Fuel Retention Practices of Natural Gas Companies, 72039-72041 [E8-28021]
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Federal Register / Vol. 73, No. 229 / Wednesday, November 26, 2008 / Notices
Docket Numbers: RP09–81–000.
Applicants: Guardian Pipeline, L.L.C.
Description: Guardian Pipeline, LLC
submits Second Revised Sheet 21 et al.
in compliance with the G-II Certificate
Order compliance filing, proposed to be
effective 12/31/08.
Filed Date: 11/14/2008.
Accession Number: 20081118–0044.
Comment Date: 5 p.m. Eastern Time
on Wednesday, November 26, 2008.
Docket Numbers: RP09–82–000.
Applicants: Guardian Pipeline, L.L.C.
Description: Guardian Pipeline, LLC
submits an application for authorization
to construct and operate the proposed
G-II Expansion Project, to be effective
12/31/08.
Filed Date: 11/14/2008.
Accession Number: 20081118–0043.
Comment Date: 5 p.m. Eastern Time
on Wednesday, November 26, 2008.
Docket Numbers: RP09–84–000.
Applicants: Destin Pipeline Company,
L.L.C.
Description: Destin Pipeline Co., LLC
submits Title Sheet et al. to FERC Gas
Tariff, Original Volume No. 1, to be
effective 12/18/08.
Filed Date: 11/17/2008.
Accession Number: 20081118–0104.
Comment Date: 5 p.m. Eastern Time
on Monday, December 1, 2008.
Docket Numbers: RP09–85–000.
Applicants: Northwest Pipeline GP.
Description: Northwest Pipeline GP
submits Second Revised Sheet No. 7 to
FERC Gas Tariff, Fourth Revised
Volume No. 1, to be effective 1/1/09.
Filed Date: 11/17/2008.
Accession Number: 20081118–0103.
Comment Date: 5 p.m. Eastern Time
on Monday, December 1, 2008.
Docket Numbers: CP08–8–001.
Applicants: Leaf River Energy Center
LLC.
Description: Leaf River Energy Center,
LLC submits its application for
amendment of certificate to permit
modification of Pro form FERC Gas
Tariff.
Filed Date: 11/14/2008.
Accession Number: 20081118–0047.
Comment Date: 5 p.m. Eastern Time
on Monday, December 1, 2008.
Any person desiring to intervene or to
protest in any of the above proceedings
must file in accordance with Rules 211
and 214 of the Commission’s Rules of
Practice and Procedure (18 CFR 385.211
and 385.214) on or before 5 p.m. Eastern
time on the specified comment date. It
is not necessary to separately intervene
again in a subdocket related to a
compliance filing if you have previously
intervened in the same docket. Protests
will be considered by the Commission
in determining the appropriate action to
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be taken, but will not serve to make
protestants parties to the proceeding.
Anyone filing a motion to intervene or
protest must serve a copy of that
document on the Applicant. In reference
to filings initiating a new proceeding,
interventions or protests submitted on
or before the comment deadline need
not be served on persons other than the
Applicant.
The Commission encourages
electronic submission of protests and
interventions in lieu of paper, using the
FERC Online links at https://
www.ferc.gov. To facilitate electronic
service, persons with Internet access
who will eFile a document and/or be
listed as a contact for an intervenor
must create and validate an
eRegistration account using the
eRegistration link. Select the eFiling
link to log on and submit the
intervention or protests.
Persons unable to file electronically
should submit an original and 14 copies
of the intervention or protest to the
Federal Energy Regulatory Commission,
888 First St., NE., Washington, DC
20426.
The filings in the above proceedings
are accessible in the Commission’s
eLibrary system by clicking on the
appropriate link in the above list. They
are also available for review in the
Commission’s Public Reference Room in
Washington, DC. There is an
eSubscription link on the Web site that
enables subscribers to receive e-mail
notification when a document is added
to a subscribed dockets(s). For
assistance with any FERC Online
service, please e-mail
FERCOnlineSupport@ferc.gov. or call
(866) 208–3676 (toll free). For TTY, call
(202) 502–8659.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E8–28023 Filed 11–25–08; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Docket No. RM07–20–000]
Fuel Retention Practices of Natural
Gas Companies
Issued November 20, 2008.
Federal Energy Regulatory
Commission.
ACTION: Notice Terminating Proceeding.
