Natural Gas Rate Cases: Assessing Rate Change Risk for Pipelines, Shippers & Investors
As we discussed in FERC Launches Two Gas Pipeline Rate Cases – Are More on the Way?, FERC launched two rate investigations before the end of last year, and data shows more are likely on the horizon, since 40 more pipelines earned a 2021 return at or above the ROE we calculated for those pipes.
Rate cases — while a normal and essential part of the FERC regulatory process — can be a complex topic, but it’s essential for various gas industry participants to understand, anticipate, and track them.
That's why we joined East Daley for a comprehensive discussion and Q&A on rate cases, risk assessment, and implications for pipelines, shippers, and investors. Watch the webinar replay below.
We begin with a basic overview — the purpose and types of rate cases, how and when they are likely to be initiated, common terminology and calculations, process, timing, and potential outcomes. Next, we apply this foundation to a discussion of recent cases and industry-wide trends we’ve observed in the past few years. And finally, recent activity within Kinder Morgan’s portfolio of pipes provides an illustration of rate risk and impact at the entity level from an investor perspective.
Why it matters
Natural gas pipelines must understand FERC rate cases and related risk to anticipate filings by competitors, benchmark strategies, study proceeding testimony and adequately monitor results.
It’s critical also for natural gas shippers using long-term contracts to evaluate rate risk potential for current and future contracted capacity; this understanding provides a stronger negotiating position, and often tips the balance when comparing competing transport options.
For investors in the publicly traded companies that own these pipelines, an understanding of each subsidiary’s rate risk impacts the financial outlook at the broader entity level. If a public company’s pipelines are ripe for a rate increase, that may help improve returns, but conversely if its pipelines are overearning, the revenue of the public company could be at risk.
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Managing Director of Research
Managing Director of Research, Arbo
INDUSTRY EXPERT, PIPELINE COMPANY GENERAL COUNSEL, LAW FIRM PARTNER
Gary leads the delivery of expert services and insights. Gary’s viewpoints on the regulatory, tax, and permitting complexities of the energy markets are derived from 20 years of experience as a lawyer in the industry, including 8 years as the General Counsel for a FERC regulated pipeline and are sought after by decision makers. Mr. Kruse is a graduate of the University of Virginia School of Law and received a B.A. in Mathematics from the University of Dayton.
Energy Analyst, EDA
Alex is an analyst on East Daley’s Capital Markets team. His expertise lies in understanding, quantifying, and driving transparency related to natural gas interstate pipelines, natural gas gathering and processing asset systems, and LNG. Alex produces financial models, insights, and research reports on a monthly, quarterly, and ad-hoc basis. Alex also models supply and demand dynamics across numerous basins and commodities such as crude, NGLs, and natural gas.
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Recent Rate Case Analyses on the Blog
Arbo's free blog covers natural gas, oil & liquids, and renewables infrastructure; regulatory and permitting events, policy, and litigation; pipeline asset management, rate-making and accounting; and the market impacts of these industry complexities and risks.
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Work with Arbo and East Daley to understand and quantify rate change risk on your pipelines of interest.