On November 19, 2009, the Federal Energy Regulatory Commission, known as “FERC,” instituted its first investigations of interstate natural gas pipeline rates since the FERC streamlined the regulation of natural gas pipelines in 1992. The investigations target the rates of three key suppliers of natural gas to the Midwest: Natural Gas Pipeline Company of America LLC (“Natural”), Northern Natural Gas Company (“Northern”), and Great Lakes Gas Transmission LP (“Great Lakes”).1 After examining the revenue and costs of service reported by these three pipeline systems in their respective annual reports to the FERC for 2008, the Commission determined that these three pipelines may be substantially over-recovering their respective costs of service, causing their respective existing rates to be unjust and unreasonable. These investigations represent a major policy shift by the Commission to resume an active oversight role in natural gas interstate pipeline rates.
The investigation of these rates has the potential to impact a significant portion of the natural gas supply to the Midwest. Natural’s interstate gas transportation system consists of two main lines, one originating in the West Texas and New Mexico producing basins and the other originating in the Gulf Coast-areas of Texas and Louisiana, with each terminating in the Chicago, Illinois metropolitan area. Natural is the largest transporter of gas into the Chicago market. Northern’s interstate gas transportation system extends from the Permian Basin to the Upper Midwest, serving 76 utilities and numerous end users. Great Lakes’ interstate gas transportation system originates in Western Canada and serves the states of Michigan, Wisconsin and Minnesota.
FERC’s action revives a long-dormant oversight role, which is driven in large part by recent changes in regulatory reporting requirements. In March 2008, the Commission issued Order No. 710, changing the filing requirements for the Form No. 2 filed annually by interstate natural gas pipelines. The new requirements increased the transparency of financial reporting and cost information so as to more accurately reflect a pipeline’s cost of service. An analysis of the new Form No. 2 information for each of these three companies demonstrated that each company is over-recovering its cost of service by a significant margin: Natural may be over-recovering by 29%; Northern may be over-recovering by 30%; and Great Lakes my be over-recovering by 24%.
The Natural Gas Act provides that any person whose participation in the proceeding may be in the public interest may intervene and participate as a party to the investigation.2 All entities wishing to intervene in these proceedings must file a timely motion to intervene by December 21, 2009.
1 Natural Gas Pipeline Company of America LLC, 129 FERC ¶ 61,158 (2009); Northern Natural Gas Company, 129 FERC ¶ 61,159 (2009); Great Lakes Gas Transmission Limited Partnership, 129 FERC ¶ 61,160 (2009).
2 NGA § 15; 15 U.S.C. § 717n.