Interstate and Intrastate Natural Gas Pipelines; Rate Changes Relating to Federal Income Tax Rate, 12888-12901 [2018-05669]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)]
[Proposed Rules]
[Pages 12888-12901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05669]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 154, 260, & 284

[Docket No. RM18-11-000]


Interstate and Intrastate Natural Gas Pipelines; Rate Changes 
Relating to Federal Income Tax Rate

AGENCY:  Federal Energy Regulatory Commission, Department of Energy.

ACTION:  Notice of proposed rulemaking.

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SUMMARY:  The Federal Energy Regulatory Commission is proposing a 
process that will allow it to determine which jurisdictional natural 
gas pipelines may be collecting unjust and unreasonable rates in light 
of the recent reduction in the corporate income tax rate in the Tax 
Cuts and Jobs Act and changes to the Commission's income tax allowance 
policies following the United Airlines, Inc. v. FERC decision.

DATES:  Comments are due April 25, 2018.

ADDRESSES:  Comments, identified by docket number, may be filed 
electronically at https://www.ferc.gov in acceptable native applications 
and print-to-PDF, but not in scanned or picture format. For those 
unable to file electronically, comments may be filed by mail or hand-
delivery to: Federal Energy Regulatory Commission, Secretary of the 
Commission, 888 First Street NE, Washington, DC 20426. The Comment 
Procedures Section of this document contains more detailed filing 
procedures.

FOR FURTHER INFORMATION CONTACT: 
Adam Eldean (Legal Information), Office of the General Counsel, 888 
First Street NE, Washington, DC 20426, (202) 502-8047, 
[email protected].

[[Page 12889]]

Seong-Kook Berry (Technical Information), Office of Energy Market 
Regulation, 888 First Street NE, Washington, DC 20426, (202) 502-6544, 
[email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

 
                                                         Paragraph Nos.
 
I. Introduction......................................                  1
II. Background.......................................                  6
    A. Tax Cuts and Jobs Act.........................                  6
    B. United Airlines...............................                  9
    C. Overview of Natural Gas Rates.................                 11
        1. The Natural Gas Act.......................                 11
        2. The Natural Gas Policy Act of 1978........                 17
    D. Requests for Commission Action................                 20
III. Discussion......................................                 24
    A. Interstate Natural Gas Pipelines With Cost-                    26
     Based Rates.....................................
        1. One-Time Report on Rate Effect of the Tax                  32
         Cuts and Jobs Act...........................
        2. Additional Filing Options for Natural Gas                  41
         Pipelines...................................
        a. Limited NGA Section 4 Filing..............                 42
        b. Commitment To Make General NGA Section 4                   47
         Filing......................................
        c. Statement Explaining Why Adjustment in                     48
         Rates Is Not Needed.........................
        d. Take No Action............................                 51
    B. Initial Rates Under NGA Section 7.............                 52
    C. NGPA Section 311 and Hinshaw Pipelines........                 55
IV. Implementation...................................                 62
V. Regulatory Requirements...........................                 66
    A. Information Collection Statement..............                 66
    B. Environmental Analysis........................                 79
    C. Regulatory Flexibility Act Certification......                 80
    D. Comment Procedures............................                 83
    E. Document Availability.........................                 87
 

I. Introduction

    1. On December 22, 2017, the President signed into law the Tax Cuts 
and Jobs Act.\1\ The Tax Cuts and Jobs Act, among other things, lowers 
the federal corporate income tax rate from 35 percent to 21 percent, 
effective January 1, 2018. This means that, beginning January 1, 2018, 
companies subject to the Commission's jurisdiction will compute income 
taxes owed to the Internal Revenue Service (IRS) based on a 21 percent 
tax rate. The tax rate reduction will result in less corporate income 
tax expense going forward.\2\
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    \1\ An Act to provide for reconciliation pursuant to titles II 
and V of the concurrent resolution on the budget for fiscal year 
2018, Public Law 115-97, 131 Stat. 2054 (2017) (Tax Cuts and Jobs 
Act).
    \2\ See id. 11011, 131 Stat. at 2063.
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    2. Concurrently with the issuance of this Notice of Proposed 
Rulemaking, the Commission is issuing a Revised Policy Statement on 
Treatment of Income Taxes (Revised Policy Statement) \3\ and an Order 
on Remand \4\ in response to the decision of the United States Court of 
Appeals for the District of Columbia Circuit (D.C. Circuit) in United 
Airlines.\5\ The Revised Policy Statement explains that a double 
recovery results from granting a Master Limited Partnership (MLP) an 
income tax allowance and a discounted cash flow (DCF) return on equity 
(ROE), and accordingly establishes a policy that MLPs are not permitted 
to recover an income tax allowance in their cost of service. The 
Revised Policy Statement also explains that other partnership and pass-
through entities not organized as an MLP must, if claiming an income 
tax allowance, address the D.C. Circuit's double-recovery concern.\6\
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    \3\ Inquiry Regarding the Commission's Policy for Recovery of 
Income Tax Costs, 162 FERC ] 61,227 (2018) (Revised Policy 
Statement).
    \4\ SFPP, L.P., Opinion No. 511-C, 162 FERC ] 61,228 (2018) 
(Remand Order).
    \5\ United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir. 
2016).
    \6\ Revised Policy Statement, 162 FERC ] 61,227.
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    3. In response to the Tax Cuts and Jobs Act and the Revised Policy 
Statement following the United Airlines decision, the Commission 
proposes to require interstate natural gas pipelines to file an 
informational filing with the Commission pursuant to sections 10 and 14 
of the Natural Gas Act (NGA) (One-time Report on Rate Effect of the Tax 
Cuts and Jobs Act).\7\ The One-time Report is designed to collect 
financial information to evaluate the impact of the Tax Cuts and Jobs 
Act and the Revised Policy Statement on interstate natural gas 
pipelines' revenue requirement. In addition to the One-time Report, the 
Commission proposes to provide four options for each interstate natural 
gas pipeline to voluntarily make a filing to address the changes to the 
pipeline's recovery of tax costs, or explain why no action is needed: 
(1) File a limited NGA section 4 filing to reduce the pipeline's rates 
to reflect the decrease in the federal corporate income tax rate 
pursuant to the Tax Cuts and Jobs Act and the elimination of the income 
tax allowance for MLPs consistent with the Revised Policy Statement, 
(2) make a commitment to file a general NGA section 4 rate case in the 
near future, (3) file a statement explaining why an adjustment to its 
rates is not needed, or (4) take no action other than filing the One-
time Report. If an interstate natural gas pipeline does not choose 
either of the first two options, the Commission will consider, based on 
the information in the One-time Report and comments by interested 
parties, whether to issue an order to show cause under NGA section 5 
requiring the pipeline either to reduce its rates to reflect the income 
tax reduction or explain why it should not be required to do so.
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    \7\ The One-time Report on Rate Effect of the Tax Cuts and Jobs 
Act is referred to interchangeably as ``One-time Report'' or ``FERC 
Form No. 501-G'' in this Notice of Proposed Rulemaking.
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    4. The Commission proposes to establish a staggered schedule for 
interstate natural gas pipelines to file the One-time Report and choose 
one of the four options described above. The Commission anticipates 
that the deadlines for these filings will be in the late summer and 
early fall of this year. The Commission encourages each pipeline to 
meet with its customers as soon as possible to discuss whether and how 
its rates should be modified in light of the Tax Cuts and Jobs Act and 
the

[[Page 12890]]

Revised Policy Statement, and whether settlement is possible. 
Interstate natural gas pipelines that file general NGA section 4 rate 
cases or pre-packaged uncontested rate settlements before the deadline 
for their One-time Report will be exempted from making the One-time 
Report.\8\
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    \8\ In addition, interstate pipelines whose rates are being 
investigated under NGA section 5 need not file the One-time Report.
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    5. The Commission proposes to provide separate procedures for 
intrastate natural gas pipelines performing interstate service pursuant 
to section 311 of the Natural Gas Policy Act of 1978 (NGPA) and Hinshaw 
pipelines performing interstate transportation pursuant to a limited 
jurisdiction certificate under Sec.  284.224 of the Commission's 
regulations. The Commission proposes to require these pipelines to file 
a new rate election under Sec.  284.123(b) of the Commission's 
regulations if their rates for intrastate service are reduced to 
reflect the Tax Cuts and Jobs Act.

II. Background

A. Tax Cuts and Jobs Act

    6. On December 22, 2017, the President signed the Tax Cuts and Jobs 
Act. The Tax Cuts and Jobs Act, among other things, lowers the federal 
corporate income tax rate from 35 percent to 21 percent, effective 
January 1, 2018. This means that, beginning January 1, 2018, companies 
subject to the Commission's jurisdiction will compute income taxes owed 
to the IRS based on a 21 percent tax rate. The tax rate reduction will 
result in less corporate income tax expense going forward.
    7. The tax rate reduction will also result in a reduction in 
accumulated deferred income taxes (ADIT) on the books of rate-regulated 
companies. The amount of the reduction to ADIT that was collected from 
customers but is no longer payable to the IRS is excess ADIT and should 
be flowed back to ratepayers under general ratemaking principles. The 
Tax Cuts and Jobs Act does not prevent such flow back, although it does 
include rules on how quickly companies may reduce their excess ADIT. 
Specifically, the Tax Cuts and Jobs Act indicates that rate-regulated 
companies generally should use the average rate assumption method when 
flowing excess ADIT back to customers.\9\ Rate-regulated companies must 
follow this requirement to be considered in compliance with 
normalization. This means that any flow back of ADIT faster than the 
requirement imposed by the Tax Cuts and Jobs Act (e.g., a one-time 
large credit to ratepayers or a flow-back method that is over a 
relatively short period of time) would constitute a normalization 
violation and may result in unfavorable tax consequences.\10\
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    \9\ See Tax Cuts and Jobs Act 13001, 131 Stat. at 2096.
    \10\ Id. 13001(b)(6)(A), 131 Stat. at 2100 (``If . . . the 
taxpayer does not use a normalization method of accounting for the 
corporate rate reductions provided in the amendments made by this 
section . . . the taxpayer's tax for the taxable year shall be 
increased by the amount by which it reduces its excess tax reserve 
more rapidly than permitted under a normalization method of 
accounting.'').
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    8. The Tax Cuts and Jobs Act also establishes a 20 percent 
deduction, with several exceptions, of ``qualified business income'' 
from certain pass-through businesses (such as a partnership or S 
corporation) for a taxpayer other than a corporation.\11\ The deduction 
reduces taxable income, not adjusted gross income.
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    \11\ See id. 11011, 131 Stat. at 2063.
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B. United Airlines

