206 F.3d 47 (D.C. Cir. 2000)
Exxon Corporation, et al.,Petitionersv.Federal Energy Regulatory Commission, RespondentConsolidated Edison Company of New York, Inc., et al., Intervenors
No. 97-1092
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 13, 2000Decided March 24, 2000

On Petition for Review of an Order of the Federal Energy Regulatory Commission
Thomas J. Eastment argued the cause for petitioners. With him on the briefs were Marc C. Johnson, Bruce A.  Connell, Jennifer S. Leete, Linda L. Geoghegan and Michael  L. Pate.
Timm L. Abendroth, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent.  With him on  the brief were Jay L. Witkin, Solicitor, and Susan J. Court,  Special Counsel.  John H. Conway, Deputy Solicitor, entered  an appearance.
Marc Richter, Harvey L. Reiter, Richard Arlen Rapp, Jr.,  James H. Byrd, L. Clifford Adams, Jr., Allen Weinberg,  Kenneth R. Carretta, John E. Holtzinger, Jr., Jacolyn A.  Simmons and Kevin M. Downey were on the brief for  intervenors.  Kent K. Carter, Joel F. Zipp, Michael J. Fremuth, J. Paul Douglas and Mary L. Wright entered appearances.
Before:  Williams, Randolph and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Dissenting opinion filed by Circuit Judge Randolph.
Williams, Circuit Judge:


1
This case arises out of the Federal Energy Regulatory Commission's "unbundling" of interstate gas pipelines' sales and transportation service.  As part  of that unbundling, parties with firm rights to buy natural gas  in the downstream areas served by Transcontinental Gas Pipe  Line Corporation ("Transco") were given the right to convert  their gas purchase entitlements into transportation service  rights.  They evidently all did so, and are known as the "FT  conversion shippers."  When Transco reached an unbundling  settlement with its customers, these conversion shippers  sought assurance that their rights to use of the pipeline  upstream would be sufficiently firm.  FERC responded affirmatively, insisting that Transco give the service a priority  that rendered it "essentially firm."  Transcontinental Gas  Pipe Line Corp., 55 FERC p 61,446 at 62,345-46 (1991)  ("Settlement Order").


2
Ranged against the conversion shippers are "Indicated  Shippers," led by Exxon, who are gas producers in Transco's  production areas.  They contend that if the conversion shippers are to enjoy firm transportation service in the production areas, they should pay for it in the way that is predominant for firm transportation service, i.e., by a two-part charge--first a reservation charge for the right to use the  service, and second a usage charge covering the costs of  actual usage.


3
Transco filed tariffs under S 4 of the Natural Gas Act, 15  U.S.C. S 717c, proposing such two-part rates, designating  them "firm-to-the-wellhead" or "FTW" rates.  (Petitioners  note that this is technically a misnomer;  the rates in fact  would go only as far as producers' gathering systems.  But,  as have all the participants, we use the FTW label.)  The  Commission rejected the FTW rates, Transcontinental Gas  Pipe Line Corp., 76 FERC p 61,021 ("Opinion No. 405"),  denied rehearing, 77 FERC p 61,270 (1996) ("Opinion No.  405-A"), and finally issued a further "Order on Rehearing  and Request for Clarification," 79 FERC p 71,205 (1997),  adhering to the rejection.  The Indicated Shippers petition  for review.


4
The Indicated Shippers also attack prior decisions in which  the Commission rejected two-part FTW rates that Transco  had proposed under S 5 of the Act, 15 U.S.C. S 717d, Transcontinental Gas Pipe Line Corp., 63 FERC p 61,194, rehearing denied, 65 FERC p 61,023 (1993).  We do not address  those decisions directly.  In the S 4 cases, we find no reasoned decision-making to support the Commission's rejection  of Transco's filings.  If on remand theCommission adheres to that rejection and justifies it, the Indicated Shippers' ability  to secure relief under S 5 will probably be remote;  if on  remand the Commission accepts the Indicated Shippers' position under S 4, then of course they will need no relief under  S 5.


