Cost Recovery Mechanisms for Modernization of Natural Gas Facilities; Order Denying Request For Clarification, 43414-43419 [2015-17949]
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Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
notes that Freeport LNG currently holds
a blanket authorization to import LNG
from various international sources by
vessel in an amount up to the equivalent
of 30 Bcf of natural gas.2 Freeport LNG
is requesting this authorization both on
its own behalf and as agent for other
parties who hold title to the LNG at the
time of export. The Application was
filed under section 3 of the Natural Gas
Act (NGA). Additional details can be
found in Freeport LNG’s Application,
posted on the DOE/FE Web site at: http:
//energy.gov/fe/downloads/freeport-lngdevelopment-lp-fe-dkt-no-15–103-lng.
Protests, motions to intervene, notices of
intervention, and written comments are
invited.
DATES: Protests, motions to intervene or
notices of intervention, as applicable,
requests for additional procedures, and
written comments are to be filed using
procedures detailed in the Public
Comment Procedures section no later
than 4:30 p.m., Eastern time, August 20,
2015.
ADDRESSES:
Electronic Filing by Email fergas@
hq.doe.gov.
U.S. Department of Energy (FE–34),
Office of Oil and Gas Global Security
and Supply, Office of Fossil Energy,
P.O. Box 44375, Washington, DC
20026–4375.
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Hand Delivery or Private Delivery
Services (e.g., FedEx, UPS, etc.)
U.S. Department of Energy (FE–34),
Office of Oil and Gas Global Security
and Supply, Office of Fossil Energy,
Forrestal Building, Room 3E–042,
1000 Independence Avenue SW.,
Washington, DC 20585.
FOR FURTHER INFORMATION CONTACT:
Beverly Howard, or Larine Moore, U.S.
Department of Energy (FE–34), Office
of Oil and Gas Global Security and
Supply, Office of Fossil Energy,
Forrestal Building, Room 3E–042,
1000 Independence Avenue SW.,
Washington, DC 20585, (202) 586–
9387; (202) 586–9478.
Cassandra Bernstein, U.S. Department of
Energy, Office of the Assistant
General Counsel for Electricity and
Fossil Energy, Forrestal Building,
1000 Independence Ave. SW.,
Washington, DC 20585, (202) 586–
9793.
SUPPLEMENTARY INFORMATION:
2 Freeport LNG Development, L.P., DOE/FE Order
No. 3379, FE Docket No. 13–148–LNG, Order
Granting Blanket Authorization to Import Liquefied
Natural Gas from Various International Sources by
Vessel (Jan. 9, 2014).
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The Application will be reviewed
pursuant to section 3 of the NGA, as
amended, and the authority contained
in DOE Delegation Order No. 00–
002.00N (July 11, 2013) and DOE
Redelegation Order No. 00–006.02 (Nov.
17, 2014). In reviewing this LNG export
application, DOE will consider domestic
need for the gas, as well as any other
issues determined to be appropriate,
including whether the arrangement is
consistent with DOE’s policy of
promoting competition in the
marketplace by allowing commercial
parties to freely negotiate their own
trade arrangements. Parties that may
oppose this application should
comment in their responses on these
issues.
The National Environmental Policy
Act (NEPA), 42 U.S.C. 4321 et seq.,
requires DOE to give appropriate
consideration to the environmental
effects of its proposed decisions. No
final decision will be issued in this
proceeding until DOE has met its NEPA
responsibilities.
Public Comment Procedures
Regular Mail
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DOE/FE Evaluation
In response to this Notice, any person
may file a protest, comments, or a
motion to intervene or notice of
intervention, as applicable. Any person
wishing to become a party to the
proceeding must file a motion to
intervene or notice of intervention. The
filing of comments or a protest with
respect to the Application will not serve
to make the commenter or protestant a
party to the proceeding, although
protests and comments received from
persons who are not parties will be
considered in determining the
appropriate action to be taken on the
Application. All protests, comments,
motions to intervene, or notices of
intervention must meet the
requirements specified by the
regulations in 10 CFR part 590.
Filings may be submitted using one of
the following methods: (1) Emailing the
filing to fergas@hq.doe.gov, with FE
Docket No. 15–103–LNG in the title
line; (2) mailing an original and three
paper copies of the filing to the Office
of Oil and Gas Global Security and
Supply at the address listed in
ADDRESSES; or (3) hand delivering an
original and three paper copies of the
filing to the Office of Oil and Gas Global
Supply at the address listed in
ADDRESSES. All filings must include a
reference to FE Docket No. 15–103–
LNG. PLEASE NOTE: If submitting a
filing via email, please include all
related documents and attachments
(e.g., exhibits) in the original email
PO 00000
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correspondence. Please do not include
any active hyperlinks or password
protection in any of the documents or
attachments related to the filing. All
electronic filings submitted to DOE
must follow these guidelines to ensure
that all documents are filed in a timely
manner. Any hardcopy filing submitted
greater in length than 50 pages must
also include, at the time of the filing, a
digital copy on disk of the entire
submission.
A decisional record on the
Application will be developed through
responses to this notice by parties,
including the parties’ written comments
and replies thereto. Additional
procedures will be used as necessary to
achieve a complete understanding of the
facts and issues. If an additional
procedure is scheduled, notice will be
provided to all parties. If no party
requests additional procedures, a final
Opinion and Order may be issued based
on the official record, including the
Application and responses filed by
parties pursuant to this notice, in
accordance with 10 CFR 590.316.
The Application is available for
inspection and copying in the Division
of Natural Gas Regulatory Activities
docket room, Room 3E–042, 1000
Independence Avenue, SW.,
Washington, DC 20585. The docket
room is open between the hours of 8:00
a.m. and 4:30 p.m., Monday through
Friday, except Federal holidays. The
Application and any filed protests,
motions to intervene or notice of
interventions, and comments will also
be available electronically by going to
the following DOE/FE Web address:
https://www.fe.doe.gov/programs/
gasregulation/.
Issued in Washington, DC, on July 13,
2015.
John A. Anderson,
Director, Office of Oil and Gas Global Security
and Supply, Office of Oil and Natural Gas.
[FR Doc. 2015–17980 Filed 7–21–15; 8:45 am]
BILLING CODE 6450–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Docket No. PL15–1–001]
Cost Recovery Mechanisms for
Modernization of Natural Gas
Facilities; Order Denying Request For
Clarification
Before Commissioners: Norman C. Bay,
Chairman; Philip D. Moeller, Cheryl A.
LaFleur, Tony Clark, and Colette D.
Honorable.
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Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
1. On April 16, 2015, the Commission
issued a policy statement in the
referenced proceeding to provide greater
certainty regarding the ability of
interstate natural gas pipelines to
recover the costs of modernizing their
facilities and infrastructure to enhance
the efficient and safe operation of their
systems.1 The Policy Statement explains
the standards the Commission will
require interstate natural gas pipelines
to satisfy in order to establish simplified
mechanisms, such as trackers or
surcharges, to recover certain costs
associated with replacing old and
inefficient compressors and leak-prone
pipes and performing other
infrastructure improvements and
upgrades to enhance the efficient and
safe operation of their pipelines. On
May 15, 2015, Process Gas Consumers
Group (PGC) and the American Forest
and Paper Association (AF&PA)(jointly
Requesters) filed, pursuant to 18 CFR
385.212 (2014), a joint ‘‘Request for
Clarification’’ of the Policy Statement.2
As discussed more fully below, the
Commission denies the requested
clarifications of the Policy Statement.
I. Background
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A. Policy Statement
2. The Policy Statement established a
process to allow interstate natural gas
pipelines to seek to recover certain
capital expenditures made to modernize
system infrastructure through a
surcharge mechanism, subject to
conditions intended to ensure that the
resulting rates are just and reasonable
and protect natural gas consumers from
excessive costs. Recognizing that
historically the Commission has
required interstate natural gas pipelines
to design their transportation rates
based on projected units of service, the
Commission found in the Policy
Statement that recent governmental
safety and environmental initiatives
have raised the probability that
interstate natural gas pipelines will soon
face increased costs to enhance the
safety and reliability of their systems.
The Commission issued the Policy
Statement in an effort to address these
1 Cost Recovery Mechanisms for Modernization of
Natural Gas Facilities, 151 FERC ¶ 61,047 (2015)
(Policy Statement).
2 On June 1, 2015, the Interstate Natural Gas
Association of America (INGAA) and Tenaska
Marketing Ventures (Tenaska) filed answers to the
request for clarification, and on June 2, 2015, the
Kansas Corporation Commission filed in support of
the clarification request. On June 9, AF&PA and
PGC separately filed replies to INGAA and Tenaska.
