A municipal natural gas group has called on President-elect Obama to support amending Section 5 of the Natural Gas Act (NGA) to address a “fatal flaw” that prevents customers from collecting retroactive refunds when they have been overcharged by pipelines.

The “fatal flaw” is that rate relief is only available from the date FERC decides a complaint brought by a pipeline shipper, assuming the the Federal Energy Regulatory Commission (FERC) rules in a shipper’s favor, rather than from the date a complaint is filed, as is the case with refunds owed electric customers, said Bert Kalisch, president of the American Public Gas Association (APGA) in a letter to Obama Thursday.

“Under current law a [natural gas] pipeline will continue to over-collect during the entire complaint case proceeding without fear of making its customers whole for past overcharges. This means that the pipeline has every incentive to extend the complaint case (through various litigation tactics), and as a result a typical complaint case is likely to last over two years,” he said.

And “since [gas] customers understand how the game is played, they seldom initiate complaints, knowing full well that their resources will be exhausted under this process and that, even if they prevail, there will be no [retroactive] refunds of the overcharges. Thus…Section 5 complaint proceedings are rarely initiated by customers, no matter how egregious the overcharges,” Kalisch said.

He noted that a similar problem had existed with refunds for electric customers under the Federal Power Act (FPA), but Congress corrected it. “Congress recognized this inequity and fixed it in 1988 with passage of the Regulatory Fairness Act (which was further amended in the Energy Policy Act of 2005). Now under FPA Section 206 refunds are due from the date that [a] complaint was filed if the FERC determines that the electric utility was overcharging its customers under the ‘just and reasonable’ rate standard.”

There is “no reason to treat electric utilities and gas pipelines differently when it comes to the ability of FERC to protect customers from paying unjust and unreasonable rates,” said Kalisch. In November, FERC Chairman Joseph Kelliher and the commissioners stated their support for Congress to amend Section 5 of the NGA to bring parity to the way overcharged customers are treated under the FPA and NGA (see NGI, Nov. 24, 2008).

“APGA strongly urges you to stand with consumers (and with the FERC commissioners) in supporting revisions to Section 5,” Kalisch said.

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