In another case the FERC is going to have to defend its policy
of not requiring pipelines to flow through penalty revenues, the
U.S. Court of Appeals ruled Friday in remanding a case involving
NorAm Gas Transmission (No. 97-1607). The 2-1 decision in Amoco v.
FERC, with Judge Randolph concurring in part and dissenting in
part, did not object to NorAm's raising penalty rates, but it does
ask for an explanation of why the Commission believes penalty
revenues will be so insignificant as to warrant no consideration.
In the year prior to NorAm's rate filing the pipeline had collected
$1.8 million in penalty revenue. The court noted FERC appeared to
believe that because penalty rates were raised, the incidence of
penalties would decrease. But "even if a lesser number of penalties
are imposed, the increased penalty rate might result in a gross
increase in penalty revenue. Moreover - and this is the key
imponderable - whether a shipper will be willing to incur the
penalty depends on his cost in securing alternative supplies in a
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