Week Ending March 11, 2016

ANR Pipeline Asks FERC to Clarify (or Rehear) Summary Rejection of its Proposed Conversion from Seven-Zone to Four-Zone Rate Structure

This Article Appears as Published in Foster Report No 3090
ANR Pipeline Asks FERC to Clarify (or Rehear) Summary Rejection of its Proposed Conversion from Seven-Zone to Four-Zone Rate Structure

On 3/8/16, ANR Pipeline Co. requested FERC either to clarify or grant rehearing on what could be interpreted as an outright dismissal of ANR’s proposal (RP16-440)  – filed as part of a general rate case – to restructure its system rates from its current seven-zone to a four-zone construct.  The pipeline’s motion took exception to a procedural ruling in FERC’s February 29 order generally setting for hearing ANR’s proposal under section 4 of the Natural Gas Act (NGA) to restate base rates – which would be its first such restatement since 1997.[1]

ANR’s 1/29/16 rate case filing included two distinct approaches to its rate structure.  What it tabbed as its “Primary Case” was predicated on its existing seven-zone rate structure, but reflected the company’s claimed changes in “costs and business environment” since the 1997 settlement of its last section 4 filing (RP94-43).  The second approach, tabbed its “Preferred Case,” proposed a reduction of its seven rate zones to a four-zone rate structure and included a pro forma tariff indicting the rates that would result if the four-zone structure were implemented (based on the same proposed cost-of-service).[2]

ANR’s new motion notes that it filed testimony to support the proposed transition to a four-zone structure and, while various parties urged that this “Preferred Case” be set for hearing, no party argued that the Commission should summarily reject the four-zone proposal.

But that is arguably what the 2/29 order did.  Although the order recited that FERC would set for hearing “all issues presented in this filing” because it could not determine the merits from the pleadings, it proceeded to exclude consideration of at least some portion of the Preferred Case, if not all.  Specifically, the Commission said it would “not take any action on the pro forma tariff records” proposing rates based on a four-zone structure, explaining “ANR’s pro forma filing is a procedurally null alternative, as it is only the actual rate case proffered by ANR with actual tariff records that can be and are being set for hearing.”

ANR’s motion advises that the “procedurally null” sentence “has created uncertainty among some parties” regarding whether the four-zone rate structure is, or is not, an issue the Commission’s February 29 order set for hearing.

How ANR Parses the Ruling.  The pipeline’s motion urges FERC to “clarify” the ruling by explaining that its exclusion was limited to the “pro forma tariff sheets themselves.”  That is, ANR suggests FERC did not intend to exclude from consideration at the hearing the pipeline’s proposal to switch to a four-zone rate structure, but only to reject at this time the proffered tariff sheets reflecting rates with a four-zone structure.

ANR elaborates that its narrow interpretation of the order’s exclusion is “consistent with Commission precedent” in other cases where the proponent has offered “preferred rate or tariff proposals.”  It is “common practice,” the motion adds, for pipelines in general rate filings under NGA Section 4 to include tariff modifications that are “intended to become effective on a prospective basis” once the Commission has determined that they are “just and reasonable.”  ANR’s 1/29/16 filing initiating this rate case did, in fact, propose implementation of its “Preferred Case” only on a prospective basis.

In such cases, continues ANR, proponents typically furnish the Commission with pro forma tariff sheets to illustrate the effects of the change, but not with any intention of putting these changes into effect “immediately or upon expiration of the suspension period.”  FERC has typically followed through by “declin[ing] to set the pro forma tariff sheets themselves for hearing,” but nonetheless setting the underlying prospective tariff change for hearing.

In a 2010 Columbia Gulf Transmission Co. case featuring the same type of bifurcation – a “primary case” and a “preferred case” – FERC issued an order, notes ANR, stating that the Preferred Case tariff records were “moot and of no effect” but adding:  “However, the rate proposals in the Preferred Case will be considered in the hearing established.”[3]

ANR restates its belief that the Commission meant to set aside as “null” only the tariff records associated with the proposed change to a four-zone rate structure – not the merits of the underlying proposal for potential prospective application.  It hence requests “clarification” along these lines.

Request for Rehearing.  Should FERC not clarify its February 29 ruling in this manner, ANR requests rehearing.  It asserts that rehearing should be granted because the Commission has erred in failing to provide a basis for rejecting out-of-hand the company’s four-zone proposal.  This would be an “unexplained departure” from precedent controlling similar situations.

The pipeline relates that it had offered testimony describing why a change to a four-zone rate structure would be “just and reasonable” – i.e., because it “better reflects the existing supply and market dynamics” on its system.  The 2/29/16 order, ANR continues, contained a “brief summary” of the proposal, but did not offer “any rationale for rejecting it.”  Instead, it merely labeled the associated pro forma tariff sheets a “procedurally null alternative” and added it is “only the actual rate case proffered by the pipeline” with the “actual tariff records” that can be set for hearing.  The order is otherwise bereft of “any substantive analysis” of the four-zone proposal or the evidence offered in its support.

Moreover, ANR cites an inherent contradiction between any conclusion that the four-zone proposal must be completely rejected and the statement, earlier in the order, that the Commission was “setting all issues for hearing.”  The pipeline concludes that FERC (if it actually meant to dismiss the four-zone concept in its entirety) is in violation of section 705(2) (A) of the Administrative Procedure Act for failing to “articulate a rational explanation for its action” or a “reasoned basis for its decision,” since it “provided absolutely no basis.”

Another legal defect requiring rehearing, alleges ANR, is FERC’s failure to distinguish this case from other precedents in which it has expressly set issues like ANR’s prospective tariff change for hearing while declining to accept, or accepting for information purposes only, pro forma tariff sheets reflecting the impact of the changes.  “Reasoned decision making” requires consideration of such precedents, ANR reminds the Commission.[4]


[1]   See FR No. 3088, pp. 12-14.

[2]   The “Preferred Case” also included other tariff changes ANR described as “necessary” if the four-zone structure were to be found “just and reasonable.”

[3]   The motion goes on to cite similar examples of such handling of prospective tariff proposals in National Fuel Gas Supply Corp. (2011) and CenterPoint Energy-       Mississippi River Transmission, LLC (2012).

[4]   ANR cites Exxon Mobil Corp. v. FERC (D.C. Cir. 2003) and Greater Boston Television Corp. v. FCC (D.C. Cir. 1970).



Copyright © 2016 by Concentric Energy Publications, Inc.  All rights reserved.

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