May 20, 2022
Docket No. RP21-1001-006
I concur with today’s order[1] affirming the Commission’s January 2022 Order[2] setting aside its prior order[3] that rejected in its entirety the general section 4 rate case filed by Texas Eastern Transmission, LP (Texas Eastern) based on its inclusion of a conditional 25% corporate tax rate adjustment. The Commission’s rejection was a departure from its past precedent which the Commission failed to acknowledge or explain. The January 2022 Order appropriately corrected such failure.[4]
I write separately to make two points. First, I agree with Texas Eastern that section 4 of the Natural Gas Act (NGA) does not authorize the Commission to outright dispose of tariff filings for any reason at all.[5] There must be some limits to our authority to reject. However, I am not certain that a court would find that the Commission’s rejection of a filing for its failure to comply with a regulation falls outside those bounds, even if that failure amounted to what is a minor and fixable infraction.
Second, I regret having contributed to the significant disruption that has been caused by the Commission’s handling of this proceeding. I understand that in some cases it can take years (from planning to filing) to prepare a general NGA section 4 rate case and the statements, schedules and associated workpapers that go along with it. Pipelines meticulously plan for their rates to go into effect on a specific date in order to recover certain expenditures.[6] To have sent Texas Eastern back to the drawing board simply because it proposed a conditional 25% corporate tax rate adjustment, which had it not ultimately been implemented would have been later adjusted to the actual rate, was improper.
One can understand why Texas Eastern proposed a 25% tax rate adjustment. If a law had been passed increasing the corporate tax rate, which was a possibility,[7] it is certainly unlikely that the current Commission would have allowed natural gas companies to file a limited section 4 rate case to recover the increased tax rate.[8] Proposing a 25% corporate tax rate adjustment, just in case, was rational, and while it may have caused some inconvenience, it would not have required shippers to overpay.
Texas Eastern’s shippers have fared no better. On January 20, 2022, nearly five months after rejecting Texas Eastern’s general rate case in its entirety, the Commission modified its prior order to accept the filing subject to Texas Eastern proposing the actual corporate tax rate. Shippers, which according to some had made “significant commercial decisions, including pricing decisions on natural gas transactions during the winter heating season” based on one rate,[9] were informed that new rates would be in effect just twelve days later on February 1, 2022, upon Texas Eastern’s motion.[10]
For these reasons, I respectfully concur.
[1] Tex. E. Transmission, LP, 179 FERC ¶ 61,120 (2022).
[2] Tex. E. Transmission, LP, 178 FERC ¶ 61,024 (2022) (January 2022 Order).
[3] Tex. E. Transmission, LP, 176, FERC ¶ 61,138 (2021).
[4] See January 2022 Order, 178 FERC ¶ 61,024 at P 27. The Commission also reversed its finding that the corporate tax rate adjustment was integral to the general rate because Texas Eastern had stated it was severable. See id.; see also NRG Power Mktg., LLC v. FERC, 862 F.3d 108, 114-15 (D.C. Cir. 2017) (“In City of Winnfield v. FERC, this Court—speaking through Judge Scalia—concluded that FERC does not violate Section 205 [of the Federal Power Act] when it suggests ‘a system of rates similar to that previously in effect, and the utility acquiesces.’ 744 F.2d 871, 876 (D.C. Cir. 1984). In those circumstances, we noted that it would be ‘empty formalism’ to require the utility to make a new filing in order to implement minor changes proposed by FERC. Id.”).
[5] See Texas Eastern Transmission, LP February 18, 2022 Request for Clarification, or Alternatively Rehearing, of January 20, 2022 Order at 11 (“Such a threshold rejection without a hearing is nowhere authorized in the NGA’s text. And while the courts have implied a limited, atextual power to reject filings in ‘clear case[s] of a filing that patently is either deficient in form or a substantive nullity’ and to summarily dispose of discrete issues on which ‘there is neither a dispute as to material facts nor a need to ventilate the underlying facts’ at a hearing, those limited powers do not authorize the Commission to reject without hearing a procedurally sound, 2,700-page Rate Case Filing in toto.”) (quoting Mun. Light Bds. v. FPC, 450 F.2d 1341, 1345 (D.C. Cir. 1971)) (citation omitted).
[6] See Texas Eastern Transmission, LP September 29, 2021 Rehearing Request of August 31, 2021 Order at 56 (“In addition to the time and expense of preparing and filing another rate case, there is no guarantee that the new base and test periods are as representative of Texas Eastern’s cost of providing service as the periods chosen in the Rate Case Filing pursuant to the rights afforded to Texas Eastern under the NGA and the Commission’s regulations. Not only did the August 31 Order take away Texas Eastern’s right to change its filed rates, the order eliminated Texas Eastern’s right to select, and recover costs based on, a period that Texas Eastern believes is most representative of its cost of service.”); see also id. at 3 (“[A] Rate Case Filing comprised of 2,700 pages of materials punctiliously organized, including all required statements and schedules to comply with the Commission’s filing regulations and the sworn testimony of 22 witnesses.”).
[7] See Trevor Hunnicutt, Biden willing to accept 25% corporate tax rate to fund spending programs, Reuters (May 6, 2021), https://www.reuters.com/world/us/biden-visit-storm-battered-louisiana-tout-infrastructure-spending-2021-05-06/.
[8] But see Interstate and Intrastate Nat. Gas Pipelines; Rate Changes Relating to Federal Income Tax Rate, Order No. 849, 83 Fed. Reg. 36,672 (July 30, 2018), FERC Stats. & Regs. ¶ 31,404 (2018) (cross-referenced at 164 FERC ¶ 61,031) (Order No. 849).
[9] Indicated Shippers February 18, 2022 Rehearing Request of January 20, 2022 Order at 9-10 (Indicated Shippers Rehearing).
[10] See January 2022 Rehearing, 178 FERC ¶ 61,024 at Ordering Para. (B); see also Indicated Shippers Rehearing at 10 (“The January 20 Order’s decision to reinstitute the July 2021 Rate Case Filing has resulted in substantial disruption, confusion, and rate uncertainty for Texas Eastern’s shippers.”); id. at 11 (“the January 20 order disrupted state retail access bids that did not take into account the timing of the rate increase”); EQT Energy, LLC February 22, 2022 Rehearing Request of January 20, 2022 Order at 7 (“This absence of notice provides shippers inadequate time to budget and plan. It also makes analyzing Texas Eastern’s rate filing a moving target for the purpose of hearing and settlement procedures.”).