At today’s Open Meeting, the Federal Energy Regulatory Commission (FERC) approved issuing a Notice of Proposed Rulemaking intended to allow FERC to determine which pipelines under the Natural Gas Act (NGA)may be collecting unjust and unreasonable rates in light of the corporate tax reduction (from 35 percent to 21 percent) and changes to the Commission’s income tax allowance policies. The proposal requires interstate pipelines to file a one-time report, called FERC Form No. 501-G, on the rate effect of the new tax law and changes to the Commission’s income tax allowance policies. In addition to filing the one-time report, each pipeline would have four options:At today’s Open Meeting, the Federal Energy Regulatory Commission (FERC) approved issuing a Notice of Proposed Rulemaking intended to allow FERC to determine which pipelines under the Natural Gas Act (NGA)may be collecting unjust and unreasonable rates in light of the corporate tax reduction (from 35 percent to 21 percent) and changes to the Commission’s income tax allowance policies. The proposal requires interstate pipelines to file a one-time report, called FERC Form No. 501-G, on the rate effect of the new tax law and changes to the Commission’s income tax allowance policies. In addition to filing the one-time report, each pipeline would have four options:
• Each pipeline could make a limited section 4 filing to reduce its rates by the percentage reduction in its cost of service shown in its FERC Form No. 501-G.
• Each pipeline may commit to file either a prepackaged uncontested rate settlement or a general NGA section 4 rate case if it believes that using the limited section 4 option will not result in a just and reasonable rate. If the pipeline commits to do this by December 31, 2018, FERC will not initiate a section 5 investigation of its rates prior to that date.
• Alternatively, each pipeline that does not believe it has to change its rates may choose to file a statement explaining why.
• Finally, a pipeline may file the new FERC form without taking any other action. At that point, FERC would consider whether to initiate a section 5 investigation of any pipeline that has not submitted a limited section 4 rate reduction filing or committed to file a general section 4 rate case.
Under the Commission’s action, changes in pipeline rates, and the timing of rate changes, will vary on a pipeline by pipeline basis. In response to a question to Commission staff from Chairman McIntyre regarding when consumers might see changes in their rate, staff communicated that with the lack of refund authority it is likely that pipeline rates may not be impacted until late summer or early fall at the earliest. The Commission has also asked for comments regarding how accumulated deferred income taxes, which are the dollar amounts of taxes that are collected from customers in anticipation of paying the Internal Revenue Service, should be addressed.
APGA released a press statement commending the Commission for its action while expressing concern about delays that could result from the rulemaking approach. As you may recall, on January 3, APGA sent a letter to the Commission urging prompt action to ensure that the recourse rates paid by customers of natural gas pipelines are reduced to reflect the lower corporate tax rate. In its press statement, APGA also stated that “the rulemaking process will delay the relief that customers need and deserve,” and that is, “particularly problematic because, unlike the Federal Power Act, the Natural Gas Act only permits FERC to change rates prospectively, so pipelines will continue to pocket and benefit from the full amount of the tax rate reduction in the meantime.”
A copy of APGA’s press release, as well as the January 3 letter to the Commission, is available on the APGA website. For questions on this article, please contact Dave Schryver of APGA’s staff by phone at 202-464-2742 or by email at
dschryver@apga.org.