    9. In United Airlines, the D.C. Circuit held that the Commission 
failed to demonstrate that allowing SFPP, L.P. (SFPP), an MLP, to 
recover both an income tax allowance and the DCF methodology rate of 
return does not result in a double recovery of investors' tax costs. 
Accordingly, the D.C. Circuit remanded the underlying rate proceeding 
to the Commission for further consideration. While the D.C. Circuit's 
decision directly addressed the rate case filed by SFPP, the United 
Airlines double-recovery analysis referred to partnerships generally. 
Recognizing the potentially industry-wide ramifications, the Commission 
issued a Notice of Inquiry in Docket No. PL17-1-000, soliciting 
comments on how to resolve any double recovery resulting from the rate 
of return policies and the policy permitting an income tax allowance 
for partnership entities.\12\
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    \12\ Inquiry Regarding the Commission's Policy for Recovery of 
Income Tax Costs, Notice of Inquiry, 157 FERC ] 61,210 (2016).
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    10. Concurrently with the issuance of this Notice of Proposed 
Rulemaking, the Commission is issuing both (a) an Order on Remand in 
the SFPP rate case \13\ and (b) a Revised Policy Statement in Docket 
No. PL17-1.\14\ The Revised Policy Statement explains that a double 
recovery results from granting an MLP an income tax allowance and a DCF 
ROE. Accordingly, the Commission will no longer permit MLPs to recover 
an income tax allowance in their cost of service. The Revised Policy 
Statement also explains that while all partnerships seeking to recover 
an income tax allowance in a cost-of-service rate case will need to 
address the United Airlines double-recovery concern, the Commission 
will address the application of United Airlines to these non-MLP 
partnership forms as those issues arise in subsequent proceedings.
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    \13\ Remand Order, 162 FERC ] 61,228.
    \14\ Revised Policy Statement, 162 FERC ] 61,227.
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C. Overview of Natural Gas Rates

1. The Natural Gas Act
    11. As required by Sec.  284.10 of the Commission's 
regulations,\15\ interstate natural gas pipelines generally have stated 
rates for their services, which are approved in a rate proceeding under 
NGA sections 4 or 5 and remain in effect until changed in a subsequent 
section 4 or 5 proceeding. The stated rates recover all components of 
the pipeline's cost of service, including the pipeline's federal income 
taxes, in a single, overall rate.\16\ When pipelines file under NGA 
section 4 to change their rates, the Commission requires the pipeline 
to provide detailed support for all the components of its cost of 
service, including federal income taxes.\17\
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    \15\ 18 CFR 284.10 (2017).
    \16\ Most pipeline tariffs include tracking mechanisms for the 
recovery of fuel and lost and unaccounted for gas, but generally 
pipelines do not separately track any other cost.
    \17\ 18 CFR 154.312 and 154.313 (2017). The pipeline must show 
the computation of its allowance for federal income taxes in 
Schedule H-3.
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    12. The Commission generally does not permit pipelines to change 
any single component of their cost of service outside of a general NGA 
section 4 rate case.\18\ A primary reason for this policy is that, 
while one component of the cost of service may have increased, others 
may have declined. In a general NGA section 4 rate case, all components 
of the cost of service may be considered and any decreases in an 
individual component can be offset against increases in other cost 
components.\19\ For the same reasons, the Commission reviews all of a 
pipeline's costs and revenues when it investigates whether a pipeline's 
existing rates are unjust and unreasonable under NGA section 5.\20\
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    \18\ See, e.g., Trunkline Gas Co., 142 FERC ] 61,133, at P 24 
n.28 (2013).
    \19\ ANR Pipeline Co., 110 FERC ] 61,069, at P 18 (2005).
    \20\ Natural Gas Pipeline Co. of America LLC, 158 FERC ] 61,044 
(2017); Wyoming Interstate Co., L.L.C., 158 FERC ] 61,040 (2017); 
Tuscarora Gas Transmission Co., 154 FERC ] 61,030 (2016); Iroquois 
Gas Transmission System, L.P., 154 FERC ] 61,028 (2016); Empire 
Pipeline, Inc., 154 FERC ] 61,029 (2016); Columbia Gulf 
Transmission, LLC, 54 FERC ] 61,027 (2016); Wyoming Interstate Co., 
L.L.C., 141 FERC ] 61,117 (2012); Viking Gas Transmission Co., 141 
FERC ] 61,118 (2012); Bear Creek Storage Co., L.L.C., 137 FERC ] 
61,134 (2011); MIGC LLC, 137 FERC ] 61,135 (2011); ANR Storage Co., 
137 FERC ] 61,136 (2011); Ozark Gas Transmission, L.L.C., 133 FERC ] 
61,158 (2010); Kinder Morgan Interstate Gas Transmission LLC, 133 
FERC ] 61,157 (2010); Northern Natural Gas Co., 129 FERC ] 61,159 
(2009); Great Lakes Gas Transmission Ltd. P'ship, 129 FERC ] 61,160 
(2009); Natural Gas Pipeline Co. of America LLC, 129 FERC ] 61,158 
(2009).

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[[Page 12891]]

    13. NGA sections 4 and 5 proceedings are routinely resolved through 
a settlement agreement between the pipeline and its customers. Most of 
the agreements are ``black box'' settlements that do not provide 
detailed cost-of-service information. In addition, in lieu of 
submitting a general NGA section 4 rate case, a pipeline may submit a 
pre-packaged settlement to the Commission. When pipelines file pre-
packaged settlements, they generally do not include any cost and 
revenue data in the filing. The Commission will approve an uncontested 
settlement offer upon finding that ``the settlement appears to be fair 
and reasonable and in the public interest.'' \21\ Many settlements 
include moratorium provisions that limit the ability of the pipeline to 
file to revise its rates, or for the shippers to file a section 5 
complaint, for a particular time period. In addition, many settlements 
include ``come-back provisions,'' which require a pipeline to file a 
NGA section 4 filing no later than a particular date.
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    \21\ 18 CFR 385.602(g)(3).
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    14. The Commission has granted most interstate natural gas 
pipelines authority to negotiate rates with individual customers.\22\ 
Such rates are not bound by the maximum and minimum recourse rates in 
the pipeline's tariff.\23\ In order to be granted negotiated rate 
authority, a pipeline must have a cost-based recourse rate on file with 
the Commission, so a customer always has the option of entering into a 
contract at the cost-based recourse rate rather than a negotiated rate 
if it chooses. The pipeline must file each negotiated rate agreement 
with the Commission. In addition, pipelines are also permitted to 
selectively discount their rates and the Commission approves the 
maximum recourse rate. While negotiated rates may be above the maximum 
recourse rate, discount rates must remain below the maximum rate. The 
maximum recourse rate is the ceiling rate for all long-term capacity 
releases, including capacity releases to replacement shippers by firm 
customers with negotiated rates.
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    \22\ See Natural Gas Pipeline Negotiated Rate Policies and 
Practices; Modification of Negotiated Rate Policy, 104 FERC ] 61,134 
(2003), order on reh'g and clarification, 114 FERC ] 61,042, 
dismissing reh'g and denying clarification, 114 FERC ] 61,304 
(2006).
    \23\ Northern Natural Gas Co., 105 FERC ] 61,299, at PP 15-16 
(2003).
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    15. Changes to a pipeline's recourse rates occurring under NGA 
sections 4 and 5 do not affect a customer's negotiated rate, because 
that rate is negotiated as an alternative to the customer taking 
service under the recourse rate. However, a shipper receiving a 
discounted rate may experience a reduction as a result of the outcome 
of a rate proceeding if the recourse rate is reduced below the 
discounted rate. The prevalence of negotiated and discount rates varies 
among pipelines, depending upon the competitive situation.
    16. The Commission also grants interstate natural gas pipelines 
market-based rate authority when the pipeline can show it lacks market 
power for the specific services or when the applicant or the Commission 
can mitigate the market power with specific conditions.\24\ A pipeline 
that has been granted market-based rate authority will have an approved 
tariff on file with the Commission but will not have a Commission 
approved rate. Rather, all rates for services are negotiated by the 
pipeline and its customers. Currently, 29 interstate natural gas 
pipelines have market-based rate authority for storage and 
interruptible hub services (such as wheeling and park and loan 
services), and one pipeline (Rendezvous Pipeline Company, LLC) has 
market-based rate authority for transportation services.
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    \24\ Alternatives to Traditional Cost of Service Ratemaking for 
Natural Gas Pipelines and Regulation of Negotiated Transportation 
Services of Natural Gas Pipelines, 74 FERC ] 61,076 (1996) 
(Negotiated Rate Policy Statement); see also Rate Regulation of 
Certain Natural Gas Storage Facilities, Order No. 678, FERC Stats. & 
Regs. ] 31,220 (2006), reh'g denied, Order No. 678-A, 117 FERC ] 
61,190 (2006).
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2. The Natural Gas Policy Act of 1978
    17. NGPA section 311 authorizes the Commission to allow intrastate 
pipelines to transport natural gas ``on behalf of'' interstate 
pipelines or local distribution companies served by interstate 
pipelines.\25\ NGPA section 311(a)(2)(B) provides that the rates for 
interstate transportation provided by intrastate pipelines shall be 
``fair and equitable and may not exceed an amount which is reasonably 
comparable to the rates and charges which interstate pipelines would be 
permitted to charge for providing similar transportation service.'' 
\26\ In addition, NGPA section 311(c) provides that any authorization 
by the Commission for an intrastate pipeline to provide interstate 
service ``shall be under such terms and conditions as the Commission 
may prescribe.'' \27\ Section 284.224 of the Commission's regulations 
provides for the issuance of blanket certificates under section 7 of 
the NGA to Hinshaw pipelines \28\ to provide open access transportation 
service ``to the same extent that and in the same manner'' as 
intrastate pipelines are authorized to perform such service.\29\ The 
Commission regulates the rates for interstate service provided by 
Hinshaw pipelines under NGA sections 4 and 5.
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    \25\ 15 U.S.C. 3371 (2012).
    \26\ 15 U.S.C. 3371(a)(2)(B) (2012).
    \27\ 15 U.S.C. 3371(c)(2012).
    \28\ Section 1(c) of the NGA, 15 U.S.C. 717(c), exempts from the 
Commission's NGA jurisdiction those pipelines which transport gas in 
interstate commerce if: (1) They receive natural gas at or within 
the boundary of a state, (2) all the gas is consumed within that 
state, and (3) the pipeline is regulated by a state Commission. This 
is known as the Hinshaw exemption.
    \29\ See 18 CFR 284.224 (2017).
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    18. Section 284.123 of the Commission's regulations provides 
procedures for section 311 and Hinshaw pipelines to establish fair and 
equitable rates for their interstate services.\30\ Section 284.123(b) 
allows intrastate pipelines an election of two different methodologies 
upon which to base their rates for interstate services.\31\ First, 
Sec.  284.123(b)(1) permits an intrastate pipeline to elect to base its 
rates on the methodology or rate(s) approved by a state regulatory 
agency included in an effective firm rate for city-gate service. 
Second, Sec.  284.123(b)(2) provides that the pipeline may petition for 
approval of rates and charges using its own data to show its proposed 
rates are fair and equitable. The Commission has established a policy 
of reviewing the rates of section 311 and Hinshaw pipelines every five 
years.\32\ Section 311 pipelines not using state-approved rates must 
file a new rate case every five years, and Hinshaw pipelines must file 
a cost and revenue study every five years. Intrastate pipelines using 
state-approved rates that have not changed since the previous five-year 
filing are only required to make a filing certifying that those rates 
continue to meet the requirements of Sec.  284.123(b)(1) on the same 
basis on which they were approved. Conversely, if the state-approved 
rate used for the election is changed at any time, the section 311 or 
Hinshaw pipeline must file a new rate election pursuant to Sec.  
284.123(b) for its interstate rates no later than 30 days after the 
changed rate becomes effective.
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    \30\ 18 CFR 284.123 (2017).
    \31\ 18 CFR 284.123(b) (2017).
    \32\ Contract Reporting Requirements of Intrastate Natural Gas 
Companies, Order No. 735, FERC Stats. & Regs. ] 31,310, at P 92, 
order on reh'g, Order No. 735-A, FERC Stats. & Regs. ] 31,318 
(2010); see also Hattiesburg Industrial Gas Sales, L.L.C., 134 FERC 
] 61,236 (2011) (imposing a five-year rate review requirement on 
Hattiesburg Industrial Gas Sales, L.L.C.).
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    19. An intrastate pipeline may file to request authorization to 
charge market-

[[Page 12892]]

based rates under subpart M of part 284 of the Commission's 
regulations. The same requirements for showing a lack of market power 
apply to intrastate pipelines as for interstate pipelines. The 
Commission has granted market-based rate authority for storage and hub 
services to 19 of the 112 intrastate pipelines with subpart C of part 
284 tariffs.

