164 FERC ¶ 61,031

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 154, 260, & 284

[Docket Nos. RM18-11-000, RP18-415-000; Order No. 849]

Interstate and Intrastate Natural Gas Pipelines; Rate Changes Relating to Federal Income 

Tax Rate

American Forest & Paper Association

(Issued July 18, 2018)

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final Rule.

SUMMARY: The Commission is adopting procedures for determining which 

jurisdictional natural gas pipelines may be collecting unjust and unreasonable rates in 

light of the income tax reductions provided by the Tax Cuts and Jobs Act and the 

Commission’s revised policy and precedent concerning tax allowances to address the 

double recovery issue identified by United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. 

Cir. 2016). These procedures also allow interstate natural gas pipelines to voluntarily 

reduce their rates. 

EFFECTIVE DATE: This rule will become effective [INSERT DATE 45 DAYS 

AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]
Docket Nos. RM18

-11-000 and RP18-415-000 ii

FOR FURTHER INFORMATION CONTACT:

Adam Eldean (Legal Information)

Office of the General Counsel

888 First Street, NE

Washington, DC 20426

(202) 502-8047

Adam.Eldean@ferc.gov

Seong-Kook Berry (Technical Information)

Office of Energy Market Regulation

888 First Street, NE

Washington, DC 20426

(202) 502-6544

Seong-Kook.Berry@ferc.gov

SUPPLEMENTARY INFORMATION:
164 FERC ¶ 61,031

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Kevin J. McIntyre, Chairman;

 Cheryl A. LaFleur, Neil Chatterjee,

Robert F. Powelson, and Richard Glick.

Interstate and Intrastate Natural Gas Pipelines; Rate 

Changes Relating to Federal Income Tax Rate

American Forest & Paper Association

Docket Nos. RM18-11-000

RP18-415-000

ORDER NO. 849

FINAL RULE

(Issued July 18, 2018)

TABLE OF CONTENTS

*

Paragraph Numbers

I. Introduction .................................................................................................................... 1.

II. Background ................................................................................................................... 5.

A. Tax Cuts and Jobs Act.............................................................................................. 5.

B. United Airlines Issuances ......................................................................................... 6.

C. Overview of Natural Gas Rates.............................................................................. 10.

1. The Natural Gas Act ........................................................................................... 10.

2. The Natural Gas Policy Act of 1978 .................................................................. 16.

D. Request for Commission Action ............................................................................ 19.

E. Notice of Proposed Rulemaking............................................................................. 21.

F. Comments on Notice of Proposed Rulemaking...................................................... 23.

III. Overview of Final Rule ............................................................................................. 29.

IV. Discussion ................................................................................................................. 37.

A. Treatment of Pass-through Entities........................................................................ 37.

1. NOPR.................................................................................................................. 37.

2. Comments........................................................................................................... 39.

a. Challenges to the Commission’s response to United Airlines ....................... 41.

b. Arguments Regarding the Implementation .................................................... 44.
Docket Nos. RM18-11-000 and RP18-415-000 - 2 -

3. Discussion........................................................................................................... 49.

a. Limited Section 4 Filings ............................................................................... 51.

b. FERC Form No. 501-G and Addendum ........................................................ 58.

c. Other Issues.................................................................................................... 62.

B. One-time Report .................................................................................................... 63.

1. Legal Authority................................................................................................... 67.

a. Comments....................................................................................................... 67.

b. Discussion ...................................................................................................... 69.

2. Burden of Proof .................................................................................................. 77.

a. Comments....................................................................................................... 77.

b. Discussion ...................................................................................................... 78.

3. Docketing and Comments .................................................................................. 80.

a. Comments....................................................................................................... 81.

b. Discussion ..................................................................................................... 84.

4. Rights of Intervenors .......................................................................................... 93.

a. Comments....................................................................................................... 94.

b. Discussion ...................................................................................................... 95.

5. Use of 10.55 Percent Indicative Return on Equity .......................................... 100.

a. Comments..................................................................................................... 101.

b. Discussion .................................................................................................... 103.

6. Use of Stated Capital Structure ........................................................................ 107.

a. Comments..................................................................................................... 109.

b. Discussion .................................................................................................... 111.

7. Accumulated Deferred Income Taxes ............................................................. 116.

a. Comments .................................................................................................... 120.

b. Discussion .................................................................................................... 128.

8. Who Must File .................................................................................................. 153.

a. Comments..................................................................................................... 154.

b. Discussion .................................................................................................... 158.

9. Miscellaneous Changes to FERC Form No. 501-G ......................................... 166.

a. Comments and Discussion ........................................................................... 166.

C. Additional Filing Options for Natural Gas Companies........................................ 190.

1. Limited NGA Section 4 Filing (Option 1) ....................................................... 191.

a. NOPR ........................................................................................................... 191.

b. Comments..................................................................................................... 193.

c. Discussion..................................................................................................... 198.

2. General NGA Section 4 Filing or Prepackaged Uncontested Settlement (Option 

2)............................................................................................................................ 206.

a. NOPR ........................................................................................................... 206.

b. Comments..................................................................................................... 207.

c. Discussion..................................................................................................... 211.

3. Statement That No Adjustment in Rates Needed (Option 3) .......................... 216.

a. NOPR ........................................................................................................... 216.
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b. Comments..................................................................................................... 218.

c. Discussion..................................................................................................... 222.

4. Take No Action (Option 4)............................................................................... 226.

a. NOPR ........................................................................................................... 226.

b. Comments..................................................................................................... 227.

c. Discussion..................................................................................................... 228.

D. Negotiated Rates .................................................................................................. 229.

1. Comments ........................................................................................................ 231.

2. Discussion......................................................................................................... 245.

E. Miscellaneous Clarifications ................................................................................ 250.

F. Implementation Schedule for Informational Filings............................................. 261.

1. NOPR................................................................................................................ 261.

2. Comments......................................................................................................... 262.

3. Discussion......................................................................................................... 265.

G. NGPA section 311 and Hinshaw Pipelines.......................................................... 267.

1. NOPR................................................................................................................ 267.

2. Comments......................................................................................................... 270.

3. Discussion......................................................................................................... 277.

H. Request for Commission Action .......................................................................... 285.

V. Regulatory Requirements......................................................................................... 286.

A. Information Collection Statement........................................................................ 286.

B. Environmental Analysis ....................................................................................... 293.

C. Regulatory Flexibility Act.................................................................................... 294.

D. Document Availability ......................................................................................... 297.

E. Effective Date and Congressional Notification.................................................... 300.
Docket Nos. RM18-11-000 and RP18-415-000 - 4 -

I. Introduction

1. In this Final Rule, the Commission adopts procedures for determining which 

jurisdictional natural gas pipelines may be collecting unjust and unreasonable rates in 

light of (1) the income tax reductions provided by the Tax Cuts and Jobs Act1 and (2) the 

Commission’s Revised Policy Statement2 and Opinion No. 511-C3 concerning income

tax allowances following the decision of the United States Court of Appeals for the 

District of Columbia Circuit (D.C. Circuit) in United Airlines.

4

 These procedures also 

allow interstate natural gas pipelines to voluntarily reduce their rates to reflect the income 

tax reductions and United Airlines Issuances. 

2. The procedures adopted in this Final Rule are generally the same as the 

Commission proposed in its March 15, 2018 Notice of Proposed Rulemaking (NOPR or 

proposed rule) in this proceeding.5

 The Commission is thus adopting, with clarifications,

 1 An Act to provide for reconciliation pursuant to titles II and V of the concurrent 

resolution on the budget for fiscal year 2018, Pub. L. No. 115-97, 131 Stat. 2054 (2017) 

(Tax Cuts and Jobs Act).

2 Inquiry Regarding the Commission’s Policy for Recovery of Income Tax Costs, 

Revised Policy Statement, 83 FR 12,362 (Mar. 21, 2018), FERC Stats & Regs. ¶ 35,060 

(2018), order on reh’g, 164 FERC ¶ 61,030 (2018). 

3 SFPP, L.P., Opinion No. 511-C, 162 FERC ¶ 61,228, at P 9 (2018).

4 United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir. 2016). For purposes of 

this order, the Revised Policy Statement, United Airlines, and Opinion No. 511-C will 

collectively be referred to as “United Airlines Issuances.”

5 Interstate and Intrastate Natural Gas Pipelines; Rate Changes Relating to 

Federal Income Tax Rate, 83 FR 12,888 (Mar. 26, 2018), FERC Stats. & Regs. ¶ 32,725

(2018) (NOPR).
Docket Nos. RM18-11-000 and RP18-415-000 - 5 -

the proposed FERC Form No. 501-G informational filing for evaluating the impact of the 

Tax Cuts and Jobs Act and United Airlines Issuances on interstate natural gas pipelines’ 

revenue requirements. The Commission is also providing four options each interstate 

natural gas pipeline may choose from to address the changes to the pipeline’s revenue 

requirement as a result of the income tax reductions: (1) a limited Natural Gas Act 

(NGA) section 46 rate reduction filing, (2) a commitment to file a general section 4 rate 

case in the near future, (3) an explanation why no rate change is needed, and (4) no action

(other than filing a report). 

3. However, as discussed further below, the Final Rule modifies the NOPR’s 

proposed treatment of master limited partnership (MLP) pipelines7 and other passthrough entities in several respects. First, the Commission has modified the FERC Form 

No. 501-G so that, if a pipeline states that it is not a tax paying entity, the form will not 

only automatically enter a federal and state income tax of zero, but also eliminate 

Accumulated Deferred Income Taxes (ADIT) from the pipeline’s cost of service. 

Second, if an MLP pipeline chooses Option 1 (limited section 4 rate filing), this Final 

Rule permits the pipeline to reflect only the tax reductions in the Tax Cuts and Jobs Act. 

Although the Commission determined in the Revised Policy Statement that permitting 

 6 15 U.S.C. 717c (2012).

7 Throughout this order, as in prior Commission orders, we use the phrase “MLP 

pipeline.” For the purposes of this proceeding, MLP pipeline includes a pipeline, such as 

SFPP, L.P., that does not pay taxes itself and is a wholly-owned subsidiary of an MLP. 

See Opinion No. 511-C, 162 FERC ¶ 61,228 at P 9.
Docket Nos. RM18-11-000 and RP18-415-000 - 6 -

MLP pipelines to include a tax allowance in their cost of service results in a double 

recovery of the MLP pipeline’s tax costs, this Final Rule does not require MLP pipelines 

to eliminate their tax allowances at this time in compliance with this rulemaking. Third, 

the Final Rule clarifies that a natural gas company organized as a pass-through entity all 

of whose income or losses are consolidated on the federal income tax return of its 

corporate parent is considered to be subject to the federal corporate income tax, and is 

thus eligible for a tax allowance.

4. The Final Rule also makes certain changes to the proposed FERC Form 

No. 501-G, including modifying the hypothetical capital structure to be used by pipelines

who cannot use their own or their parent’s capital structure. In addition, the Final Rule 

provides a guarantee that the Commission will not initiate a NGA section 5 rate 

investigation for a three-year moratorium period of an interstate pipeline that makes a 

limited NGA section 4 rate reduction filing that reduces its ROE to 12 percent or less. 

II. Background

A. Tax Cuts and Jobs Act

5. On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act. 

The Tax Cuts and Jobs Act, among other things, reduces the federal corporate income tax 

rate from 35 percent to 21 percent, effective January 1, 2018. This means that, beginning 

January 1, 2018, companies subject to the Commission’s jurisdiction will compute 

income taxes owed to the Internal Revenue Service (IRS) based on a 21 percent tax rate. 
Docket Nos. RM18-11-000 and RP18-415-000 - 7 -

The tax rate reduction will result in less corporate income tax expense going forward.8

 

Further, with respect to income derived from pass-through entities, the Tax Cuts and Jobs 

Act generally reduced the income tax liability for individuals, and permitted up to a 

20 percent deduction of pass-through income.9

 The combination of these two changes 

for individuals holding units of pass-through entities means that the effective tax level 

applicable to individuals with pass-through derived income may be slightly less than the 

corporate income tax. 

B. United Airlines Issuances

6. In United Airlines, the D.C. Circuit held that the Commission failed to 

demonstrate that allowing SFPP, L.P. (SFPP), an MLP pipeline, to recover both an 

income tax allowance and the discounted cash flow (DCF) methodology rate of return 

does not result in a double recovery of investors’ tax costs. Accordingly, the D.C. Circuit 

remanded the underlying rate proceeding to the Commission for further consideration. 

Although the D.C. Circuit’s decision directly addressed the rate case filed by SFPP, the 

United Airlines double-recovery analysis referred to partnerships generally. Recognizing 

the potentially industry-wide ramifications, the Commission issued a Notice of Inquiry in 

Docket No. PL17-1-000, soliciting comments on how to resolve any double recovery 

 8 See Tax Cuts and Jobs Act 13001, 131 Stat. at 2096.

9 See id. 11011, 131 Stat. at 2063.
Docket Nos. RM18-11-000 and RP18-415-000 - 8 -

resulting from the rate of return policies and the policy permitting an income tax 

allowance for partnership entities.

10

7. Concurrently with the issuance of the NOPR in this proceeding, the Commission 

issued an Order on Remand in Opinion No. 511-C11 in response to United Airlines. 

Consistent with the United Airlines remand, Opinion No. 511-C concluded that granting 

SFPP an income tax allowance in addition to its return on equity (ROE) determined by 

the DCF methodology resulted in a double-recovery. The Commission explained:

[MLP pipelines (such as SFPP)] and similar pass-through entities do 

not incur income taxes at the entity level. Instead, the partners are 

individually responsible for paying taxes on their allocated share of 

the partnership’s taxable income.

The DCF methodology estimates the returns a regulated entity must 

provide to investors in order to attract capital. 

To attract capital, entities in the market must provide investors a 

pre-tax return, i.e., a return that covers investor-level taxes and 

leaves sufficient remaining income to earn investors’ required aftertax return. In other words, because investors must pay taxes from 

any earnings received from the partnership, the DCF return must be 

sufficient both to cover the investor's tax costs and to provide the 

investor a sufficient after-tax ROE.12

8. Accordingly, the Commission ordered removal of the additional income tax 

allowance from SFPP’s cost of service. The Commission explained that such action 

 10 Inquiry Regarding the Commission’s Policy for Recovery of Income Tax Costs, 

Notice of Inquiry, FERC Stats & Regs. ¶ 35,581 (2016).

11 Opinion No. 511-C, 162 FERC ¶ 61,228.

12 Id. P 22.
Docket Nos. RM18-11-000 and RP18-415-000 - 9 -

(a) remedies the double recovery identified by the court in its United Airlines remand, 

(b) restores parity between SFPP (an MLP pipeline) and corporate investment forms, 

(c) is consistent with Congressional intent, and (d) provides SFPP with a sufficient return 

via the DCF ROE.13

9. Simultaneously, the Commission also issued the Revised Policy Statement14 that 

superseded the Commission’s prior guidance in the 2005 Income Tax Policy Statement15

and established new guidance following United Airlines. Like Opinion No. 511-C, the 

Revised Policy Statement explained that a double recovery results from granting an MLP 

pipeline an income tax allowance and a DCF ROE, and accordingly provided guidance 

that the Commission will no longer permit MLP pipelines to recover an income tax 

allowance in their cost of service. The Revised Policy Statement also explained that 

although all partnerships seeking to recover an income tax allowance in a cost-of-service 

rate case will need to address the United Airlines double-recovery concern, the 

Commission will address the application of United Airlines to these non-MLP partnership 

forms as those issues arise in subsequent proceedings.16 The Commission received 

requests for rehearing of Opinion No. 511-C and the Revised Policy Statement.

 13 Id. P 21.

14 Revised Policy Statement, FERC Stats. & Regs. ¶ 35,060.

15 Policy Statement on Income Tax Allowances, 111 FERC ¶ 61,139 (2005).

16 Revised Policy Statement, FERC Stats. ¶ Regs. 35,060 at P 3.
Docket Nos. RM18-11-000 and RP18-415-000 - 10 -

C. Overview of Natural Gas Rates

1. The Natural Gas Act

10. As required by section 284.10 of the Commission’s regulations,17 interstate natural 

gas pipelines generally have stated rates for their services, which are approved in a rate 

proceeding under NGA sections 4 or 5 and remain in effect until changed in a subsequent 

NGA section 4 or 5 proceeding. The stated rates are designed to provide the pipeline the 

opportunity to recover all components of the pipeline’s cost of service, including the 

pipeline’s federal income taxes.18 When pipelines file under NGA section 4 to change 

their rates, the Commission requires the pipeline to provide detailed support for all the 

components of its cost of service, including federal income taxes.19 

11. The Commission generally does not permit pipelines to change any single 

component of their cost of service outside of a general NGA section 4 rate case.20 A 

primary reason for this policy is that, while one component of the cost of service may 

have increased, others may have declined. In a general NGA section 4 rate case, all 

components of the cost of service may be considered and any decreases in an individual 

 17 18 CFR 284.10 (2017).

18 Most pipeline tariffs include tracking mechanisms for the recovery of fuel and 

lost and unaccounted for gas, but generally pipelines do not separately track any other 

cost.

19 18 CFR 154.312 and 154.313. The pipeline must show the computation of its 

allowance for federal income taxes in Statement H-3.

20 See, e.g., Trunkline Gas Co., 142 FERC ¶ 61,133, at P 24 n.28 (2013).
Docket Nos. RM18-11-000 and RP18-415-000 - 11 -

component can be offset against increases in other cost components.21 For the same 

reasons, the Commission reviews all of a pipeline’s costs and revenues when it 

investigates whether a pipeline’s existing rates are unjust and unreasonable under NGA 

section 5.22

12. NGA sections 4 and 5 proceedings are routinely resolved through settlement 

agreements between the pipeline and its customers. Most of the agreements are “black 

box” settlements that do not provide detailed cost-of-service information. In addition, in 

lieu of submitting a general NGA section 4 rate case, a pipeline may submit a prepackaged settlement to the Commission. When pipelines file pre-packaged settlements, 

they generally do not include detailed cost and revenue information in the filing. The 

Commission will approve an uncontested settlement offer upon finding that “the 

 21 ANR Pipeline Co., 110 FERC ¶ 61,069, at P 18 (2005).

22 Midwestern Gas Transmission Co., 162 FERC ¶ 61,219 (2018); Dominion 

Energy Overthrust Pipeline, LLC, 162 FERC ¶ 61,218 (2018); Natural Gas Pipeline Co. 

of America LLC, 158 FERC ¶ 61,044 (2017); Wyoming Interstate Co., L.L.C., 158 FERC 

¶ 61,040 (2017); Tuscarora Gas Transmission Co., 154 FERC ¶ 61,030 (2016); Iroquois 

Gas Transmission System, L.P., 154 FERC ¶ 61,028 (2016); Empire Pipeline, Inc., 

154 FERC ¶ 61,029 (2016); Columbia Gulf Transmission, LLC, 154 FERC ¶ 61,027 

(2016); Wyoming Interstate Co., L.L.C., 141 FERC ¶ 61,117 (2012); Viking Gas 

Transmission Co., 141 FERC ¶ 61,118 (2012); Bear Creek Storage Co., L.L.C., 

137 FERC ¶ 61,134 (2011); MIGC LLC, 137 FERC ¶ 61,135 (2011); ANR Storage Co., 

137 FERC ¶ 61,136 (2011); Ozark Gas Transmission, L.L.C., 133 FERC ¶ 61,158 

(2010); Kinder Morgan Interstate Gas Transmission LLC, 133 FERC ¶ 61,157 (2010); 

Northern Natural Gas Co., 129 FERC ¶ 61,159 (2009); Great Lakes Gas Transmission 

Ltd. P’ship, 129 FERC ¶ 61,160 (2009); Natural Gas Pipeline Co. of America LLC, 

129 FERC ¶ 61,158 (2009).
Docket Nos. RM18-11-000 and RP18-415-000 - 12 -

settlement appears to be fair and reasonable and in the public interest.”23 Many rate case 

settlement agreements include moratorium provisions that limit the ability of the pipeline 

to file to revise its rates, or for the shippers to file an NGA section 5 complaint, for a 

particular time period. In addition, many settlement agreements include “come-back 

provisions,” which require a pipeline to file an NGA section 4 filing no later than a 

particular date.

13. The Commission has granted most interstate natural gas pipelines authority to 

negotiate rates with individual customers.24 Such rates are not bound by the maximum 

and minimum recourse rates in the pipeline’s tariff.25 In order to be granted negotiated 

rate authority, a pipeline must have a cost-based recourse rate on file with the 

Commission, so a customer always has the option of entering into a contract at the costbased recourse rate rather than a negotiated rate if it chooses. The pipeline must file each 

negotiated rate agreement with the Commission. In addition, pipelines are also permitted 

to selectively discount their rates. Although negotiated rates may be above the maximum 

recourse rate, discounted rates must remain below the maximum rate. The maximum 

 23 18 CFR 385.602(g)(3).

24 See Natural Gas Pipeline Negotiated Rate Policies and Practices; Modification 

of Negotiated Rate Policy, 104 FERC ¶ 61,134 (2003), order on reh’g and clarification, 

114 FERC ¶ 61,042, dismissing reh’g and denying clarification, 114 FERC ¶ 61,304 

(2006) (Negotiated Rate Policy Statement).

25 Northern Natural Gas Co., 105 FERC ¶ 61,299, at PP 15-16 (2003).
Docket Nos. RM18-11-000 and RP18-415-000 - 13 -

recourse rate is the ceiling rate for all long-term capacity releases, including capacity 

releases to replacement shippers by firm customers with negotiated rates.

14. Changes to a pipeline’s recourse rates occurring under NGA sections 4 and 5 do 

not affect a customer’s negotiated rate, because that rate is negotiated as an alternative to 

the customer taking service under the recourse rate. However, a shipper receiving a 

discounted rate may experience a reduction as a result of the outcome of a rate 

proceeding if the recourse rate is reduced below the discounted rate. The prevalence of 

negotiated and discounted rates varies among pipelines, depending upon the competitive 

situation.

15. The Commission also grants interstate natural gas pipelines market-based rate 

authority when the pipeline can show it lacks market power for the specific services or 

when the applicant or the Commission can mitigate the market power with specific 

conditions.26 A pipeline that has been granted market-based rate authority will have an 

approved tariff on file with the Commission but will not have a Commission approved 

rate. Rather, all rates for services are negotiated by the pipeline and its customers. 

Currently, 29 interstate natural gas pipelines have market-based rate authority for storage 

and interruptible hub services (such as wheeling and park and loan services), and one 

 26 Alternatives to Traditional Cost of Service Ratemaking for Natural Gas 

Pipelines and Regulation of Negotiated Transportation Services of Natural Gas 

Pipelines, 74 FERC ¶ 61,076 (1996) (Negotiated Rate Policy Statement); see also 

Rate Regulation of Certain Natural Gas Storage Facilities, Order No. 678, FERC Stats. 

& Regs. ¶ 31,220 (2006) (cross-referenced at 115 FERC ¶ 61,343), reh’g denied, Order 

No. 678-A, 117 FERC ¶ 61,190 (2006).
Docket Nos. RM18-11-000 and RP18-415-000 - 14 -

pipeline (Rendezvous Pipeline Company, LLC) has market-based rate authority for 

transportation services.

2. The Natural Gas Policy Act of 1978

16. Section 311 of the Natural Gas Policy Act of 1978 (NGPA) authorizes the 

Commission to allow intrastate pipelines to transport natural gas “on behalf of” interstate 

pipelines or local distribution companies served by interstate pipelines.27 NGPA 

section 311(a)(2)(B) provides that the rates for interstate transportation provided by 

intrastate pipelines shall be “fair and equitable and may not exceed an amount which is 

reasonably comparable to the rates and charges which interstate pipelines would be 

permitted to charge for providing similar transportation service.”28 In addition, NGPA 

section 311(c) provides that any authorization by the Commission for an intrastate 

pipeline to provide interstate service “shall be under such terms and conditions as the 

Commission may prescribe.”29 Section 284.224 of the Commission’s regulations 

provides for the issuance of blanket certificates under section 7 of the NGA to Hinshaw 

pipelines30 to provide open access transportation service “to the same extent that and in 

 27 15 U.S.C. 3371.

28 15 U.S.C. 3371(a)(2)(B).

29 15 U.S.C. 3371(c).

30 Section 1(c) of the NGA, 15 U.S.C. 717(c), exempts from the Commission’s 

NGA jurisdiction those pipelines which transport gas in interstate commerce if (1) they 

receive natural gas at or within the boundary of a state, (2) all the gas is consumed within 
Docket Nos. RM18-11-000 and RP18-415-000 - 15 -

the same manner” as intrastate pipelines are authorized to perform such service.31 The 

Commission regulates the rates for interstate service provided by Hinshaw pipelines 

under NGA sections 4 and 5.

17. Section 284.123 of the Commission’s regulations provides procedures for 

NGPA section 311 and Hinshaw pipelines to establish fair and equitable rates for their 

interstate services.32 Section 284.123(b) allows intrastate pipelines an election of 

two different methodologies upon which to base their rates for interstate services.33 First, 

section 284.123(b)(1) permits an intrastate pipeline to elect to base its rates on the 

methodology or rate(s) approved by a state regulatory agency included in an effective 

firm rate for city-gate service. Second, section 284.123(b)(2) provides that the pipeline 

may petition for approval of rates and charges using its own data to show its proposed 

rates are fair and equitable. The Commission has established a policy of reviewing the 

rates of NGPA section 311 and Hinshaw pipelines every five years.34 Section 311 

 

that state, and (3) the pipeline is regulated by a state Commission. This is known as the 

Hinshaw exemption.

31 See 18 CFR 284.224.

32 18 CFR 284.123.

33 18 CFR 284.123(b).

34 Contract Reporting Requirements of Intrastate Natural Gas Companies, 

Order No. 735, FERC Stats. & Regs. ¶ 31,310, at P 92, order on reh’g, Order No. 735-A, 

FERC Stats. & Regs. ¶ 31,318 (2010); see also Hattiesburg Industrial Gas Sales, L.L.C., 

134 FERC ¶ 61,236 (2011) (imposing a five-year rate review requirement on Hattiesburg 

Industrial Gas Sales, L.L.C.).
Docket Nos. RM18-11-000 and RP18-415-000 - 16 -

pipelines not using state-approved rates must file a new rate case every five years, and 

Hinshaw pipelines must at a minimum file a cost and revenue study every five years. 

Intrastate pipelines using state-approved rates that have not changed since the previous 

five-year filing are only required to make a filing certifying that those rates continue to 

meet the requirements of section 284.123(b)(1) on the same basis on which they were 

approved. Conversely, if the state-approved rate used for the election is changed at any 

time, the NGPA section 311 or Hinshaw pipeline must file a new rate election pursuant to 

section 284.123(b) for its interstate rates no later than 30 days after the changed rate 

becomes effective.

18. An intrastate pipeline may file to request authorization to charge market-based 

rates under subpart M of Part 284 of the Commission’s regulations. The same 

requirements for showing a lack of market power apply to intrastate pipelines as for 

interstate pipelines. The Commission has granted market-based rate authority for storage 

and hub services to 19 of the 112 intrastate pipelines with subpart C of Part 284 tariffs.

D. Request for Commission Action

19. On January 31, 2018, in Docket No. RP18-415-000, several trade associations and 

companies representing a coalition of the natural gas industry that are dependent upon 

services provided by interstate natural gas pipeline and storage companies (Petitioners)35

 35 Petitioners include the following trade associations: American Forest and Paper 

Association, American Public Gas Association, Independent Petroleum Association of 

America, Natural Gas Supply Association, and Process Gas Consumers Group. 

Petitioners also include the following companies: Aera Energy LLC, Anadarko Energy 
Docket Nos. RM18-11-000 and RP18-415-000 - 17 -

filed a petition requesting that the Commission take immediate action under sections 5(a), 

10(a), and 14(a) and (c) of the NGA to initiate show cause proceedings against all 

interstate natural gas pipeline companies (with certain exceptions) and require each 

pipeline to submit a cost and revenue study to demonstrate that its existing jurisdictional 

rates continue to be just and reasonable following the passage of the Tax Cuts and Jobs 

Act. 

20. Petitioners requested that the Commission require an immediate rate reduction, if a 

filed cost and revenue study demonstrates that the interstate natural gas pipeline is overrecovering its costs following the adjustments to account for changes to the tax laws 

implemented under the Tax Cuts and Jobs Act. Petitioners contended that, if a pipeline 

believed that a Commission-approved settlement exempted it from such a rate analysis, 

the Commission should require such company to provide evidence to that effect. 

E. Notice of Proposed Rulemaking

21. In response to the Tax Cuts and Jobs Act and United Airlines Issuances, on 

March 15, 2018, the Commission issued a NOPR proposing to require interstate 

natural gas pipelines to file an informational filing with the Commission pursuant to 

sections 10(a) and 14(a) of the NGA36 (One-time Report on Rate Effect of the Tax Cuts 

 

Services Company, Chevron U.S.A. Inc., ConocoPhillips Company, Hess Corporation, 

Petrohawk Energy Corporation, WPX Energy Marketing, LLC, and XTO Energy Inc.

36 15 U.S.C. 717i(a), 717m(a).
Docket Nos. RM18-11-000 and RP18-415-000 - 18 -

and Jobs Act, FERC Form No. 501-G).37 The One-time Report was designed to 

collect financial information to evaluate the impact of the Tax Cuts and Jobs Act and 

United Airlines Issuances on interstate natural gas pipelines’ revenue requirements. In 

addition to the One-time Report, the Commission proposed to provide four options for 

each interstate natural gas pipeline to choose from, including to voluntarily make a filing 

to address the changes to the pipeline’s recovery of tax costs, or explain why no action is 

needed. The four options are: (1) file a limited NGA section 4 filing to reduce the 

pipeline’s rates to reflect the decrease in the federal corporate income tax rate pursuant to 

the Tax Cuts and Jobs Act and the elimination of the income tax allowance for MLP

pipelines consistent with the Revised Policy Statement, (2) make a commitment to file a 

general NGA section 4 rate case in the near future, (3) file a statement explaining why an 

adjustment to its rates is not needed, or (4) take no action other than filing the One-time 

Report. If an interstate natural gas pipeline does not choose either of the first two 

options, the Commission would consider, based on the information in the One-time 

Report and comments by interested parties, whether to issue an order to show cause 

under NGA section 5 requiring the pipeline either to reduce its rates to reflect the income 

tax reduction or explain why it should not be required to do so.38

 37 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 32. The One-time Report on Rate 

Effect of the Tax Cuts and Jobs Act is referred to interchangeably as “One-time Report” 

or “FERC Form No. 501-G” in this Final Rule.

38 NOPR, FERC Stats. & Regs. ¶ 32,725 at PP 41-51.
Docket Nos. RM18-11-000 and RP18-415-000 - 19 -

22. The Commission proposed to establish a staggered schedule for interstate natural 

gas pipelines to file the One-time Report and choose one of the four options described 

above. The Commission stated in the NOPR that interstate natural gas pipelines that file 

general NGA section 4 rate cases or pre-packaged uncontested rate settlements before the 

deadline for their One-time Report will be exempted from making the One-time Report. 

In addition, the Commission stated that interstate natural gas pipelines whose rates are 

being investigated under NGA section 5 need not file the One-time Report.39

F. Comments on Notice of Proposed Rulemaking

23. The Commission received 33 comments and ten answers and reply comments in 

response to its NOPR.40 In general, commenters support the Commission taking action 

in regard to the recent tax changes although commenters disagree about various aspects 

of the Commission’s proposed procedures. These comments have informed our 

determinations in this Final Rule.

24. Several commenters take issue with the NOPR’s implementation of the Revised 

Policy Statement and the proposal that, if an MLP pipeline chooses the option of making

a limited NGA section 4 filing, that filing must reduce its maximum rates to reflect the 

elimination of any tax allowance included in its current rates consistent with the Revised 

Policy Statement. 

 39 Id. PP 4, 40 & n.8.

40 The list of commenters and the abbreviation used for each in this order are 

shown on Appendix A.
Docket Nos. RM18-11-000 and RP18-415-000 - 20 -

25. In regard to the proposed FERC Form No. 501-G, among other things, 

commenters challenge the Commission’s authority to require such a filing, seek 

clarification regarding inputs to the form including the use of an indicative ROE of 

10.55 percent, and suggest changes to the form.

26. Commenters also seek clarification and suggest changes to the four options for an

interstate natural gas pipeline to make a filing to address the changes to the pipeline’s 

recovery of tax costs or explain why no action is needed. Commenters suggest 

alternative timelines or request additional time to make such filings. Commenters also 

seek clarification regarding the deadline to make such filings. Some commenters suggest 

that the Commission eliminate or alter some of the proposed filing options. 

27. The Commission also received several comments regarding negotiated rate 

agreements and whether those agreements can or should be altered by the Final Rule. 

28. Commenters generally support the Commission’s proposed procedures for NGPA 

section 311 and Hinshaw pipelines with some suggested modifications.

III. Overview of Final Rule

29. In this Final Rule, the Commission adopts procedures for determining which 

jurisdictional natural gas pipelines may be collecting unjust and unreasonable rates in 

light of (1) the income tax reductions provided by the Tax Cuts and Jobs Act and (2) the 

United Airlines Issuances. These procedures also allow interstate natural gas pipelines to 

voluntarily reduce their rates to reflect the income tax reductions and change in tax 

allowance resulting from the United Airlines Issuances.
Docket Nos. RM18-11-000 and RP18-415-000 - 21 -

30. The Commission adopts, with modifications, the procedures proposed in the 

NOPR. The Final Rule establishes a requirement, pursuant to sections 10 and 14(a) of 

the NGA, that all interstate natural gas companies, with cost-based stated rates, that filed 

a 2017 FERC Form No. 2 or 2-A must file the FERC Form No. 501-G informational 

filing for the purpose of evaluating the impact of the Tax Cuts and Jobs Act and the 

United Airlines Issuances on interstate natural gas pipelines’ revenue requirements. The 

Final Rule makes certain adjustments to the FERC Form No. 501-G. For example, if a 

pipeline states that it is not a tax paying entity, the revised form will not only 

automatically enter a federal and state income tax of zero, but also eliminate ADIT from 

the pipeline’s cost of service. This change is consistent with the policy announced in our 

contemporaneous order on rehearing of the Revised Policy Statement,41 that when a 

pass-through entity’s tax allowance is eliminated, it is appropriate to also eliminate

ADIT. The Final Rule also modifies the FERC Form No. 501-G’s treatment of capital 

structure, so that, among other things, if a pipeline must report a hypothetical capital 

structure, that capital structure will be 57 percent equity, instead of 50 percent equity.

31. In addition to the FERC Form No. 501-G filing requirement, the Commission 

provides four options for each interstate natural gas pipeline to make a filing to address 

the changes to the pipeline’s recovery of tax costs or explain why no action is needed: 

(1) a limited NGA section 4 rate reduction filing (Option 1), (2) a commitment to file a 

 41 Inquiry Regarding the Commission’s Policy for Recovery of Income Tax Costs, 

Order on Rehearing, 164 FERC ¶ 61,030 (2018). 
Docket Nos. RM18-11-000 and RP18-415-000 - 22 -

general section 4 rate case in the near future (Option 2), (3) an explanation why no rate 

change is needed (Option 3), and (4) no action (Option 4). These procedures are intended 

to encourage natural gas pipelines to voluntarily reduce their rates to the extent the tax 

changes result in their over-recovering their cost of service, while also providing the 

Commission and stakeholders information necessary to take targeted actions under NGA 

section 5 where necessary to achieve just and reasonable rates. 

32. We modify the NOPR proposal so as to permit MLP pipelines to, under Option 1,

propose in their limited section 4 filings to either (1) eliminate their tax allowance, along 

with their ADIT, or (2) reflect only the tax reductions in the Tax Cuts and Jobs Act. 

Although the Commission determined in the Revised Policy Statement that permitting 

MLP pipelines to include a tax allowance in their cost of service results in a double 

recovery of the MLP pipeline’s tax costs, the Commission will not require MLP pipelines 

to eliminate their tax allowances in this rulemaking proceeding. The Final Rule also 

clarifies that a natural gas company organized as a pass-through entity is considered 

subject to the federal corporate income tax, if all of its income or losses are consolidated 

on the federal income tax return of its corporate parent. Thus, such a pass-through entity 

is eligible for a tax allowance.

33. The Commission reiterates the voluntary nature of the three filing options and the 

option to take no action available to pipelines once the pipeline files the required FERC 

Form No. 501-G. While the Commission is permitting interstate natural gas pipelines 

to voluntarily file a limited NGA section 4 filing or commit to make a general NGA 

section 4 rate case filing to modify their rates to reflect the impact of the Tax Cuts and 
Docket Nos. RM18-11-000 and RP18-415-000 - 23 -

Jobs Act and United Airlines Issuances, the Commission is not ordering interstate natural 

gas pipelines to make such filings. The limited NGA section 4 filing option (Option 1) is 

beneficial to both pipelines and their customers because it allows interstate pipelines to 

voluntarily reduce their rates to reflect a reduction in a single cost component—their 

federal income tax costs—so as to flow through that benefit to consumers as soon as 

possible. In order to provide an additional incentive for pipelines to make a limited NGA 

section 4 rate reduction filing, the Final Rule includes a guarantee that the Commission 

will not, for a three-year moratorium period, initiate a NGA section 5 rate investigation of 

a pipeline that makes such a filing, if that filing reduces the pipeline’s ROE to 12 percent 

or less.

34. The commitment to file a general NGA section 4 rate case in the near future 

option (Option 2) provides an opportunity for pipelines to reflect the impact of the Tax 

Cuts and Jobs Act and United Airlines Issuances if the limited NGA section 4 filing 

option would not be appropriate. Although the Commission prefers for pipelines to 

reflect the impact of the Tax Cuts and Jobs Act and United Airlines Issuances on their 

own accord, the Commission will consider whether to initiate an investigation to 

determine if the pipeline’s rates may be unjust and unreasonable under NGA section 5 if 

a pipeline that chooses Option 3 (provide an explanation why no rate change is needed) 

fails to convince the Commission, or the pipeline chooses Option 4 (take no action).

35. The Commission also modifies the implementation schedule proposed in the 

NOPR by combining the third and fourth groups of pipelines into a single group. The 

deadline for the first group of pipelines to file their FERC Form No. 501-Gs will be 
Docket Nos. RM18-11-000 and RP18-415-000 - 24 -

28 days after the effective date of the Final Rule and the deadlines for the second and 

third groups will each be 28 days after the previous group’s deadline. Combining the 

third and fourth groups into a single group will allow the filing of the FERC Form 

No. 501-Gs to be completed by early December of this year. 

36. Additionally, the Commission adopts, with clarifying modifications, the

procedures proposed in the NOPR for NGPA section 311 and Hinshaw pipelines to 

reflect in their jurisdictional rates any rate reductions from the Tax Cuts and Jobs Act and 

the United Airlines Issuances directed by a state agency. Pursuant to this Final Rule, 

NGPA section 311 and Hinshaw pipelines are not required to file the FERC Form 

No. 501-G or make any other immediate filing. Instead, the Commission will rely on its 

five-year rate review process as the primary mechanism to consider changes to 

reflect the Tax Cuts and Jobs Act, and the Commission adopts the NOPR’s proposed 

section 284.123(i) in this Final Rule. Under pre-existing policy, any pipeline that elected 

to use state-derived rates pursuant to section 284.123(b)(1) is already required to file with 

the Commission a new rate election 30 days after a state regulatory agency adjusts its 

intrastate rates, and new section 284.123(i) expands that requirement to include 

intrastate pipelines that use Commission-established cost-based rates pursuant to 

section 284.123(b)(2), as well as pipelines that use state derived rates pursuant to 

section 284.123(b)(1).
Docket Nos. RM18-11-000 and RP18-415-000 - 25 -

IV. Discussion

A. Treatment of Pass-through Entities

1. NOPR

37. The NOPR addressed the treatment of pass-through entities in two ways. First, the 

proposed One-time Report, FERC Form No. 501-G, assumed a federal and state income 

tax allowance of zero for all pass-through entities in order to address the double-recovery 

issues discussed in the United Airlines Issuances.

