FERC’s Natural Gas Act Section 5 investigation of Kinder Morgan Inc.’s (KMI) Natural Gas Pipeline Company of America LLC (NGPL) is based on a miscalculation of the pipeline’s return on equity (ROE) and should be terminated, according to NGPL.

The Federal Energy Regulatory Commission voted Jan. 19 to initiate Section 5 investigations of the rates charged by two KMI interstate natural gas pipelines — NGPL [RP17-303] and Wyoming Interstate Co. LLC (WIC) [RP17-302] — to determine if they are just and reasonable. Analysis by FERC’s Office of Energy Market Regulation indicated that NGPL had a calculated ROE of 28.5% for 2014 and 20.8% for 2015, while WIC had a calculated ROE of 17.7% for 2014 and 19.0% 2015, FERC said.

But FERC’s calculations in the NGPL analysis were faulty, according to NGPL.

“…FERC’s ROE estimates are grossly overstated due to a calculation error that incorrectly includes fuel revenues while excluding fuel expenses,” the KMI affiliate said in a FERC filing this week. “Correcting only this error, (and removing the associated power expenses for electric compression) and making no other corrections or adjustments, results in estimated ROEs of 17.7% and 15.7% for 2014 and 2015, respectively.”

The case for termination of the Section 5 investigation “is even more compelling due to [NGPL’s] current financial condition and the extraordinary challenges that [NGPL’s] owners face in returning the company to a sound financial footing,” the company said in its FERC filing. NGPL asked FERC to terminate the investigation by Thursday (Feb. 2), “due to the impending resignation of Commissioner Norman Bay effective Feb. 3, 2017, and the resulting lack of a quorum.”

NGPL’s debt ratings were hobbled in 2010 following FERC’s approval of a settlement of allegations that NGPL over-recovered its cost of service.

Since 2009, FERC has initiated 14 Section 5 proceedings to determine if pipeline revenues significantly exceed their annual cost of service. Twelve of the proceedings ended with settlement agreements and two proceedings were terminated, according to FERC.

Last January, FERC opened investigations into the rates of four interstate natural gas pipeline companies — Tuscarora Gas Transmission Co. [RP16-299], Empire Pipeline [RP16-300], Iroquois Gas Transmission System [RP16-301] and Columbia Gulf Transmission [RP16-302]. Those investigations eventually led to uncontested settlements with Tuscarora and by Columbia in September and with Iroquois and Empire in October.