FERC Thursday terminated an inquiry into the fuel retention practices of interstate natural gas pipelines, saying there was no basis for the agency to proceed with generic action.

The order concluded that shippers’ requests to impose a tracker mechanism with a true-up on every pipeline would be difficult to justify under the requirements of Section 5 of the Natural Gas Act (NGA).

The notice of inquiry, which was issued in September 2007, sought comments on whether the Federal Energy Regulatory Commission should change the policy governing fuel retained in-kind from transportation and storage shippers [RM07-20]. While shippers argued in favor of a tracker mechanism with a true-up, gas pipelines said there was no need to change Commission policy, which allows pipelines to either charge a fixed cost or use a tracker mechanism to recover fuel costs.

“We find there is no basis for a generic proceeding with respect to fuel retention,” said Chairman Joseph Kelliher. “Trying to put a round peg in a square hole was not the best way to achieve the objective of fairness to the shippers and energy efficiency,” agreed Commissioner Marc Spitzer. The Commission generally supported examination of fuel retention practices on a case-by-case basis.

The FERC order pointed out that Section 5 complaints filed by shippers have been responsible for significantly reducing fuel charges on some pipelines. It advised shippers that suspect particular pipelines of overrecovering fuel charges to file complaints.

Kelliher conceded that the Section 5 remedy for shippers was “arguably inadequate,” but he said there was little FERC could do absent a congressional change to that portion of the NGA.

“I would support a statutory change to reform Section 5,” said Commissioner Jon Wellinghoff.

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