On June 11, 2015, the Natural Gas Supply
Association (NGSA) filed an answer to the request
for clarification and comments on INGAA’s answer.
On June 24, 2015, Tenaska filed an answer to
AF&PA and PGC.
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potential costs and to ensure that
existing Commission ratemaking
policies do not unnecessarily inhibit
interstate natural gas pipelines’ ability
to expedite needed or required upgrades
and improvements, such as replacing
old and inefficient compressors and
leak-prone pipelines. The Policy
Statement adopted five guiding
standards a pipeline would have to
satisfy for the Commission to approve a
proposed modernization cost tracker or
surcharge. Those criteria are (1) Review
of Existing Base Rates; (2) Defined
Eligible Costs; (3) Avoidance of Cost
Shifting; (4) Periodic Review of the
Surcharge and Base Rates; and (5)
Shipper Support.
3. The Policy Statement addressed
how the Commission would apply those
standards, and noted that ‘‘the Policy
Statement will be most effective and
efficient if designed according to
flexible parameters that will allow for
accommodation of the particular
circumstances of each pipeline’s
circumstances. Maintaining a
transparent policy with flexible
standards will best allow pipelines and
their customers to negotiate just and
reasonable, and potentially mutually
agreeable, cost recovery mechanisms to
address the individual safety, reliability,
regulatory compliance and other
infrastructure issues facing that
pipeline.’’ 3 The Commission also stated
that ‘‘while we are imposing specific
conditions on the approval of any
proposed modernization cost tracker,
leaving the parameters of those
conditions reasonably flexible will be
more productive in addressing needed
and required system upgrades in a
timely manner. Further, consistent with
this approach, the Commission will be
able to evaluate any proposals in the
context of the specific facts relevant to
the particular pipeline system at
issue.’’ 4
collaborative process to ensure all
stakeholders are invited and included in
meetings; (4) that the Commission
intends the pipeline to work with each
shipper sector in the collaborative
process; (5) that if a pipeline has overcollected through a surcharge or tracker
such that its rates are later found unjust
and unreasonable the pipeline must pay
refunds calculated from the date a
protest or complaint was filed; and (6)
that pipelines may not seek to
implement a modernization tracker or
surcharge until the October 1, 2015
effective date of the Policy Statement.
5. On June 1, INGAA and Tenaska
filed answers to the request for
clarification. INGAA asserts the
clarification request raises issues that
were addressed by the Policy Statement
and attempts to impose added burdens
and restrictions not required by the
Policy Statement, and as such should be
rejected as an impermissible request for
rehearing.5 INGAA further states that
even if the requests can be considered
requests for clarification, they are
unnecessary because contrary to the
assertion of Requesters, the Policy
Statement’s resolution of the issues
raised is clear. Tenaska urges the
Commission to reject the request for
clarification of the cost responsibility
for modernization charges in the
capacity release context, stating that to
do so would preemptively resolve a
bilateral contract issue against
replacement shippers. NGSA makes
similar comments, stating that the issue
of cost responsibility for modernization
surcharges is one for the parties to the
contracts, and that a generic
determination by the Commission will
inhibit contract negotiations.
6. As discussed more fully below, the
Commission denies the requests for
clarification and declines to adopt the
suggested formal procedures.
B. Request for Clarification
4. In the Request for Clarification, the
Requesters seek what they assert is
‘‘clarification’’ of six points related to
the Policy Statement. Specifically they
request the Commission clarify (1) that
pipelines must provide actual cost and
revenue information, based on twelve
months of operation, including the type
of data required in section 154.312 of
the Commission’s regulations, to justify
its existing rates under standard 1; (2)
the party responsible for paying
modernization surcharges in existing
capacity release arrangements; (3) the
formal procedures for conducting the
II. Discussion
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3 Policy
Statement, 151 FERC ¶ 61,047 at P 40.
4 Id.
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7. The Commission issued the Policy
Statement in order to provide guidance
to the industry as to how the
Commission will evaluate proposals by
interstate natural gas pipelines for the
recovery of infrastructure modernization
costs. As we stated in the Policy
Statement, the Commission intends the
standards a pipeline must satisfy to
implement a modernization cost tracker
‘‘to be sufficiently flexible so as not to
require any specific form of compliance
but to allow pipelines and their
customers to reach reasonable
accommodations based on the specific
5 INGAA Answer at 2 (citing Natural Gas Supply
Ass’n, et al., 137 FERC ¶ 61,051, at P 30 (2011)).
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circumstances of their systems.’’ 6 The
Commission will evaluate any proposal
for such a surcharge on an individual,
case-by-case basis, at which time
interested parties will have the
opportunity to raise any issues or
concerns. The requested clarifications
are antithetical to that approach, and
accordingly, as discussed below, the
Commission denies the requested
clarifications.
A. Collaborative Process
8. The Policy Statement requires
pipelines to work collaboratively with
shippers and other interested parties to
seek support for any proposed cost
modernization surcharge. As part of this
collaborative process, the Commission
stated that, before submitting a
modernization cost recovery proposal to
the Commission, a pipeline should meet
with its customers and other interested
parties to seek resolution of as many
issues as possible.
9. The Requesters ask the Commission
to ‘‘clarify’’ the ‘‘formal procedures’’ for
conducting the collaborative process
required by the Policy Statement before
the pipeline files its proposal with the
Commission, asserting that because the
Policy Statement does not require a
filing to commence such a process, there
is no clear way for all shippers to know
when a pipeline is initiating the
process, or to ensure that the process is
fair and transparent. Requesters state
that the Commission should require the
involvement of Commission settlement
judges, mediators or technical staff to
ensure shippers’ rights are protected
during the collaborative process.7
Requesters also request clarification that
the Commission intends the pipeline to
work with ‘‘each shipper sector’’ during
the collaborative process. Requesters
assert that while the Commission stated
it was not requiring a specific
percentage of shipper support to
approve a potential modernization cost
tracker, it did not address ‘‘whether the
pipeline is required to seek shipper
support from a broad spectrum of
shipper sectors . . . or whether it can
just strike a deal with a subset of its
customers.’’ 8
10. The Commission denies
clarification and declines to adopt
formal procedures or specified rules for
the pre-filing collaborative process
required for a modernization cost
tracker. The Policy Statement makes
clear the Commission’s expectation that
a pipeline work with all of its customers
6 Policy
Statement, 151 FERC ¶ 61,047 at P 3.
for Clarification at 6–8.
8 Request for Clarification at 9 & n.25 (citing
Requester’s February 26, 2015 Joint Reply
Comments).
7 Request
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during the collaborative process 9 that
would precede a Natural Gas Act (NGA)
section 4 filing. 10 We decline to adopt
formal procedures for this collaboration,
however, as it is the Commission’s
intention that the process be an informal
process for parties to share information
and negotiate absent Commission
involvement. The Policy Statement
clearly states that during this process, a
pipeline should share with its
customers the results of its review of its
systems to determine what system
upgrades and improvements are
necessary, be responsive to requests for
specific cost and revenue data to
determine whether existing rates are just
and reasonable, and provide parties the
opportunity to comment on draft tariff
language for the proposed
modernization cost mechanism. 11
11. With respect to concerns that
customers may not be aware of, or be
made aware of, the initiation of the
collaborative process to implement a
modernization cost tracker, a pipeline
will have to make an NGA section 4
filing to implement any cost
modernization surcharge. That filing
will be noticed the same as any other
NGA section 4 filing at the Commission,
and will provide all interested persons
the opportunity to intervene in the
proceeding and to protest. Consistent
with NGA section 4, the burden in that
instance will be on the pipeline to
demonstrate that its proposal is just and
reasonable, and as we stated, the
Commission will decide upon
appropriate procedures to address
protests based upon the specific
circumstances of each proposal. Thus,
in order to implement a proposed
modernization cost tracker in an
efficient manner and without
unnecessary delay, it is in the proposing
pipeline’s best interest to resolve as
many outstanding issues as possible
through the collaborative process prior
to filing a modernization cost recovery
mechanism proposal.12 As noted in the
Policy Statement, the intent is to
‘‘provide pipelines and their customers
wide latitude to reach agreements
9 Policy Statement, 151 FERC ¶ 61,047 at P 93
(‘‘As part of this collaborative process, pipelines
should meet with their customers and other
interested parties to seek resolution of as many
issues as possible before submitting a
modernization cost recovery proposal to the
Commission.’’)
10 15 U.S.C. 717c (2006).