5
* * *


6
At stake are rates governing gas transportation on "laterals" linking gas producers' gathering systems with Transco's  main pipelines.  Transco was an early unbundler, reaching an  unbundling settlement with its customers in 1991.  When  FERC reviewed the settlement, representatives of the FT  conversion shippers sought assurance of high priority for  their use of these laterals.  (The service is dubbed "IT-feeder service";  nominally interruptible, it feeds the conversion shippers' entitlements to mainline capacity.)  FERC agreed, ordering that


7
Transco's tariff should specifically set forth the capacity priority of Rate Schedule IT feeder service, i.e., that such service is not firm but that it has priority over any other interruptible service regardless of the date of the service agreement.


8
Settlement Order, 55 FERC at 62,377.  As everyone understood at the time, including FERC, this grant of priority  made Transco's IT-feeder service for the FT conversion  shippers "essentially firm."  Id. at 62,346.  But the Commission did not direct two-part rates for this "essentially firm"  service, and it has been subject to only a single volumetric  usage charge.


9
In 1992 the Commission adopted Order No. 636, extending  its restructuring of the gas industry.  See Pipeline Service  Obligations and Revisions to Regulations Governing Self Implementing Transportation under Part 284 of the Commission's Regulation of Natural Gas Pipelines after Partial  Wellhead Decontrol, FERC Stats. & Regs. p 30,939 (1992).One of its goals was the creation of a "national gas market"  with "head-to-head, gas-on-gas competition where the firm  transportation rate structure is not a potentially distorting  factor in the competition among merchants for gas purchasers  at the wellhead and in the field."  Id. at 30,434.  To this end,  FERC ordered that when pipelines provide firm transportation with a two-part fee structure, all fixed costs are allocated  to the reservation charge so that the usage charge is based  only on variable costs.  This new rate design was called  "straight fixed variable" ("SFV").  It replaced "modified fixed  variable" ("MFV") pricing, under which the usage charge for  any two-part rate included a portion of a pipeline's fixed  costs.  See United Distribution Cos. v. FERC, 88 F.3d 1105,  1167-68 (D.C. Cir. 1996) (upholding FERC's abandonment of  modified fixed variable pricing);  see also 18 CFR S 284.8(d).With MFV the pipelines had varied in their allocation of fixed  costs to the usage charge, and "[t]he Commission believed the MFV rate design distorted the unit delivered prices of gas,  and thereby hindered the development of an efficient national  market for gas."  Municipal Defense Group v. FERC, 170  F.3d 197, 199 (D.C. Cir. 1999).  With SFV the Commission  hoped "to promote competition at the natural gas wellhead by  increasing the transparency of natural gas pricing."  Texaco  Inc. v. FERC, 148 F.3d 1091, 1094 (D.C. Cir. 1998).


10
Because conversion from MFV to SFV often contradicted  contracts between pipelines and purchasers, the Commission  could require SFV only by invoking its authority to modify  private contracts under the so-called "Mobile-Sierra doctrine."  See Texaco Inc., 148 F.3d at 1096-97;  see also  United Gas Pipe Line Co. v. Mobile Gas Corp., 350 U.S. 332  (1956);  FPC v. Sierra Pacific Power Co., 350 U.S. 348 (1956).Under Mobile-Sierra, FERC may modify a contract rate  provision if (but only if) the "public interest" so requires, a  standard understood by all to demand more of a showing by  FERC, in rejecting rates, than is needed to reject rates under  the "just and reasonable"standard of S 5.  See Papago  Tribal Utility Auth. v. FERC, 723 F.2d 950, 953 (D.C. Cir.  1983);  Northeast Utilities Service Co. v. FERC, 993 F.2d 937,  960 (1st Cir. 1993).  In part because of FERC's insistence  that the MFV rate design will "distort gas market pricing to  the detriment of the 'integrated national gas sales market,' "  we have upheld FERC's abrogation of private contracts to  convert natural gas pricing to SFV.  See Texaco, 148 F.3d at  1097.  Nonetheless, in the S 5 proceeding alluded to at the  outset of the opinion, the Commission rejected Transco's  effort to establish a two-part SFV rate for the IT-feeder  service enjoyed by Transco's conversion shippers.


