FERC Determines Compliance With Capacity Release Order to Show Cause

10.21.14

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In March of this year, the Commission initiated a show cause proceeding requiring all pipelines to either: (1) revise their tariffs in accordance with the Commission’s regulations under 18 C.F.R. 284.8(d), which requires pipelines to provide for the posting of capacity release offers; or (2) demonstrate that they are in full compliance with those regulations.

In response to its show cause order, the Commission received 157 compliance filings. On October 16, 2014, in its Order on Filings In Compliance With Order to Show Cause, 149 FERC ¶ 61,031,the Commission accepted the compliance filings with certain conditions. Of these responses, 64 pipelines properly revised their respective tariffs to provide for the posting of capacity release offers in accordance with section 284.8(d). An additional 23 pipelines successfully demonstrated that their tariffs were already in compliance with the regulations. However, the Commission found that the remaining 69 filings were not acceptable and required further compliance. The two major issues with these filings involved setting of minimum periods for posting and the reasonableness of posting fees.

Length of Posting:

The Commission found that potential replacement shippers should be permitted to have their offers posted for however long they desire, subject to the pipeline’s right to establish a posting cap. These caps, though, may not be less than 30 days. A 30-day cap, according to the Commission, addresses the interests of the potential replacement shippers, who desire longer posting periods in order to seek the best offers of released capacity, while imposing a minimal burden on the pipeline.

Out of the 157 compliance filings, 31 pipelines submitted compliance filings that were silent on how long a potential replacement shipper could post offers. An additional 32 pipelines included provisions limiting the length of a posting, but those filings imposed caps of less than 30 days. The Commission accepted these compliance filings, but required the pipelines to submit a revised filing extending the minimum length of the caps.

Fee for Posting:

In their compliance filings, three pipelines proposed a $50 fee for posting offers, while three other pipelines had existing tariff provisions that already imposed a $50 posting fee. Another pipeline had a provision that allowed for a fee, but did not set the amount of the fee. The Commission struck down these fees as inconsistent with Order No. 636, requiring the removal of existing fee provisions within 30 days of the order.

In Order No. 636-A, the Commission held that a pipeline should recover the fixed costs for its electronic bulletin board in its transportation rates as part of its cost of service and may not recover an administrative fee from its operation of a capacity release program. The pipeline could, however, charge a fee to frequent users of the electronic bulletin board, such as marketers, but these charges must be limited to the recovery of variable costs.

Further compliance filings consistent with the Commission’s October 16 Order are due within 30 days (November 17). If you have questions or would like more information on the issues discussed in this article, please feel free to contact us.