In a major clarification of policy, the Federal EnergyRegulatory Commission last week decided it wasn’t necessary toaddress the merits of each objection before approving contestedpipeline rate settlements. Instead, it said settlements could becertified based on the reasonableness of the overall package.

The policy adjustment was reflected in a rehearing order thatapproved a rate settlement between Trailblazer Pipeline and itscustomers as being “reasonable as a package” for consentingparties, yet at the same time severed contesting parties, AmocoProduction and Amoco Energy. The Commission’s action cleared theway for consenting parties to preserve the benefits of theirsettlement bargain while giving the Amoco affiliates a chance tolitigate the “complex factual issues” that they raised[RP97-408-006].

“…I believe that [this] order reflects a change in policy withregard to several important issues involving settlements. [It]clarifies that the Commission does not have to make a determinationon all the issues contested in a rate case in order to approve theoverall settlement. Rather, the Commission is making a meritsdetermination in approving Trailblazer’s settlement as just andreasonable as a whole,” Commissioner Linda Breathitt said.

In short, the Commission found that the “overall benefits” ofthe Trailblazer settlement outweighed the alternative of”litigation for all parties,” she said. “This…approach is onethat makes sense to me and [is] one that I support.” The InterstateNatural Gas Association of America praised the FERC decision,noting that a ruling to the contrary would have been a deterrent topipeline-customer settlements.

In its order, FERC stressed that it still considered severanceof contesting parties in rate settlements “an option of lastresort.” It said severance was “appropriate” for the Amocoaffiliates because it provided them a “forum” in which to litigatetheir objections, while keeping the settlement benefits in tact forthe consenting parties.

Susan Parker

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