AGENCY:
SUMMARY: The Federal Energy
Regulatory Commission is terminating
its notice of inquiry regarding its policy
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72039
on the in-kind recovery of fuel and lost
and unaccounted-for gas by natural gas
pipeline companies and will consider
any changes to the application of such
policy in individual cases.
EFFECTIVE DATE: November 26, 2008.
FOR FURTHER INFORMATION CONTACT:
Anna Fernandez (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426,
(202) 502–6682.
SUPPLEMENTARY INFORMATION:
Before Commissioners: Joseph T.
Kelliher, Chairman; Suedeen G. Kelly,
Marc Spitzer, Philip D. Moeller, and
Jon Wellinghoff
1. On September 30, 2007, the
Commission issued a Notice of Inquiry
concerning its current policy on the inkind recovery of fuel and lost and
unaccounted-for gas by natural gas
pipeline companies.1 The Commission
sought comments on whether it should
change its current policy to provide
pipelines a greater incentive to reduce
their fuel use and lost and unaccountedfor gas and to minimize pipeline overrecoveries of these costs. For the reasons
discussed below, the Commission is
terminating this proceeding.
I. Background
2. A detailed discussion of the
Commission’s current policy regarding
in-kind fuel retention by natural gas
pipeline companies is contained in the
NOI and will not be repeated here.
Briefly, interstate natural gas pipelines
frequently require that customers
contribute in-kind a small percentage of
the volumes of natural gas tendered for
transportation service to provide fuel for
compressors and to make up for lost and
unaccounted-for gas. Each pipeline
states the percentage of gas it retains in
its tariff.
3. The Commission established its
current policy concerning a pipeline’s
in-kind recovery of fuel use and lost and
unaccounted-for gas in ANR Pipeline
Company (ANR).2 In its January 2005
order in the ANR case,3 the Commission
stated that pipelines have two options to
recover these costs. The first option is
to establish a fixed fuel retention
percentage in a general Natural Gas Act
(NGA) section 4 rate case, and leave that
1 Fuel Retention Practices of Natural Gas
Companies, FERC Stats. & Regs. ¶ 35,556 (2007)
(NOI).
2 ANR Pipeline Co., order on compliance filing,
108 FERC ¶ 61,050, order inviting comments, 109
FERC ¶ 61,038 (2004), order on reh’g and
compliance filing, 110 FERC ¶ 61,069, order on
reh’g and compliance filing, 111 FERC ¶ 61,290
(2005).
3 110 FERC ¶ 61,069 at P 18–28.
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Federal Register / Vol. 73, No. 229 / Wednesday, November 26, 2008 / Notices
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percentage unchanged until the pipeline
files its next general section 4 rate case.
That option is consistent with the
Commission’s general ratemaking
policy, set forth in section 284.10(c)(2)
of the Commission’s regulations,4 that
pipelines must design their rates based
on estimated units of service without
any type of tracker or true-up
mechanism. That policy provides
pipelines an incentive to minimize
costs, by allowing them to retain any
cost over-recoveries between rate cases,
while putting them at risk for cost
under-recoveries.5 The second recovery
option is for the pipeline to include in
its tariff a mechanism permitting
periodic changes in its fuel retention
percentage outside of a general section
4 rate case, as allowed by section
154.403 of the Commission’s
regulations.6 ANR held that, if a pipeline
chooses the second option, it must
include in its tariff a mechanism to trueup any over- and under-recoveries of
fuel, absent agreement otherwise by all
interested parties.
4. In ANR,7 the Commission also left
open the possibility that a pipeline
could include an incentive mechanism
in a fuel cost tracker, if the pipeline
made the proposal pursuant to the
Commission’s incentive ratemaking
policy. The Commission’s current
policy on incentive rates is set forth in
Alternatives to Traditional Cost-ofService Ratemaking for Natural Gas
Pipelines (1996 Incentive Ratemaking
Policy Statement).8
5. In the NOI, the Commission sought
comments on whether it should change
its current in-kind fuel retention policy
for the purpose of (a) minimizing
pipeline over-recoveries of fuel and lost
and unaccounted-for gas or (b)
providing pipelines with a greater
incentive to reduce their fuel use and
lost and unaccounted-for gas, for
example by permitting pipelines with
fuel trackers and true-up mechanisms to
include a profit or loss sharing
mechanism.9
6. Thirty-two parties filed comments
in response to the NOI.10 Shippers and
end-users generally argued that the
Commission should require all
pipelines to use a tracker with a true-up
in order to prevent over-recovery of
costs. The pipelines, however, argued
that the Commission should retain its
current policy and continue to permit
4 18
CFR 284.10(c)(2).
