In another case the FERC is going to have to defend its policyof not requiring pipelines to flow through penalty revenues, theU.S. Court of Appeals ruled Friday in remanding a case involvingNorAm Gas Transmission (No. 97-1607). The 2-1 decision in Amoco v.FERC, with Judge Randolph concurring in part and dissenting inpart, did not object to NorAm’s raising penalty rates, but it doesask for an explanation of why the Commission believes penaltyrevenues will be so insignificant as to warrant no consideration.In the year prior to NorAm’s rate filing the pipeline had collected$1.8 million in penalty revenue. The court noted FERC appeared tobelieve that because penalty rates were raised, the incidence ofpenalties would decrease. But “even if a lesser number of penaltiesare imposed, the increased penalty rate might result in a grossincrease in penalty revenue. Moreover – and this is the keyimponderable – whether a shipper will be willing to incur thepenalty depends on his cost in securing alternative supplies in atight market.”
Policy
Articles from Policy
Third Remand Affects Penalty Revenue
In another case the Federal Energy Regulatory Commission isgoing to have to defend its policy of not requiring pipelines toflow through penalty revenues, the U.S. Court of Appeals ruledFriday in remanding a case involving NorAm Gas Transmission (No.97-1607). The 2-1 decision in Amoco v. FERC, with Judge Randolphconcurring in part and dissenting in part, did not object toNorAm’s raising penalty rates, but it does ask for an explanationof why the Commission believes penalty revenues will be soinsignificant as to warrant no consideration. In the year prior toNorAm’s rate filing the pipeline had collected $1.8 million inpenalty revenue. The court noted FERC appeared to believe thatbecause penalty rates were raised, the incidence of penalties woulddecrease. But “even if a lesser number of penalties are imposed,the increased penalty rate might result in a gross increase inpenalty revenue. Moreover – and this is the key imponderable -whether a shipper will be willing to incur the penalty depends onhis cost in securing alternative supplies in a tight market.”
People
The Coastal Corp. said Herbert W. Cole was elected vicepresident, accounting policy and operational compliance, of CoastalOil & Gas. Cole will be responsible for regulatory accounting,contract compliance and special projects for Coastal’s explorationand production (E&P) business. Cole joined Coastal in 1984 andhas served as assistant controller, budgeting and financialaccounting of Coastal Oil & Gas since 1995.
People
The Coastal Corp. said Herbert W. Cole was elected vicepresident, accounting policy and operational compliance, of CoastalOil & Gas. Cole will be responsible for regulatory accounting,contract compliance and special projects for Coastal’s explorationand production (E&P) business. Cole joined Coastal in 1984 andhas served as assistant controller, budgeting and financialaccounting of Coastal Oil & Gas since 1995.
FERC Wins the Praise of Pipeline for ROR Revisions
FERC made three small but significant changes to its pipelinerate of return policy this week, winning the praise of theInterstate Natural Gas Association of America (INGAA), whichrepresents the pipelines. INGAA President Jerald V. Halvorsen saidthe Commission’s action “should help pipelines compete in theincreasingly competitive financial markets for the capital to buildprojects that are necessary to meet projections of a 30 Tcf naturalgas economy by 2010.”
Distributors Blast Northern’s Proposal
A rate hike proposal of Northern Natural Gas that has thepotential to cause a showdown at FERC over key policy issues got acool reception last week from Midwest municipals and smalldistributors on Northern’s system.
Massey Questions Rolled-in Rate Policy
Giving pipelines the presumption in favor of rolled-in rates mayhave been a good idea a couple of years ago, but CommissionerWilliam Massey says he’s now beginning to have second thoughtsabout that decision.
