Administrative Law Judge (ALJ) Michael J. Cianci Jr. has certified an uncontested settlement resolving claims that Tuscarora Gas Transmission Co. significantly overrecovered its cost of service, making its current transportation rates unjust and unreasonable.

The settlement, which Tuscarora and affected shippers filed in December, establishes the rates for mainline transportation services and specifies that costs for the pipeline’s 2002 and 2008 expansion projects will be rolled into Tuscarora’s system-wide rates permanently for as long as the 2002 and 2008 expansion projects are in service.

It establishes a three-year moratorium period during which Tuscarora and the settling parties are prohibited from taking certain actions, including but not limited to any filings under Section 4 and Section 5 of the Natural Gas Act (NGA) that would be inconsistent with the terms of the settlement (see Daily GPI, Dec. 28, 2011). It lists permissible filings during the moratorium period.

Part B of the settlement further states that Tuscarora shall have no further obligation to file a general rate case under Section 4 of the NGA.

Tuscarora, which is principally owned by TransCanada subsidiary TC Pipelines LP, will be allowed to retain 100% of interruptible rate revenues during the moratorium period, provided the settlement is approved in whole by the Commission. The Federal Energy Regulatory Commission has the option to approve the ALJ initial decision in whole or in part, or reject it in whole or in part.

“Overall and on balance…the settlement agreement is an uncontested offer of settlement that reflects a just and reasonable negotiated resolution of the issues set for hearing in this proceeding,” said ALJ Cianci.

Based on claims filed by Sierra Pacific Power Co., a subsidiary of Las Vegas-Based holding company NV Energy Inc., and the Public Utilities Commission of Nevada (PUC), the FERC last May initiated a Section 5 investigation into the pipeline for overrecovery of cost of service (see Daily GPI, May 26, 2011). Other parties to the settlement are Shell Energy North America (US) LP, Southwest Gas Corp., Plumas-Sierra Rural Electric Cooperative, United States Gypsum Co., IGI Resources Inc. and Northwest Pipeline.

The Nevada PUC and Sierra Pacific alleged that, based on the pipeline’s last two Form 2-A filings, Tuscarora’s return on equity (ROE) was 22.2% for 2008 and 27.2 % for 2009, far above what the Commission typically allows for interstate gas pipelines. Tuscarora is a 229-mile pipeline that serves Nevada and southwestern California.

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