Canyon Creek Compression Co., 99 FERC
¶ 61,351, at P 14 (2002).
6 18 CFR 154.403.
7 110 FERC ¶ 61,069 at P 39.
8 74 FERC ¶ 61,076, at 61,237–38 (1996).
9 NOI at P 23–26.
10 The parties are listed in Appendix A.
5 See
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pipelines to choose whether a fixed
retention percentage established in a
section 4 rate case or a tracker is best
suited to their particular circumstances.
Most parties stated that including some
form of incentive mechanism in a
tracker true-up mechanism could
encourage greater efficiency. However,
the parties asserted that the Commission
should consider such mechanisms on a
case-by-case basis rather than imposing
any generic requirements.
II. Discussion
7. After carefully reviewing the
comments, the Commission has
determined to terminate this proceeding
and consider any changes to the
application of the Commission’s policy
concerning fuel recovery in individual
cases.
8. As described above, a number of
non-pipeline commenters contend that
the Commission should require all
pipelines to recover their fuel costs
through trackers with true-up
mechanisms in order to minimize
pipeline over-recovery of fuel costs.
However, the Commission would have
to act under NGA section 5 to require
pipelines which currently have fixed
fuel charges established in general
section 4 rate cases to adopt trackers
and true-up mechanisms. In order to do
that, the Commission would have to
find that all fixed fuel charges are unjust
and unreasonable and that the only just
and reasonable method for pipelines to
recover fuel costs is through a tracker
with a true-up mechanism. The
commenters have failed to provide the
Commission a basis to take such generic
action under NGA section 5.
9. Recovery of fuel costs through a
fixed charge established in a general
section 4 rate case is consistent with the
Commission’s general ratemaking policy
for open access pipelines, set forth in
section 284.10(c)(2) of the Commission’s
regulations, that pipelines design their
rates based on estimated units of
service, without any type of true-up
mechanism.11 The non-pipeline
11 In Order No. 436, the Commission explained
that this requirement means that the pipeline is at
risk for under-recovery of its costs between rate
cases, and may retain any over-recovery. This gives
the pipeline an incentive both to minimize its costs
and maximize the service it provides. A cost tracker
would undercut these incentives by guaranteeing
the pipeline a set revenue recovery. Pipeline Service
Obligations and Revisions to Regulations Governing
Self-Implementing Transportation; and Regulation
of Natural Gas Pipelines After Partial Wellhead
Decontrol, Order No. 636, FERC Stats. & Regs.
¶ 30,939, order on reh’g, Order No. 636–A, FERC
Stats. & Regs. ¶ 30,950, order on reh’g, Order No.
636–B, 61 FERC ¶ 61,272 (1992), order on reh’g, 62
FERC ¶ 61,007 (1993), aff’d in part and remanded
in part sub nom. United Distribution Cos. v. FERC,
88 F.3d 1105 (D.C. Cir. 1996), order on remand,
Order No. 636, 78 FERC ¶ 61,186 (1997).
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commenters’ only basis for requiring all
pipelines to recover their fuel costs in
a manner contrary to that policy is that
(1) fixed fuel charges present too much
potential for pipelines to over-recover
their fuel costs and (2) remedying such
over-recoveries through complaints
under NGA section 5 is too difficult.12
However, the courts have insisted that
the Commission not ‘‘compromise
section 5’s limits on its power to revise
rates.’’ 13 Requiring pipelines to recover
their fuel costs through a tracker and
true-up mechanism based solely on the
alleged difficulty of remedying cost
overrecoveries under NGA section 5,
and without any other independent
policy justification, would be contrary
to the court’s holding that the
Commission may not order pipelines to
make section 4 filings in order ‘‘to avoid
the ‘insufficient protection’ afforded by
section 5, i.e., to avoid its procedural
constraints.’’ 14
10. Accordingly, if a shipper believes
that a particular pipeline is overrecovering its fuel costs, it should file a
complaint under NGA section 5,
pursuant to the procedures set forth in
section 385.206 of the Commission’s
procedural regulations. While several
shippers commented that section 5 does
not provide an adequate remedy,15 in
fact, section 5 complaints have resulted
in significantly reduced fuel charges on
several pipelines. National Fuel 16 and
Dominion 17 are two examples of how
actual or potential section 5 complaints
can cause pipelines to reduce their fuel
retention percentages.
