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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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. 

Let's work together

Work with Arbo and East Daley to understand and quantify rate change risk on your pipelines of interest.