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FERC Considering Changes to Oil Pipeline Rate Index Policies

FERC is considering modifications to its policies for evaluating oil pipeline index rate changes and data reporting requirements that would make it easier for shippers to challenge rates that they believe exceed industry costs.

The Federal Energy Regulatory Commission is seeking comment on the advance notice of proposed rulemaking (ANOPR). The ANOPR is the result of the commission's ongoing monitoring and evaluation of the relationship between oil pipeline costs and rates. It has found that some pipelines continue to obtain additional index rate increases despite reporting revenues that significantly exceed costs.

Last year, the Liquids Shippers Group, Airlines for America and the National Propane Gas Association filed a petition for rulemaking seeking additional cost information on Form No. 6, page 700, which FERC currently uses to evaluate complaints that a pipeline's indexed rate change is substantially more than its costs.

FERC's indexing methodology allows oil pipelines to change rates subject to certain ceiling levels rather than make cost-of-service filings. The ceiling levels change every July 1 with an index based on industry-wide cost changes.

The ANOPR considers whether the commission should deny index increases for a pipeline with Form No. 6, page 700 revenues exceeding costs by 15% over the prior two years. The Commission is also considering denying increases that exceed by 5% the cost changes reported on the form and whether to apply new criteria to costs more closely associated with a pipeline's proposed rates than with total company-wide costs and revenues that are now reported on the form.

Initial comments on the proposal are due 45 days after it is published in the Federal Register. A date for publication has not yet been set.

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