D. Requests for Commission Action

    20. Several entities \33\ have sent letters to the Commission 
requesting that the Commission act to ensure that the economic benefits 
related to the reduction in the federal corporate income tax rate are 
passed through to customers. These entities request, among other 
things, that the Commission institute investigations into the justness 
and reasonableness of all applicable rates recovered by public 
utilities and/or pipelines subject to the Commission's jurisdiction 
with respect to the revenue requirement for federal corporate income 
taxes and explore ways to implement voluntary rate reductions or 
refunds. In response to several of these letters, the Interstate 
Natural Gas Association of America sent a letter to Chairman McIntyre 
arguing that suggestions for a generic order compelling pipelines to 
adjust an individual component of their respective recourse rates will, 
in many cases, not yield a just and reasonable result because of the 
Commission's policy preference for complete rate reviews, the limits 
the Mobile-Sierra doctrine places on the Commission's ability to reopen 
rates resulting from freely negotiated agreements, the existence of 
negotiated ``black-box'' settlements that do not specify a particular 
tax allowance, and the Internal Revenue Code's normalization rules that 
a pipeline would violate if excess ADIT was returned to ratepayers more 
rapidly than allowed by the required amortization methods.\34\
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    \33\ These entities include State Advocates (States, state 
agencies, and state consumer advocates), Organization of PJM States, 
Inc., Organization of MISO States, American Public Gas Association, 
Process Gas Consumers Group, Natural Gas Supply Association, Natural 
Gas Indicated Shippers, Liquids Shippers Group, Oklahoma Attorney 
General, Gordon Gooch (pro se consumer), Advanced Energy Buyers 
Group, National Association of State Energy Officials, The R-Street 
Institute, Office of the Ohio Consumers' Counsel, and the Governor 
of Delaware.
    \34\ Letter to Chairman McIntyre by the Interstate Natural Gas 
Association of America in response to letters by the American Public 
Gas Association, FERC eLibrary Accession No. 20180130-4005 (filed 
Jan. 30, 2018).
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    21. In addition, on January 31, 2018 in Docket No. RP18-415-000, 
several trade associations and companies representing a coalition of 
the natural gas industry that are dependent upon services provided by 
interstate natural gas pipeline and storage companies (Petitioners) 
\35\ filed a petition requesting that the Commission take immediate 
action under sections 5(a), 10(a), and 14(a) and (c) of the NGA to 
initiate show cause proceedings against all interstate natural gas 
pipeline and storage companies (unless barred by a settlement 
moratorium) and require each company to submit a cost and revenue study 
to demonstrate that their existing jurisdictional rates continue to be 
just and reasonable following the passage of the Tax Cuts and Jobs Act. 
Several parties filed comments in support of the petition. Petitioners 
argue that the following companies should be excluded from the show 
cause proceedings: (1) Section 311 pipelines (which Petitioners argue 
are otherwise required to file updated rate justifications on an 
ongoing basis), and (2) natural gas pipeline and storage companies that 
are obligated to file a NGA section 4 rate case in 2018.\36\
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    \35\ Petitioners include the following trade associations: 
American Forest and Paper Association, American Public Gas 
Association, Independent Petroleum Association of America, Natural 
Gas Supply Association, and Process Gas Consumers Group. Petitioners 
also include the following companies: Aera Energy LLC, Anadarko 
Energy Services Company, Chevron U.S.A. Inc., ConocoPhillips 
Company, Hess Corporation, Petrohawk Energy Corporation, WPX Energy 
Marketing, LLC, and XTO Energy Inc.
    \36\ Petitioners, Filing, Docket No. RP18-415-000, at 3-4 (filed 
Jan. 31, 2018).
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    22. Petitioners argue that the Commission should require an 
immediate rate reduction, based upon the Commission's calculations, if 
a filed cost and revenue study demonstrates that the revenues from 
services offered on the interstate natural gas pipeline or storage 
company's system exceed the costs following the adjustments to account 
for changes to the tax laws implemented under the Tax Cuts and Jobs 
Act. Petitioners contend that, if a pipeline or storage company 
believes that it has a Commission-approved settlement that would exempt 
it from such a rate analysis (e.g., NGA section 5 rate moratorium), the 
Commission should require such company to provide evidence to that 
effect. Petitioners argue that if the Commission determines that a 
settlement prohibits a rate change during the term of the settlement, 
then the show cause order would be applicable to the company at the 
termination of any applicable NGA section 5 rate moratorium provisions 
of the settlement. Petitioners also argue that if a pipeline or storage 
company believes that any of its contracts are exempt from Commission-
ordered rate adjustments (e.g., discounted or negotiated rate 
contracts), the Commission should require such company to identify 
those contracts and provide evidence to that effect, and permit shipper 
counterparties the opportunity to contest such a claim.\37\
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    \37\ Id. at 5-6, 12-19.
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    23. Several parties filed answers in opposition to the 
petition.\38\ These parties argue that the petition asks the Commission 
to circumvent the statutory requirements of section 5 of the NGA by 
unlawfully shifting the burden of proof regarding the justness and 
reasonableness of pipeline rates and denying pipelines their right to 
an evidentiary hearing.\39\ They contend that NGA section 5 and 
Commission precedent does not generally allow for piecemeal review of a 
single component of a filed rate considering that a fundamental tenet 
of ratemaking is that the end result, not any individual component, is 
what determines whether rates are just and reasonable.\40\ They also 
argue that, given the unique and different circumstances across all 
pipeline rates including the presence of discounted and negotiated 
rates, ``black box'' settlements, and moratoria and rate case come-back 
provisions, a one-size-fits-all approach to modify rates for every 
pipeline is not appropriate.\41\
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    \38\ Parties in opposition to the petition include: Interstate 
Natural Gas Association of America, TransCanada Corporation, 
Boardwalk Pipeline Partners, LP, and Kinder Morgan Entities.
    \39\ Interstate Natural Gas Association of America, Answer, 
Docket No. RP18-415-000, at 4-6 (filed Feb. 12, 2018); TransCanada 
Corporation, Answer, Docket No. RP18-415-000, at 4-9 (filed Feb. 12, 
2018).
    \40\ Interstate Natural Gas Association of America, Answer, 
Docket No. RP18-415-000, at 9-10 (filed Feb. 12, 2018); TransCanada 
Corporation, Answer, Docket No. RP18-415-000, at 9-10 (filed Feb. 
12, 2018); Kinder Morgan Entities, Answer, Docket No. RP18-415-000, 
at 7-11 (filed Feb. 12, 2018).
    \41\ Interstate Natural Gas Association of America, Answer, 
Docket No. RP18-415-000, at 11-18 (filed Feb. 12, 2018); TransCanada 
Corporation, Answer, Docket No. RP18-415-000, at 2-3, 11-12 (filed 
Feb. 12, 2018); Boardwalk Pipeline Partners, LP,
    Answer, Docket No. RP18-415-000, at 1-8 (filed Feb. 12, 2018); 
Kinder Morgan Entities, Answer, Docket No. RP18-415-000, at 3-7 
(filed Feb. 12, 2018).
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III. Discussion

    24. The Tax Cuts and Jobs Act, together with the Revised Policy 
Statement, reduce certain costs eligible for recovery in the rates of 
every natural gas pipeline subject to the Commission's jurisdiction. 
The Tax Cuts and Jobs Act reduces the federal income tax rate of all 
pipelines organized as corporations. The Revised Policy Statement 
establishes a policy that all pipelines organized as MLPs should 
eliminate any income tax

[[Page 12893]]

allowance from their rates.\42\ The Commission believes that interstate 
natural gas pipelines and intrastate natural gas pipelines providing 
interstate service should flow through the benefits of the corporate 
income tax reduction and elimination of MLP income tax allowances to 
consumers to the extent that their rates would otherwise over-recover 
their costs of service. Therefore, the Commission is initiating this 
rulemaking proceeding to consider the most efficient and expeditious 
method of accomplishing this goal consistent with the requirements of 
the NGA and the NGPA. Specifically, the Commission proposes to revise 
its regulations to (1) require interstate natural gas pipelines to file 
a One-time Report concerning the effects of these tax changes, (2) 
permit interstate natural gas pipelines to voluntarily submit a limited 
NGA section 4 filing to reflect the decrease in the federal corporate 
income tax rate pursuant to the Tax Cuts and Jobs Act and the 
elimination of the income tax allowance for MLPs consistent with the 
Revised Policy Statement,\43\ and (3) require NGPA section 311 and 
Hinshaw pipelines to modify their rates for interstate service if they 
modify their rates for intrastate service to reflect the tax changes. 
These proposals are intended to encourage natural gas pipelines to 
voluntarily reduce their rates to the extent the tax changes result in 
their over-recovering their cost of service, while also providing the 
Commission and stakeholders information necessary to take targeted 
actions under NGA section 5 where necessary to achieve just and 
reasonable rates.
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    \42\ Revised Policy Statement, 162 FERC ] 61,227.
    \43\ In addition, consistent with the Revised Policy Statement, 
partnerships or other pass-through entities that have not adopted 
the MLP business form must address the double-recovery concern 
raised by United Airlines. To the extent any of these partnerships 
or pass-through entities argue that they should continue to recover 
an income tax allowance, then the entity's revised tax rate should 
reflect any relevant tax reductions resulting from the Tax Cuts and 
Jobs Act. The Commission will review this information in light of 
its post-United Airlines policy changes, including any subsequent 
orders affecting the income tax policy for other non-MLP partnership 
or pass-through business forms. See Revised Policy Statement, 162 
FERC ] 61,227 at P 3 (``While all partnerships seeking to recover an 
income tax allowance will need to address the double-recovery 
concern, the Commission will address the application of United 
Airlines to non-MLP partnership or other pass-through business forms 
as those issues arise in subsequent proceedings.'').
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    25. The Commission addresses interstate natural gas pipelines under 
the NGA and NGPA section 311 and Hinshaw pipelines separately below.

