The NGA required gas companies to file tariffs of their new rates with the FPC, a federal administrative agency, at least thirty days prior to their becoming effective, and authorized the FPC to investigate rates to determine if they were in the public interest.

Since the only remaining issue was the alleged excess payment resulting from the difference between 10.7 and 14.5 cents per thousand cubic feet that Mobil Gas had paid to United Gas while responsible for the contract, the FPC ended its investigation regarding the validity of the new rate as it believed that its ruling would not have a retroactive effect.

Mobile Gas appealed the administrative decision of the FPC to the Court of Appeals for the Third Circuit, which reversed the decision and directed the FPC to reject the new tariffed rate in question and to order United Gas to refund the excess payments received under the new rate.

The opinion also explained that the NGA was different from the Interstate Commerce Act (ICA) then in effect, which required transportation companies to use the same rate schedule for all customers and did not authorize special rates to be set by contract with individual customers as the large number of customers engaged in interstate commerce did not permit an administrative agency to review contracts with special rates.

In comparison, there were relatively few gas companies and customers, and the NGA’s authorization to set rates using contracts recognized that dedicated infrastructure and capacity with individualized costs might be required for a gas company to serve a customer.

Based on this difference, the Court then distinguished the prior case of Armour Packing Co. v. United States (1908),[5] where a contract between a shipper and a railroad used the same rate as in a rate schedule filed with the Interstate Commerce Commission (ICC).

[2] In later cases, the validity of rates set by contracts between gas and electric transmission companies became known as the Mobile-Sierra presumption.

Under this presumption, an electricity or gas rate specified in a freely negotiated contract is presumed to be “just and reasonable” and thus acceptable under the FPA or NGA.