On April 25, APGA filed comments with the Federal Energy Regulatory Commission (FERC) in response to a Notice of Proposed Rulemaking (NOPR) concerning the impact on interstate pipeline rates of the Tax Cuts and Jobs Act. The NOPR, which was approved at FERC’s March meeting, is 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) as part of the signing into law of The Tax Cuts and Jobs Act of 2017. 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 FERC’s income tax allowance policies. In addition to filing the one-time report, each pipeline would have the four below options.On April 25, APGA filed comments with the Federal Energy Regulatory Commission (FERC) in response to a Notice of Proposed Rulemaking (NOPR) concerning the impact on interstate pipeline rates of the Tax Cuts and Job Act. The NOPR, which was approved at FERC’s March meeting, is intended to would 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) as part of the signing into law of The Tax Cuts and Jobs Act of 2017.
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 FERC’s income tax allowance policies. In addition to filing the one-time report, each pipeline would have the four below 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.
In its comments to FERC, APGA states that it was one of the first—if not the first—group of pipeline customers to request that FERC take prompt action so that ratepayers would justly receive the rate benefit from lower federal income tax payments owed by the pipelines. The comments also state that the vast amount of public gas systems are recourse rate shippers that rely on FERC to ensure that their rates are just and reasonable under the Natural Gas Act. APGA also states that while the rate situation for each pipeline is unique, the public record thus far has supported APGA’s initial estimate that the tax rate change by itself should lower pipeline firm transportation and storage rates in the range of 5 to 9 percent.
In a press statement that accompanied the release of the comments, APGA commended FERC for its action in releasing the NOPR, and communicated that a disparity between the Federal Power Act and the Natural Gas Act limits the ability of FERC to ensure that natural gas consumers receive the benefits of the lowered tax rate. This means that they continue to be overcharged, as they have been since the corporate tax rate was lowered on January 1. This is because under the Natural Gas Act, unlike the Federal Power Act, FERC can only act prospectively to lower unjust and unreasonable rates. Each month that passes means that consumers fail to see the benefit of the new tax rate in their rates.
A copy of APGA’s comments as well as the press release are available on the APGA website.
For questions or need additional information, please contact Dave Schryver of APGA staff by phone at 202-464-2742 or by email at
dschryver@apga.org.