Rate reductions across the natural gas sector could materialize as a result of the Federal Energy Regulatory Commission’s ongoing investigation of benefits gained by the recent reduction in the federal corporate income tax rate.
The Federal Energy Regulatory Commission (FERC or the Commission) on January 16 initiated three Natural Gas Act (NGA) Section 5 investigations and terminated nine proceedings involving FERC Form 501-G One-time Reports that were filed late last year. As we previously reported, natural gas pipeline and storage companies that filed a FERC Form No. 2 or 2-A for calendar year 2017 were required to submit a “One-time Report” (FERC Form No. 501-G) for review so that FERC could ascertain whether reductions in cost-of-service rates were necessary in light of benefits received under the Tax Cuts and Jobs Act (TCJA), which reduces the federal corporate income tax rate from 35% to 21%. Unless a company was granted an extension or already filed a pending NGA Section 4 general rate case, the submission dates for these filings have all come and gone.
Pursuant to FERC Order No. 849, the Commission required each company to designate a course of action they would take in light of the data reflected in the One-time Report and any additional adjustments that were submitted in an attached addendum. The companies had the option to file a limited NGA Section 4 rate reduction filing (option 1); commit to file a general Section 4 rate case in the near future or file an uncontested prepackaged settlement (option 2); explain why no rate reduction is necessary (option 3); or take no action (option 4). The majority of companies explained that there was no reason to propose an adjustment to their rates based on individual circumstances and/or the data provided in their One-time Reports. Some companies also asked for waivers of the submission requirement in light of settlements they reached with their customers. Overall, there remains a number of proceedings where FERC still has the option to initiate an NGA Section 5 rate investigation in response to company submissions.
Most recently, Section 5 rate investigations were initiated in response to the One-time Reports and associated materials submitted by Bear Creek Storage Company (RP19-51), Northern Natural Gas Company (RP19-59), and Panhandle Eastern Pipe Line Company (RP19-78) on the grounds that these companies may be substantially over-recovering their costs-of-service rates. Conversely, FERC terminated nine other proceedings without further action in response to One-time Reports filed by: ETC Tiger Pipeline (RP19-80), Gulfstream Natural Gas System, LLC (RP19-52), Horizon Pipeline Company, LLC (RP19-68), MIGC, Inc. (RP19-69), Millennium Pipeline Company, LLC (RP19-65), North Baja Pipeline, LLC (RP19-71), Portland Natural Gas Transmission System (RP19-70), Vector Pipeline LP (RP19-60), and White River Hub, LLC (RP19-50). FERC explained that these companies each selected an option ranging from filing a limited Section 4 rate reduction to explaining why no reduction was necessary; additionally, no adverse comments or protests were filed in response to any of the submissions.
This table contains the current status of each proceeding in which a company has submitted a One-time Report (as well as related proceedings) in response to FERC Order No. 849. The resolution of these proceedings could result in many more reductions in rates across the sector, developments that all market participants should be watching closely in the coming weeks and months.
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