FERC last Tuesday approved a settlement resolving a complaint brought against Southwest Gas Storage by shippers on affiliate Panhandle Eastern Pipe Line and other parties, which accused the company of charging "unjust and unreasonable" rates for jurisdictional storage services. The settlement also addressed Southwest Gas Storage's proposal last year to increase its rates.

The agreement requires Southwest Gas to maintain its currently effective rates, and thus no refunds will be required; establishes a cost-of-service of $47.75 million; requires that $21 million of base gas be reclassified from recoverable to nonrecoverable; and requires the company to file semi-annual reports with settlement parties during the term of the settlement detailing its storage contracts and balances by field, and injections and withdrawals and changes in contracts or demand under third-party storage contracts.

Federal Enerty Regulatory Commission (FERC) staff has estimated that by retaining the currently effective rates, the settlement will save Southwest Gas customers approximately $6.23 million annually. The settlement is scheduled to become effective March 1.

The "Panhandle complainants" in their October 2006 complaint alleged that unreasonable rates had allowed Southwest Gas Storage to overrecover its costs by nearly 60% (see NGI, Nov. 20, 2006). While FERC at the time granted complainants' request for an evidentiary hearing and Section 5 investigation, it denied their plea for an immediate interim rate reduction.

Southwest Gas Storage is a wholly owned subsidiary of Panhandle Eastern and provider of the majority of underground storage capacity used by Panhandle in rendering both jurisdictional transmission services and a variety of storage services. Panhandle currently is the sole firm customer of Southwest Gas Storage, holding a firm contract for 61 Bcf of capacity (essentially the entire capacity of Southwest Gas Storage), and pays Southwest $45 million for those services.

All of the parties to the settlement either supported or did not oppose it. They included American Forest & Paper Association, American Iron and Steel Institute, American Public Gas Association, Anadarko Petroleum Corp., Anadarko Energy Services Co., Citizens Utility Board of Illinois, ConocoPhillips, ExxonMobil Gas & Power Marketing, Independent Petroleum Association of America and the Process Gas Consumers Group.

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