11
Following a Commission suggestion, Transco made a S 4  filing that proposed two-part SFV rates in the production  areas.  An administrative law judge to whom the Commission  referred the matter rejected the rates on various grounds. Transcontinental Gas Pipe Line Corp., 72 FERC p 63,003  (1995).  Transco and Indicated Shippers filed exceptions with  the Commission, which in its decision dropped nearly every  aspect of the ALJ's analysis save the conclusion--that the  proposed rates were unjust and unreasonable.  See Opinion No. 405, 76 FERC p 61,021 (1996).  The Commission began  by repudiating the ALJ's highly critical view of two-part rates  and SFV.  First, "[a] reservation charge helps ration capacity, whether in the market area or in the production area." Id. at 61,060.  Second, rebutting the ALJ's belief that a two part rate with reserved capacity was an anticompetitive "tying" practice, it said there was nothing anti competitive about  putting shippers to a choice regarding whether or not to  reserve capacity:  "These are the types of choices that consumers are constantly required to make in a competitive  marketplace."  Id.  Finally, any concerns regarding a tying  effect once the choice to reserve was made were "tempered"  by capacity holders' rights, established in Order No. 636, to  release their capacity entitlements and thereby at least in  part to offset the reservation costs.  Id. at 61,061.  In fact,  "this flexibility is enhanced on Transco's system by the right  of firm shippers to release capacity in segments in order to  tailor their capacity needs and alternatives to fit their needs."Id.  Indeed, the Commission had little choice but to defend  two-part SFV rates;  as it acknowledges, they are the predominant method of pricing firm service in the wake of Order  636, Resp. Br. at 39, so a FERC repudiation would have  risked regulatory upheaval.


12
But the Commission found a catch in Transco's proposal, the 1991 settlement:


13
Transco proposes, in effect, to unilaterally modify those[1991] contracts so that the customer will pay a two-part rate for essentially the same firm service on the supply laterals.  This is unacceptable.  The customers must be given an opportunity to choose between firm or interruptible service.


14
Opinion No. 405, 76 FERC at 61,061.  Thus the Commission  offered its support for an "open season" where Transco's  customers would be allowed to choose between firm and truly  interruptible service (i.e., service that can and will be interrupted at times).  Id. at 61,061-62.


15
Indicated Shippers petitioned for rehearing.  On the contract abrogation argument, they argued that "[a] change from IT-feeders to FTW is a change in rate structure that changes  the apportionment of costs, just as costs are shifted upon the  adoption of a change in rate design or cost allocation method. Such a change does not constitute an abrogation of existing  contracts."  In other words, they said, Transco had proposed  nothing different from the MFV-SFV shift that the Commission had routinely endorsed--had, indeed, imposed on parties  by overriding contracts in the name of the public interest  under Mobile-Sierra.  The Commission, however, was resolute in defense of the prevailing rates.  Transco had proposed  "a fundamental change to the rate design, not a mere cost reallocation."  Opinion No.405-A, 77 FERC p 61,270 at 62,127.  "A cost reallocation will not change a one-part rate into  a two-part rate;  it will only change the level of existing  charges."  Id.  Indicated Shippers petition for review.


16
* * *


17
Under S 4 of the Natural Gas Act a pipeline proposing a  rate change has the burden of showing that the proposed rate  is just and reasonable.  If it meets that burden, FERC  approves the rate regardless of whether there may be other  rates that would also be just and reasonable.  See Western  Resources, Inc. v. FERC, 9 F.3d 1568, 1578 (D.C. Cir. 1993);Public Serv. Comm'n v. FERC, 866 F.2d 487, 488 (D.C. Cir.  1989).  The Commission is afforded a "narrow section 4 range  of acceptance or disapproval of a pipeline's proposed  changes."  Public Serv. Comm'n, 866 F.2d at 491 (quoting  Sea Robin Pipeline Co. v. FERC, 795 F.2d 182, 183 (D.C. Cir.  1986)).


18
The Commission concedes that "two-part rates are permissible for firm service in the production area."  Opinion No.  405, 76 FERC at 61,061;  see also 18 CFR S 284.8(d).  In  fact, FERC informs us that such rates are "predominant" for  firm service in the production area.  Resp. Br. at 39.  Thus a  logical first question might be:  is Transco's IT-feeder service  "firm service" of the sort for which SFV rates are, in FERC's  words, "permissible" and "predominant"?


