Federal Register / Vol. 72, No. 37 / Monday, February 26, 2007 / Proposed Rules

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Federal Register / Vol. 72, No. 37 / Monday, February 26, 2007 / Proposed Rules

SUPPLEMENTARY INFORMATION:

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

18 CFR Chapter I

[Docket No. RM07–9–000]

Assessment of Information

Requirements for FERC Financial

Forms

Issued February 15, 2007.

AGENCY: Federal Energy Regulatory

Commission, DOE.

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ACTION: Notice of inquiry.

SUMMARY: The Federal Energy

Regulatory Commission (Commission) is

issuing a notice of inquiry into the need

for changes or revisions to the

Commission’s reporting requirements

for FERC Forms Nos. 1, 1–F, 2, 2–A, 3–

Q, 6 and 6–Q (Financial Forms). This

notice of inquiry follows informal

meetings held by Office of Enforcement

(OE) staff with both filers and users of

FERC Forms Nos. 1 and 2 to reexamine

the information in the forms and

determine whether these forms should

be modified to improve their usefulness.

The notice of inquiry invites all

interested persons to participate in the

inquiry and to submit answers to several

specific questions.

DATES: Comments on this Notice of

Inquiry are due on March 28, 2007.

Reply comments are due April 27, 2007.

ADDRESSES: You may submit comments

identified by Docket No. RM07–9–000

by one of the following methods:

• Agency Web Site: http://ferc.gov.

Follow the instructions for submitting

comments via the eFiling link found in

the Comment Procedures Section of the

preamble.

• Mail: Commenters unable to file

comments electronically must mail or

hand deliver an original and 14 copies

of their comments to the Federal Energy

Regulatory Commission, Secretary of the

Commission, 888 First Street, NE.,

Washington, DC 20426. Please refer to

the Comment Procedures Section of the

preamble for additional information on

how to file paper comments.

FOR FURTHER INFORMATION CONTACT:

Jane Stelck, Office of Enforcement,

Federal Energy Regulatory

Commission, 888 First Street, NE.,

Washington, DC 200426,

jane.stelck@ferc.gov, (202) 502–6648.

Michelle Veloso, Office of Enforcement,

Federal Energy Regulatory

Commission, 888 First Street, NE.,

Washington, DC 20426,

michelle.veloso@ferc.gov, (202) 502–

8363.

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I. Introduction

1. The Federal Energy Regulatory

Commission (Commission) is initiating

an inquiry into the need for changes or

additions to the financial information

reported in quarterly and annual report

forms, FERC Form Nos. 1, 1–F, 2, 2–A,

3–Q, 6 and 6–Q (Financial Forms).

Specifically, the Commission seeks

comments on whether the Commission’s

annual and quarterly financial forms

provide sufficient information to the

public to permit an evaluation of the

filers’ jurisdictional rates, and whether

these forms should otherwise be

modified to improve their usefulness.

II. Background

2. The Federal Power Act (FPA), the

Natural Gas Act (NGA) and the

Interstate Commerce Act (ICA) authorize

the Commission to prescribe annual or

other periodic reports to assist the

Commission in the administration of its

jurisdictional responsibilities.1 FERC

Form No. 1, ‘‘Annual Report of Major

Electric Utilities, Licensees and Others’’

(Form 1), and FERC Form No. 1–F,

‘‘Annual Report for Nonmajor Public

Utilities and Licensees’’ (Form 1–F),

collect annual financial information as

prescribed in §§ 141.1 and 141.2 of the

Commission’s regulations.2 FERC Form

No. 2, ‘‘Annual Report for Major Natural

Gas Companies’’ (Form 2), and FERC

Form No. 2–A, ‘‘Annual Report for

Nonmajor Natural Gas Companies’’

