Opinion ID: 721438
Heading Depth: 3
Heading Rank: 4

Heading: Impact on pipeline rate of return

Text: 228 The PUCs argue that FERC should have reduced the pipelines' rate of return because the pipelines will be able to recover all of their fixed costs and return on investment through demand and reservation charges instead of facing the uncertainty of recovering a portion of their fixed costs and return through gas sales throughout the year. See supra Part IV.B.2.b (describing reduced pipeline uncertainty under SFV rate design). Specifically, the PUCs contend that FERC should have followed its decision in Transcontinental Gas Pipe Line Corp., 56 FERC p 61,037, modified in part, 57 FERC p 61,331 (1991), 62 FERC p 61,221 (1993), 64 FERC p 61,099 (1993), rev'd in part on other grounds, Transcontinental Gas Pipe Line Corp. v. FERC, 54 F.3d 893 (D.C.Cir.1995), and imposed a 25 basis point reduction in pipelines' return on equity to reflect the lower risk under SFV rate design. However, FERC stresses that it deferred any such adjustments in rates of return to the individual restructuring proceedings in light of the fact that pipeline risk is a matter for pipeline-specific analysis in light of all risks. Order No. 636, p 30,939, at 30,437. As we have said before, setting a rate of return is an intensely practical affair requiring the conversion of inexact data into exact rates or limits upon rates. Matson Navigation Co. v. Federal Maritime Comm'n, 959 F.2d 1039, 1043 (D.C.Cir.1992) (citations and internal quotation marks omitted). Nothing in the law requires that FERC take a shotgun approach to the problem of decreased pipeline risk by ordering an across-the-board rate reduction, much less that the court do so. We note in this regard that Transcontinental Gas, the decision upon which petitioners rely, was itself an individual pipeline rate making decision. FERC easily meets its burden of supporting its decision to defer rate of return adjustments to individual restructuring proceedings.