Putting an end to several years of squabbling, Kansas PipelineCo. has acquiesced to FERC jurisdiction but only on the conditionthat the Commission grandfather the existing, state-approved ratesin its contracts until it is ordered to file a Section 4 rate case.
Kansas Pipeline’s action follows a decision last October inwhich FERC denied rehearing of an earlier ruling in which it heldthat three affiliated pipelines – Kansas Pipeline Partnership,KansOk Partnership and Riverside Pipeline Co. L.P. – were, in fact,a single interstate pipeline subject to the Commission’s purview.At the time, the Commission granted a certificate under Section 7of the Natural Gas Act to Kansas Pipeline, approved a cost ofservice and rate base for it, and set initial rates. It laterstayed the rehearing order after Kansas Pipeline successfullyargued the approved initial rates would cause it to default on itsloan agreements, threatening it with bankruptcy.
Underscoring its willingness to “cooperate and work” with theCommission, Kansas Pipeline said that along with acceding to FERCjurisdiction, it would withdraw its petition for review of theOctober order currently pending in the U.S. Court of Appeals forthe District of Columbia Circuit. But the price for this, it said,was the grandfathering of existing rates.
Kansas Pipeline contends that the grandfathering of existingrates would provide for an “orderly transition from state tofederal jurisdiction; [and] preserve the integrity of existingcontracts, which will provide financial stability to KansasPipeline and ensure rate certainty for its customers…” It notedthe rates it seeks to grandfather are ones that were “scrutinizedand approved” by the Kansas Corporation Commission during its12-year regulation of the pipeline [CP96-152].
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