(Form 2–A), collect annual financial

information from natural gas companies

subject to the Commission’s

jurisdiction, as prescribed in §§ 260.1

and 260.2 of the regulations.3 FERC

Form No. 6, ‘‘Annual Report of Oil

Pipeline Companies’’ (Form 6), collects

annual financial information from oil

pipeline companies subject to the

Commission’s jurisdiction, as prescribed

in §§ 357.2 and 357.4 of the

regulations.4 In 2004, the Commission’s

regulations were revised to require the

filing entities to submit quarterly

financial reports to supplement the

annual filings: FERC Form No. 3–Q by

electric utilities, licensees and natural

gas companies; and FERC Form No. 6–

Q by oil pipeline companies.5

1 See sections 4, 304 and 309 of the Federal Power

Act, 16 U.S.C. 797, 825c and 825h (2000); and

sections 10(a), 16 of the Natural Gas Act, 15 U.S.C.

717i(a) and 717o (2000); and 49 App. U.S.C. 1–85

(2000).

2 18 CFR 141.1, 141.2.

3 18 CFR. 260.1, 260.2.

4 18 CFR 357.2, 357.4.

5 Quarterly Financial Reporting and Revisions to

the Annual Reports, Order No. 646, 69 FR 9030

(Feb. 26, 2004), FERC Stats. & Regs. ¶ 31,158 (2004),

as amended by Order No. 646–A, 69 FR 32440 (June

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3. The Financial Forms provide

information that is essential to the

Commission’s oversight authority,

namely, financial data covering a

company’s past performance. The

financial statements are prepared in

accordance with the Commission’s

Uniform Systems of Accounts and

related regulations and provide data that

enables the Commission to develop and

monitor cost-based rates, analyze costs

of different services and classes of

assets, and compare costs across lines of

business. In addition, the Financial

Forms are relied upon by electric utility,

interstate natural gas pipeline and oil

pipeline customers, state commissions,

and trade associations to develop and

monitor rates. When the Commission

revised its rules to require quarterly

financial reporting, it concluded, based

on comments received, that ‘‘the

financial information filed with the

Commission represents, in most cases,

the only source of financial data

presented in a format and detail suitable

for the Commission to exercise its duties

and responsibilities under the Federal

Power, Natural Gas, and Interstate

Commerce Acts.’’ 6

4. In the spring of 2006, the Office of

Enforcement (OE) assumed

responsibility for all financial forms

filed with the Commission, which

routinely reviews and updates the

forms’ requirements. Accordingly, in

September and October of 2006, OE staff

met informally with both filers and

users of Forms 1 and 2 to reexamine the

breadth of data collected by the forms

and to determine the need for

clarifications, corrections, deletions or

additional information.7 In particular

with respect to Form 2, the meetings

were also prompted because pleadings

filed recently by certain market

participants had questioned the

adequacy of the type and amount of data

reported in the forms for purposes of

challenging rates on file for natural gas

companies.8

10, 2004), FERC Stats. & Regs. ¶ 31,163 (2004). See

18 CFR 141.400, 260.300, and 357.4.

6 Order No. 646 at P 16.

7 References to Forms 1 and 2, to the extent

applicable, also refer to Forms 1–F, 2–A, 3–Q, 6 and

6–Q.

8 See, e.g., Public Service Commission of New

York, Pennsylvania Public Utility Commission and

Pennsylvania Office of Consumer Advocate v.

National Fuel Gas Supply Corp., 115 FERC ¶ 61,299

(2006) (National Fuel) (setting for hearing a

complaint filed by state commissions against

National Fuel Gas Supply Corp. alleging that the

company’s rates are unjust and unreasonable, based

on an analysis of Form 2 data). See also Panhandle

Complainants v. Southwest Gas Storage Company,

117 FERC ¶ 61,318 (2006) (Panhandle) (setting for

hearing a complaint filed by customers of

Panhandle Eastern Pipeline Company (PEPL), in

which complainants relied on Form 2–A data for

support).