38. Second, the implementation of Option 1, described above, provided different 

treatment for MLP pipelines as compared to other entities, as set forth in proposed 

section 154.404 of the regulations.

42 Specifically, proposed section 154.404 

distinguishes between the types of rate reductions pipelines could include in these limited 

NGA section 4 filings, depending upon whether the pipeline should be treated as a 

corporation, an MLP pipeline, or a non-MLP partnership. Thus, proposed section 

154.404(a)(1) permits a pipeline subject to the federal corporate income tax to make a 

limited NGA section 4 filing reducing its maximum rates to reflect the decrease in the 

federal corporate income tax rate pursuant to the Tax Cuts and Jobs Act. However, 

proposed section 154.404(a)(2) only permits an MLP pipeline to file a limited NGA 

section 4 filing reducing its maximum rates to reflect the elimination of any tax 

allowance included in its current rates consistent with the United Airlines Issuances. In 

contrast, proposed section 154.404(a)(3) provides that if a partnership not organized as 

 42 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 42.
Docket Nos. RM18-11-000 and RP18-415-000 - 26 -

an MLP pipeline believes that a federal or state income tax allowance is permissible 

notwithstanding United Airlines, it may justify why its pipeline should continue to 

receive an income tax allowance and reduce its maximum rates to reflect the decrease in 

the federal income tax rates applicable to partners pursuant to the Tax Cuts and Jobs 

Act.43

2. Comments

39. Some commenters support the implementation of the Revised Policy Statement in 

the proposed rule, including NGSA,44 APGA,45 CAPP,46 and Direct Energy.47 CAPP 

supports the proposal that pass-through entities report a federal and state income tax 

expense of zero on the proposed FERC Form No. 501-G, unless a non-MLP partnership 

can justify why it should continue to receive an income tax allowance while reducing its 

maximum rates to reflect the decrease in the federal income tax rates resulting from the 

Tax Cuts and Jobs Act. CAPP asserts that such information will enable shippers and the 

Commission to properly evaluate submissions by pipelines as to whether adjustments to 

rates are appropriate in light of the tax changes and, in the absence of any pipeline 

 43 Id. P 36.

44 NGSA Comments at 3, 5.

45 APGA Comments at 5-7.

46 CAPP Comments at 3-4, 7.

47 Direct Energy Comments at 7.
Docket Nos. RM18-11-000 and RP18-415-000 - 27 -

commitments to changing rates, whether an NGA section 5 review of rates is warranted.48 

APGA asserts that the proposed rule is an appropriate response to pipelines that seek 

clarification of the Revised Policy Statement because pipelines can demonstrate the 

applicability of the Commission’s revised policy to their own situations.

40. Several commenters representing pipeline interests oppose the implementation of 

the Revised Policy Statement in the proposed rule, including INGAA, Enable Interstate 

Pipelines, Boardwalk, Spectra, Kinder Morgan, Williams, Millennium, and Dominion 

Energy. These commenters request that the Commission remove the requirements that 

MLP pipelines and other pass-through pipelines (1) report an income tax expense of zero 

in the FERC Form No. 501-G and (2) eliminate a tax allowance in making a limited 

section 4 rate reduction filing.49 These commenters also request that the Commission 

clarify that pass-through pipelines, including MLP pipelines, will be allowed to propose 

and present evidence supporting an income tax allowance in future rate proceedings.50 

To support these positions, the pipelines (a) raise various challenges to the Commission’s 

response to United Airlines and (b) identify various concerns with the implementation of 

 48 CAPP Comments at 7.

49 INGAA Comments at 3, 11, 15, 17-18; Boardwalk Comments at 2; Spectra 

Comments at 16-17, 28; Kinder Morgan Comments at 21-23; Williams Comments at 4, 

14; Millennium Comments at 1-2; Dominion Energy Comments at 2, 9; Enable Interstate 

Pipelines Comments at 28-31.

50 INGAA Comments at 3, 11, 18-19; Boardwalk Comments at 2, 5; Spectra 

Comments at 4-5; Williams Comments at 14; Millennium Comments at 1-2.
Docket Nos. RM18-11-000 and RP18-415-000 - 28 -

those policies in the NOPR. These arguments, and various requests for clarification, are 

discussed below.

a. Challenges to the Commission’s response to United 

Airlines

41. Pipeline commenters argue that the Revised Policy Statement is not a binding rule 

with the force of law.51 They assert that under the Administrative Procedure Act, the 

Commission must support the policy with substantial evidence as if it had never been 

issued in order to apply the policy as a substantive rule in this proceeding and the 

Commission has not done so.52 

42. In addition, several pipeline commenters challenge the Commission’s Revised 

Policy Statement and Opinion No. 511-C, including INGAA, Enable Interstate Pipelines, 

Boardwalk, Spectra, Kinder Morgan, Williams, Tallgrass Pipelines, EQT Midstream, and 

Dominion Energy.53 These commenters assert that the Revised Policy Statement was not 

the product of reasoned decision-making.54 Other commenters request that the 

Commission resolve similar issues raised in requests for rehearing of the Revised Policy 

 51 INGAA Comments at 2-3; Boardwalk Comments at 2; Williams Comments at 

4, 12; Millennium Comments at 1; Tallgrass Pipelines Comments at 10; Dominion 

Energy Comments at 5-7.

52 INGAA Comments at 16-18; Williams Comments at 4, 14-15; Millennium 

Comments at 1.

53 INGAA, Enable, Spectra, Kinder Morgan, Tallgrass Pipelines, EQT Midstream, 

and Dominion Energy filed requests for rehearing of the Revised Policy Statement in 

Docket No. PL17-1.

54 Dominion Energy Comments at 3; INGAA Comments at 2.
Docket Nos. RM18-11-000 and RP18-415-000 - 29 -

Statement before natural gas pipelines are required to file any information regarding the 

effects upon the pipeline’s cost of service.55 

43. Pipeline commenters argue that implementing the Revised Policy Statement in this 

rulemaking proceeding will introduce uncertainty that will delay resolution of the action 

to address the rate impact from the Tax Cuts and Jobs Act. They state that removing the 

MLP pipeline and pass-through income tax allowance issues from the proposed rule will 

reduce the uncertainty associated with the proposed rule and allow pipelines and their 

customers to focus on the potential rate reductions resulting from the Tax Cuts and Jobs 

Act.56

b. Arguments Regarding the Implementation

44. Commenters also raise concerns and request clarification regarding the NOPR’s 

proposed implementation of the Revised Policy Statement. 

45. First, pipeline commenters argue that the proposed rule improperly places the 

burden under NGA section 5 onto pass-through entities to justify a tax allowance.57 

46. Second, while generally supporting the proposal, APGA also claims that proposed 

section 154.404(a)(3) should be amended to replace “partnership” with “partnership or 

 55 Tallgrass Pipelines Comments at 4-9; EQT Midstream Comments at 2, 6-8.

56 INGAA Comments at 3; Boardwalk Comments at 2; Tallgrass Pipelines 

Comments at 4-9; EQT Midstream Comments at 2, 6-8.

57 INGAA Comments at 19-22; Enable Interstate Pipelines Comments at 25-26; 

Kinder Morgan Comments at 19; Williams Comments at 11; Millennium Comments 

at 7-8; TransCanada Comments at 9.
Docket Nos. RM18-11-000 and RP18-415-000 - 30 -

other pass-through entity.” APGA argues that the proposed NOPR recognizes that 

partnerships or other pass-through entities such as limited liability corporations must 

address the double-recovery concern raised by United Airlines.

58 APGA also proposes 

that the Commission clarify that if a pass-through entity files a written justification to 

preserve its tax allowance under the limited section 4 option (Option 1), staff and 

intervenors may comment or seek a hearing on that issue. APGA proposes to add a new 

subpart (iv) to section 154.404(e) that states “Whether any justification submitted 

pursuant to paragraph (a)(3)(ii) of this section is consistent with Commission policy and 

the public interest.”59

47. Finally, several pipeline commenters challenge the FERC Form No. 501-G’s 

assumption that a non-MLP pass-through pipeline’s federal and state tax allowance is 

zero.60 They request that the Commission clarify that non-MLP pass-through entities, in 

particular those that are owned, in whole or in part, by tax-paying corporate partners, may 

continue to recover an income tax allowance.61 These commenters argue that the 

 58 APGA Comments at 6.

59 Id.

60 INGAA Comments at 21; Enable Interstate Pipelines Comments at 25-26; 

Spectra Comments at 5, 12, 18-20; Kinder Morgan Comments at 14-23; Williams 

Comments at 4, 11; Millennium Comments at 7-9; TransCanada Comments at 8-10; 

Tallgrass Pipelines Comments at 10-11; EQT Midstream Comments at 6-7; Dominion 

Energy Comments at 5-6.

61 INGAA Comments at 19-21; Enable Interstate Pipelines Comments at 33; 

Kinder Morgan Comments at 17-18, 21-23; Millennium Comments at 5-6.
Docket Nos. RM18-11-000 and RP18-415-000 - 31 -

assumed tax allowance of zero for pass-through entities is unwarranted given that the 

Revised Policy Statement and section 154.404(a)(3) of the proposed rule explicitly permit

a non-MLP pass-through entity to justify why it should continue to receive an income tax 

allowance.62 They further claim that assuming a tax allowance of zero for all passthrough pipelines will result in inaccuracies and distortions of such pipeline’s reported 

cost of service on the FERC Form No. 501-G. They allege that such distortions could 

discourage pipelines from making the limited section 4 filings,

63 lead customers to 

mistakenly conclude that these pipelines are over-earning,64 and hinder settlement 

negotiations between pipelines and shippers.65 

48. Regarding non-MLP pass-through entities, commenters support these concerns 

with specific arguments and requests for clarification. For instance, arguing that there is 

no double-recovery when a pass-through entity is owned by a corporation, Millennium 

requests that a partnership be permitted to include an income tax allowance on the FERC 

Form No. 501-G and in the limited section 4 filings if such entity is owned by 

 62 INGAA Comments at 19-21; Enable Interstate Pipelines Comments at 25-26, 

33; Spectra Comments at 12; Kinder Morgan Comments at 2, 17-23; Williams Comments 

at 11; Millennium Comments at 5-7, 9; TransCanada Comments at 3, 8-9; Tallgrass 

Pipelines Comments at 10-11; EQT Midstream Comments at 6-7.

63 INGAA Comments at 21; Millennium Comments at 6-7.

64 INGAA Comments at 21; Spectra Comments at 18-19; Millennium Comments 

at 9; Tallgrass Pipelines Comments at 10-11; Kinder Morgan Comments at 15.

65 Kinder Morgan Comments at 15.
Docket Nos. RM18-11-000 and RP18-415-000 - 32 -

corporations that incur an income tax liability before issuing dividends to their 

shareholders.66 AGA requests that the Commission clarify the proper reporting on FERC 

Form No. 501-G for a non-MLP pass-through pipeline that is partly owned by at least one 

MLP and partly owned by one or more corporations.67 Similarly, Spectra requests that 

the Commission revise the FERC Form No. 501-G to allow joint venture pipelines to 

include an income tax allowance or to reflect such pipeline’s ownership in the cost-ofservice components.68 

3. Discussion

49. As discussed below, the Commission is revising proposed section 154.404 so that 

MLP pipelines, like other pass-through entities,69 that choose Option 1 (limited section 4 

rate filing) may reduce their rates solely to reflect the Tax Cuts and Jobs Act without 

further reducing rates for the elimination of the income tax allowance. The Commission 

also provides clarification regarding the completion of FERC Form No. 501-G and the 

permissible adjustments.

 66 Millennium Comments at 5-6.

67 AGA Comments at 5-6.

68 Spectra Comments at 28-29.

69 A pass-through entity or pipeline refers to an entity that does not pay taxes 

itself. As discussed below, in the Final Rule we are revising section 154.404 to provide 

that a natural gas company organized as a pass-through entity whose income or losses are 

included in the consolidated federal income tax return of its corporate parent is 

considered to be subject to the federal corporate income tax. 
Docket Nos. RM18-11-000 and RP18-415-000 - 33 -

50. Given these modifications, the Commission is not, in this rulemaking proceeding, 

addressing the merits of either (1) the Commission’s holding in Opinion No. 511-C that 

an impermissible double recovery results from granting an MLP pipeline both an income 

tax allowance and a DCF ROE or (2) the similar policy the Commission announced in the 

Revised Policy Statement. However, the binding precedent of United Airlines and 

Opinion No. 511-C may be considered by the Commission or any shipper when initiating 

any subsequent section 5 action, and we encourage pipelines to consider the guidance 

provided by the Revised Policy Statement.

a. Limited Section 4 Filings

51. In the Final Rule, the Commission modifies the proposed section 154.404(a)

permitting limited section 4 rate filings as follows [deletions in italics, additions in 

underline]:

The limited rate filing permitted by this section is intended to 

permit

(1) a natural gas company subject to the federal corporate income tax 

to reduce its maximum rates to reflect the decrease in the federal 

corporate income tax rate pursuant to the Tax Cuts and Jobs Act of 

2017, 

(2) a natural gas company organized as a master limited partnership 

to reduce its maximum rates to reflect the elimination of any tax 

allowance included in its current rates, and

(23) a natural gas company organized as a pass-through entity 

partnership (but not a master limited partnership) either (i) to 

eliminate any income tax allowance and accumulated deferred 

income taxes reflected included in its current rates or (ii) to justify 

why it should continue to receive an income tax allowance and to 

reduce its maximum rates to reflect the decrease in the federal 

income tax rates applicable to partners pursuant to the Tax Cuts and 

Jobs Act of 2017.
Docket Nos. RM18-11-000 and RP18-415-000 - 34 -

52. Pursuant to these revisions to section 154.404(a), MLP pipelines will have the 

same options as other pass-through entities in a limited section 4 rate filing: either to 

reduce their rates to reflect complete elimination of the tax allowance or to reduce 

their rates only for the Tax Cuts and Jobs Act without further reducing rates for the 

elimination of their income tax allowance. Likewise, consistent with the discussion in 

section IV.B.7, the Commission is also modifying the proposed section 154.404 so that a 

pipeline’s limited NGA section 4 filing can reflect the elimination of ADIT as a result of 

the elimination of an income tax allowance.

53. The Commission expects that modifying proposed section 154.404(a) in this 

manner will help achieve Commission objectives. The Commission seeks to encourage 

MLP pipelines (like all other pipeline entities) to quickly reduce rates and to pass on the 

benefits of reduced tax costs to customers without the need for a full examination of costs 

and revenues. Allowing MLP pipelines the option to make a rate reduction reflecting 

reduced tax rates under the Tax Cuts and Jobs Act while still asserting eligibility for a tax

allowance will incentivize more pipelines to file the limited section 4 rate cases. 

Additionally, MLP pipelines and other pass-through entities making the limited section 4 

filing would be eligible for the moratoria on NGA section 5 rate investigations discussed 

below. Although in a subsequent proceeding the Commission (subject to the moratoria)

or any shipper may take action under NGA section 5 to further reduce an MLP pipeline’s 
Docket Nos. RM18-11-000 and RP18-415-000 - 35 -

rates, we believe providing pipelines flexibility in the limited NGA section 4 filing option

will increase the probability that customers benefit from an immediate rate reduction.70 

54. Furthermore, we seek to avoid complicating the optional, limited NGA section 4 

proceedings. We recognize that the Revised Policy Statement itself is guidance, not 

binding precedent. Although United Airlines and Opinion No. 511-C are binding 

precedent,71 SFPP has sought rehearing of that order, and other pipelines have raised 

issues involving the Commission’s income tax policies for pass-through entities in 

comments in response to the NOPR. We decline to address such matters in this 

rulemaking proceeding, particularly when the Commission will be able to address these 

United Airlines issues, as appropriate, when we address the pending request for rehearing 

of Opinion No. 511-C and in any ensuing NGA section 5 investigation after pipelines file 

their FERC Form No. 501-Gs as discussed below. 

55. Consistent with the modifications discussed above, we clarify that an MLP 

pipeline or other pass-through entity’s decision to submit an optional limited NGA

section 4 rate filing to reduce rates for the Tax Cuts and Jobs Act, as opposed to 

 70 As discussed below, the Commission acknowledges that the Revised Policy 

Statement’s elimination of an income tax allowance for MLP pipelines is not a binding 

rule, but an expression of policy intent following the United Airlines decision. Pacific 

Gas & Electric Co. v. FPC, 506 F.2d 33, 38 (D.C. Cir. 1974).

71 In Pacific Gas & Electric Co., 506 F.2d at 33, 38, the D.C. Circuit stated that 

the Commission may “establish binding policy ... through adjudications which constitute 

binding precedent.” See Algonquin Gas Transmission, LLC, 153 FERC ¶ 61,038, at 

PP 29-37 (2015), and cases cited. Although Opinion No. 511-C is pending rehearing, it 

remains binding precedent.
Docket Nos. RM18-11-000 and RP18-415-000 - 36 -

eliminating its income tax allowance, is not an issue that is within the scope of the limited 

NGA section 4 proceeding. Permitting parties to challenge a pass-through entity’s choice 

to not eliminate its income tax allowance through its limited NGA section 4 rate filing 

would undermine the Commission’s objectives in affording pass-through entities both 

options in the first place, namely to encourage more entities to file limited NGA section 4 

rate cases and expedite rate reductions. If an MLP pipeline or other pass-through entity 

chooses to make the more limited rate reduction reflecting reduced tax rates under the 

Tax Cuts and Jobs Act, the issue of whether a further rate reduction is just and reasonable 

because the entity should not recover any income tax allowance may arise in a 

subsequent NGA section 5 proceeding, subject to the moratoria provisions regarding 

Commission-initiated section 5 proceedings discussed below. Nonetheless, the 

Commission encourages MLP pipelines to consider the guidance provided in the Revised 

Policy Statement as well as the precedents of United Airlines and Opinion No. 511-C in 

evaluating the options available in section 154.404.

56. In response to the comments, the Commission also provides other clarifications 

regarding the limited NGA section 4 filings. In response to comments from APGA, we 

clarify that section 154.404 applies to all pass-through entities (such as limited liability 

corporations), not merely partnerships, and we have modified section 154.404 to replace 

the reference to “partnership” with “pass-through entity.” We also add language in 

section 154.404(b) to clarify that, for purposes of making a limited NGA section 4 filing 

under section 154.404(a), a natural gas company organized as a pass-through entity all of

whose income or losses are consolidated on the federal income tax return of its corporate 
Docket Nos. RM18-11-000 and RP18-415-000 - 37 -

parent is considered to be subject to the federal corporate income tax.72 Thus, such 

a natural gas company may make its limited NGA section 4 filing pursuant to 

section 154.404(a)(1), which is applicable to natural gas companies subject to the federal 

corporate income tax, rather than under section 154.404(a)(2), which is applicable to 

pass-through entities.73

57. In addition, the Commission eliminates any requirement as a part of the limited 

NGA section 4 filing for a pass-through entity to satisfy a burden of showing that it is 

entitled to receive any income tax allowance. The Commission recognizes that it will 

have the burden, in any proceeding it initiates under NGA section 5 to support complete 

elimination of the existing tax allowance. Moreover, as discussed below, any passthrough entity reporting an income tax allowance in an optional Addendum to FERC 

Form No. 501-G may provide such explanation.

b. FERC Form No. 501-G and Addendum

58. Although the Commission will permit all pass-through entities to make limited 

NGA section 4 filings which only reduce their rates to reflect the reduced income tax 

 72 BP West Coast Products, LLC v. FERC, 374 F.3d 1263, at 1289 (D.C. Cir. 

2004) (explaining that an income tax allowance is appropriate in the cost of service of a 

pass-through subsidiary of a corporation “when such a subsidiary does not itself incur a 

tax liability but generates one that might appear on a consolidated return of the corporate 

group.”).

73 Similarly, when filling out the FERC Form No. 501-G, such a natural gas 

company may state that it is a tax paying entity, and thus, as discussed below, the form 

will not automatically enter a federal and state income tax of zero.
Docket Nos. RM18-11-000 and RP18-415-000 - 38 -

rates in the Tax Cuts and Jobs Act, the Commission is continuing to design the FERC 

Form No. 501-G so that it will automatically enter a federal and state income tax of zero

for all respondents that state they are not tax paying entities.

74 However, we clarify that a 

pass-through entity claiming a tax allowance may submit an Addendum to the FERC 

Form No. 501-G that includes an income tax allowance. Moreover, consistent with the 

discussion above, to the extent a pipeline elects to make the optional limited NGA 

section 4 filing, the pipeline may use either (a) the FERC Form No. 501-G if it proposes 

to eliminate its tax allowance or (b) the Addendum to the FERC Form No. 501-G if it 

claims a tax allowance.

75

59. The FERC Form No. 501-G will continue to require pass-through entities to report

an income tax allowance of zero, because this informational filing is intended to aid the 

Commission’s further evaluation of a pipeline’s cost of service given the double-recovery 

 74 However, as discussed below, consistent with the language the Commission is 

adding to 154.404(b)(1), a natural gas company organized as a pass-through entity all of 

whose income or losses are consolidated on the federal income tax return of its corporate 

parent is considered to be subject to the federal corporate income tax for purposes of the 

FERC Form No. 501-G, and therefore the form will not automatically enter a federal and 

state income tax of zero for such a natural gas company. BP West Coast Products, LLC 

v. FERC, 374 F.3d 1263, at 1289 (D.C. Cir. 2004).

75 As explained below, whether or not the pipeline uses FERC Form No. 501-G or 

the optional Addendum, the limited NGA section 4 rate filing should only reflect the 

percent change to the pipeline’s cost of service resulting from the reduction in the 

pipeline’s income tax allowance and any corresponding adjustment to ADIT. In the 

limited NGA section 4 filing, the pipeline cannot treat other cost changes as offsetting the 

reduction to the income tax allowance.
Docket Nos. RM18-11-000 and RP18-415-000 - 39 -

concerns raised by United Airlines76 and Opinion No. 511-C.77 This precedent provides

that an MLP cannot claim an income tax allowance if a double-recovery results from the 

inclusion of both (a) a DCF ROE and (b) an income tax allowance. Although the 

Commission is not adopting the NOPR proposal to require MLP pipelines to eliminate 

their tax allowances in any limited NGA section 4 filing, Opinion No. 511-C remains 

binding Commission precedent. Accordingly, if a pass-through entity files a limited 

NGA section 4 filing reducing its rates to reflect the Tax Cuts and Jobs Act without 

proposing to eliminate its tax allowance, the Commission will consider whether to initiate 

an NGA section 5 investigation to further reduce the pipeline’s rates by eliminating its 

tax allowance consistent with Opinion No. 511-C and United Airlines, subject to the 

moratoria provisions regarding Commission-initiated section 5 proceedings discussed 

below. In addition, shippers have the option of bringing a complaint under NGA 

section 5 and raising arguments based upon the United Airlines Issuances. The 

elimination of the income tax allowance in the FERC Form No. 501-G will help the 

Commission and pipeline customers assess the potential effects of the removal of any 

income tax allowance as a consequence of United Airlines’ double-recovery concerns. 

60. However, in an Addendum to FERC Form No. 501-G that pipelines may choose to 

file along with their FERC Form No. 501-G, the Commission will permit pass-through 

 76 United Airlines, 827 F.3d 122 at 134, 136.

77 Opinion No. 511-C, 162 FERC ¶ 61,228.
Docket Nos. RM18-11-000 and RP18-415-000 - 40 -

entities to report an income tax allowance alongside the other adjustments to FERC Form 

No. 501-G. Any income tax allowance reported in the Addendum should reflect the 

relevant tax reductions resulting from the Tax Cuts and Jobs Act.78 We encourage any 

pass-through entity reporting an income tax allowance in an Addendum to FERC Form 

No. 501-G to support its calculation of that income tax allowance, including showing 

where and how the income tax liability is incurred.79 Some commenters argue that passthrough entities have complex ownership forms which may be relevant to assessing 

whether there is a double recovery of tax costs when affording any such entity an income 

tax allowance in addition to a DCF ROE.80 Although not required, in preparing any 

Addendum to FERC Form No. 501-G, we encourage pass-through entities to provide any 

information regarding their particular circumstances or ownership structures that they 

consider relevant in assessing any potential United Airlines double-recovery issue. 

61. We emphasize that this one-time filing of FERC Form No. 501-G and the 

Addendum are for informational purposes pursuant to NGA sections 10 and 14. As 

discussed below, we also emphasize that in any subsequent NGA section 5 proceeding 

 78 The income tax allowance attributable to individual unit holders should reflect 

the reduction in the tax rate applicable to the taxpayer(s) and include any adjustment for 

the deduction for section 199A “qualified business income of pass-thru entities” pursuant 

to the Tax Cuts and Jobs Act. See Tax Cuts and Jobs Act 11011, 131 Stat. at 2063.

79 See, e.g., IRS Form 851: Affiliations Schedule; IRS Form 1122: Authorization 

and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax 

Return.

80 See, e.g., Millennium Comments at 5-6; AGA Comments at 5-6.
Docket Nos. RM18-11-000 and RP18-415-000 - 41 -

initiated by the Commission (regardless of the contents of the FERC Form No. 501-G or 

the optional Addendum), the Commission will have the burden under NGA section 5 to 

justify any changes to the pipeline’s rates.81

c. Other Issues

62. In response to the comments, we decline to clarify further our income tax 

allowance policies for MLP pipelines or other pass-through entities. As modified above, 

the rule does not require pass-through entities to eliminate the income tax allowance in 

limited section 4 filings pursuant to section 154.404 or in any subsequent rate proceeding. 

As for the commenters’ request to clarify whether pass-through entities will be granted an 

income tax allowance in future rate proceedings, the Commission will not speculate now 

on future potential actions. We recognize that the Revised Policy Statement itself is 

guidance, not binding precedent, but any participant in a subsequent rate proceeding must 

be prepared to address the Opinion No. 511-C and United Airlines precedent. Moreover, 

this binding precedent, as well as the Commission’s Revised Policy Statement, will be 

considered in any subsequent section 5 action, whether initiated by the Commission or by 

any shipper.

 81 Interstate Natural Gas Ass'n of America v. FERC, 285 F.3d 18, 38 (2002) 

(INGAA) (observed that the Commission would “shoulder the burden under [section] 5 of 

the NGA” with respect to any rate change and found “no violation of the NGA” with 

respect to “the Commission's determination to extract information from pipelines relevant 

to the practical issues”).
Docket Nos. RM18-11-000 and RP18-415-000 - 42 -

B. One-time Report

63. In the NOPR, the Commission proposed to exercise its authority under NGA 

sections 10(a) and 14(a)82 to require all interstate natural gas pipelines that file a 2017 

FERC Form No. 2 or 2-A to submit an abbreviated cost and revenue study in a format 

similar to the cost and revenue studies the Commission has attached to its orders 

initiating NGA section 5 rate investigations in recent years.83 Using the data in the 

pipelines’ 2017 FERC Form Nos. 2 and 2-A, these studies would estimate (1) the 

percentage reduction in the pipeline’s cost of service resulting from the Tax Cuts and 

Jobs Act and the Revised Policy Statement, and (2) the pipeline’s current ROEs before 

and after the reduction in corporate income taxes and the elimination of income tax 

allowances for MLP pipelines. The proposed One-time Report is an Excel spreadsheet 

with formulas.

64. The Commission stated that the Commission and interested parties could use this 

information in the One-time Report in considering whether to initiate NGA section 5 rate 

investigations of pipelines which do not opt to file a limited NGA section 4 to reduce

their rates or commit to make a general NGA section 4 filing by December 31, 2018, and 

 82 See Tuscarora Gas Transmission Co., 154 FERC ¶ 61,273, at PP 4-14 (2016) 

(requiring a pipeline to submit a more detailed cost and revenue study than that which the 

Commission is proposing here).

83 The Commission proposed to exempt from this requirement (1) interstate natural 

gas pipelines whose rates are being examined in a general NGA section 4 rate case or an 

NGA section 5 investigation and (2) pipelines that file a pre-packaged uncontested rate 

settlement before the deadline for their One-time Report.
Docket Nos. RM18-11-000 and RP18-415-000 - 43 -

the order in which to initiate any such investigations so as to make the most efficient use 

of the Commission’s and interested parties’ resources to provide consumer benefits.

65. The cost and revenue study required by the One-time Report incorporates all the 

major cost components of a jurisdictional cost of service, including: Administrative and 

General, Operation and Maintenance, other taxes, depreciation and amortization expense, 

and the return related components of ROE, interest expenses and income taxes. Most of 

the required data is to be taken directly from the respondent’s 2017 FERC Form No. 2 or 

2-A84 without modification. However, the NOPR stated that, if a pipeline believes that 

this data does not reflect its current situation, the pipeline may make adjustments to 

individual line items in additional work sheets, referred to below as an Addendum to the 

FERC Form No. 501-G. The NOPR stated that all adjustments should be shown in a 

manner similar to that required for adjustments to base period numbers provided in 

statements and schedules required by sections 154.312 and 154.313 of the Commission’s 

regulations.

66. The NOPR also proposed an Implementation Guide for One-time Report on Rate 

Effect of the Tax Cuts and Jobs Act (Implementation Guide), providing additional 

guidance to parties as to the expected data entries, including the proposed staggered 

compliance dates and the list of companies for each of the four compliance periods. 

 84 FERC Form Nos. 2s (Annual report for Major natural gas companies) and 2-As 

(Annual report for Nonmajor natural gas companies) for calendar year 2017 were due 

April 18, 2018. 18 CFR 260.1(b)(2) & 260.2(b)(2).
Docket Nos. RM18-11-000 and RP18-415-000 - 44 -

1. Legal Authority

a. Comments

67. Southern Star, TransCanada, and Enable Interstate Pipelines question the 

Commission’s legal authority to require the One-time Report.85 They each raise the same 

argument: compelling a pipeline to file the One-time Report is equivalent to compelling 

the pipeline to initiate an NGA section 4 rate proceeding, which the Consumers court 

case prohibits.86 Enable Interstate Pipelines note that the “pipeline filing the form is not 

making a proposal to change rates under NGA Section 4, justify its rates, or take any 

position regarding its current or future rates.”87 Enable Interstate Pipelines argue that 

because the Commission has “stated that it will ‘consider whether to initiate an 

investigation under NGA Section 5 based upon the ‘statement filed with the form,’” and 

because intervenors can “make any further comments that intervenors want,” the effect is 

to “require[] pipelines to justify their current rates through statements.”88

68. Southern Star contends that, by permitting pipelines to make adjustments to 

individual line items in the FERC Form No. 501-G on additional worksheets and support 

those adjustments in a separate document, the Commission is requiring pipelines to 

 85 Enable Interstate Pipelines Comments at 13-17; Southern Star Comments at 3-5; 

TransCanada Comments at 4-7.

86 Consumers Energy Co. v. FERC, 226 F.3d 777 (6th Cir. 2000) (Consumers).

87 Enable Interstate Pipelines Comments at 14.

88 Enable Interstate Pipelines Comments at 15.
Docket Nos. RM18-11-000 and RP18-415-000 - 45 -

justify their existing rates under the guise of an informational filing. Southern Star states 

that making any such adjustments based on more recent data would require the pipeline 

to make judgement calls with respect to data sources and reliability of the type it makes 

in an NGA section 4 rate filing.89

b. Discussion

69. These comments misapprehend both the nature of the One-time Report and the 

holding in Consumers. The primary purpose of the One-time Report, together with any 

comments and protests to it, is to provide information relevant to determining whether 

the Commission should exercise its discretion to initiate an investigation under NGA 

section 5 as to whether the subject interstate natural gas pipeline may be collecting unjust 

and unreasonable rates in light of the recent reduction in the corporate income tax rate 

and change in the Commission’s income tax allowance policies.90

70. The Commission routinely initiates NGA section 5 investigations “based upon our 

review of publicly available information on file with the Commission.”91 The court in 

 89 Southern Star Comments at 3-4.

90 General Motors Corp v. FERC, 613 F.2d 939, 944 (D.C. Cir. 1979); Southern 

Union Gas Co., 840 F.2d 964, 968 (D.C. Cir. 1988); see also Iroquois Gas Transmission 

System, L.P., 69 FERC ¶ 61,165, at 61,631 (1994); JMC Power Projects v. Tennessee 

Gas Pipeline, Co., 69 FERC ¶ 61,162 (1994), reh’g denied, 70 FERC ¶ 61,168, at 61,528 

(1995), affirmed, Ocean States Power v. FERC, 84 F.3d 1453 (D.C. Cir. 1996) 

(unpublished opinion).

91 See, e.g., Natural Gas Pipeline Co. of America LLC, 158 FERC ¶ 61,044 at P 1;

Wyoming Interstate Co., L.L.C., 158 FERC ¶ 61,040 at P 1; Tuscarora Gas Transmission 

Co., 154 FERC ¶ 61,030 at P 1, reh’g denied, 154 FERC ¶ 61,273.
Docket Nos. RM18-11-000 and RP18-415-000 - 46 -

Consumers did not prohibit such information collection; to the contrary, it condoned 

information collection.92 The limitation that Consumers placed is that the Commission 

must act “with clarity and precision” so as to ensure that any directive for the pipeline to 

make “informational filings” is just that, and not an NGA section 4 filing to “justify its 

current rate.”93 

71. Indeed, this Final Rule is patterned on the Commission’s successful method of 

collecting information from the Hinshaw pipelines that were specifically at issue in 

Consumers. For the past decade, instead of requiring Hinshaw pipelines to periodically 

file to justify their current rates, the Commission now requires Hinshaw pipelines to 

periodically “file with the Commission an informational filing with cost, throughput, 

revenue and other data, in the form specified in section 154.313 of the Commission’s 

regulations.”94 These five-year review filings are docketed and noticed, and parties may 

intervene, comment, and protest.95 The Commission expressly warns Hinshaw pipelines 

that the Commission will use that informational filing “to determine whether any change 

 92 Consumers, 226 F.3d at 777 (“Should FERC wish [the pipeline] to make 

periodic informational filings, it may of course so require pursuant to [section] 10a of the 

NGA.”).

93 Id. at 781.

94 See, e.g., Hattiesburg Industrial Gas Sales, L.L.C., 134 FERC ¶ 61,236 at P 13 

(imposing a five-year rate review requirement on Hattiesburg Industrial Gas Sales, 

L.L.C.).

95 Narragansett Electric Co., 155 FERC ¶ 61,159, at P 2 & n.15 (2016).
Docket Nos. RM18-11-000 and RP18-415-000 - 47 -

in [the pipeline’s] interstate transportation or storage rates should be ordered pursuant to 

section 5 of the Natural Gas Act.”96 This two-step process allows the Commission to 

collect cost-of-service data consistent with NGA section 10(a), which the Commission 

may rely upon in deciding whether to exercise its discretion to initiate an investigation of 

the Hinshaw pipeline’s rates pursuant to NGA section 5. The Hinshaw pipeline is free, if 

it so chooses, to propose to modify its rates under NGA section 4, based on the cost and 

revenue information in the study submitted to the Commission. Absent such a voluntary 

section 4 filing, no change in the Hinshaw pipeline’s rates will occur, without the 

Commission satisfying its burden of persuasion under NGA section 5. 

72. The One-time Report, adopted in this Final Rule, will operate in a similar fashion. 

The Final Rule permits an interstate natural gas pipeline, if it so chooses, to submit a 

limited NGA section 4 filing reducing its rates to reflect the income tax reductions in the 

Tax Cuts and Jobs Act or following the United Airlines Issuances, using the information 

in the One-time Report.97 However, the Final Rule contains no requirement that an 

interstate pipeline make any form of rate filing. Indeed, as discussed further below, the 

Final Rule expressly permits interstate pipelines to take no action other than submitting 

the required One-time Report in order to avoid any implication that the Commission is 

 96 Id.

97 An interstate pipeline may also file a general NGA section 4 rate case. 

However, such a filing would not use the information in the One-time Report. Rather, a 

pipeline submitting a general section 4 rate case would be required to submit the 

statements and schedules set forth in 18 CFR 154.312 or 313.
Docket Nos. RM18-11-000 and RP18-415-000 - 48 -

requiring interstate pipelines to make an NGA section 4 rate change filing, contrary to the 

decision of the United States Court of Appeals for the D.C. Circuit in Public Service 

Commission of New York v. FERC98 that the Commission may not require pipelines to 

file rate cases under NGA section 4.

73. The Commission rejects Southern Star’s contention that the Commission is 

requiring pipelines to justify their existing rates under the guise of an informational filing 

by permitting pipelines to make adjustments to individual line items in the FERC Form 

No. 501-G on additional worksheets. The FERC Form No. 501-G requires interstate 

natural gas pipelines to develop a cost and revenue study in which most of the data is 

taken directly from the pipeline’s FERC Form No. 2 or 2-A without modification. Using 

formulas that are incorporated into the form that may not be changed by the pipeline, the 

FERC Form No. 501-G produces a cost and revenue study in a format similar to the cost 

and revenue studies the Commission has used in recent years to determine whether to 

initiate NGA section 5 rate investigations of individual pipelines. As Southern Star and 

other pipelines recognize, pipelines have little discretion in how they fill out the FERC 

Form No. 501-G.99 However, the Commission recognizes that the 2017 calendar year 

data reported in the pipeline’s FERC Form No. 2 or 2-A may not be fully representative 

of the pipeline’s current situation when it files the FERC Form No. 501-G in the fall of 

2018. For example, shippers may have left the system after their contracts expired, the 

 98 866 F.2d 487 (D.C. Cir. 1989).

99 See Southern Star Comments at 7.
Docket Nos. RM18-11-000 and RP18-415-000 - 49 -

pipeline may have been unsuccessful in remarketing its capacity, or the pipeline may 

have restructured. Accordingly, the Commission is providing pipelines the opportunity 

to inform both it and other parties of significant changes in their situation by filing an 

Addendum to the FERC Form No. 501-G. The filing of such an Addendum is purely

voluntary, but the information in such an Addendum should assist the Commission in 

determining what further steps to take with respect to the pipeline in question. 

