 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued December 12, 2014                Decided April 7, 2015

                         No. 13-1278

          MISSOURI PUBLIC SERVICE COMMISSION,
                      PETITIONER

                              v.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

                   MOGAS PIPELINE LLC,
                      INTERVENOR


           On Petition for Review of Orders of the
           Federal Energy Regulatory Commission


     Lera Shemwell argued the cause for petitioner. With her on
the briefs was Stephen C. Pearson.

     Carol J. Banta, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief were David L. Morenoff, General Counsel, and Robert H.
Solomon, Solicitor.

     Paul Korman argued the cause for intervenor. With him on
the brief were Amy W. Beizer and Emily R. Pitlick.
                                2

    Before: GARLAND, Chief Judge, and ROGERS and MILLETT,
Circuit Judges.

    Opinion for the Court filed by Circuit Judge Rogers.

    Concurring opinion by Circuit Judge Millett.

     ROGERS, Circuit Judge: This petition follows our remand
for application of the “benefits exception” to the general policy
of the Federal Energy Regulatory Commission against including
an acquisition premium in a pipeline’s rate base. Missouri Pub.
Serv. Comm’n v. FERC (“Missouri I”), 601 F.3d 581, 588 (D.C.
Cir. 2010). The Commission describes its benefits exception as
allowing an acquisition premium to be included in a pipeline’s
rate base when the purchase price is less than the cost of
constructing comparable facilities, the facility is converted to a
new use, and the transacting parties are unaffiliated. See
Missouri Interstate Gas, LLC (“Remand Order”), 142 F.E.R.C.
¶ 61,195, at ¶ 113 (2013). That is consistent with the
Commission’s precedent, see Longhorn Partners Pipeline, 73
F.E.R.C. ¶ 61,355, at 62,112 (1995), and with our own
characterization of that precedent, see Rio Grande Pipeline Co.
v. FERC, 178 F.3d 533, 536–37 (D.C. Cir. 1999). Although
petitioners would distinguish past decisions on their facts, the
court defers to the Commission’s interpretation of its own
precedents in the challenged orders. To the extent petitioner
raises a question whether the pipeline project benefits Missouri
customers in the first place, the Commission permissibly relied
on its 2002 Order certificating the Missouri Interstate Gas
facilities for interstate use. Accordingly, we deny the petition
for review.

                                I.

    At issue is the acquisition premium associated with the
                                3

Trans-Mississippi Pipeline (“TMP”), a 5.6-mile stretch of
pipeline that connects Missouri with Illinois beneath the
Mississippi River. In 2002, pursuant to section 7 of the Natural
Gas Act (“NGA”), 15 U.S.C. § 717f, the Commission issued
Missouri Interstate Gas, LLC (which later merged to become
MoGas Pipeline, LLC (“MoGas”)) a certificate of public
convenience and necessity to undertake a project that included
using the TMP for natural gas service for the first time. The
Commission found it was in the public interest because the
project would “provide Missouri customers the opportunity to
diversify their gas supply options with the installation of minor
pipeline facilities and a minimal impact to the environment,”
Missouri Interstate Gas, LLC (“2002 Order”), 100 F.E.R.C.
¶ 61,312, at ¶ 2 (2002), and that in turn would improve
reliability and supply diversity and increase competition, see id.
¶¶ 15, 17–18. On remand from this court in Missouri I, the
Commission approved inclusion of the acquisition cost in
MoGas’s rate base because the TMP had been devoted to a new
use, transporting natural gas instead of oil, and the cost of new
construction would have been greater, see Remand Order ¶¶ 95,
110, and denied rehearing, Missouri Interstate Gas, LLC
(“Rehearing Order”), 144 F.E.R.C. ¶ 61,220 (2013).

     Petitioner does not challenge the Commission’s factual
findings on remand or its determination that the TMP was
converted to a new use. Instead, petitioner challenges the
Commission’s determination that the pipeline company had
shown that the acquisition of pipeline facilities provided specific
benefits in accordance with Commission precedent. Although
acknowledging that a lower acquisition cost can produce
benefits to customers in some cases, petitioner contends the
Commission failed to adhere to its precedent and to examine
whether there were actual quantifiable dollar benefits for
Missouri customers.
                                 4