11 Id.
12 In fact, INGAA recognizes in its answer (at 5)
that ‘‘excluding specific shippers or shipper sectors
from the collaborative process . . . would not be in
pipelines’ best interests because any shippers or
shipper groups that were excluded from the process
would surely contest any agreement reached by the
other parties.’’
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Fmt 4703
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incorporating remedies for a variety of
system safety, reliability and/or
efficiency issues.’’ 13 Adoption of formal
procedures as suggested by the
Requesters would thwart rather than
facilitate this intent and the
collaborative process.
B. Existing Rate Justification
12. The Policy Statement states that
‘‘any pipeline seeking a modernization
cost recovery tracker must demonstrate
that its current base rates to which the
surcharge would be added are just and
reasonable. This is necessary to ensure
that the overall rate produced by the
addition of the surcharge to the base rate
is just and reasonable, and does not
reflect any cost over-recoveries that may
have been occurring under the
preexisting base rates.’’ 14
13. Requesters assert that the Policy
Statement does not identify the data
that pipelines must provide under the
Commission’s regulations to show that
the rates are just and reasonable, and
whether a cost and revenue study would
need to include the information in the
form required by section 154.312 or
154.313 of the Commission’s
regulations. Requesters state the
Commission should clarify that the
pipeline must provide its most recent
12-months of actual costs and revenues,
and the information required under the
more inclusive section 154.312, prior to
engaging in any collaborative process
with its shippers.15
14. The Commission denies
clarification. In the Policy Statement,
we declined to adopt suggestions that
we require an NGA general section 4
rate proceeding as the only means to
satisfy the standard that existing rates
are just and reasonable. As we noted,
the ‘‘type of rate review necessary to
determine whether a pipeline’s existing
rates are just and reasonable is likely to
vary from pipeline to pipeline . . .
therefore, we remain open to
considering alternative approaches for a
pipeline to justify its existing rates.’’ 16
As that statement implies, the
Commission determined neither to
require a specific method by which the
pipeline must show its existing rates are
just and reasonable, nor to proscribe the
specific data or form that the data must
take if a pipeline chooses to justify its
existing rates by a method other than a
general NGA section 4 rate case.
15. As we made clear in the Policy
Statement, a pipeline seeking a
13 Policy
Statement, 151 FERC ¶ 61,047 at P 94.
P 51.
15 Request for Clarification at 1–5.
16 Policy Statement, 151 FERC ¶ 61,047 at P 52.
14 Id.
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Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
modernization cost surcharge must
demonstrate to the Commission that its
existing base rates are no higher than a
just and reasonable level. Absent such a
showing, the Commission would be
unable to find that the overall rate
produced by the addition of the
surcharge to the base rate is just and
reasonable. In order to facilitate the
review of the pipeline’s existing rates,
we encouraged pipelines to engage in a
full exchange of information with their
customers.17 If that process fails to
satisfy interested parties that existing
base rates are no higher than a just and
reasonable level, then the Commission
will establish procedures to resolve any
disputed issues of fact raised in the
parties’ protests to the filing based upon
substantial evidence on the record. Such
procedures may include, if necessary, a
hearing before an Administrative Law
Judge.18 Thus, to the extent a pipeline
seeks expedient approval of a
modernization cost tracker, the
Commission expects that the pipeline
will freely share data and the results of
its system testing to attempt to resolve
as many issues as possible prior to filing
for the tracker.
C. Retroactive Refunds
16. Requesters also state that the
Commission should clarify that if a
pipeline has over-collected through a
surcharge or tracker, such that its rates
are later found to be unjust and
unreasonable after a protest or
complaint proceeding, the pipeline
must pay refunds calculated from the
date a protest or complaint was filed.
They request a requirement that a
pipeline seeking a modernization cost
surcharge or tracker must agree that, if
during the period that the surcharge is
in effect, a protest or an NGA section 5
complaint is filed against the pipeline,
the pipeline must make refunds
retroactive to the date of the protest or
complaint.19 Requesters assert the
condition is justified in return for
obtaining an exception to the standard
NGA section 4 ratemaking principles.
17. The Commission denies the
requested clarification.20 If the
17 Policy
Statement, 151 FERC ¶ 61,047 at P 53.
the pipeline files a settlement supported by
many of its shippers but some contesting parties
raise issues that cannot be resolved on the existing
record, the Commission may approve the settlement
as uncontested for the consenting parties and sever
the contesting parties to litigate their issues. This
preserves the benefit of the settlement for the
consenting parties, while allowing the contesting
parties to obtain a litigated result on the merits.
Trailblazer Pipeline Co., 85 FERC ¶ 61,345, at
62,344–5 (1998), reh’g, 87 FERC ¶ 61,110, at
61,446–7 (1999).
19 Request for Clarification at 10–11.
20 The Commission notes further that this request
is effectively a request for rehearing of the
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18 If
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19:59 Jul 21, 2015
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Commission is unable to determine the
justness and reasonableness of a
proposed modernization cost tracker
mechanism within 30 days after its
filing pursuant to NGA section 4, the
Commission will suspend the filing and
it will remain subject to refund until the
Commission determines whether it is
just and reasonable. Further, once a
modernization cost tracker mechanism
has been approved, the requirement that
such mechanisms include a provision
for trueing up cost over and underrecoveries will ensure that the pipeline
only recovers eligible costs approved for
recovery in the tracker mechanism. Each
of the pipeline’s periodic filings
pursuant to its modernization cost
tracker mechanism would include a
comparison of the costs approved for
recovery during the prior period with
the amounts the pipeline actually
collected from its shippers during that
period.21 To the extent the pipeline
over-recovered or under-recovered those
costs during the relevant period, it
would adjust the surcharge for the next
period up or down so as to either return
the over-recovery to its shippers or
collect any under-recovery from them.
Accordingly, the Commission finds no
reason to condition the right to
implement a modernization cost tracker
mechanism on the pipeline’s agreement
to forego its NGA section 5 rights
against retroactive refunds for amounts
recovered pursuant to a modernization
cost tracker mechanism that the
Commission has approved as just and
reasonable under NGA section 4.
D. Cost Responsibility in Capacity
Release Agreements
18. With respect to capacity releases,
Requesters state that the Policy
Statement did not respond to concerns
raised by AF&PA that parties to existing
capacity release agreements did not
contemplate cost responsibility for
modernization costs in existing capacity
release agreements, and thus the
Commission should clarify that such
costs should be placed on replacement
shippers.22
19. In their answers, INGAA and the
NGSA oppose Requesters’ proposal that
cost responsibility for any
modernization surcharge be placed on
replacement shippers. INGAA states
that under Commission policy, the
Commission’s decision not to adopt a virtually
identical condition requested by APGA in its
comments on the Proposed Policy Statement. See
APGA Initial Comments at 20, Policy Statement,
151 FERC ¶ 61,047 at P 86.
21 The pipeline’s customers would have a chance
to challenge any of the projected costs included in
the periodic filings.
22 Request for Clarification at 5–6.
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43417
releasing shipper remains ultimately
liable for any surcharge amount that a
replacement shipper does not pay.
NGSA asserts that given the myriad of
current day contracting options, the
resolution of contractual matters,
particularly where the contract is silent
as to surcharge cost responsibility, is
best left to the contracting parties.
NGSA also argues that the Commission
should not make a generic
determination as to the responsibility
for modernization cost surcharges
within existing capacity release
agreements because doing so would
unnecessarily impede the parties’
attempts to negotiate and resolve the
issue.
20. The Commission denies
clarification. Section 284.8(f) of the
Commission’s regulations 23 provides
that, unless otherwise agreed by the
pipeline, the contract of the releasing
shipper will remain in full force and
effect during the release, with the net
proceeds from any release to a
replacement shipper credited to the
releasing shipper’s reservation charge.
Therefore, to the extent the releasing
shipper’s service agreement permits the
pipeline to recover the surcharge from
the releasing shipper, the releasing
shipper would remain liable for the
surcharge during the term of any
temporary release. The replacement
shipper’s liability for the surcharge
would turn on the terms of its release.
If the release requires the replacement
shipper to pay any portion of the
surcharge, those payments would be
credited to the releasing shipper. In
short, the issue of cost responsibility for
modernization costs during the term of
a capacity release is a contractual issue
between the relevant parties,24 and that
issue cannot be resolved on a generic
basis.
E. Effective Date
21. Finally, Requesters seek
clarification that pipelines may not seek
to implement a modernization cost
tracker through a filing, or even
commence the collaborative process,
until the October 1, 2015 effective date
of the Policy Statement.25 Requesters
state that this effective date enforcement
would provide the Commission time to
proscribe the formal procedures that it
requests.