19
FERC and the parties call the IT-feeder service "firm" or  at least "essentially firm."  The term "essentially firm" derives from the 1991 settlement, see Settlement Order, 55  FERC at 62,346, and FERC still agrees with that characterization.  Opinion No. 405-A, 77 FERC at 62,129.  The qualifier--"essentially"--appears to derive from certain grand fathered firm service that predated the 1991 settlement.  See  Settlement Order, 55 FERC at 62,345-46.  The qualifier  might also derive from the paradoxical characterization of IT feeder service in the Settlement Order, that it is "not firm"  but also not to be interrupted.  See id. at 62,377.  FERC at  times returns to this apparent doublespeak in Order No. 405,  referring to "high priority, interruptible service."  Order No.  405, 76 FERC at 61,061.  In this proceeding, FERC has at no  time rested its decision on any claim that the qualifier "essentially" is material.  Accordingly, we treat the service as firm  and the qualifier as immaterial, subject, of course, to the  possibility that on remand the Commission may breathe life  into the qualifier.


20
And so we reach the central issue:  if two-part rates are  permissible and predominant for firm service in the production area, and Transco is providing firm service in the production area, how can Transco's proposed rate not be just and  reasonable?  The Commission offers two bases:  first, the  contracts don't allow it, and second, "customers must be given  an opportunity to choose between firm or interruptible service," what might be termed a "customer choice policy." Opinion No. 405, 76 FERC at 61,061.

The Contracts

21
The Commission's reliance on the prior contracts seems not  to advance the case at all.  After the Supreme Court enunciated the Mobile-Sierra doctrine, it approved and gave effect  to so-called "Memphis clauses," under which a pipeline by  contract reserves the freedom to secure rate changes by  standard filings with FERC such as those under S 4.  See  United Gas Pipe Line Co. v. Memphis Light, Gas and Water  Div., 358 U.S. 103, 110-15 (1958);  see also Union Pacific Fuels, Inc. v. FERC, 129 F.3d 157, 160 (D.C. Cir. 1997).Before us the Indicated Shippers assert, and the Commission  does not dispute, that the contracts contained Memphis clauses.  With a Memphis clause, the contract contemplates and  allows section 4 filings and any "just and reasonable" rates  that result from such filings.  Thus we are puzzled by the Commission's insistence, in the opinions under review and its  brief here, that Transco's filing was inherently an "abrogation"of the contracts.  For example, the Commission states  that Transco seeks to "unilaterally modify those contracts,"  Opinion No. 405, 76 FERC at 61,061, and that "Transco's  proposed unilateral change results in an abrogation of the  contracts," Opinion No. 405-A, 77 FERC at 62,127.  See also  Resp. Br. at 41-42.


22
But with a Memphis clause, where is the "abrogation"?  At  this point, one would suspect that part of FERC's theory of  "abrogation" would be that the contracts gave rise to a  Mobile-Sierra bar on two-part rates.  Opinions No. 405 and  No. 405-A certainly imply as much (although without discussing either Mobile-Sierra or Memphis).  But FERC's brief  disclaims the presence of a Mobile-Sierra bar.  Resp. Br. at  42.  Rather, FERC describes its analysis as merely "tak[ing]  existing private contractual agreements into consideration,"  id. at 42-43, citing three cases that purportedly encourage  such consideration, one of which is the "Mobile" of Mobile Sierra.  See id. at 43 (citing Mobile, 350 U.S. at 338-39;Associated Gas Distribs. v. FERC, 824 F.2d 981, 1009 (D.C.  Cir. 1987);  Cities of Bethany v. FERC, 727 F.2d 1131, 1139  (D.C. Cir. 1984)).


23
Associated Gas and Cities of Bethany are not similar to the  situation Transco presents;  they involve inquiries as to  whether rates reached by private contract are discriminatory. And the Mobile citation is inapt because the Commission  rightly disclaims any Mobile-Sierra bar in the contract.  Given the presence of Memphis clauses, observations from these  three opinions regarding "Congress's intention in the NGA to  allow a vital role for private contracting between parties,"  Associated Gas, 824 F.2d at 1009, provide no apparent basis for rejecting a proposal for rates that undeniably meet the  "just and reasonable" standard.


