Natural gas producers scored a victory Wednesday when FERC ruledthey could post surety bonds in lieu of multi-million dollarrefunds to customers that fast coming due on March 9th. The bondmethod guarantees that customers will receive their refundpayments, and it gives producers what they seek most – a delay inpaying out the amounts until disputes over the refunds calculationsare resolved. The downside of this option is that producers will berequired to continue paying interest on the refund principal aslong as the bond remains in effect. Producers also have thealternative of paying their refund amounts into escrow accounts.
“The Commission is willing to accommodate this request [forsurety bonds] in view of the unusual circumstance of thisproceeding,” the order said [98-39-0902]. Refund recipients will bethose who bought gas produced in Kansas in the 1980s at pricesthat, because they included the state’s ad valorem tax as anadd-on, were above the levels allowed under the Natural Gas PolicyAct of 1978. Total refunds due customers are estimated at $500million.
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