rolled-in pricing for new pipeline facilities where the benefits to the system are proportionate to the rate impact on existing customers (Docket No. PL94-4-000). In the past, the FERC made cost-recovery pricing decisions during the first rate case after the facilities were constructed. Now, the FERC will make its determination when the certificate is issued. That finding will apply in the first rate proceeding unless a significant change in circumstances can be shown.
The FERC found that a project can benefit a pipeline system either operationally or financially. To justify rolled-in pricing, the benefits must be clearly and precisely demonstrated; societal benefits were excluded as too difficult to quantify. The FERC will apply a presumption in favor of rolled-in rates if the rate impact is 5 percent or less, and the pipeline can show system benefits. Customers may rebut the presumption in individual cases by disproving the benefits. Projects at risk for cost recovery do not qualify for the presumption.
Commissioner William L. Massey said the policy will provide "upfront guidance." He explained that the FERC will balance costs and benefits when the
5-percent threshold is exceeded. Although not defined, Massey opined that a small increase in rates may be justified by a small increase in benefits. The same would apply for moderate and large rate increases.