                                   A.
     NGA § 7 requires that the Commission must issue a
certificate of public convenience and necessity before a new
interstate pipeline may begin to operate. See 15 U.S.C.
§ 717f(c)(1)(A); Missouri I, 601 F.3d at 583. A certificate may
issue only if “the proposed service, sale, operation, construction,
extension, or acquisition, to the extent authorized by the
certificate, is or will be required by the present or future public
convenience and necessity.” 15 U.S.C. § 717f(e). When the
Commission issues a certificate of public convenience and
necessity, it “sets initial rates governing the sale price of natural
gas transported in the pipeline,” Missouri I, 601 F.3d at 583, and
may “attach to the . . . certificate . . . such reasonable terms and
conditions as the public convenience and necessity may
require,” 15 U.S.C. § 717f(e). Under that authority, the
Commission “employs a ‘public interest’ standard to determine
the initial rates that a pipeline may charge for newly certificated
service.” Mo. Pub. Serv. Comm’n v. FERC, 337 F.3d 1066,
1068 (D.C. Cir. 2003) (citing Atl. Ref. Co. v. Pub. Serv.
Comm’n, 360 U.S. 378, 391 (1959)). Initial rates “offer a
temporary mechanism to protect the public interest until” the
Commission sets permanent rates pursuant to NGA § 4, 15
U.S.C. § 717c. Algonquin Gas Transmission Co. v. Fed. Power
Comm’n, 534 F.2d 952, 956 (D.C. Cir. 1976).

     “Generally, when establishing the cost of service upon
which a pipeline’s regulated rates are based, [the Commission]
employs ‘original cost’ principles,” and “when a facility is
acquired by one regulated entity from another, [only] the seller’s
depreciated original cost is included in the cost-of-service
computations, even though the price paid by the purchaser may
exceed that amount.” Rio Grande, 178 F.3d at 536 (citing N.
Natural Gas Co., 35 F.E.R.C. ¶ 61,114, at 61,236 (1986)). The
cost above that amount (i.e., net-book value) is known as an
acquisition adjustment or premium and is disallowed, unless the
                                  5

“benefits exception” applies. The general policy, as described
by the Federal Power Commission, was designed to prevent
facilities from being sold at artificially inflated prices in order to
increase rates, see United Gas Pipe Line Co., 25 F.P.C. 26, at 64
(1961), and since then has been described as designed to protect
customers from paying twice for depreciation, see, e.g., Cities
Serv. Gas Co., 4 F.E.R.C. ¶ 61,268, at 61,596 (1978).

     The Commission has established a two-part benefits
exception test, whereby a pipeline facility that has been
converted from one public use to another or placed in
jurisdictional service for the first time may include an
acquisition premium in its rate base if the pipeline can show by
clear and convincing evidence that its acquisition of the facilities
will provide “substantial, quantifiable benefits to ratepayers.”
Longhorn, 73 F.E.R.C. at 62,112. One way these benefits can
be shown is by demonstrating that the proposed conversion
would “result in utilization of a currently-underutilized facility,
which could not be replicated for the price that [the pipeline
was] willing to pay.” Id. at 62,113. The new-use requirement
is consistent with the Commission’s general policy of exclusion
of acquisition premiums because customers will not be burdened
twice for the cost of depreciating facilities. See Cities, 4
F.E.R.C. at 61,596; see also Longhorn, 73 F.E.R.C. at 62,113;
Natural Gas Pipeline Co. of Am., 29 F.E.R.C. ¶ 61,073, at
61,150 (1984).

                              B.
    The background to the instant petition is set forth in
Missouri I, 601 F.3d at 583–85. On remand from this court, an
administrative law judge (“ALJ”) ruled, after an evidentiary
hearing, that the TMP’s acquisition cost could not be included
in MoGas’s rate base. Although finding the pipeline’s net-book
value was zero and thus the entire $10,088,925 purchase price
constituted an acquisition premium, and the pipeline was being
                                 6

put to a new use, transporting natural gas rather than oil, the ALJ
concluded that the second prong of the benefits exception test
was not satisfied because the pipeline had “not met its burden to
prove that the cost to construct the TMP is considerably higher
than the pipeline’s purchase price.” Missouri Interstate Gas,
LLC (“ALJ Remand”), 137 F.E.R.C. ¶ 63,014, at ¶ 320 (2011).

