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FERC Upholds Gas Pipeline Surcharge Policy, Rejects Call For Formalized Procedures

FERC on Thursday, reiterating its call for “collaboration” between a pipeline and its customers and a “case-by-case” review of pipelines’ proposed modernization cost trackers, rejected a bid by end users to set additional formal standards [PL15-1].

The Federal Energy Regulatory Commission upheld the standards in its policy statement issued earlier this year for interstate pipelines to recover through a surcharge or cost tracker certain costs associated with replacing old and inefficient compressors and leak-prone pipes. The cost trackers would enable the pipelines to expeditiously make infrastructure improvements to respond to government safety and environmental initiatives (see Daily GPI, April 16).

The policy statement “will be most effective and efficient if designed according to flexible parameters that will allow for accommodation of the particular circumstances of each pipeline,” FERC said.

The Process Gas Consumers and the American Forest and Paper Assoc. had requested clarification of the policy statement, saying it should include formal procedures for setting the tracker, including investigation of the pipelines’ revenues, and provide for refunds, calculated from the date a complaint is filed, if there are found to be overcharges.

It is intended that the pipeline engage in a collaborative process with its customers, reviewing maintenance and upgrades to be accomplished before it files for a Section 4 rate case for Commission review, FERC said.

Companies seeking modernization cost-recovery surcharges or trackers would be required to meet five standards:

  • Base rates must have been recently reviewed through a Natural Gas Act general Section 4 rate proceeding or through a collaborative effort between the pipeline and its customers;
  • Eligible costs must be limited to one-time capital costs incurred to meet safety or environmental regulations, and the pipeline must specifically identify each capital investment to be recovered by the surcharge;
  • Captive customers must be protected from cost shifts if the pipeline loses shippers or increases discounts to retain business;
  • Periodic reviews must be conducted to ensure that rates remain just and reasonable; and
  • Pipelines must work with shippers to seek support for surcharge proposals.

The policy statement was based on principles outlined in a January 2013 order in which FERC allowed Columbia Gas Transmission to implement such a tracker (see Daily GPINov. 20, 2014Jan. 31, 2013). 

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