Major pipeline companies are getting heartburn from President Trump's corporate tax cuts, as scores of trade groups and states pressure federal energy regulators to force the industry to cut their rates.
The Federal Energy Regulatory Commission is receiving a flood of petitions from consumer energy advocates to state energy commissions and governors' energy offices to force the industry to cut rates in line with Trump's reduction in the corporate tax rate from 35 percent to 21 percent.
The Interstate Natural Gas Association of America, representing natural gas pipeline companies regulated by FERC, has begun pushing back against the flood, urging the commission to reject the petitions as an unfair "one-size fits all" policy.
In a letter sent to FERC Chairman Kevin McIntyre made public on Monday, the interstate pipeline group's president, Don Santa, said the petitions run contrary to FERC policy that supports "full rate proceedings" and obeys the law governing freely negotiated agreements in establishing what customers pay to ship their fuel to the market.
Opening previously approved rate case could result in the opposite effect that the petitioners desire.
If FERC were to approve the petitions with "a generic order compelling pipelines to adjust an individual component of their respective recourse rates,” Santa said the result would not be more reasonable rates.
"The end result produced by isolating only changes to individual cost components that reduce a pipeline’s rate would be unjust and unreasonable," Santa said.
At the heart of his concerns is a petition by the American Public Gas Association, which represents publicly owned local distribution utilities that ship natural gas to heat homes and businesses. The association's members rely on the natural gas shipped across states by the companies that Santa represents.
Santa pointed out in the letter to McIntyre that FERC already has a process for adjusting rates if a group believes the cost it is paying is unjustified.
"Here, the parties are requesting inappropriately that the commission compel rates to be adjusted to reflect the reduction in income taxes without consideration of pipelines’ other cost‐of‐service components," Santa said.
"INGAA urges the commission to move cautiously and to avoid a one‐size‐fits‐all approach to addressing the reductions in corporate income tax rates," he added.
Some state energy regulators, such as Michigan's, asked FERC to force interstate pipeline companies to reduce their rates in line with the 14-point drop in the corporate tax rate.
Michigan's public service commission asked the commission to direct pipeline companies to act "voluntarily," as many electric utilities have done in announcing rate cuts for consumers, or be subject to FERC investigations under federal law.
The Michigan Agency for Energy, which reports to the governor, agreed with the public service commission in a letter sent to FERC last month.
Santa said pipelines are not regulated in the same ways as electric utilities, where they can easily initiate rate changes. He pointed out that there is Supreme Court precedent for blocking FERC from forcing the pipelines to redo their rates, and laid out a legal argument against the petitioners.
The Supreme Court found under its landmark 1956 Sierra-Mobile doctrine that the commission cannot "modify contractually determined rates" without first finding that the rate "is so low as to adversely affect the public interest." The Supreme Court has extended the doctrine to situations when rates are too high.
"Thus, the commission would need to meet this extremely high burden before it could disrupt contractually determined rates," Santa wrote.