11. In addition, the changes recently
enacted by the Commission to the
financial reporting requirements for
natural gas pipelines should assist
shippers who wish to file a section 5
complaint involving fuel cost overrecovery. In March 2008, the
Commission issued Order No. 710,18 a
12 Industry Associations at 7–8 (‘‘Although the
Commission and pipeline customers are entitled to
bring Section 5 complaints, such complaints require
the complainant to carry the burden of proof, can
be extremely expensive, and only offer prospective
relief.’’). See also Ameren, TVA, and Texas
Producers.
13 Western Resources, Inc. v. FERC, 9 F.3d 1568,
1578 (D.C. Cir. 1993).
14 Public Service Commission of New York v.
FERC, 866 F.2d 487, 491 (D.C. Cir. 1989).
15 See, e.g., comments of the American Public Gas
Association at 3–4.
16 National Fuel Gas Supply Corporation, 118
FERC ¶ 61,091 (2007) (National Fuel) (settlement
agreement followed section 5 complaint).
17 Dominion Transmission, Inc., 111 FERC
¶ 61,285 (2005) (Dominion) (settlement agreement
came about in response to potential section 5
complaint).
18 Revisions to Forms, Statements and Reporting
Requirements for Natural Gas Pipelines, Order No.
710, 73 FR 19389 (Apr. 10, 2008), FERC Stats. &
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Final Rule to change the financial forms
and reporting requirements for natural
gas pipelines in order to enhance the
transparency of financial reporting by
interstate natural gas pipelines and
better reflect the current market and cost
information. Among the changes were
new reporting requirements that require
natural gas companies to provide
detailed information regarding the
acquisition and disposition of fuel use
and lost and unaccounted-for gas.19
With this new information, shippers
will be better able to use the section 5
complaint process to address fuel cost
over-recovery by a pipeline.
12. Finally, the operation of the
interstate pipeline system involves a
significant amount of fuel use and lost
and unaccounted-for gas to deliver
supplies to market. Fuel gas charges
now make up a greater percentage of the
overall interstate transportation rate
than they have in the past. Such
considerations reinforce the need to
improve the efficiency of our existing
infrastructure. While the parties
generally commented that fuel savings
incentive mechanisms could be helpful
in reducing fuel use and, therefore, fuel
costs, they believed that such
mechanisms should be developed by the
parties in individual proceedings. In
light of those comments, the
Commission will take a case-by-case
approach at this time. In a recent order,
the Commission ordered a technical
conference to consider a three-year
experimental fuel incentive mechanism
proposed by Texas Gas Transmission,
L.L.C. and what changes, if any, might
be necessary or appropriate.20 The
Commission concludes that case-by-case
consideration of incentive proposals
will assist in the development of the
Commission’s policies concerning
pipelines’ recovery of fuel costs, and
encourages pipelines to work with their
customers to develop these
mechanisms.
13. For these reasons, Docket No.
RM07–20–000 is terminated.
The Commission orders:
Docket No. RM07–20–000 is
terminated.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
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Appendix A
List of Parties
Ameren Energy Generating Company,
Central Illinois Public Service
Regs. ¶ 31,267 (2008), reh’g and clarification, Order
No. 710–A, 123 FERC ¶ 61,278 (June 20, 2008).
19 Order No. 710 at P 16.
20 See Texas Gas Transmission, LLC, 125 FERC
¶ 61,134 (2008).
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17:30 Nov 25, 2008
Jkt 217001
Company, Central Illinois Light Co.,
Illinois Power Co., and Union Electric
Company (Ameren)
American Chemistry Council
American Gas Association
American Public Gas Association
Apache Corporation
Atmos Energy Corporation
Boardwalk Pipeline Partners, LP, Gulf
Crossing Pipeline Company LLC, Gulf
South Pipeline Company, LP, and
Texas Gas Transmission, LLC
Calpine Corporation
Columbia Gas Transmission
Corporation, Columbia Gulf
Transmission Company, Crossroads
Pipeline Company, Granite State Gas
Transmission, Inc., and Central
Kentucky Transmission Company
Dominion Resources, Inc.
El Paso Corporation
Enbridge, Inc. and Enbridge Energy
Partners, L.P.
FPL Group, Inc.
Honda of America Mfg., Inc.
