The Federal Energy Regulatory Commission on Wednesday adopted new policies and a new federal form to assure that natural gas pipeline consumers will benefit from last year’s reduction of federal corporate income taxes from a maximum 35% to a flat 21%. The commission discussed the issue at its Thursday open meeting, the final one for Commissioner Rob Powelson, who is leaving Washington next month and returning to his native Philadelphia to head the National Association of Water Companies.
Gas pipelines have been concerned since the passage of the new tax law last December as consumers of pipeline gas began calling on FERC to categorically reduce pipeline rates to reflect lower taxes. Otherwise, the consumer groups said, pipelines would be overearning and rates would not be just and reasonable. The pipelines countered that such action would not take into consideration various components that make up pipeline rates.
In March, FERC responded to those concerns and to an appeals court order on what is allowed in rates for master limited partnerships, which generally don’t pay income taxes. Instead, the partners pay taxes individually.
This week’s action modifies the March proposal, requiring pipelines to file a one-time form, FERC Form No. 501-G, which, according to a FERC press release, requires “interstate pipelines…to provide a rough estimate of a pipeline’s return on equity before and after the new tax law and changes to the Commission’s income tax allowance policies.”
Powelson’s departure will complicate life for FERC at least this summer. One of the three-member Republican majority on the commission, Powelson, a strong advocate of competitive wholesale electric markets, has been a firm vote for granting gas pipelines permission to build without taking into consideration their impacts on global warming. The two Democrats, commissioners Cheryl LaFleur and Richard Glick, have often challenged that position. That could create 2-2 divisions in some pipeline certification requests.
FERC will be working on hammering out a new policy on pipeline certificates during August, when there is no monthly open meeting. That means August is likely to be busier this year than in most prior years.
Named to FERC by President Trump, Powelson has only served at FERC for a year, with a year-and-a-half left on his term of office. It’s unlikely that a replacement can be identified, vetted, and confirmed by the U.S. Senate before November’s mid-term elections.
Also this week, FERC Chairman Kevin McIntyre denied that the commission preparing to send some developers of liquefied natural gas plants letters announcing 12-18 month delays in considering the projects, which Bloomberg reported July 11, with anonymous sourcing. McIntyre said that “since we have been working diligently to streamline our permitting process and are still making significant strides in that direction, the release of any schedules to date would have been premature.” At Thursday’s meeting, he said the commission has been working with pipeline safety regulators at the Department of Transportation on streamlining LNG reviews.
— Kennedy Maize