A. Interstate Natural Gas Pipelines With Cost-Based Rates

    26. The Commission proposes to require interstate natural gas 
pipelines to file, pursuant to sections 10 and 14(a) of the NGA, a One-
time Report on Rate Effect of the Tax Cuts and Jobs Act, to be known as 
FERC Form No. 501-G,\44\ that includes an abbreviated cost and revenue 
study estimating (1) the percentage reduction in the pipeline's cost of 
service resulting from the Tax Cuts and Jobs Act and the Revised Policy 
Statement, and (2) the pipeline's current ROEs before and after the 
reduction in corporate income taxes and the elimination of income tax 
allowances for MLPs. As described in more detail below, the FERC Form 
No. 501-G is designed to collect financial information to evaluate the 
impact of the Tax Cuts and Jobs Act and the Revised Policy Statement on 
the pipeline's cost of service, and to inform stakeholders and the 
Commission regarding the continued justness and reasonableness of the 
pipeline's rates after the income tax reduction and elimination of MLP 
income tax allowances. Interstate natural gas pipelines that file 
general NGA section 4 rate cases or pre-packaged uncontested rate 
settlements before the deadline for their One-time Report will be 
exempted from making the One-time Report.\45\
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    \44\ Proposed FERC Form No. 501-G will not be published in the 
Federal Register or the Code of Federal Regulations, but is 
available in the Commission's eLibrary website under Docket No. 
RM18-11-000.
    \45\ In addition, interstate pipelines whose rates are being 
investigated under NGA section 5 need not file the One-time Report.
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    27. In addition to the mandatory One-time Report, the Commission 
also proposes several options for interstate natural gas pipelines to 
voluntarily make a filing to address the effect of the Tax Cuts and 
Jobs Act and the Revised Policy Statement. The Commission proposes to 
allow an interstate natural gas pipeline to make a limited NGA section 
4 filing to reduce its rates by the percentage reduction in its cost of 
service resulting from the Tax Cuts and Jobs Act and the Revised Policy 
Statement, as calculated in the FERC Form No. 501-G. This would allow 
the pipeline to quickly pass on to ratepayers the benefit of the 
reduction in the corporate income tax rate or the elimination of the 
MLP income tax allowance, without the need for a full examination of 
all its costs and revenues. Alternatively, as described below, an 
interstate pipeline may commit to file either a prepackaged uncontested 
settlement or, if that is not possible, a general NGA section 4 rate 
case if the pipeline believes that using the limited NGA section 4 
option will not result in a just and reasonable rate. If the pipeline 
commits to do this by December 31, 2018, the Commission will not 
initiate an NGA section 5 investigation of its rates prior to that 
date.
    28. The Commission also recognizes that there may be reasons why 
some pipelines need not change their rates at this time and therefore 
proposes an interstate pipeline may choose to file a statement 
explaining why an adjustment to its rates is not needed. For example, a 
pipeline may argue that it is currently under-recovering its overall 
cost of service, such that the reduction in its tax costs or 
elimination of an MLP income tax allowance will not lead to excessive 
recovery. If that is true, no reduction in the pipeline's existing 
stated rates would be justified under NGA section 5.\46\ The proposed 
FERC Form No. 501-G will provide information as to whether an 
interstate pipeline may be under recovering its cost of service. Other 
pipelines may have settlements providing for moratoria on rate changes 
until some future date or requiring them to file new NGA section 4 rate 
cases in the near future.
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    \46\ When an interstate pipeline proposes to increase its rates 
pursuant to NGA section 4, the Commission may issue an order 
reducing one component of the proposed increased cost of service, so 
as to reduce the proposed rate increase, before resolving other 
issues. FPC v. Tennessee Gas Transmission Co., 371 U.S. 145, 149-156 
(1962). However, in order to reduce a pipeline's existing stated 
rates below their current level under NGA section 5, the Commission 
must consider all the pipeline's costs and revenues related to that 
rate. See FPC v. Natural Gas Pipeline Co., 315 U.S. 574 (1942) 
(finding that, when acting under NGA section 5, the Commission may 
adjust the pipeline's ``general revenue level to the demands of a 
fair return'' before adjusting specific rate schedules to eliminate 
discriminations and unfairness from its details) (emphasis added).
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    29. Lastly, a pipeline may file its FERC Form No. 501-G without 
taking any other action. The Commission will assign each pipeline's 
filing of the FERC Form No. 501-G an RP docket number and notice the 
filing providing for interventions and protests. Based on the 
information in that form, together with any statement filed with the 
form and comments by intervenors, the Commission will consider whether 
to initiate an investigation under NGA section 5 of those pipelines 
that have not filed a limited NGA section 4 rate reduction filing or 
committed to file a general NGA section 4 rate case.
    30. The Commission proposes to require only interstate natural gas 
pipelines that have cost-based rates for

[[Page 12894]]

service under any rate schedule filed pursuant to part 154 of the 
Commission's regulations to comply with this proposed rule. Therefore, 
pipelines with market-based rates would not be subject to this proposed 
rule.
    31. The Commission does not propose to take any action regarding 
the effect of the Tax Cuts and Jobs Act on ADIT in this Notice of 
Proposed Rulemaking. In a concurrent Notice of Inquiry,\47\ the 
Commission is seeking comment regarding this issue.
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    \47\ Inquiry Regarding the Effect of the Tax Cuts and Jobs Act 
on Commission-Jurisdictional Rates, 162 FERC ] 61,223 (2018).
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1. One-Time Report on Rate Effect of the Tax Cuts and Jobs Act
    32. The Commission proposes to exercise its authority under NGA 
sections 10(a) and 14(a) \48\ to require all interstate natural gas 
pipelines that file a 2017 FERC Form Nos. 2 or 2A to submit an 
abbreviated cost and revenue study in a format similar to the cost and 
revenue studies the Commission has attached to its orders initiating 
NGA section 5 rate investigations in recent years.\49\ Using the data 
in the pipelines' 2017 FERC Form Nos. 2 and 2A, these studies will 
estimate (1) the percentage reduction in the pipeline's cost of service 
resulting from the Tax Cuts and Jobs Act and the Revised Policy 
Statement, and (2) the pipeline's current ROEs before and after the 
reduction in corporate income taxes and the elimination of income tax 
allowances for MLPs.\50\ FERC Form No. 501-G is an Excel spreadsheet 
with formulas that, when the respondents populate the form, will 
calculate an indicated percentage rate reduction reflecting only the 
corporate income tax rate reduction provided by the Tax Cuts and Jobs 
Act and the elimination of the MLP tax allowance by the Revised Policy 
Statement. The form will also calculate the pipeline's estimated actual 
return on equity both before and after the tax change and 
implementation of the Revised Policy Statement. The Commission and the 
parties may use this information in considering whether to initiate NGA 
section 5 rate investigations of pipelines which do not opt to file a 
limited section 4 to reduce their rates or commit to make a general 
section 4 filing by December 31, 2018, and the order in which to 
initiate any such investigations so as to make the most efficient use 
of the Commission's and interested parties' resources to provide 
consumer benefits.
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    \48\ See Tuscarora Gas Transmission Co., 154 FERC ] 61,273, at 
PP 4-14 (2016), requiring a pipeline to submit a more detailed cost 
and revenue study than that which the Commission is proposing here.
    \49\ See orders cited in footnote 20. Interstate natural gas 
pipelines whose rates are being examined in a general NGA section 4 
rate case or an NGA section 5 investigation need not file the One-
time Report. In addition, pipelines that file a pre-packaged 
uncontested rate settlement before the deadline for their One-time 
Report will be exempted from making the One-time Report.
    \50\ An MLP is a publicly traded partnership under the Internal 
Revenue Code that receives at least 90 percent of its income from 
certain qualifying sources, including gas and oil transportation. 
See 26 U.S.C. 7704; Inquiry Regarding the Commission's Policy for 
Recovery of Income Tax Costs, Notice of Inquiry, 157 FERC ] 61,210 
at PP 4-7.
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    33. Most of the required data is to be taken directly from the 
respondent's 2017 FERC Form Nos. 2 or Form 2-A \51\ without 
modification. The cost and revenue study incorporates all the major 
cost components of a jurisdictional cost of service, including: 
Administrative and General, Operation and Maintenance, other taxes, 
depreciation expense, and the return related components of ROE, 
interest expenses and income taxes.
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    \51\ FERC Form 2s (Annual report for Major natural gas 
companies) and 2-As (Annual report for Nonmajor natural gas 
companies) for calendar year 2017 are due April 18, 2018. 18 CFR 
260.1(b)(2) & 260.2(b)(2).
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    34. A cost and revenue study requires an indicative ROE. In the 
proposed form, the Commission uses, consistent with Commission 
practice, the last litigated ROE applicable to situations involving 
existing plant.\52\ The last litigated ROE was in El Paso Natural Gas 
Company, wherein the Commission adopted an ROE of 10.55 percent.\53\
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    \52\ See, e.g., High Point Gas Transmission, LLC, 139 FERC ] 
61,237, at P 154 (2012); Alliance Pipeline L.P., 140 FERC ] 61,212, 
at P 20 (2012); Northern Natural Gas Co., 119 FERC ] 61,035, at P 37 
(2007).
    \53\ El Paso Natural Gas Co., Opinion No. 528, 145 FERC ] 
61,040, at P 642 (2013), reh'g denied, Opinion No. 528-A, 154 FERC ] 
61,120 (2016).
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    35. In approving the capital structure to be used for ratemaking 
purposes, the Commission uses an operating company's actual capital 
structure if the operating company (1) issues its own debt without 
guarantees, (2) has its own bond rating, and (3) has a capital 
structure within the range of capital structures approved by the 
Commission.\54\ If the operating company meets these requirements, then 
the Commission will find that the operating company has demonstrated a 
separation of financial risks between the operating and parent company. 
Where these requirements are not met, the Commission will use the 
consolidated capital structure of the parent company or a proxy capital 
structure in order to set the overall rate of return for the operating 
utility company.\55\ The proposed form requests the respondent's FERC 
Form Nos. 2 or 2-A equity related balance sheet items. However, if that 
data does not satisfy the three-part test of Opinion No. 414, et al., 
the form provides alternative data entries to reflect parent or 
hypothetical capital structures consistent with Opinion No. 414, et al. 
If the respondent uses the consolidated capital structure of the parent 
company, it should provide the capital structure as shown on the parent 
company's U.S. Securities and Exchange Commission's Form 10-K for 2017.
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    \54\ Transcontinental Gas Pipe Line Corp., Opinion No. 414-A, 84 
FERC ] 61,084, at 61,413-61,415, reh'g denied, Opinion No. 414-B, 85 
FERC ] 61,323 (1998), petition for review denied sub nom. N.C. 
Utils. Comm'n v. FERC, D.C. Cir. Case No. 99-1037 (Feb. 7, 2000) 
(per curiam).
    \55\ Id.
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    36. Income tax expenses for pass-through entities are not captured 
by FERC Form Nos. 2 and 2-A. Income tax expenses for such entities are 
based upon the individual unit holder's income tax levels. The form 
requires pass-through entities to provide the weighting and marginal 
tax rates for each unit holder class ending calendar year 2017. 
Prospectively for pass-through entities, FERC Form No. 501-G assumes a 
federal and state income tax expense of zero. As the Commission states 
in the Revised Policy Statement, all partnerships seeking to recover an 
income tax allowance will need to address the double-recovery 
concern.\56\ If a partnership not organized as an MLP believes that a 
federal or state income tax expense is permissible notwithstanding 
United Airlines, proposed Sec.  154.404(a)(3) provides that it may 
submit that statement with supporting documentation to justify why it 
should continue to receive an income tax allowance and to reduce its 
maximum rates to reflect the decrease in the federal income tax rates 
\57\ applicable to partners pursuant to the Tax Cuts and Jobs Act. The 
Commission will review this information in light of its post-United 
Airlines policy changes, including any subsequent orders affecting the 
income tax policy for other non-MLP partnership or pass-through 
business forms.
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    \56\ See Revised Policy Statement, 162 FERC ] 61,227 at P 3.
    \57\ If a pass-through entity that is not an MLP claims an 
income tax allowance, it must reflect the corporate rate reduction 
and any other relevant tax reductions in the Tax Cuts and Jobs Act.
---------------------------------------------------------------------------

