Mandatory three-year reviews of natural gas pipeline rates, which haven’t been required by FERC in more than two decades, should be resumed, according to the Industrial Energy Consumers of America (IECA) and three-dozen companies and organizations.
Since the Federal Energy Regulatory Commission ended mandatory three-year reviews with the adoption of Order 636 in 1992, pipelines “only go before the FERC if they need a rate increase to cover increased costs, or if challenged by a customer through an expensive and lengthy process that can cost the consumer millions of dollars per rate case and can take upwards of two years to be resolved,” the IECA-led coalition said in a letter Tuesday.
“The burden should be on the pipeline companies to regularly prove that their rates are just and reasonable as a matter of course of business. Given that pipelines are monopolies, this is not asking much. As a result of the existing process, many pipelines have not had their rates examined by the FERC for many years, leaving customers vulnerable to overcharges.”
In one recent analysis of the return on equity (ROE) of 32 natural gas pipelines, researchers at the Natural Gas Supply Association concluded that 20 pipelines earned above 12% ROE from 2009 to 2013, costing customers $5 billion.
FERC only infrequently reviews pipeline rates “despite the fact that pipeline customers are being overcharged,” according to IECA and 36 other companies and organizations, including Dow Corning Corp., Kimberly-Clark Corp., Steel Manufacturers Association and W.R. Grace and Co.
But pipelines aren’t likely to see it that way. Mandatory three year reviews are outdated and unnecessary, according to the Interstate Natural Gas Association of America spokeswoman Cathy Landry.
“Triennial rate reviews are a vestige of the distant past (20 plus years ago), before FERC restructured the pipeline industry to place a greater emphasis on competition,” Landry told NGI. “There is no need for triennial rate reviews.
“FERC retains the authority to investigate rates it believes are no longer just and reasonable. The gas industry’s collective efforts are best spent working cooperatively to increase infrastructure development, providing customers with competitive choices and bringing increased domestic natural gas to consumers.”
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