FERC Monday upheld a March order rejecting ANR Pipeline’s request to recover the costs associated with natural gas lost during Hurricane Ike via its annual fuel tracker mechanism.
In March the Federal Energy Regulatory Commission (FERC) issued an order directing ANR to remove from the “lost and unaccounted-for” component of its transporters’ use percentage the 187,540 Mcf of gas lost as a result of Hurricane Ike, the third most destructive hurricane to ever make landfall in the United States [RP09-428]. ANR, which sustained significant damage to its Gulf of Mexico facilities during the 2008 hurricane, argued that the fuel tracker was the quickest and most efficient method to recover the costs for hurricane-related gas losses.
“The ‘standard for recovery of a loss in a [loss and unaccounted-for] tracking mechanism is based on whether or not the loss resulted from normal pipeline operations,'” FERC said in its order on rehearing. “In 1935 the Supreme Court recognized that ‘lost and accounted-for’ gas is that which is inevitably lost through routine pipeline operations…The meaning of the term ‘lost and unaccounted-for’ gas has remained constant. More recently the courts have stated that ‘as natural gas is transported through a pipeline, a fraction is lost due to system leakage. This is known as lost and unaccounted-for fuel.’ Certainly gas lost as a result of a hurricane is not part of a pipeline’s normal operations.”
ANR’s gas losses from Hurricane Ike are “extraordinary losses” that should be recovered through a pipeline’s insurance or the normal ratemaking process, the order said. “To the extent a pipeline has insurance for certain losses, that would be the appropriate avenue to pursue. On the other hand, absent insurance, a pipeline has the opportunity to file a limited Section 4 filing to recover extraordinary losses,” the agency said.
“The Commission’s decision in the [March] order did not address the merits of whether ANR’s Hurricane Ike losses are recoverable. Rather, the Commission [simply] found that ANR’s annual fuel tracker was not the appropriate forum to recover such costs.”
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