Underground Infrastructure - March 2023 - 12

WASHINGTONWATCH
The Federal Energy Regulatory Commission
(FERC) moved forward recently
with projected policies that have
gas pipeline implications. But their
resolution is a bit up in the air now that
former Chairman Richard Glick has
left the commission, after failing to be
reconfirmed by the Senate. Willie Phillips,
another Democratic commissioner,
is the new chairman and instead of
the 3-2 Democratic majority in 2022,
FERC now has a 2-2 Democratic-Republican
split in 2023.
" With a deadlocked Commission, a
number of agenda items furthered may
be left in limbo - at least for the near future, "
Sarah Tucker, an energy attorney
with the law firm Sidley, wrote in a Jan.
23, 2023, blog post. " These include a series
of natural gas policy statements that
the Commission converted to draft form
in March 2022, along with power transmission
initiatives aiming to respond to
capacity and reliability challenges. "
A major difference between Glick
and Phillips is the former had a bee
in his bonnet regarding reduction of
greenhouse gas emissions in gas pipeline
projects, including new compressors.
Also, he sometimes took a prominent
adversary role with regard to new
pipeline infrastructure. He was viewed
as an ally of environmental groups.
Stephen Barlas | Washington, D.C. Editor
FERC Moves Forward Tentatively
on Pipeline Rates, Affiliates
Phillips was chairman of the D.C.
Public Service Commission when he
was appointed by President Biden in
September 2021. His background is in
electric grid issues. In announcing his
appointment as chairman of the FERC,
the commission's press release stated:
" Phillips has an extensive background
in the areas of public utility regulation,
bulk power system reliability and corporate
governance. "
One Washington observer calls Phillips,
as opposed to Glick, a " consensus
builder, " given his technical background
and work at places like the National
Association of Regulatory Utility
Commissioners.
A key FERC decision, while Glick
was still aboard and that will have
ramifications going forward, slightly
changed the way the commission views
rate change requests made by interstate
pipelines. The filing by Panhandle, an
Energy Transfer subsidiary, was noteworthy
because it was the first time in 10
years the commission actually litigated
a complete rate case and, of course, the
natural gas environment has changed
considerably in the past decade.
In December 2022, FERC issued an
order setting a return on equity (ROE)
of 11.25 percent for Panhandle Eastern
Pipe Line Co. Commissioner Allison
A blog post from the law firm Akin Gump stated:
" FERC policy often uses the 'last litigated ROE'
as a proxy for just and reasonable rates when
it is developing initial rates for existing facilities
being acquired by a new pipeline.
12 MARCH 2023 | UndergroundInfrastructure.com
Clements indicated she expects the
order will " provide important guidance
on [FERC's] approach to natural gas
rates in coming years. "
The last NGA section 4 general rate
case to be fully litigated was El Paso
Natural Gas Co., a 2013 decision that
derived rates based on a test period that
straddled 2010 and 2011. The allowed
ROE in that case was 10.55 percent.
A blog post from the law firm Akin
Gump stated: " FERC policy often uses
the 'last litigated ROE' as a proxy for
just and reasonable rates when it is developing
initial rates for existing facilities
being acquired by a new pipeline.
It has also relied upon the 'last litigated
ROE' in rulemaking proceedings that
concerned pipeline rates. Hence, the
Panhandle mark of 11.25 is an increase
of 70 basis points and may change
the calculation made by pipelines and
shippers when they consider whether
to litigate a rate case proceeding or
agree to a black-box settlement without
a stated ROE. "
One attorney who practices before
FERC states that the Panhandle rate
was a case of " FERC not trying to make
waves. " She adds that despite the 70
basis-point increase, the commission
kept its standard of using 35 years as
the period over which to measure the
economic life of an asset. Some on the
staff of FERC and from the outside had
pushed for extending that period up to
50 years. That would have probably led
to lower ROEs for pipelines.
Contractual commitments
In another recent action, FERC proposed
a policy statement addressing
contractual commitments between an
affiliate shipper and its parent oil or
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Underground Infrastructure - March 2023

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