    37. Page 1, Line 33, of FERC Form No. 501-G contains the percentage 
reduction of each pipeline's cost of service attributable solely to the 
revised income tax allowance. This percentage reflects the amount a 
pipeline may choose to use to reduce its reservation rates and any one-
part rates which include a fixed cost recovery should it

[[Page 12895]]

choose to file a limited NGA section 4 filing as described below.
    38. The next part of the report estimates the actual rate of return 
on equity earned by the pipeline for its non-gas revenues during 
calendar year 2017. Page 3 of the report requires the pipeline to 
report its revenues from which the cost of service items, as detailed 
on Page 1, are subtracted. The report depicts the pipeline's estimated 
actual return on equity both before and after the tax change and 
implementation of the Revised Policy Statement. The information will be 
used to guide the Commission, other stakeholders, and potentially the 
pipelines in determining additional steps.
    39. Pipelines may believe that certain 2017 FERC Form Nos. 2 or 2A 
cost or revenue data require adjustments to properly reflect their 
situation. Respondents should not make adjustments to the data 
transferred from FERC Form Nos. 2 or 2-A and 10-K and reported on the 
FERC Form No. 501-G. Instead, respondents may make adjustments to 
individual line items in additional work sheets. If a respondent 
proposes any adjustments, it must fully explain and support the 
adjustment in a separate document. All adjustments should be shown in a 
manner similar to that required for adjustments to base period numbers 
provided in statements and schedules required by Sec. Sec.  154.312 and 
154.313 of the Commission's regulations.\58\
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    \58\ See Implementation Guide for Electronic Filing of Parts 35, 
154, 284, 300, and 341 Tariff Filings, Appendix, Instruction Manual 
for Electronic Filing of Part 154 Rate Filings (November 14, 2016), 
found on the Commission's website, https://www.ferc.gov/docs-filing/etariff/implementation-guide.pdf, wherein filers are required to 
show the base figure and then the adjustment and the as-adjusted 
figures in adjacent columns.
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    40. When respondents file their FERC Form No. 501-G, the form 
should be in spreadsheet format with all the formulas unchanged from 
those provided in the posted form. The Commission proposes to post the 
FERC Form No. 501-G on its website. In addition, the Commission has 
prepared an Implementation Guide for One-time Report on Rate Effect of 
the Tax Cuts and Jobs Act (Implementation Guide) that provides 
additional guidance to parties as to the expected data entries. The 
Implementation Guide also contains the proposed staggered compliance 
dates and the list of companies for each of the four compliance 
periods. Drafts of the FERC Form No. 501-G and Implementation Guide are 
attached to this NOPR for review and comment as separate files. The 
attachments to the NOPR will be available in the Commission's eLibrary 
under Docket No. RM18-11-000 but not published in the Federal Register 
or Code of Federal Regulations.
2. Additional Filing Options for Natural Gas Pipelines
    41. The Commission proposes that, upon filing of the FERC Form No. 
501-G, interstate natural gas pipelines will have four options. The 
first two options--filing a limited NGA section 4 rate filing or a 
general section 4 rate case--allow the pipelines to voluntarily make a 
filing to address the effects of the Tax Cuts and Jobs Act and the 
Revised Policy Statement. Under the third option, pipelines may file an 
explanation why no rate change is necessary. Finally, pipelines may 
simply file the FERC Form No. 501-G described above, without taking any 
other action at this time. The One-time Report should help inform the 
pipeline's choice of the four options, as well as assist the Commission 
in determining what NGA section 5 investigations it should initiate in 
order to assure that the cost reduction benefits of the Tax Cuts and 
Jobs Act and the Revised Policy Statement are passed through to 
consumers.
a. Limited NGA Section 4 Filing
    42. Under this option, an interstate natural gas pipeline would 
file the proposed FERC Form No. 501-G and simultaneously make a 
separate limited NGA section 4 filing, pursuant to proposed section 
154.404, to reduce its reservation charges and any one-part rates that 
include fixed costs \59\ by the percentage reduction in its cost of 
service calculated in the FERC Form No. 501-G \60\ resulting from the 
reduced corporate income tax rates provided by the Tax Cuts and Jobs 
Act and the elimination of MLP tax allowances by the Revised Policy 
Statement. In other words, the Commission proposes to allow interstate 
pipelines to reduce their rates to reflect the reduced income tax rates 
and elimination of the MLP income tax allowance on a single-issue 
basis, without consideration of any other cost or revenue changes. 
Interested parties may protest the limited NGA section 4 filing, but 
the Commission will only consider arguments relating to matters within 
the scope of the proceeding. Thus, interested parties could raise 
issues as to whether the interstate pipeline is eligible to make the 
limited NGA section 4 filing,\61\ whether the percentage reduction has 
been properly applied to the pipeline's rates, and whether the correct 
information was used in calculating the percentage reduction. However, 
the Commission will consider any other issues raised as being outside 
the scope of the proceeding and will dismiss it without prejudice. If 
shippers or other interested parties believe further adjustments to the 
rate are warranted, they may file an NGA section 5 complaint with the 
Commission.
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    \59\ A pipeline's 100 percent load factor rate for interruptible 
service is an example of a one-part rate containing fixed costs.
    \60\ That percentage reduction is listed on Page 1, Line 33 of 
the proposed FERC Form No. 501-G.
    \61\ The pipeline may not be eligible to make a limited NGA 
section 4 filing because of a settlement rate moratorium or an 
ongoing NGA section 4 or 5 proceeding.
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    43. The Commission believes that FERC Form No. 501-G's comparison 
of (1) the pipeline's existing cost of service as reported in its FERC 
Form Nos. 2 or 2-A for 2017 to (2) a revised cost of service using the 
new income tax rates, or eliminating the income tax allowance of an 
MLP, is the most reasonable method to estimate the rate reduction to be 
implemented in a limited NGA section 4 filing. The Commission 
recognizes that, after the Tax Reform Act of 1986, the Commission 
established a procedure for public utilities to reduce their rates 
based on a formula using cost data provided by the public utility in 
its most recent FPA section 205 rate filing.\62\ However, this 
methodology does not appear workable for many interstate natural gas 
pipelines. In recent years, many interstate pipelines have filed ``pre-
packaged'' uncontested settlements pursuant to Sec.  385.207(a)(5) of 
the Commission's regulations,\63\ without submitting the cost and 
revenue data required to be filed with a general NGA section 4 rate 
case by Sec. Sec.  154.312 or 154.313 of the Commission's 
regulations.\64\ In addition, a number of pipelines have not filed rate 
cases in many years, with the result that the cost and revenue data 
underlying their existing rates is stale and may not reflect all their 
current services or system expansions.
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    \62\ Rate Changes Relating to Federal Corporate Income Tax Rate 
for Public Utilities, FERC Stats. & Regs. ] 30,752, order on reh'g, 
41 FERC ] 61,029 (1987) (Order No. 475).
    \63\ 18 CFR 385.207(a)(5) (2017).
    \64\ 18 CFR 154.312 and 154.313 (2017). See, e.g., Dominion 
Transmission, Inc., 111 FERC ] 61,285 (2005); Colorado Interstate 
Gas Co., 156 FERC ] 61,085 (2016).
---------------------------------------------------------------------------

    44. The Commission recognizes that it generally does not permit 
pipelines to change any single component of their cost of service 
outside of a general NGA

[[Page 12896]]

section 4 rate case.\65\ Here, however, the Commission believes an 
exception to that policy is justified in order to permit interstate 
pipelines to voluntarily reduce their rates as soon as possible to 
reflect a reduction in a single cost component--their federal income 
tax costs--so as to flow through that benefit to consumers. In 
addition, our proposed requirement that all interstate pipelines file 
the abbreviated cost and revenue study in FERC Form No. 501-G will 
enable pipelines and all other interested parties to evaluate whether 
there are significant changes in other cost components or revenues that 
affect the need for a rate reduction with respect to taxes.
---------------------------------------------------------------------------

    \65\ See, e.g., Trunkline Gas Co., 142 FERC ] 61,133, at P 24 
n.28 (2013).
---------------------------------------------------------------------------

    45. Finally, any rate reduction implemented pursuant to a limited 
NGA section 4 filing under this option would be a reduction to the 
pipeline's maximum recourse rates. Similar to the situation in a 
general NGA section 4 rate case or an NGA section 5 rate investigation, 
a pipeline's limited NGA section 4 filing to reduce its maximum 
recourse rate to reflect reduced income tax rates, or elimination of 
the MLP income tax allowance, ordinarily will not affect any negotiated 
rate agreements the pipeline has with individual shippers. In the 
Negotiated Rate Policy Statement,\66\ the Commission allowed pipelines 
to negotiate individualized rates that are not bound by the maximum and 
minimum recourse rates in the pipeline's tariff.\67\ Among other 
things, this permits pipelines, as a means of providing rate certainty, 
to negotiate a fixed rate or rate formula that will continue in effect 
regardless of changes in the pipeline's maximum recourse rate.\68\ 
Accordingly, unless a negotiated rate agreement expressly provides 
otherwise, the rates in such agreements will be unaffected by any 
reduction in the pipeline's maximum rate reductions resulting from the 
policies adopted in the rulemaking proceeding, whether in a limited or 
general NGA section 4 rate proceeding or a subsequent NGA section 5 
investigation.
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    \66\ Negotiated Rate Policy Statement, 74 FERC ] 61,076 at 
61,225-61,226.
    \67\ Northern Natural Gas Co., 105 FERC ] 61,299, at PP 15-16 
(2003).
    \68\ Columbia Gulf Transmission Co., 109 FERC ] 61,152, at P 13, 
reh'g denied, 111 FERC ] 61,338 (2005). See also Iberdrola 
Renewables, Inc. v. FERC, 597 F.3d 1299, 1305 (D.C. Cir. 2010).
---------------------------------------------------------------------------

