The Missouri Public Service Commission (MPSC) said Tuesday that state gas customers can expect to see approximately $30.3 million in refunds stemming from cases involving Kansas ad valorem (property) taxes unlawfully collected during the period of 1983 through 1988 by natural gas producers from Southern Star Central Gas Pipeline (formerly Williams) and Panhandle Eastern Pipe Line customers.

Under settlements recently approved by the Federal Energy Regulatory Commission (FERC), the monies will go to Missouri natural gas customers of Missouri Gas Energy, Union Electric Company (d/b/a AmerenUE), Aquila Networks-MPS, Atmos Energy and City Utilities of Springfield.

“The staff of the Missouri Public Service Commission has been very involved in this case, aggressively representing the interests of Missouri ratepayers before the FERC and the courts,” said Steve Gaw, MPSC chairman. “Through the PSC staff’s hard work and the work of others, Missouri consumers will benefit from these refunds this spring.”

While the MPSC had agreed to provisions settling small-to-medium refund obligations during 2001, unlike other parties, the MPSC opted out of settlement provisions granting 25% waivers on producers’ large refund obligations. As a result, in January 2003 FERC set the outstanding issues for hearing.

Prior to hearings, the MPSC said it was able to enter into reasonable settlement agreements with the majority of the remaining producers such as BP America Production Co. (formerly Amoco Production Co.), OXY USA Inc., Anadarko E&P Co. LP. (formerly Anadarko Petroleum Corp. and Union Pacific Resources Co.), ExxonMobil Oil Corp., and Duke Energy Services Inc.

With the final nod from FERC already received, the biggest part of the settlement refunds will be paid by producers during the month of March, with some Missouri consumers seeing related bill credits in the following months. These recent settlements provide $7.9 million more to Missouri customers than would have been paid if MPSC had agreed to earlier settlements.

The dispute goes all the way back to 1983 when Colorado Interstate Gas filed a case before FERC objecting to the inclusion of Kansas ad valorem taxes in the price paid for natural gas. In that initial case, FERC allowed the producers to recover the Kansas ad valorem taxes from interstate pipelines, who then in turn were permitted to pass those costs through to their customers. After appeal in 1988, the federal appeals court remanded the issue to FERC. In 1994, at the urging of the MPSC, FERC reached a decision ordering Kansas producers to refund overcharges, plus accrued interest, for the period of July 1988 through December 1993. Missouri consumers received approximately $13 million in refunds in late 1994 and early 1995 for overcharges occurring during 1988-1993.

However, customers then appealed FERC’s decision to limit refunds to overcharges occurring after July 1988. The MPSC said that in late 1996 and early 1997, the courts determined additional refunds, including accrued interest, needed to be made for overcharges collected during the October 1983-June 1988 period. As a result, Missouri customers initially received $7.3 million during 1998-99 and $1.5 million during 2000-01 for refunds.

The recent settlements also pertain to refunds for overcharges associated with this earlier time period.

Despite FERC’s approval, the MPSC’s job is not done yet. The commission said it continues to litigate an additional $11 million in refund claims against Pioneer Natural Resources USA Inc. FERC hearings related to those claims were held in August and October 2003. The MPSC, with the assistance of the Missouri attorney general’s office, is also pursuing “certain” unpaid refunds that other parties have deemed uncollectible.

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.