Natural Gas Pipeline Company of America (NGPL) has submitted a proposed settlement that would give shippers an 8% reduction in firm transportation rates in exchange for resolving Section 5 allegations of over-recovery of cost of service.
The stipulation and agreement was filed a month after NGPL and its customers reached a settlement in principle, and informed FERC that it planned to submit an agreement no later than June 15. The ball is now in Federal Energy Regulatory Commission’s court to either accept or reject the settlement.
The proposed agreement calls for NGPL’s maximum recourse reservation rates for all firm transportation rate schedules to be cut by a total of 8% for the period between Nov. 1 of this year and June 30, 2011. The maximum recourse one-part FTS-G rate also will be reduced by 8% during the same period, according to the proposed settlement (RP10-147).
In addition, it proposes that the maximum recourse reservation rates for all firm storage rate schedules that were in effect April 1 be reduced by 3% effective Nov. 1.
And for the period of July 1 through June 30, 2011, the fuel retention factors that were in effect April 1, 2010 will be reduced by 30%. Effective July 1, 2011, the fuel retention factors that were in effect April 1, 2010 will be reduced by 45%.
“The settlement represents a fair and reasonable resolution of numerous complex issues in this proceeding. [It] will provide certainty in fuel retention factors and base rates much earlier than if the case was fully litigated. Natural believes that the Commission staff and all of the parties to this proceeding either support or do not oppose the settlement,” NGPL told FERC.
Last November FERC initiated Section 5 proceedings against three interstate pipelines — NGPL, Northern Natural Gas and Great Lakes Transmission — for over-recovery of cost of services. Agency staff’s preliminary investigation indicated that NGPL may have achieved a return on equity (ROE) of 24.5% based on an over-recovery of $149 million (RP10-147), while Great Lakes’ estimated ROE was 20.83% with an over-recovery of $56 million. Northern Natural Gas Co. had an estimated ROE of 24.36% with an over-recovery of $167 million, FERC alleged (see Daily GPI, Nov. 20, 2009).
FERC earlier this month terminated its Section 5 complaint proceeding against Northern Natural when the pipeline agreed to a one-year rate freeze for shippers (see Daily GPI, June 3). Northern Natural agreed not to file a Section 4 rate case on May 28, proposing a substantial rate hike, if the Section 5 complaint case was resolved prior to that time. Northern Natural said it would not move higher rates into effect prior to Nov. 1, 2011.
Great Lakes Gas Transmission Ltd. Partnership submitted a proposed settlement at the same time as NGPL, but the Commission has yet to act on it (see Daily GPI, May 17).
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