     The Commission reversed in part, finding the first prong of
the benefits exception test had not been challenged and that the
ALJ erred in concluding that the second prong was not satisfied,
because “the record demonstrates that the acquisition of these
facilities at more than their net book value results in substantial
benefits to ratepayers.” Remand Order ¶ 2. The ALJ erred in
requiring the difference between purchase price and construction
cost to be “exorbitant,” ALJ Remand ¶ 313, the Commission
explained, because nothing in Crossroads, 71 F.E.R.C. ¶ 61,076,
on which the ALJ relied, supported such a prerequisite and
instead only required that the benefits must be “commensurate
with the acquisition costs that exceed the depreciated original
costs.” Remand Order ¶ 111 (quoting Crossroads, 71 F.E.R.C.
at 61,262) (internal quotation marks omitted). The ALJ’s
reliance on KN Wattenberg Transmission Limited Liability Co.,
85 F.E.R.C. ¶ 61,204 (1998), was also misplaced because that
decision relied upon factors not present here, namely that the
buyer and seller were affiliates and ratepayers had already paid
for depreciation of the facility. Remand Order ¶ 112.

     To clarify, the Commission stated: “In conversion cases
involving non-affiliates, the Commission has consistently
allowed the full purchase price in [a] rate base when the record
supports a finding that the purchase price is less than the cost to
construct comparable facilities.” Id. ¶ 113. It cited its decisions
in Crossroads, 71 F.E.R.C. at 61,262–63; Natural, 29 F.E.R.C.
at 61,150; and Cities, 4 F.E.R.C. at 61,596. The Commission
elaborated on its rationale: “Allowing the full purchase price . . .
                                 7

in rate base in these circumstances provides specific benefits to
. . . ratepayers because the approved recourse rates will be no
higher, if not somewhat lower, than if the pipeline built new
facilities.” Remand Order ¶ 113. Further, the Commission
noted,“[t]his ruling also provides jurisdictional companies
appropriate incentives to purchase and utilize existing facilities
in lieu of constructing new facilities, thereby avoiding
unnecessary construction and the attendant environmental
impacts.” Id. Having found that the second prong of the
benefits exception test was satisfied, the Commission stated it
had no need to consider additional specific dollar benefits
identified by MoGas once the TMP offered service, such as
“demand charge credits to shippers, access to flexible point
rights, and lower initial rates.” Id. ¶ 114.

     On rehearing, the Commission again rejected arguments
that its benefits exception “requires a finding of specific benefits
in addition to a finding that the costs of acquiring the existing
pipeline is less than cost of constructing comparable facilities”
and that it “can only make a finding of specific benefits if the
pipeline’s rate proposal is supported, or at least not opposed, by
customers.” See Rehearing Order ¶¶ 48, 50. The Commission
found no support for this requirement in Cities, Natural, or
Crossroads, and, in light of its own precedent, did not interpret
the description of the benefits exception in Missouri I, 601 F.3d
at 586, to require separate findings of both “‘specific dollar
benefits resulting directly from the sale’” and a purchase price
lower than the cost of new construction. Rehearing Order ¶ 48
(quoting Missouri I, 601 F.3d at 586). Furthermore, the
Commission noted that because the decision to issue a certificate
of public convenience and necessity to place the TMP facilities
into interstate service “already addressed the initial question as
to whether there are benefits to including the cost of the TMP
facilities in initial rates,” on remand it “appropriately applied the
Longhorn test to determine the exact level of costs of the TMP
                                8

facilities to include in rates by evaluating whether it would cost
more to construct new comparable facilities.” Id. ¶ 49.
Additionally, in view of its “independent obligation under [NGA
§ 7, 15 U.S.C. § 717f(e)] to ensure that initial rates are in the
public interest,” id. ¶ 50, the Commission explained that
“[p]ermitting a single customer the right to veto the inclusion of
an acquisition . . . premium in rates, regardless of the pipeline’s
showing of specific benefits, is at odds with this statutory
requirement.” Id. So, disregarding the testimony of Ameren, a
MoGas customer, challenging MoGas’s claims of additional
specific dollar benefits was not inappropriate because the
difference in acquisition and construction costs satisfied the
second prong of the benefits exception test and there was no
need to consider other possible benefits. See id. ¶ 54.

     The Commission further concluded that the attempt to
distinguish its precedents on other grounds was unpersuasive for
the following reasons: The fact that there were existing
customers on the merged pipeline, unlike in Crossroads, did not
make inapposite its decision in Crossroads that specific benefits
had been shown because the Commission had addressed
customers’ subsidization concerns in designing MoGas’s initial
rates. Id. ¶ 51. Likewise, it was a misreading of Natural to
suggest the pipeline proposed to provide service on newly
acquired facilities for free; in that case, “the costs of the
facilities, including the acquisition adjustment, were borne by
the new shippers” taking service. Id. ¶ 52. So too, United Gas
and Kansas Pipeline were not at odds with the Commission’s
decision on the TMP acquisition premium because the denials
of rate base treatment for acquisition adjustments in those cases
were based on different records. See id. ¶ 53. In Kansas
Pipeline Co., 81 F.E.R.C. ¶ 61,005 (1997), the State’s inclusion
of the acquisition premiums in state-regulated rates was
insufficient to demonstrate specific dollar benefits resulting
from the sale. In United Gas, “there was no showing that any
                                9

