FERC Launches Two Gas Pipeline Rate Cases – Are More on the Way?

What’s the issue?

Each year natural gas pipelines are required to file an annual financial report with FERC. That filing is made in April for the preceding year and then FERC has typically reviewed those annual reports to determine if any pipelines appear to be earning more than an appropriate rate of return on the assets invested to provide the regulated services. In the past, this review typically was not completed until the end of the year and then FERC would commence any rate investigations early the following year.

Why does it matter?

This year FERC appears to have conducted its review on a faster schedule and started two rate investigations at its open meeting last week. In the past, those subjected to rate investigations have generally reduced their rates by about ten percent. The key question is whether the two cases started last week will be the only ones FERC commences based on the 2021 annual reports, or if this is just the beginning.

What’s our view?

Each year we also use the annual reports that are filed to perform our own calculation of the return each pipeline is earning. Our data shows that there are over forty pipelines that earned a return in 2021 that was at or above the return we calculated for the two pipelines against which FERC chose to start rate investigations. Those forty pipelines collected over $8 billion in revenue in 2021, or about thirty percent of the total industry’s revenue. Therefore, these first two cases may just be the beginning.

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