New Rules from FERC on Pipeline Profit Margins?

A DeSmog article on May 13, 2019, Energy Regulators May Reconsider Rules Critics Say Fueled America’s Oil and Gas Pipeline Glut, discusses a “little-noticed Federal Energy Regulatory Commission (FERC) announcement could have an outsized impact on the oil and gas pipeline industries — if the commission decides to snap shut loopholes that analysts say create financial incentives to build too many new pipelines in the U.S.” FERC’s announcement was followed by a March 21 notice of inquiry requesting “information and stakeholder views to help the Commission explore whether, and if so how, it should modify its policies concerning the determination of the return on equity (ROE) to be used in designing jurisdictional rates charged by public utilities. The Commission also seeks comment on whether any changes to its policies concerning public utility ROEs should be applied to interstate natural gas and oil pipelines.”

The high rate of return on equity (a guaranteed 14% for the Atlantic Coast Pipeline) allows for the construction of unnecessary pipeline projects, “which critics say will leave the United States criss-crossed by newly built fossil fuel infrastructure despite falling renewable energy prices and growing concern about the climate crisis. Critics add that because utilities can pass along costs to consumers in their monthly bills, FERC has effectively allowed them to use other people’s money to build pipes that may never be fully used.”

Now is your chance to comment to FERC on whether it should change the way it determines rate of return. Comments from the public on FERC’s new inquiry are due on June 26, 2019.