The self-styled “Panhandle complainants” have called on FERC to grant their motion for interim rate relief and to take expedited action in an ongoing complaint case against Southwest Gas Storage. Missouri regulators also urged the agency to take swift action in the case.
“Unless the Commission grants the interim relief [originally] requested in March 2007…and promptly reduces the rates of Southwest Gas Storage to a just and reasonable level consistent with Southwest Gas Storage’s own Form 2-A and own cost-and-revenue study for the 12-month period ended December 2006, the Commission will itself have sanctioned a blueprint for pipelines to avoid meaningful Section 5 review of their rates,” said the complainants, which include shippers on Southwest Gas affiliate Panhandle Eastern Pipe Line, industry associations and customer advocacy groups [RP07-34].
This latest request comes just two weeks after Southwest Gas filed a Section 4 proposal to increase its existing rates by $4.7 million for storage services [RP07-541]. Complainants believe the rate proposal by Southwest Gas was designed to head off a FERC administrative law judge (ALJ) hearing into the complaint case, which was scheduled to begin later this month but has been postponed for about one month.
Complainants and the Missouri Public Service Commission (PSC) separately have asked the Federal Energy Regulatory Commission to act on the request for interim rate relief before it addresses Southwest Gas Storage’s proposed rate hike, which if suspended for the maximum term would take effect on Feb. 1, 2008. The complainants have requested maximum suspension of the proposed rate filing. If FERC decides otherwise, they asked that the rate filing and complaint case be combined.
“Unless the Commission acts on pending requests for interim rate relief prior to the effective date of rates [in Southwest Gas Storage’s rate proposal]…Southwest Gas Storage may take the position that the Section 5 [complaint] proceeding is moot because the Section 5 proceeding cannot establish a rate no longer subject to refund before the new rates take effect,” the complainants said.
“Permitting a regulated utility to avoid potentially adverse results of litigation by kicking over the chessboard on the eve of trial to improve its odds is incompatible with [the] objective” of protecting customers from excessive rates, they said. “Further, as the Commission is well aware, natural gas shippers, unlike electric transmission customers, lack any statutory right to refunds in connection with complaint proceedings. Only the Commission through prompt and effective action can ensure that Section 5 remains a viable alternative to correct unjust and unreasonable rates, terms and conditions of service.”
Southwest Gas Storage’s proposed rate hike is “extremely suspect because it is being filed on the eve of hearings convened by the Commission…to investigate the justness and reasonableness of Southwest Gas’s existing rates,” the Missouri PSC agreed.
Panhandle complainants called on FERC to grant interim rate relief ideally by Aug. 31 and not later than prior to the effective date of Southwest Gas Storage’s new proposed rates.
To achieve this goal, the Missouri PSC urged the Commission to waive the initial decision of the ALJ in the complaint case and issue an order on the requested interim rate relief to become effective immediately. Southwest Gas Storage’s position is that “the instant rate increase (assuming a Feb. 1, 2008 effective date) will render the…ongoing Section 5 investigation moot. This belief, however, is rooted in the company’s assumption that no action by the Commission establishing lower rates in that [complaint] case will occur prior to Feb. 1, 2008.”
In December 2006, FERC set for evidentiary hearing and instituted a Section 5 investigation of Southwest Gas Storage’s rates for jurisdictional storage services, which complainants allege are “unjust and unreasonable.”
The “Panhandle complainants” in a November complaint said unreasonable rates have allowed Southwest Gas to overrecover its costs by nearly 60%. FERC’s December order required Southwest Gas to file a cost-and-revenue study.
While the agency granted complainants’ request for an evidentiary hearing and Section 5 investigation, it denied their plea for an immediate interim rate reduction of about $16.9 million. However, FERC said that if the cost-and-revenue study filed by Southwest Gas did not support the company’s current rates, it would order an immediate rate reduction down to a level that is justified by the study. And the evidentiary hearing before an ALJ would consider whether a further rate reduction would be justified.
Southwest Gas said its cost-and-revenue study, which was filed in February, “more than supports the existing rates” of the company. As a result, “no immediate rate reduction is appropriate or can be ordered,” it noted. The study revealed that Southwest Gas had a cost of service of $63.95 million for the 12-month period that ended Nov. 30, 2006, as adjusted. The Panhandle complainants have asked FERC to reject the cost-and-revenue study.
Southwest Gas is a wholly owned subsidiary of Panhandle Eastern and provider of the majority of underground storage capacity used by Panhandle in rendering both jurisdictional transmission services and a variety of storage services. Panhandle is the sole firm customer of Southwest Gas, holding a firm contract for 61 Bcf of storage capacity (essentially the entire capacity of Southwest Gas Storage).
The parties to the complaint include American Forest & Paper Association, American Iron and Steel Institute, American Public Gas Association, Anadarko Petroleum Corp., Anadarko Energy Services Co., Citizens Utility Board of Illinois, ConocoPhillips, ExxonMobil Gas & Power Marketing, Independent Petroleum Association of America and the Process Gas Consumers Group.
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