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FERC opens rate investigations into 2 Kinder Morgan gas pipelines

FERC will investigate the natural gas transportation rates charged by Kinder Morgan Inc. gas pipeline companies Natural Gas Pipeline Co. of America LLC and Wyoming Interstate Co. LLC in 2014 and 2015.

The commission plans to use its authority under Section 5 of the Natural Gas Act to see whether the two interstate pipelines, also known as NGPL and WIC, are "substantially over-recovering their costs, resulting in unjust and unreasonable rates," according to a Jan. 19 statement. FERC introduced draft orders to initiate the investigations at its monthly meeting the same day.

FERC directed the companies to file a cost and revenue study for the latest 12-month period within 75 days of the commission's orders on the investigations. FERC set each case for evidentiary hearings before an administrative law judge. Section 5 rate investigations are typically resolved in settlement agreements between the pipeline and FERC staff, with input from pipeline customers.

Based on a review of cost and revenue information, FERC said it was concerned that the earnings of NGPL and WIC might exceed their cost of service plus a reasonable return on equity. FERC staff reviewed the information on the commission's Form No. 2 annual reports for 2014 and 2015. Staff estimated NGPL's return on equity for 2014 and 2015 to be 28.5% and 20.8%, respectively. It estimated WIC's return on equity to be 17.7% and 19.0%, respectively.

"These estimated levels of return lead staff to believe that these two pipelines are over-recovering their costs of service and may be charging rates that are no longer just and reasonable," FERC staff said at the meeting. "In addition, none of these pipelines have an existing settlement with their customers that places a currently effective moratorium on existing rates, or requires them to file a new general Section 4 rate case in the future."

Kinder Morgan shares ownership of NGPL with Brookfield Infrastructure Partners LP. WIC is a subsidiary of El Paso Pipeline Partners LP, which is part of Kinder Morgan. (FERC dockets RP17-302, RP17-303)