Interstate Natural Gas Association of
America
Independent Oil & Gas Association of
West Virginia
The Independent Petroleum Association
of America, The Process Gas
Consumers Group, The American
Forest & Paper Association and The
American Iron and Steel Institute
(Industry Associations)
Kinder Morgan Interstate Gas
Transmission, LLC, Natural Gas
Pipeline Company of America,
Trailblazer Pipeline Company, and
TransColorado Gas Transmission
Louisville Gas and Electric Company
MidAmerican Energy Company and
PacifiCorp
Middle Tennessee Natural Gas Utility
District
National Fuel Gas Supply Corporation
Natural Gas Supply Association
Northern Natural Gas Company and
Kern River Gas Transmission
Company
The Ohio Oil & Gas Association
Public Service Commission of New York
Sequent Energy Management, L.P.
Spectra Energy Transmission, LLC
Tennessee Valley Authority (TVA)
Texas Independent Producers and
Royalty Owners Association (Texas
Producers)
Transwestern Pipeline Company, LLC
Williston Basin Interstate Pipeline
Company
[FR Doc. E8–28021 Filed 11–25–08; 8:45 am]
BILLING CODE 6717–01–P
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72041
ENVIRONMENTAL PROTECTION
AGENCY
[EPA–HQ–ORD–2008–0872; FRL–8745–1]
Board of Scientific Counselors
(BOSC), Executive Committee
Meeting—December 2008
Environmental Protection
Agency (EPA).
ACTION: Notice of meetings.
AGENCY:
SUMMARY: Pursuant to the Federal
Advisory Committee Act, Public Law
92–463, the Environmental Protection
Agency, Office of Research and
Development (ORD), gives notice of one
meeting of the Board of Scientific
Counselors (BOSC) Executive
Committee.
The meeting (a teleconference)
will be held on Wednesday, December
17, 2008, from 10 a.m. to 12 p.m. EDT.
The meeting may adjourn early if all
business is finished. Requests for the
draft agenda or for making oral
presentations at the meeting will be
accepted up to one business day before
the meeting.
ADDRESSES: The meeting will be held
via teleconference only. Submit your
comments, identified by Docket ID No.
EPA–HQ–ORD–2008–0872, by one of
the following methods:
• www.regulations.gov: Follow the
on-line instructions for submitting
comments.
• E-mail: Send comments by
electronic mail (e-mail) to:
ORD.Docket@epa.gov, Attention Docket
ID No. EPA–HQ–ORD–2008–0872.
• Fax: Fax comments to: (202) 566–
0224, Attention Docket ID No. EPA–
HQ–ORD–2008–0872.
• Mail: Send comments by mail to:
Board of Scientific Counselors (BOSC),
Executive Committee Meeting—2008
Docket, Mailcode: 28221T, 1200
Pennsylvania Ave., NW., Washington,
DC 20460, Attention Docket ID No.
EPA–HQ–ORD–2008–0872.
• Hand Delivery or Courier. Deliver
comments to: EPA Docket Center (EPA/
DC), Room B102, EPA West Building,
1301 Constitution Ave., NW.,
Washington, DC, Attention Docket ID
No. EPA–HQ–ORD–2008–0872. Note:
this is not a mailing address. Such
deliveries are only accepted during the
docket’s normal hours of operation, and
special arrangements should be made
for deliveries of boxed information.
Instructions: Direct your comments to
Docket ID No. EPA–HQ–ORD–2008–
0872. EPA’s policy is that all comments
received will be included in the public
docket without change and may be
made available online at
DATES:
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]]>Agencies
[Federal Register Volume 73, Number 229 (Wednesday, November 26, 2008)]
[Notices]
[Pages 72039-72041]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-28021]
-----------------------------------------------------------------------
DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. RM07-20-000]
Fuel Retention Practices of Natural Gas Companies
Issued November 20, 2008.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice Terminating Proceeding.
-----------------------------------------------------------------------
SUMMARY: The Federal Energy Regulatory Commission is terminating its
notice of inquiry regarding its policy on the in-kind recovery of fuel
and lost and unaccounted-for gas by natural gas pipeline companies and
will consider any changes to the application of such policy in
individual cases.
Effective Date: November 26, 2008.
FOR FURTHER INFORMATION CONTACT: Anna Fernandez (Legal Information),
Office of the General Counsel, Federal Energy Regulatory Commission,
888 First Street, NE., Washington, DC 20426, (202) 502-6682.
SUPPLEMENTARY INFORMATION:
Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. Kelly,
Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff
1. On September 30, 2007, the Commission issued a Notice of Inquiry
concerning its current policy on the in-kind recovery of fuel and lost
and unaccounted-for gas by natural gas pipeline companies.\1\ The
Commission sought comments on whether it should change its current
policy to provide pipelines a greater incentive to reduce their fuel
use and lost and unaccounted-for gas and to minimize pipeline over-
recoveries of these costs. For the reasons discussed below, the
Commission is terminating this proceeding.