    46. Discounted rates, by contrast, must remain within the range 
established by the pipeline's maximum and minimum recourse rates.\69\ 
Accordingly, to the extent a pipeline reduces its maximum rate below 
the level of a shipper's discounted rate, that shipper's discounted 
rate will be similarly reduced.
---------------------------------------------------------------------------

    \69\ Columbia Gulf, 109 FERC ] 61,152 at P 16.
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b. Commitment to Make General NGA Section 4 Filing
    47. Under this option, an interstate natural gas pipeline would 
include with its One-time Report a commitment to file either a 
prepackaged uncontested settlement or, if that is not possible, a 
general NGA section 4 rate case to revise its rates based upon current 
cost data. If a pipeline believes that a reduction in its rates by the 
percentage reduction in its cost of service calculated in its FERC Form 
No. 501-G would not be reasonable because of other changes in its costs 
and revenues since its last rate case, this option would permit the 
pipeline to adjust its rates taking into account all such changes 
either through an uncontested settlement or a general section 4 rate 
case. The pipeline would also indicate an approximate time frame 
regarding when it would file the settlement or make the NGA section 4 
filing. The Commission proposes that if the pipeline commits to make 
such a filing by December 31, 2018, the Commission will not initiate an 
NGA section 5 investigation of its rates prior to that date.
c. Statement Explaining Why Adjustment in Rates Is not Needed
    48. Under this option, an interstate natural gas pipeline would 
include with its One-time Report a statement explaining why no 
adjustment in its rates is needed at this time. The Commission 
recognizes that, despite the reduction in the corporate income tax and 
the elimination of MLP income tax allowances, a rate reduction may not 
be justified for a significant number of pipelines. For example, the 
Commission is aware from its reviews of pipeline Form Nos. 2 and 2-A 
financial data for prior years that a number of pipelines may currently 
have rates that do not fully recover their overall cost of service. 
Accordingly, the reduction in those pipelines' tax costs may not cause 
their rates to be excessive. The proposed FERC Form No. 501-G will 
provide information as to whether an interstate pipeline may fall into 
this category. Accordingly, a pipeline may include with its FERC Form 
No. 501-G a full explanation of why, after accounting for its reduction 
in tax costs, its rates do not over recover its overall cost of service 
and therefore no rate reduction is justified. The pipeline would 
provide this statement along with any additional supporting information 
it deems necessary.
    49. In addition, interstate pipelines may provide any other reason 
they believe a rate reduction is not justified at this time. For 
example, they may assert that an existing rate settlement provides for 
a moratorium on rate changes that applies to any rate changes that 
might result from the Tax Cuts and Jobs Act or the Commission's change 
in policy concerning MLP income tax allowances. Parties agree to rate 
moratoria in settlements in order to provide rate certainty, and 
therefore the Commission generally does not disturb a settlement during 
a rate moratorium.\70\
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    \70\ Iroquois Gas Transmission System L.P., 69 FERC ] 61,165, at 
61,631 (1994); JMC Power Projects v. Tennessee Gas Pipeline Co., 69 
FERC ] 61,162 (1994), reh'g denied, 70 FERC ] 61,168, at 61,528 
(1995), aff'd, Ocean States Power v. FERC, 84 F.3d 1453 (D.C. Cir. 
1996).
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    50. As described above, interested parties will have an opportunity 
to comment on any assertion by a pipeline that no adjustment to its 
rates is needed, and the Commission will then determine whether further 
action is needed with respect to that pipeline.
d. Take No Action
    51. Under this option, the interstate natural gas pipeline would 
take no action other than making the One-time Report. This option is 
consistent with the fact that the Commission lacks authority under the 
NGA to order an interstate pipeline to file a rate change under NGA 
section 4.\71\ While the Commission is permitting interstate pipelines 
to voluntarily file a limited NGA section 4 filing or commit to make 
general NGA section 4 filing to modify their rates to reflect the 
reduction in the income tax rates or elimination of the MLP income tax 
allowance, the Commission is not ordering interstate pipelines to make 
such filings. However, based on the information contained in the 
pipeline's FERC Form No. 501-G, which the Commission is proposing to 
require each interstate pipeline to file, and comments by interested 
parties, the Commission will, on a case-by-case basis, consider 
initiating a section 5 investigation of a pipeline's rates, if it 
appears those rates may be unjust and unreasonable.
---------------------------------------------------------------------------

    \71\ Pub. Serv. Comm. of New York v. FERC, 866 F.2d 487, 492 
(D.C. Cir. 1989).
---------------------------------------------------------------------------

B. Initial Rates Under NGA Section 7

    52. The issue of how to address the Tax Cuts and Jobs Act in 
establishing initial rates for new projects arises in a variety of 
contexts, depending upon the current status of the certificate 
proceeding and the type of project at

[[Page 12897]]

issue. For greenfield pipelines such as PennEast,\72\ the Commission 
added a condition to the certificate order directing the company to 
recalculate its initial rates consistent with the Tax Cuts and Jobs Act 
when it files its compliance tariff records before going into service. 
For other filings, such as the Transco St. James Project,\73\ the 
Commission estimated downward the incremental rate in order to ensure 
analysis of the appropriate initial rate.
---------------------------------------------------------------------------

    \72\ PennEast Pipeline Co., LLC, 162 FERC ] 61,053, at P 66 
(2018).
    \73\ Transcontinental Gas Pipe Line Co., LLC, 162 FERC ] 61,050, 
at P 17 (2018).
---------------------------------------------------------------------------

    53. For pending incremental expansion certificate filings without 
near-term deadlines, Commission staff has issued data requests to 
pipelines directing them to provide an adjusted cost of service and 
recalculation of the proposed initial recourse rates consistent with 
the Tax Cuts and Jobs Act. The Commission will take these responses 
into account when evaluating and approving initial rates.
    54. There are a number of certificate projects which have been 
authorized by the Commission--including approval of initial rates--but 
which have not yet gone into service. The Commission proposes that 
existing pipelines, in their FERC Form No. 501-G reports and/or section 
154.404 limited NGA section 4 rate reduction filings, address any 
approved initial rate for services provided by expansion facilities 
that have not gone into service. We recognize that there is also a 
finite group of greenfield pipeline projects that have been authorized 
but are not yet in service and therefore will not file a Form No. 2 or 
2A for 2017. As a result, those pipelines also are not required to file 
a FERC Form No. 501-G report. The Commission proposes to address the 
issue of the Tax Cuts and Jobs Act and the Revised Policy Statement 
impact on these pipelines on a case-by-case basis.\74\
---------------------------------------------------------------------------

    \74\ For example, the Commission may, under section 5 of the 
NGA, direct the greenfield pipeline to recalculate its initial 
recourse rates consistent with the Tax Cuts and Jobs Act and Revised 
Policy Statement when it files actual tariff records before going 
into service. See, e.g., PennEast Pipeline Co., LLC, 162 FERC ] 
61,053 at P 66.
---------------------------------------------------------------------------

C. NGPA Section 311 and Hinshaw Pipelines

    55. The Commission believes that its existing regulations and 
policy concerning the rates charged by NGPA section 311 and Hinshaw 
pipelines are generally sufficient to provide shippers reasonable rate 
reductions with respect to the Tax Cuts and Jobs Act and Revised Policy 
Statement. However, as described below, the Commission is proposing to 
modify Sec.  284.123 of its regulations to require all NGPA section 311 
and Hinshaw pipelines to file a new rate election for interstate 
service if their rates for intrastate service are reduced to reflect 
the Tax Cuts and Jobs Act.
    56. As described above, Sec.  284.123(b) allows NGPA section 311 
and Hinshaw pipelines an election of two different methodologies upon 
which to base their rates for interstate services.\75\ First, Sec.  
284.123(b)(1) permits an intrastate pipeline to elect to base its rates 
on the methodology or rate(s) approved by a state regulatory agency 
included in an effective firm rate for city-gate service. Second, Sec.  
284.123(b)(2) provides that the pipeline may petition for Commission 
approval of rates and charges using its own data to show its proposed 
rates are fair and equitable. The Commission has a policy of requiring 
a review of the rates of each NGPA section 311 and Hinshaw pipeline 
every five years.\76\ Consistent with that policy, when the Commission 
issues an order approving rates filed by an NGPA section 311 pipeline, 
the Commission requires the pipeline to file a new rate election within 
five years. When the Commission approves rates filed by a Hinshaw 
pipeline, it requires the pipeline to file a cost and revenue study 
within five years. In addition, the Commission requires NGPA section 
311 and Hinshaw pipelines that have elected to use a state rate 
pursuant to Sec.  284.123(b)(1) to file a new rate election within 30 
days after any change in the state rate.\77\
---------------------------------------------------------------------------

    \75\ 18 CFR 284.123(b) (2017).
    \76\ Contract Reporting Requirements of Intrastate Natural Gas 
Companies, FERC Stats & Regs. ] 31,310 at P 96. Pipelines using 
state-approved rates pursuant to section 284.123(b)(1) may certify 
that those rates continue to meet the requirements of section 
284.123(b)(1) on the same basis on which they were approved.
    \77\ 18 CFR 284.123(g)(9)(iii) (2017). See also Lobo Pipeline 
Co. L.P., 145 FERC ] 61,168, at P 5 (2013) and Atmos Pipeline--
Texas, 156 FERC ] 61,094, at P 8 (2016).
---------------------------------------------------------------------------

    57. The Commission believes that these requirements adequately 
provide for the approximately 44 NGPA section 311 and Hinshaw pipelines 
that have elected to use state-derived rates pursuant to Sec.  
284.123(b)(1) to pass on to ratepayers the benefit of the reduction in 
the corporate income tax rate. Pursuant to their rate election, these 
pipelines are authorized to charge rates approved by their state 
regulatory agency. Therefore, the decision whether the interstate rates 
of these pipelines should be reduced to reflect the Tax Cuts and Jobs 
Act is in the hands of the state regulatory agency. If the state 
regulatory agency requires any of these pipelines to reduce their 
intrastate rates to reflect the decreased income tax, Commission 
policy, as explained above, requires those pipelines to file with the 
Commission to reduce their interstate rates correspondingly within 30 
days of the effective date of the reduced intrastate rates.
    58. We now turn to the approximately 61 NGPA section 311 and 
Hinshaw pipelines which have elected to use Commission-established 
cost-based rates pursuant to Sec.  284.123(b)(2). Pursuant to our five-
year rate review policy, we estimate that almost half of these 
pipelines will have their rates restated within the next 24 months. In 
addition, a review of the quarterly transactional reports filed by 
these pipelines pursuant to Sec.  284.126(b) \78\ indicates that these 
pipelines rarely charge their maximum rates. Instead, they charge 
discounted rates for most of their transactions so that any reduction 
in their maximum rates is unlikely to provide significant benefits to 
the customers in those transactions.
---------------------------------------------------------------------------