23 18
CFR 284.8(f) (2014).
Policy Statement, 151 FERC ¶ 61,047 at P
82, stating that the pipeline’s ability to impose a
modernization cost surcharge on discounted or
negotiated rate shippers is a contractual issue
between the pipeline and its discounted or
negotiated rate shippers.
25 Request for Clarification at 11–12.
24 See
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22. The Commission declines to
provide the requested clarification. The
Commission has no authority to regulate
a pipeline’s discussions with its
customers or the content of such
discussions. Moreover, even if it had the
authority, the Commission advocates
active discussions between pipelines
and their customers, and as we stated in
the Policy Statement, ‘‘[t]he
Commission sees no reason for
pipelines to wait to make needed
improvements to their systems until a
regulation is adopted requiring them to
do so.’’ 26
23. Additionally, the Commission
lacks the authority to prevent a pipeline
from making an NGA section 4 filing to
request approval for a modernization
cost tracker. As INGAA notes, the Policy
Statement did not permit pipelines to
file for tracker mechanisms for the first
time; it announced the Commission’s
policy for addressing such filings. There
is nothing to prevent a pipeline from
making a proposal consistent with the
Commission’s existing policy as set
forth in Columbia Gas Transmission,
LLC,27 prior to October 1, 2015.28
24. Finally, we note that, as with any
policy statement, the Policy Statement
is not a final action of the Commission
but an expression of our intent as to
how we will evaluate proposals by
interstate natural gas pipelines for the
recovery of infrastructure modernization
costs. As the U.S. Court of Appeals for
the District of Columbia Circuit has
held, a statement of policy ‘‘is not
finally determinative of the issues or
rights to which it is addressed;’’ rather,
it only ‘‘announces the agency’s
tentative intentions for the future.’’ 29
We will consider each pipeline proposal
to implement a modernization cost
tracker based on the facts relevant to
that particular pipeline and will address
any further concerns regarding the
Policy Statement on a case-by-case
basis.
F. Information Collection Statement
25. The collection of information
discussed in the Policy Statement is
being submitted to the Office of
Management and Budget (OMB) for
review under section 3507(d) of the
Paperwork Reduction Act of 1995 30 and
OMB’s implementing regulations.31
OMB must approve information
collection requirements imposed by
agency rules.
26. In the Policy Statement, the
Commission solicited comments from
the public on the Commission’s need for
this information, whether the
information will have practical utility,
the accuracy of the burden estimates,
recommendations to enhance the
quality, utility, and clarity of the
information to be collected, and any
suggested methods for minimizing
respondents’ burden, including the use
of automated information techniques.
The Commission received no comments
on those issues.
27. The burden estimates are for
implementing the information
collection requirements of the Policy
Statement. The collection of information
related to the Policy Statement falls
under FERC–545 (Gas Pipeline Rates:
Rate Change (Non-Formal).32 The
following estimate of reporting burden
is related only to the Policy Statement.
28. Public Reporting Burden: The
estimated annualburdenand cost follow.
FERC–545, MODIFICATIONS FROM POLICY STATEMENT IN PL15–1–000
Number of respondents 33
Number of responses per
respondent
Average burden hours per
response
Total annual
burden hours
(1)
(2)
(3)
(1) × (2) × (3)
Provide information to shippers for any surcharge proposal, and prepare modernization cost tracker filing 35 ...........................................................................
Perform periodic review and provide information to show that both base rates
and the surcharge amount remain just and reasonable ...................................
26 Policy
Statement, 151 FERC ¶ 61,047 at P 68.
Gas Transmission, LLC, 142 FERC
¶ 61,062 (2013).
28 Further, because the Commission declines to
adopt the requested formal procedures for the
collaborative process there is no need for the
suggested delay to allow time for the Commission
to develop those procedures.
29 Pacific Gas & Electric Co. v. FPC, 506 F.2d 33,
38 (D.C. Cir. 1974). See Alternatives to Traditional
Cost-of-Service Ratemaking for Natural Gas
Pipelines, 75 FERC ¶ 61,024, at 61,076 (citing,
American Gas Ass’n v. FERC, 888 F.2d 136 (1989);
Interstate Natural Gas Pipeline Rate Design, 47
FERC ¶ 61,295 (1985), order on reh’g, 48 FERC
¶ 61,122, at 61,442 (1989)).
30 44 U.S.C. 3507(d) (2012).
31 5 CFR 1320.
32 The information collection requirements in the
Policy Statement were included in FERC–545A
(OMB Control No.: TBD). The Commission used
FERC–545A (a temporary collection number)
because another item was pending OMB review
under FERC–545, and only one item per OMB
Control Number can be pending review at OMB at
a time. The submittal to OMB will now be made
under FERC–545 (OMB Control No. 1902–0154).
33 An estimated 165 natural gas pipelines (Part
284 program) may be affected by the Policy
Statement. Of the 165 pipelines, Commission staff
estimates that 3 pipelines may choose to submit an
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27 Columbia
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3
1
750
2,250
$147,578
3
36 0.60
350
630
$42,235
application for a modernization cost tracker per
year.
34 The hourly wage figures are published by the
Bureau of Labor Statistics, U.S. Department of
Labor, National Occupational Employment and
Wage Estimates, United States, Occupation Profiles,
May 2014 (available 4/1/2015) at https://
www.bls.gov/oes/home.htm, and the benefits are
calculated using BLS information, at https://
www.bls.gov/news.release/ecec.nr0.htm.
The average hourly cost (salary plus benefits) to
prepare the modernization cost tracker filing is
$65.59. It is the average of the following hourly
costs (salary plus benefits): manager ($77.93, NAICS
11–0000), Computer and mathematical ($58.17,
NAICS 15–0000), Legal ($129.68, NAICS 23–0000),
Office and administrative support ($39.12, NAICS
43–0000), Accountant and auditor ($51.04, NAICS
13–2011), Information and record clerk ($37.45,
NAICS 43–4199), Engineer ($66.74, NAICS 17–
2199), Transportation, Storage, and Distribution
Manager ($64.55, NAICS 11–3071).
The average hourly cost (salary plus benefits) to
perform the periodic review is $67.04. It is the
average of the following hourly costs (salary plus
benefits): manager ($77.93, NAICS 11–0000), Legal
($129.68, NAICS 23–0000), Office and
administrative support ($39.12, NAICS 43–0000),
Accountant and auditor ($51.04, NAICS 13–2011),
Information and record clerk ($37.45, NAICS 43–
4199).
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Total annual
cost
($) 34
[rounded]
Sfmt 4703
35 The pipeline’s modernization cost tracker filing
is expected to include information to:
Demonstrate that its current rates are just and
reasonable and that proposal includes the types of
benefits that the Commission found maintained the
pipeline’s incentives for innovation and efficiency;
Identify each capital investment to be recovered
by the surcharge, the facilities to be upgraded or
installed by those projects, and an upper limit on
the capital costs related to each project to be
included in the surcharge, and schedule for
completing the projects;
Establish accounting controls and procedures that
it will utilize to ensure that only identified eligible
costs are included in the tracker;
Include method for periodic review of whether
the surcharge and the pipeline’s base rates remain
just and reasonable; and
State the extent to which any particular project
will disrupt primary firm service, explain why it
expects it will not be able to continue to provide
firm service, and describe what arrangements the
pipeline intends to make to mitigate the disruption
or provide alternative methods of providing service.
36 Based on the Columbia case, we estimate that
a review may be required every 5 years, triggering
the first pipeline reviews to be done in Year 6 (for
the pipelines which applied and received approval
in Year 1).
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Federal Register / Vol. 80, No. 140 / Wednesday, July 22, 2015 / Notices
29. Title: FERC–545, Gas Pipeline
Rates: Rate Change (Non-formal).
30. Action: Revisions to an
information collection.
31. OMB Control No.: 1902–0154.
32. Respondents: Business or other for
profit enterprise (Natural Gas Pipelines).
33. Frequency of Responses: Ongoing.
34. Necessity of Information: The
Commission is establishing a policy to
allow interstate natural gas pipelines to
seek to recover certain capital
expenditures made to modernize system
infrastructure through a surcharge
mechanism, subject to certain
conditions. The information that the
pipeline should share with its shippers
and submit to the Commission is
intended to ensure that the resulting
rates are just and reasonable and protect
natural gas consumers from excessive
costs
35. Internal Review: The Commission
has reviewed the guidance in the Policy
Statement and has determined that the
information is necessary. These
requirements conform to the
Commission’s plan for efficient
information collection, communication,
and management within the natural gas
pipeline industry. The Commission has
assured itself, by means of its internal
review, that there is specific, objective
support for the burden estimates
associated with the information
requirements.
