FERC on Friday accepted and suspended for five months a $40.1 million rate hike on Kern River Gas Transmission subject to the result of a hearing. The Commission said the new cost-of-service rates, which total $347.4 million, will be effective on Nov. 1 and in part on June 1, 2005. It denied Kern’s request for fast-track processing of its application.

The overall cost of service that Kern River proposed includes $34.1 million in operation and maintenance expenses, plus depreciation, depletion, amortization, taxes and an after-tax return of 9.59%. The proposed return reflects an overall cost of debt of 6.62% annually and a rate of return on equity of 15.1%.

Kern River also proposes a rate base of $1,803.8 million and a decrease in projected annual throughput of 58,241 MDth (155 MMcf/d) to 572,174 MDth (or about 1.52 Bcf/d).

“The rates reflect a substantial increase in depreciation and a reduction in rate design volume,” FERC noted in its order. “All of these are factual issues which require further examination in a hearing. As a result, the Commission finds that these rate changes reflected in the proposed tariff sheets have not been shown to be just and reasonable and may be unjust, unreasonable, unduly discriminatory or otherwise unlawful.”

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