On January 20, 2022, Venable prevailed in its rehearing request to the Federal Energy Regulatory Commission (FERC), persuading the commission to revise the Index level used to determine annual changes to interstate oil and petroleum product pipeline rate ceilings. Venable filed its request on behalf of Airlines for America (A4A), the National Propane Gas Association (NPGA), Chevron Products Company, and Valero Marketing and Supply Company.
FERC’s ruling that the middle 50 percent calculation is consistent with its practice in previous Index reviews and will reflect rates that are reasonable is a departure from a December 2020 order in which the Commission calculated the Index level based upon the middle 80 percent of pipeline cost changes on a per-barrel mile basis for the period from 2014 to 2019. Venable was also successful in convincing FERC to reverse course on the treatment of its 2018 Income Tax Policy Change in the derivation of the annual Index differential for Index-based rate changes. Specifically, FERC granted rehearing in part to incorporate as part of the calculation of the Index level the effects of the Commission’s 2018 Income Tax Policy Change, which required Master Limited Partnership-owned pipelines to remove the income tax allowance and associated accumulated deferred income taxes from cost of service.
As a result of its decision on rehearing, FERC has now established an Index level of Producer Price Index for Finished Goods (PPI-FG) minus 0.21% versus the prior proposed Index level of PPI-FG plus 0.78%. The Commission estimates this change will result in approximately $3.7 billion in savings on a cumulative basis over the 2021 to 2026 period.