74. The Commission recognizes that deciding what information, if any, to include in 

an Addendum to the FERC Form No. 501-G may require the pipeline to exercise some 

degree of judgment. However, that fact does not require the pipeline to make the 

equivalent of an NGA section 4 rate filing or improperly shift to the pipeline the burden 

of justifying its existing rates in violation of NGA section 5. In INGAA, the D.C. Circuit 

rejected a contention similar to the one made here by Southern Star. The Commission in 

Order No. 637 had directed each pipeline to file pro forma tariff sheets showing how it 

intended to comply with a regulation requiring pipelines to permit segmentation100 or to 

explain why its system’s configuration justified curtailing segmentation rights. As in this 

rulemaking proceeding, the pipelines in the Order No. 637 proceeding contended that 

requiring them to submit these filings impermissibly shifted the burden of proof, and the 

Commission had in essence required pipelines to make NGA section 4 filings to defend 

their current rates. The court rejected this argument, finding that the Commission had 

 100 18 CFR 284.7(d) (2011).
Docket Nos. RM18-11-000 and RP18-415-000 - 50 -

stated that it “will indeed shoulder the burden under [section] 5 of the NGA.”101 As 

pertinent here, the court expressly stated that: 

As to the Commission’s determination to extract 

information from pipelines relevant to the practical issues, 

we see no violation of the NGA. The Commission has 

authority under [section] 5 to order hearings to determine 

whether a given pipeline is in compliance with FERC’s rules, 

15 U.S.C. [] 717d(a), and under [section] 10 and [section]

14 to require pipelines to submit needed information for 

making its [section] 5 decisions, 15 U.S.C. [] 717i & 

717m(c).102

75. The Commission’s decision in this Final Rule to authorize pipelines to submit an 

Addendum with their FERC Form No. 501-G fits even more easily with our NGA 

sections 10 and 14 information collection authority than Order No. 637’s directive, 

affirmed in INGAA, that pipelines file pro forma tariff sheets showing how they 

intended to comply with the new segmentation regulation or explain why they should be 

exempted from that requirement. A pipeline’s filing of an Addendum to the FERC Form 

No. 501-G is voluntary, unlike Order No. 637’s mandatory requirement for each pipeline 

to state in its compliance proceeding how it believed shippers on its system should be 

permitted to segment their capacity in light of the operational requirements of their 

 101 INGAA, 285 F.3d at 38.

102 Id. (emphasis added).
Docket Nos. RM18-11-000 and RP18-415-000 - 51 -

systems and to propose specific tariff language implementing the pipeline’s proposed 

segmentation plan.103 

76. Moreover, in this Final Rule, unlike in Order No. 637, we have not yet initiated 

any investigation of a pipeline’s rates under NGA section 5. The Commission will 

review each pipeline’s FERC Form No. 501-G and Addendum not to set rates (absent a 

voluntary limited NGA section 4 filing), but to determine whether to exercise our 

discretion to initiate a rate investigation under NGA section 5. If we decide based on the 

information in the One-time Report to initiate a section 5 investigation, we will, as in the 

Order No. 637 compliance filings addressed in INGAA, “shoulder the burden under 

[section] 5 of the NGA.” We discuss further details of the procedures to be used in 

addressing the pipeline One-time Reports below.

2. Burden of Proof

a. Comments

77. Several commenters request confirmation that filing the FERC Form No. 501-G 

will not affect the burden of proof in future NGA section 4 or 5 rate proceedings, be used 

as evidence against or a concession by the pipeline, limit the pipeline’s ability to take

contrary positions in the future, or otherwise constitute estoppel.104 Commenters note 

 103 See, e.g., Columbia Gas Transmission Corp., 100 FERC ¶ 61,084, at PP 12-14 

(2002), in which the pipeline described how its segmentation proposal complied with 

Order No. 637 in light of the operational characteristics of its system.

104 EQT Midstream Comments at 20; Spectra Comments at 11-12; Tallgrass 

Pipelines Comments at 23-24; TransCanada Comments at 16.
Docket Nos. RM18-11-000 and RP18-415-000 - 52 -

that the Commission is collecting this information under its NGA sections 10 and 14 

authority, not its NGA section 4 or 5 authority. Commenters also argue that, because the 

FERC Form No. 501-G “hard-wires” certain components of a pipeline’s actual cost of 

service, such information would be inaccurate if used in a general ratemaking 

proceeding.105

b. Discussion

78. We clarify that statements in a FERC Form No. 501-G will constitute a valid form 

of evidence, as noted below, but will not otherwise bind or estop a pipeline in future 

proceedings. Most obviously, if a pipeline elects Option 1, the special limited NGA 

section 4 rate proceeding based upon the FERC Form No. 501-G, the One-time Report, 

including any adjustments the pipeline proposes, will constitute a major part of its case in 

chief.106 We also clarify that the FERC Form No. 501-G can be used as evidence to the 

exact same extent that any other Commission form can be used as evidence. A pipeline 

will be responsible for the truthfulness of statements it makes in the One-time Report, but 

those statements must be evaluated in context, representing a necessarily incomplete 

picture of the company, under the constraints that are inherent in any one-size-fits-all 

form. 

79. Although the Commission and other stakeholders will use information in the 

FERC Form No. 501-G, together with any other information provided by the pipelines 

 105 Spectra Comments at 12.

106 See NOPR, FERC Stats. & Regs. ¶ 32,725 at PP 43-44.
Docket Nos. RM18-11-000 and RP18-415-000 - 53 -

and commenters, in deciding whether to initiate a section 5 proceeding to further 

investigate the justness and reasonableness of the pipeline’s rates, the Commission or 

complainant will still bear the burden of proof in section 5 proceedings. Furthermore, the 

pipeline will be free to argue that the information it provided in the FERC Form No. 501-

G is unrepresentative of its true cost of service; those statements will not otherwise limit 

or estop the pipeline in future proceedings.

3. Docketing and Comments

80. The Commission proposed to assign each pipeline’s FERC Form No. 501-G filing 

an RP docket number and to notice the filing providing for interventions and protests. 

Based on the information in that form, together with any statement filed with the form 

and comments by intervenors, the Commission stated that it will consider whether to 

initiate an investigation under NGA section 5 of those pipelines that have not filed a 

limited NGA section 4 rate reduction filing or committed to file a general NGA section 4 

rate case.107 The Commission also stated that, if the pipeline makes a limited NGA 

section 4 filing to reduce its rates to reflect the reduced income taxes in the Tax Cuts and 

Jobs Act, the Commission would assign the limited section 4 filing a separate docket 

number.108

 107 Id. P 29.

108 Id. P 64.
Docket Nos. RM18-11-000 and RP18-415-000 - 54 -

a. Comments

81. INGAA, Boardwalk, Williams, Spectra, Southern Star, and EQT Midstream argue 

that the Commission should eliminate the NOPR’s proposal to assign each pipeline’s 

FERC Form No. 501-G filing an RP docket number. The Commission, they continue, 

does not assign docket numbers to FERC Form No. 2 and other similar informational 

filings, nor does it subject these filings to intervention and protest. They further argue 

that the NOPR provides no basis for modifying this practice solely for the FERC Form 

No. 501-G reports, and there is no statutory authorization for treating a FERC Form 

No. 501-G submission as a rate filing pursuant to NGA sections 4 or 5.

82. These commenters also object to the Commission’s proposal to formally notice 

and permit shippers to intervene and protest the filings. Boardwalk believes that the 

NOPR offered no basis for allowing protests to FERC Form No. 501-G filings. INGAA, 

Boardwalk, and Spectra state that this proposal ignores that the submission of FERC 

Form No. 501-G is not a voluntary rate filing by the pipeline subject to the Commission’s 

approval pursuant to NGA section 4, nor is the FERC Form No. 501-G submission a 

response to Commission action under NGA section 5. They argue that the NOPR’s 

proposal to allow protests to the FERC Form No. 501-G risks upsetting these 

fundamental requirements of the NGA, because the NOPR appears to contemplate that 

the dockets created for the informational FERC Form No. 501-G submission could be 

turned into rate proceedings without meeting the statutory standards of NGA sections 4 

or 5. Thus, INGAA and Southern Star continue, pipelines will necessarily respond to any 

protest, converting an informational filing into a de facto rate filing. Southern Star 
Docket Nos. RM18-11-000 and RP18-415-000 - 55 -

concludes by stating that the Commission should treat the FERC Form No. 501-G filing 

similar to a FERC Form No. 2 filing and not permit intervention and comments. 

83. These parties also assert that the proposal to allow interventions and protests of 

FERC Form No. 501-G filings is unnecessary and duplicative. INGAA, Boardwalk, and 

EQT Midstream argue that shippers can use FERC Form No. 501-G as a tool to assist 

their determination of whether to initiate NGA section 5 rate cases requesting reductions 

in pipelines’ rates, in a separate proceeding. INGAA and Spectra also speculate that the 

Commission may be inviting duplicative and confusing efforts if pipelines subsequently 

file an actual rate proceeding. Similarly, Williams urges the Commission to not allow 

interventions and protests to the pipeline’s filing of the report itself. Williams argues that 

foreclosing comments to the FERC Form No. 501-G would not leave shippers without a 

forum for stating their views on a pipeline’s FERC Form No. 501-G filings. 

b. Discussion 

84. The Commission adopts the NOPR proposal to require pipelines to file FERC 

Form No. 501-G through eTariff,

109 assign each filing a separate RP root docket number, 

and notice the filing for interventions, comments, and protests. This method of 

processing the FERC Form No. 501-G does not convert the form into an NGA section 4 

filing, nor do the results of FERC Form No. 501-G constitute a finding that the filer’s 

 109 The Commission established eTariff Type of Filing Code (ToFC) 1430 for 

FERC Form No. 501-G filings.
Docket Nos. RM18-11-000 and RP18-415-000 - 56 -

rates are no longer just and reasonable or establish new just and reasonable rates pursuant 

to NGA section 5.

85. Contrary to some commenters’ concerns, there is no NGA-required relationship 

between the assignment of a particular docket prefix and a particular provision of the 

statute. Docketing is a Commission administrative tool used to control workflow. Under 

NGA section 16, the Commission has the general statutory authority “to perform any and 

all acts, and to prescribe, issue, make, amend and rescind such orders, rules and 

regulations as it may find necessary or appropriate to carry out the provisions of this 

act.”110 Docketing FERC Form No. 501-G filings is an administrative function which 

creates no presumption that the filing is pursuant to NGA sections 4 or 5. 

86. The commenters also argue that the proposed notice and opportunity for others to 

comment on the FERC Form No. 501-G filings is without precedent, and converts the 

filing of a financial report into a de facto NGA section 4 or 5 proceeding. 

87. The proposed FERC Form No. 501-G, together with any comments and protests,

is intended to assist the Commission in determining whether to initiate an investigation 

under NGA section 5 as to whether the subject jurisdictional natural gas pipeline may be 

 110 Such broad grants of authority have been held “not restricted to procedural 

minutiae, and [to] ... authorize means of regulation not spelled out in detail, provided the 

agency’s action conforms with the purposes and policies of Congress and does not 

contravene any terms of the Act.” Mesa Petroleum Co. v. F.P.C., 441 F.2d 182, 187 (5th 

Cir. 1971) (citing Niagara Mohawk Power Corp. v. F.P.C., 379 F.2d 158). See also 

Public Service Comm’n of State of N.Y. v. F.P.C., 327 F.2d 893, 897 (D.C. Cir. 1964). 

(NGA Section 16 provides a basis for the Commission to cope with unforeseen problems, 

and is not confined to procedural regulations, but is a broad grant of authority).
Docket Nos. RM18-11-000 and RP18-415-000 - 57 -

collecting unjust and unreasonable rates in light of the recent reduction in the corporate 

income tax rate and change in the Commission’s income tax allowance policies. Thus, 

the filing of the FERC Form No. 501-G does not itself initiate an NGA section 5 

investigation, but rather gives all parties an opportunity to advise the Commission on 

whether it should initiate such an investigation.

88. The pipeline’s filing of the FERC Form No. 501-G, together with any Addendum 

proposing adjustments to reflect updated information, gives the pipeline an opportunity to 

explain why no further investigation is needed. Noticing the pipeline’s filing for 

comment and protest allows other interested parties to state their views as to whether an 

investigation is needed. As the commenters have noted, the Commission cannot simply 

require a pipeline to reduce its rates consistent with a known reduction in a single cost 

component of a cost-based rate. The Commission must look at other factors, including 

whether the pipeline is over recovering its overall cost of service and the applicability of 

any settlement rate moratorium. These other factors are not limited to those of interest to 

pipelines. Shippers and customers pay these cost-based rates and, for some pipelines, are 

parties to rate settlements. These parties also have an interest in whether the currently 

effective rates are no longer just and reasonable. The Commission believes allowing the 

parties to file comments will create a more complete record. That record will permit the 

Commission to better evaluate the pipelines’ FERC Form No. 501-G filings and any 

additional statements or material that pipelines may file in determining whether to 

exercise its discretion to initiate an investigation of the pipeline’s rates under NGA 

section 5.
Docket Nos. RM18-11-000 and RP18-415-000 - 58 -

89. If the Commission does decide to initiate an NGA section 5 investigation, it will 

issue an order establishing a proceeding for that purpose, similar to prior orders 

establishing NGA section 5 investigations of natural gas pipeline rates.111 Thus, the 

Commission will require the pipeline to submit a cost and revenue study based on cost 

and revenue information for the latest 12-month period available. That cost and revenue 

study, not the FERC Form No. 501-G based on 2017 FERC Form No. 2 or 2-A data, will 

provide the evidentiary starting point for the actual NGA section 5 rate investigation. In 

short, the FERC Form No. 501-G, together with comments and protests thereto, will 

assist the Commission in evaluating whether to initiate a section 5 investigation, but will 

not be the record basis for any actual order requiring the pipeline to modify its rates 

pursuant to NGA section 5. A subsequent hearing ordered by the Commission will be 

necessary to develop the record on which any NGA section 5 action would be taken. The 

Commission agrees with the parties that such determinations must be performed on a 

pipeline-by-pipeline basis. 

90. The second purpose of the FERC Form No. 501-G, together with any adjustments 

the pipeline may propose, is to serve as the evidentiary support for any limited NGA 

section 4 filing the pipeline may propose pursuant to this rule to reduce its rates to reflect 

the reduced income taxes under the Tax Cuts and Jobs Act and/or the United Airlines 

Issuances. As proposed by the NOPR, the Commission will assign a separate docket 

 111 See cases cited supra note 22.
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number to any such limited NGA section 4 filing,112 and thus the limited NGA section 4 

filing, and any protests thereto, will be considered in a separate proceeding from the 

docket established for the FERC Form No. 501-G itself.

91. Therefore, the proposed process adopted here, contrary to the concerns of these 

commenters, is not a requirement for the pipelines to file an NGA section 4 rate case, nor 

are the results from FERC Form No. 501-G a finding that the current rate is not just and 

reasonable or the specification of a new just and reasonable rate pursuant to NGA 

section 5. However, the process the Commission is adopting is intended to help identify 

which pipelines deserve closer attention. 

92. Some commenters believe that permitting parties to comment on pipelines’ FERC

Form No. 501-G reports may be duplicative. Notwithstanding this possibility, we believe 

there is value in providing interested parties an opportunity to comment on a pipeline’s 

FERC Form No. 501-G report, even if they might raise similar arguments later, should 

the Commission decide to initiate additional proceedings. 

4. Rights of Intervenors

93. In the NOPR, the Commission stated:

The Commission will assign each pipeline’s filing of the 

FERC Form No. 501-G an RP docket number and notice the 

filing providing for interventions and protests. Based on the 

information in that form, together with any statement filed 

 112 See NOPR, FERC Stats. & Regs. ¶ 32,725 at P 64 (establishing an eTariff 

ToFC 1440 for the limited NGA section 4 filings, separate from the ToFC for the FERC 

Form No. 501-G filings). These different filing codes will produce separate root docket 

numbers for the two types of filing.
Docket Nos. RM18-11-000 and RP18-415-000 - 60 -

with the form and comments by intervenors, the Commission 

will consider whether to initiate an investigation under NGA 

section 5 of those pipelines that have not filed a limited NGA 

section 4 rate reduction filing or committed to file a general 

NGA section 4 rate case.113 

a. Comments

94. In addition to the comments discussed above, LDC Coalition raises several 

questions about the role of parties intervening in One-time Report dockets. In particular, 

in the event that a party has questions or concerns about a given One-time Report, LDC 

Coalition asks:

Will Commission Staff have access to the deficiency notice process?

Does the Commission contemplate setting One-time Report 

proceedings for technical conference, hearing, and/or settlement 

judge proceedings? 

Will parties have the ability to seek discovery from the pipeline on 

its FERC Form No. 501-G inputs and calculations even before the 

Commission sets a One-time Report for technical conference, 

hearing, or settlement judge procedures?

Will the Commission issue an Order in response to each FERC Form 

No. 501-G filing either closing out the proceeding or continuing the 

review in that or another docket?

If the Commission intends to issue an order in each docket, will it 

state an expected timeline for doing so to provide customers 

certainty about the process? 

What actions will the Commission take if a pipeline does not submit 

an NGA section 4 filing or pre-filing settlement by the proposed 

deadline of December 31, 2018? 

What options do the Commission and pipeline customers have if a 

pipeline fails to timely submit a FERC Form No. 501-G or does not 

 113 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 29.
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strictly follow Commission guidance in completing a submitted 

form?114

b. Discussion

95. We clarify that Subpart B of the Commission’s Rules of Practice and Procedure115

does not apply to the various reports required by Part 260 of the Commission’s 

regulations. Rule 201 provides that Subpart B of the Rules of Practice and Procedure 

apply “to any pleading, tariff or rate filing, notice of tariff or rate examination, order to 

show cause, intervention, or summary disposition;”116 Part 260 reports fall into none of 

those categories. Therefore, the Commission clarifies the procedures to be used in 

noticing pipelines’ filings of the FERC Form No. 501-G for intervention, protest, and 

comment, as well as addressing LDC Coalition’s other procedural questions. 

96. First, the Commission is revising the Implementation Guide for the FERC Form 

No. 501-G to provide that the Secretary will issue a notice of each pipeline’s filing of its 

FERC Form No. 501-G, consistent with section 385.210 of the Commission’s Rules of 

Practice and Procedure.117 Unless the notice provides otherwise, interventions, protests,

and comments will be due not later than 12 days after the filing of the subject FERC 

Form No. 501-G. This will mean that such interventions, protests, and comments will be 

due on the same day as interventions, protests, and comments are due on any limited 

 114 LDC Coalition Comments at 12.

115 18 CFR Part 385.

116 18 CFR 385.201.

117 18 CFR 385.210.
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NGA section 4 filing accompanying the FERC Form No. 501-G, as provided by 

section 154.210 of the Commission’s Rules of Practice and Procedure. As revised, the 

Implementation Guide also states that interventions will be governed by section 385.214 

of the Commission’s Rules of Practice and Procedure,118 and protests will be governed by 

section 385.211.

119

97. Proceeding to LDC Coalition’s list of questions, we clarify that Commission staff 

may issue data requests to pipelines if it identifies problems with their FERC Form 

No. 501-G.120 However, the Commission will not set One-time Report proceedings for 

technical conference, hearing, and/or settlement judge proceedings, nor will it allow 

discovery; such actions would only be appropriate in the context of an NGA section 4 or 

5 rate proceeding. The purpose of publicly docketing the One-time Reports is not to 

conduct a rate proceeding, but rather to allow for public discussion of whether the 

Commission should exercise its discretion to initiate an NGA section 5 investigation of 

the subject pipeline’s existing rates because of the Tax Cuts and Jobs Act’s reduction in 

income taxes or the United Airlines Issuances. 

 118 18 CFR 385.214.

119 18 CFR 385.211.

120 See 18 CFR 375.307(b)(3)(ii) (delegating to the Office of Energy Market 

Regulation the authority to “Issue and sign requests for additional information regarding 

applications, filings, reports and data processed by the Office of Energy Market 

Regulation.”).
Docket Nos. RM18-11-000 and RP18-415-000 - 63 -

98. If the Commission decides to initiate a section 5 investigation, it will, as described 

above, issue an order establishing a hearing under NGA section 5. If the Commission 

determines that the information in a pipeline’s FERC Form No. 501-G does not justify 

initiating such an NGA section 5 proceeding, the Commission will issue a notice 

accepting the pipeline’s One-time Report. That notice shall close the One-time Report 

proceeding. But the act of acceptance shall only constitute assurance that the 

Commission accepts the report, and does not constitute a statement or action on the 

pipeline’s rates, nor does it foreclose the Commission from initiating a future NGA 

section 5 investigation based upon new information such as the pipeline’s future FERC 

Form No. 2 or 2-A reports or for other reasons. The Commission will not establish a 

formal deadline for acting on each One-time Report, but will act as promptly as possible 

on all filings in order to promote rate certainty for pipelines and customers. 

99. If a pipeline refuses to promptly submit a One-time Report, or to correct a patently 

erroneous or incomplete One-time Report, the Commission could consider the pipeline to 

be in violation of its reporting obligation.

121 Likewise, if a pipeline commits to submit an 

NGA section 4 filing or pre-filing settlement by the proposed deadline of December 31, 

2018, but fails to do so, the Commission could consider the pipeline to be in violation of 

its reporting obligation.

 121 15 U.S.C. 717t.
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5. Use of 10.55 Percent Indicative Return on Equity 

100. A cost and revenue study requires an indicative return on equity (ROE). In the 

proposed FERC Form No. 501-G, the Commission used, consistent with Commission 

practice, the last litigated ROE applicable to situations involving existing plant.122 

The last litigated ROE was in El Paso, wherein the Commission adopted a ROE of 

10.55 percent.123 

a. Comments

101. The Pipeline Commenters124 argue that use of an indicative ROE of 10.55 percent 

in the FERC Form No. 501-G is arbitrary and capricious. They note that the El Paso 

ROE is based on test period data that is now about seven years old, that the Commission 

has not shown that the financial data underlying that proceeding is currently 

representative for any pipeline, let alone for all pipelines, and the indicative ROE is 

artificially low. Further, they contend that El Paso is not final as it has not been reviewed 

by the Court of Appeals. Citing previous Commission NGA section 5 show cause 

proceedings, Kinder Morgan argues that the Commission has not previously required 

pipelines to propose a ROE. The Pipeline Commenters request that the Commission 

 122 See, e.g., Southern Natural Gas Co. L.L.C., 139 FERC ¶ 61,237, at P 154 

(2012); Alliance Pipeline L.P., 140 FERC ¶ 61,212, at P 20 (2012); Northern Natural 

Gas Co., 119 FERC ¶ 61,035, at P 37 (2007).

123 El Paso Natural Gas Co., Opinion No. 528, 145 FERC ¶ 61,040, at P 642 

(2013), reh’g denied, Opinion No. 528-A, 154 FERC ¶ 61,120 (2016) (El Paso).

124 INGAA, Southern Star, Boardwalk, Dominion Energy, Williams, Tallgrass 

Pipelines, TransCanada, Enable Interstate Pipelines, Kinder Morgan, and Spectra.
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clarify that the 10.55 percent ROE is to be used only for the purposes of completing 

FERC Form No. 501-G, and is not an indicative ROE or reflective of the ROE that would 

be determined in a general rate case proceeding. Dominion Energy, Spectra and 

Tallgrass request that pipelines be permitted to use their own ROEs. 

102. Enable Interstate Pipelines argue that the Commission should permit ROEs 

derived during a rate proceeding or established pursuant to approved settlements that 

were used to set their current rates, or rely upon the methodology used to set such ROEs. 

Enable Interstate Pipelines also argue that if pass-through entities are not permitted to 

report an income tax allowance on the FERC Form No. 501-G, the Commission must 

increase the allowable ROE for such pipelines to allow them to report a higher ROE than 

corporate pipelines on the form. Alternatively, Enable Interstate Pipelines argue that the 

Commission should adjust the ROE upwards by eliminating the reduction in long-term

growth rates for MLP pipelines.

b. Discussion

103. The Commission adopts the NOPR’s proposal to require that each pipeline’s 

FERC Form No. 501-G be completed using an indicative ROE of 10.55 percent, 

consistent with the ROE determined in El Paso, the last rate case where that issue was 

fully litigated. The One-time Report is an informational filing required pursuant to NGA 

sections 10 and 14 that serves two purposes: (1) to help determine whether to initiate 

NGA section 5 investigations of interstate natural gas pipelines’ rates and (2) to support 

any limited NGA section 4 filings pipelines may choose to make to reduce their rates to 

reflect the Tax Cuts and Jobs Act or the United Airlines Issuances. 
Docket Nos. RM18-11-000 and RP18-415-000 - 66 -

104. When used for the first purpose, the FERC Form No. 501-G is intended to provide 

a rough estimate of the pipeline’s return on equity before and after the Tax Cuts and Jobs 

Act or the United Airlines Issuances. The data in the FERC Form No. 501-G, including 

the indicative ROE, will not be used to actually establish rates in any NGA section 5 

investigation that the Commission may initiate. Rather, any rates determined in an NGA 

section 5 investigation, including ROE, will be based on the record developed in any 

hearing established by the Commission, and in such a hearing, the Commission will have 

the burden of persuasion under NGA section 5 on all issues, including ROE.

105. In addition, although the Commission recognizes that the 10.55 percent ROE 

determined in El Paso was based on financial data from 2011, no commenter has 

provided any updated ROE analysis using current financial data that the Commission 

could use in the FERC Form No. 501-G in place of the El Paso ROE. There is thus 

nothing in the comments to show that an updated ROE analysis would produce a 

significantly different ROE than that approved in El Paso. Instead, pipeline commenters 

request that they be permitted to use their own ROEs or ROEs derived in a rate 

proceeding or established pursuant to approved settlements. However, the last rate cases 

of many pipelines occurred as long ago as, or even before, the El Paso rate case. 

Moreover, many settlements are “black box” settlements that do not have a ROE. In 

these circumstances, the Commission finds that using the El Paso 10.55 percent ROE as 

the indicative ROE in all pipelines’ FERC Form No. 501-G is preferable to pipelines 

using a variety of ROEs, which they claim represent their currently approved ROEs, but 

which in almost all cases were not fully litigated, in contrast to the El Paso ROE, and 
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may be as old or older than the 10.55 percent El Paso ROE. However, if a pipeline 

believes that the 10.55 percent El Paso ROE does not represent a reasonable ROE for its 

system in light of its current circumstances, the pipeline may file an alternative ROE, 

together with support for that ROE as described below, as part of its Addendum to the 

required FERC Form No. 501-G. 

106. The FERC Form No. 501-G does serve a ratemaking purpose in the narrow 

situation when it is used as support for the limited NGA section 4 filing this Final Rule 

authorizes a pipeline to voluntarily make to reduce its rates to reflect the Tax Cuts and 

Jobs Act or the United Airlines Issuances. Our requirement that pipelines use the El Paso

10.55 percent ROE in filling out the FERC Form No. 501-G does not mean that they 

must use that ROE in a limited section 4 filing. As just described, the pipeline may 

submit an Addendum with its FERC Form No. 501-G setting forth an alternative ROE 

and use that ROE in calculating its proposed percentage rate reduction in its limited NGA 

section 4 rate filing. When a pipeline proposes such an alternative ROE in a limited 

section 4 rate filing, the Commission would expect the pipeline to provide full support for 

its proposed ROE, including a Discounted Cash Flow (DCF) analysis of a proxy group 

consistent with Commission policy. Such support is not necessary if the pipeline 

proposes to reduce its rates by a percentage calculated consistent with the FERC Form 

No. 501-G, without any Addendum.

6. Use of Stated Capital Structure

107. In the NOPR, the Commission stated that the established policy in rate cases is 

that a company may use its actual capital structure only if it “(1) issues its own debt 
Docket Nos. RM18-11-000 and RP18-415-000 - 68 -

without guarantees, (2) has its own bond rating, and (3) has a capital structure within the 

range of capital structures approved by the Commission.”125 Where these requirements 

are not met, the Commission will use the consolidated capital structure of the parent 

company or a hypothetical capital structure. The NOPR proposed that the One-time 

Report would follow this policy: 

The proposed form requests the respondent’s FERC Form 

Nos. 2 or 2-A equity related balance sheet items. However, if 

that data does not satisfy the three-part test of Opinion No. 

414, et al., the form provides alternative data entries to reflect 

parent or hypothetical capital structures consistent with 

Opinion No. 414, et al.126

108. If neither the pipeline’s own capital structure nor its parent’s capital structure 

satisfies the Commission’s policy, the proposed FERC Form No. 501-G requires use of a 

50 percent equity, 50 percent debt capital structure, with an implied debt rate of five 

percent.

a. Comments

109. Several pipeline commenters argue that pipelines should be permitted to use their 

capital structure as reported on the FERC Form No. 2 or 2-A, even if that capital structure 

 125 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 35 (citing Transcontinental Gas 

Pipe Line Corp., Opinion No. 414-A, 84 FERC ¶ 61,084, at 61,413-61,415, reh’g denied, 

Opinion No. 414-B, 85 FERC ¶ 61,323 (1998), petition for review denied sub nom. N.C. 

Utils. Comm’n v. FERC, D.C. Cir. Case No. 99-1037 (Feb. 7, 2000) (per curiam)).

126 Id. P 35.
Docket Nos. RM18-11-000 and RP18-415-000 - 69 -

does not comply with the Opinion No. 414, et al., policy.127 Boardwalk and INGAA 

argue that using a hypothetical capital structure attempts to shift to the pipeline the 

burden of justifying its own capital structure.128 Boardwalk argues that requiring 

different data on the FERC Form No. 501-G than on the FERC Form No. 2 

“impermissibly blurs the distinction between NGA sections 4 and 5.”129 They also argue 

that the hypothetical capital structure that FERC Form No. 501-G requires when neither 

the pipeline’s nor its parent’s capital structure satisfies Commission policy is financially 

unrealistic, and that companies that attempt to actually implement them would harm their 

credit rating and financial viability. Enable Interstate Pipelines argue that the NOPR 

proposes only three possible choices of capital structure, but that ratemaking precedent 

allows other possibilities, such as using an intermediate subsidiary’s structure. Enable 

Interstate Pipelines also argue that the FERC Form No. 501-G default 50/50 debt/equity 

ratio is inconsistent with ratemaking precedent concerning hypothetical capital structures, 

which they state uses the average capitalization of a proxy group to develop a 

hypothetical capital structure.130

 127 Boardwalk Comments at 27-29; Enable Interstate Pipelines Comments at 22; 

INGAA Comments at 36-38; Kinder Morgan Comments at 23-26.

128 Boardwalk Comments at 28; INGAA Comments at 36.

129 Boardwalk Comments at 29.

130 Enable Interstate Pipelines Comments at 24.
Docket Nos. RM18-11-000 and RP18-415-000 - 70 -

110. Kinder Morgan notes that page 4 of the proposed FERC Form No. 501-G asks the 

respondent, “does the Capital Structure and the Long-Term Debt from the cited source 

meet the requirements of Opinion No. 414, et al.?” Kinder Morgan argues that this 

question impermissibly goes beyond a request for information, and instead would compel 

the respondent to provide a legal opinion. Kinder Morgan argues sections 10(a) and 

14(a) of the NGA do not permit the Commission to solicit legal positions of a pipeline 

rather than information.131 Kinder Morgan notes that the Commission has not asked this 

question or similar questions in its recent NGA section 5 show cause orders. Kinder 

Morgan argues that it is especially inconsistent to compel a respondent to take a legal 

position given that page 4 of the proposed FERC Form No. 501-G also compels certain 

respondents to report a hypothetical 50/50 debt/equity capital structure rather than 

choosing other lawful options, potentially prejudicing the pipeline in the limited section 4 

filing under Option 1.

b. Discussion

111. We generally adopt the NOPR proposal regarding how capital structure must be 

reported on FERC Form No. 501-G, but make several changes to address concerns raised 

by the commenters. As discussed above, the One-time Report is an informational filing 

required pursuant to NGA sections 10 and 14 that serves two purposes: (1) to help

determine whether to initiate NGA section 5 investigations of interstate natural gas 

pipelines’ rates and (2) as support for limited NGA section 4 filings pipelines may choose 

 131 Kinder Morgan Comments at 24.
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to make to reduce their rates to reflect the Tax Cuts and Jobs Act or the United Airlines 

Issuances. When used for the first purpose, the FERC Form No. 501-G is intended to 

provide a rough estimate of the pipeline’s return on equity before and after the Tax Cuts 

and Jobs Act or the United Airlines Issuances. Such an estimate will be one factor the 

Commission will refer to in deciding whether to exercise its discretion to initiate an NGA 

section 5 rate investigation. For that purpose, the Commission desires to design the form 

in a manner that will produce an estimated return on equity that is as accurate as possible. 

Therefore, the Commission seeks to use a capital structure that is consistent with 

Commission policy. For that reason, the Commission finds it appropriate for the FERC 

Form No. 501-G to use a different capital structure than that used in the pipeline’s FERC 

Form No. 2 or 2-A, when it appears that the capital structure reported in the FERC Form 

No. 2 or 2-A does not comply with Commission policy.132 Thus, as described below, the 

form will ask a series of factual questions, designed to result in a capital structure 

consistent with Commission policy. However, the form will not be used to actually 

establish rates in any NGA section 5 investigation that the Commission may initiate. 

 132 INGAA argues that, in order to use a different capital structure than that used 

in the FERC Form No. 2 or 2-A, “the Commission must first show that the pipeline’s 

submitted data is not just and reasonable.” INGAA Comments at 28. However, data 

cannot be just or unjust, which is why NGA section 10 instead speaks of “specific 

answers,” “full information,” and “adequate provision.” The Commission is not 

modifying any rates pursuant to NGA section 5 in the FERC Form No. 501-G, but simply 

seeking to estimate the pipeline’s current return on equity for purposes of deciding 

whether to initiate a rate investigation pursuant to NGA section 5.
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Rather, any rates determined in a section 5 investigation, including the capital structure, 

will be based on the record developed in the hearing.

112. The Commission has used a similar approach to capital structure in its analysis of 

FERC Form No. 2 or 2-A data in recent years for purposes of deciding whether to initiate 

NGA section 5 rate investigations. Thus, when a pipeline has reported a capital structure 

in its FERC Form No. 2 or 2-A that appeared not to comply with the Commission’s 

capital structure policy, the Commission has used a hypothetical capital structure to 

determine the return on equity shown by the pipeline’s FERC Form No. 2 or 2-A cost and 

revenue data. For example, in its 2011 order establishing a hearing under NGA section 5 

concerning the rates of Bear Creek Storage Company, L.L.C. (Bear Creek), the 

Commission stated that, because Bear Creek had used a 100 percent equity capital 

structure in its FERC Form No. 2, the Commission had used a hypothetical capital 

structure to estimate that Bear Creek’s return on equity using Bear Creek’s FERC Form 

No. 2 cost and revenue information was over 20 percent. However, the Commission was 

careful to state in its hearing order that “in this order, we make no finding as to what 

should constitute a just and reasonable capital structure for Bear Creek. That is among 

the issues set for hearing in this order and should be decided consistent with the 

Commission capital structure policies.”133 The Commission intends to take a similar 

 133 Bear Creek Storage Co., L.L.C., 137 FERC ¶ 61,134, at P 8 n.6 (2011). See 

also Dominion Energy Overthrust Pipeline, LLC, 162 FERC ¶ 61,218, at Appendix, 

n.1 & 2 (2018); Midwestern Gas Transmission Co., 162 FERC ¶ 61,219, at Appendix, 

n.1 & 2 (2018); Natural Gas Pipeline Co. of America LLC, 158 FERC ¶ 61,044, at 

Appendix, n.1 & 2 (2017); Wyoming Interstate Co., L.L.C., 158 FERC ¶ 61,040, at 
Docket Nos. RM18-11-000 and RP18-415-000 - 73 -

approach with respect to any NGA section 5 rate investigations it initiates based on the 

return on equity estimated in the FERC Form No. 501-G. The hearing order will make 

no finding as to what would constitute a just and reasonable capital structure for the 

pipeline in question, regardless of what type capital structure was required to be used in 

the FERC Form No. 501-G. The capital structure issue will be included in the hearing, 

and the Commission will have the burden of persuasion under NGA section 5 to support 

any rate reduction, including any capital structure used to support the rate reduction. 

113. The Commission recognizes that when the FERC Form No. 501-G is used for its 

second purpose – as support for the percentage rate reduction proposed in a pipeline’s 

limited NGA section 4 rate case filing – the FERC Form No. 501-G does serve a 

ratemaking purpose. However, as discussed above, pipelines are permitted to submit an 

Addendum to their FERC Form No. 501-G if they believe that the form inaccurately 

represents their financial situation. A pipeline may propose to use the percentage cost of 

service reduction calculated in its Addendum in its limited NGA section 4 rate filing. 

Thus, a pipeline may propose to use a capital structure other than that used in its FERC 

Form No. 501-G in its limited NGA section 4 rate filing. For example, Boardwalk 

provides comments on its specific financial situation; although this information is not 

relevant to developing a form for the entire natural gas pipeline industry, it may prove 

relevant in evaluating whether further procedures will be necessary to address the 

 

Appendix, n.1 & 2 (2017); Tuscarora Gas Transmission Co., 154 FERC ¶ 61,030, at 

Appendix, n.1 & 2 (2016); MIGC LLC, 137 FERC ¶ 61,135, at Appendix, n.3 (2011); 

ANR Storage Co., 137 FERC ¶ 61,136, at Appendix, n.2 (2011).
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consequences of the Tax Cuts and Jobs Act for Boardwalk’s pipelines, and we encourage 

Boardwalk to include such information when it submits its One-time Reports.

114. The Commission is making two changes to the treatment of capital structure in the 

FERC Form No. 501-G, as proposed in the NOPR. First, the Commission has modified 

page 4 of the proposed FERC Form No. 501-G in response to Kinder Morgan’s concerns 

that, as proposed, the form requires the pipelines to state an opinion as to whether the 

capital structure reported in their FERC Form No. 2 or 2-A complies with the 

Commission’s capital structure policies. Although the Commission does not concede the 

point that it lacks the authority under NGA section 10 or 14 to compel a pipeline to state 

whether it complies with an established policy, we recognize that such a requirement is 

unnecessary in order to achieve the goals of this rulemaking. Instead of asking the 

respondent its position with regard to whether its capital structure complies with Opinion 

No. 414-A, the form now includes a statement explaining how the Commission will use 

the respondent’s data to perform our own Opinion No. 414-A analysis. Page 4 of the 

proposed FERC Form No. 501-G now asks respondents a series of factual questions 

about its actual capital structure. The form will automatically select from the data 

provided to show the Commission’s default presumed capital structure under its Opinion 

No. 414-A analysis, but will not require the respondent to apply the Commission’s 

position as if it was the pipeline’s.

115. Second, as requested by Enable Interstate Pipelines, the Commission will modify 

the hypothetical capital structure used in the FERC Form No. 501-G, for those pipelines 

which the form considers ineligible to use their own or their parent’s capital structure. As 
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Enable Interstate Pipelines point out, in an NGA section 4 rate case in HIOS the 

Commission adopted a policy of basing a hypothetical capital structure on the average 

capital structure of the companies in the proxy group used for purposes of determining 

ROE. The Commission explained that “this assures a match between the financial risk 

inherent in the DCF analysis used to develop return on equity and the hypothetical capital 

structure.”134 The FERC Form No. 501-G uses the 10.55 percent ROE determined in 

El Paso. The average capital structure of the proxy group in that rate case was 

approximately 57 percent equity and 43 percent debt.135 Accordingly, the Commission is 

revising the FERC Form No. 501-G to use a hypothetical capital structure of 57 percent 

equity and 43 percent debt. This revision should also help address Boardwalk’s concern 

that the 50 percent equity/50 percent debt capital structure in the proposed FERC Form 

No. 501-G is financially unrealistic in today’s market conditions.

