Michael Giberson
Tom Fowler, at NewsWatch: Energy, takes note of commentary by Tudor Pickering concerning a FERC investigation into whether three natural gas pipeline companies were over-recovering on their regulated rates. (See FERC press release here; a Reuters article.)
Tudor Pickering, an energy industry advisory and investment company, notes that since 1992 FERC hasn’t required periodic rate cases by natural gas pipelines, but rather has predominantly relied upon pipeline co. initiative or customer complaints to motivate changes in rates. Rate cases are expensive for pipelines, customers, and regulators, so minimizing the number of rates cases can cut costs. Even when customers complain, rates are typically settled by agreement rather than through new rate cases. The 1992 policy switch was part of a “light-handed” approach to regulation that accompanied deregulation or restructuring of many other industries in the 1980s and 1990s.
Apparently now, however, disclosure regulations issued in 2008 resulted in FERC noticing that a few companies appeared to be over-recovering costs. Not only did FERC notice, they’ve decided to do something about it. Investigations will be launched, hearings held, etc. Tudor Pickering finds this turn of events “disturbing.” The “pipes probably assumed the FERC would continue to let market forces work,” but instead, Tudor Pickering observes in chilling tones: “So much for that. Big Brother is watching!”
Hmmm, who would have thought that, if you disclose information to the government entity regulating your rates, that the agency would use that information in rate regulation? Apparently “light-handed rate regulation” is actually a form of rate regulation.