This overview of ratemaking and rate-design principles should ease the myriad tasks awaiting new rate analysts and attorneys, while provoking nostalgia among industry veterans still manning the...
Zone of Reasonableness
Coping with rising profitability, a decade after restructuring.
abnormally high equity ratios.”); Transcontinental Gas Pipe Line Corp. , 71 FERC ¶61,305 (1995) (“[t]he determination of an appropriate capital structure involves a balancing of the investor and consumer interests. Equity generally costs more than debt. Hence, ratepayers would be subjected to an excessive burden if their rates had to be set at a level high enough to compensate the pipeline for excessive equity in its capital structure. This burden on ratepayers can be limited by ‘levering a capital structure with lower-cost debt.’”)
14. The imposition of ratemaking based on contract levels, rather than flowing volumes, makes pipeline revenues highly predictable for pipelines that are fully-subscribed with such contracts, which is the case for most interstate pipeline capacity.
15. Expansion of the U.S. Natural Gas Pipeline Network: Additions in 2008 and Projects through 2011 , Energy Information Administration, Office of Oil and Gas, September 2009.
16. Natural Gas Act of 1938, 52 Stat., pp. 823.
17. Kinder Morgan Interstate Gas Transmission LLC, 133 FERC ¶61,157 (2010), reh’g granted in part and denied in part, 134 FERC ¶61,061 (2011).
18. Public Service Comm’n of N.Y. v. National Fuel Gas Supply , 115 FERC ¶61,299 (2006).
19. Panhandle Complainants, v. Southwest Gas Storage Company , 117 FERC ¶61,318 (2006).
20. Public Service Comm’n of N.Y. v. National Fuel Gas Supply, supra.
21. Panhandle Complainants, v. Southwest Gas Storage Co., 120 FERC ¶61,207 (2007).
22. The Senate Energy & Natural Resources Committee examined NGA reform and voted in June 2009 to reject an amendment that would have modified Natural Gas Act Section 5 to provide the FERC with the authority to grant refunds to consumers that are paying unjust and unreasonable pipeline rates. In 2010, however, FERC Chairman Jon Wellinghoff continued to communicate his support for legislative changes to the evident asymmetry between Section 4 and Section 5 remedies under the NGA. See: 131 FERC ¶61,178 (dissenting opinion to an order issued May 27, 2010, in Docket No. RP10-148-000, Issued June 8, 2010).