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5. During this two-month outreach

period, OE staff met with

representatives of natural gas and

electric utility companies, state

commissions, trade associations,

financial entities, energy data

publishers, federal agencies, and other

Commission staff. In addition to

attending the informal meetings,

participants were invited to submit

written comments and

recommendations. At each session, staff

sought the participants’ views on

several issues, including: how Forms 1

and 2 are used; which information is

most helpful; whether and what

additional information might be sought;

and how burdensome to filers might be

changes made or requirements added to

either Form 1 or 2.9

III. Comments on Form 1

6. Representatives of public utilities

who file Form 1 advocated streamlining

the form, i.e., limiting the information

collected to only what is necessary for

the Commission to perform its

regulatory function and avoiding the

collection of unnecessary additional

information. Many Form 1 filers

expressed concern that these extensive

reporting requirements put them at a

competitive disadvantage because they

apply only to major public utilities and

hydropower licensees, and not to state

and municipal public utilities, rural

cooperatives, independent power

producers, exempt wholesale generators

and power marketers.

7. Users of Form 1 data emphasized

its importance in monitoring cost-based

rates to ensure that rates are just and

reasonable, and in determining the

potential need for a section 206

complaint. More generally, users

complained that the Form 1 filings are

often incomplete or inconsistent and

there is a need for greater quality control

and follow-up by Commission staff.

Several users focused on the need for

greater clarity in the Form 1 instructions

and a need for upgrades to the software

to provide for, among other things, more

standardization of data queries.

8. Specific suggestions for additional

information items to be collected in

Form 1 submitted by the American

Public Power Association include the

following: (1) additional cost data

needed to complete formula rate

calculations, e.g., a summary schedule

of information provided on transmission

line statistics for lines 132 kV or greater;

9 The staff outreach did not extend to Form 6 or

6–Q. The Commission believes, however, that

extension of this inquiry to the oil pipeline

financial forms makes sense as many of the

concerns raised with respect to the other forms

could apply to the oil pipeline forms as well.

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(2) the standard rate divisor as specified

in Order No. 888; 10 (3) expansion of

existing reporting of individual line and

substation facilities to identify which

facilities have been placed under

operation or control of another entity;

and, (4) reporting revenue distributions

from regional transmission

organizations (RTOs) or independent

system operators (ISOs) with a

breakdown of costs and revenues.

IV. Comments on Form 2

9. Representatives of the interstate

natural gas pipeline companies, filers of

Form 2, complained that the filing

requirements, including the filing of

quarterly information, are burdensome

and collect unnecessary data. These

filers also expressed their opinion that

Form 2 is an accounting document that

does not include projections and,

therefore, should not be used as a

substitute for a cost and revenue study

or be used to gauge earnings.

10. The users of Form 2 called for

more, not less data, and identified

specific areas and accounts they found

lacking in detail. According to these

Form 2 users, the lack of detail affects

the reliability of an accurate assessment

of pipeline rates. Users of the data

emphasized the significance of the

information collected in Form 2 as the

primary source for evaluating cost-based

rates. They added that since interstate

natural gas pipeline companies are no

longer required to file a periodic

restatement of rates, the importance of

the information in Form 2 is particularly

significant and constitutes the only

resource available to shippers seeking

pipeline rate changes by filing a

complaint.11

11. Specific changes or additional

details sought by the users of Form 2

include: (1) A breakdown of operating

revenues; (2) unbundling of certain

accounts; (3) additional detail on cost of

service items, billing determinants, and

maximum rate contracts; (4) detail on

pensions and Post Retirement Benefits

Other Than Pension (OPEBs); (5) more

detail on employee expenses, employee

benefits and executive compensation;

and (6) more affiliate transaction

10 Promoting Wholesale Competition Through

Open Access Non-Discriminatory Transmission

Services by Public Utilities; Recovery of Stranded

Costs by Public Utilities and Transmitting Utilities,

Order No. 888, 61 FR 21540 (May 10, 1996), FERC

Stats. & Regs. ¶ 31,036 (1996), order on reh’g, Order

No. 888–A, 62 FR 12274 (Mar. 14, 1997), FERC

Stats. & Regs. ¶ 31,048 (1997), order on reh’g, Order

No. 888–B, 81 FERC ¶ 61,248 (1997), order on reh’g,

Order No. 888–C, 82 FERC ¶ 61,046 (1998), aff’d

in relevant part sub nom. Transmission Access

Policy Study Group v. FERC, 225 F.3d 667 (D.C. Cir.