---------------------------------------------------------------------------
\1\ Fuel Retention Practices of Natural Gas Companies, FERC
Stats. & Regs. ] 35,556 (2007) (NOI).
---------------------------------------------------------------------------
I. Background
2. A detailed discussion of the Commission's current policy
regarding in-kind fuel retention by natural gas pipeline companies is
contained in the NOI and will not be repeated here. Briefly, interstate
natural gas pipelines frequently require that customers contribute in-
kind a small percentage of the volumes of natural gas tendered for
transportation service to provide fuel for compressors and to make up
for lost and unaccounted-for gas. Each pipeline states the percentage
of gas it retains in its tariff.
3. The Commission established its current policy concerning a
pipeline's in-kind recovery of fuel use and lost and unaccounted-for
gas in ANR Pipeline Company (ANR).\2\ In its January 2005 order in the
ANR case,\3\ the Commission stated that pipelines have two options to
recover these costs. The first option is to establish a fixed fuel
retention percentage in a general Natural Gas Act (NGA) section 4 rate
case, and leave that
[[Page 72040]]
percentage unchanged until the pipeline files its next general section
4 rate case. That option is consistent with the Commission's general
ratemaking policy, set forth in section 284.10(c)(2) of the
Commission's regulations,\4\ that pipelines must design their rates
based on estimated units of service without any type of tracker or
true-up mechanism. That policy provides pipelines an incentive to
minimize costs, by allowing them to retain any cost over-recoveries
between rate cases, while putting them at risk for cost under-
recoveries.\5\ The second recovery option is for the pipeline to
include in its tariff a mechanism permitting periodic changes in its
fuel retention percentage outside of a general section 4 rate case, as
allowed by section 154.403 of the Commission's regulations.\6\ ANR held
that, if a pipeline chooses the second option, it must include in its
tariff a mechanism to true-up any over- and under-recoveries of fuel,
absent agreement otherwise by all interested parties.
---------------------------------------------------------------------------
\2\ ANR Pipeline Co., order on compliance filing, 108 FERC ]
61,050, order inviting comments, 109 FERC ] 61,038 (2004), order on
reh'g and compliance filing, 110 FERC ] 61,069, order on reh'g and
compliance filing, 111 FERC ] 61,290 (2005).
\3\ 110 FERC ] 61,069 at P 18-28.
\4\ 18 CFR 284.10(c)(2).
\5\ See Canyon Creek Compression Co., 99 FERC ] 61,351, at P 14
(2002).
\6\ 18 CFR 154.403.
---------------------------------------------------------------------------
4. In ANR,\7\ the Commission also left open the possibility that a
pipeline could include an incentive mechanism in a fuel cost tracker,
if the pipeline made the proposal pursuant to the Commission's
incentive ratemaking policy. The Commission's current policy on
incentive rates is set forth in Alternatives to Traditional Cost-of-
Service Ratemaking for Natural Gas Pipelines (1996 Incentive Ratemaking
Policy Statement).\8\
---------------------------------------------------------------------------
\7\ 110 FERC ] 61,069 at P 39.
\8\ 74 FERC ] 61,076, at 61,237-38 (1996).
---------------------------------------------------------------------------
5. In the NOI, the Commission sought comments on whether it should
change its current in-kind fuel retention policy for the purpose of (a)
minimizing pipeline over-recoveries of fuel and lost and unaccounted-
for gas or (b) providing pipelines with a greater incentive to reduce
their fuel use and lost and unaccounted-for gas, for example by
permitting pipelines with fuel trackers and true-up mechanisms to
include a profit or loss sharing mechanism.\9\
---------------------------------------------------------------------------
\9\ NOI at P 23-26.
---------------------------------------------------------------------------
6. Thirty-two parties filed comments in response to the NOI.\10\
Shippers and end-users generally argued that the Commission should
require all pipelines to use a tracker with a true-up in order to
prevent over-recovery of costs. The pipelines, however, argued that the
Commission should retain its current policy and continue to permit
pipelines to choose whether a fixed retention percentage established in
a section 4 rate case or a tracker is best suited to their particular
circumstances. Most parties stated that including some form of
incentive mechanism in a tracker true-up mechanism could encourage
greater efficiency. However, the parties asserted that the Commission
should consider such mechanisms on a case-by-case basis rather than
imposing any generic requirements.