rate reductions had any relationship to the payment of amounts
in excess of the original cost.” Rehearing Order ¶ 53. By
contrast, the Commission observed, MoGas had demonstrated
specific dollar benefits because the purchase price of the TMP
facilities was less than the cost of constructing comparable
facilities. See id. It further observed, upon acknowledging its
statement in Enbridge Pipelines (KPC), 109 F.E.R.C. ¶ 61,042
(2004), that proving substantial benefits under Longhorn is a
heavy burden, that case did not involve a pipeline converted to
a new use and that its precedents such as Cities, Natural, and
Crossroads showed that its strong policy against inclusion of
acquisition adjustments in rate base “‘is not inflexible.’”
Rehearing Order ¶ 57 (quoting Cities, 4 F.E.R.C. at 61,596).

                               II.

     Petitioner challenges the Remand and Rehearing Orders on
two grounds. First, it contends that, under Commission
precedent, “whether the purchaser has demonstrated specific
dollar benefits resulting directly from the sale” cannot be
satisfied simply by demonstrating that “the purchase price of the
asset at issue is less than the cost of constructing a comparable
facility.” Petr.’s Br. 18 (internal quotation marks omitted).
Second, it contends the Commission was required to examine
whether there were actual benefits to consumers beyond the
lower purchase price and it failed to do so, in part by failing to
address whether consumers opposed the acquisition.

     The court reviews the Commission’s decisions under the
deferential arbitrary and capricious standard of the
Administrative Procedure Act, and its role “is limited to assuring
that the Commission’s decisionmaking is reasoned, principled,
and based upon the record.” Rio Grande, 178 F.3d at 541
(internal quotation marks omitted). When ratemaking is
involved, the court is “particularly deferential to the
                               10

Commission’s expertise.” Midwest ISO Transmission Owners
v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004) (internal
quotation marks omitted). Further, deference is due to the
Commission’s interpretation of its own precedent. See
Columbia Gas Transmission Corp. v. FERC, 477 F.3d 739, 743
(D.C. Cir. 2007). The court, however, “must reverse a decision
that departs from established precedent without a reasoned
explanation.” Exxon Mobil Corp. v. FERC, 315 F.3d 306, 309
(D.C. Cir. 2003) (citing ANR Pipeline Co. v. FERC, 71 F.3d
897, 901 (D.C. Cir. 1995)). We find no basis to do so here.

                                A.
     Commission precedent amply supports the challenged
orders. The precedent cited by the Commission allows inclusion
of an acquisition premium in a pipeline’s rate base under the
benefits exception where there has been arms-length bargaining
so long as there is a new use and the cost of acquisition is less
than the cost of construction. Following an evidentiary hearing
on remand, the Commission found that applying the benefits
exception to the TMP project ensured that “the approved
recourse rates will be no higher, if not somewhat lower, than if
the pipeline built new facilities.” Remand Order ¶ 113. This
was because the acquisition cost was $1.4 million less than new
construction. Id. Counsel for the Commission noted that if
there is a finding that the public convenience and necessity
requires that a new pipeline is being put into service one way or
another, then the question is whether it will come into existence
through new-use acquisition or new construction, and whichever
course of action is selected, the cost will be passed along to
ratepayers. See Oral Arg. Rec. 40:18-40:22; 21:50-22:36 (Dec.
12, 2014). The choice of a lesser acquisition cost benefits
consumers, cf. Enbridge Energy Co., Inc., 110 F.E.R.C.
¶ 61,211, at 61,796 (2005), and the cost difference with new
construction costs quantifies the benefits.
                                11

     In Cities, 4 F.E.R.C. ¶ 61,268, the Commission had
determined that “the public convenience and necessity requires
Cities Service’s pipeline,” id. at 61,595, and permitted inclusion
of the full purchase price of a new pipeline in the rate base, id.
at 61,596, explaining that although it “generally has a strong
policy against” including acquisition premiums in rate base,
“that policy is not inflexible,” id. “Where the transfer at a price
above book value benefits consumers, it is sometimes
appropriate to permit the entire purchase price to go into the rate
base.” Id. There, the depreciated book value was approximately
$3 million, while the purchase price was $18.5 million, and
construction of a new pipeline would have cost over $40
million. Id. The Commission noted that it was “also significant
that the pipeline ha[d] not been devoted to gas utility service”
and thus “gas consumers w[ould] not be burdened twice for the
costs of depreciating the facilities.” Id. The Commission’s
analysis was limited to those two factors: new use and a
purchase price less than the cost of new construction.

