longer immune from antitrust actions caused by their activities in the natural gas vehicle (NGV) industry. The decision clears the way for a federal district court to hear a complaint lodged against Southern California Gas, a local distribution company (LDC), by two California corporations engaged in the NGV refueling business.

The refueling companies had claimed that the LDC attempted to dominate the market by offering NGV fleet operators "free or virtually free" installation and maintenance of vehicle refueling facilities. The district court dismissed the complaint, ruling that the LDC was immune from such suits under the "state action" doctrine.

On appeal, the circuit court found that recent actions by the California Public Utility Commission (CPUC) (em implementing a clearly expressed policy of the state legislature to encourage "substantial market penetration of . . . compressed natural gas fueled vehicles" (em contained incentives for utility participation as well as guidelines to ensure fair competition in the marketplace. The court explained that the CPUC had at first ruled that ratepayer funding of utility NGV facilities was permissible and posed no danger to competition because the market contained no competitors. More recently, however, the CPUC expressly forbid utilities to use ratepayer funds to compete with nonutilities in providing NGV refueling stations. This latter policy removed any inference that CPUC intended to shield utilities from complaints under antitrust laws. Thus, the court concluded, the utilities no longer qualified for state action immunity from antitrust liability. California CNG, Inc. v. Southern California Gas Co., No. 95-555806, Sept. 19, 1996 (9th Cir.). t

Phillip S. Cross is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.

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