Decet
Regulation / De-regulation
FERC Order 636 (1992)
Mandated “unbundling” of pipeline services
Storage had to be offered as a distinct service
Customers could sub-lease any contracted capacity (“capacity release”)
Created a secondary market for storage
Created an opportunity for marketers to use storage to support their business activities
Helped create market centers / market hubs
FERC allowance of market-based rates (1992)
Almost exclusively granted to natural gas storage facilities
Ratemaking under FERC jurisdiction
Pipelines
Generally Cost-of-Service based
Rates are set to allow the asset owner to recover costs:
O&M/G&A
Depreciation
Interest Expense
Taxes
Allowed Return on Equity
11.0% - 13.5%
As asset depreciates, equity balance declines
Rate cases allow/require asset owner to “refresh” rates
Some market-based rates allowed ( Bistineau)
Independents
Generally market-based rates
Owner/operator “at risk” for investment return
∂Wells Chappell
Consulting
Sugar Land, Texas