    \78\ 18 CFR 284.126(b) (2012). These reports are set forth in 
Form No. 549D.
---------------------------------------------------------------------------

    59. However, the Commission believes that, if an NGPA section 311 
or Hinshaw pipeline using Commission-established cost-based rates 
reduces its intrastate rates to reflect the reduced income taxes 
resulting from the Tax Cuts and Jobs Act, it would be reasonable for 
that pipeline to make a corresponding reduction in its rates for 
interstate service. This would give the same rate reduction benefit to 
any interstate shippers on those pipelines as the intrastate shippers 
receive, thereby ensuring that the two groups of shippers are treated 
similarly. Therefore, for the purposes of the Tax Cuts and Jobs Act 
only, the Commission proposes a new Sec.  284.123(i), which would 
impose the same re-filing requirement on Sec.  284.123(b)(2) rates as 
on pipelines electing to use state-derived rates under Sec.  
284.123(b)(1). Namely, if any intrastate pipeline adjusts its state-
jurisdictional rates to reflect the reduced corporate income tax rates 
adopted in the Tax Cuts and Jobs Act, then the intrastate pipeline must 
file a new rate election pursuant to paragraph (b) of this section no 
later than 30 days after the reduced intrastate rate becomes effective.
    60. The Commission notes that, for any pipeline that the Commission 
does identify that charges an excessive Commission-established cost-
based maximum rate to captive shippers (whether through staff 
investigation or a shipper-filed complaint), the Commission could 
exercise its authority under NGPA section 311(c) to order any such 
section 311 intrastate pipeline to

[[Page 12898]]

reduce its rates to reflect the reduced income tax rates, and take 
similar action against any such Hinshaw pipeline under NGA section 
5.\79\
---------------------------------------------------------------------------

    \79\ The courts have held that the Commission's conditioning 
authority under NGPA section 311(c) permits the Commission to order 
changes in section 311 pipelines' rates, terms, and conditions of 
service. See Associated Gas Distributors v. FERC, 824 F.2d 981, 
1016-7 (D.C. Cir. 1987). See also Bay Gas Storage Co., 126 FERC ] 
61,018, at PP 22-24 (2009) (requiring a prospective change in 
intrastate pipeline's Statement of Operating Conditions).
---------------------------------------------------------------------------

    61. Finally, the Commission will not take any action with respect 
to the market-based rates it has approved for some NGPA section 311 and 
Hinshaw pipelines. Market-based rates are, by definition, subject to 
change according to market forces, and do not have cost-based rates 
that directly account for taxes. For such rates, no change is required.

IV. Implementation

    62. The Commission proposes staggered dates for pipelines filing 
the FERC Form No. 501-G report. In the Implementation Guide for the 
proposed FERC Form No. 501-G, 133 interstate natural gas pipelines with 
cost-based rates are split into four groups. The due date for the first 
group will be 28 days from the effective date of any final rule in this 
proceeding, and the due date for each subsequent group will be 28 days 
from the previous group's due date. When the final due dates are known, 
the Office of the Secretary will issue a Notice and update the FERC 
Form No. 501-G Implementation Guide. Pipelines may file their FERC Form 
No. 501-G report earlier than the proposed dates. The Commission will 
post the FERC Form No. 501-G form and the FERC Form No. 501-G 
Implementation Guide on its website at https://www.ferc.gov/legal/maj-ord-reg.asp#gas. As noted in the discussion above, this form is in 
spreadsheet format. The Commission proposes to require that the form be 
filed with the Commission in the same spreadsheet format. Respondents 
should not modify the formulas. If respondents, in addition to the 
required spreadsheet version of the report, wish to attach a PDF 
version of the report, they may do so. The Commission proposes to 
require that FERC Form No. 501-G forms be filed through eTariff. The 
Commission will establish a new Type of Filing Code (TOFC) \80\ just 
for these reports. Respondents may include with this filing, as 
appropriate, a statement explaining why no adjustment in its rates is 
needed, or their commitment to make a general NGA section 4 rate case 
filing in lieu of a limited NGA section 4 filing as permitted by Sec.  
154.404. The Implementation Guide provides contact information for 
Commission staff if assistance is needed regarding FERC Form No. 501-G.
---------------------------------------------------------------------------

    \80\ The type of filing business process categories are 
described in the Implementation Guide for Electronic Filing of Parts 
35, 154, 284, 300, and 341 Tariff Filings (November 14, 2016), found 
on the Commission's website, https://www.ferc.gov/docs-filing/etariff/implementation-guide.pdf.
---------------------------------------------------------------------------

    63. For the limited NGA section 4 rate reduction option proposed in 
Sec.  154.404, the Commission proposes to establish a new TOFC. 
Pipelines are required to incorporate by reference their filed FERC 
Form No. 501-G as a supporting document. No other documentation is 
necessary if the pipelines propose to reduce their rates by the 
percentage shown on their FERC Form No. 501-G. Pipelines may file a 
Sec.  154.404 rate reduction earlier than the proposed FERC Form No. 
501-G compliance dates.
    64. Each report and limited NGA section 4 filing will receive a new 
root docket number. The Commission will issue a Notice for each report 
and filing, with interventions and comments due under the standard 
Sec.  154.210 notice period.\81\ The following table lists the proposed 
new TOFCs. FERC Form No. 501-G is a one-time form. As such, the 
Commission proposes to retire these TOFCs after the end of the 
staggered compliance dates provided in the FERC Form No. 501-G 
Implementation Guide.
---------------------------------------------------------------------------

    \81\ 18 CFR 154.210 (2017).

----------------------------------------------------------------------------------------------------------------
           Type of filing code                   Filing title            Citation       Type of filing category
----------------------------------------------------------------------------------------------------------------
1430....................................  FERC Form No. 501-G Report         260.402  Compliance.
1440....................................  Limited Sec. 4 Tax                 154.404  Normal/Statutory.
                                           Reduction.
----------------------------------------------------------------------------------------------------------------

    65. Intrastate pipelines with cost-based rates established pursuant 
to Sec.  284.123(b)(2) of the Commission's regulations that are filing 
to reduce rates pursuant to proposed Sec.  284.123(i) may use any 
appropriate existing TOFC under the NGPA Gas Tariff Program options.

V. Regulatory Requirements

A. Information Collection Statement

    66. The Office of Management and Budget (OMB) regulations require 
that OMB approve certain reporting, record keeping, and public 
disclosure requirements (information collection) imposed by an 
agency.\82\ Therefore, the Commission is submitting its proposed 
information collection to OMB for review in accordance with section 
3507(d) of the Paperwork Reduction Act of 1995. Upon approval of a 
collection of information, OMB will assign an OMB control number and an 
expiration date. Respondents subject to the filing requirements of a 
rule will not be penalized for failing to respond to the collection of 
information unless the collection of information displays a valid OMB 
control number.
---------------------------------------------------------------------------

    \82\ 5 CFR 1320.11 (2017).
---------------------------------------------------------------------------

    67. Public Reporting Burden: The overall proposed data collection 
(FERC-501G, One-time Report on Rate Effect of the Tax Cuts and Jobs 
Act) includes the following requirements.
    68. The Commission has identified 133 interstate natural gas 
pipelines with cost-based rates that will be required to file the 
proposed FERC Form No. 501-G. That figure is based upon a review of the 
pipeline tariffs on file with the Commission. Interstate natural gas 
pipelines have four options as to how to address the results of the 
formula contained in FERC Form No. 501-G. Each option has a different 
burden profile and a different cost per response. Companies will make 
their own business decisions as to which option they will select, thus 
the estimate for the number of respondents for each option as shown in 
the table below is just an estimate.
    69. The number of NGPA section 311 and Hinshaw pipelines that will 
be required to file a rate case pursuant to proposed Sec.  284.123(i) 
is a function of state actions outside of the control of the 
Commission. Thus, the estimate for the number of respondents for NGPA 
section 311 and Hinshaw pipelines filing a rate case in compliance with 
proposed Sec.  284.123(i) as shown in the table below is just an 
estimate.
    70. Based on these assumptions, we estimate the one-time burden and 
cost \83\

[[Page 12899]]

for the information collection requirements as follows.
---------------------------------------------------------------------------

    \83\ The estimated average hourly cost of $79.77 (rounded) 
assumes equal time is spent by an accountant, management, lawyer, 
and office and administrative support. The average hourly cost 
(salary plus benefits) is: $53.00 for accountants (occupation code 
13-2011), $81.52 for management (occupation code 11-0000), $143.68 
for lawyers (occupation code 23-0000), and $40.89 for office and 
administrative support (occupation code 43-000). (The figures are 
taken from the Bureau of Labor Statistics, October 2017 for the year 
ending May 2016, figures at https://www.bls.gov/oes/current/naics2_22.htm.).

                                         FERC-501G: One-Time Report on Rate Effect of the Tax Cuts and Jobs Act
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number of                     Avg.  burden
                                             Number of     responses per       Total         hr.  per      Avg. cost per   Total  burden  Total cost ($)
                                            respondents     respondent       responses       response        response          hours
                                                     (1)             (2)             (3)             (4)             (5)     (3)*(4)=(6)     (3)*(5)=(7)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                 Interstate Natural Gas Pipelines with Cost-Based Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
FERC Form No. 501-G, One-time Report                 133               1             133               9             718           1,197          95,485
 \84\...................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                    Optional Response
--------------------------------------------------------------------------------------------------------------------------------------------------------
No Response.............................              53               0               0               0               0               0               0
Case for no change......................              64               1              64               5             399             320          25,526
Limited Sec 4 filing \85\...............              15               1              15               6             479              90           7,179
General Sec. 4 filing \86\..............               1               1               1        \87\ 512          40,842             512          40,842
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              NGPA section 311 and Hinshaw Pipelines with Cost-Based Rates
--------------------------------------------------------------------------------------------------------------------------------------------------------
NGPA rate filing \88\...................         \89\ 15               1              15              24           1,914             360          28,717
    Total...............................        \90\ 148  ..............             228  ..............  ..............           2,479         197,749
--------------------------------------------------------------------------------------------------------------------------------------------------------

    71. The Commission does not expect any mandatory or voluntary 
reporting requirements other than those listed above.
---------------------------------------------------------------------------

    \84\ 18 CFR 260.402 (proposed).
    \85\ 18 CFR 154.404 (proposed).
    \86\ 18 CFR 154.312 (2017).
    \87\ The estimate for hours is based on the estimated average 
hours per response for the FERC-545 (OMB Control No. 1902-0154), 
with general NGA section 4, 18 CFR 154.312 filings weighted at a 
ratio of 20 to one.
    \88\ 18 CFR 284.123(i) (proposed).
    \89\ Estimate of number of respondents assumes that states will 
act within one year to reduce NGPA section 311 and Hinshaw pipeline 
rates to reflect the Tax Cuts and Jobs Act.
    \90\ Number of unique respondents = (One-time FERC Form No. 501-
G) + (NGPA rate filing).
---------------------------------------------------------------------------

    72. Action: Proposed information collection, FERC-501G (One-time 
Report on Rate Effect of the Tax Cuts and Jobs Act).
    73. OMB Control No.: To be determined.
    74. Respondents for this Rulemaking: Interstate natural gas 
pipelines with cost-based rates, and certain NGPA section 311 and 
Hinshaw pipelines.
    75. Frequency of Information: One-time, for each indicated 
reporting requirement.
    76. Necessity of Information: The Commission requires information 
in order to determine the effect of the Tax and Jobs Act on the rates 
of natural gas pipelines to ensure those rates continue to be just and 
reasonable.
    77. Internal Review: The Commission has reviewed the proposed 
information collection requirements and has determined that they are 
necessary. These requirements conform to the Commission's need for 
efficient information collection, communication, and management within 
the energy industry. The Commission has specific, objective support for 
the burden estimates associated with the information collection 
requirements.
    78. The Commission requests comments on the utility of the proposed 
information collection, the accuracy of the burden estimates, how the 
quality, quantity, and clarity of the information to be collected might 
be enhanced, and any suggested methods for minimizing the respondent's 
burden, including the use of automated information techniques. 
Interested persons may obtain information on the reporting requirements 
or submit comments by contacting the Federal Energy Regulatory 
Commission, 888 First Street NE, Washington, DC 20426 (Attention: Ellen 
Brown, Office of the Executive Director, (202) 502-8663, or email 
[email protected]:). Comments may also be sent to the Office 
of Management and Budget (Attention: Desk Officer for the Federal 
Energy Regulatory Commission), by email at [email protected].

