Originally published for customers June 16, 2023
What’s the issue?
FERC allows oil pipelines to automatically increase their rates in line with inflation. Not so for gas pipelines. In 2022, inflation was high and FERC will allow oil pipelines to increase their rates this July 1 by 13.3%.
Why does it matter?
As one would expect with inflation running that high, the annual reports by gas pipelines show that, as a whole, the industry’s costs increased in 2022 compared to 2021. However, for now, the good news is that the industry’s revenues grew even more.
What’s our view?
Because gas pipeline rates do not increase with inflation, the last two years of inflation will begin to exert pressure on the earnings of gas pipelines and the returns they are earning on their rate base. This could lead to pipelines needing to file more rate cases in the coming years to adjust their rates for the increasing costs.
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