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Highlights

Debate over 16.1% proposed ROE

Groups question projects use of modernization tracker

Washington — Columbia Gas Transmission's recent proposal at the Federal Energy Regulatory Commission for a major rate hike as part its first Natural Gas Act Section 4 rate case in more than 20 years is drawing objections from a wide array of shippers.

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The company, which operates 12,000 miles of pipeline traversing 10 states, on July 31 proposed to increase its cost of service and rate base, lift its return on equity to 16.1% and alter its latest modernization settlement in light of two new federal safety regulations.

The list of producers, distribution companies and consumer advocates filing protests by Aug. 12 was long. Some flagged the higher rate of return and systemwide rate increase and others questioned what they cast as a departure from FERC's policy on modernization trackers, among other concerns.

TC Energy proposal

In announcing the filing July 31, TC Energy Executive Vice President Stanley Chapman in a statement pointed to modernization and other capital investments the company has made to provide customers with more reliable access to low-cost gas and premium markets.

Columbia highlighted efforts to reduce greenhouse gas emissions, and noted that a third phase of its modernization program would take place over seven years and allow it to recover for an investment of up to $3 billion without a need to file more rate cases.

It proposed to increase its cost of service from to $2.9 billion from $602 million and raise its total rate base to about $11.8 billion from $1.6 billion.

"The proposed rate increase also reflects significantly higher business risk that Columbia now faces," it wrote in the FERC filing. It cited costs of modernizing an aging system, changes in its shipper mix toward producers affected by price volatility and competition among pipelines in the Appalachian region. It also highlighted risks associated with storage commitments set to expire and opposition to pipeline development.

It separately sought to shift from the existing postage-stamp rate design to a two-zone rate structure.

Protests

A group calling itself Indicated Shippers moved for summary rejection of the rate filing and tariff changes on the ground that it violates terms of a second modernization settlement filed by Columbia and approved by FERC in 2016. The group, which included Direct Energy Business Marketing, Interstate Gas Supply and Shell Energy North America, argued Columbia was attempting to prematurely terminate the settlement on limited evidence that the basis for the agreement was unexpectedly altered by the Pipeline and Hazardous Materials Safety Administration's pipeline safety "mega rule."

Indicated Shippers also asked FERC to examine Columbia's proposed 16.1% ROE, contending it "appears plainly excessive."

"This return level is significantly higher than any recent litigated result under the [Natural Gas Act," they wrote. "Based on an initial review of the supporting evidence, Columbia has in particular not shown that its business risk justifies or warrants a return based on the midpoint of the upper third of the zone of reasonableness."

Tenaska Marketing Ventures wrote that Columbia is "proposing radically higher rates -- TMV calculates reservation rate increases of 107%, notwithstanding the 78% increase stated in the application — while simultaneously proposing a panoply of rate schedule and term and condition changes that have the potential to impair measurably the flexibility and value of its current service offerings."

It also worried that non-rate aspects of the application, based on a preliminary review, were "ill-considered, customer-unfriendly changes that may disrupt established, efficient business practices, and unnecessarily impose increased costs and reduced efficiencies on Columbia's shippers and their customers."

Another group, Indicated Consumer Advocates, included advocates from Delaware, Pennsylvania and New Jersey.

Columbia has failed to "demonstrate that its proposed system-wide general rate increase, which reflects a 78% increase over the existing transportation service rates (Rate Schedule FTS) and 134% increase over the existing storage service rates (Rate Schedule FSS), is just and reasonable," they wrote.

They also argued the filing strays from the modernization settlement by proposing changes to certain rates prior to February 1, 2022.

"Contrary to the commission's modernization policy statement, Columbia proposes to identify projects as the need for them arises during the term of the proposed [tracker] rather than identifying those projects at the outset," they wrote.

Numerous parties asked the commission to set the issues for full evidentiary hearing if it does not deny the July 31 filing.