B. Environmental Analysis

    79. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\91\ The 
actions proposed to be taken here fall within categorical exclusions in 
the Commission's regulations for rules regarding information gathering, 
analysis, and dissemination, and for rules regarding sales, exchange, 
and transportation of natural gas that require no construction of 
facilities.\92\ Therefore, an environmental review is unnecessary and 
has not been prepared in this rulemaking.
---------------------------------------------------------------------------

    \91\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. ] 30,783 (1987).
    \92\ See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5) and 380.4(a)(27) 
(2017).
---------------------------------------------------------------------------

C. Regulatory Flexibility Act Certification

    80. The Regulatory Flexibility Act of 1980 (RFA) \93\ generally 
requires a description and analysis of rules that will have significant 
economic impact on a substantial number of small entities. The 
Commission is not required to make such analysis if proposed 
regulations would not have such an effect.
---------------------------------------------------------------------------

    \93\ 5 U.S.C. 601-612 (2012).
---------------------------------------------------------------------------

    81. As noted in the above Information Collection Statement, 
approximately 133 interstate natural gas pipelines, both large and 
small, are respondents subject to the requirements adopted by this 
rule. In addition, the Commission estimates that another 59 NGPA 
natural gas pipelines may be required to file restated rates pursuant 
to proposed Sec.  284.123(i). However, the actual

[[Page 12900]]

number of NGPA section 311 and Hinshaw pipelines that will be required 
to file is a function of actions taken at the state level. The 
Commission estimates that only 15 of the 59 NGPA natural gas pipelines 
will file a rate case pursuant to proposed Sec.  284.123(i).
    82. Most of the natural gas pipelines regulated by the Commission 
do not fall within the RFA's definition of a small entity,\94\ which is 
currently defined for natural gas pipelines as a company that, in 
combination with its affiliates, has total annual receipts of $27.5 
million or less.\95\ For the year 2016 (the most recent year for which 
information is available), only five of the 133 interstate natural gas 
pipeline respondents had annual revenues in combination with its 
affiliates of $27.5 million or less and therefore could be considered a 
small entity under the RFA. This represents 3.8 percent of the total 
universe of potential NGA respondents that may have a significant 
burden imposed on them. For NGPA section 311 and Hinshaw pipelines, 
three of the 59 potential respondents could be considered a small 
entity, or 5.1 percent. However, it is not possible to predict whether 
any of these small companies may be required to make a rate filing. In 
view of these considerations, the Commission certifies that this 
proposed rule's amendments to the regulations will not have a 
significant impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \94\ See 5 U.S.C. 601(3) citing section 3 of the Small Business 
Act, 15 U.S.C. 623. Section 3 of the SBA defines a ``small business 
concern'' as a business which is independently owned and operated 
and which is not dominant in its field of operation (2017).
    \95\ 13 CFR 121.201 (Subsector 486--Pipeline Transportation; 
North American Industry Classification System code 486210; Pipeline 
Transportation of Natural Gas) (2017). ``Annual Receipts'' are total 
income plus cost of goods sold.
---------------------------------------------------------------------------

D. Comment Procedures

    83. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments are due April 25, 2018. Comments must refer to 
Docket No. RM18-11-000, and must include the commenter's name, the 
organization they represent (if applicable), and their address in their 
comments.
    84. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at https://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    85. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
    86. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

E. Document Availability

    87. In addition to publishing the full text of this document in the 
Federal Register, the Commission provides all interested persons an 
opportunity to view and/or print the contents of this document via the 
internet through the Commission's Home Page (https://www.ferc.gov) and 
in the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street NE, Room 2A, 
Washington, DC 20426.
    88. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    89. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at 202-502-
8371, TTY 202-502-8659. Email the Public Reference Room at 
[email protected].
    90. The proposed FERC Form No. 501-G and the Implementation Guide 
are available on the Commission's eLibrary and website. These will not 
be published in the Federal Register or the Code of Federal 
Regulations.

List of Subjects in 18 CFR Parts 154, 260, & 284

Part 154

    Natural gas, Pipelines, Reporting and recordkeeping requirements.

Part 260

    Natural gas, Reporting and recordkeeping requirements.

Part 284

    Continental shelf, Natural gas, Reporting and recordkeeping 
requirements.

    By direction of the Commission.

    Issued: March 15, 2018.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    In consideration of the foregoing, the Commission proposes to amend 
parts 154, 260, and 284, Chapter I, Title 18, Code of Federal 
Regulations, as follows.

PART 154-- RATE SCHEDULES AND TARIFFS

0
1. The authority citation for part 154 continues to read as follows:

    Authority: 15 U.S.C. 717-717w; 31 U.S.C. 9701; 42 U.S.C. 7102-
7352.

0
2. Add Sec.  154.404 to read as follows:


Sec.  154.404  Tax Cuts and Jobs Act Rate Reduction.

    (a) Purpose. The limited rate filing permitted by this section is 
intended to permit:
    (1) A natural gas company subject to the federal corporate income 
tax to reduce its maximum rates to reflect the decrease in the federal 
corporate income tax rate pursuant to the Tax Cuts and Jobs Act of 
2017,
    (2) A natural gas company organized as a master limited partnership 
to reduce its maximum rates to reflect the elimination of any tax 
allowance included in its current rates, and
    (3) A natural gas company organized as a partnership (but not a 
master limited partnership) either
    (i) To eliminate any income tax allowance included in its current 
rates or
    (ii) To justify why it should continue to receive an income tax 
allowance and to reduce its maximum rates to reflect the decrease in 
the federal income tax rates applicable to partners pursuant to the Tax 
Cuts and Jobs Act of 2017.
    (b) Applicability. (1) Except as provided in paragraph (b)(2) of 
this section, any natural gas company with cost-based rates may submit 
the limited rate filing permitted by this section.
    (2) If a natural gas company has a rate case currently pending 
before the Commission in which the change in the federal corporate 
income tax rate can be reflected, the public utility may not use this 
section to adjust its rates.
    (c) Determination of Rate Reduction. A natural gas company 
submitting a filing pursuant to this section shall reduce:
    (1) Its maximum reservation rates for firm service, and

[[Page 12901]]

    (2) Its one-part rates that include fixed costs, by
    (3) The percentage calculated consistent with the instructions to 
FERC Form No. 501-G prescribed by Sec.  260.402 of this chapter.
    (d) Timing. Any natural gas company filing to reduce its rates 
pursuant to this section must do so no later than the date that it 
files its FERC Form No. 501-G pursuant to Sec.  260.402.
    (e) Hearing Issues. (1) The only issues that may be raised by 
Commission staff or any intervenor under the procedures established in 
this section are:
    (i) Whether or not the natural gas company may file under this 
section.
    (ii) Whether or not the percentage reduction permitted in Sec.  
154.402(c)(iii) has been properly applied, and
    (iii) Whether or not the correct information was used in that 
calculation.
    (2) Any other issue raised will be severed from the proceeding and 
dismissed without prejudice.

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

0
3. The authority citation for part 260 continues to read as follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

0
4. Add Sec.  260.402 to read as follows:


Sec.  260.402  FERC Form No. 501-G. One-time Report on Rate Effect of 
the Tax Cuts and Jobs Act.

    (a) Prescription. The form for the One-time Report on Rate Effect 
of the Tax Cuts and Jobs Act of 2017, designated herein as FERC Form 
No. 501-G is prescribed.
    (b) Filing requirement. (1) Who must file. (i) Except as provided 
in paragraph (b)(1)(ii) of this section, every natural gas company that 
is required under this part to file a Form No. 2 or 2A for 2017 and has 
cost-based rates for service under any rate schedule that were filed 
electronically pursuant to part 154 of this chapter, must prepare and 
file with the Commission a FERC Form No. 501-G pursuant to the 
definitions and instructions set forth in that form and the 
Implementation Guide.
    (ii) A natural gas company whose rates are being examined in a 
general rate case under section 4 of the Natural Gas Act or in an 
investigation under section 5 of the Natural Gas Act need not file FERC 
Form No. 501-G. In addition, a natural gas company that files an 
uncontested settlement of its rates pursuant to Sec.  385.207(a)(5) of 
this chapter after March 26, 2018 need not file FERC Form No. 501-G.
    (2) FERC Form No. 501-G must be filed as prescribed in Sec.  
385.2011 of this chapter as indicated in the instructions set out in 
the form and Implementation Guide, and must be properly completed and 
verified. Each natural gas company must file FERC Form No. 501-G 
according to the schedule set forth in the Implementation Guide set out 
in that form. Each report must be prepared in conformance with the 
Commission's form and guidance posted and available for downloading 
from the FERC website (https://www.ferc.gov). One copy of the report 
must be retained by the respondent in its files.

PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE 
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES

0
5. The authority citation for part 284 continues to read as follows:

    Authority: 15 U.S.C. 717-717z, 3301-3432; 42 U.S.C. 7101-7352; 
43 U.S.C. 1331-1356.

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6. In Sec.  284.123, add paragraph (i) to read as follows:


Sec.  284.123  Rates and charges.

* * * * *
    (i) If an intrastate pipeline's rates on file with the appropriate 
state regulatory agency are reduced to reflect the reduced income tax 
rates adopted in the Tax Cuts and Jobs Act of 2017, the intrastate 
pipeline must file a new rate election pursuant to paragraph (b) of 
this section not later than 30 days after the reduced intrastate rate 
becomes effective. This requirement applies regardless of whether the 
intrastate pipeline's existing interstate rates are based on Sec.  
284.123(b)(1) or (2).

[FR Doc. 2018-05669 Filed 3-23-18; 8:45 am]
 BILLING CODE 6717-01-P