FERC Rejects Controversial Enterprise Tariff Increase

April 2012, Vol. 239 No. 4

The Federal Energy Regulatory Commission rejected a major tariff increase sought by the Enterprise TE Products Pipeline Company for the Enterprise TEPPCO pipeline. The increase was hotly opposed by the National Propane Gas Association (NPGA) and many individual shippers.

Nils Nichols, Director, Division of Pipeline Regulation at FERC, said the Enterprise TE Products Pipeline Company (Enterprise TEPPCO) failed to meet FERC requirements, for example, by not explaining 22 propane and butane route cancellations. But that was just one of a number of technical inadequacies Nichols pointed to in the tariff increase application. Nichols did not comment on whether the requested rate hikes themselves were "just and reasonable," which is the standard FERC uses.

"We are in the process now of deciding how to proceed," says Rick Rainey, spokesman for Enterprise Products.

The NPGA had led an attack on the tariff increase request, filed in February, which Enterprise wanted to put in place on March 12.Tom Van Buren, Vice President of Ferrell North America and Chairman of NPGA's Pipeline Advocacy Task Force, says, "Never before have we seen such an emphatic and concerted response to a FERC proceeding. The industry believes the abnormally large rate increases -- many of which are 70% to more than 100% -- will have a devastating effect on the competitiveness of propane as an alternative fuel in the eastern United States."

Casey P. McFaden, Senior Counsel, BP America Inc., says the amount of the rate increases sought from BP in each zone ranged from a low of about 2% to 124%. BP estimates that the proposed annual rate increase sought by TEPPCO from BP alone as a result of this filing would exceed $2.4 million per year."

The Enterprise TEPPCO pipeline runs from near Houston, TX, to upstate New York.

The NPGA alleged in filing its protest that FERC's policy of "light-handed enforcement" as applied to the oil pipeline industry has effectively left it up to shippers to protect the consuming public by challenging the enormous rate increases proposed by Enterprise TEPPCO. Rick Roldan, NPGA's President and CEO, states "The propane industry has drawn a line in the sand today for one simple reason: unless the propane industry takes action, FERC will not do so on its own."

FERC Begins To Examine Gas And Electric Utility Integration
Talking about FERC, the commission is starting to look at the issue of whether natural gas pipelines and electric utilities are working smoothly together. That general question was at the center of a meeting at FERC during February. Commissioner Philip Moeller is apparently the guy who is behind the FERC initiative in this area, which looks at the growing reliance of generators on natural gas as they switch out of coal. The FERC commissioners are asking a lot of questions, such as to what extent FERC should consider modifying its existing Standards of Conduct with regulated utilities—either on an emergency basis or in a more fundamental manner—to assure greater coordination of the two industries.