7. Accumulated Deferred Income Taxes

116. Accumulated Deferred Income Taxes (ADIT) balances are accumulated on the 

regulated books and records of interstate natural gas pipelines based on the requirements 

 134 High Island Offshore System, L.L.C., 110 FERC ¶ 61,043, at P 147 (2005).

135 The Commission notes that this capital structure is also consistent with the 

capital structures the Commission typically approves in litigated rate cases for pipelines 

that do issue their own publically traded debt. Transok, Inc., 70 FERC ¶ 61,177, 

at 61,554 (1995) (58.49 percent equity ratio); Panhandle Eastern Pipe Line Co., 

Opinion No. 395, 71 FERC ¶ 61,228, at 61,827 (1996) (61.79 percent equity ratio); 

Panhandle Eastern Pipe Line Co., Opinion No. 404, 74 FERC ¶ 61,109, at 61,359 (1996) 

(59.97 percent equity ratio); Transcontinental Gas Pipe Line Corp., Opinion No. 414-A,

84 FERC ¶ 61,084, at 61,419 (1998) (57.58 percent equity ratio).
Docket Nos. RM18-11-000 and RP18-415-000 - 76 -

of the Commission’s Uniform System of Accounts.136 ADIT balances arise from 

differences between the method of computing taxable income for reporting to the IRS 

and the method of computing income for regulatory accounting purposes. The 

Commission’s regulatory accounting requirements then serve to inform the development 

of a natural gas pipeline’s rates, including the depreciation and ADIT ratemaking 

components. The most significant cause for differences between regulatory accounting 

and tax income is the use of straight-line depreciation rates for accounting and 

ratemaking purposes and the use of accelerated depreciation rates for federal income tax 

reporting purposes. As such, depreciation expense is higher for tax reporting purposes 

than that calculated for accounting and ratemaking purposes, resulting in higher taxes 

computed for accounting and ratemaking purposes than the taxes actually owed to the 

IRS authorities, in the early years of the property’s service life. This creates an ADIT 

liability. In later years, depreciation expense is lower for tax reporting purposes than that 

calculated for accounting and ratemaking purposes, resulting in lower taxes computed for 

accounting and ratemaking purposes than the taxes actually owed to the IRS and 

reductions to the ADIT liability. Ultimately, at the end of the property’s service life, the 

cumulative depreciation under either method are equal and the ADIT liability will be 

reduced to zero.

117. ADIT generally impacts regulated natural gas pipelines’ ratemaking either by 

decreasing rate base, in the case of an ADIT liability, or increasing rate base, in the case 

 136 18 CFR pt. 201.
Docket Nos. RM18-11-000 and RP18-415-000 - 77 -

of an ADIT asset. As a result of the reduction in the federal corporate income tax rate, 

taxes which have been previously deferred and reflected in ADIT will be owed to the IRS 

based on the 21 percent tax rate, rather than the 35 percent tax rate used to recognize 

the ADIT initially. The difference between the already recognized ADIT based on a 

35 percent tax rate and the recomputed deferred taxes, which will actually be owed to the 

IRS, at a 21 percent tax rate requires an adjustment to ADIT balances for the excess or 

deficiency. Notwithstanding potential future Commission action in the ADIT NOI on 

how to treat excess ADIT or deficiency ADIT, these balances and the associated 

amortization are essential in appropriately computing a total cost of service. 

118. As discussed, the Commission is implementing in this Final Rule FERC Form 

No. 501-G as a basis for determining whether a natural gas pipeline may be overrecovering its cost of service, and thus whether there should be further investigation 

pursuant to NGA section 5. FERC Form No. 501-G is designed to collect financial 

information to evaluate the impact of the Tax Cuts and Jobs Act and the United Airlines 

Issuances on the pipeline’s cost of service, and to inform stakeholders, the Commission, 

and all interested parties regarding the continued justness and reasonableness of the 

pipeline’s rates after the income tax reduction and elimination of MLP pipeline income 

tax allowances.137 

 137 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 26.
Docket Nos. RM18-11-000 and RP18-415-000 - 78 -

119. As proposed, the FERC Form No. 501-G would require pipelines to use calendar 

year 2017 ADIT balances as reported in their 2017 FERC Form Nos. 2 and 2-A in 

calculating rate base.138 The FERC Form No. 501-G would also require the pipelines to 

reduce their income tax allowance by an amount reflecting the first year’s amortization of 

excess ADIT resulting the reduced income tax rates under the Tax Cuts and Jobs Act.

139

a. Comments 

120. Several commenters filed similar comments on this issue.

140 They are concerned 

that FERC Form No. 501-G’s proposed treatment of ADIT and related amortization of 

excess ADIT is inextricably linked with the Commission’s Notice of Inquiry on the effect 

of the Tax Cuts and Jobs Act on Commission jurisdictional rates.141 These commenters 

insist that resolution of the requested areas of comment in the ADIT NOI on a number of 

issues regarding the details and effect of the appropriate treatment of ADIT as a result of 

the lower tax rates in the Tax Cuts and Jobs Act may impact the excess ADIT amounts 

that are entered in FERC Form No. 501-G, which will be filed with the Commission prior 

 138 See proposed FERC Form No. 501-G, page 2, lines 13-17. All references to 

FERC Form No. 501-G line numbers in this Final Rule are to the proposed form as 

contained in the NOPR. Certain line numbers have been modified in the final version of 

the form as discussed below.

139 See proposed FERC Form No. 501-G, page 1, line 31.

140 INGAA Comments at 22; Boardwalk Comments at 13-15; Spectra Comments 

at 7, 22; Kinder Morgan Comments at 28; National Fuel Comments at 4-6; Dominion 

Energy Comments at 3-4; EQT Midstream Comments at 8; Tallgrass Pipelines 

Comments at 7-8; Williams Comments at 9; Berkshire Hathaway Comments at 5; 

Southern Star Comments at 9.

141 ADIT NOI, 162 FERC ¶ 61,223.
Docket Nos. RM18-11-000 and RP18-415-000 - 79 -

to any ADIT NOI resolution. According to these commenters, excess ADIT amounts are 

entered on Lines 13-17 on Page 2 of FERC Form No. 501-G for purposes of calculating 

rate base, and that results in the annual amortization figure entered in Line 31 on page 1 

of the Form for purposes of calculating the tax allowance. These commenters note that 

the ADIT NOI seeks comments concerning potential adjustments to pipelines’ rate base 

relating to, and amortization of, excess or deficient ADIT; whether and how excess or 

deficient ADIT should be reflected in pipelines’ rates; and the treatment of excess ADIT 

associated with assets that pipelines sell or retire after the effective date of the Tax Cuts 

and Jobs Act. Without this guidance, they argue, pipelines will likely make individual 

judgments about the treatment of their ADIT balances, which will ultimately result in 

different inputs into their FERC Form No. 501-G from the final resolution. Thus, these 

commenters argue that the information would be highly varied and not comparable, 

which would hinder the Commission in evaluating pipelines’ rates. With the lack of 

clarity for these outstanding issues, these commenters contend that it will be nearly

impossible to choose from among the four options available. The commenters are 

concerned that the proposed information in FERC Form No. 501-G and related 

amortization in the indicative rate reduction will prejudge the outcome of the ADIT NOI

rulemaking. These commenters insist that, as required by the Administrative Procedure 

Act, these issues should be addressed through adequate notice and comment procedures. 

In addition to the uncertainty originating from the resolution in the ADIT NOI, Berkshire 

Hathaway notes that the Commission is not the only regulatory agency evaluating the 

impact of the Tax Cuts and Jobs Act. Berkshire Hathaway further notes that both the 
Docket Nos. RM18-11-000 and RP18-415-000 - 80 -

Securities Exchange Commission (SEC) and the Financial Accounting Standards Board

must set standards for financial reporting that address the reduction in the federal 

corporate income tax rate. Thus, Berkshire Hathaway states that although it has recorded 

the impacts of the Tax Cuts and Jobs Act in its FERC Form No. 2, it considers the 

amounts recorded, and the interpretations related to the financial reporting of bonus 

depreciation and regulatory liability amortization, to be provisional and subject to 

changes during the measurement period. Therefore, the commenters urge that the 

Commission consider the final resolution in the ADIT NOI proceeding before requiring 

the pipelines to file their FERC Form No. 501-G.

121. The Oklahoma AG believes that the NOPR does not include the effects of excess 

ADIT on the revenue requirements of interstate natural gas pipelines and does not agree 

with this approach. Instead, the Oklahoma AG believes that the most effective and 

efficient means for resolving excess ADIT for interstate natural gas pipelines would be to 

include the amortization of excess ADIT in the FERC Form No. 501-G rather than 

awaiting conclusion of the open-ended ADIT NOI process. 

122. Enable Interstate Pipelines, Spectra, and National Fuel argue that establishing a 

generic policy regarding the treatment of ADIT ignores the complexity of the issue. 

They argue that the level of ADIT attributed to an entity depends on where (among other 

things) that entity’s assets are in their depreciable lives (for tax purposes and for 

ratemaking purposes), what transactions the entity has engaged in in the past, what assets 

have been fully depreciated, and differences in timing between book depreciation and tax 

depreciation. National Fuel notes that because its fiscal year is not on a calendar year 
Docket Nos. RM18-11-000 and RP18-415-000 - 81 -

basis, the applicable federal tax rate for fiscal year 2018 will be a composite tax rate, not 

the 21 percent specified in FERC Form No. 501-G. National Fuel insists that requiring 

pipelines with non-calendar year bases to utilize a 21 percent federal tax rate will yield 

incorrect and invalid results. National Fuel notes that the Commission has approved 

differing rate treatments in its rate cases. Because of expected differences from the 

FERC Form No. 501-G assumptions, National Fuel requests that the Commission modify 

the form to allow flexibility in regards to the form’s inputs in order to ensure a 

calculation of valid results.

123. Spectra argues that FERC Form No. 501-G has erroneous built-in features that 

reduce rate base by the total regulatory liability reported on page 278 of the 2017 FERC 

Form No. 2. Spectra states that for many pipelines, a substantial portion of that

regulatory liability is related to deferred income taxes. Also, Spectra states that FERC 

Form No. 501-G requires a pipeline to reduce its cost of service by the annual 

amortization of the excess ADIT regulatory liability. According to Spectra, this reduces 

rates twice for the same regulatory liability. 

124. LDC Coalition notes that pipelines will have adjusted their ADIT balances to 

reflect the change in the federal corporate income tax rate by the time they make their 

FERC Form No. 501-G filing. LDC Coalition speculates that pipelines may use several 

alternatives to recalculate ADIT and then account for the excess ADIT. LDC Coalition 

states that although the pipeline may simply be transferring a previously booked item 

from its FERC Form No. 2 to the FERC Form No. 501-G, the Commission and 

customers reviewing the pipeline filing will have no transparency in how an adjustment 
Docket Nos. RM18-11-000 and RP18-415-000 - 82 -

potentially involving many millions of dollars was calculated. To obtain better 

transparency, LDC Coalition requests that the Commission require pipelines to file an 

accompanying spreadsheet that provides how they recalculated ADIT and excess ADIT 

balances. In addition, LDC Coalition requests that the Commission include within the 

scope of hearing issues whether a pipeline has properly calculated ADIT for purposes of 

its FERC Form No. 501-G and concurrent limited NGA section 4 rate reduction filing 

pursuant to proposed section 154.404. AGA and APGA also believe that ratepayers 

should be allowed to comment on a pipeline’s proposed treatment of ADIT. 

125. Commenters also raise concerns regarding the uncertainty surrounding the rate 

treatment of ADIT for those MLP pipelines or other pass-through entities that eliminate 

an income tax allowance pursuant to the United Airlines Issuances. For instance,

Boardwalk argues that the uncertainty surrounding how to handle ADIT is particularly 

problematic for MLP pipelines that own pipelines that are no longer permitted an income 

tax allowance in their rates under the Revised Policy Statement but still have large ADIT 

balances on their FERC books.142

126. Spectra further argues that the proposed FERC Form No. 501-G treats certain 

entities as though they will not be permitted an income tax allowance going forward, but 

requires those same entities to carry-over historic ADIT-related balances and costs inputs. 

Spectra asserts that if there is no income tax liability, there should be no ADIT and 

associated adjustments. Accordingly, Spectra contends that FERC Form No. 501-G

 142 Boardwalk Comments at 14.
Docket Nos. RM18-11-000 and RP18-415-000 - 83 -

inappropriately requires such entities to reduce rate base by the amount of ADIT and 

reduce the total cost of service by the amortization of the excess ADIT Regulatory 

Liability balance. Spectra claims that, in the absence of an income tax allowance, ADIT 

is being used to provide a refund and violates precedent against retroactive ratemaking. 

Accordingly, Spectra argues that FERC Form No. 501-G data entry for ADIT 

amortization should be zero for entities that are disallowed an income tax allowance

pursuant to the United Airlines Issuances. 

127. In sum, commenters argue that the uncertainty regarding ADIT may (1) result in 

misleading or inaccurate information provided in the FERC Form No. 501-G filings, 

particularly the inputs related to ADIT;

143 (2) discourage pipelines from selecting the 

option to file a limited section 4 rate case;

144 and (3) reduce the likelihood pipelines and 

 143 INGAA Comments at 23; Boardwalk Comments at 14; Spectra Comments 

at 7-8; Kinder Morgan Comments at 28; Williams Comments at 9; Millennium 

Comments at 10; Tallgrass Pipelines Comments at 6, 9, 12; EQT Midstream Comments 

at 5, 8; Dominion Energy Comments at 4-5; National Fuel Comments at 5; Berkshire 

Hathaway Comments at 4-6; Southern Star Comments at 9-10. Similarly, LDC Coalition 

argues that the staggered timing of this proceeding and the ADIT NOI proceeding may 

make it difficult to determine how pipelines have adjusted their ADIT balances in 

calculating their costs in the FERC Form No. 501-G filings. LDC Coalition Comments at 

22.

144 INGAA Comments at 23; Boardwalk Comments at 14; Spectra Comments at 8; 

Williams Comments at 9; Millennium Comments at 10; Tallgrass Pipelines Comments at 

12; EQT Midstream Comments at 2, 8-9; Dominion Energy Comments at 4.
Docket Nos. RM18-11-000 and RP18-415-000 - 84 -

shippers will enter into settlements.145 Commenters urge that the Commission consider 

the final resolution of the issues in the pending ADIT NOI proceeding before the issuance 

of the Final Rule in this proceeding or at least before pipelines are required to file their 

FERC Form No. 501-G.146

b. Discussion

128. The majority of pipeline commenters recommend that the Commission delay the 

requirement to file FERC Form No. 501-G until a Final Rule is issued in the ADIT NOI 

proceeding. The Commission concludes that such a delay is unnecessary in light of the 

steps we take below.

129. The Commission is setting forth its policy concerning the treatment of ADIT when 

the tax allowances of pass-through pipelines (including MLP pipelines) are eliminated, 

and the Commission modifies the FERC Form No. 501-G to reflect that policy. The 

Commission declines to make other changes from the NOPR proposal because, as 

 145 INGAA Comments at 23; Boardwalk Comments at 14; Williams Comments at 

9-10; Millennium Comments at 10; TransCanada Comments at 3-4; Tallgrass Pipelines 

Comments at 12; EQT Midstream Comments at 9; Dominion Energy Comments at 4; 

National Fuel Comments at 6; Southern Star Comments at 3, 10.

146 INGAA Comments at 4, 22-23; Boardwalk Comments at 5, 13-15; Spectra 

Comments at 6-9; Kinder Morgan Comments at 28-29; Williams Comments at 3, 9; 

Millennium Comments at 2, 9-10; Tallgrass Pipelines Comments at 4-9, 11-12; EQT 

Midstream Comments at 2, 8-9; Dominion Energy Comments at 2-5; National Fuel 

Comments at 4-6; Berkshire Hathaway Comments at 3-6; Southern Star Comments at 3, 

9-10.
Docket Nos. RM18-11-000 and RP18-415-000 - 85 -

explained below, the Commission’s existing ADIT policies provide sufficient guidance 

for the purposes of this Final Rule.

i. Treatment of ADIT When a Pass-Through 

Pipeline’s Income Tax Allowance is Eliminated

130. In response to the concerns raised by Spectra, Boardwalk, and others, the 

Commission takes two steps to address treatment of ADIT when a pass-through entity 

eliminates its income tax allowance. 

131. First, in the rehearing of the Revised Policy Statement (which is issuing 

concurrently with this Final Rule),147 the Commission announces its intent to permit a 

pass-through pipeline to eliminate ADIT from its cost of service if that pass-through 

pipeline eliminates its income tax allowance pursuant to the United Airlines Issuances

policy. Thus, the Commission does not intend to require a pass-through pipeline to return 

ADIT to its customers or to adjust its rate base by any outstanding ADIT balance.

Although non-binding, this guidance should help pipelines more efficiently evaluate their 

options pursuant to the Final Rule. This clarification may also facilitate potential 

settlement negotiations between pipelines and customers.

132. Second, the Commission modifies the proposed Form No. 501-G so that, if a passthrough entity states that it does not pay taxes, the form will not only eliminate its income 

 147 Inquiry Regarding the Commission’s Policy for Recovery of Income Tax Costs, 

Order on Rehearing, 164 FERC ¶ 61,030 (2018). 
Docket Nos. RM18-11-000 and RP18-415-000 - 86 -

tax allowance, but will also eliminate ADIT.148 Several reasons support this change. As 

an initial matter, this modification will provide that the FERC Form No. 501-G defaults 

to providing data consistent with the guidance the Commission is concurrently providing 

on rehearing of the Revised Policy Statement. Commission and IRS regulations 

regarding normalization (including ADIT) only apply to entities with an income tax 

allowance component in their regulated cost-of-service rates.149 ADIT is a regulatory 

 148 This change will reduce to zero on the FERC Form No. 501-G line items for 

Accumulated Deferred Income Taxes (Account 190), Accumulated Deferred Income 

Taxes–Other Property (Account 282), and Accumulated Deferred Income Taxes–Other 

(Account 283). See FERC Form No. 501-G, page 2, lines 13-15. The pipeline should 

also remove any sums related to ADIT from Other Regulatory Liabilities (Account 254) 

and Other Regulatory Assets (Account 182.3). See FERC Form No. 501-G, page 2, lines 

16-17. The Implementation Guide includes more specific instructions for the FERC 

Form No. 501-G.

149 See 18 CFR 154.305(a) (“An interstate pipeline must compute the income 

tax component of its cost-of-service by using tax normalization for all transactions.”); 

18 CFR 154.305(b)(1) (“Tax normalization means computing the income tax 

component as if transactions recognized in each period for ratemaking purposes are also 

recognized in the same amount and in the same period for income tax purposes.”); 

18 CFR 154.305(b)(4) (“Income tax component means that part of the cost-of-service that 

covers income tax expenses allowable by the Commission.”); 26 U.S.C. 168(i)(9)(A) 

(“the taxpayer must, in computing its tax expense for purposes of establishing its cost of 

service for rate-making purposes ...use a method of depreciation with respect to such 

property that is the same as, and a depreciation period for such property that is no 

shorter than, the method and period used to compute its depreciation expense for such 

purposes....”) (emphasis added). Algonquin Gas Transmission Co., 76 FERC ¶ 61,075, 

at 61,449 (1996); see also 18 CFR 154.305(c)(2) (“rate base reductions or additions” 

for ADIT “must be limited to deferred taxes related to rate base, construction, or 

other costs and revenues affecting jurisdictional cost-of-service”) (emphasis added); 

18 CFR 154.305(d)(1) (requirements relating to excess or deficient ADIT balances apply 

where the discrepancy is “a result of changes in tax rates” or where “the rate applicant 

has not provided deferred taxes in the same amount that would have accrued had tax 

normalization always been applied.”).
Docket Nos. RM18-11-000 and RP18-415-000 - 87 -

construct to ensure that regulated entities do not earn a return on cost-free capital based 

upon timing differences between federal and state tax liability and Commission 

ratemaking.150 The purpose of normalization is matching the pipeline’s cost-of-service 

expenses in rates with the tax effects of those same cost-of-service expenses.151 If there 

is no income tax allowance in Commission rates, there is no basis for the “matching” 

function of normalization152 and no liability for the deferred taxes reflected in ADIT. In 

the absence of ADIT, there is no ADIT adjustment to rate base or amortization allowance 

to be reflected in cost-of-service rates.

133. Moreover this modification to the FERC Form No. 501-G comports with 

retroactive ratemaking principles. The rule against retroactive ratemaking bars “the 

Commission’s retroactive substitution of an unreasonably high or low rate with a just and 

 150 Arco Pipe Line Co., Opinion No. 351, 52 FERC ¶ 61,055, at 61,238 (1990).

151 “The primary rationale for normalization is matching: the recognition in rates 

of the tax effects of expenses and revenues with the expenses and revenues themselves.” 

Regulations Implementing Tax Normalization for Certain Items Reflecting Timing 

Differences in the Recognition of Expenses or Revenues for Ratemaking and Income Tax 

Purposes, Order No. 144, FERC Stats. & Regs. ¶ 30,254 at 31,522 (1981), reh’g denied, 

Order No. 144-A, FERC Stats. & Regs. ¶ 30,340 (1982), aff’d, Public Systems v. FERC, 

709 F.2d 73 (D.C. Cir. 1983). 

152 See Public Utilities, 894 F.2d at 1382 (noting that “[t]ax normalization sought 

to ‘match’ the timing of a customer’s contribution toward a cost with enjoyment of any 

offsetting tax benefit,” but finding the passage of the NGPA which resulted in El Paso no 

longer using cost-of-service rates “mooted the whole question to which normalization 

was the answer”).
Docket Nos. RM18-11-000 and RP18-415-000 - 88 -

reasonable rate.”153 As relevant here, when a pass-through pipeline eliminates its income 

tax allowance consistent with the United Airlines Issuances policy, maintaining ADIT in 

cost of service would violate retroactive ratemaking by requiring pipelines to refund to 

shippers tax costs the pipeline collected in past rates for payment to the IRS pursuant 

to the Commission’s pre-United Airlines policy. This analysis is supported by the 

D.C. Circuit’s Public Utilities decision which held that requiring a pipeline to credit 

ratepayers for earnings on an excess ADIT balance or refund the balance to ratepayers 

violated retroactive ratemaking where the pipeline switched to statutory proscribed rate 

ceilings from cost-of-service rates, meaning that the rates no longer included a cost-ofservice normalization of income tax costs.154 

134. Finally, shippers have no equity interest in ADIT that justifies maintaining ADIT 

in rates or alleviates the above retroactive ratemaking concerns. The Commission and the 

D.C. Circuit have rejected arguments based on the misconception that ADIT is a cash 

 153 City of Piqua v. FERC, 610 F.2d 950, 954 (D.C. Cir. 1979). 

154 Public Utilities Comm’n of State of Cal. v. FERC, 894 F.2d 1372 (D.C. Cir. 

1990). Specifically, Public Utilities held that requiring a pipeline to credit ratepayers for 

earnings on an excess ADIT balance where the pipeline switched from cost-of-service 

rates to ceiling prices violated the rule against retroactive ratemaking. As the court found 

in Public Utilities, ADIT “is composed entirely of rate revenue that [the pipeline] has 

already collected. Refund of such property, or its earnings, would effectively force [the 

pipeline] to return a portion of rates approved by FERC, and collected by [the pipeline].” 

Id. at 1383. The D.C. Circuit explained that to the extent any basis for requiring the 

credit to ratepayers rested on the view that the pipeline’s prior cost-of-service rates were 

“in retrospect too high” or “unjust and unreasonable” then the credit for earnings on 

previously accumulated ADIT sums violated the rule against retroactive ratemaking. Id. 

at 1380, 1382.
Docket Nos. RM18-11-000 and RP18-415-000 - 89 -

reserve over which ratepayers have an ownership claim or equitable interest.155 

Consistent with these holdings, the Commission has also explained that ADIT is not a 

true-up or tracker of money owed to shippers.156 Rather, under the Commission’s preUnited Airlines policies involving tax allowances for pass-through entities, normalization 

in past rates required ratepayers to pay their properly allocated share of the pipeline’s tax 

expenses as matched to the ratepayers’ payment of straight-line depreciation costs.157 

ADIT is not money owed to past or future ratepayers, but rather deferred taxes that are 

ultimately owed to the government.

158

 155 Public Systems, 709 F.2d at 85 (rejecting the notion “that ratepayers have an 

ownership claim” to the ADIT balance); Public Utilities, 894 F.2d at 1381 (“The 

Commission and this Court have both rejected” “the notion that under normalization 

accounting customers enjoy an equitable interest in a utility’s deferred tax account.”); 

Order No. 144, FERC Stats. & Regs. ¶ 30,254 at 31,539 (addressing the “erroneous 

premise that a loan is being made by ratepayers to utilities” through the normalization 

process” and stating that ratepayers do not “have an ownership claim or equitable 

entitlement to the ‘loaned monies’”); id. at 31,539 n.75 (“This is not to say that customers 

do not pay rates that recover deferred taxes. They do. But paying deferred taxes in rates 

does not convey and ownership or creditor’s right.”).

156 Lakehead Pipe Line Co. L.P., 75 FERC ¶ 61,181, at 61,594 (1996). Moreover, 

there would be practical problems with maintaining such a tracker as many oil pipeline 

rates have never have been subject to a cost-of-service rate proceeding. For these 

pipelines, there is no cost-of-service income tax allowance which has been established.

157 The Commission’s primary justification for its decision to adopt tax 

normalization was “the matching principle: as a matter of fairness, customers who pay an 

expense should get the tax benefit that accompanies the expense ....” Public Systems, 

709 F2d at 80.

158 For example, ADIT is eliminated (not returned to shippers) when the pipeline 

must pay these deferred taxes to the federal government as a result of a sale of the asset. 

Enbridge Pipelines (KPC), 100 FERC ¶ 61,260, at PP 158-162 (2002).
Docket Nos. RM18-11-000 and RP18-415-000 - 90 -

135. Accordingly, the informational FERC Form No. 501-G is likely to be the most 

useful if it removes ADIT whenever the income tax allowance is eliminated. 

Furthermore, although the Commission has made this adjustment to the FERC Form 

No. 501-G, a pipeline may propose alternative treatment of ADIT in the Addendum.159 

Similarly, the removal of ADIT on FERC Form No. 501-G (or any subsequent 

adjustments in the Addendum) may be reflected in the optional limited section 4 rate 

filings. Given that these section 4 rate filings reduce the pipeline’s rates and are entirely 

at the pipeline’s discretion, we do not think this modification is inappropriate. The 

Commission also emphasizes that this modification only applies to the FERC Form 

No. 501-G (and the optional limited section 4 filings pursuant to section 154.404(a)). It 

does not establish a broader rule. Shippers and pipelines may advocate for a different 

treatment of ADIT in any future rate litigation.

ii. Other ADIT Issues

136. To the extent commenters request that the Commission delay issuance of this Final 

Rule until other issues raised in the ADIT NOI are resolved, the Commission believes 

that the commenters misconstrue the ADIT NOI proceeding. The ADIT NOI is a notice 

of inquiry that does not change or propose to change any existing ratemaking or 

accounting regulations. As noted by the Oklahoma AG, the ADIT NOI has an open 

ended process and may or may not result in any final rulemaking. The Commission has 

 159 Of course, we anticipate that any pass-through entity claiming an income tax 

allowance in the Addendum to Form No. 501-G will include the previously accumulated 

sums in ADIT.
Docket Nos. RM18-11-000 and RP18-415-000 - 91 -

asked for comment from the public on numerous ADIT-related questions as they relate to 

the proper implementation procedures on the various effects on cost-of-service rates 

resulting from the Tax Cuts and Jobs Act and the United Airlines Issuances. To the 

extent the Commission does change its ratemaking and accounting regulations, the 

implementation of any new instructions and policies will have only a prospective 

application. In the meantime, natural gas pipelines must follow the Commission’s 

existing ratemaking and accounting regulations concerning ADIT described below. 

137. Commenters argue that without the guidance resulting from the ADIT NOI 

proceeding, individual natural gas companies may not populate FERC Form No. 501-G 

in a consistent manner. However, we believe that this is not the case, because all ADITrelated data elements are to be taken directly from the natural gas companies’ FERC 

Form Nos. 2 and 2-A and their existing accounting records. The FERC Form Nos. 2 and 

2-A data largely originates from the Commission’s Uniform System of Accounts 

(USofA) instructions. As such, the Commission’s existing USofA, among other things, 

contains instructions on balance sheet and statement of income accounts related to 

ADIT.160 Natural gas companies report all ADIT balances on their FERC Form Nos. 2 

and 2-A. Thus, 2017 FERC Form Nos. 2 and 2-A prepared consistent with existing 

guidance should provide the amounts of the excess or deficiency ADIT balances as of 

 160 See, e.g., Accounting For Income Taxes, Docket No. AI93-5-000 (April 23, 

1993), available at http://www.ferc.gov/enforcement/acct-matts/docs/AI93-5-000.asp

(AI93-5-000 Guidance).
Docket Nos. RM18-11-000 and RP18-415-000 - 92 -

December 31, 2017, after the enactment date of December 22, 2017 of the Tax Cuts and 

Jobs Act. 

138. Finally, the IRS has accepted two methods to flow back any excess or deficiency 

ADIT since at least the Tax Reform Act of 1986. The Commission, consistent with 

current guidance and the Tax Cuts and Jobs Act directives,161 will continue to allow the 

use of either of these two methods: (1) the Average Rate Assumption Method (ARAM), 

which is the primary method, and (2) the Reverse South Georgia Method (RSGM), which 

is permitted as an exception, if a rate regulated company does not have vintage records 

for its plant assets to support the reversal of book/tax differences. 

139. When the Tax Cuts and Jobs Act passed on December 22, 2017, the effect of the 

federal income tax reduction from 35 percent to 21 percent became known. Therefore, 

consistent with the Commission’s current accounting guidance in Docket No. AI93-5-

000, natural gas companies are required to adjust their “deferred tax liabilities and assets 

for the effect of the change in tax law or rates in the period that the change is enacted.”162 

This guidance means that, as the Tax Cuts and Jobs Act was enacted before the end of the 

2017 calendar year, all natural gas companies’ 2017 FERC Form Nos. 2 and 2-A filed 

April 2018 should have reflected recalculated deferred tax liabilities and assets consistent 

with the Tax Cuts and Jobs Act, even though the Tax Cuts and Jobs Act did not become 

 161 See Tax Cuts and Jobs Act 13001(d), 131 Stat. at 2099-2100.

162 AI93-5-000 Guidance, Question 8: Changes In Tax Law Or Rates (emphasis 

added).
Docket Nos. RM18-11-000 and RP18-415-000 - 93 -

effective until January 1, 2018. Specifically, the Commission’s AI93-5-000 Guidance at 

Question 8 provides the following:

The adjustment shall be recorded in the proper deferred tax 

balance sheet accounts (Accounts 190, 281, 282 and 283) 

based on the nature of the temporary difference and the 

related classification requirements of the accounts. If as a 

result of action by a regulator, it is probable that the future 

increase or decrease in taxes payable due to the change in tax 

law or rates will be recovered from or returned to customers 

through future rates, an asset or liability shall be recognized 

in Account 182.3, Other Regulatory Assets, or Account 254, 

Other Regulatory Liabilities, as appropriate, for that probable 

future revenue or reduction in future revenue. That asset or 

liability is also a temporary difference for which a deferred 

tax asset or liability shall be recognized in Account 190, 

Accumulated Deferred Income Taxes or Account 283, 

Accumulated Deferred Income Taxes Other, as appropriate. 

140. Moreover, it has been a long-standing policy for the Commission to require 

natural gas companies to flow back the effects of timing differences between the 

Commission approved income tax allowances and the IRS tax liabilities.163 This Final 

Rule is also premised on the Commission’s concern that natural gas pipelines may be 

collecting unjust and unreasonable rates in light of the recent reduction in the federal 

corporate income tax rate in the Tax Cuts and Jobs Act, and that it may be appropriate to 

 163 Tax Normalization for Certain Items Reflecting Timing Differences in the 

Recognition of Expenses or Revenues for Ratemaking and Income Tax Purposes, Order 

No. 144, FERC Stats. & Regs. ¶ 30,254 (1981) (cross-referenced at 15 FERC ¶ 61,133), 

order denying reh’g, lifting stay and clarifying order, Order No. 144-A, FERC Stats. & 

Regs. ¶ 30,340 (1982) (established 18 CFR 154.63a). The content of section 154.63a was 

later updated and moved to 18 CFR 154.305: Tax Normalization. Filing and Reporting 

Requirements for Interstate Natural Gas Co. Rate Schedules and Tariffs, Order No. 582, 

FERC Stats. & Regs. ¶ 31,025 (1995) (cross-referenced at 72 FERC ¶ 61,300).
Docket Nos. RM18-11-000 and RP18-415-000 - 94 -

direct natural gas pipelines to reduce their rates to reflect the effects of the Tax Cuts and 

Jobs Act, or to establish proceedings to determine whether natural gas companies’ 

existing rates are no longer just and reasonable and establish new just and reasonable 

rates.164 

141. With the precondition satisfied, the Commission’s guidance in AI93-5-000 at 

Question 8 continues with regard to the recognition of ADIT regulatory assets or 

liabilities: 

... [A]n asset or liability shall be recognized in Account 

182.3, Other Regulatory Assets, or Account 254, Other 

Regulatory Liabilities, as appropriate, for that probable future 

revenue or reduction in future revenue. That asset or liability 

is also a temporary difference for which a deferred tax asset 

or liability shall be recognized in Account 190, Accumulated 

Deferred Income Taxes or Account 283, Accumulated 

Deferred Income Taxes Other, as appropriate. 

142. Further, the Commission’s USofA instructions for each of the referenced balance 

sheet accounts provide detailed guidance on how the accounting journal entries for the 

regulatory asset, in the case of a deficiency ADIT, or regulatory liability, in the case of 

excess ADIT, should be established and amortized to account for the flow-back of the 

deficiency or excess ADIT through the appropriate income statement accounts based on 

current guidance.

165 

 164 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 4.

165 18 CFR pt. 201.
Docket Nos. RM18-11-000 and RP18-415-000 - 95 -

143. With the amounts recorded in the appropriate accounts, consistent with the 

Commission’s existing instructions and guidance, there should be only limited variation 

in the natural gas companies’ financial information reported in their FERC Form Nos. 2 

and 2-A and the proposed FERC Form No. 501-G. To the extent that further 

explanations for the reported financial information are necessary, natural gas companies 

are advised to provide such explanations in the footnotes to their financial statements.166 

Any explanations or differences in reported financial information can also be provided in 

the optional Addendum that pipelines are permitted to file along with their FERC Form 

No. 501-G. As the Commission already has in place sufficient guidance in regards to 

classification and recording of ADIT-related amounts, the Commission does not expect 

any significant variations in how natural gas companies account for such amounts. 

Further, to the extent a natural gas pipeline did not prepare its 2017 FERC Form Nos. 2 

and 2-A consistent with the prior Commission guidance discussed above, the company 

must make the appropriate corrections.

167

144. FERC Form No. 501-G largely requires natural gas companies to transfer financial 

data directly from their FERC Form Nos. 2 and 2-A for purposes of examining their costs 

of service. FERC Form No. 501-G calculates an indicated cost of service (page 1) and 

rate base (page 2). The ADIT amounts that natural gas companies enter on lines 13-17 of 

 166 Id. at General Instructions, No. VIII.

167 See Entergy Services, Inc., Opinion No. 545, 153 FERC ¶ 61,303, at P 156 

(2015); as clarified 156 FERC ¶ 61,196, at P 150 (2016) (Finding that past FERC Form 

No. 1s must be refiled to correct an ADIT amortization period mistake.).
Docket Nos. RM18-11-000 and RP18-415-000 - 96 -

page 2 for purposes of calculating their rate base must be transferred directly from the 

companies’ 2017 FERC Form Nos. 2 and 2-A. The 2017 FERC Form Nos. 2 and 2-A do 

not necessarily provide the figure for Amortization of Excess/Deficiency ADIT that the

FERC Form No. 501-G requires natural gas companies to enter on page 1, line 31, for 

purposes of calculating the tax allowance included in cost of service. That is because this 

information will be reported in subsequent periods. However, as explained above, 

natural gas companies should already have this amount determined based on previous 

Commission and IRS guidance. Specifically, under current guidance, the Commission 

expects the flow-back of the excess regulatory liability or deficiency regulatory asset to 

occur over the remaining book life of the associated plant assets, because depreciation of 

plant assets is the primary driver of timing differences in taxes as they relate to natural 

gas companies. The Commission expects insignificant differences between proposed 

amortization periods by the natural gas companies and approved amortization periods by 

the Commission as they relate to items other than plant assets. Whenever there is a need 

for noting potential differences, natural gas companies may provide explanations in the 

optional Addendum that pipelines are permitted to file along with their FERC Form 

No. 501-G. 

145. Additionally, FERC Form No. 501-G appropriately considers the amortization of 

excess ADIT balances as part of calculating the tax allowance included in cost of service. 
Docket Nos. RM18-11-000 and RP18-415-000 - 97 -

This is a requirement codified at section 154.305(d) of the Commission’s regulations.

168

As described above, FERC Form No. 501-G, page 1, requires Amortization of Excess 

ADIT as part of the indicated cost of service. Further, FERC Form No. 501-G 

appropriately adjusts rate base for ADIT balances. This is consistent with current 

guidance under section 154.305(c) of the Commission’s regulations.169 On FERC Form 

No. 501-G, page 2, the rate base calculation removes the excess ADIT balance and adds 

the deficiency ADIT balance from/to rate base. As discussed above, Spectra and 

 168 18 CFR 154.305(d):

(d) Special rules.

(1) This paragraph applies: .... or (ii) If, as a result of changes in tax rates, 

the accumulated provision for deferred taxes becomes deficient in, or in 

excess of, amounts necessary to meet future tax liabilities.

(2) The interstate pipeline must compute the income tax component in its 

cost-of-service by making provision for any excess or deficiency in 

deferred taxes.

169 18 CFR 154.305(c):

(c) Reduction of, and addition to, Rate Base.

(1) The rate base of an interstate pipeline using tax normalization under this 

section must be reduced by the balances that are properly recordable in 

Account 281, "Accumulated deferred income taxes-accelerated 

amortization property"; Account 282, "Accumulated deferred income taxes 

- other property": and Account 283, "Accumulated deferred income taxes -

other." Balances that are properly recordable in Account 190, 

"Accumulated deferred income taxes," must be treated as an addition to rate 

base. Include, as an addition or reduction, as appropriate, amounts in 

Account 182.3, Other regulatory assets, and Account 254, Other regulatory 

liabilities, that result from a deficiency or excess in the deferred tax 

accounts (see paragraph (d) of this section) and which have been, or are 

soon expected to be, authorized for recovery or refund through rates.

(2) Such rate base reductions or additions must be limited to deferred taxes 

related to rate base, construction, or other costs and revenues affecting 

jurisdictional cost-of-service.
Docket Nos. RM18-11-000 and RP18-415-000 - 98 -

Boardwalk expressed concern that proposed FERC Form No. 501-G provides that entities 

not permitted an income tax allowance going forward are still required to carry-over 

historic ADIT-related balances and costs inputs. Consistent with the discussion above,

the Commission has modified FERC Form No. 501-G’s treatment of ADIT balances and 

amortization of excess or deficient ADIT. For pipelines that indicate that they are not a 

separate income taxpaying entity on FERC Form No. 501-G, page 1, Line 4, page 2 

eliminates the ADIT adjustment to rate base and does not require the pipeline to estimate 

the amortization of excess or deficient ADIT on page 1, Line 31. 

146. In summary, the Commission has existing and currently applicable regulations, 

instructions, and guidance necessary for natural gas companies to account properly for 

the effects of the Tax Cuts and Jobs Act. Further, section 154.305 of the Commission’s 

regulations establishes the default treatment of ADIT balances and amortization thereof 

in rate base and the cost of service. For all the stated reasons discussed above, the 

Commission does not find persuasive commenters’ argument that there is a lack of 

guidance on how to account for and flow-back ADIT balances. 

