Revisions to Forms, Statements, and Reporting Requirements for Natural Gas Pipelines, 032108 FERC, RM07-9-000

Docket Nº:RM07-9-000
Party Name:Revisions to Forms, Statements, and Reporting Requirements for Natural Gas Pipelines 18 CFR Parts 158, 18 CFR Parts 260
Judge Panel:Kimberly D. Bose, Secretary.
Case Date:March 21, 2008
Court:Federal Energy Regulatory Commission

122 FERC ¶ 61, 262

Revisions to Forms, Statements, and Reporting Requirements for Natural Gas Pipelines

No. RM07-9-000

18 CFR Parts 158, 18 CFR Parts 260

United States of America, Federal Energy Regulatory Commission

March 21, 2008

Order No. 710

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule.

SUMMARY: In this Final Rule, the Federal Energy Regulatory Commission (Commission) is revising its financial forms, statements, and reports for natural gas companies, contained in FERC Form Nos. 2, 2-A and 3-Q. The revisions are designed to enhance the forms’ usefulness by updating them to reflect current market and cost information relevant to interstate natural gas pipelines and their customers. The changes will provide additional information that the Commission needs to carry out its responsibilities under the Natural Gas Act (NGA).

EFFECTIVE DATE: This Final Rule is effective January 1, 2008 for the revisions to FERC Form Nos. 2, 2-A, and 3-Q and February 28, 2009 for the termination of FERC Form No. 11.

FOR FURTHER INFORMATION CONTACT:

Michelle Veloso (Technical Information)

Division of Financial Regulation

Office of Enforcement

Federal Energy Regulatory Commission

888 First Street, N.E., Washington, D.C. 20426

Telephone: (202) 502-8363

E-mail: michelle.veloso@ferc.gov

Scott Molony (Technical Information)

Chief Accountant

Division of Financial Regulation

Office of Enforcement

Federal Energy Regulatory Commission

888 First Street, N.E., Washington, D.C. 20426

Telephone: (202) 502-8919

E-mail: scott.molony@ferc.gov

Jane E. Stelck (Legal Information)

Office of Enforcement

Federal Energy Regulatory Commission

888 First Street, N.E., Washington, D.C. 20426

Telephone: (202) 502-6648

E-mail: jane.stelck@ferc.gov

SUPPLEMENTARY INFORMATION:

FINAL RULE

I. Inroduction

1. The Federal Energy Regulatory Commission (Commission) is revising Parts 158 and 260 of its regulations to effect changes to its FERC Form No. 2 (Form 2), Annual report for major natural gas companies, FERC Form No. 2-A (Form 2-A), Annual report for nonmajor natural gas companies, and FERC Form No. 3-Q (Form 3-Q), Quarterly financial report of electric utilities, licensees and natural gas companies to expand and update the forms to reflect current market and cost information relevant to interstate natural gas pipelines and their customers.1 The Commission is revising these financial forms to provide, in greater detail, the information the Commission needs to carry out its responsibilities under the NGA to ensure that rates are just and reasonable, and to provide pipeline customers and the public the information they need to assess the justness and reasonableness of pipeline rates.

II. Background

2. Before the restructuring of pipeline services promulgated by the Commission’s Order No. 636, interstate natural gas pipelines offered both sales and transportation services.2 Gas costs were charged to a purchased gas adjustment (PGA) account and were periodically adjusted and passed through to customers. The quid pro quo for the ability to recover the gas costs through a PGA tracker was the requirement that the pipelines file to restate their rates every three years. Order No. 636 eliminated the PGA regulations and the triennial filing requirement. Subsequently, the Commission issued a final rule that changed pipeline filing and reporting requirements in the post-Order No. 636 unbundled environment.3

3. The financial reporting forms for natural gas companies were again revised in 1995, in Order No. 581, to reflect the changed regulatory environment of unbundled pipeline sales for resale at market-based prices and open-access transportation of natural gas.4 Order No. 637, issued in 2000, among other things, revised the Commission’s regulatory approach to pipeline pricing by permitting pipelines to propose peak/off peak and term differentiated rate structures.5

4. Since the Commission eliminated the triennial restatement of rates filing requirement in Order No. 636, there has been a decline in filings under NGA section 4.6 As stated in the NOPR, the records indicate that as many as 15 major and 20 nonmajor gas pipelines have not filed a section 4 rate case in more than a decade.7 While the Commission may, on its motion, institute a section 5 investigation, it relies also on section 5 complaints filed by pipeline customers or state public utility commissions, to review a pipeline company’s rates outside of a section 4 proceeding.8 A section 5 complaint may rely on Forms 2, 2-A, and 3-Q financial data to support a complaint.