     A differential similar to that in the instant case sufficed in
Natural, 29 F.E.R.C. ¶ 61,073, where the acquisition cost was $1
million lower than new construction costs. The Commission
had found in Natural the pipeline would be in the public interest
and thereafter allowed the acquisition premium attributable to
the interstate portion of the new pipeline — $20 million, which
was greater than the $6 million depreciated original cost, but
less than the $21 million estimated cost of constructing a
comparable pipeline — to be included in the rate base. Id. at
61,150. The Commission noted that costs associated with the
purchased pipeline would be borne only by customers who
chose to use the new segment. It further explained that “gas
customers would not be burdened twice for the cost of
depreciating the facilities since the facilities had not previously
been devoted to gas utility service.” Id. (citing Cities, 4
F.E.R.C. ¶ 61,268).
                               12

     In Crossroads, 71 F.E.R.C. ¶ 61,076, too, the Commission
had found the pipeline, which was being put to a new use by
providing natural gas in Indiana and Ohio instead of oil, was
“required by the public convenience and necessity,” id. at
61,261, and so allowed the $16 million acquisition cost to be
included in the initial rate base of the pipeline. The $16 million
acquisition cost and associated costs of $6.4 million for
conversion and extension were “considerably less than the costs
associated with constructing a new 201-mile, 20-inch diameter
pipeline.” Id. at 61,262. Hence, the Commission determined
that “ratepayers will receive commensurate benefits from the
acquisition of the oil pipeline.” Id.

     Other precedent cited by the Commission on brief is to the
same effect, indicating that the cost differential itself provides
a commensurate benefit that is sufficient to satisfy the second
prong of the benefits exception test. For example, in Longhorn,
the Commission had concluded that the second prong of the test
was met because “[t]he conversion will result in utilization of a
currently-underutilized facility, which could not be replicated
for the price that [the buyer] is willing to pay.” 73 F.E.R.C. at
62,113. As it also noted in Cities and Natural, the Commission
observed that “shippers who have paid for the crude oil line . . .
are quite different from those shippers who would be charged
for the use of the converted [natural gas] line.” Id. Likewise, in
KN Interstate Gas Transmission Co., 79 F.E.R.C. ¶ 61,268, at
62,151 (1997), the Commission explained the second prong of
the benefits exception test required only that “rate payers will
realize benefits commensurate with the acquisition costs that
exceed the depreciated original costs.” There, the “estimated
cost of $159.2 million to complete the . . . project [wa]s
considerably below the estimated $320 million cost to construct
a comparable new pipeline.” Id.

    To the extent petitioner attempts to distinguish the cases
                               13

cited by the Commission in the challenged orders on the grounds
that the pipelines’ rates in Crossroads, Cities, and Natural were
either negotiated or unopposed, or both, and so there must have
been benefits for customers, see Petr.’s Br. 33–38, the
Commission responded, correctly: “There is no language in the
Commission orders in [those decisions] that suggests that
customer support or a lack of customer opposition was an
essential factor in the Commission’s findings in those
proceedings,” Rehearing Order ¶ 50. The Commission pointed
out that relying on non-opposition, as petitioner suggested,
would have been “at odds with” its “independent obligation . . .
to ensure that initial rates are in the public interest.” Id.; see
also Mo. Pub. Serv. Comm’n, 337 F.3d at 1076. Moreover,
evidence of Missouri customer opposition was considered in the
2002 Order, and, the Commission noted, that order was never
challenged. Rehearing Order ¶¶ 49, 54.