147. National Fuel advocates that the Commission should permit pipelines flexibility in 

ADIT treatment in FERC Form No. 501-G. National Fuel states that the Commission has 

permitted differing rate treatment, including National Fuel’s. However, National Fuel 

does not provide any specific examples or citations. Therefore, it is not clear as to the 

nature of flexibility National Fuel is advocating. Further, as to National Fuel’s own cost 

of service, the Commission notes that National Fuel informed the Commission that the 
Docket Nos. RM18-11-000 and RP18-415-000 - 99 -

settlements underlying its currently effective rates are “black box” settlements.170 As is 

the case with most black box settlements, National Fuel’s May 22, 2012 and 

September 29, 2015 Settlements did not contain cost-of-service work papers. Therefore,

it is not possible to confirm National Fuel’s claim that the Commission afforded differing 

treatment of ADIT in National Fuel’s currently effective rates.171 With regard to ADIT, 

the May 22, 2012 Settlement provides that the settlement rates are consistent with IRS 

regulations with respect to normalization of any excess and/or deficiency in deferred 

income taxes.172 Commission normalization requirements are not inconsistent with the 

IRS normalization regulations.173 Notwithstanding, natural gas pipelines may suggest 

alternative ADIT treatment as part of an Addendum. 

 170 National Fuel Gas Supply Corp., May 22, 2012 Settlement filed in Docket 

No. RP12-88, Article I, approved National Fuel Gas Supply Corp., 140 FERC ¶ 61,114 

(2012). This provision of the May 22, 2012 Settlement remains unchanged and continues 

pursuant to Article II of the September 29, 2015 Supplemental Stipulation and 

Agreement filed in Docket No. RP15-1310-000, approved National Fuel Gas Supply 

Corp., 153 FERC ¶ 61,170 (2015).

171 Further, even if there had been such a provision or work papers, it would have 

had no precedential value: “The Commission’s order approving this Stipulation shall not 

constitute approval or acceptance of any concept, theory, principle, or method underlying 

any of the rates or charges or any other matter identified in this Stipulation or in this 

proceeding.” May 22, 2012 Settlement at Article XIII.

172 Id. at Article VII.

173 See Koch Gateway Pipeline Co., 74 FERC ¶ 61,088, at 61,277 (1996) (“While 

the Commission is not bound to follow an IRS ruling for ratemaking purposes, we are 

reluctant to take action which would endanger a pipeline’s right to favorable tax 

treatment from the IRS.”).
Docket Nos. RM18-11-000 and RP18-415-000 - 100 -

148. National Fuel notes that because its fiscal year is not on a calendar year basis,174

the applicable federal tax rate for fiscal year 2018 will be a composite tax rate, not the 21 

percent specified in FERC Form No. 501-G. National Fuel believes that requiring 

pipelines with non-calendar year bases to utilize a 21 percent federal tax rate will yield 

incorrect and invalid results. The Commission disagrees. National Fuel’s ADIT 

balances, as reported in its 2017 FERC Form No. 2, should be recalculated to reflect the 

known reduction in the level of federal income tax as the result of the Tax Cuts and Jobs 

Act as of the enactment date of December 22, 2017 of the new law. Although National 

Fuel’s recalculation of its excess or deficiency ADIT may be more complex than that of 

other pipelines, if the recalculation is done consistent with the Commission’s USofA and 

the AI93-5-000 Guidance, the FERC Form No. 2 data should be sufficient to determine 

the needed adjustment to rate base. Further, with regard to FERC Form No. 501-G, the 

Commission notes that the Commission has assigned National Fuel to reporting 

Group III. That group is not required to file their FERC Form No. 501-Gs until 84 days 

after the effective date of this Final Rule. By that required reporting time, National 

Fuel’s fiscal year issue will be moot, and its FERC Form No. 501-G results will be valid. 

149. Spectra notes that FERC Form No. 501-G reduces rate base by the full ADIT

balance existing at the end of calendar year 2017 without any adjustment for the 

amortization of excess ADIT, but at the same time the FERC Form No. 501-G reduces 

 174 National Fuel reports its fiscal year is October 1 through September 30. 

National Fuel’s 2017 FERC Form No. 2, page 122.9 (filed April 16, 2018).
Docket Nos. RM18-11-000 and RP18-415-000 - 101 -

the tax allowance included in the cost of service by an amount equaling the annual 

amortization of excess ADIT. Spectra contends that such treatment reduces rates twice 

for the same regulatory liability. Spectra is incorrect. The Commission’s rationale for 

subtracting accumulated deferred taxes from rate base was discussed in Order No. 144-A:

The deduction of accumulated deferred taxes from rate base 

... is intended to reflect the lower cost of service that a utility 

achieves by its use of the cash flow from deferred taxes in 

place of debt and equity capital.175

150. The Commission is modifying FERC Form No. 501-G in response to Spectra’s 

argument that the amortization of excess ADIT balances in the cost of service (in 

combination with a rate base adjustment reflecting the full ADIT balance) reduces rates 

twice. As a pipeline amortizes its excess ADIT (i.e., credits excess ADIT in determining 

the current period’s tax allowance), the ADIT balance subtracted from rate base will 

decline, with the result that net rate base will be higher than it would be absent the 

amortization of excess of ADIT. The Commission acknowledges that the FERC Form 

No. 501-G in the NOPR was based upon an historic test period with only a single static 

adjustment to cost of service to account for the change in the income allowance as a 

result of the Tax Cuts and Jobs Act. The effect of Spectra’s request is to make the 

adjustment dynamic by reflecting an initial amortization of excess ADIT in rate base. 

The Commission is making a change to reflect a reduction to Other Regulatory Liabilities 

 175 Order No. 144-A, FERC Stats. & Regs. ¶ 30,340 at 30,128.
Docket Nos. RM18-11-000 and RP18-415-000 - 102 -

for the Net Amortization of Excess and / or Deficient ADIT in the FERC Form 

No. 501-G.

151. LDC Coalition requests that the Commission require natural gas companies to file 

an accompanying spreadsheet that provides how companies recalculated ADIT and 

excess ADIT balances. In addition, LDC Coalition and AGA request that the 

Commission discuss within the scope of hearing issues whether a natural gas company 

has properly calculated ADIT for purposes of its FERC Form No. 501-G and concurrent 

limited NGA section 4 rate reduction filing pursuant to proposed section 154.404. The 

Commission declines to do so. The Commission has previously provided guidance to 

natural gas companies on how to properly recalculate ADIT balances and determine 

amortization amounts of excess or deficiency ADIT balances. With regard to all the 

financial data reported in FERC Form Nos. 2 and 2-A, natural gas companies are required 

to attest to the conformity of that data, in all material respects, with the Commission's 

applicable USofA and to have the submission signed by an independent certified public 

accountant. FERC Form No. 501-G is not the vehicle for parties to challenge the validity 

of FERC Form Nos. 2 and 2-A data. In addition, the data underlying the calculation of 

natural gas companies’ amortization of excess or deficiency ADIT balances can be 

extensive, and the calculation itself requires iterative calculations extending over the 

longer of the Commission’s or the IRS’ depreciation schedules. Providing that data as 

part of the FERC Form No. 501-G filing requirement would significantly increase the 

burden on the natural gas companies for a form with the limited purpose of assisting the 

Commission, the pipelines and the parties to screen which pipelines deserve additional 
Docket Nos. RM18-11-000 and RP18-415-000 - 103 -

attention. Similarly, permitting parties to challenge or protest recalculated ADIT 

balances and amortization amounts on excess and deficient ADIT amounts in the 

section 1543.404 limited section 4 rate filings would undermine the objective of 

expediting rate reductions.

152. Enable Interstate Pipelines argue that, to the extent that significant amounts of 

capital previously available to a natural gas company by virtue of the ADIT balance are 

to be removed from rate base, the result would be to render erroneous any FERC Form 

No. 501-G, page 4, estimate of debt cost based on access to the ADIT balance, given the 

increasing financial risk and hence the cost of capital that would be incident to the ADIT 

change. However, Enable Interstate Pipelines appear to assume that the ADIT balances 

have been invested in jurisdictional natural gas activities. If a natural gas company chose 

to invest funds generated by deferred income tax, then its rate base would have been 

increased by a like amount,176 and the effect of the ADIT adjustment to rate base would 

be an offset. The Commission's policy to adjust rate base stems from the fact that tax

rules may, in effect, defer payment for tax liabilities beyond the timing provided for in 

rates. The pipeline collects the customers' payment while obtaining the benefits of the 

tax deferral.177 To reflect the timing difference, the Commission requires natural gas 

 176 El Paso Natural Gas Co., L.L.C., 152 FERC ¶ 61,039, at P 88 (2015) (El 

Paso).

177 See Distrigas Mass. Corp. v. FERC, 737 F.2d 1208, 1212 (1st Cir. 1984) 

(describing the tax deferral as "highly advantageous" to regulated entities, noting that 

service providers "obtain the use of the ‘saved tax’ money until the time it falls due"). 

See also United Gas Pipeline Co., Opinion No. 99, 13 FERC ¶ 61,044, at 61,096 (1980) 
Docket Nos. RM18-11-000 and RP18-415-000 - 104 -

companies to deduct the deferred tax from rate base, with the effect that the customers 

need not pay in current rates the time value of the money previously paid.178 FERC Form 

No. 501-G reflects Commission policy and the section 154.305(c) requirement that rate 

base be adjusted for ADIT balances.

8. Who Must File

153. In the NOPR, the Commission proposed that “every natural gas company that is 

required ... to file a Form No. 2 or 2-A for 2017 and has cost-based rates for service ... 

must prepare and file with the Commission a FERC Form No. 501-G.”179 The 

Commission also proposed to exempt pipelines that, as of the deadline for filing their 

FERC Form No. 501-G, are the subject of an ongoing general rate case under section 4 or 

rate investigation under NGA section 5.180 In addition, the Commission proposed that 

any pipeline that files an uncontested pre-packaged settlement of its rates after the 

March 26, 2018 publication of the NOPR in the Federal Register and before the deadline 

for their One-time Report need not file that report.

181

 

(excluding undistributed subsidiary earnings from equity because funds not available for 

investment in jurisdictional activities).

178 El Paso, 152 FERC ¶ 61,039 at P 89.

179 NOPR, FERC Stats. & Regs. ¶ 32,725 at proposed 18 CFR 260.402(b)(1)(i); 

see id. P 26.

180 Id. n.49, proposed 18 CFR 260.402(b)(1)(ii).

181 Id. PP 4, 26, proposed 18 CFR 260.402(b)(1)(ii).
Docket Nos. RM18-11-000 and RP18-415-000 - 105 -

a. Comments

154. Hampshire notes that it has a cost-of-service tariff that provides for automatic 

adjustment for changes in income tax rates, and requests that such pipelines be exempt 

from the One-time Report.182

155. Numerous other commenters weigh in on whether, and under what circumstances, 

filing an uncontested settlement should exempt the pipeline from the One-time Report. 

Under the NOPR, the Commission would exempt any pipeline that filed an uncontested 

rate settlement after the March 26, 2018 date of the NOPR but before the deadline for its

One-time Report. CAPP supports the proposal as is. NGSA and Southern Companies 

argue for a stricter proposal, under which the Commission would require further 

information in order to ensure that any settlements result in rates that are just and 

reasonable in light of the effects of the Tax Cuts and Jobs Act. Similarly, APGA argues 

not only that pipelines under settlement moratoria should be subject to the One-time 

Report, but also that the Commission should be prepared to commence investigations on 

such pipelines prior to the expiration of the moratoria, given the inevitable delays under 

NGA section 5 in proceeding from an investigation to a final rate.183 Indicated Shippers 

request that the Commission clarify that any pipeline precluded from making changes to 

 182 Hampshire Comments at 3.

183 AGA Comments at 8.
Docket Nos. RM18-11-000 and RP18-415-000 - 106 -

its rates due to a settlement moratorium would be required to comply with the FERC 

Form No. 501-G filing requirement once the settlement moratorium has expired.184

156. Several other commenters present overlapping arguments for expanding 

settlement-related exemptions. Commenters request exemptions from the One-time 

Report for pipelines with rate settlements that pre-date the NOPR, but also (1) contain a 

rate moratorium clause;185 (2) post-date the Tax Cuts and Jobs Act;186 or (3) expressly 

contemplate future changes to tax rates.187 Similarly, commenters request a FERC Form 

No. 501-G exemption for pipelines that, whether voluntarily or due to a settlement 

comeback clause, elect Option 2, that is, to file a new general section 4 rate case or 

settlement shortly after the filing deadline for the One-time Report.188

157. For each of these four categories, commenters argue that filing the One-time 

Report “would serve no purpose ... since the rates would not be affected.”189 

Commenters argue that filing the One-time Report would cut against the Commission’s 

 184 Indicated Shippers Comments at 14-15.

185 Boardwalk Comments at 18; Dominion Energy Comments at 14; Kinder 

Morgan Comments at 29; National Fuel Comments at 1-2; Spectra Comments at 13; 

TransCanada Comments at 14; Williams Comments at 5.

186 INGAA Comments at 28; Kinder Morgan Comments at 30-31.

187 Cove Point Comments at 2; Dominion Energy Comments at 15; Williams 

Comments at 5-6.

188 Dominion Energy Comments at 14; INGAA Comments at 29; Kinder Morgan 

Comments at 31; National Fuel Comments at 2; Tallgrass Pipelines Comments at 15.

189 See, e.g., Boardwalk Comments at 18.
Docket Nos. RM18-11-000 and RP18-415-000 - 107 -

longstanding policy of not disturbing accepted settlements.190 In particular, commenters 

argue that filing the FERC Form No. 501-G would prejudice the pipeline by presenting 

an incomplete or confusing picture of how the tax changes affect the pipeline’s rates.191

b. Discussion

158. The Commission clarifies that pipelines such as Hampshire that have formula rates 

which provide for automatic rate adjustment to account for changes in income tax rates 

are not covered by this rulemaking. Accordingly, the Commission is revising proposed 

sections 154.404(b)(2) and 260.402(b)(1), to clarify that the authorization to file a limited 

 190 Id. at n.44:

[T]he Commission “recognize[s] the role of settlements in 

providing rate certainty,” and has stated that in deciding 

whether to exercise its discretion to initiate a section 5 

proceeding, it would “take into account the parties’ interest in 

maintaining a Settlement.” (quoting Nat. Gas Pipeline Co. of 

Am. LLC, 162 FERC ¶ 61,009, at P 29 (2018)). The 

Commission has explained that, without rate moratoria, “the 

utility of settlements for resolving cases would be severely 

jeopardized. No settlement could ever be truly final, because 

the rates resulting from the settlement would always be 

subject to reopening based on subsequent Commission or 

Court decisions.” See Iroquois Gas Transmission Sys. L.P., 

69 FERC ¶ 61,165, at p. 61,631 (1994), reh’g denied, 70 

FERC ¶ 61,181 (1995). The Commission also noted that its 

decision not to order a modification to a settlement was 

“consistent with the principle that approved settlements are 

binding on the parties and should not be modified simply 

because it later appears that ‘the result is not as good as it 

ought to have been.’” Id. (quoting Tex. E. Transmission Corp. 

v. FPC, 306 F.2d 345, 348 (5th Cir. 1962)).

See also Kinder Morgan Comments at 30 & n.84.

191 INGAA Comments at 29; Kinder Morgan Comments at 32.
Docket Nos. RM18-11-000 and RP18-415-000 - 108 -

NGA section 4 filing and the requirement to file a FERC Form No. 501-G only apply to 

natural gas pipelines that have cost-based, stated rates.

159. We decline to adopt commenters’ other proposals to expand the proposed 

exemptions from filing the FERC Form No. 501-G, and instead adopt the proposal in the 

NOPR, providing an automatic exemption from filing FERC Form No. 501-G only to 

(1) pipelines who file an uncontested, prepackaged settlement of their rates between the 

March 26, 2018 date the NOPR was published in the Federal Register and the date their 

FERC Form No. 501-G would otherwise be due and (2) pipelines whose rates are being 

examined in a general rate case under NGA section 4 or a rate investigation under NGA 

section 5 as of the deadline for filing their FERC Form No. 501-G. However, we clarify 

that pipelines may, on a case-by-case basis, request waivers of the filing requirement. 

160. With regard to settlements, the Commission finds it appropriate to limit the 

exemption to settlements filed after the March 26, 2018 publication of the NOPR in the 

Federal Register. It is only in that circumstance, that the Commission is willing to 

presume that all the settling parties were aware of, and took into account, both the NOPR 

and the United Airlines Issuances concerning MLP pipeline tax allowances when they 

agreed to the settlement, and therefore no further change in the pipeline’s rates is needed. 

However, when a settlement was filed before March 26, 2018, the Commission will not 

prejudge what action to take with respect to the subject pipeline’s rates until interested 

persons have been provided a process in which to state their views concerning how the 

settlement should affect the Commission’s decision. Based on those comments, the 

Commission can determine whether no change in the pipeline’s rates is justified at this 
Docket Nos. RM18-11-000 and RP18-415-000 - 109 -

time because (1) the settlement reflects an agreement by the parties that the pipeline’s 

revised rates reasonably reflect the reduced income taxes provided by the Tax Cuts and 

Jobs Act and the United Airlines Issuances and/or (2) any rate moratorium in the 

settlement should be interpreted as prohibiting changes to the settlement rates to reflect 

the Tax Cuts and Jobs Act and the United Airlines Issuances during the term of the rate 

moratorium. 

161. With regard to rate moratoria, as the Commission stated in the NOPR, “the 

Commission generally does not disturb a settlement during a rate moratorium.”192 

However, this policy only extends to rate changes that would violate the terms of the rate 

moratorium in the settlement at issue. Some settlement rate moratoria include exceptions 

for certain types of rate changes, which might include rate changes resulting from generic 

policy changes of the type at issue here. Accordingly, if a pipeline contends that its rates 

are subject to a rate moratorium, the Commission finds it reasonable to give other 

interested persons an opportunity to state whether they agree that the rate moratorium is 

applicable to the reduced tax costs at issue here.

162. A pipeline’s filing of the FERC Form No. 501-G, together with any explanation it 

wishes to provide of why its rate settlement justifies not adjusting its rates at this time, 

 192 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 49 (citing Iroquois Gas 

Transmission System L.P., 69 FERC at 61,631; JMC Power Projects v. Tennessee Gas 

Pipeline Co., 69 FERC ¶ 61,162, reh’g denied, 70 FERC at 61,528, aff’d, Ocean States 

Power, 84 F.3d 1453). See also Natural Gas Pipeline Co., 162 FERC ¶ 61,009, at P 29 

(2018) (stating that in deciding whether to initiate an NGA section 5 rate investigation, 

“the Commission would take into account the parties’ interest in maintaining a 

settlement.”).
Docket Nos. RM18-11-000 and RP18-415-000 - 110 -

will give interested persons the requisite opportunity to present their views on whether 

the settlement has reasonably modified the pipeline’s rates to reflect the Tax Cuts and 

Jobs Act and/or the United Airlines Issuances and whether any rate moratorium prohibits 

a rate change at this time. However, if an individual pipeline believes that the issue of 

whether a pre-March 26, 2018 settlement justifies not adjusting its rates at this time can 

be resolved without the need to file the FERC Form No. 501-G, it may file a request for a 

waiver of the requirement to file the FERC Form No. 501-G, with an explanation of why 

its pre-March 26, 2018 settlement justifies no change in its rates to reflect the Tax Cuts 

and Jobs Act and/or the United Airlines Issuances.

193 The pipeline should file such a 

request at least 30 days before the date its FERC Form No. 501-G is due. Any such 

request will be noticed for interventions, protests, and comments, and, based upon all the 

pleadings, the Commission will determine whether to grant the waiver.

163. In the NOPR, the Commission proposed to exempt pipelines from filing the FERC 

Form No. 501-G, if they file a general NGA section 4 rate case or a prepackaged rate 

settlement before the deadline for filing their form.194 The Commission rejects the 

 193 For administrative efficiency, the Commission requires any request for an 

exemption from filing the FERC Form No. 501-G to be filed using the same Type of 

Filing Code as used by the FERC Form No. 501-G: ToFC 1430.

194 Although the NOPR preamble clearly limited this exemption to situations 

where pipelines had filed a general rate case or prepackaged settlement “before the 

deadline for their One-time Report,” (NOPR, FERC Stats. & Regs. ¶ 32,725 at P 26) the 

proposed regulatory text in section 260.402(b)(1)(ii) was less clear on this point. 

Accordingly, we are revising that section to clearly limit this exemption to situations 

where the relevant filing was made before the deadline for the pipeline’s FERC Form 

No. 501-G. Since March 26, 2018, five pipelines have made such filings. On May 2, 
Docket Nos. RM18-11-000 and RP18-415-000 - 111 -

request that this automatic exemption be expanded to include pipelines that commit to 

file a general section 4 rate case or prepackaged settlement within some period after the 

otherwise applicable deadline for filing the form. Given the Commission’s lack of refund 

authority under NGA section 5, the Commission is unwilling to automatically exempt 

pipelines from filing the FERC Form No. 501-G based on commitments to file rate cases 

or settlements at some time in the future. The Commission also rejects contentions that 

providing the information required by the FERC Form No. 501-G will prejudice 

settlement talks or unduly burden the pipeline. As several commenters acknowledge, any 

pipeline hoping to reach a future settlement would inevitably grant shippers access to 

even more information than the FERC Form No. 501-G would collect. However, on a 

case-by-case basis, individual pipelines may file requests for waiver of filing the FERC 

Form No. 501-G if they are in settlement negotiations. In deciding whether to grant such 

 

2018, Granite State Gas Transmission, Inc. (Granite State) filed a prepackaged 

uncontested settlement in Docket No. RP18-793-000 (approved at Granite State Gas 

Transmission, Inc., 163 FERC ¶ 61,224 (2018)). On May 31, 2018, MoGas Pipeline 

LLC (MoGas) filed a general NGA section 4 rate case in Docket No. RP18-877-000. On 

June 29, 2018, Empire Pipeline, Inc. (Empire), Enable Mississippi River Transmission, 

LLC (Enable), and Trailblazer Pipeline Co. LLC, (Trailblazer) filed general section 4 rate 

cases in Docket Nos. RP18-940-000, RP18-923-000, an RP18-922-000 respectively. As 

such, Granite State, MoGas, Empire, Enable, and Trailblazer are not required to file 

FERC Form No. 501-G. 

Additional pipelines may choose to file NGA section 4 rate filings before this Final Rule 

is effective; those pipelines would not be required to file the FERC Form No. 501-G. 

Because the numbers are dynamic and may continue to change (reducing the number 

of filers of the FERC Form No. 501-G), we are retaining a conservative estimate of 

129 pipelines who may be required to file the FERC Form No. 501-G.
Docket Nos. RM18-11-000 and RP18-415-000 - 112 -

waivers, the Commission will consider whether other interested parties support or do not 

oppose the request. We encourage pipelines to file such requests for waiver as soon as 

practicable to allow time for the Commission to issue a decision on the request. We note 

that pipelines are obligated to meet their FERC Form No. 501-G filing obligation by the 

deadline outlined in the Implementation Guide unless the Commission has issued an 

order affirmatively granting the requested waiver on or before that deadline. 

164. Eastern Shore argues that it should be exempt from filing the One-time Report 

because it has already filed to lower its rates, in response to a settlement provision 

triggered by the Tax Cuts and Jobs Act, and its filing was accepted on April 24, 2018.195 

However, Eastern Shore’s referenced filing was a compliance filing made March 1, 

2018,196 pursuant to a rate case settlement it filed on December 13, 2017 that the 

Commission approved on February 28, 2018.

197 The December 13, 2017 settlement was

prior to the Commission’s issuances of the NOPR and United Airlines Issuances. Parties 

to the settlement could not have been aware of these Commission orders. As discussed 

above, the Commission will not presume what the parties’ positions may be with respect 

to settlements filed prior to March 26, 2018. The Commission will not exempt Eastern 

Shore from filing a FERC Form No. 501-G in this Final Rule. But, as discussed above, it 

 195 Eastern Shore Comments at 4 (citing Eastern Shore Natural Gas Co., 

163 FERC ¶ 61,054 (2018)).

196 Eastern Shore Natural Gas Co., 163 FERC ¶ 61,054 at P 1.

197 Eastern Shore Natural Gas Co., 162 FERC ¶ 61,183 (2017).
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may file a separate request for a waiver of the FERC Form No. 501-G filing requirement

which interested persons may comment upon. 

165. EQT Midstream and Tallgrass Pipelines request that the Commission “provide 

other pipelines with the ability to request a waiver,” or an extension of time, with both 

citing the example of a publicly announced corporate restructuring.198 We clarify that 

pipelines have the same right to request waiver or an extension of time of the One-time 

Report for any reason as they do to request waiver or an extension of time of any 

informational reporting requirement. We caution, however, that the Commission bears 

no obligation to grant any request that would have the effect of delaying rate relief, and 

as stated above, pipelines must file the FERC Form No. 501-G by the required deadline, 

unless the Commission has affirmatively granted a requested waiver. 

9. Miscellaneous Changes to FERC Form No. 501-G

a. Comments and Discussion

166. Boardwalk and INGAA state line 34 of page 1 of the proposed FERC Form 

No. 501-G is labeled the “Indicated Rate Reduction” and provides the results from 

completing the form. Boardwalk and INGAA argue this label is misleading, and if not 

modified, would create adverse consequences for pipelines. Boardwalk claims line 34

shows only the potential modification to a pipeline’s cost of service due to tax policy 

changes, without regard for changes that may occur to a pipeline’s billing determinants, 

discount adjustments, and other issues impacting recourse rates. INGAA states that the 

 198 EQT Midstream Comments at 13-14; Tallgrass Pipelines Comments at 19-20.
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FERC Form No. 501-G does not show what a pipeline’s rate reduction would be if the 

pipeline were to modify its rates in response to the new policies on income tax and other 

factors that would be considered in a full review of its costs and revenues in an NGA 

sections 4 or 5 rate proceeding. To prevent line 34 from being misleading, Boardwalk 

and INGAA propose that the Commission should label it “Indicated Cost of Service 

Reduction.”199

167. The Commission adopts Boardwalk’s and INGAA’s proposal to change the 

label for page 1, line 34 to “Indicated Cost of Service Reduction” in the FERC Form 

No. 501-G. 

168. Indicated Shippers request the following additions, in order to ensure that the 

proposed FERC Form No. 501-G provides shippers and the Commission with sufficient 

information to determine the level of cost reductions due to the Tax Cuts and Jobs Act 

and Revised Policy Statement:

a. Page 1, Lines 6-10 – The Commission should include a line for storage gas 

losses recorded in Account No. 823, which are not appropriately included 

in a pipeline’s cost of service. 

b. Page 1, Lines 7-9 and 12-13 – The Commission should provide separate 

lines for gas fuel cost exclusions, electric power cost exclusions, and 

miscellaneous fuel costs (such as fuel cost exclusions for building heat). 

 199 INGAA Comments at 39; Boardwalk Comments at 30.
Docket Nos. RM18-11-000 and RP18-415-000 - 115 -

c. Page 1, Line 15 and Page 3, Lines 1-6 – The Commission should include a 

line item detailing ACA [Annual Charge Adjustments] costs, as well as a 

line for exclusion of ACA revenues. These costs and revenues are not 

typically included in pipeline costs of service for ratemaking purposes, 

given that ACA costs are collected through a surcharge. 

d. Page 1, Line 17 – The Commission should include a separate line item for 

any negative salvage amounts, as well as any amortization of asset 

retirement obligations. 

e. Page 2, Line 13 – The Commission should add two separate lines to reflect 

the effect on the ADIT balance due to changes in the tax rate. One line 

would show the temporary differences between book and accelerated 

depreciation rates, and the other line would show permanent differences 

due to the change in the tax rates under the Tax Cuts and Jobs Act. 

f. Page 2, Lines 13 -15 – The Commission should require pipelines to submit 

footnotes that reflect FERC Form No. 2 footnote data referenced on these 

lines. 

g. Page 2, Lines 16-17 – The Commission should require pipelines to specify 

whether the recourse rates are based upon a levelized rate design versus a 

traditional rate design. This could be accomplished via a separate line that 

displays the regulatory asset or liability associated with the rate 

levelization, if applicable. 
Docket Nos. RM18-11-000 and RP18-415-000 - 116 -

h. Page 3, Lines 1-6 – The Commission should include a line that shows 

revenues reserved for refunds. Page 301 of FERC Form No. 2 requires 

gross revenues and reservations for refunds to be reported. Reserved 

revenues have book/tax implications in the ADIT amounts. 

i. Page 3, Lines 7-8 – The Commission should include an option for the 

pipeline to state whether it recovers both fuel gas and electric fuel costs 

through its fuel tracking and true-up mechanism. 

j. Page 4, Lines 8-10 and Lines 29-30 – The Commission should require the 

pipeline to provide the time period and SEC Form 10K reference 

supporting the parent company capital structure claimed, in addition to the 

Ticker and Company Name. 

k. Page 4, Line 13 – The Commission should include a separate line item 

specifying “other interest,” and the pipeline should list only those items that 

are properly included in a cost of service. 

l. Page 5, Lines 11-24 – The Commission should require the pipeline to 

provide the year of the owner data provided. There is often a lag in the data 

related to ownership percentages (for example, the 2017 data would likely 

only include 2016 ownership percentages).200

169. The Commission declines Indicated Shippers’ requests, except for Items j and l

noted above.

 200 Indicated Shippers Comments at 15-17.
Docket Nos. RM18-11-000 and RP18-415-000 - 117 -

170. Indicated Shippers’ request in Item a asks the Commission to include a line that 

shows storage gas losses recorded in Account No. 823, which are not included in a 

pipeline’s cost of service. Account No. 823 can be recorded differently by each pipeline 

and may be included in a pipeline’s cost of service. It is not possible to account for all 

the differences between pipelines so the Commission declines to include a separate line 

for Account No. 823. 

171. For Items b and d, Indicated Shippers request to disaggregate the gas exclusions 

and negative salvage data provided on the FERC Form No. 501-G. However, this request 

would not provide additional information to evaluate the impact of the Tax Cuts and Jobs 

Act and the United Airlines Issuances on a pipeline’s cost of service. Therefore, the 

Commission finds this request unnecessary and declines Indicated Shippers’ request.

172. For Item c, Indicated Shippers state that ACA cost and revenue are not typically 

included in a pipeline cost of service for ratemaking purposes. Indicated Shippers 

conflate a cost-of-service item with cost recovery. ACA costs are a recoverable cost-ofservice item. FERC Form No. 501-G is focused on costs, not on revenues. The 

Commission finds that the ACA cost is appropriately included in the FERC Form 

No. 501-G data and that there is no need to modify the form for ACA revenues. 

Therefore, the Commission denies Indicated Shippers’ request. 

173. For Item e, Indicated Shippers request that the Commission add two lines to reflect 

changes to the ADIT balance due to changes in the tax rate. The FERC Form No. 501-G 

already reflects changes in ADIT due to the changed tax rate, as the data is brought over

from the pipeline’s FERC Form Nos. 2 and 2-A. As is explained elsewhere in this 
Docket Nos. RM18-11-000 and RP18-415-000 - 118 -

order,201 the 2017 FERC Form Nos. 2 and 2-A ADIT balances are required to be 

recalculated reflecting the Tax Cuts and Jobs Act. There is no need to show the level of 

the required adjustment. Indicated Shippers’ request is denied.

174. For Item f, Indicated Shippers request that the Commission require pipelines to 

supply any associated footnotes that may have been provided in FERC Form Nos. 2 and 

2-A. The Commission finds that there is no need to require pipelines to submit footnotes 

when they are already provided in the pipeline’s Form No. 2 or 2-A. Any interested party 

may simply reference the pipeline’s Form No. 2 or 2-A footnotes.

175. For Item g, Indicated Shippers request to disaggregate the data in the FERC Form 

No. 501-G by requiring pipelines to specify whether the recourse rates are based upon a 

levelized rate design versus a traditional rate design by adding a separate line to display 

the regulatory asset balance attributable to the levelized rate design. The FERC Form 

No. 501-G already carries over the FERC Form Nos. 2 and 2-A data that includes 

regulatory assets or liabilities attributable to levelized rates. Indicated Shippers do not 

identify what purpose would be served by the additional level of disaggregation. The

Commission finds Indicated Shippers’ request unnecessary.

176. Indicated Shippers request in Item h to add a line to show revenues reserved for 

refunds. FERC Form No. 501-G focuses on a pipeline’s cost of service. Funds reserved 

for refunds are pipeline revenues. FERC Form No. 501-G is focused on costs, and not on 

revenues. The Commission rejects Indicated Shippers’ proposed change. 

 201 See supra P 144.
Docket Nos. RM18-11-000 and RP18-415-000 - 119 -

177. For Item i, Indicated Shippers request to include an option to state whether a 

pipeline recovers both fuel gas and electric fuel costs through its fuel tracking and true-up 

mechanism. The Commission is aware that pipelines record gas and electric fuel, lost 

and accounted for gas, and related gas sales and purchases, in a variety of accounts. On

page 3, Lines 2-4 capture the major accounts. Lines 7 and 8 request information as to 

whether a pipeline has a true-up mechanism for fuel or stated rates. The Commission 

acknowledges that the FERC Form No. 501-G adjustments for fuel and related costs will 

not be complete. However, as the major accounts are accounted for, the end result should 

not significantly impact the use of the form as a screening tool. 

178. For Item k, Indicated Shippers request to include a separate page 4 line item 

specifying “other interest” and list only those items that are properly included in a cost of 

service. The Commission denies this request. This request would require a pipeline to 

make a cost allocation determination, which would vary by pipeline. As previously 

stated, the purpose of FERC Form No. 501-G is to create a screen to determine whether 

additional procedures are required. The form is not designed to duplicate each and every 

pipeline’s cost-of-service design. 

179. The Commission will incorporate Indicated Shippers’ requests for Items j and l, 

wherein they request the pipelines to provide references to the data provided on FERC 

Form No. 501-G, page 4, capital structure, and page 5, ownership data, respectively. For 

Item j, instead of requiring pipelines to provide the time period of the SEC Form 10K 

reference in addition to the ticker and company name, the Commission will add a 

separate cell in the FERC Form No. 501-G where pipelines can provide a hyperlink to the 
Docket Nos. RM18-11-000 and RP18-415-000 - 120 -

referenced SEC Form 10K. For Item l, the Commission will add a separate cell to the 

FERC Form No. 501-G for pipelines to specify the year of the owner data provided.

180. Berkshire Hathaway requests the Commission modify the FERC Form No. 501-G,

pages 1-3 to eliminate market-based costs and revenues. Berkshire Hathaway claims 

during the course of traditional rate proceeding, these revenues and costs would not be 

included as part of the cost-of-service calculation, and therefore, should not be part of the 

FERC Form No. 501-G reporting.202 TransCanada raises similar concerns that the FERC 

Form No. 501-G should exclude all incremental cost of service and revenue components 

from FERC Form No. 2 pages 217 and 217a.203

181. The Commission rejects Berkshire Hathaway’s and TransCanada’s proposal to 

exclude costs and revenues from the FERC Form Nos. 2 and 2-A, pages 217 and 217a. 

Contrary to Berkshire Hathaway’s claims that the non-traditional cost and revenue would 

not be included in a cost-of-service calculation, general rate case filings pursuant to 

Part 154 of the Commission’ regulations require pipelines to provide a complete cost of 

service, including non-jurisdictional functions and costs associated with service for which 

the pipeline does not propose to change the rates.204 As the Commission has explained, a 

complete cost-of-service filing is required to permit examination and allocation of 

 202 Berkshire Hathaway Comments at Ex. A.

203 TransCanada Comments at 16.

204 18 CFR 154.313.
Docket Nos. RM18-11-000 and RP18-415-000 - 121 -

common costs.205 A complete cost of service would include market-based rate and 

incremental services. Incomplete rate case filings may be rejected.

206 If, as a matter of 

functionalization, cost allocation or rate design,207 a pipeline believes that the data in 

FERC Form No. 501-G should be adjusted, they may do so in an Addendum to the FERC 

Form No. 501-G filing.

182. In addition, Berkshire Hathaway argues that on FERC Form No. 501-G’s page 1,

lines 7-9 and 12-13, and page 3, lines 2-5, all revenues and expense should be included in 

the cost of service and return on equity calculations; therefore, page 1, lines 7-9 and 12-

13, and page 3, lines 2-5 related to fuel and gas balances are not necessary. Berkshire 

Hathaway explains pipelines without fuel, unaccounted for gas, or other trackers could 

have potential gains or losses associated with the fuel revenues collected and sales 

 205 See, e.g., Equitrans, L.P., 109 FERC ¶ 61,214, at P 14 (2004).

206 Id.; Williston Basin Interstate Pipeline Co., 55 FERC ¶ 61,340 (1991); National 

Fuel Gas Supply Corp., 69 FERC ¶ 61,253 (1994); CNG Transmission Corp., 80 FERC 

¶ 61,137 (1997), reh'g denied, 81 FERC ¶ 61,031 (1997).

207 The five steps of rate design are (1) determining the pipeline's cost of service, 

(2) functionalizing the pipeline's costs among the pipeline's various operations, 

(3) classifying the pipeline's fixed and variable costs to reservation and usage charges of 

the pipeline's rates, (4) allocating the costs classified as fixed or variable among the 

pipeline's various rate zones and services, and (5) designing per unit rates for each 

service. Pipeline Service Obligations & Revisions to Regulations Governing SelfImplementing Transportation; & Regulation of Natural Gas Pipelines After Partial 

Wellhead Decontrol, Order No. 636, FERC Stats. & Regs. ¶ 30,939 at 30,431, order on 

reh'g, Order No. 636-A, FERC Stats. & Regs. ¶ 30,950, order on reh'g, Order No. 636-B, 

61 FERC ¶ 61,272 (1992), order on reh'g, 62 FERC ¶ 61,007 (1993), aff'd in part and 

remanded in part sub nom. United Distribution Cos. v. FERC, 88 F.3d 1105 (D.C. 

Cir. 1996), order on remand, Order No. 636-C, 78 FERC ¶ 61,186 (1997).
Docket Nos. RM18-11-000 and RP18-415-000 - 122 -

expenses associated with such activity, which should flow through the cost of service and 

return on equity calculations as part of the FERC Form No. 501-G calculation. Berkshire 

Hathaway states excluding these accounts would fail to capture those gains and losses. 

Conversely, pipelines with trackers should not have any gains or losses on fuel or sale 

expense; therefore, including all of these accounts would ensure that the net amount is 

zero. In either case, Berkshire Hathaway asserts no adjustments are necessary.208 

183. The Commission denies Berkshire Hathaway’s request. FERC Form No. 501-G is 

designed to create a non-gas cost of service. The form is designed in this manner as most 

pipelines have some form of fuel tracker that should result in cost and revenue neutrality. 

As noted above in discussing Indicated Shippers’ Item i, the Commission is aware that 

the listed accounts will not capture all the accounts that may include fuel and gas balance 

accounts. However, a form designed to be used by approximately 130 pipelines cannot

achieve the cost of service and rate design granularity to accurately reflect every 

pipeline’s individual circumstance. The Commission is aware that pipelines with stated 

fuel rates may not have cost and revenue neutrality. That is why FERC Form No. 501-G, 

page 3, lines 7-8 request information as to whether the pipeline’s tariff provides for a fuel 

tracker or stated fuel rates. For pipelines with a stated fuel rate, the form is consistent in 

its treatment of that cost-of-service item as every other cost-of-service item. 

