FERC has approved an uncontested settlement resolving allegations that Great Lakes Gas Transmission LP “substantially” overrecovered its cost of service, which resulted in “unjust and unreasonable” rates.
“The settlement resolves all issues in this proceeding,” said the order issued by the Federal Energy Regulatory Commission [RP10-149]. It reduces the pipeline’s firm transportation rates by about 8% beginning May 1 of this year, and it also requires Great Lakes to share with qualifying shippers half of the revenues in excess of $500 million that the pipeline receives during a two-year period from Nov. 1, 2010 through Oct. 31, 2012 for jurisdictional service.
And the settlement bars Great Lakes from filing a Natural Gas Act (NGA) Section 4 rate case prior to June 1, 2011 or later than Nov. 1, 2013, according to the order. Lastly, the agreement restricts the pipeline from modifying the settlement terms or rates to be effective before Nov. 1, 2012.
Administrative Law Judge (ALJ) David H. Coffman certified the Great Lakes settlement to the full Commission in mid-June (see Daily GPI, June 18).
In November FERC initiated formal Section 5 investigations of three interstate pipelines: Great Lakes, Natural Gas Pipeline Company of America LLC (NGPL) and Northern Natural Gas (see Daily GPI, Nov. 20, 2009). FERC staff’s preliminary investigation indicated that Great Lakes’ estimated return on equity (ROE) was 20.83% with an overrecovery of $56 million, while NGPL may have achieved a ROE of 24.5% based on an overrecovery of $149 million. Northern Natural Gas Co. had an estimated ROE of 24.36% with an over-recovery of $167 million.
FERC approved a settlement between Northern and its shippers in early June. However, later that month industrial natural gas users FERC to reconsider its decision to terminate the Section 5 complaint proceeding against Northern, saying customers and the agency yielded to the pipeline’s threat of filing higher transportation rates if the case was not closed quickly.
The Process Gas Consumers Group, the American Forest & Paper Association and the United States Gypsum Co. urged the Commission to reopen the Section 5 investigation into Northern’s rates, and direct the presiding ALJ to order an expedited procedural schedule designed to issue a ruling at the “earliest possible date and..prior to the date that a new Section 4 filing could be made effective, subject to refund.” Their request still is pending before FERC.
Northern “is exploiting a flaw in the legal structure of NGA Sections 4 and 5, and the Commission, instead of using all the tools available to it in order to prevent the exploitation of customers, has become complicit in this exploitation by terminating the Section 5 investigation,” the industrial end-users said in their request for rehearing [RP10-148].
Earlier this month an ALJ certified an uncontested settlement of the Section 5 allegations against NGPL for overrecovery of its cost of service. The agreement still is pending before the full Commission (see Daily GPI, July 7).
“The settlement will provide for reduction in transportation and storage rates and fuel retention factors. In addition, the settlement will provide rate certainty during the moratorium period. [And] if approved, the settlement will avoid lengthy and costly litigation and the unnecessary expenditure of resources by the parties” and the Commission, said Deputy ALJ Bobbie J. McCartney.
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