NGI The Weekly Gas Market Report / NGI All News Access

WY Delegation Says Ruling on Pipe ROE Sends 'Discouraging Message'

Three members of Wyoming's congressional delegation have expressed concern with a FERC administrative law judge's (ALJ) initial decision that recommends a significantly lower return on equity (ROE) for a Wyoming-to-California pipeline, Kern River Gas Transmission.

In March, FERC ALJ Charlotte J. Hardnett proposed an ROE of 9.34% for Kern River, considerably below the pipeline's request of 15.1% and its current ROE of 13.25%. An industry pipeline group at the time called the decision a "troubling sign," saying it would affect the ability of pipelines to attract investors for their projects (see NGI, March 27).

"This ruling sends a discouraging message to the market at a time when investment in pipeline infrastructure is increasingly important for Wyoming and the nation," said Republican Sens. Craig Thomas and Michael Enzi and Democratic Rep. Barbara Cubin in a letter to FERC Chairman Joseph Kelliher.

"One of the primary goals of Congress has been to facilitate and encourage the development of energy infrastructure -- particularly interstate transmission facilities," the lawmakers noted. "While the Energy Policy Act of 2005 did not directly address FERC policies related to natural gas transmission pricing, we would encourage the Commission to consider this subject within the overall context of that legislation and the goals it established."

The Wyoming lawmakers urged the Federal Energy Regulatory Commission to "keep our thoughts on this matter in mind" when it reviews the ALJ's decision on Kern River. The Commission can accept or reject in full or in part the ALJ's ruling.

Before the agency acts, Salt Lake City, UT-based Kern River has requested that FERC schedule an oral argument on the ALJ's initial decision, saying it raises "fundamental policy issues" that should be aired before the full Commission (see NGI, May 1). FERC has not yet responded to Kern River's request.

Kern River's system extends about 900 miles from Wyoming through Utah and Nevada to the San Joaquin Valley near Bakersfield, CA. The pipeline, which began service in 1992, had an initial transportation capacity of 700 MMcf/d. A $1.2 billion expansion in 2003 more than doubled Kern River's firm delivery capacity to 1.7 Bcf/d.

Kern River Gas Transmission is a subsidiary of MidAmerican Energy Holdings, a Berkshire Hathaway company.

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