---------------------------------------------------------------------------
\10\ The parties are listed in Appendix A.
---------------------------------------------------------------------------
II. Discussion
7. After carefully reviewing the comments, the Commission has
determined to terminate this proceeding and consider any changes to the
application of the Commission's policy concerning fuel recovery in
individual cases.
8. As described above, a number of non-pipeline commenters contend
that the Commission should require all pipelines to recover their fuel
costs through trackers with true-up mechanisms in order to minimize
pipeline over-recovery of fuel costs. However, the Commission would
have to act under NGA section 5 to require pipelines which currently
have fixed fuel charges established in general section 4 rate cases to
adopt trackers and true-up mechanisms. In order to do that, the
Commission would have to find that all fixed fuel charges are unjust
and unreasonable and that the only just and reasonable method for
pipelines to recover fuel costs is through a tracker with a true-up
mechanism. The commenters have failed to provide the Commission a basis
to take such generic action under NGA section 5.
9. Recovery of fuel costs through a fixed charge established in a
general section 4 rate case is consistent with the Commission's general
ratemaking policy for open access pipelines, set forth in section
284.10(c)(2) of the Commission's regulations, that pipelines design
their rates based on estimated units of service, without any type of
true-up mechanism.\11\ The non-pipeline commenters' only basis for
requiring all pipelines to recover their fuel costs in a manner
contrary to that policy is that (1) fixed fuel charges present too much
potential for pipelines to over-recover their fuel costs and (2)
remedying such over-recoveries through complaints under NGA section 5
is too difficult.\12\ However, the courts have insisted that the
Commission not ``compromise section 5's limits on its power to revise
rates.'' \13\ Requiring pipelines to recover their fuel costs through a
tracker and true-up mechanism based solely on the alleged difficulty of
remedying cost overrecoveries under NGA section 5, and without any
other independent policy justification, would be contrary to the
court's holding that the Commission may not order pipelines to make
section 4 filings in order ``to avoid the `insufficient protection'
afforded by section 5, i.e., to avoid its procedural constraints.''
\14\
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\11\ In Order No. 436, the Commission explained that this
requirement means that the pipeline is at risk for under-recovery of
its costs between rate cases, and may retain any over-recovery. This
gives the pipeline an incentive both to minimize its costs and
maximize the service it provides. A cost tracker would undercut
these incentives by guaranteeing the pipeline a set revenue
recovery. Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation of
Natural Gas Pipelines After Partial Wellhead Decontrol, Order No.
636, FERC Stats. & Regs. ] 30,939, order on reh'g, Order No. 636-A,
FERC Stats. & Regs. ] 30,950, order on reh'g, Order No. 636-B, 61
FERC ] 61,272 (1992), order on reh'g, 62 FERC ] 61,007 (1993), aff'd
in part and remanded in part sub nom. United Distribution Cos. v.
FERC, 88 F.3d 1105 (D.C. Cir. 1996), order on remand, Order No. 636,
78 FERC ] 61,186 (1997).
\12\ Industry Associations at 7-8 (``Although the Commission and
pipeline customers are entitled to bring Section 5 complaints, such
complaints require the complainant to carry the burden of proof, can
be extremely expensive, and only offer prospective relief.''). See
also Ameren, TVA, and Texas Producers.
\13\ Western Resources, Inc. v. FERC, 9 F.3d 1568, 1578 (D.C.
Cir. 1993).
\14\ Public Service Commission of New York v. FERC, 866 F.2d
487, 491 (D.C. Cir. 1989).
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10. Accordingly, if a shipper believes that a particular pipeline
is over-recovering its fuel costs, it should file a complaint under NGA
section 5, pursuant to the procedures set forth in section 385.206 of
the Commission's procedural regulations. While several shippers
commented that section 5 does not provide an adequate remedy,\15\ in
fact, section 5 complaints have resulted in significantly reduced fuel
charges on several pipelines. National Fuel \16\ and Dominion \17\ are
two examples of how actual or potential section 5 complaints can cause
pipelines to reduce their fuel retention percentages.
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\15\ See, e.g., comments of the American Public Gas Association
at 3-4.
\16\ National Fuel Gas Supply Corporation, 118 FERC ] 61,091
(2007) (National Fuel) (settlement agreement followed section 5
complaint).
\17\ Dominion Transmission, Inc., 111 FERC ] 61,285 (2005)
(Dominion) (settlement agreement came about in response to potential
section 5 complaint).
