No clear signal as yet from new chair James Hoecker.
The Federal Energy Regulatory Commission had a busy day on July 30, but observers will have to wait until the fall to learn of any new wide-ranging policy initiatives planned by incoming chair James Hoecker, who has now succeeded Elizabeth Moler in the top post.
The end-of-summer meeting (em and Commissioner Donald F. Santa Jr.'s last (em was marked largely by a lack of controversy. Among other items, the FERC revisited the old ratemaking issue of double leverage in the capital structure for corporate subsidiaries and cleaned up its docket on electric utility mergers and open-access transmission tariffs. It also turned away requests for additional hearings or technical conferences on the California Power Exchange and Independent System Operator.
Pipeline Capital Structure. In two orders involving interstate natural gas pipelines, the FERC modified its policy on capital structure (em regarding the amount of equity it will recognize in setting an overall return for pipelines that operate as corporate subsidiaries. The two pipelines, Transcontinental Gas Pipeline Corp. (Docket Nos. RP95-197-023 et al.) and Williams Natural Gas Co. (Docket No. RP93-109-011), both operate as subsidiaries of The Williams Cos.
Commissioner Vicky Bailey said the orders will affect rate of return throughout the pipeline industry. Chair James Hoecker said return-on-equity methods will be subject to debate, and so perhaps FERC should explore use of incentive rates.
The issue concerns subsidiaries, which can issue debt capital in part on the strength of the parent company. And, because the parent company issues its own debt, a portion of the subsidiary's apparent equity capital is actually funded by parent company debt.