Additionally, FERC Form No. 501-G, page 3, line 5 requests the removal of any other 

 208 Berkshire Hathaway Comments at Ex. A.
Docket Nos. RM18-11-000 and RP18-415-000 - 123 -

fuel related revenues from any source that are not recognized as part of its non-fuel cost 

of service. 

184. Millennium observes that page 1 of FERC Form No. 501-G automatically assumes 

an income tax allowance of zero for any pass-through entities’ costs of service, while 

page 5 of FERC Form No. 501-G reflects an income tax allowance for pass-through 

entities calculated pursuant to the Commission’s 2005 Policy Statement. Accordingly, 

Millennium asserts that the form is internally inconsistent.

185. The Commission clarifies that there is no inconsistency. The information 

requested on page 5 provides the current income tax allowance reflected in the current 

rates of the pipeline prior to the Tax Cuts and Jobs Act and the United Airlines Issuances. 

By comparing a cost of service containing the income tax allowance applicable to current 

rates with a cost of service containing the reduced or eliminated income tax allowance 

consistent with section 154.404(a)(2), FERC Form No. 501-G determines the Indicated 

Cost of Service Reduction on line 34 of page 1. 

186. Furthermore, the Commission clarifies that any pipeline that answers “no” 

to the question on line 4 of page 1 in the FERC Form No. 501-G, “Is the Pipeline a 

separate income taxpaying entity?” must answer lines 13-26 of page 5 in the FERC Form 

No. 501-G and include the most recent date the marginal taxes rates represent. This 

applies whether or not the pipeline seeks the limited section 4 filing pursuant to 

section 154.404(a)(2). The Commission requests this information because it is not 

available to the public and provides useful data for assessing the effect of the tax policy 
Docket Nos. RM18-11-000 and RP18-415-000 - 124 -

changes on pipeline cost of service. The Commission is adding this guidance to both the 

FERC Form No. 501-G and to the FERC Form No. 501-G Implementation Guide. 

187. Spectra argues the proposed FERC Form No. 501-G is not structured appropriately 

to account for joint venture ownership of pipelines. Spectra explains that many of the 

fields in the form and the hard-wired formulae and outputs from those fields simply do 

not apply to joint ventures. For example, Spectra points to page 5 of the form that 

provides a list breaking down equity owners but does not reference joint ventures. 

Spectra also argues the FERC Form No. 501-G does not address how to include an 

income tax allowance for pipelines owned in part by corporations and in part by MLP

pipelines. Spectra asserts the form should be revised to clearly address joint venture 

pipelines and allow for inclusion of an income tax allowance for these entities, or to 

allow pipelines the opportunity to reflect such ownership and appropriate cost-of-service 

components in the FERC Form No. 501-G.209 

188. The Commission will accept in part and deny in part Spectra’s request to revise 

the FERC Form No. 501-G. To account for each pipeline’s unique situation is not 

feasible and may overly complicate the FERC Form No. 501-G. Instead, pipelines may 

make adjustments to individual line items in additional work sheets attached as an 

Addendum to the FERC Form No. 501-G to properly reflect their situation.210 If Spectra 

 209 Spectra Comments at 28.

210 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 39.
Docket Nos. RM18-11-000 and RP18-415-000 - 125 -

or any other pipeline proposes any adjustments, it must fully explain and support the 

adjustments in the Addendum. All adjustments should be provided in a manner similar to 

that required in adjustments to base period numbers provided in statements and schedules 

required by sections 154.312 and 154.313 of the Commission’s regulations.211 

189. TransCanada notes that as proposed, FERC Form No. 501-G requires pipelines to 

input the cost of capital from FERC Form No. 2 page 218a to complete lines 3 through 5. 

TransCanada argues this data is inappropriate to determine a pipeline’s capital structure, 

as that data is used for calculating AFUDC, and as a result, it includes prior year-end 

balances.212 The Commission acknowledges that in certain situations, this may result in 

slightly out-of-date capital structures. This timing problem should be ameliorated by the 

revision of page 4 of FERC Form No. 501-G to re-rank the capital structure analysis. In 

the event that any responses on the One-time Report nevertheless reflect inaccurate 

capital data, we encourage respondents to explain the inaccuracy in an Addendum to their 

report.

C. Additional Filing Options for Natural Gas Companies

190. In the NOPR, the Commission proposed that, upon filing of the FERC Form 

No. 501-G, interstate natural gas pipelines would have four options. The first two 

options – filing a limited NGA section 4 rate filing or a general NGA section 4 rate case –

would allow the pipelines to voluntarily make a filing to address the effects of the Tax 

 211 18 CFR 154.312 and 154.313.

212 TransCanada Comments at 16-17.
Docket Nos. RM18-11-000 and RP18-415-000 - 126 -

Cuts and Jobs Act and the Revised Policy Statement. Under the third option, pipelines

could file an explanation why no rate change is necessary. Finally, pipelines could file 

the FERC Form No. 501-G described above, without taking any other action at this time. 

As discussed below, in this Final Rule, the Commission adopts all four of these options, 

with various clarifications.

1. Limited NGA Section 4 Filing (Option 1)

a. NOPR

191. The Commission proposed that, together with its FERC Form No. 501-G, an 

interstate natural gas pipeline could file a limited NGA section 4 filing to allow interstate 

pipelines to reduce their rates to reflect the reduced income tax rates and elimination of 

the MLP pipeline income tax allowance on a single-issue basis, without consideration of 

any other cost or revenue changes. In other words, the Commission proposed to allow 

interstate natural gas pipelines to file a limited NGA section 4 filing, pursuant to 

proposed section 154.404, to reduce their reservation charges and any one-part rates that 

include fixed costs by the percentage reduction in their costs of service calculated in the 

FERC Form No. 501-G resulting from the reduced corporate income tax rates provided 

by the Tax Cuts and Jobs Act and the elimination of MLP tax allowances by the Revised 

Policy Statement. The Commission proposed to require MLP pipelines to eliminate their 

income tax allowances in any limited NGA section 4 filing, but permitted other passthrough entities to either eliminate their income tax allowances or justify why they should 

continue to receive an income tax allowance and to reduce their rates to reflect the 

decrease in federal income tax rates applicable to partners pursuant to the Tax Cuts and 
Docket Nos. RM18-11-000 and RP18-415-000 - 127 -

Jobs Act. The Commission stated that interested parties may protest the limited NGA 

section 4 filing, but that the Commission would only consider arguments relating to 

matters within the scope of the proceeding.213

192. The Commission noted that it generally does not permit pipelines to change any 

single component of their cost of service outside of a general NGA section 4 rate case but 

that the Commission believes an exception to that policy is justified in this case in order 

to permit interstate pipelines to voluntarily reduce their rates as soon as possible to reflect 

a reduction in a single cost component – their federal income tax costs – so as to flow 

through that benefit to consumers. The Commission also noted that the proposed 

requirement that all interstate pipelines file the abbreviated cost and revenue study in 

FERC Form No. 501-G would enable pipelines and all other interested parties to evaluate 

whether there are significant changes in other cost components or revenues that affect the 

need for a rate reduction with respect to taxes.214

b. Comments

193. Several commenters argue that the Commission should impose a moratorium on 

NGA section 5 actions if a pipeline chooses to make the limited NGA section 4 filing.215 

INGAA argues that pipelines electing to make the limited NGA section 4 filing will be 

 213 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 42.

214 Id. P 44.

215 INGAA Comments at 29; Dominion Energy Comments at 11; Williams 

Comments at 8; EQT Midstream Comments at 12-13; Kinder Morgan Comments at 33.
Docket Nos. RM18-11-000 and RP18-415-000 - 128 -

implementing a rate decrease sooner than would be required in a section 5 rate 

proceeding and that pipelines will have no incentive to make the limited NGA section 4 

filing absent a firm assurance that it will not immediately be subject to an additional 

NGA section 5 proceeding.216 Some commenters suggest a moratorium of at least three 

years would be appropriate.217 

194. INGAA and Kinder Morgan argue that a pipeline that elects to file a limited 

section 4 rate case should not be required to complete page 3 of FERC Form No. 501-G, 

which collects the data necessary to calculate an estimated ROE.

218 INGAA argues that 

the Commission stated that it will only consider protests of the limited NGA section 4 

filings that are directly related to the reduced income tax rates and elimination of the 

MLP pipeline income tax allowances.

219 INGAA contends that this information serves 

no purpose, would not lead to additional rate modifications under the limited NGA 

section 4 option, and the information could be used as a basis for a complaint by shippers 

seeking to initiate a section 5 proceeding.220

 216 INGAA Comments at 29.

217 Id.; Williams Comments at 8; EQT Midstream Comments at 12-13; Kinder 

Morgan Comments at 33.

218 INGAA Comments at 30; Kinder Morgan Comments at 33.

219 INGAA Comments at 30 (citing NOPR, FERC Stats. & Regs. ¶ 32,725 

at P 42).

220 Id.
Docket Nos. RM18-11-000 and RP18-415-000 - 129 -

195. Commenters ask for clarification regarding whether a pipeline is limited to using 

the data provided in the FERC Form No. 501-G without adjustment when reducing its 

rates under the limited NGA section 4 option or whether a pipeline is permitted to 

incorporate into its calculations the supported adjustments included in the Addendum that 

are permitted under the NOPR.221

196. APGA contends that not all interstate natural gas pipelines employ a straight 

fixed-variable rate design where all fixed costs are collected through the reservation 

charge and that the Commission should allow a pipeline to revise usage rates as well if 

there are fixed costs collected in usage rates.222

197. APGA asks the Commission to clarify that a limited NGA section 4 rate filing (to 

reduce a pipeline’s reservation charges and any one-part rates that include fixed costs by 

the percentage reduction in its cost of service calculated in the FERC Form No. 501–G) 

may be made prior to the due date for FERC Form No. 501-G.223

c. Discussion

198. The Commission adopts proposed section 154.404 authorizing natural gas 

pipelines to submit limited NGA section 4 filings to reduce their rates to reflect the Tax 

Cuts and Jobs Act and the United Airlines Issuances, with three modifications. First, as 

 221 EQT Midstream Comments at 18-19; Tallgrass Pipelines Comments at 22.

222 APGA Comments at 7 (noting that proposed § 154.404(c) permits the pipeline 

to reduce only its reservation rates).

223 APGA Comments at 4-5.
Docket Nos. RM18-11-000 and RP18-415-000 - 130 -

already discussed, the Commission is removing the requirement that MLP pipelines 

eliminate their tax allowances in any limited NGA section 4 filing. Instead, like other 

pass-through entities, MLP pipelines may either eliminate their tax allowances or reduce 

their rates to reflect the reduced income tax expenses provided by the Tax Cuts and Jobs 

Act. Second, as discussed below, we grant in part commenters’ request for a moratorium 

on NGA section 5 investigations in the event a pipeline chooses the limited NGA 

section 4 option. Third, as discussed below, the Commission is also revising proposed 

section 154.404 to recognize that pipelines that do not use a straight fixed-variable rate 

design may include fixed costs in their usage charges and thus require that such pipelines’ 

limited NGA section 4 filings include a percentage reduction of any usage charges 

including fixed costs.

199. We grant, in part, commenters’ request for a moratorium on NGA section 5 

investigations in the event a pipeline chooses to make a limited NGA section 4 rate 

reduction filing. Such a filing is an efficient and expeditious method of passing along to 

ratepayers the benefit of the reduction in the corporate income tax rate or the elimination 

of the MLP income tax allowance, without the need for the costly and time-consuming 

litigation entailed in an NGA section 5 rate investigation. Accordingly, it is reasonable to 

provide pipelines an incentive to make such limited NGA section 4 rate reduction filings. 

On the other hand, it is possible that a pipeline could make a limited NGA section 4 rate 

reduction filing and yet still have a significantly excessive ROE. In order to balance 

these concerns, the Commission has determined that it will not initiate an NGA section 5 

investigation into the rates of a pipeline for three years from the effective date of the rate 
Docket Nos. RM18-11-000 and RP18-415-000 - 131 -

reduction resulting from the pipeline’s limited NGA section 4 filing if the pipeline’s 

filing meets certain requirements. A pipeline would qualify for the NGA section 5 

investigation moratorium if (1) the Commission accepts its limited NGA section 4 filing 

and (2) its Total Estimated ROE after the filing, as calculated on page 3, line 26, column 

(E) of its FERC Form No. 501-G, is 12 percent or less.

224 For purposes of determining 

whether a pipeline qualifies for the NGA section 5 investigation moratorium, the 

Commission will rely on data in the FERC Form No. 501-G itself, without considering 

any adjustments the pipeline may include in an Addendum, so as to minimize any 

disputes as to whether the pipeline qualifies for the moratorium. However, as discussed 

below, the pipeline is free to calculate the percentage rate reduction proposed in its

limited NGA section 4 filing using the adjusted data in its Addendum to its FERC Form 

No. 501-G. 

 224 FERC Form No. 501-G includes a new column titled “Rate Moratorium Option 

12% ROE Test.” In that column, the effect of a limited section 4 rate reduction is 

measured by reducing a pipeline’s total adjusted revenues (adjusted for non-base rate and 

non-jurisdictional activities) by the indicated cost-of-service reduction. The Commission 

is aware this adjustment is a proxy for a detailed revision to rates and does not reflect any 

discount adjustment, negotiated rates or treatment of fixed and variable cost components. 

With that caveat, the ROE calculation for the three-year rate moratorium begins with the 

adjusted revenue and subtracts the operating costs to obtain revised income before 

income taxes. That amount is further reduced to reflect the new tax rates for a C Corp or 

elimination thereof for a pass-through entity to calculate net income. The net income is 

compared to the pipeline’s rate base to develop the test ROE to determine whether the 

pipeline qualifies for the moratorium.
Docket Nos. RM18-11-000 and RP18-415-000 - 132 -

200. The Commission uses its discretion when deciding whether to initiate an NGA 

section 5 investigation.

225 Using a 12 percent Total Estimated ROE threshold to 

determine whether a pipeline qualifies for a moratorium will allow for a more efficient 

use of the Commission’s resources and provide an additional incentive for pipelines to 

choose the limited NGA section 4 filing option so that customers will receive a rate 

reduction sooner than if the Commission initiated an NGA section 5 investigation.

201. The Total Estimated ROE calculated in the FERC Form No. 501-G need not be

12 percent or less for the Commission to accept a limited NGA section 4 filing. Further, 

a FERC Form No. 501-G with a Total Estimated ROE higher than 12 percent will not 

necessarily result in a NGA section 5 rate investigation. For pipelines that are not 

covered by the moratorium, the Commission will take many factors into consideration

when determining whether to exercise its discretion to initiate a NGA section 5 

investigation, including whether a pipeline chooses the limited NGA section 4 option, 

any information the pipeline provides in an Addendum to its FERC Form No. 501-G, or 

any other explanation the pipeline may provide as to why the Commission should not 

initiate a NGA section 5 rate investigation. Finally, we note that the NGA section 5 

investigation moratorium would not prevent customers from filing an NGA section 5 

complaint.

 225 See General Motors Corp v. FERC, 613 F.2d at 944 (“[A]n administrative 

agency’s decision to conduct or not to conduct an investigation is committed to the 

agency’s discretion.”) (citations omitted).
Docket Nos. RM18-11-000 and RP18-415-000 - 133 -

202. We agree with APGA that not all interstate natural gas pipelines employ a straight 

fixed-variable rate design where all fixed costs are collected through the reservation 

charge and that a pipeline should be able to revise usage rates using the limited NGA 

section 4 option if there are fixed costs collected in usage rates. Accordingly, we have 

revised proposed section 154.404 to require that the authorized limited NGA section 4 

filing include a percentage reduction of a usage charge that includes fixed costs.

203. We also affirm that pipelines must complete FERC Form No. 501-G in its entirety, 

including page 3, even when choosing the limited NGA section 4 filing option. Page 3 of 

the report requires the pipeline to report its revenues from which the cost-of-service 

items, as detailed on page 1, are subtracted. Thus, the information reported on page 3 of 

the report is necessary to calculate the pipeline’s ROE before and after the reduction in 

income taxes provided by the Tax Cuts and Jobs Act and the elimination of the MLP 

pipeline income tax allowance by the United Airlines Issuances. Although such ROE

information may not be relevant to calculating the rate reduction included in a limited 

NGA section 4 rate filing, it is relevant to determining whether the Commission should 

initiate an investigation of the pipeline’s rates under NGA section 5 despite the pipeline’s 

limited NGA section 4 filing, and that information is necessary for purposes of applying 

the moratorium discussed above. Thus, the pipeline must complete the entire FERC 

Form No. 501-G regardless of the subsequent filing option chosen by the pipeline. 

204. In response to questions regarding whether a pipeline may calculate the percentage 

reduction in its rates for the limited NGA section 4 option using the adjustments in its 

Addendum to the FERC Form No. 501-G, we clarify that such adjustments may be 
Docket Nos. RM18-11-000 and RP18-415-000 - 134 -

reflected in the calculation of the limited NGA section 4 rate reduction, subject to the 

following conditions. As stated in the NOPR, the limited NGA section 4 option is meant 

to “allow interstate pipelines to reduce their rates to reflect the reduced income tax rates 

and elimination of the MLP pipeline income tax allowance on a single-issue basis, 

without consideration of any other cost or revenue changes.”226 Thus, the pipeline may 

not offset the percentage reduction in its cost of service resulting from the Tax Cuts and 

Jobs Act and the United Airlines Issuances with unrelated increases in its cost of service. 

However, the pipeline may take into account adjustments included in its Addendum to 

the FERC Form No. 501-G for the purpose of accurately calculating the percentage 

reduction in its cost of service caused by the Tax Cuts and Jobs Act or the United Airlines

Issuances. For this purpose, in calculating the percentage reduction in its cost of service 

related to the reduction or elimination of its tax allowance, the pipeline should include the 

cost-of-service adjustments in its Addendum in its cost of service for the periods both 

before and after the Tax Cuts and Jobs Act and United Airlines Issuances. As noted 

above, for purposes of the NGA section 5 investigation moratorium, the Commission will 

use the pipeline’s unaltered FERC Form No. 501-G to determine whether it qualifies for 

the moratorium. 

205. In response to APGA’s request, we clarify that a pipeline may file its FERC Form 

No. 501-G and limited NGA section 4 filing in advance of the due date of its FERC Form 

No. 501-G, and encourage pipelines to do so. A pipeline cannot, however, make the 

 226 See NOPR, FERC Stats. & Regs. ¶ 32,725 at P 42.
Docket Nos. RM18-11-000 and RP18-415-000 - 135 -

limited NGA section 4 filing described in this Final Rule without also filing the FERC 

Form No. 501-G.

2. General NGA Section 4 Filing or Prepackaged Uncontested 

Settlement (Option 2)

a. NOPR

206. The Commission proposed in the NOPR that an interstate natural gas pipeline 

could include with its FERC Form No. 501-G a commitment to file either a prepackaged 

uncontested settlement or, if that is not possible, a general NGA section 4 rate case to 

revise its rates based upon current cost data.227 The Commission stated that a pipeline 

choosing this option would also indicate an approximate time frame regarding when it 

would file the settlement or the NGA section 4 filing. The Commission also proposed 

that if the pipeline commits to make such a filing by December 31, 2018, the 

Commission would not initiate an NGA section 5 investigation of its rates prior to that 

date.228

b. Comments

207. Several commenters argue that pipelines that elect to file a pre-packaged 

settlement or general NGA section 4 rate case should be granted additional time to make 

such a filing.229 INGAA argues that the proposed deadline of December 31, 2018 does 

 227 Id. P 47.

228 Id.

229 INGAA Comments at 23-25; Dominion Comments at 12-14; Southern Star 

Comments at 10; EQT Midstream Comments at 9-12; Tallgrass Pipelines Comments at 

13-15; Kinder Morgan Comments at 34-35; Spectra Comments at 9.
Docket Nos. RM18-11-000 and RP18-415-000 - 136 -

not give pipelines sufficient time after the filing of FERC Form No. 501-G to negotiate 

uncontested rate settlements, and, if such negotiations do not succeed, to prepare a 

general NGA section 4 rate case. Tallgrass Pipelines contend that the December 31, 2018 

deadline is unduly burdensome, especially for companies that own and operate multiple 

jurisdictional natural gas pipelines and shippers that ship on multiple pipelines.230 EQT 

Midstream contends that a pipeline’s deadline to submit its FERC Form No. 501-G is 

directly tied to the date when a Final Rule is issued and that a pipeline may only have a 

matter of months to file an uncontested settlement agreement or a general NGA section 4 

rate case with the proposed static deadline of December 31, 2018.231 INGAA argues that 

the proposed deadline discourages uncontested settlements because a pipeline may not 

want to allocate its limited resources to negotiations and instead use those resources to 

prepare a general NGA section 4 rate case.232 Dominion Energy argues that shippers are 

unlikely to be ready to negotiate until a pipeline’s FERC Form No. 501-G has been 

submitted.233 Commenters argue that, instead of imposing a fixed December 31, 2018 

filing deadline upon all pipelines that elect option 2, the Commission should allow 

pipelines to file pre-packaged uncontested settlements or general NGA section 4 rate 

 230 Tallgrass Pipelines Comments at 15.

231 EQT Midstream Comments at 10.

232 INGAA Comments at 23-25.

233 Dominion Energy Comments at 13.
Docket Nos. RM18-11-000 and RP18-415-000 - 137 -

cases up to 180 days following their deadline for filing FERC Form No. 501-G, and that 

the Commission should also permit parties to request waivers or extensions of the filing 

deadline for pre-packaged uncontested settlements or rate cases if publically-announced 

settlement discussions are underway but parties have not yet resolved all issues.234 EQT 

Midstream argues that the Commission should provide pipelines additional time to 

commit to filing a general NGA section 4 rate case if pipelines choose to engage in 

publicly-noticed prefiling settlement negotiations with shippers but fail to reach an

agreement by December 31, 2018.235 

208. Spectra asks for clarification regarding the December 31, 2018 deadline and 

whether that is the date pipelines should notify the Commission whether they will file a 

pre-packaged settlement/general NGA section 4 rate case or whether that is the date 

pipelines must make those filings.236

209. Several commenters argue that the Commission should not require prepackaged 

settlements to be uncontested.237 EQT Midstream and Tallgrass Pipelines contend that 

prepackaged settlements submitted pursuant to option 2 should be reviewed under the 

 234 INGAA Comments at 25; Dominion Energy Comments at 13; EQT Midstream 

Comments at 11-12; Tallgrass Pipelines Comments at 14; Kinder Morgan Comments at 

34-35.

235 EQT Midstream Comments at 11.

236 Spectra Comments at 9.

237 EQT Midstream Comments at 19; Dominion Energy Comments at 11-12; 

Tallgrass Pipelines Comments at 22-23.
Docket Nos. RM18-11-000 and RP18-415-000 - 138 -

Commission’s normal standard for reviewing contested settlement filings and that 

prepackaged settlements should not be automatically rejected because they are not 

uncontested at the time the agreement is filed with the Commission.238 Dominion Energy 

argues that requiring prepackaged settlements to be completely uncontested is too high a 

bar and will likely cause few pipelines and customers to attempt that option.239

210. Commenters also argue that the Commission should not allow shippers with 

negotiated rates to withhold consent from an otherwise uncontested prepackaged 

settlement.240 EQT Midstream argues that, given that negotiated rate shippers are not 

impacted by a reduction to a pipeline’s recourse rate through an NGA section 4 or 5 

filing,241 the Commission should clarify that shippers do not have the ability to veto an 

otherwise unopposed settlement.242

c. Discussion

211. In the NOPR, the Commission stated that, if a pipeline commits to file an 

uncontested prepackaged settlement or a general NGA section 4 rate case on or before 

December 31, 2018, the Commission would not initiate an NGA section 5 rate 

investigation before that date. In other words, the Commission proposed to grant all

 238 EQT Midstream Comments at 19; Tallgrass Pipelines Comments at 22-23.

239 Dominion Energy Comments at 12.

240 EQT Midstream Comments at 19; Tallgrass Pipelines Comments at 23.

241 EQT Midstream Comments at 19 (citing NOPR, FERC Stats. & Regs. ¶ 32,725 

at P 15).

242 Id.
Docket Nos. RM18-11-000 and RP18-415-000 - 139 -

pipelines who make the above described commitment a guaranteed safe harbor from an 

NGA section 5 rate investigation until December 31, 2018. A number of pipeline 

commenters request that the Commission extend this guaranteed safe harbor from the 

initiation of an NGA section 5 rate investigation until a later date in order to give them 

more time to negotiate settlements with their customers and others. 

212. We deny this request. We recognize that pipelines must expend time and 

resources to reach a settlement or prepare an NGA section 4 rate case, but it is important

to implement rate reductions as a result of the Tax Cuts and Jobs Act and the United 

Airlines Issuances. The proposed December 31, 2018 end of the guaranteed safe harbor 

is already one year after the effective date of the Tax Cuts and Jobs Act. We also note 

that pipelines need not wait until the FERC Form No. 501-G deadline to begin 

discussions with customers or to begin preparing a general NGA section 4 rate case. 

Indeed, the Commission encourages pipelines to begin discussions with their customers 

immediately, if those discussions have not already begun.

213. However, we clarify that, if a pipeline is engaged in productive settlement 

negotiations as the December 31, 2018 end of the safe harbor period approaches, it may 

file a request for an extension of the safe harbor period. The filing of such requests will 

give other interested parties an opportunity to state whether they agree that productive 

settlement negotiations are underway. In determining whether to grant an extension, the 

Commission will consider whether other interested parties support the request.

214. Commenters argue that the Commission should not require prepackaged 

settlements to be uncontested. The Commission notes that prepackaged rate change 
Docket Nos. RM18-11-000 and RP18-415-000 - 140 -

filings typically do not contain all the supporting documents as required by section 

154.312 of the Commission’s regulations. As such, there is likely no record evidence 

upon which the Commission can approve a prepackaged settlement over the objections of 

a protesting party. Although prepackaged tariff filings are not technically settlements

filed pursuant to section 385.602 of the Commission’s regulations, the Commission 

typically applies Rule 602 standards in evaluating these filings. Under Rule 602 the 

Commission “may decide the merits of the contested settlement issues, if the record 

contains substantial evidence upon which to base a reasoned decision....”243 Without 

substantial evidence upon which to base a reasoned decision, and without additional 

procedures, the Commission could not approve a protested prepackaged filing. 

215. In regards to arguments that the Commission should not allow shippers with 

negotiated rates to withhold consent from an otherwise uncontested prepackaged 

settlement, we determine that the effect of opposition by a negotiated rate customer can 

be considered on a case-by-case basis.

3. Statement That No Adjustment in Rates Needed (Option 3)

a. NOPR

216. In the NOPR, the Commission proposed that a pipeline could include with its 

FERC Form No. 501-G a statement explaining why no adjustment in its rates is needed. 

The Commission recognized that a rate reduction may not be justified for a significant 

 243 18 CFR 385.602(h)(1)(i); see also Mobil Oil Corp. v. FPC, 417 U.S. 283, 314 

(1974).
Docket Nos. RM18-11-000 and RP18-415-000 - 141 -

number of pipelines for a number of reasons. For example, a number of pipelines may 

currently have rates that do not fully recover their overall cost of service. Therefore, a 

reduction in those pipelines’ tax costs may not cause their rates to be excessive. The 

Commission stated that the proposed FERC Form No. 501-G would provide information 

as to whether an interstate pipeline may fall into this category. The Commission stated 

that the pipeline could provide a full explanation of why, after accounting for its 

reduction in tax costs, its rates do not over recover its overall cost of service and therefore 

no rate reduction is justified. The pipeline would provide this statement along with any 

additional supporting information it deems necessary. 

217. The Commission also stated that an interstate pipeline might explain that an 

existing rate settlement provides for a moratorium on rate changes that applies to any rate 

changes that might result from the Tax Cuts and Jobs Act or the United Airlines

Issuances. The Commission stated that interested parties would have an opportunity to 

comment on any assertion by a pipeline that no adjustment to its rates is needed, and the 

Commission would then determine whether further action is needed with respect to that 

pipeline.244

b. Comments

218. Indicated Shippers argue that the Commission should thoroughly examine any 

assertion by a pipeline that its rate case settlement includes a rate moratorium preventing 

any rate change to reflect the reduction in its tax expenses. Indicated Shippers assert that 

 244 NOPR, FERC Stats. & Regs. ¶ 32,725 at PP¶ 49-50.
Docket Nos. RM18-11-000 and RP18-415-000 - 142 -

some settlements state that the rate moratorium does not apply to industry-wide 

Commission mandated changes to rates to account for tax cost savings, and the 

Commission should require those pipelines to implement rate changes to take into 

account the effects of the tax changes.245 

219. Indicated Shippers also request that the Commission clarify that any pipeline that 

is precluded from making rate changes due to a settlement moratorium will be required to 

comply with the FERC Form No. 501-G filing requirement once the moratorium has 

expired. LDC Coalition similarly argues that the Commission should clarify how it will 

encourage pipelines with rate case filing moratoria but no requirement to file a new rate 

case after the moratorium expires to reflect the impact of the Tax Cuts and Jobs Act and 

the Revised Policy Statement on its rates.246

220. LDC Coalition asks the Commission to specify how soon a pipeline must file a 

general NGA section 4 rate case in the context of pipelines filing an explanatory 

statement using a comeback provision as justification for why an adjustment to its rates is 

not needed.247

221. Direct Energy and Range argue that the Commission should establish a process for 

requiring immediate rate reductions to reflect the reduction in the corporate tax rate or tax 

 245 Indicated Shippers Comments at 14-15.

246 LDC Coalition Comments at 19-21.

247 Id. at 21.
Docket Nos. RM18-11-000 and RP18-415-000 - 143 -

allowance pursuant to NGA section 5.248 Direct Energy argues that the Commission 

should order an immediate proportional rate reduction under NGA section 5 for pipelines 

with revenues so far in excess of their actual cost of service that the rates are 

presumptively unjust and unreasonable under NGA section 5 based on a review of the 

information provided in the FERC Form No. 501-G.249

c. Discussion

222. As explained in the NOPR, despite the reduction in the corporate income tax and 

the change in policy concerning MLP tax allowances, a rate reduction may not be 

justified for a significant number of pipelines. For example, the pipeline’s existing rates 

may not fully recover its cost of service or a rate moratorium may prohibit rate changes at 

this time. Pipelines may include with their filing of the FERC Form No. 501-G a 

statement explaining why these or other reasons justify their not changing their rates at 

this time.

223. As discussed previously, the Commission will notice the filing of each pipeline’s 

FERC Form No. 501-G and permit interested persons to file interventions, protests, and 

comments. If any person disagrees with a pipeline’s explanation of why it believes no 

rate change is justified at this time, that person may intervene and protest the pipeline’s 

filing. For example, if a party that believes that a rate case moratorium relied on by the 

pipeline should be interpreted as permitting rate changes related to the Tax Cuts and Jobs 

 248 Direct Energy Comments at 4-5, 8; Range Comments at 11-13.

249 Direct Energy Comments at 8.
Docket Nos. RM18-11-000 and RP18-415-000 - 144 -

Act and the change in policy concerning MLP tax allowances, that party may provide a 

full explanation of why it interprets the settlement as it does, and the Commission will 

consider the views of both the pipeline and other intervening parties in deciding what 

action to take with respect to that pipeline.

224. Indicated Shippers request that the Commission clarify that any pipeline precluded 

from making changes to its rates by a settlement moratorium will be required to file a 

FERC Form No. 501-G after the settlement moratorium. LDC Coalition also suggests 

that the Commission might continue the FERC Form No. 501-G process beyond the onetime aspect of the proposed requirement for any pipeline with a settlement rate 

moratorium that extends past the compliance filing dates. The Commission rejects these 

requests. The Commission is adopting the FERC Form No. 501-G process as a one-time 

filing requirement enabling the Commission to consider what actions to take to address 

the rate effects of the Tax Cuts and Jobs Act. All pipelines with cost-based, stated rates 

are required to make their filings by the deadlines established in the Implementation 

Guide. Pipelines with rate moratoria currently in effect must comply with their 

applicable deadline and may include an explanation of why their settlement moratorium 

prevents a rate change at this time. If the Commission agrees that a rate moratorium 

prevents a rate change at this time, there is no need to require the subject pipeline to file 

another FERC Form No. 501-G at such time as the rate moratorium expires. The 

Commission intends to continue its existing practice of reviewing pipeline FERC Form 

No. 2 and 2-A filings every year to determine whether to initiate rate investigations under 

NGA section 5. Therefore, when a pipeline’s rate moratorium expires, the Commission 
Docket Nos. RM18-11-000 and RP18-415-000 - 145 -

will examine that pipeline’s most recent FERC Form No. 2 and 2-A filings as of that date 

and all other relevant factors in order to determine whether an NGA section 5 

investigation of that pipeline’s rates is justified.

225. In response to arguments by commenters that the Commission should immediately 

reduce pipelines’ rates pursuant to NGA section 5, as explained in the NOPR, the 

Commission recognizes that some pipelines need not change their rates at this time250

and, therefore, an immediate reduction in all pipeline rates pursuant to NGA section 5 

would not be appropriate. We also reject the request to immediately reduce rates based 

on a review of the information provided in the FERC Form No. 501-G. The FERC Form 

No. 501-G is only designed to estimate the percentage reduction in the pipeline’s cost of 

service resulting from the Tax Cuts and Jobs Act and the United Airlines Issuances and 

the pipeline’s current ROEs before and after the reduction in corporate income taxes 

and, if applicable, income tax allowance.251 However, as discussed above, FERC Form 

No. 501-G cannot capture all the intricacies of a fully developed cost of service, 

allocation and rate design for all pipelines. The FERC Form No. 501-G does not provide 

enough information by itself for the Commission to determine the just and reasonable 

rate pursuant to NGA section 5.

 250 See NOPR, FERC Stats. & Regs. ¶ 32,725 at P 28.

251 Id. P 32.
Docket Nos. RM18-11-000 and RP18-415-000 - 146 -

4. Take No Action (Option 4)

a. NOPR

226. Upon filing FERC Form No. 501-G, a pipeline may choose to take no action other 

than submitting FERC Form No. 501-G (Option 4). 

b. Comments

227. Some entities commented on this option,252 generally stating that the Commission 

should require pipelines choosing this option to include at least a statement of the basis 

for that decision.253 Indicated Shippers similarly comment that the Commission should 

combine Option 4 with Option 3 and clarify that a pipeline electing the take no action 

option must submit a notice that it will not be adjusting rates with its FERC Form 

No. 501-G filing, including an explanation for why the pipeline is doing nothing.254 

NGSA suggests that the Commission eliminate Option 4 altogether, stating that it 

provides pipelines with an incentive to delay the process of providing rate relief to 

customers and consumers.255

 252 Indicated Shipper Comments at 13; NGSA Comments at 6; Southern 

Companies Comments at 5; Direct Energy Comments at 8-9.

253 Southern Companies Comments at 5.

254 Indicated Shippers Comments at 13.

255 NGSA Comments at 6.
Docket Nos. RM18-11-000 and RP18-415-000 - 147 -

c. Discussion

228. The Commission declines to provide the requested clarification or to require 

statements of explanation as suggested by the commenters. As stated in the NOPR, the 

“no action” option is consistent with the fact that the Commission lacks authority to order 

an interstate pipeline to file a rate change under NGA section 4.256 Although the 

Commission is permitting interstate pipelines to voluntarily file a limited NGA section 4 

filing or commit to make a general NGA section 4 filing to modify their rates to reflect 

the reduction in the income tax rates or elimination of the MLP pipeline income tax 

allowance, the Commission is not requiring interstate pipelines to make such filings. As 

the Commission also stated, however, based on the information contained in the 

individual pipeline’s FERC Form No. 501-G, and comments by interested parties on that 

information, the Commission will consider initiating an NGA section 5 investigation of a 

particular pipeline’s rates if it appears those rates may be unjust and unreasonable.

D. Negotiated Rates

229. In the NOPR, the Commission stated that it has granted most interstate natural gas 

pipelines authority to negotiate rates with individual customers that are not bound by the 

maximum and minimum rates in the pipeline’s tariff. The Commission noted that before 

it permits a pipeline to implement a negotiated rate a pipeline must have a cost-based 

recourse rate on file with the Commission, so that a customer always has the option of 

 256 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 51 & n.71 (citing Pub. Serv. Comm. 

of New York v. FERC, 866 F.2d 487, 492 (D.C. Cir. 1989)).
Docket Nos. RM18-11-000 and RP18-415-000 - 148 -

entering into a contract at the cost-based recourse rate rather than a negotiated rate if it 

chooses.257

230. The Commission stated that changes to a pipeline’s recourse rates occurring under 

NGA sections 4 and 5 would not affect a customer’s negotiated rate because that rate is 

negotiated as an alternative to the customer taking service under the recourse rate.258 By 

allowing the pipeline to negotiate individualized rates, the Commission permitted 

pipelines, as a means of providing rate certainty, to negotiate a fixed rate or rate formula 

that would continue in effect regardless of changes in the pipeline’s maximum recourse 

rate.259 Therefore, the Commission found that, “unless a negotiated rate agreement 

expressly provides otherwise, the rates in such agreements will be unaffected by any 

reduction in the pipeline’s maximum rate ... resulting from the policies adopted in the 

rulemaking proceeding, whether in a limited or general NGA section 4 rate proceeding or 

a subsequent NGA section 5 investigation.”260

 257 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 14 (citing Negotiated Rate Policy

Statement, 104 FERC ¶ 61,134, order on reh’g and clarification, 114 FERC ¶ 61,042, 

dismissing reh’g and denying clarification, 114 FERC ¶ 61,304).

258 Id. P 15.

259 Id. P 45 (citing Columbia Gulf Transmission Co., 109 FERC ¶ 61,152, at P 13, 

reh’g denied, 111 FERC ¶ 61,338 (2005)). See also Iberdrola Renewables, Inc. v. FERC, 

597 F.3d 1299, 1305 (D.C. Cir. 2010).

260 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 45.
Docket Nos. RM18-11-000 and RP18-415-000 - 149 -

1. Comments 

231. Boardwalk argues that the Commission has specifically recognized the role of 

negotiated rate agreements in providing rate certainty to pipelines and their shippers,261

and maintains that the Commission should not reduce any negotiated rates due to recent 

tax policy changes (unless the agreement specifically requires such a reduction).

232. Boardwalk argues that this position is consistent with the Mobile-Sierra

doctrine,262 because the courts require that in order to modify such contracts, the 

Commission must satisfy the Mobile-Sierra standard, under which the Commission must 

“presume that the rate set out in a freely negotiated contract meets the just and reasonable 

requirement imposed by law.”263 Boardwalk asserts that the Commission may only 

modify a contract under Mobile-Sierra if it demonstrates “that the contract seriously 

harms the public interest,” which generally requires “a finding that the existing rate might 

impair the financial ability of [the pipeline] to continue its service, or that the rate would 

 261 Boardwalk Comments at 17 (citing Columbia Gulf Transmission Co., 109 

FERC ¶ 61,152 at P 13 (“To the extent a pipeline and its shipper want to obtain rate 

certainty by agreeing to a rate that will remain in effect throughout the term of the service 

agreement, the Commission provides them an opportunity to do so by entering into a 

negotiated rate agreement.”), reh’g denied, 111 FERC ¶ 61,338, aff’d, Columbia Gulf 

Transmission Co. v. FERC, 477 F.3d 739 (D.C. Cir. 2007)).

262 Boardwalk Comments at 16 (citing Dominion Transmission v. FERC, 533 F.3d 

845, 852-53 (D.C. Cir. 2008) (citing United Gas Pipe Line Co. v. Mobile Gas Serv. 

