Hearing Will Review Northern’s Substantial Rate Increase Proposal
On July 31, 2019, FERC established a hearing to examine Northern Natural Gas Co.’s (Northern) proposed rate increases and tariff changes.
Northern’s proposed Base Case rates reflect an overall cost of service of $1,005,000,000, as compared to the $480,000,000 cost of service established in its last rate case settlement, approved in 2005. “Northern mainly attributes its increased cost of service to capital costs associated with modernization and maintenance. … Northern states that the increase in its cost of service is partially offset by the lower federal corporate income tax rate, including amortization of excess deferred income taxes.”
Northern proposed a 14.2 percent return on equity applied to an expected capital structure of 59.4 percent equity and 40.6 percent debt.
Northern also proposed an alternative Prospective Case using a different cost allocation method than that used in its current rates and Base Case.
The hearing will explore disputed material issues of fact.
In addition, FERC: (1) directed its staff to conduct a technical conference to address certain non-rate tariff issues raised in Northern’s proposal; (2) rejected Northern’s proposal to replace the current tariff requirement to receive FERC approval for each periodic rate adjustment change with an annual report filing requirement; and (3) denied Northern’s request to terminate the ongoing investigation into the justness and reasonableness of Northern’s rates in light of tax cuts and policy changes. FERC left it to the discretion of its Chief Administrative Law Judge whether to consolidate the investigation proceeding with Northern’s proposed rate case.
See ¶501: Cost-Based Rates for more information on FERC’s review of proposed natural gas pipeline rate increases.
Northern Natural Gas Co., Order Accepting and Suspending Tariff Records, Subject to Refund, Rejecting Tariff Revisions, and Establishing Hearing Procedures and Technical Conference, 168 FERC ¶61,069 (2019) [Docket Nos. RP19-1353-000 and RP19-59-000].