Opinion ID: 721438
Heading Depth: 4
Heading Rank: 2

Heading: PUCs' claim

Text: 211 The PUCs argue that the switch to SFV rate design will frustrate, rather than promote, the goals of maximizing efficiency and competition. Their complaint centers on the claim that because pipelines under SFV rate design will be able to collect all their fixed costs, including return on investment and taxes, in the demand charge, they will have no incentive to assure that gas actually flows through the pipeline under firm service arrangements. That is, because a pipeline will recover no fixed costs or return on investment through the commodity or usage charge, it will have no incentive to transport any gas. 212 FERC recognized this potential incentive problem in Order No. 636, but determined that the pipelines will now have much less influence on the use of their systems because they are transporting gas to, rather than selling gas at, the city-gate. Order No. 636, p 30,939, at 30,436. Accordingly, [t]ransportation volumes will mainly be a function of the needs of gas purchasers and the prices offered by gas sellers in the production areas. Id. In any case, the goals to be accomplished via SFV outweigh generally the goal of allocating fixed costs to annual throughput. Order No. 636-A, p 30,950, at 30,606. We find these explanations sufficiently convincing to meet the substantial evidence standard for rate design in the face of the PUCs' incentive argument. 213