Recent Developments in Retail Pass-Through of Take-or-Pay Costs

✍ Scribed by Batla, Raymond J.

• Publisher: John Wiley and Sons
• Year: 2007
• Weight: 249 KB
• Volume: 5
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410051201

✦ Synopsis

In a series of orders issued on April 28, L.e Federal Energy Regulatory Commission accepted twenty pipeline take-or-pay cost-recovery filings submitted on March 31. Pursuant to the commission's orders, these pipelines will attempt to recover up to 75 percent of some $2 billion in additional take-or-pay buyouts and buydowns through a combination of directly billed fixed charges to firm sales customers and volumetric surcharges on sales and transportation throughput. In line with earlier orders,' these costs will include non-cash considerations such as transportation credits and discounts given to reform producer contracts. Additional pass-throughs will be forthcoming pursuant to the commission's "litigation exception," which permits additional filings to recover take-or-pay costs resulting from litigation or arbitration underway on March 31, 1989. As these costs are passed through by pipelines to their local-distribution-company customers, state regulators are beginning to wrestle with the thorny problem of LDC passthrough of such costs to their end-use customers. Several critical questions are being debated before state public service commissions. How much of these take-or-pay costs should ratepayers be required to absorb? Can the LDC be forced to absorb part of these costs? Does the public service commission have authority to answer these questions?