Opinion ID: 370388
Heading Depth: 2
Heading Rank: 1

Heading: Expenditures for Alternative Gas Supply Projects

Text: 113 The Commission affirmed the ALJ's exclusion from rate base of over $22 million expended by Transco in four unsuccessful projects related to the production of synthetic natural gas (SNG). 112 The pipeline argued that these amounts should be included in rate base to be amortized as expense items for inclusion in cost of service. Thus Transco sought both a return On, and the return of its investments. The Commission found that the expenditures were not used and useful in providing service and should not be charged to the rate payers. 113 Since the projects did not produce any jurisdictional gas, this ruling clearly was a proper exercise of discretion. 114 We find without merit the claim that the Commission had established a policy, relied on by Transco, creating an exception from the traditional used and useful principle with respect to expenditures for SNG development. 115 The Commission had established such an exception for research and development costs, but the Transco projects failed to qualify for special R & D treatment. 116 These expenditures were prudent investments, argues Transco; however, for rate base inclusion expenditures must satisfy not only the necessary condition of prudent investment but also must be used and useful in providing service. The Commission did not abuse its discretion when it applied a policy that SNG expenditures which do not qualify as R & D can be recovered, if at all, only through the price paid for actual SNG production sold in interstate commerce. 117