FERC Contests High Rates of Three Interstate Natural Gas Pipelines

FERC commenced three separate investigations November 19th into the rates of three different interstate pipeline companies "” Northern Natural Gas Company, Great Lakes Gas Transmission LP, and Natural Gas Pipeline Company of America LLC.  FERC began these three investigations on its own motion (not in response to a complaint) in order to determine whether the rates were generating windfall profits for the pipelines.

FERC alleges that these pipelines are recovering returns on equity in excess of 20 percent "” as high as 24.5 percent in the case of Natural Gas Pipeline "” amounts far in excess of what FERC deems  the upper end of lawful rates.  FERC also alleges that Natural Gas Pipeline was over-recovering fuel use gas from its customers, and that in the fourth quarter of 2008 and the first quarter of 2009 alone, the pipeline received revenues of $59.6 million and $48.7 million, respectively, from the sale of excess retained gas quantities.

FERC Chairman Wellinghoff issued a press release touting FERC's action, stating that "protecting consumers against unjust and unreasonable rates is a fundamental responsibility of the Commission under the Natural Gas Act."  Instigation of these investigations appears to put the industry on notice that if pipelines don't file rate cases to ensure that their revenues are commensurate with their costs, FERC will do it for them.