FERC Changes Policy in First Negotiated Gas Rate Order

Fortnightly Magazine - December 1996
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The Federal Energy Regulatory Commission (FERC) has announced two policy changes in its first final order on negotiated rates under its policy statement on Alternatives to Traditional Cost-of-Service Ratemaking. The FERC will now require pipelines to file either negotiated rate contracts or tariff sheets that reflect the essential elements of their negotiated rate agreements. In addition, pipelines will no longer be permitted discounted adjustments to their recourse rates.

The case involved NorAm Gas Transmission Co. (Docket No. RP96-200-001).

NorAm's tariff sheets, filed April 1, provided that 1) shippers may elect existing, FERC-approved tariff rates rather than negotiating rates; 2) shippers may not exceed the maximum FERC-approved recourse rate in NorAm's tariff; 3) for capacity-allocation purposes, shippers willing to pay more than the maximum recourse rate will be considered to have paid the maximum recourse rate; and 4) NorAm will not alter its recovery and treatment of various costs, such as transition and Gas Research Institute costs, through surcharges for shippers that pay negotiated rates.

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