     Petitioner’s reliance on United Gas, 25 F.P.C. 26, as
requiring that a pipeline must show benefits to consumers
beyond a construction-acquisition cost differential, is misplaced.
In observing that acquisition costs “may or they may not be
includible in the rate base, depending on whether it can be
established . . . that consumer benefits flowed to the rate payers
to the extent of the” premium, 25 F.P.C. at 50, the Federal
Power Commission referred to rate reductions as one example
of such benefits. Building on United Gas, Commission
precedent has since explained why the requisite showing of
customer benefits can be satisfied with evidence of an
acquisition cost being lower than that of new construction. See,
e.g., Longhorn, 73 F.E.R.C. at 62,112–13. As discussed,
because the ratepayers for a project that has received a
certificate of public convenience and necessity will pay rates
based on the rate base associated either with the costs of
acquisition or costs of new construction, acquiring a pipeline
segment at a price cheaper than the cost of constructing a
                                14

comparable alternative can reasonably be expected to lead to
benefits in the form of rate reductions. Other Commission
decisions describing the benefits exception that are relied on by
petitioner indicate no change in the Commission’s approach.
See, e.g., Enbridge Pipelines (Southern Lights) LLC, 121
F.E.R.C. ¶ 61,310 (2007); Enbridge Energy, 110 F.E.R.C.
¶ 61,211; Questar S. Trails Pipeline Co., 89 F.E.R.C. ¶ 61,050
(1999).

     Petitioner maintains, however, that there are instances
where the Commission has identified benefits beyond a cost
differential (e.g., offering access to a new or under-utilized
supply), or highlighted factual circumstances not present in the
instant case (such as a pipeline’s reliance on a negotiated rate
instead of a cost of service rate), or relied upon benefits that the
Commission did not mention. See Petr.’s Br. 21, 25–31. As to
types of benefits, the court in Missouri I, 601 F.3d at 586, listed
four elements it found in Commission decisions. Quoting
Kansas Pipeline for the proposition that one factor is “whether
‘the purchaser has demonstrated specific dollar benefits
resulting directly from the sale,’” Missouri I, 601 F.3d at 586
(quoting Kansas Pipeline, 81 F.E.R.C. at 61,018), the court
characterized this as the “key” element, id. at 588. In
petitioner’s view, the challenged orders are inconsistent with the
court’s statement of the test. But nothing the court said
purported to change the test adopted by the Commission. The
issue before the court in Missouri I was whether the
Commission improperly included the alleged acquisition
premium in MoGas’s initial rates while deferring resolution of
the issue to a future NGA § 4 rate proceeding. See id. at 585.
Concluding that it had, the court noted that the Commission “did
not directly evaluate the . . . premium according to any of the
elements of the benefits exception test,” id. at 586 (emphasis
added), vacated the Commission’s order with respect to the
alleged acquisitions premium issue, and remanded that issue to
                               15

the Commission for resolution, see id. at 588. The court thus
had no occasion to consider the evidentiary content of the
second prong of the Longhorn test. Previously, in Rio Grande,
178 F.3d at 542, where the Commission had adopted a per se
prohibition when the seller acquires an equity position in the
purchaser that the court concluded was unsupportable, the court
noted because it was clear Rio Grande had put the pipeline to a
new use, see id., a remand was called for to allow the
Commission to address the second prong, see id. at 543; nothing
in Missouri I purported to question that understanding of the
Commission’s test.

     The Commission’s analysis of its precedent in the
challenged orders, to which we defer, refutes petitioner’s
suggestion that the Commission has departed from the Longhorn
test and the determination that evidence of a difference between
acquisition and construction costs generally may suffice to
satisfy the second prong of the test. Other Commission
decisions relied upon by petitioner to show the Commission has
departed from its precedent are inapposite. For instance, in
Enbridge Pipelines (KPC), 102 F.E.R.C. ¶ 61,310, at 62,022–23
(2003), and KN Wattenberg, 85 F.E.R.C. at 61,853–54, no new
pipeline use was involved. See Remand Order ¶ 112.

                                B.
     Petitioner also contends that a cost differential cannot
suffice under the second prong of the benefits exception test
absent a determination that the consumers being served will
actually benefit. See Petr.’s Br. 38. Even assuming, as
petitioner maintains, that the Commission was required to
identify benefits for consumers from the TMP project other than
a cost of acquisition lower than the hypothetical cost of
construction, the Commission did so, appropriately relying in
part on benefits that it had identified in 2002 when it certified
the TMP project pursuant to NGA § 7.
                               16

     Again, the clearest benefit resulting from the lower
acquisition cost of the TMP project is the likelihood that it will
lower costs passed along to ratepayers in using a pipeline whose
construction the Commission determined was required by the
public convenience and necessity. See Remand Order ¶ 113.
In addition, the Commission noted its findings in the 2002
Order that the TMP project would benefit customers by
promoting reliability through providing new sources of supply
and fostering competition. See Rehearing Order ¶ 49 & n.86.
For instance, the Commission found that certain parts of
Missouri had limited access to certain supply areas and the TMP
project would increase competition and offer new sources of gas
supply and transportation to Missouri consumers served by the
interstate pipeline that would interconnect with the TMP. See
id. (citing 2002 Order ¶ 18). Contrary to the implication of
petitioner’s argument, then, this is not a case in which the
Commission certified the TMP project based principally on out-
of-state benefits and approved an acquisition premium in the
pipeline’s rate base to be paid by non-beneficiary in-state
ratepayers; the court consequently has no occasion to consider
how a petition in those circumstances would be resolved.