36. Interested persons may obtain
information on the reporting
requirements by contacting the
following: Federal Energy Regulatory
Commission, 888 First Street NE.,
Washington, DC 20426 [Attention: Ellen
Brown, Office of the Executive Director,
email: DataClearance@ferc.gov, phone:
(202) 502–8663, fax: (202) 273–0873].
37. Comments filed with OMB,
identified by the OMB Control No.
1902–0154 should be sent via email to
the Office of Information and Regulatory
Affairs: oira_submission@omb.gov,
Attention: Federal Energy Regulatory
Commission Desk Officer. The Desk
Officer may also be reached via
telephone at 202–395–0710. A copy of
the comments should also be sent to the
Commission, in Docket No. PL15–1–
000. Comments concerning the
collection of information and the
associated burden estimate should be
submitted by August 21, 2015.
The Commission orders:
The requests for clarification are
denied as discussed above.
By the Commission.
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Jkt 235001
Issued: July 16, 2015.
Kimberly D. Bose,
Secretary.
[FR Doc. 2015–17949 Filed 7–21–15; 8:45 am]
BILLING CODE 6717–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
[Docket No. CP15–504–000]
Dominion South Carolina Gas, Inc;
Notice of Intent To Prepare an
Environmental Assessment for the
Proposed Columbia to Eastover
Project and Request for Comments on
Environmental Issues
The staff of the Federal Energy
Regulatory Commission (FERC or
Commission) will prepare an
environmental assessment (EA) that will
discuss the environmental impacts of
the Columbia to Eastover Project
involving construction and operation of
facilities by Dominion South Carolina
Gas, Inc (DCG) in Calhoun, Richland,
and Lexington Counties, South Carolina.
The Commission will use this EA in its
decision-making process to determine
whether the project is in the public
convenience and necessity.
This notice announces the opening of
the scoping process the Commission
will use to gather input from the public
and interested agencies on the project.
You can make a difference by providing
us with your specific comments or
concerns about the project. Your
comments should focus on the potential
environmental effects, reasonable
alternatives, and measures to avoid or
lessen environmental impacts. Your
input will help the Commission staff
determine what issues they need to
evaluate in the EA. To ensure that your
comments are timely and properly
recorded, please send your comments so
that the Commission receives them in
Washington, DC on or before August 17,
2015.
If you sent comments on this project
to the Commission before the opening of
this docket on May 29, 2015, you will
need to file those comments in Docket
No. CP15–504–000 to ensure they are
considered as part of this proceeding.
This notice is being sent to the
Commission’s current environmental
mailing list for this project. State and
local government representatives should
notify their constituents of this
proposed project and encourage them to
comment on their areas of concern.
If you are a landowner receiving this
notice, a pipeline company
representative may contact you about
PO 00000
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Fmt 4703
Sfmt 4703
43419
the acquisition of an easement to
construct, operate, and maintain the
proposed facilities. The company would
seek to negotiate a mutually acceptable
agreement. However, if the Commission
approves the project, that approval
conveys with it the right of eminent
domain. Therefore, if easement
negotiations fail to produce an
agreement, the pipeline company could
initiate condemnation proceedings
where compensation would be
determined in accordance with state
law.
DCG provided landowners with a fact
sheet prepared by the FERC entitled
‘‘An Interstate Natural Gas Facility On
My Land? What Do I Need To Know?’’
This fact sheet addresses a number of
typically asked questions, including the
use of eminent domain and how to
participate in the Commission’s
proceedings. It is also available for
viewing on the FERC Web site
(www.ferc.gov).
Public Participation
For your convenience, there are three
methods you can use to submit your
comments to the Commission. The
Commission encourages electronic filing
of comments and has expert staff
available to assist you at (202) 502–8258
or efiling@ferc.gov. Please carefully
follow these instructions so that your
comments are properly recorded.
(1) You can file your comments
electronically using the eComment
feature on the Commission’s Web site
(www.ferc.gov) under the link to
Documents and Filings. This is an easy
method for submitting brief, text-only
comments on a project;
(2) You can file your comments
electronically by using the eFiling
feature on the Commission’s Web site
(www.ferc.gov) under the link to
Documents and Filings. With eFiling,
you can provide comments in a variety
of formats by attaching them as a file
with your submission. New eFiling
users must first create an account by
clicking on ‘‘eRegister.’’ If you are filing
a comment on a particular project,
please select ‘‘Comment on a Filing’’ as
the filing type; or
(3) You can file a paper copy of your
comments by mailing them to the
following address. Be sure to reference
the project docket number (CP15–504–
000) with your submission: Kimberly D.
Bose, Secretary, Federal Energy
Regulatory Commission, 888 First Street
NE., Room 1A, Washington, DC 20426.
Summary of the Proposed Project
DCG proposes the Columbia to
Eastover Project to construct and
operate 28 miles of new 8-inch-diameter
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]]>Agencies
[Federal Register Volume 80, Number 140 (Wednesday, July 22, 2015)]
[Notices]
[Pages 43414-43419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17949]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. PL15-1-001]
Cost Recovery Mechanisms for Modernization of Natural Gas
Facilities; Order Denying Request For Clarification
Before Commissioners: Norman C. Bay, Chairman; Philip D. Moeller,
Cheryl A. LaFleur, Tony Clark, and Colette D. Honorable.
[[Page 43415]]
1. On April 16, 2015, the Commission issued a policy statement in
the referenced proceeding to provide greater certainty regarding the
ability of interstate natural gas pipelines to recover the costs of
modernizing their facilities and infrastructure to enhance the
efficient and safe operation of their systems.\1\ The Policy Statement
explains the standards the Commission will require interstate natural
gas pipelines to satisfy in order to establish simplified mechanisms,
such as trackers or surcharges, to recover certain costs associated
with replacing old and inefficient compressors and leak-prone pipes and
performing other infrastructure improvements and upgrades to enhance
the efficient and safe operation of their pipelines. On May 15, 2015,
Process Gas Consumers Group (PGC) and the American Forest and Paper
Association (AF&PA)(jointly Requesters) filed, pursuant to 18 CFR
385.212 (2014), a joint ``Request for Clarification'' of the Policy
Statement.\2\ As discussed more fully below, the Commission denies the
requested clarifications of the Policy Statement.
---------------------------------------------------------------------------
\1\ Cost Recovery Mechanisms for Modernization of Natural Gas
Facilities, 151 FERC ] 61,047 (2015) (Policy Statement).
\2\ On June 1, 2015, the Interstate Natural Gas Association of
America (INGAA) and Tenaska Marketing Ventures (Tenaska) filed
answers to the request for clarification, and on June 2, 2015, the
Kansas Corporation Commission filed in support of the clarification
request. On June 9, AF&PA and PGC separately filed replies to INGAA
and Tenaska. On June 11, 2015, the Natural Gas Supply Association
(NGSA) filed an answer to the request for clarification and comments
on INGAA's answer. On June 24, 2015, Tenaska filed an answer to
AF&PA and PGC.
---------------------------------------------------------------------------
I. Background
A. Policy Statement
2. The Policy Statement established a process to allow interstate
natural gas pipelines to seek to recover certain capital expenditures
made to modernize system infrastructure through a surcharge mechanism,
subject to conditions intended to ensure that the resulting rates are
just and reasonable and protect natural gas consumers from excessive
costs. Recognizing that historically the Commission has required
interstate natural gas pipelines to design their transportation rates
based on projected units of service, the Commission found in the Policy
Statement that recent governmental safety and environmental initiatives
have raised the probability that interstate natural gas pipelines will
soon face increased costs to enhance the safety and reliability of
their systems. The Commission issued the Policy Statement in an effort
to address these potential costs and to ensure that existing Commission
ratemaking policies do not unnecessarily inhibit interstate natural gas
pipelines' ability to expedite needed or required upgrades and
improvements, such as replacing old and inefficient compressors and
leak-prone pipelines. The Policy Statement adopted five guiding
standards a pipeline would have to satisfy for the Commission to
approve a proposed modernization cost tracker or surcharge. Those
criteria are (1) Review of Existing Base Rates; (2) Defined Eligible
Costs; (3) Avoidance of Cost Shifting; (4) Periodic Review of the
Surcharge and Base Rates; and (5) Shipper Support.
