A FERC administrative law judge’s (ALJ) initial decision ordering refunds of pipeline charges wrongfully collected by Rockies Express LLC (REX) pipeline for lost and unaccounted for gas, if endorsed by the full Commission, could disrupt the entire pipeline industry, according to the Interstate Natural Gas Association of America (INGAA).
INGAA has filed a motion with the Federal Energy Regulatory Commision (FERC) to intervene out-of-time or, in the alternative, file an amicus brief to protest a portion of the recent initial decision by ALJ Judith A. Dowd, which called for $22.2 million in refunds to shippers.
Dowd found that the fuel tracking provisions for REX are not just and reasonable, called for the refunds, and endorsed an alternative to the existing tracker, which was found to be overly complex and almost impossible to monitor. The full FERC has the authority to accept or reject in full or in part the ALJ’s decision. Dowd sided with Indicated Shippers (BP America Production Co., BP Energy Co., and WPX Energy Marketing) and Ultra Petroleum in finding that REX profited from its tracking surcharge mechanism for fuel and lost and unaccounted for gas (FL&U). “Fuel reimbursement provisions, including cash-outs for over-collections of fuel, should not be a profit center for the pipeline,” the judge said in her decision.
Dowd accepted an estimate of the excess retained and subject to refund during 2011 and 2012 of approximately $22.2 million, submitted by an independent witness (see NGI, July 8).
According to INGAA, Dowd erred in reopening a closed proceeding and ordering retroactive refunds under Section 4. If approved by FERC, Dowd’s “finding will have widespread and disruptive ramifications in the pipeline industry.”
It has long been a pillar of the regulated pipeline industry and a nemesis of its customers that under the Natural Gas Act (NGA) a finding of wrongful charges against a pipeline may involve rate changes going forward (prospective) but in most cases not retroactive refunds. Electric utilities under the Federal Power Act are not afforded the same protection. INGAA said it was concerned with the ALJ’s “holding that FERC has authority under the NGA Section 4 to order retroactive refunds for a prior period FL&U filing that was accepted without suspension and permitted to take effect without being subject to refund.”
FERC has no statutory authority under NGA Section 4 to order retroactive refunds of rates that have not been suspended and set for hearing, the pipeline group said. It added that REX’s 2010 FL&U filing was never suspended.
Dowd also concluded that it is appropriate under NGA Section 4 to use a prior period adjustment to correct REX’s 2010 FL&U filing miscalculation and refund REX’s unjust and unreasonable over-recovering that stemmed from these miscalculations. The decision also orders disgorgement of ‘unjust’ profits collected through the 2010 FL&U filing under NGA Section 16.
INGAA said it seeks clarification of a second issue in the initial decision that found REX to be in violation of its tariff by “retaining and selling the proceeds of shipper-supplied gas through the FL&U mechanism.”
The decision “suggests that pipelines without specific tariff language can never make operational sales of shipper-supplied fuel gas. INGAA seeks clarification from FERC that operation sales can encompass excess gas obtained through a pipeline’s fuel tracker mechanism.”
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