5. In 2006, two section 5 complaints were filed with the Commission, both relying on data provided in Forms 2 and 2-A to support allegations that the pipeline’s rates were unjust and unreasonable.9 In National Fuel, the pipeline responded that the Form 2 data relied upon by the complainants was not sufficient to support a complaint and that only a detailed cost and revenue study could provide the necessary justification for a section 5 investigation. In setting the complaint for hearing, the Commission rejected National Fuel’s contention, noting that the Form 2 data relied upon by complainants was sufficient to raise serious questions about the pipeline’s rates.10] The National Fuel complaint was followed by a section 5 action filed by a group of Southwest Gas customers alleging unjust and unreasonable rates and relying, in that instance, on Form 2-A data.11

6. The question of whether the Commission’s financial forms provide data sufficient to support a complaint resulted in a review of Forms 1, 1-F, 2, 2-A, and 3-Q data in the fall of 2006. Staff met with both form filers and users to discuss the need for additional information or other clarifications. Thereafter, on February 15, 2007, the Commission issued a Notice of Inquiry (NOI).12

7. The NOI sought comments on the need for changes to the financial forms. The Commission received 35 comments and 15 reply comments in response to the NOI. Eleven initial comments and two reply comments specifically addressed Forms 2, 2-A, and 3-Q data, with most pipeline customers seeking expanded information and pipelines opposing additional filing requirements.

8. Following a careful review of the comments and reply comments, the Commission issued a Notice of Proposed Rulemaking (NOPR) on September 20, 2007, proposing revisions to Forms 2, 2-A, and 3-Q, and the elimination of Form 11.13] The NOPR proposed to add several new schedules, requiring pipelines to report: (1) the disposition of shipper-supplied gas; (2) transactions between the pipeline and its affiliates; (3) revenues and volumes applicable to discount and negotiated rate services; and (4) identification of rate treatment afforded new pipeline projects. In addition, the NOPR proposed modifications to existing schedules to require more detail regarding: (1) sales data; (2) deferred income taxes; (3) state income tax expense; (4) regulatory assets and liabilities; (5) distribution of salaries and wages; and (6) employee pensions and benefits.

9. The Commission received 17 comments in response to the proposed reporting requirements which ranged from favorable to those seeking yet more detailed information, and a few who argued that the proposed modifications were unnecessary or burdensome.14] In general, most commenters applauded the Commission’s efforts to improve the quality of the financial forms. After careful consideration of the comments received, the Commission is adopting the changes and revisions as proposed in the NOPR with certain modifications and clarifications as discussed below. If no comments were received on a particular issue and it is not discussed below, the proposal is adopted as set forth in the NOPR.

III. Discussion

A. General

10. The NOPR discussed a concern raised by the Interstate Natural Gas Association of America (INGAA) that the proposed changes to reporting requirements could blur the distinction between sections 4 and 5 of the NGA, and invited comments on this issue.15] A few commenters addressed this issue. Dominion Resources, Inc. (Dominion) commends the Commission for recognizing this concern and requests that the Commission keep the concern in mind when finalizing the rule.16] The Michigan Public Service Commission (MPSC) urges the Commission to reject any argument that the reporting requirements proposed in the NOPR would improperly shift the burden of proof under section 5 of the NGA by requiring pipelines to justify their existing rates outside the context of a section 4 rate case.17] The MPSC states that the NGA explicitly gives the Commission the authority to require periodic reporting as necessary for purposes of administering the NGA.18] The Process Gas Consumers Group (PGC) states that the NOPR is proposing greater transparency and accuracy, which are essential to the Commission’s oversight obligations and neither of which could reasonably impact the burden of proof in section 5 proceedings.19

11. The Kansas Corporation Commission (KCC) and Apache Corporation (Apache) express concern that the ability of a pipeline to file a section 4 rate case even after parties have filed a section 5 complaint, as transpired in the recent Southwest Gas proceeding, may serve as a disincentive for some parties to file section 5 complaints.20] Apache recommends that the Commission add to the Form 2 and 2-A a cost and revenue summary page that would provide the Commission and interested parties a clear view of whether a pipeline’s filed rates are just and reasonable.21] The KCC agrees...

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