The Federal Energy Regulatory Commission (FERC) has issued its rehearing order for Great Lakes Gas Transmission Ltd. Partnership (GLGT), upholding its July 26, 1995, order allowing GLGT to roll in the costs of expanding its natural gas pipeline facilities (Docket Nos. RP91-143-030 et al.).
The July 26 order was issued on remand from the U.S. Court of Appeals for the D.C. Circuit, reversing a 1991 order allowing incremental pricing. The case arose when GLGT spent over $700 million to expand its pipeline system. At issue: the rates for service on the new capacity created by four of five separate expansion projects.
In the July 26 order, the FERC cited Battle Creek Co. v. FPC, 281 F.2d 42 (D.C.Cir. 1960), which allows rolled-in rates whenever the expanding pipeline can show that its new facilities would be integrated into the mainline system and would confer some positive benefits on all customers. In 1991, however, the FERC used a "commensurate benefits" test, finding that the expansion facilities should be priced incrementally. Thus, to justify rolled-in rates, GLGT would have had to show that systemwide benefits to existing customers were commensurate with any increase in rates to those same customers.