24
Yet the Commission was ready to approve the rates under  special circumstances;  because the proposed change was too  "fundamental," Opinion No. 405-A, 77 FERC at 62,127, Transco could apply it only after an open season.  This position  confirms that the Commission perceives no Mobile-Sierra  bar.  After such an open season, customers will either have  firm service with a two-part rate or truly interruptible service  with a purely volumetric rate;  they will not have their  original bargain.


25
And so we are left with something of a purple cow.  According to the Commission, Transco sought an abrogation of  the contracts by proposing a two-part rate, but the original  one-part rate is not protected by a Mobile-Sierra bar.  The  Commission must explain this state of affairs because it  seems to defy the doctrines built upon Memphis and Mobile Sierra.  Since Opinions No. 405 and No. 405-A do not discuss  either of these cases, or their progeny, we safely conclude  that there was inadequate explanation on this point.

Customer Choice

26
Perhaps intertwined with the theory of contractual abrogation, the Commission concludes that as a matter of policy  Transco's customers should get a choice as to whether they  pay a reservation charge for their firm service.  This policy is  defended as something of a corollary of a policy that is part of  the Commission's regulations:  the choice between firm and  interruptible service.


27
An interstate pipeline that provides firm transportation service under subpart B and G of this part must also offer transportation service on an interruptible basis under that subpart or sub parts and separately from any sales service.


28
18 CFR S 284.9(a)(1).


29
Back at the time of the settlement, Transco's customers  made a choice between firm and interruptible service;  they  specifically asked FERC to guarantee them firm rights on the IT-feeders, and FERC did so.  The customers also  received (temporarily, because of the Memphis clause) something of a windfall--firmservice but without paying for their  entitlement to capacity.  Before these customers can be  forced to pay for their firm service in the predominant  manner (i.e., two-part rates), FERC says they must be given  a new choice


30
between purchasing a higher quality firm service with are servation charge or purchasing a lower quality interruptible service without a reservation charge.


31
Opinion No. 405, 76 FERC at 61,060.  See also Opinion No.  405-A, 77 FERC at 62,124 n.3 (speaking of the desirability of  customer "choice of a higher quality firm service with a  reservation fee and a lower quality interruptible service without a reservation fee" (emphasis added)).


32
For practical purposes, the choice between firm and interruptible service will usually entail a choice between two-part  and one-part rates.  Two-part rates predominate for firm  service, and interruptible service has only a one-part rate. The choice made in Transco's settlement did not correspond  to this model, but the Commission does not make a coherent  case as to why the new choice is required, or why a two-part  rate structure--not merely permissible but predominant for  the service chosen--is unjust or unreasonable.


33
The Commission calls the imposition of a two-part rate a  "fundamental" change in the rate structure, but a significant  chunk of the Commission's opinion disclaims the criticism of  reservation charges found in the ALJ opinion.  See Opinion  No. 405, 76 FERC at 61,060-61.  The Commission does offer  the terse conclusion that "[a] cost reallocation will not change  a one-part rate into a two-part rate;  it will only change the  level of existing charges."  Opinion No. 405-A, 77 FERC at  62,127.  We are unsure why this should be relevant.  The  basic idea of a Memphis clause is to reserve to the utility the  power to file tariffs that can take effect if they pass Commission scrutiny under its ordinary standards:  thus, if a filing  under S 4 proposes rates that are just and reasonable, as  these concededly are, they are to be accepted--regardless of  the justness and reasonableness of the former rates.


34
FERC's resistance here is especially odd in light of its  aggressiveness in shifting pipelines with two-part rates from  MFV to SFV.  If inclusion of a few fixed costs in the usage  component of a two-part charge was so distortive of the  market as to require the Commission's use of the Mobile Sierra public interest standard to effect the MFV-SFV conversion, one would suppose a one-part charge for firm customers, with all fixed costs in a purely volumetric charge,  would be similarly offensive.  The Commission's opinions in  this case do not explain why Order No. 636's principles are  not at play here on the side of the Indicated Shippers1.


35
The policy embedded in the regulations is a choice between  firm and interruptible service, and Transco's customers made  that choice in 1991.  They got firm service and a one-part  rate;  the pipeline got a Memphis clause.  The Commission's  new policy that Transco's customers get a second choice  (framed as one between two packages, firm service with a  reservation charge or interruptible service without) rests on  some heretofore unspoken reason why a reservation charge  for firm service--concededly just and reasonable--is not just  and reasonable because the customers had previously been  receiving firm service under a purely volumetric charge.  The  Commission's insistence that the change can be made only by  an open season seems to amount to a belief that customers,  having already elected firm service, must now be asked,  "Firm service--is that your final answer?"  Why this secondbite at the apple is needed remains a mystery.