2000) (TAPS v. FERC), aff’d sub nom. New York v.

FERC, 535 U.S. 1 (2002).

11 See supra note 8.

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schedules. Other data and changes

requested include: (1) Separation of

cost-of-service components from noncost-of-service components; (2)

requiring a filer to identify items that it

considers rate-base components for

ratemaking purposes; (3) information on

construction costs and capitalized costs;

and (4) additional information on

deferred taxes and capital structure.

12. The Industry Coalition 12

(Coalition) submitted written comments

suggesting specific changes to Form 2,

information they identified as necessary

to perform an evaluation of pipeline

rates. The Coalition’s specific

suggestions include the following: (1)

Identify which components of deferred

taxes are included in rate base for costof-service purposes; (2) provide

additional information on the entity

whose capital structure is reported on

page 218a of the form; (3) provide detail

on gas purchases and sales; (4) provide

detail on miscellaneous gas revenues;

(5) provide a calculation of the

pipeline’s effective overall state income

tax rate; (6) provide detail for

miscellaneous assets; (7) provide detail

concerning the total parent company

overhead costs and the amount assigned

or allocated to the pipeline; (8) provide

aggregate information on volumes and

revenues associated with discounted

services and negotiated rate services; (9)

identify costs and revenues associated

with at-risk facilities; and (10) provide

a calculation of the pipeline’s earned

annual return on equity.

13. In addition, many participants

commented on the need to limit delays

in filing, and the incompleteness of

some information that is filed. The

Commission shares the concern

regarding timely filings. The

Commission expects that all Financial

Forms will be filed in a timely manner

and will provide all of the requested

information.13

14. The comments and information

received as a result of the outreach

meetings reinforce the significance of

this data to the Commission, and to the

public who depend almost solely on the

data reported when they elect to file a

complaint under section 5 of the NGA

or section 206 of the FPA. The forms

represent more than simply accounting

documents; the information provided is

essential to the public’s right to

12 The Industry Coalition comprised the following

entities: Natural Gas Supply Association, American

Public Gas Association, Independent Petroleum

Association of America, and The Process Gas

Consumers Group.

13 Concurrently with the issuance of this Notice

of Inquiry, the Commission is issuing a show cause

order to financial forms filers who have been

delinquent in making their filings.

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hsrobinson on PROD1PC76 with PROPOSALS

examine, monitor, and assess utility and

pipeline rates to ensure that they do not

pay excessive or unduly discriminatory

rates.

15. In light of the comments received,

both orally and written, during OE’s

review of Forms 1 and 2, and in light

of the complaints set for hearing in

National Fuel and Panhandle and the

importance of the questions they raise,

the Commission believes it is

appropriate to solicit comments on

these matters. Although the informal

meetings held as a result of OE’s

outreach efforts focused on Forms 1 and

2, this Notice of Inquiry (NOI) solicits

comments on the need for changes to

any and all of the Financial Forms filed

with the Commission, i.e., Form 6 and

quarterly submissions, Forms 3-Q and 6Q. The Commission is aware that not all

participants in the informal review had

an opportunity to submit written

comments or to respond to comments

submitted by other parties. This NOI

gives those entities, and all other

interested persons, the opportunity to

comment formally with the Commission

on any of the issues raised herein. The

list is not exhaustive. Those responding

to this NOI should feel free to raise any