     Petitioner’s critique that the benefits exception test lacks
teeth because “the estimate [of construction cost] is a
hypothetical alternative” that “will never be put to the test,”
Petr.’s Br. 52, is belied by the record. Petitioner challenged the
hypothetical construction cost, prompting the ALJ to reduce it
by $2.4 million, see ALJ Remand ¶ 314; Remand Order ¶ 110;
Rehearing Order ¶ 55. Intervenor notes, moreover, that
petitioner also had the opportunity to present other challenges to
the pipeline’s evidence, such as cross-examining MoGas’s
expert, but did not. See Intervenor MoGas Pipeline LLC Br.
28–29.

    Finally, in its reply brief petitioner suggests that when
                               17

determining whether an acquisition premium can be included in
a pipeline’s rate base, the Commission ought not be permitted to
rely on the findings made when certifying the project pursuant
to NGA § 7, lest the two questions collapse into one. See Reply
Br. 18–19. Even assuming this argument is properly before the
court, see Holland v. Bibeau Const. Co., 774 F.3d 8, 14 (D.C.
Cir. 2014), nothing in this court’s remand order in Missouri I so
limited the Commission, and the record in the instant case shows
that the fact some benefits may be analogous does not render the
two determinations legally indistinguishable. Of course, insofar
as petitioner seeks to suggest there was no benefit to Missouri
consumers from the TMP project in the first place, that
challenge would be an impermissible collateral attack on the
2002 Order. See Pac. Gas & Elec. Co. v. FERC, 533 F.3d 820,
824–25 (D.C. Cir. 2008).

    Accordingly, we deny the petition for review.
     MILLETT, Circuit Judge, concurring: In my view, the
Commission’s decision barely ekes past our deferential
review. The near-fatal flaw is that the Commission persists in
a bafflegab articulation of its rule for including acquisition
premiums in rates. On the one hand, the Commission has said
repeatedly that the prohibition on the inclusion of acquisition
premiums in rates is broad and emphatic, with the benefits
exception being narrow and sparingly applied. To walk that
narrow path, a pipeline must “show[] by clear and convincing
evidence that the acquisition results in substantial benefits to
ratepayers.” Longhorn Partners Pipeline, 82 FERC ¶ 61,146,
61,542 (1998); see also, e.g., Public Service Co. of New
Mexico, 142 FERC ¶ 61,168 P 25 (2013) (requiring “tangible
and nonspeculative” “specific dollar benefits” that “are
clearly related [to] and solely the result of the acquisitions”)
(internal quotation marks omitted); Missouri Pub. Service
Comm’n v. FERC, 601 F.3d 581, 586 (D.C. Cir. 2010)
(“‘heavy’ burden” to show “benefits to consumers that are
‘tangible, non-speculative, and quantifiable in monetary
terms’”) (quoting Kansas Pipeline Co., 81 FERC ¶ 61,005,
61,018 (1997)).

     On the other hand, aspects of the Commission’s decision
in this and some past cases seem to welcome automatically
the inclusion of acquisition premiums in rates any time the
pipeline shows that “(1) the acquired facility is being put to
new use, and (2) the purchase price is less than the cost of
constructing a comparable facility.” Enbridge Pipelines (S.
Lights) LLC, 121 FERC ¶ 61,310 P 38 (2007) (quoting Rio
Grande Pipeline Co. v. FERC, 178 F.3d 533, 536-537 (D.C.
Cir. 1999)). Beyond any findings underlying a certificate of
public convenience and necessity, the Commission seems to
indicate that no showing of actual desire or demand by
customers for the refurbished service need be made, or even
that a new pipeline would actually have been built.
                               2
     Whither that prior insistence on clear and convincing
evidence of actual, substantial and direct benefits to
ratepayers?

     Here the Commission says the benefit is that the rates
“will be no higher, if not somewhat lower, than if the pipeline
built new facilities.” Missouri Interstate Gas, LLC (“Remand
Order”), 142 FERC ¶ 61,195 P 113 (2013). That is not the
same as an actual, substantial benefit at all. And if that
articulation actually captured the Commission’s position,
what began as a clear requirement that a substantial
affirmative benefit be shown would have transmogrified into
a “no harm, no foul” rule, without an explanatory word being
uttered by the Commission.