Corp., 350 U.S. 332 (1956); FPC v. Sierra Pac. Power Co., 350 U.S. 348 (1956) 

(Mobile-Sierra))).

263 Id. (citing Dominion Transmission, 533 F.3d at 853 (internal punctuation and 

citations omitted)).
Docket Nos. RM18-11-000 and RP18-415-000 - 150 -

cast upon other consumers an excessive burden, or be unduly discriminatory, or that there 

are other circumstances of unequivocal public necessity.”264 Boardwalk maintains that a 

change in the corporate tax rate or Commission policy cannot satisfy this high threshold.

233. Indicated Shippers argue that the Commission has the authority to revise 

negotiated rate contracts under the Mobile-Sierra doctrine to revise any contract if the 

public interest requires a modification265 and therefore, the Commission should ensure 

that each negotiated rate contract is examined. They assert that given the change in 

circumstances related to reductions in income tax rates, as well as the need to remove any 

unjust and unreasonable windfall for the natural gas pipeline companies, the Commission 

could find that the public interest requires such a finding. 

234. However, Indicated Shippers maintain that because many pipelines have a 

Memphis clause266 in their service agreements and individual negotiated rate agreements, 

 264 Id.

265 Indicated Shippers Comments at 6 (citing Mobile, 350 U.S. 332; Sierra, 350 

U.S. 348).

266 Indicated Shippers Comments at 7 (citing United Gas Pipe Line Co. v. 

Memphis Light, Gas, & Water Division, 358 U.S.103 (1958) (Memphis)). In Williston 

Basin Pipeline Co. v. FERC, the Court stated:

The label “Memphis clause” derives from the Supreme 

Court’s decision in United Gas Pipe Line Co. v. Memphis 

Light, Gas & Water Division,, holding that a contract 

provision allowing a party to seek a rate adjustment under a 

suitable provision of the Natural Gas Act ([section] 4 for the 

utility, [section] 5 for the customer) obviates the need to 

apply Mobile-Sierra’s “public interest” criterion. The 

Memphis Court could see “no tenable basis of distinction 
Docket Nos. RM18-11-000 and RP18-415-000 - 151 -

the Commission would only need to make a “just and reasonable” determination to revise 

negotiated rates.267 Indicated Shippers maintain that the Commission should establish a 

process to review each negotiated rate contract and examine the language set forth in 

each negotiated rate agreement to determine whether that agreement contains an explicit 

prohibition on rate reductions.

235. Indicated Shippers assert that one way for the Commission to allow negotiated rate 

contracts to share in the subject cost reductions would be to implement a negative 

surcharge, applicable to all volumes on a particular system. Indicated Shippers assert that 

the Commission has implemented positive surcharges in certain instances268 and many 

 

between the filing of [a new rate under section 4 of the NGA] 

in the absence of a contract and a similar filing under an 

agreement which explicitly permits it.” Thus, a Memphis

clause simply entitles a party to file for changes under an 

applicable provision of the NGA. 

519 F.3d 497, 499 (2008) (internal citations omitted).

267 Indicated Shippers maintain that the Commission has a long court and 

Commission precedent to follow to allow for negotiated rate contracts to benefit from 

rate reduction through the application of the Memphis clause, unless there is a specific 

provision that explicitly prohibits changes to the negotiated rate or the applicability of the 

Memphis clause. Indicated Shippers Comments at 8 (citing Union Pac. Fuels v. FERC, 

129 F.3d 157, 161 (D.C. Cir. 1997); Papago Tribal Util. Auth. v. FERC, 723 F.2d 950, 

953 (D.C. Cir. 1983); Cost Recovery Mechanisms for Modernization of Natural Gas 

Facilities, 151 FERC ¶ 61,047, at P 84 (2015) (Modernization Policy Statement); Sea 

Robin Pipeline Co., LLC, Opinion No. 516-A, 143 FERC ¶ 61,129, at PP 85-213 (2013)).

268 Indicated Shippers assert that the Commission utilized such a methodology 

for Account No. 858 costs, Natural Gas Pipeline Co. of America, 70 FERC ¶ 61,317, 

at 61,967-61,968 (1995); and hurricane-related costs, Sea Robin Pipeline Co., 128 FERC 

¶ 61,286, at PP 38-42 (2009), order on reh’g, 130 FERC ¶ 61,191, at PP 11-13 (2010), 

Sea Robin Pipeline Co., LLC, Opinion No. 516, 137 FERC ¶ 61,201 (2011), order on 
Docket Nos. RM18-11-000 and RP18-415-000 - 152 -

pipelines already have mechanisms in place for the return of over-collected amounts via a 

negative surcharge.

236. Range requests that the Commission find, under the Mobile-Sierra doctrine, that 

existing jurisdictional contracts between interstate pipelines and shippers including 

negotiated rate contracts which do not reflect the subject reduction in the corporate tax 

rate, are unjust and unreasonable under the NGA. Range states that the dramatic 

reduction in pipeline tax rates provides one of the few instances where the public interest 

requires the Commission to modify the rates under all shipper/pipeline transportation 

contracts.

237. If the Commission declines to make such a Mobile-Sierra finding, Range argues 

that the Commission has not provided a valid basis for excluding negotiated rate 

contracts from the Tax Cuts and Jobs Act rate reduction. Range asserts that the 

Commission’s reliance on the Negotiated Rate Policy Statement to exclude negotiated 

rate contracts from sharing in the Income Tax Reduction is misplaced. Range states that 

although the Commission allowed pipelines to negotiate individualized rates as a means 

of allowing the pipeline to provide rate certainty by the negotiation of a fixed rate or rate 

formula that would continue in effect regardless of changes in the pipeline’s maximum 

recourse rate, such permission does not support the Commission’s finding that a 

negotiated rate agreement will be unaffected by any reduction in the pipeline’s maximum 

 

reh’g, Opinion No. 516-A, 143 FERC ¶ 61,129 at PP 146-151; High Island Offshore 

System, LLC, 145 FERC ¶ 61,155, at PP 16-20 (2013).
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rate reductions resulting from the policies adopted in the instant rulemaking unless the 

negotiated rate contract provides otherwise.”269

238. Range states that the courts allow the Commission to exercise “light-handed” 

regulation, but asserts that such regulation still is tied to the NGA and the “just and 

reasonable” standard. Range asserts that in INGAA, the court held that the “overarching 

criterion” was that such regulation based on other than only cost should be justified by “a 

showing that ... the goals and purposes of the statute will be accomplished,” and to 

satisfy that standard, the court “demanded that the resulting rates be expected to fall 

within a ‘zone of reasonableness, where [they] are neither less than compensatory nor 

excessive.’”270 Range states that INGAA also held that “[w]hile the expected rates’ 

proximity to cost was a starting point for this inquiry into reasonableness... ‘non-cost 

factors may legitimate a departure from a rigid cost-based approach,’” and that “we said 

that FERC must retain some general oversight over the system, to see if competition in 

fact drives rates into the zone of reasonableness ‘or to check rates if it does not.’”271 

Moreover, Range states that the courts have held that competition normally provides a 

reasonable assurance that rates will approximate cost, at least over the long run.272 Range 

 269 Range Comments at 10 (citing NOPR, FERC Stats. & Regs. ¶ 32,725 at P 45).

270 Id. (citing INGAA, 285 F.3d at 31 (quoting Farmers Union Cent. Exch. v. 

FERC, 734 F.2d 1486, 1502 (D.C. Cir 1984), cert. denied, 469 U.S. 1034 (1984))).

271 Id.

272 Id. (citing Elizabeth Gas Co. v. FERC, 10 F.3d 866, 870 (D.C. Cir. 1993)).
Docket Nos. RM18-11-000 and RP18-415-000 - 154 -

reasons that because the Commission assumes the negotiated rates approximate 

competitive rates, it follows that such rates must also approximate cost-based rates. 

Range alleges that the Commission has failed to apply these principles in excluding 

negotiated rate contracts from the tax reduction. Range asserts that this result is 

discriminatory, arbitrary and capricious, and not based on substantial evidence or 

reasoned decision-making. 

239. IOGA asserts that the Commission must review the language in individual 

contracts and aggressively use its NGA section 5 power to ensure that negotiated rates are 

just and reasonable. IOGA argues that the Commission’s suggestion in the NOPR that 

negotiated rate agreements would be unaffected in an NGA section 5 investigation273 is 

inconsistent with precedent and the presumption set out by the Mobile-Sierra doctrine 

that such contracts are just and reasonable.274 IOGA states that such a presumption can 

be overcome with a public interest showing in an NGA section 5 proceeding. IOGA 

asserts that although the public interest standard may pose a high bar, the Commission 

 273 IOGA Comments at 7 (citing Dominion Transmission, Inc., 135 FERC 

¶ 61,239, at P 30 (2011)).

274 Id. (citing Mobile, 350 U.S. 332; Sierra, 350 U.S. 348; Morgan Stanley Capital 

Group. Inc. v. Public Utility District No. 1 of Snohomish County., Wash., 554 U.S. 527, 

530 (FERC “must presume that the rate set out in a freely negotiated wholesale-energy 

contract meets the ‘just and reasonable’ requirement imposed by law. The presumption 

may be overcome only if FERC concludes that the contract seriously harms the public 

interest.”); Iberdrola Renewables, Inc. v. FERC, 597 F.3d at 1301 (“[N]egotiated rate 

customers are not left without redress if they think the rate has become unjust and 

unreasonable over time. They can always challenge the established rate under [S]ection 

5....”)).
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should make clear in the Final Rule that it did not intend to suggest in the NOPR that 

NGA section 5 relief was unavailable to negotiated rate shippers. 

240. IOGA asserts that because not all shippers have equal bargaining leverage and 

often there is no firm capacity available at the recourse rate, the Commission should 

consider the context of the negotiated rate bargain in determining whether above 

maximum negotiated rates should be reduced like recourse rates. IOGA argues that 

although the parties may have bargained for a fixed negotiated rate the pipeline bargained 

for a rate that recovers its federal income taxes and other costs that it recovers in the 

maximum recourse rate, not a rate that over-recovers its costs. IOGA maintains that it is 

neither just nor reasonable nor in the public interest for the Commission to permit such 

over-collection. IOGA concludes that the Commission should require any pipeline that 

declines to adjust negotiated rates to explain why an adjustment is not needed. 

241. NGSA also argues that negotiated rate contract holders should not be excluded 

from this tax reduction process because this would run contrary to Commission policy 

that allows the application of surcharges for extraordinary circumstances. NGSA argues 

that negotiated contracts often contain language with surcharge provisions to capture 

unforeseen items or special circumstances that are not part of the standard ratemaking 

process.275 NGSA maintains that if shippers with negotiated rate contracts are expected 

 275 NGSA Comments at 8 (citing Sea Robin Pipeline Company, LLC, 130 FERC 

¶ 61,261 (2010); High Island Offshore Sys., L.L.C., 138 FERC ¶ 61,114 (2012) as relying 

on the contracts containing a Memphis clause to permit the pipelines to impose a 

surcharge on fixed, negotiated rate contracts).
Docket Nos. RM18-11-000 and RP18-415-000 - 156 -

to share in costs incurred by pipelines for special situations, such as hurricanes or 

modernizations, then the Commission should also require that shippers share in cost 

reductions received by pipelines in special situations. 

242. NGSA requests that the Commission implement a negative surcharge mechanism, 

as warranted, for shippers with negotiated rate contracts. NGSA claims that this will 

ensure that all parties are afforded the opportunity to appropriately share in the benefits of 

the Tax Cuts and Jobs Act and Revised Policy Statement, and that pipeline rates are just 

and reasonable.

243. AGA requests that the Commission confirm that where the pipeline required that 

the rate for capacity awarded under a negotiated rate agreement be no less than the 

pipeline’s otherwise applicable tariff rate, such that the negotiated rate is now equal to the 

otherwise applicable tariff rate, and the tariff rate is reduced pursuant to proceedings 

related to the Tax Cuts and Jobs Act, any such negotiated rate be similarly reduced.

244. CAPP argues that the use of negotiated rates does not warrant the continuation of 

excessive recourse rates. CAPP argues that the rationale for this rate review extends to 

all pipelines, irrespective of the prevalence of negotiated rates on the pipeline. CAPP 

asserts that the fundamental purposes for which recourse rates are maintained is to 

provide an alternative to negotiated rates and a check on the exercise of market power. 

Therefore, CAPP argues that if a pipeline experiences a decline in income tax expense 

that warrants a reduction in its tariff rates, the use of negotiated rates and the impact of 

such contracting practices on its revenues has no impact on the justification for recomputing maximum tariff rates. 
Docket Nos. RM18-11-000 and RP18-415-000 - 157 -

2. Discussion

245. The Commission declines to establish a process under which it would review 

every currently effective negotiated rate contract in order to determine whether that 

contract can and should be modified to reflect the pipeline’s reduced tax costs as a result 

of the Tax Cuts and Jobs Act or the elimination of MLP tax allowances. For the reasons 

discussed below, the Commission believes that, as a general matter, such contracts should 

be allowed to remain in effect without change. However, an individual shipper under 

such a contract is free to file a complaint pursuant to NGA section 5 presenting evidence 

as to why its negotiated contract is unjust and unreasonable or contrary to the public 

interest and must be modified. Alternatively, if a shipper believes that the terms of its 

negotiated contract provide for a reduction in the negotiated rate to reflect the pipeline’s 

reduced tax costs and the pipeline has failed to comply with the contract, the shipper may 

file a complaint or seek to enforce the contract in a court.

246. As the Commission has explained, the negotiated rate program allows “pipelines 

to negotiate individualized rates that [are] not constrained by the maximum and minimum 

rates in the pipeline’s tariff.... Additionally, it permit[s] pipelines as a means of 

providing rate certainty, to negotiate a fixed rate that would continue in effect regardless 

of changes in the pipeline’s maximum rate.”276 In the Negotiated Rate Policy Statement 

 276 Northern Natural Gas Co., 105 FERC ¶ 61,299 at PP 15-16. See also

Columbia Gulf Transmission Co., 109 FERC ¶ 61,152, at P 13, reh’g denied, 111 FERC 

¶ 61,338, emphasizing that:
Docket Nos. RM18-11-000 and RP18-415-000 - 158 -

establishing the negotiated rate program, the Commission explained that the program 

“would dispense with cost of service regulation for an individual shipper when mutually 

agreed upon by the pipeline and its shipper,” and “a recourse service found in the 

pipeline’s tariff would be available for those shippers preferring traditional cost of service 

rates.”277 Indeed, as the court found in Iberdrola, the:

premise of the negotiated rate regime is that FERC will not 

review freely negotiated rates, which are presumed to be 

reasonable when a recourse rate is also offered.278

247. Thus, when a shipper enters into a negotiated rate agreement, it should be aware 

that it is agreeing to a rate that is not based on traditional cost of service regulation and 

will not be reduced simply because the pipeline’s maximum recourse rate may, at some 

future date, be lower than the negotiated rate. Because the shipper’s negotiated rate is not 

based on cost of service regulation, there is no reason why a reduction in the pipeline 

costs, including a reduction in its tax costs, should necessarily lead to a reduction in the 

 

To the extent a pipeline and its shipper want to obtain rate 

certainty by agreeing to a rate that will remain in effect 

throughout the term of the service agreement, the 

Commission provides them an opportunity to do so by 

entering into a negotiated rate agreement.

277 Alternatives to Traditional Cost-of-Service Ratemaking for Natural Gas 

Pipelines and Regulation of Negotiated Transportation Services of Natural Gas 

Pipelines; Statement of Policy and Request for Comments, 74 FERC ¶ 61,076, at 61,225-

226 (1996), order on clarification, 74 FERC ¶ 61,194 (1996), order on reh’g, 75 FERC ¶ 

61,024, reh’g denied, 75 FERC ¶ 61,066, reh’g dismissed, 75 FERC ¶ 61,291 (1996), 

petition denied sub nom. Burlington Res. Oil & Gas Co. v. FERC, 172 F.3d 918 (D.C. 

Cir 1998).

278 Iberdrola Renewables, Inc. v. FERC, 597 F.3d at 1304.
Docket Nos. RM18-11-000 and RP18-415-000 - 159 -

negotiated rate. Indeed, the Commission’s consistent practice in pipeline rate 

proceedings, whether conducted under NGA section 4 or 5, has been to address only the 

pipeline’s recourse rates and not make any modifications in any shipper’s negotiated rate. 

In these circumstances, the Commission finds it reasonable to presume that a shipper’s 

freely negotiated rate contract continues to meet the just and reasonable requirement in 

the NGA, regardless of a reduction in the pipeline’s tax costs, absent a particular shipper 

filing a complaint that presents compelling reasons to initiate an NGA section 5 

investigation.279 

248. Commenters take various positions on whether, if a complaint is filed, the 

Mobile-Sierra “public interest” presumption would apply to the negotiated rate 

agreement. Indicated Shippers assert that because many pipelines have Memphis clauses 

in their service agreements and individual negotiated rate agreements, the Commission 

would only need to make a “just and reasonable” determination to revise negotiated rates 

for such negotiated rates. IOGA and other shippers state that the Mobile-Sierra public 

interest standard would apply, but suggest that the public interest standard may be 

satisfied in the context of changes in law such as the Tax Cuts and Jobs Act. 

 279 Dominion Transmission, Inc. v. FERC, 533 F.3d 845, 852–53 (D.C. Cir. 2008) 

(noting that FERC must “presume that the rate set out in a freely negotiated ... contract 

meets the ‘just and reasonable’ requirement imposed by law.” See also Marathon Oil Co. 

v. Trailblazer Pipeline Co., 111 FERC ¶ 61,236, at P 64 (2005) (“Absent a compelling 

reason, the Commission does not believe it should second-guess the business and 

economic decisions between knowledgeable business entities when they enter into 

negotiated rate contracts.”).
Docket Nos. RM18-11-000 and RP18-415-000 - 160 -

249. The Commission need not resolve these issues in this Final Rule. Rather, the 

Commission will address these issues, as relevant, in the context of an individual 

complaint that may be filed. 

E. Miscellaneous Clarifications

250. Boardwalk comments that the Commission should recognize the effects of 

competition on the natural gas industry and the Commission’s rate making policies. 

Boardwalk asserts that pipelines have had no choice but to discount their transportation 

service rates to attract retail shippers in the face of competition. Thus, in Boardwalk’s 

view, such pipelines are already in a state of cost under-recovery. Boardwalk states that 

the NOPR and its contemplated approach of having transportation rates set arithmetically 

based on the content of FERC Form No. 501-G have exacerbated this problem and 

affected the pipelines’ ability to attract capital.280 It also claims that although customers 

receive the benefit of competition in discounted rates, the pipelines, under the referenced 

NOPR approach, do not receive a commensurate benefit when the market propels rates 

upward. Boardwalk claims that this imbalance between pipelines and their investors and 

customers and consumers is “out of step” with the competitive market intended by the 

Commission’s policies, and that the NOPR worsens this imbalance by favoring one set of 

affected parties. It also claims that the processes contemplated by the NOPR are 

inconsistent with the Commission’s prohibition on single issue ratemaking. Accordingly, 

Boardwalk states that the Commission should expressly state that the “same processes 

 280 Boardwalk Comments at 10-13.
Docket Nos. RM18-11-000 and RP18-415-000 - 161 -

offered here to adjust rates in light of the [Tax Cuts and Jobs Act] and revised Policy 

Statement will also be available to pipelines should there be a change to future tax policy, 

or any other policy affecting a key component of ratemaking.”281

251. The Commission declines to speculate on future potential actions, or what 

measures it may take should there be a future increase in the federal corporate tax rate. 

However, the Commission recognizes the importance of market issues and the potential 

for under-recoveries.282 The Commission takes the financial impact of its policies very 

seriously. The Commission will continue to consider the issues raised by Boardwalk as 

such issues arise in specific proceedings and as part of the Commission’s ongoing 

reevaluation of its policies.

252. Further, regarding this Final Rule, the Commission recognizes that it cannot 

simply require a pipeline to reduce its rates consistent with a known reduction in a single 

cost component of a cost-based rate, but rather must consider other factors, including 

whether the pipeline is over-recovering its cost of service on an overall basis. The 

Commission, in deciding whether to exercise its discretion to initiate an NGA section 5 

 281 Id. at 13.

282 See Composition of Proxy Groups for Determining Gas and Oil Pipeline 

Return on Equity, 123 FERC ¶ 61,048, at PP 3, 47 (2008) (citing Fed. Power Comm’n v. 

Hope Natural Gas Co., 320 U.S. 591 (1944)); see also Williston Basin Interstate Pipeline 

Co., 110 FERC ¶ 61,210 (2000) (balancing the Commission’s pro-competitive policies 

with the pipeline’s ability to focus discounts on less utilized parts of the system), and El 

Paso Natural Gas Co., 163 FERC ¶ 61,078, at PP 128-137 (2018) (Order No. 538-B) 

(rejecting request to design pipeline’s rates so as to require it to share in the costs of its 

discounting).
Docket Nos. RM18-11-000 and RP18-415-000 - 162 -

action, will take into account whether a rate reduction may not be justified because a 

pipeline’s rates do not over-recover its cost of service on an overall basis.

253. Southern Star comments that the Commission should allow pipelines to reinvest 

any monetary savings resulting from the Tax Cuts and Jobs Act into their respective 

systems and infrastructure instead of flowing through the benefits to customers and 

consumers.283 Southern Star claims that rate reductions provided to ultimate consumers 

as a result of the tax reduction will be nominal, and that it would be a better use of those 

savings to permit pipelines to invest those dollars in infrastructure improvements that 

would benefit customers and ratepayers, and would obviate the need for the FERC Form 

No. 501-G filings. Southern Star asserts that such reinvestment would be consistent with 

the underlying purpose of the Tax Cuts and Jobs Act, namely to make more products in 

the United States and to “bring back our companies.”

254. The Commission rejects Southern Star’s proposal. As noted, the purpose of the 

Final Rule is to provide a process for considering whether to initiate NGA section 5 

investigations of the cost-based recourse rates of interstate natural gas pipelines that do 

not voluntarily reduce those rates to reflect the reduction in the federal corporate tax rate

or elimination of MLP tax allowances, in accordance with our obligation under the NGA 

to ensure that natural gas pipeline rates are just and reasonable. Contrary to Southern 

Star’s suggestion that it would be more efficient to reinvest these dollars in pipeline 

 283 Southern Star Comments at 11-12.
Docket Nos. RM18-11-000 and RP18-415-000 - 163 -

infrastructure than to return them to customers and consumers, a just and reasonable costbased rate must be designed to provide the pipeline an opportunity to recover its cost of 

service, including a reasonable return on equity.284 The Commission lacks the authority 

to approve recourse rates that would allow pipelines to over-recover their cost of service. 

Pipelines are, of course, free to invest in additional pipeline facilities. If they do so, they 

may propose to adjust their rates to recover the costs of the new investment as part of 

their NGA section 7 initial rate proposal or in an NGA section 4 filing, and that rate 

adjustment could offset a rate reduction related to the pipeline’s reduced tax costs under 

the Tax Cuts and Jobs Act.

255. AGA and LDC Coalition comment that the Commission should clarify that the 

FERC Form No. 501-G filing, or any other limited NGA section 4 actions by a pipeline 

pursuant to the Final Rule, does not constitute a “recent rate review” sufficient for the 

purposes of the Commission’s Modernization Policy Statement on cost recovery 

mechanisms for modernization of natural gas facilities.285 The commenters state that the 

Modernization Policy Statement requires a pipeline seeking a modernization cost tracker 

to demonstrate that its current base rates are just and reasonable and reflect the pipeline’s 

current costs and revenues. LDC Coalition notes that the Modernization Policy 

 284 Alabama Elec. Coop v. FERC, 684 F2d 20, 27 (D.C. Cir. 1982) (“[R]ates 

should be based on the costs of providing service to the utility’s customers, plus a just 

and fair return on equity.”).

285 AGA Comments at 2 (citing Modernization Policy Statement, 151 FERC 

¶ 61,047 (Modernization Policy Statement)); LDC Coalition Comments at 13.
Docket Nos. RM18-11-000 and RP18-415-000 - 164 -

Statement provides that the rate review condition may be satisfied in different ways – an 

NGA section 4 rate case or a collaborative effort between a pipeline and its customers. 

They also comment that the Commission left open the possibility that pipelines could 

justify their existing rates through “alternative approaches.”286 Thus, they seek 

clarification that a pipeline’s FERC Form No. 501-G filing would not be considered 

among the alternative approaches that the Commission would consider sufficient for a

pipeline to justify its existing rates for purposes of the Modernization Policy Statement. 

Commenters argue that the information to be included in the FERC Form No. 501-G 

filings is abbreviated cost and revenue information that would not allow for the “full 

exchange of information” regarding existing rates between the pipeline and its customers 

required for a modernization cost surcharge.

256. The Commission provides the following clarification. Above, the Commission, in 

response to several pipeline comments, clarified that FERC Form No. 501-G is not an 

NGA section 4 filing and that the indicated cost of service and estimated ROE are not 

NGA section 5 findings. The Commission has noted the statutory limits upon which the 

data collection is based, and acknowledges the limitations inherent in a form designed to 

collect data from a large number of pipelines with many unique cost of service, allocation 

and rate design factors underlying their currently effective rates. Thus, by the same 

token, these same limitations will hinder a pipeline from using its FERC Form No. 501-G 

filing, designed to look at a pipeline’s overall non-gas cost of service, to demonstrate that 

 286 AGA Comments at 7.
Docket Nos. RM18-11-000 and RP18-415-000 - 165 -

its modernization surcharges are just and reasonable. We also clarify that a limited NGA 

section 4 filing made pursuant to the Final Rule does not constitute a “recent rate review” 

sufficient for the purposes of the Commission’s Modernization Policy Statement on cost 

recovery mechanisms for modernization of natural gas facilities. The Modernization 

Policy Statement established certain standards a pipeline would have to satisfy for the 

Commission to approve a proposed modernization cost tracker or surcharge including a 

requirement for “a review of the pipeline’s existing base rates by means of an NGA 

general section 4 rate proceeding, a cost and revenue study, or through a collaborative 

effort between the pipeline and its customers.”287 As described in the NOPR and the 

Final Rule, the limited NGA section 4 filing option is intended to allow interstate 

pipelines to reduce their rates to reflect the reduced income tax rates and elimination of 

the MLP pipeline income tax allowance on a single-issue basis, without consideration of 

any other cost or revenue changes. Due to the limited nature of this single-issue rate 

filing, it does not meet the rate review requirement described in the Modernization Policy 

Statement. 

257. LDC Coalition also seeks clarification that processes proposed in the NOPR do 

not obviate a pipeline’s settlement obligation to file an NGA general section 4 rate 

case.288 Specifically, they argue that any Final Rule should make clear that a pipeline 

cannot use the FERC Form No. 501-G filing, coupled with a limited NGA section 4 rate 

 287 Modernization Policy Statement, 151 FERC ¶ 61,047 at P 31.

288 LDC Coalition Comments at 15-16.
Docket Nos. RM18-11-000 and RP18-415-000 - 166 -

reduction filing, to satisfy a come-back obligation under a Commission-approved 

settlement. LDC Coalition asserts that the limited cost and revenue information in FERC 

Form No. 501-G, and the limited NGA section 4 process, are not valid substitutes for a 

general NGA section 4 rate case filing, which provides parties the opportunity to review 

all the components of the pipeline’s cost of service. LDC Coalition comments further 

that such “come-back” provisions are “often hard-fought settlement components critical 

to garnering support from customer parties.”289 Thus, it requests that the Commission 

clarify that a pipeline that “has committed to file a general NGA section 4 rate case as a 

negotiated component of a Commission-approved settlement must fulfill that settlement 

commitment.”290 

258. The Commission declines to make the broad clarification sought by LDC 

Coalition. As LDC Coalition points out, the terms and details regarding a pipeline’s 

obligation to make future filings are likely provisions negotiated between the parties to 

the settlement, and as such are governed by the settlement itself. Thus, we will not make 

a general clarification that may inhibit or impinge on negotiated provisions of 

Commission approved settlements. 

259. LDC Coalition also states that the Commission should incorporate the FERC Form 

No. 501-G Implementation Guide into the Final Rule and into proposed regulation

 289 Id. at 16.

290 Id.
Docket Nos. RM18-11-000 and RP18-415-000 - 167 -

section 260.402.291 It asserts that such inclusion is necessary to ensure that Commission 

staff and interested parties are able to access the information necessary to adequately 

assess the pipeline’s report. LDC Coalition asserts that incorporation of the

Implementation Guide into the Final Rule and Regulation, rather than just a reference to 

it in the proposed regulations, “would make clear that the Commission intends for 

customers and interested stakeholders to have access to the [report], and would help

ensure compliance with the Commission’s desired filing processes.”292

260. The Commission will not incorporate the FERC Form No. 501-G Implementation 

Guide into the Final Rule or into the proposed regulation or regulatory text. As LDC 

Coalition points out, the Commission included a Microsoft Excel version of the FERC 

Form No. 501-G and a proposed Implementation Guide as attachments to the NOPR, and 

thus made those files available in elibrary. The Commission intends to do the same for 

the Final Rule, and finds that the processes set forth in the guide, and data to be provided 

in the reports, will be adequately accessible to any interested parties in that manner.

F. Implementation Schedule for Informational Filings

1. NOPR

261. In the NOPR, the Commission proposed a staggered filing schedule. The 

Commission identified 133 interstate natural gas pipelines with cost-based rates that 

would be required to file the FERC Form No. 501-G, and divided them into four groups. 

 291 Id.

292 Id. at 18.
Docket Nos. RM18-11-000 and RP18-415-000 - 168 -

The Commission proposed that the due date for the first group be 28 days from the 

effective date of any Final Rule in this proceeding, and the due date for each subsequent 

group be 28 days from the previous group’s due date. The NOPR stated that pipelines 

may file their FERC Form No. 501-G earlier than the proposed dates and respondents 

may include with this filing, as appropriate, an Addendum explaining why no adjustment 

in their rates is needed, or their commitment to make a general NGA section 4 rate case 

filing in lieu of a limited NGA section 4 filing as permitted by section 154.404.293

2. Comments

262. Some commenters advocate for a delayed schedule. EQT Midstream urges the 

Commission to delay the FERC Form No. 501-G filing deadline for the first group of 

pipelines. EQT Midstream argues that the NOPR and Revised Policy Statement have 

made it unclear how to apply several ratemaking principles. EQT Midstream also argues 

that the 28 day deadline is not conducive to promoting settlements, as some parties may 

be wary to settle “knowing that a Commission order addressing ADIT and the Revised 

Policy Statement may subsequently be issued and may upset any agreed-to terms.”294

263. Other commenters advocate for an accelerated schedule. The Oklahoma AG 

requests that the Commission reduce the time period between FERC Form No. 501-G 

filings, then moving forward the final due date for filing rate cases.295 Process Gas 

 293 NOPR, FERC Stats. & Regs. ¶ 32,725 at P 62.

294 EQT Midstream Comments at 5.

295 Oklahoma AG Comments at 5.
Docket Nos. RM18-11-000 and RP18-415-000 - 169 -

requests that the Commission require all pipelines to file FERC Form No. 501-G within 

28 days of the effective date of the Final Rule, rather than using a staggered schedule. 

Similarly, Range requests that the Commission require all pipelines to file FERC Form 

No. 501-G within 30 days of the effective date of the Final Rule, rather than using a 

staggered schedule. 

264. Process Gas states that it is not aware of any reason why any pipeline would need 

more than the 28 days allowed for the first group of pipelines to complete the form, 

especially since the 2017 FERC Form No. 2 data was due to be filed April 18, 2018. 

Range notes that pipelines have been planning for their filings ever since the issuance of 

the NOPR. Process Gas and Range concede that Commission staff may need time to 

process all of the filings, but argue that the solution is to stagger the issuance of the final 

orders, not the receipt of the filings. They argue all parties would benefit from having the 

FERC Form No. 501-G posted promptly. For those pipelines planning to voluntarily 

reduce their rates, Process Gas and Range argue, an earlier filing date would provide their 

customers with the benefit of lower rates as soon as possible. For those pipelines 

planning not to voluntarily reduce their rates, Process Gas argues, an earlier filing date 

would provide earlier insight into the pipeline’s rationale, allowing customers and 

Commission Staff more time to evaluate the filing and prepare an appropriate 

response.296

 296 Process Gas Comments at 7; Range Comments at 14.
Docket Nos. RM18-11-000 and RP18-415-000 - 170 -

3. Discussion

265. The Commission adopts the implementation schedule proposed in the NOPR, with 

one modification. The Commission has determined to combine the third and fourth 

groups of pipelines into a single group and require all those pipelines to file their FERC 

Form No. 501-Gs within 28 days after the deadline for the second group of pipelines. 

This will allow the filing of all the FERC Form No. 501-Gs to be completed by early 

December of this year, rather than having the filing process extend into next year. We 

see no compelling reason to make any other changes in the implementation schedule. 

The Final Rule does not take effect instantly, but rather after a delay of 45 days after

publication in the Federal Register, and the first set of pipeline filings is not due until 

28 days after that. As a practical matter, then, pipelines in the initial filing group have 

over two months from the Commission’s approval of the Final Rule to prepare. 

266. We also decline to accelerate the filing schedule for the three pipeline groups. 

Commenters raise valid points in favor of requiring all pipelines to file simultaneously 

and instead staggering the target dates for final orders. We find, however, that the 

modified staggered schedule described above will allow the Commission to process the 

filings in a more efficient and orderly manner. We note that pipelines may file their 

FERC Form No. 501-G earlier than the proposed dates, and we especially encourage 

them to do so in instances where an early filing would ease the process of reaching a rate 

settlement with their customers.
Docket Nos. RM18-11-000 and RP18-415-000 - 171 -

G. NGPA section 311 and Hinshaw Pipelines

1. NOPR

267. In the NOPR, the Commission found that its existing regulations and policy 

concerning the rates charged by NGPA section 311 and Hinshaw pipelines are generally 

sufficient to provide shippers reasonable rate reductions with respect to the Tax Cuts and 

Jobs Act and the Revised Policy Statement. Accordingly, the Commission did not 

propose requiring NGPA section 311 and Hinshaw pipelines to file the FERC Form 

No. 501-G or make any other immediate filing. Instead, the Commission proposed a 

separate method for updating NGPA section 311 and Hinshaw pipelines’ rates, in 

keeping with their history of light-handed regulation.

268. Under pre-existing policy, the Commission reviews the rates of each NGPA 

section 311 and Hinshaw pipeline every five years.

297 The Commission proposed using 

this five-year rate review process as the primary mechanism to consider changes to 

reflect the Tax Cuts and Jobs Act. 

269. The Commission proposed to act ahead of this five-year schedule only when a 

state regulatory agency requires any of these pipelines to reduce their intrastate rates to 

reflect the decreased income tax. Under pre-existing policy, any pipeline that elected to 

use state-derived rates pursuant to section 284.123(b)(1) is already required to file with 

 297 Order No. 735, FERC Stats. & Regs. ¶ 31,310 at P 96. Pipelines using stateapproved rates pursuant to section 284.123(b)(1) may certify that those rates continue to 

meet the requirements of section 284.123(b)(1) on the same basis on which they were 

approved.
Docket Nos. RM18-11-000 and RP18-415-000 - 172 -

the Commission a new rate election 30 days after a state regulatory agency adjusts its 

intrastate rates.298 In the NOPR, the Commission proposed, for the purposes of the Tax 

Cuts and Jobs Act only, to expand this requirement to include intrastate pipelines that use 

Commission-established cost-based rates pursuant to section 284.123(b)(2), as well as 

pipelines that use state-derived rates pursuant to section 284.123(b)(1). Accordingly, the 

Commission proposed a new section 284.123(i) requiring that, if an intrastate pipeline’s 

rates on file with a state regulatory agency are reduced to reflect the reduced income tax 

rates adopted in the Tax Cuts and Jobs Act, the intrastate pipeline must file a new rate 

election within 30 days after the reduced intrastate rate becomes effective. The 

Commission reasoned that this requirement would give the same rate reduction benefit to 

any interstate shippers on those pipelines as the intrastate shippers receive, thereby 

ensuring that the two groups of shippers are treated similarly. 

2. Comments

270. The Texas Railroad Commission, NiSource LDCs, and AGA commented on the 

portion of the NOPR affecting NGPA section 311 and Hinshaw pipelines. The Texas

Railroad Commission, which is the state regulatory agency in Texas having jurisdiction 

over intrastate pipeline rates, supports this portion of the NOPR. The Texas Railroad

Commission states that its experience with NGPA section 311 and Hinshaw rates “is 

 298 18 CFR 284.123(g)(9)(iii). See also Lobo Pipeline Co. L.P., 145 FERC ¶ 

61,168, at P 5 (2013) and Atmos Pipeline – Texas, 156 FERC ¶ 61,094, at P 8 (2016).
Docket Nos. RM18-11-000 and RP18-415-000 - 173 -

substantially the same as the Commission’s experience described in the ... [NOPR].”299 

The Texas Railroad Commission notes that almost all intrastate contracts under Texas 

Railroad Commission jurisdiction are based on market conditions, and result in rates 

substantially lower than the maximum lawful rate. The Texas Railroad Commission

states that it has already begun adjusting intrastate rates on local distribution systems. 

For transportation pipelines, the Texas Railroad Commission states that it intends to 

follow a process similar to that described in the NOPR, revising existing rates as they are 

reviewed in the ordinary course of business.

271. NiSource LDCs state that two of its affiliates are Hinshaw pipelines providing

interstate transportation service under limited jurisdiction certificates issued by the 

Commission under Section 284.224 of its regulations. NiSource LDCs agrees with the 

assessment in the NOPR that decisions on whether to reduce those rates to reflect the 

effects of the Tax Cuts and Jobs Act are “in the hands of the state regulatory agency.”300 

NiSource LDCs states that, if a state commission requires a reduction in such intrastate 

rates to reflect the impact of the Tax Cuts and Jobs Act, Section 284.123(b) requires the 

company to make a corresponding rate filing with FERC within 30 days after the reduced 

intrastate rate becomes effective, and notes that it has already made one such filing with 

 299 Texas Railroad Commission Comments at 2 (citing NOPR, FERC Stats. & 

Regs. ¶ 32,725 at PP 58, 61).

300 NiSource LDCs Comments at 5 (quoting NOPR, FERC Stats. & Regs. ¶ 32,725 

at P 57).
Docket Nos. RM18-11-000 and RP18-415-000 - 174 -

the Commission.301 NiSource “urge[s] the Commission to adopt this procedure with 

respect to companies holding limited jurisdiction certificates that have elected to charge 

state-approved transportation rates.”302

272. AGA, whose members own or operate numerous Hinshaw pipelines, requests 

clarification of several points in the NOPR. AGA states that it “supports the efforts in the 

NOPR to obtain the information necessary” to ensure that interstate pipeline rates are just 

and reasonable,303 but argues that “any final rule should be consistent with the 

Commission’s focus on reducing regulatory burdens on [Hinshaw pipelines] not subject 

to full Commission -jurisdiction.”304 AGA argues that Hinshaw services are generally 

very small in relation to interstate services, and that the Final Rule should, 

correspondingly, impose lesser requirements on Hinshaw services than on interstate 

services.

273. AGA requests clarification of what action by a state commission triggers 

the obligation for an intrastate pipeline to file a new rate election under proposed 

section 284.123(i). AGA asks whether a pipeline must file with the Commission if the 

adjusted state-approved rate is not comparable, or if the applicable state-approved rate 

 301 Columbia Gas of Maryland, Inc., Docket No. PR18-40-000 (filed April 3, 

2018).

