Sen. Ron Wyden (D-OR), chairman of the Senate Energy and Natural Resources Committee, and ranking member Lisa Murkowski (R-AK) sent a letter last Wednesday to FERC asking that it provide more detailed information about the Section 5 complaint investigations that were initiated in past years into allegations that certain interstate gas pipelines were charging unjust and unreasonable rates.
Since 2009, the Federal Energy Regulatory Commission (FERC) has launched 10 proceedings to investigate whether rates charged by interstate natural gas pipelines are just and reasonable. An additional Section 5 complaint was filed by outside parties in the past four years. Some of the interstate gas pipelines that the agency has investigated for potentially over-recovering their cost of service, resulting in unjust and unreasonable rates, have been Natural Gas Pipeline Co. of America, Northern Natural, Tuscarora Gas Transmission Co., Wyoming Interstate Co. and Viking Gas Transmission (see NGI, Nov. 19, 2012; May 30, 2011; Nov. 23, 2009). All of the cases have been resolved, mostly through settlement.
The letter asks FERC to provide information about proceedings under Section 5 of the Natural Gas Act (NGA), which addressed allegations that pipelines collected fees from pipeline customers for transportation, storage and fuel that were unjust and unreasonable. “Consumers deserve to know how much they’ve been overcharged and whether current regulations and regulators are doing the job,” Wyden said.
“I think it’s important to establish how the process FERC has in place to maintain just and reasonable rates is working,” Murkowski said.
“In an effort to better understand the nature of these proceedings, we request that for each of the Section 5 cases, which have been resolved to date, please specify the original FERC-approved rate of return and note whether the pipeline companies offered any discounts for its services…Also provide a brief description and time line for the Section 5 proceeding and its resolution, whether by settlement or otherwise, including changes in rates for various customer classes resulting from the proceeding, if any,” the senators wrote in their letter.
In 2008 the Commission revised its Form 2, which is filed annually by natural gas pipeline companies to provide FERC, pipeline customers and the public with detailed information about the pipelines’ costs and revenues. “These changes appear to have helped FERC and pipeline customers to determine whether pipeline rates are just and reasonable.”
The senators also called on FERC to provide “information on the rules and procedures describing who may challenge pipeline rates, including the Commission and whether the FERC has the authority, under the Natural Gas Act (NGA) or any other applicable law, to require pipelines to periodically show cause that their rates are just and reasonable.”
Prior to wellhead price decontrol and FERC’s installation of pipeline open access, which essentially took away the pipelines’ merchant function, the pipelines had been required to file new rate cases every three years, which allowed for a regular review of their rates. That requirement was dropped along with the merchant function. Now it is up to the pipelines as to whether to file rate cases.
One major complaint of customers has been the fact that under the NGA there is no retroactivity on pipeline rates, which means that although rate cases or complaint cases can go on for years, there are no adjustments until the cases are completed. Customers cannot get refunds for past excesses. In an attempt to address the lack of reviews and the prohibition against refunds, FERC has filed more complaints and accelerated the adjudication process.
The Process Gas Consumers Group, representing industrial pipeline customers, and the American Public Gas Association (APGA), representing municipal transportation customers, have long argued for changes in the NGA that would allow gas consumers to have the same rights as electric power consumers to get refunds for over-recoveries in pipeline (transmission) rates (see NGI, April 23, 2012).
“It’s a very positive letter. We’ve been pushing for reform of Section 5 [of the NGA] for quite some time,” said APGA Executive Vice President Dave Schryver.
“I’m hoping that the committee will hold a hearing into whether Section 5 needs to be modified,” said Deena Wiggins, an attorney for Washington, DC-based Ballard Spahr.
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