3. The Policy Statement addressed how the Commission would apply
those standards, and noted that ``the Policy Statement will be most
effective and efficient if designed according to flexible parameters
that will allow for accommodation of the particular circumstances of
each pipeline's circumstances. Maintaining a transparent policy with
flexible standards will best allow pipelines and their customers to
negotiate just and reasonable, and potentially mutually agreeable, cost
recovery mechanisms to address the individual safety, reliability,
regulatory compliance and other infrastructure issues facing that
pipeline.'' \3\ The Commission also stated that ``while we are imposing
specific conditions on the approval of any proposed modernization cost
tracker, leaving the parameters of those conditions reasonably flexible
will be more productive in addressing needed and required system
upgrades in a timely manner. Further, consistent with this approach,
the Commission will be able to evaluate any proposals in the context of
the specific facts relevant to the particular pipeline system at
issue.'' \4\
---------------------------------------------------------------------------
\3\ Policy Statement, 151 FERC ] 61,047 at P 40.
\4\ Id.
---------------------------------------------------------------------------
B. Request for Clarification
4. In the Request for Clarification, the Requesters seek what they
assert is ``clarification'' of six points related to the Policy
Statement. Specifically they request the Commission clarify (1) that
pipelines must provide actual cost and revenue information, based on
twelve months of operation, including the type of data required in
section 154.312 of the Commission's regulations, to justify its
existing rates under standard 1; (2) the party responsible for paying
modernization surcharges in existing capacity release arrangements; (3)
the formal procedures for conducting the collaborative process to
ensure all stakeholders are invited and included in meetings; (4) that
the Commission intends the pipeline to work with each shipper sector in
the collaborative process; (5) that if a pipeline has over-collected
through a surcharge or tracker such that its rates are later found
unjust and unreasonable the pipeline must pay refunds calculated from
the date a protest or complaint was filed; and (6) that pipelines may
not seek to implement a modernization tracker or surcharge until the
October 1, 2015 effective date of the Policy Statement.
5. On June 1, INGAA and Tenaska filed answers to the request for
clarification. INGAA asserts the clarification request raises issues
that were addressed by the Policy Statement and attempts to impose
added burdens and restrictions not required by the Policy Statement,
and as such should be rejected as an impermissible request for
rehearing.\5\ INGAA further states that even if the requests can be
considered requests for clarification, they are unnecessary because
contrary to the assertion of Requesters, the Policy Statement's
resolution of the issues raised is clear. Tenaska urges the Commission
to reject the request for clarification of the cost responsibility for
modernization charges in the capacity release context, stating that to
do so would preemptively resolve a bilateral contract issue against
replacement shippers. NGSA makes similar comments, stating that the
issue of cost responsibility for modernization surcharges is one for
the parties to the contracts, and that a generic determination by the
Commission will inhibit contract negotiations.
---------------------------------------------------------------------------
\5\ INGAA Answer at 2 (citing Natural Gas Supply Ass'n, et al.,
137 FERC ] 61,051, at P 30 (2011)).
---------------------------------------------------------------------------
6. As discussed more fully below, the Commission denies the
requests for clarification and declines to adopt the suggested formal
procedures.
II. Discussion
7. The Commission issued the Policy Statement in order to provide
guidance to the industry as to how the Commission will evaluate
proposals by interstate natural gas pipelines for the recovery of
infrastructure modernization costs. As we stated in the Policy
Statement, the Commission intends the standards a pipeline must satisfy
to implement a modernization cost tracker ``to be sufficiently flexible
so as not to require any specific form of compliance but to allow
pipelines and their customers to reach reasonable accommodations based
on the specific
[[Page 43416]]
circumstances of their systems.'' \6\ The Commission will evaluate any
proposal for such a surcharge on an individual, case-by-case basis, at
which time interested parties will have the opportunity to raise any
issues or concerns. The requested clarifications are antithetical to
that approach, and accordingly, as discussed below, the Commission
denies the requested clarifications.
---------------------------------------------------------------------------
\6\ Policy Statement, 151 FERC ] 61,047 at P 3.
---------------------------------------------------------------------------
A. Collaborative Process
8. The Policy Statement requires pipelines to work collaboratively
with shippers and other interested parties to seek support for any
proposed cost modernization surcharge. As part of this collaborative
process, the Commission stated that, before submitting a modernization
cost recovery proposal to the Commission, a pipeline should meet with
its customers and other interested parties to seek resolution of as
many issues as possible.
9. The Requesters ask the Commission to ``clarify'' the ``formal
procedures'' for conducting the collaborative process required by the
Policy Statement before the pipeline files its proposal with the
Commission, asserting that because the Policy Statement does not
require a filing to commence such a process, there is no clear way for
all shippers to know when a pipeline is initiating the process, or to
ensure that the process is fair and transparent. Requesters state that
the Commission should require the involvement of Commission settlement
judges, mediators or technical staff to ensure shippers' rights are
protected during the collaborative process.\7\ Requesters also request
clarification that the Commission intends the pipeline to work with
``each shipper sector'' during the collaborative process. Requesters
assert that while the Commission stated it was not requiring a specific
percentage of shipper support to approve a potential modernization cost
tracker, it did not address ``whether the pipeline is required to seek
shipper support from a broad spectrum of shipper sectors . . . or
whether it can just strike a deal with a subset of its customers.'' \8\
---------------------------------------------------------------------------
\7\ Request for Clarification at 6-8.
\8\ Request for Clarification at 9 & n.25 (citing Requester's
February 26, 2015 Joint Reply Comments).
---------------------------------------------------------------------------
10. The Commission denies clarification and declines to adopt
formal procedures or specified rules for the pre-filing collaborative
process required for a modernization cost tracker. The Policy Statement
makes clear the Commission's expectation that a pipeline work with all
of its customers during the collaborative process \9\ that would
precede a Natural Gas Act (NGA) section 4 filing. \10\ We decline to
adopt formal procedures for this collaboration, however, as it is the
Commission's intention that the process be an informal process for
parties to share information and negotiate absent Commission
involvement. The Policy Statement clearly states that during this
process, a pipeline should share with its customers the results of its
review of its systems to determine what system upgrades and
improvements are necessary, be responsive to requests for specific cost
and revenue data to determine whether existing rates are just and
reasonable, and provide parties the opportunity to comment on draft
tariff language for the proposed modernization cost mechanism. \11\
---------------------------------------------------------------------------
\9\ Policy Statement, 151 FERC ] 61,047 at P 93 (``As part of
this collaborative process, pipelines should meet with their
customers and other interested parties to seek resolution of as many
issues as possible before submitting a modernization cost recovery
proposal to the Commission.'')
\10\ 15 U.S.C. 717c (2006).
\11\ Id.
---------------------------------------------------------------------------
11. With respect to concerns that customers may not be aware of, or
be made aware of, the initiation of the collaborative process to
implement a modernization cost tracker, a pipeline will have to make an
NGA section 4 filing to implement any cost modernization surcharge.
That filing will be noticed the same as any other NGA section 4 filing
at the Commission, and will provide all interested persons the
opportunity to intervene in the proceeding and to protest. Consistent
with NGA section 4, the burden in that instance will be on the pipeline
to demonstrate that its proposal is just and reasonable, and as we
stated, the Commission will decide upon appropriate procedures to
address protests based upon the specific circumstances of each
proposal. Thus, in order to implement a proposed modernization cost
tracker in an efficient manner and without unnecessary delay, it is in
the proposing pipeline's best interest to resolve as many outstanding
issues as possible through the collaborative process prior to filing a
modernization cost recovery mechanism proposal.\12\ As noted in the
Policy Statement, the intent is to ``provide pipelines and their
customers wide latitude to reach agreements incorporating remedies for
a variety of system safety, reliability and/or efficiency issues.''
\13\ Adoption of formal procedures as suggested by the Requesters would
thwart rather than facilitate this intent and the collaborative
process.
---------------------------------------------------------------------------
\12\ In fact, INGAA recognizes in its answer (at 5) that
``excluding specific shippers or shipper sectors from the
collaborative process . . . would not be in pipelines' best
interests because any shippers or shipper groups that were excluded
from the process would surely contest any agreement reached by the
other parties.''
\13\ Policy Statement, 151 FERC ] 61,047 at P 94.
---------------------------------------------------------------------------
B. Existing Rate Justification
12. The Policy Statement states that ``any pipeline seeking a
modernization cost recovery tracker must demonstrate that its current
base rates to which the surcharge would be added are just and
reasonable. This is necessary to ensure that the overall rate produced
by the addition of the surcharge to the base rate is just and
reasonable, and does not reflect any cost over-recoveries that may have
been occurring under the preexisting base rates.'' \14\
---------------------------------------------------------------------------
\14\ Id. P 51.
