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FERC Terminates Fuel Retention Inquiry

By Vorys

Late last year, the FERC issued a Notice of Inquiry (NOI) seeking comments on whether it should change its current policy on the in-kind recovery of fuel and lost-and-unaccounted-for gas by interstate pipelines.  That policy, in general, allowed pipelines two options - One, to establish a fixed fuel retention percentage that would remain unchanged until the pipeline filed a subsequent NGA Section 4 rate case.  Two, to establish a tariff mechanism that allowed for periodic adjustments to the fuel retention percentage outside of a general NGA Section 4 rate case, but which included a true-up mechanism for over- and under-recoveries of fuel.  The NOI asked whether the Commission should change it policy for the purpose of minimizing over-recoveries and provide greater incentives to reduce fuel loss.

In response, shippers and end-use customers generally urged the Commission to require all pipelines to use a tracker and true-up mechanism to protect against the over-recovery of costs.  Pipelines, on the other hand, urged the Commission to retain its current policy and the flexibility it provided.

After reviewing the comments, the FERC has decided to terminate the NOI and consider changes on a case-by-case basis.  To require all pipelines to adopt a fuel tracker and true-up mechanism:

 [T]he Commission would have to act under NGA section 5 to require pipelines which currently have fixed fuel charges established in general section 4 rate cases to adopt trackers and true-up mechanisms.  In order to do that, the Commission would have to find that all fixed fuel charges are unjust and unreasonable and that the only just and reasonable method for pipelines to recover fuel costs is through a tracker with a true-up mechanism.  The commenters have failed to provide the Commission a basis to take such generic action under NGA section 5.

Tags: Fuel, FERC, Pipeline, Lost-or-unaccounted-for, Energy

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