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FERC Delays Sonat's Rate Hike

FERC Delays Sonat's Rate Hike

Sonat's proposed $82 million rate hike hit a major snag last week as FERC suspended any increase from occurring until March 1 and called for a hearing where opposition to the proposal can present information.

"Based upon a review of the filing, the Commission finds that the proposed tariff sheets..have not been shown to be just and reasonable, and may be unjust, unreasonable, unduly discriminatory, or otherwise unlawful. Accordingly, the Commission shall accept such tariff sheets for filing and suspend their effectiveness.."

The Commission said that Sonat had not produced enough information about certain provisions in the proposal, and that a hearing was needed so that "parties may fully ventilate all the facts related to the issue."

The ruling fell on the side of the opposing parties, which included Atlanta Gas Light, Alabama Gas Corp., Dynegy, Shell Energy Services Co., and the GASP Coalition. They petitioned FERC last month to suspend the rate increase.

In the filing, Southern proposed a cost of service increase of $82 million to $363 million. The company wanted to increase is rate base by $433 million because of pipeline and compressor replacements and relocations, a new $29 million computer system and GISB compliance, and $272 million in expansion costs, including $103.5 million for its North Alabama expansion project which went 50% over budget. Southern also proposed an increase in its rate of return to 10.81%, predicated on a 13% return on equity, which is one percentage point higher than Sonat's existing ROE and slightly higher than FERC typically has allowed for other pipes.

FERC ordered that a prehearing conference will take place by the end of the month. An administrative law judge has yet to be assigned to the case.

John Norris

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