FERC Tuesday approved an uncontested settlement that resolves allegations that Wyoming Interstate Co. (WIC) pipeline over-recovered costs from its shippers, resulting in unjust and unreasonable rates.

The Federal Energy Regulatory Commission (FERC) initiated a Section 5 Natural Gas Act (NGA) investigation in November 2012 into the rates charged by WIC to determine if it was over-recovering its costs. The investigation was based on Form 2 cost and revenue information that WIC filed in 2010, which FERC staff said indicated that the company substantially over-recovered its actual cost of service.

Based on the Form 2 reports, FERC staff estimated WIC's return on equity (ROE) to be 19.55% for 2010 and 18.51% for 2011, significantly higher than FERC typically allows for interstate gas pipelines (see Daily GPINov. 16, 2012).

WIC, which is owned by Kinder Morgan Inc., submitted its uncontested settlement to the Commission in June on behalf of itself and its shippers, which included Anadarko Energy Services, Bill Barrett Corp., BP Energy Co., Chevron U.S.A. Inc., Occidental Energy Marketing Inc., Public Service of Colorado, Pioneer Natural Resources USA Inc., Shell Energy North America (US) LP and WPX Energy Marketing LLC.

"The Commission finds that the settlement is fair and reasonable and in the public interest, and therefore, the Commission approves the settlement," according to the order [RP13-184]. FERC gave WIC 15 days to file revised tariff records consistent with the terms of the settlement.

The WIC settlement establishes new base rates that became effective on July 1 and on Jan. 1, 2014; provides how refunds will be calculated and processed; and stipulates that costs attributable to the Echo Springs Lateral be rolled into the cost of service for WIC's mainline service effective Feb. 1, 2015.

WIC, which has a throughput capacity of 3.34 Bcf/d, is one of the primary interstate systems providing takeaway capacity from the Overthrust, Piceance, Uinta, Green River and Powder River basins in Wyoming, Utah and Colorado.

Since 2009, FERC has initiated several Section 5 Natural Gas Act investigations into interstate pipelines for potentially over-recovering rates (seeDaily GPIFeb. 8, 2012Nov. 20, 2009).

The WIC settlement comes on the heels of a FERC administrative law judge's (ALJ) certification of an uncontested settlement between Viking Gas Transmission and its shippers resolving charges of over-recovery of costs (see Daily GPISept. 24). The settlement was negotiated between Commission staff, Viking and 16 shippers [RP13-185]. FERC may approve or reject the ALJ's decision in full or in part.

FERC's charges were based on Viking's Form 2 cost and revenue information from 2010, which FERC staff said showed that the pipeline had substantially over-recovered its cost of service. FERC staff estimated Viking's ROE at 21.39% for 2010 and 21.75% for 2011.

The Viking settlement calls for the pipeline to reduce all of its base tariff rates, which were in effect on Nov. 14, 2012, by 2% and to file changes to its FERC gas tariff. The reduced base settlement rates would take effect on Jan. 1, 2014, and remain in effect for at least a year.

Viking, which is owned by Oneok Partners LP, has a design capacity of 0.5 Bcf/d. It receives Canadian gas at the Manitoba/Minnesota border and connects with four major pipelines serving markets in North Dakota, Minnesota and central Wisconsin.