302 NiSource LDCs Comments at 5.

303 AGA Comments at 4.

304 Id. at 11.
Docket Nos. RM18-11-000 and RP18-415-000 - 175 -

references the Commission-established rate. AGA also notes that proposed new 

section 284.123(i) refers to “intrastate” pipelines, and asks whether “the proposed text of 

paragraph (i) could be read to exclude section 284.224 certificate holders – Hinshaw 

pipelines and other local distribution companies – although it appears in the NOPR that 

the Commission intends to apply its requirements to intrastate pipelines and Hinshaw 

pipelines.”305 AGA also asks that the Commission limit new section 284.123(i) to only 

apply to pipelines with section 284.123(b)(2) Commission-established cost-based rates, 

reasoning that pipelines with section 284.123(b)(1) rates already must file within 30 days 

after a change in state rates.

274. AGA also raises several timing issues. AGA notes that proposed new section 

284.123(i) would require entities to file a new rate election with the Commission “not 

later than 30 days after the reduced intrastate rate becomes effective.” AGA notes that 

this may cause confusion for any intrastate pipelines whose reduced rates at the state 

level become effective before the Commission issues a Final Rule. AGA also argues that 

local distribution companies are likely to need more time to prepare and file the new rate 

election with the Commission, and therefore proposes that the deadline in new section 

284.123(i) instead read: “not less than ninety (90) days after the latter of: the effective 

date of the final rule; or the effective date of the reduced intrastate rate (if effective after 

the effective date of a final rule).”306 AGA also requests that any LDC that is subject to 

 305 Id. at 13.

306 Id. at 14.
Docket Nos. RM18-11-000 and RP18-415-000 - 176 -

multiple state jurisdictions be permitted to wait until all jurisdictions have reviewed its 

rates before filing with the Commission. Finally, AGA states that the NOPR does not 

provide clear guidance to intrastate pipelines who have had rates approved in 2017 or 

2018, who have currently pending proceedings, or who are due to make five-year rate 

review filings in the near future before the Final Rule takes effect.

275. Similarly, AGA notes that the NOPR does not address whether filings to address 

the Tax Cuts and Jobs Act will re-set the five-year review period. AGA requests that the 

Commission confirm in any Final Rule that the filing of a rate election filing under 

284.123(i) would re-set the currently applicable five-year review.

276. Finally, AGA notes that the NOPR is unclear in terms of whether the Commission 

expects Hinshaw pipelines to file a fully updated cost and revenue study. AGA argues 

that unless it is made in the context of a regular five-year review, Hinshaw pipelines 

should have the option to simply re-file their rates on the limited issue of the Tax Cuts 

and Jobs Act impact. AGA also proposes that the Commission waive the filing fee for 

such filings.

3. Discussion

277. Noting the support for the NOPR as it applies to NGPA section 311 and Hinshaw 

pipelines, we generally adopt the NOPR’s proposal concerning those pipelines in this 

Final Rule, but also provide additional guidance on the points raised by AGA.

278. First, new section 284.123(i) applies to section 284.224 certificate holders. As 

section 284.224(a)(3) states, Hinshaw pipelines and other local distribution companies, 

by accepting a certificate, are regulated “to the same extent that and in the same manner 
Docket Nos. RM18-11-000 and RP18-415-000 - 177 -

that intrastate pipelines are....”307 Therefore, the reference in new section 284.123(i) to 

“intrastate pipelines” in no way excludes Hinshaw pipelines and other local distribution 

companies that hold section 284.224 certificates. Moreover, the use of “intrastate 

pipelines” in section 284.123(i) is consistent with the remainder of section 284.123, 

which refers to “intrastate pipelines” throughout.

279. Second, we decline to revise new section 284.123(i) to exclude section 

284.123(b)(1) state-derived rates. Although it is current Commission policy to include in 

orders approving an intrastate pipeline’s state-derived rates a requirement that the 

pipeline must file a new rate election whenever the state-approved rate used in the rate 

election is changed, the Commission may not have included such a requirement in every 

such currently approved state-derived rate. Accordingly, we find that section 284.123(i) 

should apply to both section 284.123(b)(1) state-derived rates and section 284.123(b)(2) 

Commission-established cost-based rates so as to ensure that, if the intrastate pipeline’s 

rates on file with the state regulatory agency are reduced to reflect the reduced income 

tax rates adopted in the Tax Cuts and Jobs Act, the intrastate pipeline will file a new rate 

election for its interstate rates. However, we are revising proposed section 284.123(i) in 

several respects in order to clarify how section 284.123(i) applies to these two different 

types of intrastate rates for interstate service.

280. AGA requests that we clarify what type of rate change by a state regulatory 

agency triggers the section 284.123(i) filing requirement. Under current Commission 

 307 18 CFR 284.224(a)(3).
Docket Nos. RM18-11-000 and RP18-415-000 - 178 -

policy, an intrastate pipeline using state-derived rates under section 284.123(b)(1) must 

file a new rate election whenever the state-approved rate used for its election is changed. 

Consistent with that policy, we clarify that section 284.123(i) only requires such pipelines 

to make a new rate election when the state regulatory agency reduces the state-approved 

rate used for its rate election to reflect the reduced income taxes adopted in the Tax Cuts 

and Jobs Act. However, we find that a change by a state regulatory agency to the rate for 

any intrastate service due to the Tax Cuts and Jobs Act will trigger the section 284.123(i) 

filing requirement for intrastate pipelines whose existing interstate rates are Commissionestablished cost-based rates pursuant to section 284.123(b)(2). Interstate rates approved 

under section 284.123(b)(2) are not based on any particular state-approved rate. In these 

circumstances, we find it reasonable for intrastate pipelines with section 284.123(b)(2) 

interstate rates to reduce those rates if the state regulatory agency reduces their rates for 

any intrastate service to reflect the reduced income taxes resulting from the Tax Cuts and 

Jobs Act. This ensures that interstate shippers receive a similar rate reduction as those 

intrastate customers whose rates are reduced and avoids the need to consider whether the 

intrastate rates reduced by the state regulatory agency are for an intrastate service 

comparable to the interstate service of the intrastate pipeline. 

281. AGA asks whether new section 284.123(i) applies to any intrastate pipeline whose 

reduced intrastate rates “become effective before the Commission issues a final rule.”308 

This is indeed the case. However, the Commission cannot impose a rule that has not yet 

 308 AGA Comments at 13.
Docket Nos. RM18-11-000 and RP18-415-000 - 179 -

gone into effect. Accordingly, in this Final Rule we modify proposed section 284.123(i) 

to clarify that the deadline for the required rate reduction filings will be 30 days after the 

later of (1) the effective date of the new section 284.123(i) or (2) the effective date of the 

reduction in the pipeline’s intrastate rates. 

282. AGA proposes that NGPA section 311 and Hinshaw pipelines should have 

90 days from the effective date of the reduced intrastate rate to file with the Commission 

instead of 30 days. AGA also proposes that any local distribution companies subject to 

multiple state jurisdictions be permitted to wait until the last state government finishes its 

rate review before filing. We reject these proposals. Although individual pipelines are 

free to seek waiver if good cause exists, AGA’s proposals would only serve to delay the 

implementation of fair and equitable NGPA section 311 and Hinshaw rates. A 90-day 

filing requirement in new section 284.123(i) would also create an unjustifiable difference

in how the Commission treats pipelines with section 284.123(b)(2) rates versus pipelines 

with section 284.123(b)(1) rates, the latter of which already must file within 30 days after 

a change in state rates.

283. AGA states that the NOPR does not provide clear guidance to parties who have 

had rates approved in 2017 or 2018, who have currently pending rate proceedings, or who 

are due to make five-year rate review filings in the near future before the Final Rule takes 

effect. Consistent with our policy that an intrastate pipeline whose existing interstate 

rates are based on section 284.123(b)(1) must file a new rate election whenever the stateapproved rate used for the election is changed, those interstate pipelines will have to file a 

new rate election if their state regulatory agency reduces the state-approved rate used for 
Docket Nos. RM18-11-000 and RP18-415-000 - 180 -

their rate election, regardless of the pendency of, or Commission approval of, any prior 

rate filing by that intrastate pipeline. However, the Commission is revising proposed 

section 284.123(i) to provide that the requirement to file a new rate election in that 

section does not apply to intrastate pipelines using Commission-established cost-based 

rates under section 284.123(b)(2), if the Commission has approved revised rates for that 

pipeline after December 22, 2017 or that pipeline already has a rate case pending before 

the Commission as of the date reduced intrastate rates become effective. Since the 

enactment of the Tax Cuts and Jobs Act on December 22, 2017, the Commission has not 

approved revised interstate rates for any intrastate pipeline under section 284.123(b)(2)

without ensuring that the revised rates reflect the reduced income taxes adopted in the 

Tax Cuts and Jobs Act, and the Commission will continue to do so in all pending and 

future rate filings by such pipelines. Accordingly, there is no need for intrastate pipelines 

whose interstate rates are based on section 284.123(b)(2) to file a new rate election in 

these circumstances.

284. AGA also notes that the NOPR does not address whether filings to address the Tax 

Cuts and Jobs Act will re-set the five-year review period. The Commission intends for 

new section 284.123(i) and the traditional five-year review policy to work in tandem. 

Accordingly, an accepted filing under section 284.123(i) will reset the clock on the 

pipeline’s next five-year filing. Finally, AGA requests clarification regarding the filing 

fees, and content, of any filings addressing the Tax Cuts and Jobs Act. We clarify that 

the Commission has not changed its rules regarding filing fees, nor has the Commission 

changed its rules regarding the content of five-year review filings. Finally, we reject
Docket Nos. RM18-11-000 and RP18-415-000 - 181 -

AGA’s proposal to permit anyone filing under section 284.123(i) to submit a single-issue 

filing on the limited issue of the Tax Cuts and Jobs Act impact. Although we are 

permitting interstate natural gas pipelines regulated under the NGA to make such limited 

section 4 filings, as described above the interstate pipeline limited section 4 filings are 

based on financial information in the FERC Form No. 501-G, which is largely derived 

from FERC Form Nos. 2 and 2-A. Intrastate pipelines do not file such reports. 

Moreover, intrastate pipelines with cost-based interstate rates established by the 

Commission pursuant to section 284.123(b)(2) generally resolve their rate proceedings 

through black box settlements. As a result, it would be difficult, if not impossible, to 

determine how to adjust those rates solely to reflect reduced income taxes under the Tax 

Cuts and Jobs Act. State-derived rates adopted pursuant to section 284.123(b)(1) would 

be changed consistent with whatever changes the state regulatory agency requires to 

reflect the income tax reductions in the Tax Cuts and Jobs Act. Accordingly, if the state 

regulatory agency approves a change in the relevant intrastate rate that is limited to 

reflecting the income tax reduction in the Tax Cuts and Jobs Act, the intrastate pipeline 

may make a similar rate reduction in its section 284.123(b)(1) interstate rate. However, if 

the state regulatory agency revises the relevant intrastate rates based on a full review of 

all the intrastate pipelines costs and revenues, the interstate pipeline would have to make 

a similar change in its section 284.123(b)(1) interstate rate.

H. Request for Commission Action

285. We dismiss the Petitioners’ request for Commission action in Docket No. RP18-

415-000 in light of the Commission’s actions in this rulemaking proceeding.
Docket Nos. RM18-11-000 and RP18-415-000 - 182 -

V. Regulatory Requirements

A. Information Collection Statement

286. The Office of Management and Budget (OMB) regulations require that OMB 

approve certain reporting, record keeping, and public disclosure requirements 

(information collection) imposed by an agency.309 Upon approval of a collection of 

information, OMB will assign an OMB control number and an expiration date. 

Respondents subject to the filing requirements of a rule will not be penalized for failing 

to respond to the collection of information unless the collection of information displays a 

valid OMB control number.

287. The Commission is submitting these reporting and recordkeeping requirements to 

OMB for its review and approval under section 3507(d) of the Paperwork Reduction Act 

(PRA). Comments are solicited on the Commission’s need for this information, whether 

the information will have practical utility, the accuracy of the provided burden estimate, 

ways to enhance the quality, utility, and clarity of the information to be collected, and any 

suggested methods for minimizing the respondent’s burden, including the use of 

automated information techniques.

288. Public Reporting Burden: The Commission initially identified 133 interstate 

natural gas pipelines with cost-based rates that will be required to file the adopted FERC 

Form No. 501-G. That figure was based upon a review of the pipeline tariffs on file with 

the Commission. However, the number has been reduced to 129 interstate natural gas 

 309 5 CFR 1320.11.
Docket Nos. RM18-11-000 and RP18-415-000 - 183 -

pipelines, as the Commission removed Hampshire Gas Company as discussed above, 

Questar Southern Trails Pipeline Company, whom the Commission permitted to abandon 

its certificate to operate as a pipeline,

310 MoGas, who filed a general NGA section 4 rate 

case, and Granite State, who filed a prepackage uncontested settlement.311 Interstate 

natural gas pipelines have four options as to how to address the results of the formula 

contained in FERC Form No. 501-G. Each option has a different burden profile and a 

different cost per response. Companies will make their own business decisions as to 

which option they will select, thus the estimate for the number of respondents for each 

option as shown in the table below is just an estimate. 

289. The number of NGPA section 311 and Hinshaw pipelines that will be required to 

file a rate case pursuant to proposed section 284.123(i) is a function of state actions 

outside of the control of the Commission. Thus, the estimate for the number of 

respondents for NGPA section 311 and Hinshaw pipelines filing a rate case in 

compliance with adopted section 284.123(i) as shown in the table below is an estimate. 

 310 Questar Southern Trails Pipeline Co., 163 FERC ¶ 62,086 (2018).

311 Additional pipelines have chosen to file NGA section 4 rate filings before 

this Final Rule is effective; those pipelines will not be required to file the FERC Form 

No. 501-G. Because the number of pipelines choosing to make NGA section 4 filings 

may continue to change (correspondingly reducing the number of filers of the FERC 

Form No. 501-G), we are retaining a conservative estimate of 129 pipelines who may be 

required to file the FERC Form No. 501-G.
Docket Nos. RM18-11-000 and RP18-415-000 - 184 -

290. Based on these assumptions, we estimate the one-time burden and cost312 for the 

information collection requirements as follows.

FERC-501G

Resp

onde

nts

(1)

Respons

es per 

Respond

ent

(2)

Total 

Respons

es

(1)*(2)=

(3)

Avg. 

Burden 

Hr. Per 

Respons

e

(4)

Avg. 

Cost Per 

Respons

e

(5)

Total 

Burden 

Hours

(3)*(4)=(

6)

Total Cost 

($)

(3)*(5)=(7)

Interstate Natural Gas Pipelines with Cost-Based Rates

FERC 

Form 

No. 

501-G, 

Onetime 

Report

313

129 1 129 9 hrs. $756 1161 hrs. $97,524 

Optional Response

No 

Respon

se

51 0 0 0 0 0 0

Case 

for no 

change

62 1 62 5 hrs. $420 310 hrs. $26,040

 312 The estimated average hourly cost of $83.97 (rounded) assumes equal time is 

spent by an accountant, management, lawyer, and office and administrative support. The 

average hourly cost (salary plus benefits) is: $56.59 for accountants (occupation code 

13-2011), $94.28 for management (occupation code 11-0000), $143.68 for lawyers 

(occupation code 23-0000), and $41.34 for office and administrative support (occupation 

code 43-0000). (The wage figures are taken from the Bureau of Labor Statistics [BLS], 

for May 2017, figures at https://www.bls.gov/oes/current/naics3_221000.htm. BLS 

information on benefits for December 2017 was issued on March 20, 2018, at 

https://www.bls.gov/news.release/ecec.nr0.htm.)

313 18 CFR 260.402 (as revised).
Docket Nos. RM18-11-000 and RP18-415-000 - 185 -

FERC-501G

Resp

onde

nts

(1)

Respons

es per 

Respond

ent

(2)

Total 

Respons

es

(1)*(2)=

(3)

Avg. 

Burden 

Hr. Per 

Respons

e

(4)

Avg. 

Cost Per 

Respons

e

(5)

Total 

Burden 

Hours

(3)*(4)=(

6)

Total Cost 

($)

(3)*(5)=(7)

Limited 

Sec 4 

filing314

15 1 15 6 hrs. $504 90 hrs. $7,560

General 

Sec. 4 

filing315

1 1 1 512 

hrs.316

$42,968 512 hrs. $42,968

NGPA section 311 and Hinshaw Pipelines with Cost-Based Rates

NGPA 

rate 

filing317

15318 1 15 24 hrs. $2,015 360 hrs. $30,225

TOTA

L

144319 222 2,433

hrs.

$204,317

291. The Report and any tariff filing option that an NGA natural gas company may 

choose or an NGPA pipeline company may be required to file must be filed using the 

Commission’s eTariff filing format. This format requires the use of software that all 

 314 18 CFR 154.404 (as revised).

315 18 CFR 154.312.

316 The estimate for hours is based on the estimated average hours per response for 

the FERC-545 (OMB Control No. 1902-0154), with general NGA section 4, 18 CFR 

154.312 filings weighted at a ratio of 20 to one.

317 18 CFR 284.123(i) (as revised).

318 Estimate of number of respondents assumes that states will act within one year 

to reduce NGPA section 311 and Hinshaw pipeline rates to reflect the Tax Cuts and Jobs 

Act.

319 Number of unique respondents = (One-time Report) + (NGPA rate filing).
Docket Nos. RM18-11-000 and RP18-415-000 - 186 -

respondents currently have or purchase on a per-use basis. For companies that do not 

have their own software and must contract for the service, the Commission estimates a 

cost of $300 per filing. We estimate approximately 40 of the NGA and NGPA pipeline 

company respondents will contract for eTariff filing services at an estimated total cost of 

$12,000. Therefore the total cost of the Final Rule is $216,317.

292. The Commission does not expect any mandatory or voluntary reporting 

requirements other than those listed above.

Action: Proposed information collection, FERC-501G (Rate Changes Relating to Federal 

Corporate Income Tax Rate for Interstate Natural Gas Pipelines).

OMB Control No.: 1902-0302.

Respondents: Interstate natural gas pipelines with cost-based rates, and certain NGPA 

section 311 and Hinshaw pipelines.

Frequency of Information: One-time, for each indicated reporting requirement.

Necessity of Information: The Commission requires information in order to determine 

the effect of the Tax Cuts and Jobs Act on the rates of natural gas pipelines to ensure 

those rates continue to be just and reasonable.

Internal Review: The Commission has reviewed the adopted information collection 

requirements and has determined that they are necessary. These requirements conform to 

the Commission’s need for efficient information collection, communication, and 

management within the energy industry. The Commission has specific, objective support 

for the burden estimates associated with the information collection requirements.

Interested persons may obtain information on the reporting requirements or submit 
Docket Nos. RM18-11-000 and RP18-415-000 - 187 -

comments by contacting the Federal Energy Regulatory Commission, 888 First Street, 

NE, Washington, DC 20426 (Attention: Ellen Brown, Office of the Executive Director, 

(202) 502-8663, or e-mail DataClearance@ferc.gov). Comments may also be sent to the 

Office of Management and Budget (Attention: Desk Officer for the Federal Energy 

Regulatory Commission), by e-mail at oira_submission@omb.eop.gov.

B. Environmental Analysis

293. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 

on the human environment.320 The actions taken here fall within categorical exclusions 

in the Commission’s regulations for rules regarding information gathering, analysis, and 

dissemination, and for rules regarding sales, exchange, and transportation of natural gas 

that require no construction of facilities.321 Therefore, an environmental review is 

unnecessary and has not been prepared in this rulemaking.

C. Regulatory Flexibility Act

294. The Regulatory Flexibility Act of 1980 (RFA)322 generally requires a description 

and analysis of Final Rules that will have significant economic impact on a substantial 

number of small entities.

 320, Regulations Implementing the National Environmental Policy Act, Order 

No. 486, FERC Stats. & Regs. ¶ 30,783 (1987) (cross-referenced at 41 FERC ¶ 61,284.

321 See 18 CFR 380.4(a)(2)(ii), 380.4(a)(5) and 380.4(a)(27).

322 5 U.S.C. 601-612.
Docket Nos. RM18-11-000 and RP18-415-000 - 188 -

295. As noted in the above Information Collection Statement, approximately 

129 interstate natural gas pipelines, both large and small, are respondents subject to the 

requirements adopted by this rule. In addition, the Commission estimates that another 

59 NGPA natural gas pipelines may be required to file restated rates pursuant to proposed 

section 284.123(i). However, the actual number of NGPA section 311 and Hinshaw 

pipelines that will be required to file is a function of actions taken at the state level. The 

Commission estimates that only 15 of the 59 NGPA natural gas pipelines will file a rate 

case pursuant to proposed section 284.123(i).

296. Most of the natural gas pipelines regulated by the Commission do not fall within 

the RFA’s definition of a small entity,323 which is currently defined for natural gas 

pipelines as a company that, in combination with its affiliates, has total annual receipts of 

$27.5 million or less.324 For the year 2016 (the most recent year for which information is 

available), only five of the 129 interstate natural gas pipeline respondents had annual 

revenues in combination with their affiliates of $27.5 million or less and therefore could 

be considered a small entity under the RFA. This represents 3.9 percent of the total 

universe of potential NGA respondents that may have a significant burden imposed on 

 323 See 5 U.S.C. 601(3) (citing section 3 of the Small Business Act, 15 U.S.C. 

623). Section 3 of the SBA defines a “small business concern” as a business which is 

independently owned and operated and which is not dominant in its field of operation.

324 13 CFR 121.201 (Subsector 486—Pipeline Transportation; North American 

Industry Classification System code 486210; Pipeline Transportation of Natural Gas) 

(2017). “Annual Receipts” are total income plus cost of goods sold.
Docket Nos. RM18-11-000 and RP18-415-000 - 189 -

them. For NGPA section 311 and Hinshaw pipelines, three of the 59 potential 

respondents could be considered a small entity, or 5.1 percent. However, it is not 

possible to predict whether any of these small companies may be required to make a rate 

filing. The estimated cost for respondents is expected to vary from $756 to $42,968.

325 

In view of these considerations, the Commission certifies that this final rule’s 

amendments to the regulations will not have a significant impact on a substantial number 

of small entities.

D. Document Availability

297. In addition to publishing the full text of this document in the Federal Register, the 

Commission provides all interested persons an opportunity to view and/or print the 

contents of this document via the Internet through the Commission’s Home Page 

www.ferc.gov and in the Commission’s Public Reference Room during normal business 

hours (8:30 a.m. to 5:00 p.m. Eastern time) at 888 First Street, NE, Room 2A, 

Washington DC 20426.

298. From the Commission’s Home Page on the Internet, this information is available 

on eLibrary. The full text of this document is available on eLibrary in PDF and 

Microsoft Word format for viewing, printing, and/or downloading. To access this 

 325 The estimated $756 is for respondents who file the One-time Report and choose 

to take no optional response. Only one respondent who files the One-time Report and 

then chooses to make a general NGA section 4 filing is estimated to have a one-time cost 

of $42,968. These figures do not include the estimated cost of $300 per filing for 

approximately 40 filers for the use of software to make these filing in the eTariff format.
Docket Nos. RM18-11-000 and RP18-415-000 - 190 -

document in eLibrary, type the docket number excluding the last three digits in the 

docket number field.

299. User assistance is available for eLibrary and the Commission’s website during 

normal business hours from FERC Online Support at (202) 502-6652 (toll free at 1-866-

208-3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at 

(202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference Room at 

public.referenceroom@ferc.gov.

E. Effective Date and Congressional Notification

300. These regulations are effective [INSERT DATE 45 DAYS AFTER DATE OF 

PUBLICATION IN THE FEDERAL REGISTER]. The Commission has determined, 

with the concurrence of the Administrator of the Office of Information and Regulatory 

Affairs of OMB, that this rule is not a “major rule” as defined in section 351 of the Small 

Business Regulatory Enforcement Fairness Act of 1996.

List of subjects in 18 CFR Parts 154, 260, & 284 

Part 154: 

Natural gas

Pipelines

Reporting and recordkeeping requirements

Part 260:

Natural gas

Reporting and recordkeeping requirements
Docket Nos. RM18-11-000 and RP18-415-000 - 191 -

Part 284:

Continental shelf

Natural gas

Reporting and recordkeeping requirements

By the Commission. Commissioners LaFleur and Glick are concurring with a separate

 statement attached.

( S E A L )

Nathaniel J. Davis, Sr.,

Deputy Secretary.
Docket Nos. RM18-11-000 and RP18-415-000 - 192 -

In consideration of the foregoing, the Commission proposes to amend Parts 154, 260, & 

284, Chapter I, Title 18, Code of Federal Regulations, as follows:

PART 154— RATE SCHEDULES AND TARIFFS

1.The authority citation for part 154 continues to read as follows:

Authority: 15 U.S.C. 717-717w; 31 U.S.C. 9701; 42 U.S.C. 7102-7352. 

2.Add § 154.404 to read as follows:

§ 154.404 Tax Cuts and Jobs Act Rate Reduction.

(a) Purpose. The limited rate filing permitted by this section is intended to permit:

(1) a natural gas company subject to the federal corporate income tax 

to reduce its maximum rates to reflect the decrease in the federal 

corporate income tax rate pursuant to the Tax Cuts and Jobs Act of 

2017, and

(2) a natural gas company organized as a pass-through entity either 

(i) to eliminate any income tax allowance and accumulated deferred 

income taxes reflected in its current rates or (ii) to reduce its 

maximum rates to reflect the decrease in the federal income tax rates 

applicable to partners pursuant to the Tax Cuts and Jobs Act of 2017.

(b) Applicability. (1) For purposes of paragraph (a)(1) of this section, a natural gas 

company organized as a pass-through entity all of whose income or losses are 

consolidated on the federal income tax return of its corporate parent is considered to be 

subject to the federal corporate income tax.

(2) Except as provided in paragraph (b)(3) of this section, any natural gas 

company with cost-based, stated rates may submit the limited rate filing permitted by this 

section.

(3) If a natural gas company has a rate case currently pending before the 

Commission in which the change in the federal corporate income tax rate can be 

reflected, the public utility may not use this section to adjust its rates.

(c) Determination of Rate Reduction. A natural gas company submitting a filing 

pursuant to this section shall reduce: 

(i) Its maximum reservation rates for firm service, and 

(ii) Its usage charge that includes fixed costs, and

(iii) Its one-part rates that include fixed costs, by 
Docket Nos. RM18-11-000 and RP18-415-000 - 193 -

(iv) The percentage calculated consistent with the instructions to FERC Form No. 

501-G prescribed by § 260.402.

(d) Timing. Any natural gas company filing to reduce its rates pursuant to this 

section must do so no later than the date that it files its FERC Form No. 501-G pursuant 

to § 260.402. 

(e) Hearing Issues. (1) The only issues that may be raised by Commission staff 

or any intervenor under the procedures established in this section are:

(i) Whether or not the natural gas company may file under this section,

(ii) Whether or not the percentage reduction permitted in § 154.402(c)(iii) has 

been properly applied, and

(iii) Whether or not the correct information was used in that calculation. 

(2) Any other issue raised will be severed from the proceeding and dismissed 

without prejudice. 

PART 260— STATEMENTS AND REPORTS (SCHEDULES)

3.The authority citation for part 260 continues to read as follows:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352. 

4.Add § 260.402 to read as follows:

§ 260.402 FERC Form No. 501-G. One-time Report on Rate Effect of the Tax Cuts 

and Jobs Act. 

(a) Prescription. The form for the One-time Report on Rate Effect of the Tax Cuts 

and Jobs Act of 2017, designated herein as FERC Form No. 501-G is prescribed.

(b) Filing requirement. (1) Who must file. (i) Except as provided in paragraph 

(b)(1)(ii) of this section, every natural gas company that is required under this Part to file 

a Form No. 2 or 2-A for 2017 and has cost-based, stated rates for service under any rate 

schedule that was filed electronically pursuant to Part 154 of this chapter, must prepare 

and file with the Commission a FERC Form No. 501-G pursuant to the definitions and 

instructions set forth in that form and the Implementation Guide.

(ii) A natural gas company whose rates are being examined in a general rate case 

under section 4 of the Natural Gas Act or in an investigation under section 5 of the 

Natural Gas Act as of the deadline for it to file the FERC Form No. 501-G need not file 

FERC Form No. 501-G. In addition, a natural gas company that files an uncontested 

settlement of its rates pursuant to § 385.207(a)(5) of this chapter after March 26, 2018 

and before the deadline for it file the FERC Form No. 501-G need not file FERC Form 

No. 501-G. 
Docket Nos. RM18-11-000 and RP18-415-000 - 194 -

(2) FERC Form No. 501-G must be filed as prescribed in § 385.2011 of this 

chapter as indicated in the instructions set out in the form and Implementation Guide, and 

must be properly completed and verified. Each natural gas company must file FERC 

Form No. 501-G according to the schedule set forth in the Implementation Guide set out 

in that form. Each report must be prepared in conformance with the Commission’s form 

and guidance posted and available for downloading from the FERC Web site 

(http://www.ferc.gov). One copy of the report must be retained by the respondent in its 

files.

PART 284—CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS 

UNDER THE NATURAL GAS POLICY ACT OF 1978 AND RELATED 

AUTHORITIES

5.The authority citation for part 284 continues to read as follows:

Authority: 15 U.S.C. 717-717z, 3301-3432; 42 U.S.C. 7101-7352; 43 U.S.C. 

1331-1356. 

6.In § 284.123, add paragraph (i) to read as follows:

§ 284.123 Rates and charges.

* * * * *

(i)If an intrastate pipeline’s rates on file with the appropriate state regulatory agency are 

reduced to reflect the reduced income tax rates adopted in the Tax Cuts and Jobs Act of 

2017, the intrastate pipeline must file a new rate election pursuant to paragraph (b) of this 

section in the following circumstances: 

(1) If the intrastate pipeline’s existing rates for interstate service are based on § 

284.123(b)(1), the intrastate pipeline must file a new rate election, if the state-approved 

rate used for its current rate election is changed to reflect the reduced income tax rates 

adopted in the Tax Cuts and Jobs Act.

(2) If the intrastate pipeline’s existing rates for interstate service are based on § 

284.123(b)(2), the intrastate pipeline must file a new rate election, if any of its rates on 

file with the appropriate state regulatory agency are reduced to reflect the reduced income 

tax rates adopted in the Tax Cuts and Jobs Act, unless the Commission has approved 

revised interstate rates for that pipeline after December 22, 2017 or it has filed revised 

interstate rates that are pending before the Commission on the effective date of the 

reduced intrastate rates.
Docket Nos. RM18-11-000 and RP18-415-000 - 195 -

(3) Any rate election required by this paragraph must be filed on or before the later of

[Insert date 30 days after the effective date of this rule] or 30 days after the reduced 

intrastate rate becomes effective.
Docket Nos. RM18-11-000 and RP18-415-000 - 196 -

ATTACHMENTS

The Attachments (proposed FERC Form No. 501-G and the Implementation Guide) will 

not be published in the Federal Register or the Code of Federal Regulations. The 

Attachments will be available in the Commission’s eLibrary and website.
The following appendix will not appear in the Code of Federal Regulations.

Appendix A

Commenter Short Name

American Gas Association AGA

American Public Gas Association APGA

Berkshire Hathaway Energy Pipeline Group; Northern Natural 

Gas Company and Kern River Gas Transmission Company

Berkshire Hathaway

Boardwalk Pipeline Partners, LP Boardwalk

Canadian Association of Petroleum Producers CAPP

Dominion Energy Cove Point LNG, LP Cove Point

Direct Energy Business Marketing, LLC and Interstate Gas 

Supply, Inc.

Direct Energy

Dominion Energy Transmission, Inc.; Dominion Energy Carolina 

Gas Transmission, LLC; Dominion Energy Questar Pipeline, 

LLC; Dominion Energy Overthrust Pipeline, LLC; and Questar 

Southern Trails Pipeline Company 

Dominion Energy

Eastern Shore Natural Gas Company Eastern Shore

Enable Mississippi River Transmission, LLC and Enable Gas 

Transmission, LLC

Enable Interstate 

Pipelines

EQT Midstream Partners, LP EQT Midstream

Hampshire Gas Company Hampshire

Hess Corporation Hess

Industrial Energy Consumers of America IECA

Aera Energy, LLC, Anadarko Energy Services Company; Apache 

Corporation; BP Energy Company; ConocoPhillips Company;

Occidental Energy Marketing, Inc.; Petrohawk Energy 

Corporation; and XTO Energy, Inc.

Indicated Shippers

Interstate Natural Gas Association of America INGAA

Independent Oil & Gas Association of West Virginia, Inc. IOGA

Natural Gas Pipeline Company of America LLC; Tennessee Gas 

Pipeline Company, L.L.C.; Southern Natural Gas Company, 

L.L.C.; Colorado Interstate Gas Company, L.L.C.; Wyoming 

Interstate Company, L.L.C.; El Paso Natural Gas Company, 

L.L.C.; Mojave Pipeline Company, L.L.C.; Bear Creek Storage 

Company, L.L.C.; Cheyenne Plains Gas Pipeline Company, 

L.L.C.; Elba Express Company, L.L.C.; Kinder Morgan 

Louisiana Pipeline LLC; Southern LNG Company, L.L.C.; and 

TransColorado Gas Transmission Company LLC. 

Kinder Morgan

New York State Electric & Gas Corporation and Rochester Gas 

and Electric Corporation

NYSEG
Docket No. RM18-11-000, et al. - 198 -

Millennium Pipeline Company, L.L.C. Millennium

National Fuel Gas Supply Corporation and Empire Pipeline, Inc. National Fuel

Natural Gas Supply Association NGSA

Bay State Gas Company d/b/a Columbia Gas of Massachusetts;

Columbia Gas of Kentucky, Inc.; Columbia Gas of Maryland, 

Inc.; Columbia Gas of Ohio, Inc.; Columbia Gas of Pennsylvania, 

Inc.; Columbia Gas of Virginia, Inc.; and Northern Indiana Public 

Service Company LLC.

NiSource LDCs

Mike Hunter, Oklahoma Attorney General Oklahoma AG

Process Gas Consumers Group and

American Forest and Paper Association

Process Gas

Railroad Commission of Texas Texas Railroad 

Commission

Range Resources-Appalachia, LLC Range

Southern Company Services, Inc.; Alabama Power Company; 

Georgia Power Company; Gulf Power Company; Mississippi 

Power Company and Southern Power Company

Southern Companies

Southern Star Central Gas Pipeline, Inc. Southern Star

Spectra Energy Partners, LP (SEP), Algonquin Gas Transmission, 

LLC; Big Sandy Pipeline, LLC; East Tennessee Natural Gas, 

LLC; Market Hub Partners Holding, LLC; Ozark Gas 

Transmission, L.L.C.; Saltville Gas Storage Company L.L.C.; 

and Texas Eastern Transmission, LP. SEP also has ownership 

interests in Gulfstream Natural Gas System, L.L.C.; Maritimes & 

Northeast Pipeline, L.L.C.; Sabal Trail Transmission, LLC; and 

Southeast Supply Header, LLC.

Spectra

Trailblazer Pipeline Company, LLC; Tallgrass Interstate Gas 

Transmission, LLC; and Rockies Express Pipeline LLC

Tallgrass Pipelines

TransCanada Corporation TransCanada

The Williams Companies, Inc. Williams

Xcel Energy Services Inc.; Northern States Power Company, a 

Minnesota corporation; Northern States Power Company, a 

Wisconsin corporation; Public Service Company of Colorado; 

and Southwestern Public Service Company. Also Alliant Energy 

Corporate Services; Wisconsin Power and Light Company and 

Interstate Power and Light Company 

LDC Coalition
UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Interstate and Intrastate Natural Gas Pipelines; Rate 

Changes Relating to Federal Income Tax Rate

American Forest & Paper Association

Docket Nos. RM18-11-000

RP18-415-000

(Issued July 18, 2018)

LaFLEUR, Commissioner, and GLICK, Commissioner, concurring:

In companion orders issued today, the Commission (1) affirms the Revised Policy 

Statement on Treatment of Income Taxes (Revised Policy Statement) issued in response 

to the decision of the United States Court of Appeals for the District of Columbia Circuit 

(D.C. Circuit) in United Airlines;

1 (2) provides guidance regarding the treatment of 

Accumulated Deferred Income Taxes (ADIT) where the income tax allowance is 

eliminated from cost-of-service rates under the Commission’s post-United Airlines

policy; and (3) issues a Final Rule that establishes procedures for the Commission to 

determine which jurisdictional natural gas pipelines may be collecting unjust and 

unreasonable rates in light of the income tax reductions provided by the Tax Cuts and 

Jobs Act and the Commission’s revised policy and precedent concerning tax allowances 

to address the double recovery issue identified by United Airlines. These are significant 

orders, and we write separately to provide some additional thoughts regarding these 

decisions.

First, with respect to the ADIT guidance issued today, we confess to some 

frustration that the rate benefits that customers and shippers would otherwise receive 

from the Revised Policy Statement may be significantly reduced by the treatment of 

ADIT announced in today’s orders. As a matter of equity, we believe that the arguments 

for applying previously-accrued ADIT balances to reduce future rate base where a tax 

allowance is eliminated are compelling. However, based on the arguments presented in 

this docket regarding the Commission’s authority to mandate those reductions on a 

generic basis, it appears that such a directive would run afoul of the rule against 

retroactive ratemaking, as interpreted by the D.C. Circuit in Public Utilities Commission 

of State of California v. FERC.

2

 Nonetheless, we note that today’s order is simply 

 1 United Airlines, Inc. v. FERC, 827 F.3d 122 (D.C. Cir. 2016).

2 894 F.2d 1372 (D.C. Cir. 1990).
Docket Nos. RM18-11-000, et al. - 2 -

guidance, and to the extent that customers or shippers in individual proceedings argue 

that such a reduction is legal in specific cases, we will consider those arguments on the 

appropriate record. 

Second, we believe that today’s Final Rule sharply highlights the need for a 

legislative fix to the lack of refund authority in Section 5 of the Natural Gas Act (NGA).3

 

Under current law, the Commission’s ability to protect natural gas customers against 

unjust and unreasonable rates is compromised by its inability to set a refund date. We 

believe that current law provides a perverse incentive for protracted litigation and creates 

an asymmetry of leverage between pipelines seeking a rate increase under Section 4 of 

the NGA and complainants or the Commission under Section 5. 

With respect to the Final Rule, we believe that our lack of refund authority 

affected the balance the Commission was able to strike in today’s order. It is a clear tenet 

of cost-of-service ratemaking that tax savings should flow through to ratepayers, and the 

Commission is rightly pursuing that goal in the Final Rule. However, because our 

Section 5 “stick” under the NGA cannot effectively deliver timely relief to customers, the 

Final Rule proffers a series of “carrots” in the hope that pipelines will exercise their 

Section 4 filing rights to quickly flow those tax benefits back to their customers. While 

we think the balance struck in the Final Rule is reasonable in light of our limited refund 

authority, we believe that the Commission would be better equipped to protect customers 

if the law were amended. 

Accordingly, we respectfully concur.

________________________ _________________________

Cheryl A. LaFleur Richard Glick

Commissioner Commissioner

 3 Commissioner LaFleur has been on record in support of Section 5 reform for 

several years. Northern Natural Gas Co., 133 FERC ¶ 61,111 (2010) (LaFleur, Comm’r, 

dissenting).