FERC Policy Statement on ROE Favors Pipelines

摘要

Interstate gas and oil pipelines got a couple of big boosts from the Federal Energy Regulatory Commission (FERC) when it published a policy statement on May 21. The statement makes changes in the way FERC calculates a pipeline's return on equity (ROE). Generally, the higher the ROE, the higher the rates a pipeline can charge. FERC established a new ROE policy for electric utilities in 2019 and then undertook another examination to determine whether that policy should be applied to interstate gas and oil pipelines. The Interstate Natural Gas Association of America (INGAA) opposed doing so and suggested a number of changes FERC could make to existing pipeline policy, some of which the commission did when it announced the gas and oil pipeline ROE policy statement on May 20, 2020. While the Commission applied the utility policy generally to pipelines, it made a number of exceptions for the pipelines to account for the statutory, operational, organi2ational and competitive differences among the industries. Specifically, the Commission will determine just and reasonable natural gas and oil pipeline ROEs by averaging the results of discounted cash flow (DCF) model and capital asset pricing model (CAPM) analyses, according equal weight to both models.