IECA Asks FERC to Resume 3-Year Reviews of Gas Pipeline Rates

In a September 22 letter to Norman Bay, chairman of the Federal Energy Regulatory Commission (FERC), the Industrial Energy Consumers of America (IECA) and more than 30 industry signatories urged the commission to resume mandatory three-year reviews of interstate natural gas pipeline rates – noting that, “One of the Federal Energy Regulatory Commission’s most fundamental responsibilities is to ensure that rates charged by interstate natural gas pipelines are just and reasonable as required by the Natural Gas Act.”

The Washington, DC-based IECA promotes the interests of manufacturing companies for which the availability, use and cost of energy, power, or feedstock play a significant role in their ability to compete in domestic and world markets.

“Unfortunately, many interstate pipeline companies are abusing their monopoly power and are overcharging their customers,” stated IECA President Paul Cicio. “The overcharges are costs that eventually every natural gas consumer pays.”

The mandatory reviews were eliminated over 20 years ago. According to the letter, “FERC Order 636 ended the mandatory three-year reviews of pipeline rates in 1992 as a part of the broader move toward deregulation. Pipelines now only go before the FERC if they need a rate increase to cover increased costs; or if challenged by a customer through an expensive and lengthy process that can cost the consumer millions of dollars per rate case and can take upwards of two years to be resolved. As a result of the existing process, many pipelines have not had their rates examined by the FERC for many years, leaving customers vulnerable to overcharges.”

Today, the IECA claimed, “The FERC is infrequently reviewing natural gas pipelines’ rates to ensure that they are just and reasonable, despite the fact that pipeline customers are being overcharged.”

The proof? The association pointed to a 2015 study (“Interstate Natural Gas Pipeline Cost Recovery Analysis”) released by the Natural Gas Supply Association, which analyzed the cost recovery of 32 major natural gas pipelines that represent 80 percent of the market. The researchers found that, from 2009 through 2013, pipelines over-collected approximately $3.0 billion more than they would have collected on a very generous average 12 percent return on equity allowed by FERC.”

Signatories to the letter included Ag Processing, Association of Businesses Advocating Tariff Equity, American Forest & Paper Association (AF&PA), American Foundry Society, American Public Gas Association (APGA), Blair Rubber, Custom Glass Machinery, Dow Corning, East-Lind Heat Treat, Eastman Chemical, Evonik, Georgia Association of Manufacturers, Gerdau, Glass Packaging Institute (GPI), Glass Manufacturing Industry Council, Guardian Industries, Hyload, Illinois Industrial Energy Consumers, Indiana Industrial Energy Consumers (INDIEC), Industrial Energy Consumers of America (IECA), Industrial Minerals Association – North America, International Diatomite Producers Association, Kimberly-Clark, Lehigh Hanson, Linde, National Industrial Sand Association, Northwest Industrial Gas Users, Olin, Owens-Illinois, Republic Paperboard, SGL Carbon, Steel Manufacturers Association, USG, WestRock, Wisconsin Industrial Energy Group, and W.R. Grace and Company.

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