U.S. regulator to probe Kinder Morgan natural gas pipeline rates

U.S. federal energy regulators said Thursday they would investigate rates charged by two natural gas pipelines operated by Kinder Morgan Inc to determine if they may be over-recovering costs, resulting in unjust and unreasonable rates.

The U.S. Federal Energy Regulatory Commission (FERC) said it reviewed cost and revenue information provided by the Natural Gas Co of America (NGPL) and the Wyoming Interstate Co pipelines in their publicly available annual reports for 2014 and 2015.

In response to the FERC investigation, Tom Martin, president of Kinder Morgan Natural Gas Pipelines, said in a statement, “The FERC has chosen to interject itself in an unwarranted and unfair manner in the productive relationships between the companies and their customers.”

“FERC is launching this effort based on stale data in a rapidly evolving environment, and without a full understanding of the facts and the changing market conditions faced by the pipelines that could have been gained through engagement with the companies prior to taking any action,” Martin said.

Based on its review of the data, FERC said it estimates NGPL’s return on equity for those calendar years to be 28.5 percent and 20.8 percent, respectively.

However, Kinder Morgan disputed FERC’s calculation and said the return on equity for its NGPL unit was 17.7 percent in 2014 and 15.7 percent in 2015.

FERC was not immediately available for additional comment.

The commission said it estimated Wyoming Interstate’s return on equity for those calendar years to be 17.7 percent and 19.0 percent, respectively.

Based on these figures, FERC said it was concerned that both pipelines’ earnings may exceed their actual cost of service, including a reasonable return on equity.

FERC directed each pipeline to file a cost and revenue study for the latest available 12-month period within 75 days.

The commission also said it set each case for evidentiary hearings before a FERC administrative law judge.

Kinder Morgan said it would review the FERC orders and reply in accordance with procedural requirements, noting “they fully expect the evidence to show that the rates charged by (the pipelines) have been and continue to be just and reasonable.”

NGPL, jointly owned by Kinder Morgan and Brookfield Infrastructure Partners LP, is one of the largest interstate systems in the country with about 9,200 miles (14,805 kilometers) of pipeline.

Wyoming Interstate is an 850-mile pipeline system, wholly owned by Kinder Morgan.