     Also seemingly overlooked by the Commission is the
simple proposition that cheaper is not always better. In this
case, the ratepayers got a refurbished, 50-year-old pipeline
paired with the feeble assurance that the cost to them will be
“no higher” than it would be for a brand new pipeline. But
not many people would embrace as a “substantial benefit” a
recycled, 50-year-old hand-me-down for which they were
charged the same price as (or “no higher” than) brand new.

     What saves the Commission is that, as the court’s opinion
notes, see Slip Op. at 10, 15-16, a careful reading of the
agency decision shows some actual benefit to ratepayers.
While the Commission did not repeat its analysis in detail
here, it did expressly rely on its earlier findings in issuing a
certificate of public convenience and necessity that the
proposed service would provide a number of benefits
specifically to Missouri customers. Those benefits include
improving the reliability and diversity of natural gas supply in
the State and increasing competition. See Missouri Interstate
Gas, LLC (“Rehearing Order”), 144 FERC ¶ 61,220 P 49 &
                                 3
n.86 (2013); Missouri Interstate Gas, LLC, 100 FERC
¶ 61,312 PP 14–18 (2002). Importantly, petitioner never
sought review of those prior findings, so both petitioner and
this court are bound by them.

    In addition, the record (just barely) documents the
connection the Commission made between the avoided
construction costs and anticipated lower rates for pipeline
customers. See Wisconsin Pub. Power, Inc. v. FERC, 493
F.3d 239, 273 (D.C. Cir. 2007) (“Although FERC’s wording
may have been less than precise on this point, the agency’s
path may reasonably be discerned[.]”). As the Commission
noted on rehearing, that cost differential will translate into a
rate base that is lower than it would have been had a
comparable pipeline been constructed, and it is that rate base
that will serve as the foundation for the rates charged.
Rehearing Order at P 55 n.93 (2013). 1

     To the extent there could be any question regarding the
directness with which that reduction in the rate base would
translate into lower prices for shippers, it would stem from
distinct subsidization concerns that could arise if the
Commission permitted the pipeline to charge customers a rate
not linked directly to use of the new segment without
measures in place to mitigate this risk. That scenario would
distinguish this case from Natural Gas Pipeline Co. of
America, 29 FERC ¶ 61,073 (1984), where the Commission

1
  While the Commission’s precedent requires that the substantial
benefit be established by “clear and convincing evidence,” this
court’s review remains deferential. Because the Commission
correctly identified the applicable “clear and convincing” standard,
see Rehearing Order at P 35; Remand Order at P 44, this court
reviews any findings of fact made pursuant to that standard only for
substantial evidence. See Sea Island Broadcasting Corp. of South
Carolina v. FCC, 627 F.2d 240, 244 (D.C. Cir. 1980).
                              4
specifically noted that charging rates for a newly acquired
pipeline segment on an incremental basis ensured that the
company, and not its customers, “b[ore] the risk of project
failure or insufficient throughput.” See id. at 61,151.

    Here, however, the Commission addressed concerns
regarding potential subsidization specifically in its 2007
rehearing decision approving the merger that created MoGas
Pipeline, LLC. See Missouri Interstate Gas, LLC, 122 FERC
¶ 61,136 PP 67–75 (2007). No meaningful challenge to the
rate design aspect of the Commission’s decision or its
implications for the benefits exception has been pressed here.

     As a result, the court’s opinion decides only that
permitting the inclusion of an acquisition premium in the rates
on this record in a Section 7 proceeding, 15 U.S.C. § 717f,
was a tolerable application of the Commission’s benefits
exception. This decision says nothing about whether a future
premium would or would not be sustainable if the
subsidization argument were pressed and the measures the
Commission took to address that risk were found wanting.
Nor do we address whether future rates can be challenged on
that ground in a Section 4 rate-setting proceeding, 15 U.S.C.
§ 717c.

     More fundamentally, nothing in our decision today
should be held as authorizing the Commission, going forward,
to approve the inclusion of acquisition premiums based solely
on a determination that rates for the refurbished pipeline will
be “no worse than” if a new, modern pipeline had been built.
If the Commission wishes to spell the demise of the strict
actual-benefits test of past precedent and replace it with a
wooden “new use plus marginally cheaper than new” rule, it
must be up front about what it is doing and grapple directly
with the question whether the statutory and regulatory
                         5
framework and past precedent permit such a regulatory
metamorphosis.