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11. In addition, the changes recently enacted by the Commission to
the financial reporting requirements for natural gas pipelines should
assist shippers who wish to file a section 5 complaint involving fuel
cost over-recovery. In March 2008, the Commission issued Order No.
710,\18\ a
[[Page 72041]]
Final Rule to change the financial forms and reporting requirements for
natural gas pipelines in order to enhance the transparency of financial
reporting by interstate natural gas pipelines and better reflect the
current market and cost information. Among the changes were new
reporting requirements that require natural gas companies to provide
detailed information regarding the acquisition and disposition of fuel
use and lost and unaccounted-for gas.\19\ With this new information,
shippers will be better able to use the section 5 complaint process to
address fuel cost over-recovery by a pipeline.
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\18\ Revisions to Forms, Statements and Reporting Requirements
for Natural Gas Pipelines, Order No. 710, 73 FR 19389 (Apr. 10,
2008), FERC Stats. & Regs. ] 31,267 (2008), reh'g and clarification,
Order No. 710-A, 123 FERC ] 61,278 (June 20, 2008).
\19\ Order No. 710 at P 16.
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12. Finally, the operation of the interstate pipeline system
involves a significant amount of fuel use and lost and unaccounted-for
gas to deliver supplies to market. Fuel gas charges now make up a
greater percentage of the overall interstate transportation rate than
they have in the past. Such considerations reinforce the need to
improve the efficiency of our existing infrastructure. While the
parties generally commented that fuel savings incentive mechanisms
could be helpful in reducing fuel use and, therefore, fuel costs, they
believed that such mechanisms should be developed by the parties in
individual proceedings. In light of those comments, the Commission will
take a case-by-case approach at this time. In a recent order, the
Commission ordered a technical conference to consider a three-year
experimental fuel incentive mechanism proposed by Texas Gas
Transmission, L.L.C. and what changes, if any, might be necessary or
appropriate.\20\ The Commission concludes that case-by-case
consideration of incentive proposals will assist in the development of
the Commission's policies concerning pipelines' recovery of fuel costs,
and encourages pipelines to work with their customers to develop these
mechanisms.
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\20\ See Texas Gas Transmission, LLC, 125 FERC ] 61,134 (2008).
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13. For these reasons, Docket No. RM07-20-000 is terminated.
The Commission orders:
Docket No. RM07-20-000 is terminated.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
Appendix A
List of Parties
Ameren Energy Generating Company, Central Illinois Public Service
Company, Central Illinois Light Co., Illinois Power Co., and Union
Electric Company (Ameren)
American Chemistry Council
American Gas Association
American Public Gas Association
Apache Corporation
Atmos Energy Corporation
Boardwalk Pipeline Partners, LP, Gulf Crossing Pipeline Company LLC,
Gulf South Pipeline Company, LP, and Texas Gas Transmission, LLC
Calpine Corporation
Columbia Gas Transmission Corporation, Columbia Gulf Transmission
Company, Crossroads Pipeline Company, Granite State Gas Transmission,
Inc., and Central Kentucky Transmission Company
Dominion Resources, Inc.
El Paso Corporation
Enbridge, Inc. and Enbridge Energy Partners, L.P.
FPL Group, Inc.
Honda of America Mfg., Inc.
Interstate Natural Gas Association of America
Independent Oil & Gas Association of West Virginia
The Independent Petroleum Association of America, The Process Gas
Consumers Group, The American Forest & Paper Association and The
American Iron and Steel Institute (Industry Associations)
Kinder Morgan Interstate Gas Transmission, LLC, Natural Gas Pipeline
Company of America, Trailblazer Pipeline Company, and TransColorado Gas
Transmission
Louisville Gas and Electric Company
MidAmerican Energy Company and PacifiCorp
Middle Tennessee Natural Gas Utility District
National Fuel Gas Supply Corporation
Natural Gas Supply Association
Northern Natural Gas Company and Kern River Gas Transmission Company
The Ohio Oil & Gas Association
Public Service Commission of New York
Sequent Energy Management, L.P.
Spectra Energy Transmission, LLC
Tennessee Valley Authority (TVA)
Texas Independent Producers and Royalty Owners Association (Texas
Producers)
Transwestern Pipeline Company, LLC
Williston Basin Interstate Pipeline Company
[FR Doc. E8-28021 Filed 11-25-08; 8:45 am]
BILLING CODE 6717-01-P