36
* * *


37
Because the Commission has failed to "cogently explain  why it has exercised its discretion in [the] given manner," Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut.  Auto. Ins. Co., 463 U.S. 29, 48 (1983);  5 U.S.C. S 706(2)(A),  we reverse and remand the case for reconsideration in light of  this opinion.


38
So ordered.


39
Randolph, Circuit Judge, dissenting:  No party denies that  Transco could exercise the Memphis clause and propose a  rate change.  But the Commission still had a statutory duty  to ensure that the company's S 4 proposal was "just and  reasonable." 15 U.S.C. S 717c.  The Commission performed  that duty and rejected Transco's filing because it did "not  allow for a real choice of service options on Transco's supply  laterals."  76 F.E.R.C. at 61,061.  I believe the Commission  offered a reasoned explanation for its decision.


40
The majority makes much of the Commission's mention of  "abrogation of contracts," but then recognizes that this rationale is "perhaps intertwined" with the customer choice policy.  Maj. op. at 10.  Indeed, reference to the existing contracts  was not an independent ground of the Commission's decision,  but a necessary consequence of the customer choice policy.  If two-part rates are just and reasonable only when customers have already elected a reservation charge, then the  Commission must ask the simple question whether the customers have in fact chosen a reservation charge.  The Commission indicated that it would allow a change in rates after  an open season, which would alter the bargain in the original  contract.  See id.  This demonstrates that the Commission  was not nullifying the Memphis clause.


41
Thus, the real question is whether the Commission was  arbitrary and capricious in rejecting Transco's proposal based  on the customer choice policy.  The Commission has rejected  the idea of an outright ban on reservation charges, noting  that such charges offer advantages to customers.  See 76  F.E.R.C. at 61,059 (citing Order No. 436, 50 Fed. Reg. 42,408  (1985)).  But the Commission also recognizes that reservation  charges tie customers to the pipeline, creating an incentive to  use the pipeline even if more efficient service can be obtained  elsewhere.  See 76 F.E.R.C. at 61,060.  The Commission thus  decided that it is best left to individual customers to "weigh  whether the advantages of obtaining a firm right to service on  the pipeline are worth the limits which the reservation charge  will inevitably impose on the desirability of its switching to  supplies on another system."  Id.  Because Transco's proposal denied conversion shippers an opportunity to make this cost-benefit analysis for themselves, the Commission rejected  it.


42
The majority emphasizes that customers have already chosen firm service.  See maj. op. at 12.  But the question is not  whether customers already elected "essentially firm" service. The question is whether they already elected two-part rates. It is uncontested that they did not.  The majority also finds  the Commission's decision "especially odd" because it supposedly conflicts with Order 636's principle against fixed costs in  usage charges.  See id.  This takes Order 636 too far.  The  Commission there decided only that "[i]f a reservation fee is  charged, it must recover all fixed costs attributable to the  firm service....."  18 C.F.R. S 248.8(d) (emphasis added).To find that fixed costs could never be included in usage  charges would require doing away with interruptible service  (which is necessarily a one-part rate), something the Commission certainly did not intend.  According to the majority, the  Commission rejected as unjust and unreasonable a two-part  rate that is the "predominant manner" of "firm service." Maj.op. at 53.  This forgets that the predominant manner of service overall is to allow customers to choose whether to pay  a reservation charge and receive firm service or to reject the  reservation charge and receive lower priority service.  Indeed, the majority does not cite a single case (in either S 4 or S 5 proceedings) in which the Commission approved two-part rates when customers had not previously made the calculation  that reservation charges would be advantageous.


43
I therefore dissent.



Notes:


1
FERC's regulations provide that "[w]here the customer purchases firm service, a pipeline may impose a reservation fee or  charge on a shipper as a condition for providing such service."  18  CFR S 284.8(d) (emphasis added).  This regulation did not figure  prominently in arguments on appeal.  It certainly implies that  reservation fees are not required with firm service;  it expressly  provides that they are permissible.


