Docket No. RM20-14-001
FERC today revised the index level used to determine annual changes to interstate oil pipeline rate ceilings.
Today’s decision on rehearing is a departure from the December 2020 order in which the Commission calculated the index level based upon the middle 80 percent of pipeline cost changes over a per-barrel mile basis for the five-year period 2014 through 2019. Instead, the Commission found arguments to return to its policy of calculating the index level based on the middle 50 percent of pipeline cost changes persuasive.
Therefore, the Commission ruled that the middle 50 percent calculation is consistent with its practice in both its 2015 and 2010 Index Reviews and will reflect rates that are just and reasonable.
FERC also granted rehearing in part to incorporate as part of the calculation of the index level the effects of the Commission’s 2018 Income Tax Policy Change, which required Master Limited Partnership-owned pipelines to remove the income tax allowance and associated accumulated deferred income taxes from cost of service.
"I'm encouraged by today's update to the five-year old index because it means savings for customers,” Chairman Glick said. “In fact, Commission staff estimates this will result in about $3.7 billion in savings on a cumulative basis over the 2021-2026 period."
With today’s order, FERC has now established an index level of Producer Price Index for Finished Goods minus 0.21% (PPI-FG-0.21%).
All oil pipelines must recompute their ceiling levels based on the new index level, to be effective March 1, 2022.
Any oil pipeline with rates that exceed their recomputed ceiling levels must file to reduce those rates to bring the rates into compliance with the revised ceiling level. These pipelines must submit their filings 30 days in advance of their effective date, March 1, 2022.