---------------------------------------------------------------------------
13. Requesters assert that the Policy Statement does not identify
the data that pipelines must provide under the Commission's regulations
to show that the rates are just and reasonable, and whether a cost and
revenue study would need to include the information in the form
required by section 154.312 or 154.313 of the Commission's regulations.
Requesters state the Commission should clarify that the pipeline must
provide its most recent 12-months of actual costs and revenues, and the
information required under the more inclusive section 154.312, prior to
engaging in any collaborative process with its shippers.\15\
---------------------------------------------------------------------------
\15\ Request for Clarification at 1-5.
---------------------------------------------------------------------------
14. The Commission denies clarification. In the Policy Statement,
we declined to adopt suggestions that we require an NGA general section
4 rate proceeding as the only means to satisfy the standard that
existing rates are just and reasonable. As we noted, the ``type of rate
review necessary to determine whether a pipeline's existing rates are
just and reasonable is likely to vary from pipeline to pipeline . . .
therefore, we remain open to considering alternative approaches for a
pipeline to justify its existing rates.'' \16\ As that statement
implies, the Commission determined neither to require a specific method
by which the pipeline must show its existing rates are just and
reasonable, nor to proscribe the specific data or form that the data
must take if a pipeline chooses to justify its existing rates by a
method other than a general NGA section 4 rate case.
---------------------------------------------------------------------------
\16\ Policy Statement, 151 FERC ] 61,047 at P 52.
---------------------------------------------------------------------------
15. As we made clear in the Policy Statement, a pipeline seeking a
[[Page 43417]]
modernization cost surcharge must demonstrate to the Commission that
its existing base rates are no higher than a just and reasonable level.
Absent such a showing, the Commission would be unable to find that the
overall rate produced by the addition of the surcharge to the base rate
is just and reasonable. In order to facilitate the review of the
pipeline's existing rates, we encouraged pipelines to engage in a full
exchange of information with their customers.\17\ If that process fails
to satisfy interested parties that existing base rates are no higher
than a just and reasonable level, then the Commission will establish
procedures to resolve any disputed issues of fact raised in the
parties' protests to the filing based upon substantial evidence on the
record. Such procedures may include, if necessary, a hearing before an
Administrative Law Judge.\18\ Thus, to the extent a pipeline seeks
expedient approval of a modernization cost tracker, the Commission
expects that the pipeline will freely share data and the results of its
system testing to attempt to resolve as many issues as possible prior
to filing for the tracker.
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\17\ Policy Statement, 151 FERC ] 61,047 at P 53.
\18\ If the pipeline files a settlement supported by many of its
shippers but some contesting parties raise issues that cannot be
resolved on the existing record, the Commission may approve the
settlement as uncontested for the consenting parties and sever the
contesting parties to litigate their issues. This preserves the
benefit of the settlement for the consenting parties, while allowing
the contesting parties to obtain a litigated result on the merits.
Trailblazer Pipeline Co., 85 FERC ] 61,345, at 62,344-5 (1998),
reh'g, 87 FERC ] 61,110, at 61,446-7 (1999).
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C. Retroactive Refunds
16. Requesters also state that the Commission should clarify that
if a pipeline has over-collected through a surcharge or tracker, such
that its rates are later found to be unjust and unreasonable after a
protest or complaint proceeding, the pipeline must pay refunds
calculated from the date a protest or complaint was filed. They request
a requirement that a pipeline seeking a modernization cost surcharge or
tracker must agree that, if during the period that the surcharge is in
effect, a protest or an NGA section 5 complaint is filed against the
pipeline, the pipeline must make refunds retroactive to the date of the
protest or complaint.\19\ Requesters assert the condition is justified
in return for obtaining an exception to the standard NGA section 4
ratemaking principles.
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\19\ Request for Clarification at 10-11.
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17. The Commission denies the requested clarification.\20\ If the
Commission is unable to determine the justness and reasonableness of a
proposed modernization cost tracker mechanism within 30 days after its
filing pursuant to NGA section 4, the Commission will suspend the
filing and it will remain subject to refund until the Commission
determines whether it is just and reasonable. Further, once a
modernization cost tracker mechanism has been approved, the requirement
that such mechanisms include a provision for trueing up cost over and
under-recoveries will ensure that the pipeline only recovers eligible
costs approved for recovery in the tracker mechanism. Each of the
pipeline's periodic filings pursuant to its modernization cost tracker
mechanism would include a comparison of the costs approved for recovery
during the prior period with the amounts the pipeline actually
collected from its shippers during that period.\21\ To the extent the
pipeline over-recovered or under-recovered those costs during the
relevant period, it would adjust the surcharge for the next period up
or down so as to either return the over-recovery to its shippers or
collect any under-recovery from them. Accordingly, the Commission finds
no reason to condition the right to implement a modernization cost
tracker mechanism on the pipeline's agreement to forego its NGA section
5 rights against retroactive refunds for amounts recovered pursuant to
a modernization cost tracker mechanism that the Commission has approved
as just and reasonable under NGA section 4.
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\20\ The Commission notes further that this request is
effectively a request for rehearing of the Commission's decision not
to adopt a virtually identical condition requested by APGA in its
comments on the Proposed Policy Statement. See APGA Initial Comments
at 20, Policy Statement, 151 FERC ] 61,047 at P 86.
\21\ The pipeline's customers would have a chance to challenge
any of the projected costs included in the periodic filings.
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D. Cost Responsibility in Capacity Release Agreements
18. With respect to capacity releases, Requesters state that the
Policy Statement did not respond to concerns raised by AF&PA that
parties to existing capacity release agreements did not contemplate
cost responsibility for modernization costs in existing capacity
release agreements, and thus the Commission should clarify that such
costs should be placed on replacement shippers.\22\
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\22\ Request for Clarification at 5-6.
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19. In their answers, INGAA and the NGSA oppose Requesters'
proposal that cost responsibility for any modernization surcharge be
placed on replacement shippers. INGAA states that under Commission
policy, the releasing shipper remains ultimately liable for any
surcharge amount that a replacement shipper does not pay. NGSA asserts
that given the myriad of current day contracting options, the
resolution of contractual matters, particularly where the contract is
silent as to surcharge cost responsibility, is best left to the
contracting parties. NGSA also argues that the Commission should not
make a generic determination as to the responsibility for modernization
cost surcharges within existing capacity release agreements because
doing so would unnecessarily impede the parties' attempts to negotiate
and resolve the issue.
20. The Commission denies clarification. Section 284.8(f) of the
Commission's regulations \23\ provides that, unless otherwise agreed by
the pipeline, the contract of the releasing shipper will remain in full
force and effect during the release, with the net proceeds from any
release to a replacement shipper credited to the releasing shipper's
reservation charge. Therefore, to the extent the releasing shipper's
service agreement permits the pipeline to recover the surcharge from
the releasing shipper, the releasing shipper would remain liable for
the surcharge during the term of any temporary release. The replacement
shipper's liability for the surcharge would turn on the terms of its
release. If the release requires the replacement shipper to pay any
portion of the surcharge, those payments would be credited to the
releasing shipper. In short, the issue of cost responsibility for
modernization costs during the term of a capacity release is a
contractual issue between the relevant parties,\24\ and that issue
cannot be resolved on a generic basis.
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\23\ 18 CFR 284.8(f) (2014).
\24\ See Policy Statement, 151 FERC ] 61,047 at P 82, stating
that the pipeline's ability to impose a modernization cost surcharge
on discounted or negotiated rate shippers is a contractual issue
between the pipeline and its discounted or negotiated rate shippers.
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E. Effective Date
21. Finally, Requesters seek clarification that pipelines may not
seek to implement a modernization cost tracker through a filing, or
even commence the collaborative process, until the October 1, 2015
effective date of the Policy Statement.\25\ Requesters state that this
effective date enforcement would provide the Commission time to
proscribe the formal procedures that it requests.
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\25\ Request for Clarification at 11-12.
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[[Page 43418]]
22. The Commission declines to provide the requested clarification.
The Commission has no authority to regulate a pipeline's discussions
with its customers or the content of such discussions. Moreover, even
if it had the authority, the Commission advocates active discussions
between pipelines and their customers, and as we stated in the Policy
Statement, ``[t]he Commission sees no reason for pipelines to wait to
make needed improvements to their systems until a regulation is adopted
requiring them to do so.'' \26\
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\26\ Policy Statement, 151 FERC ] 61,047 at P 68.
