The Federal Energy Regulatory Commission said it will conduct a hearing to explore El Paso Natural Gas Co.’s proposal seeking to raise its transportation rates by 25% over its currently effective rates. The agency conceded that the pipeline’s filing warranted further review, but it rejected shippers’ requests to summarily reject it.

“We believe that El Paso’s filing raises many typical rate case issues that warrant further investigation. Accordingly, the Commission will establish a hearing to explore the issues set forth in the protests regarding cost-of-service, cost allocations and rate design for the existing and new services. The Commission finds that it is appropriate to examine these issues in the context of a hearing,” the FERC order said [RP08-426].

The Commission set all other issues related to proposed services and terms and conditions in El Paso’s tariff sheets for technical conference. FERC staff was directed to report the results of the technical conference to the Commission within 150 days of the order.

FERC said it “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, consistent with the terms of the 2006 settlement, the Commission will accept and suspend El Paso’s revised tariff sheets in Appendix A to be effective Jan. 1, 2009, subject to refund and conditions and the outcome of the technical conference and hearing procedures.”

El Paso’s proposed rates reflect a rate base of $1.86 billion, which is a $200 million increase over its 2006 rate base, which was established by the settlement between the pipeline and its customers. El Paso said its total cost of service is $650 million.

FERC did not address El Paso’s request to roll the costs of several expansions into its system-wide rates, including the Samalayuca Lateral, East Valley Lateral, Picacho Compressor Station, Hobbs Lateral and Compressor Station, Eunice Compressor Station, the Line 2000 Conversion, Line 2000 Power-up, Line 1903 project and the Havasu Crossover.

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