The Natural Gas Act (NGA) establishes the Federal Energy Regulatory Commission’s (FERC) role in regulating gas utilities, just as the Federal Power Act (FPA) does for electric utilities. Part of both laws outline the processes to deal with over-collections (also referred to as overcharges) – instances in which entities that transport gas or electricity over natural gas pipelines or an electric transmission line, which are subject to a federal tariff, have been charged an “unjust and unreasonable” rate.
For electric utilities, FERC or a customer can file a rate complaint under Section 206 of the FPA. If FERC later finds that an electric utility has charged an “unjust and unreasonable” rate, then FERC may order that the entity refund overcharged funds from the time that the complaint was filed. Simply, a refund date is established for a rate complaint under the FPA.
The NGA offers no such protections for overcharged entities. Under Section 5 of the NGA, entities that believe they have been overcharged can still file a complaint against an interstate natural gas pipeline – just like the FPA. However, unlike the FPA, FERC does not have authority to establish a refund date and order refunds of over-collections under Section 5. This creates an incentive for interstate natural gas pipelines to prolong such cases because they retain all of the overcharged monies.
This inequity exists because Congress amended the FPA in 1988 to provide FERC with refund authority in electricity rate cases. They did not do so for the NGA because natural gas transmission pipelines were required to have their pipeline rates reviewed every 3 years. FERC Order 636, issued in 1992, ended this process and a subsequent “fix” to the NGA was never passed.
Lack of refund authority has caused billions in overcharges to natural gas consumers. In 2019, the Natural Gas Supply Association surveyed 32 pipelines’ FERC forms and found that they over-collected $4.6 billion over what they should have collected from 2013 to 2017 (12% is typically seen as an accepted return on equity for a pipeline rate).
Congress should amend the NGA (15 U.S.C. 717d(a)) to allow FERC to set a refund effective date for Section 5 rate cases. This would mirror the FPA and allow FERC to require a pipeline to pay back overcharged funds from the date that the Section 5 complaint was filed with FERC.
What can you do?
APGA urges locally-owned natural gas utilities to contact their members of Congress and ask them to pass legislation to reform Section 5. This will protect businesses’ competitiveness and homeowners’ family budgets from artificially inflated energy costs due to over-charging by interstate pipelines.
To contact your senator, click here.
To contact your representative, click here.