To better understand the evolving outlook for LNG and its role in the U.S. gas market, Fortnightly assembled a group of LNG specialists with various perspectives on the issues.
The Case That Mattered
What’s the story with AES Ocean Express?
Recognizing the importance of the cost-mitigation issue, and possibly recognizing the likelihood that no matter what FERC decided on the issue, FERC’s decision probably would be met with an appeal, the commission spent nearly 20 pages (approximately one-sixth of its order) addressing cost mitigation. FERC ultimately came to the conclusion that it has no jurisdiction to consider how mitigation costs should be allocated among non-jurisdictional customers. FERC noted:
The commission’s only rate jurisdiction in this situation is over the rates Florida Gas charges its shippers for transporting their gas. The mitigation costs which Florida Gas’s LDC and electric generator customers seek to recover from the LNG project sponsors, Florida Gas, or other shippers are not Florida Gas’s costs, but are the customers’ costs of testing and modifying their own equipment.4
FERC pointed out that the electric generators and LDCs, many of whom are subject to the jurisdiction of the Florida Public Service Commission (FPSC), were asking FERC to establish a mechanism under which their mitigation costs would be allocated to other parties, some of whom were also regulated by the FPSC. FERC noted that it believed such a matter is more appropriately within the jurisdiction of the Florida regulatory bodies. Thus, it appears FERC has passed the buck to state regulators to address the issue of end-user cost mitigation resulting from the introduction of LNG into the U.S. pipeline grid.—JEG
1. AES Ocean Express LLC v. Florida Gas Transmission Co., Initial Decision, 115 FERC ¶ 63,009, at par. 225 (Apr. 11, 2006).
2. 13 FERC ¶ 61,102 (1980), opinion and order denying reh’g, 14 FERC ¶ 61,073 (1981), aff’d Corning Glass Works v. FERC, 675 F.2d 392 (1982).
3. AES Ocean Express LLC v. Florida Gas Transmission Co., et al., Opinion and Order on Initial Decision, Opinion No. 495, 119 FERC ¶ 61,075, at par. 250 (Apr. 20, 2007).
4. Id at par. 272.