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23. Additionally, the Commission lacks the authority to prevent a
pipeline from making an NGA section 4 filing to request approval for a
modernization cost tracker. As INGAA notes, the Policy Statement did
not permit pipelines to file for tracker mechanisms for the first time;
it announced the Commission's policy for addressing such filings. There
is nothing to prevent a pipeline from making a proposal consistent with
the Commission's existing policy as set forth in Columbia Gas
Transmission, LLC,\27\ prior to October 1, 2015.\28\
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\27\ Columbia Gas Transmission, LLC, 142 FERC ] 61,062 (2013).
\28\ Further, because the Commission declines to adopt the
requested formal procedures for the collaborative process there is
no need for the suggested delay to allow time for the Commission to
develop those procedures.
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24. Finally, we note that, as with any policy statement, the Policy
Statement is not a final action of the Commission but an expression of
our intent as to how we will evaluate proposals by interstate natural
gas pipelines for the recovery of infrastructure modernization costs.
As the U.S. Court of Appeals for the District of Columbia Circuit has
held, a statement of policy ``is not finally determinative of the
issues or rights to which it is addressed;'' rather, it only
``announces the agency's tentative intentions for the future.'' \29\ We
will consider each pipeline proposal to implement a modernization cost
tracker based on the facts relevant to that particular pipeline and
will address any further concerns regarding the Policy Statement on a
case-by-case basis.
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\29\ Pacific Gas & Electric Co. v. FPC, 506 F.2d 33, 38 (D.C.
Cir. 1974). See Alternatives to Traditional Cost-of-Service
Ratemaking for Natural Gas Pipelines, 75 FERC ] 61,024, at 61,076
(citing, American Gas Ass'n v. FERC, 888 F.2d 136 (1989); Interstate
Natural Gas Pipeline Rate Design, 47 FERC ] 61,295 (1985), order on
reh'g, 48 FERC ] 61,122, at 61,442 (1989)).
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F. Information Collection Statement
25. The collection of information discussed in the Policy Statement
is being submitted to the Office of Management and Budget (OMB) for
review under section 3507(d) of the Paperwork Reduction Act of 1995
\30\ and OMB's implementing regulations.\31\ OMB must approve
information collection requirements imposed by agency rules.
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\30\ 44 U.S.C. 3507(d) (2012).
\31\ 5 CFR 1320.
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26. In the Policy Statement, the Commission solicited comments from
the public on the Commission's need for this information, whether the
information will have practical utility, the accuracy of the burden
estimates, recommendations to enhance the quality, utility, and clarity
of the information to be collected, and any suggested methods for
minimizing respondents' burden, including the use of automated
information techniques. The Commission received no comments on those
issues.
27. The burden estimates are for implementing the information
collection requirements of the Policy Statement. The collection of
information related to the Policy Statement falls under FERC-545 (Gas
Pipeline Rates: Rate Change (Non-Formal).\32\ The following estimate of
reporting burden is related only to the Policy Statement.
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\32\ The information collection requirements in the Policy
Statement were included in FERC-545A (OMB Control No.: TBD). The
Commission used FERC-545A (a temporary collection number) because
another item was pending OMB review under FERC-545, and only one
item per OMB Control Number can be pending review at OMB at a time.
The submittal to OMB will now be made under FERC-545 (OMB Control
No. 1902-0154).
\33\ An estimated 165 natural gas pipelines (Part 284 program)
may be affected by the Policy Statement. Of the 165 pipelines,
Commission staff estimates that 3 pipelines may choose to submit an
application for a modernization cost tracker per year.
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28. Public Reporting Burden: The estimated annual burden and cost
follow.
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\34\ The hourly wage figures are published by the Bureau of
Labor Statistics, U.S. Department of Labor, National Occupational
Employment and Wage Estimates, United States, Occupation Profiles,
May 2014 (available 4/1/2015) at https://www.bls.gov/oes/home.htm,
and the benefits are calculated using BLS information, at https://www.bls.gov/news.release/ecec.nr0.htm.
The average hourly cost (salary plus benefits) to prepare the
modernization cost tracker filing is $65.59. It is the average of
the following hourly costs (salary plus benefits): manager ($77.93,
NAICS 11-0000), Computer and mathematical ($58.17, NAICS 15-0000),
Legal ($129.68, NAICS 23-0000), Office and administrative support
($39.12, NAICS 43-0000), Accountant and auditor ($51.04, NAICS 13-
2011), Information and record clerk ($37.45, NAICS 43-4199),
Engineer ($66.74, NAICS 17-2199), Transportation, Storage, and
Distribution Manager ($64.55, NAICS 11-3071).
The average hourly cost (salary plus benefits) to perform the
periodic review is $67.04. It is the average of the following hourly
costs (salary plus benefits): manager ($77.93, NAICS 11-0000), Legal
($129.68, NAICS 23-0000), Office and administrative support ($39.12,
NAICS 43-0000), Accountant and auditor ($51.04, NAICS 13-2011),
Information and record clerk ($37.45, NAICS 43-4199).
\35\ The pipeline's modernization cost tracker filing is
expected to include information to:
Demonstrate that its current rates are just and reasonable and
that proposal includes the types of benefits that the Commission
found maintained the pipeline's incentives for innovation and
efficiency;
Identify each capital investment to be recovered by the
surcharge, the facilities to be upgraded or installed by those
projects, and an upper limit on the capital costs related to each
project to be included in the surcharge, and schedule for completing
the projects;
Establish accounting controls and procedures that it will
utilize to ensure that only identified eligible costs are included
in the tracker;
Include method for periodic review of whether the surcharge and
the pipeline's base rates remain just and reasonable; and
State the extent to which any particular project will disrupt
primary firm service, explain why it expects it will not be able to
continue to provide firm service, and describe what arrangements the
pipeline intends to make to mitigate the disruption or provide
alternative methods of providing service.
\36\ Based on the Columbia case, we estimate that a review may
be required every 5 years, triggering the first pipeline reviews to
be done in Year 6 (for the pipelines which applied and received
approval in Year 1).
FERC-545, Modifications From Policy Statement in PL15-1-000
----------------------------------------------------------------------------------------------------------------
Number of Number of Average burden Total annual
respondents responses per hours per Total annual cost ($) \34\
\33\ respondent response burden hours [rounded]
----------------------------------------------------------------------------------------------------------------
(1) (2) (3) (1) x (2) x ..............
(3)
----------------------------------------------------------------------------------------------------------------
Provide information to shippers 3 1 750 2,250 $147,578
for any surcharge proposal, and
prepare modernization cost
tracker filing \35\............
Perform periodic review and 3 \36\ 0.60 350 630 $42,235
provide information to show
that both base rates and the
surcharge amount remain just
and reasonable.................
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[[Page 43419]]
29. Title: FERC-545, Gas Pipeline Rates: Rate Change (Non-formal).
30. Action: Revisions to an information collection.
31. OMB Control No.: 1902-0154.
32. Respondents: Business or other for profit enterprise (Natural
Gas Pipelines).
33. Frequency of Responses: Ongoing.
34. Necessity of Information: The Commission is establishing a
policy to allow interstate natural gas pipelines to seek to recover
certain capital expenditures made to modernize system infrastructure
through a surcharge mechanism, subject to certain conditions. The
information that the pipeline should share with its shippers and submit
to the Commission is intended to ensure that the resulting rates are
just and reasonable and protect natural gas consumers from excessive
costs
35. Internal Review: The Commission has reviewed the guidance in
the Policy Statement and has determined that the information is
necessary. These requirements conform to the Commission's plan for
efficient information collection, communication, and management within
the natural gas pipeline industry. The Commission has assured itself,
by means of its internal review, that there is specific, objective
support for the burden estimates associated with the information
requirements.
36. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426 [Attention:
Ellen Brown, Office of the Executive Director, email:
DataClearance@ferc.gov, phone: (202) 502-8663, fax: (202) 273-0873].
37. Comments filed with OMB, identified by the OMB Control No.
1902-0154 should be sent via email to the Office of Information and
Regulatory Affairs: oira_submission@omb.gov, Attention: Federal Energy
Regulatory Commission Desk Officer. The Desk Officer may also be
reached via telephone at 202-395-0710. A copy of the comments should
also be sent to the Commission, in Docket No. PL15-1-000. Comments
concerning the collection of information and the associated burden
estimate should be submitted by August 21, 2015.
The Commission orders:
The requests for clarification are denied as discussed above.
By the Commission.
Issued: July 16, 2015.
Kimberly D. Bose,
Secretary.
[FR Doc. 2015-17949 Filed 7-21-15; 8:45 am]
BILLING CODE 6717-01-P
