FERC to Give 'Highest Priority' to Assuring Energy Security

In light of the "tragic events" of last week and the "high state of alert the country is now experiencing," the Federal Energy Regulatory Commission on Friday assured regulated energy companies that it will give the "highest priority" to applications that are filed to recover the costs associated with upgrading the security of their systems.

In a statement of policy offering "regulatory guidance" to the energy industry, the Commission said it "understands that electric, gas and oil companies may need to adopt new procedures, update existing procedures and install facilities to further safeguard their electric power transmission grid and gas and oil pipeline systems," but that they may have some "uncertainty" about their ability to recover security-related costs from their ratepayers, especially if they are operating under frozen or indexed rates [PL01-6].

To remove all doubt, FERC noted it "will approve applications to recover prudently incurred costs necessary to further safeguard the reliability and security of our energy supply infrastructure in response to the heightened state of alert. Companies may propose a separate rate recovery mechanism, such as a surcharge to currently existing rates or some other cost-recovery method." It further said it would give "priority" attention to processing the applications.

This is "a step in the right direction...a very positive move," said Jerald V. Halvorsen, president of the Interstate Natural Gas Association of America (INGAA), a trade group which represents interstate natural gas pipelines.

"I think security will be the focus of everything for a while," Halvorsen told NGI. He anticipates that Congress will hold a number of hearings to explore what steps FERC, the Department of Energy and the Department of Transportation's Office of Pipeline Safety are taking to protect interstate pipelines and other energy infrastructure from potential terrorist attacks.

"We would applaud" that effort, Halvorsen said.

Interstate gas pipelines have been on a high state of alert since last Tuesday when terrorists plowed commercial airliners into the twin 110-story towers of the World Trade Center in lower Manhattan and the Pentagon military headquarters near Washington D.C., causing untold damages and deaths.

Police and sheriff authorities have been keeping a close watch on the large compressor stations of pipelines; LNG facilities and citygates are being patrolled; and pipeline personnel are conducting visual inspections by air of their systems on a regular basis, according to INGAA.

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