National Fuel Gas Supply Corp. (NFG) allegedly overcharged transportation and storage customers about 17.36 Bcf (or 17.88 MMDth) in fuel costs over the five years from 2000 through 2004 and still continues overcharging customers today, according to a complaint and motion for summary disposition filed at FERC by the Public Service Commission of New York, the Pennsylvania Public Utility Commission and the Pennsylvania Office of Consumer Advocate. The Williamsville, NY-based utility vowed to fight the complaint, saying that its fuel percentages have been in place and in public view for more than a decade.
The state regulators and consumer advocate claim that NFG's fuel charges, 2% for transportation and 1.4% for storage, have collected double what the company actually needs for compressor fuel and losses. This has led to excessive annual rates of return of more than 20% before taxes, they said.
An analysis of National Fuel's FERC Form 2 data conducted by Daniel G. Downs, utility engineer at the New York PSC, determined that from 2000 through 2004 the company retained a total of 34,892,832 Dth but only used 17,013,830 Dth.
"To offer some perspective regarding the impact of NFG customers of having to provide this excess gas, one need only look at the revenues that NFG has derived in recent years from sales of this excess retained fuel and loss gas," the regulators said. "For the five year period 2000-2004, NFG reported Efficiency Gas Revenues of over $62 million. Moreover, Mr. Downs' analysis indicates that for the 12 months ending Sept. 30, 2005, NFG's Other Gas Revenues increased to $27,318,112."
In their motion, they said FERC should direct NFG to make a compliance filing within 10 days of an order granting their motion providing details on the amounts of fuel retained, used and sold from Jan. 1, 2000 to the present. Following that, the Commission should require NFG to implement accurate fuel and loss percentages effective immediately, they said.
In their complaint, they have asked the Federal Energy Regulatory Commission (FERC) to find that the company's rates are unjust and unreasonable, fix the rates at a just and reasonable level prospectively based on a test period consisting of the 12 months ending Sept. 30, 2005, and determine whether National Fuel has authority under its tariff to make sales of gas retained from shippers. If FERC finds that National Fuel does not have authority to sell the gas collected through fuel charges, then the commission should direct the company to show cause why it should not be required to disgorge the profits associated with the gas sales, the regulators said. The complaint and motion were made under Sections 5(a) and 13 of the Natural Gas Act.
"We will vigorously oppose these actions," said David F. Smith, president of the company. "We believe our rates have been, since their approval more than 10 years ago, fair, reasonable and in the public interest.
"In addition, the gas sales called into question have been disclosed to FERC and our investing public for as long as they have been made," he added. "The FERC's regulations and our tariff provide for the authority to engage in natural gas sales and we continue to believe steadfastly that we are authorized to make these sales. These filings were just received late Friday, and given that the length of time it will take to resolve these matters is uncertain, it would be premature at this time to predict any future impact on Supply Corporation's business or financial performance."
NFG owns and operates 2,972 miles of gas pipelines and 32 natural gas storage fields, including four that are co-owned with non-affiliated companies.
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