FERC Investigates Possible Overcharging at 4 Pipelines

March 2016, Vol. 243, No. 3

It is not unprecedented for the Federal Energy Regulatory Commission (FERC) to investigate potential overcharging at pipelines, as it announced it was doing in January. But it doesn’t happen frequently, just three other times since 2009.

The agency announced Jan. 21 that it will initiate Natural Gas Act, Section 5 investigations of the rates charged by Tuscarora Gas Transmission Co., Empire Pipeline, Inc., Iroquois Gas Transmission System, LP and Columbia Gulf Transmission. The commission charged each pipeline is collecting revenue substantially in excess of the pipeline’s actual cost of service, including a reasonable return on equity.

FERC directed each pipeline to file a cost and revenue study within 75 days of the issuance date of that pipeline’s order. The commission also set each case for evidentiary hearings before a FERC administrative law judge.

The companies can use any data submitted to argue FERC’s calculations are in error. Karen Merkel, spokeswoman for Empire, an affiliate of National Fuel Gas Co., said. “We are in the process of reviewing the final order and intend to timely file the requested cost and revenue study as required in the order.”

Ruth Parkins, manager, public affairs, Iroquois Pipeline Operating Co., agrees, as does Jenna Palfrey at Tuscarora. James Yardley, director of corporate communications for Columbia Pipeline Group, to which Columbia Gulf belongs, stated, “Our current rates were established in a recent rate case which was settled in 2011. Because of this recent rate review, we believe that Columbia Gulf’s existing rates are reasonable, particularly in light of the changing market conditions.”

Asked about the reference to “changing market conditions,” Yardley added, “I am simply referring to the changing natural gas supply sources and demand centers and resulting pipeline flow dynamics.”

Changing market conditions can come into play in Section 5 investigations. That was the case in the investigation FERC initiated in 2009 to determine whether Northern Natural Gas Co. was overcharging customers. In that case, a group of customers, essentially taking Northern’s side, argued the company’s field area revenues had dropped substantially since the 2008 period relied on by the commission in the Nov.19, 2009 order initiating the hearing.

Northern had threatened to file a new Section 4 rate case if FERC didn’t back off. The customer group feared new rates would outweigh any refunds they could obtain from the successful conclusion of the investigation. They pressed FERC to drop the Section 5 investigation in return for Northern’s commitment to delay its Section 4 filing. FERC complied.

But the last two Section 5 investigations ended in settlements between the pipelines and the shippers. That was the case in 2013 when Wyoming Interstate Co. LLC and Viking Gas Transmission reached settlements with their shippers.

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