Cost-of-Service Reporting and Filing Requirements for Oil Pipelines
Federal RegisterNov 16, 1994
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 342, 346, and 347
[Docket No. RM94-2-000]
Cost-of-Service Reporting and Filing Requirements for Oil
Pipelines
Issued October 28, 1994.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission is amending its
regulations to establish filing requirements for cost-of-service rate
filings for oil pipelines; filing requirements for oil pipelines
seeking to establish new or changed depreciation rates; and new and
revised pages of FERC Form No. 6, Annual Report for Oil Pipelines.
These requirements are adopted as companions to Order No. 561,
Revisions to Oil Pipeline Regulations Pursuant to the Energy Policy Act
of 1992, published in the Federal Register on November 4, 1993. That
order established an indexing methodology which would establish
ceilings on oil pipeline rates. The Commission provided the opportunity
for oil pipelines to seek an exception to indexing through a cost-of-
service filing if the pipeline could show that, under indexing, it
would substantially underrecover prudent costs.
EFFECTIVE DATE: This final rule is effective January 1, 1995.
FOR FURTHER INFORMATION CONTACT: Harris S. Wood, Office of the General
Counsel, Federal Energy Regulatory Commission, 825 North Capitol
Street, NE., Washington, DC 20426, (202) 208-0224.
SUPPLEMENTARY INFORMATION: In addition to publishing the full text of
this document in the Federal Register, the Commission also provides all
interested persons an opportunity to inspect or copy the contents of
this document during normal business hours in Room 3104, 941 North
Capitol Street, NE., Washington, DC 20426.
The Commission Issuance Posting System (CIPS), an electronic
bulletin board service, provides access to the texts of formal
documents issued by the Commission. CIPS is available at no charge to
the user and may be accessed using a personal computer with a modem by
dialing (202) 208-1397. To access CIPS, set your communications
software to use 300, 1200, or 2400 bps, full duplex, no parity, 8 data
bits and 1 stop bit. CIPS can also be accessed at 9600 bps by dialing
(202) 208-1781. The full text of this proposed rule will be available
on CIPS for 30 days from the date of issuance. The complete text on
diskette in Wordperfect format may also be purchased from the
Commission's copy contractor, La Dorn Systems Corporation, also located
in Room 3104, 941 North Capitol Street, NE., Washington, DC 20426.
Order No. 571
The Federal Energy Regulatory Commission (Commission) in this order
revises the information reported by oil pipelines in their FERC Form
No. 6, Annual Report of Oil Pipeline Companies (Form No. 6), and adopts
filing requirements for cost-of-service rate filings by oil pipelines.
The Commission also adopts rules for oil pipelines performing
depreciation studies. Finally, the Commission is deferring at this time
the requirement to file Form No. 6 on an electronic medium in addition
to making a paper filing. These changes shall become effective January
1, 1995, concurrently with the new regulations promulgated by Order No.
561.\1\
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\1\Revisions to Oil Pipeline Regulations pursuant to Energy
Policy Act, Order No. 561, 58 FR 58785 (November 4, 1993), III
Stats. & Regs. 30,985 (1993), order on reh'g and clarification,
Order No. 561-A, 59 FR 40243 (August 8, 1994), III FERC Stats. &
Regs. 31,000 (1994). Unless the context indicates otherwise, all
references to Order No. 561 include Order No. 561-A.
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I. Introduction
This proceeding is a companion to Order No. 561. In Order No. 561,
the Commission established an indexing methodology, which would
establish ceilings on oil pipeline rates, to be used by oil pipelines
as the generally applicable and simplified ratemaking methodology for
oil pipelines on or after January 1, 1995. The Commission provided the
opportunity for oil pipelines to seek an exception to indexing through
a cost-of-service filing if the pipeline could show that, under
indexing, it would substantially underrecover prudent costs. Further,
the Commission provided that rates for new services could be
established either through settlement or by use of a cost-of-service
methodology.\2\
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\2\18 CFR 342.2. In Docket No. RM94-1-000, Market-Based
Ratemaking for Oil Pipelines, the Commission elicited comments on
its proposal to permit oil pipelines to seek market-based rates and
the appropriate standards for making a determination that a pipeline
lacks significant market power. This matter is the subject of a
Final Rule in Docket No. RM94-1-000, issued contemporaneously.
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In Order No. 561, the Commission recognized that cost-of-service
rate filing information would be necessary for oil pipelines to justify
seeking rate increases under the cost-of-service alternative, should
they choose to use this methodology, and for interested parties to
decide whether to challenge proposed cost-of-service rates. The
Commission also recognized that Form No. 6 might need to be revised to
enable review of the effectiveness of the index in tracking industry-
wide cost changes and for interested parties to decide whether to
challenge indexed rates.
The present rule adopts regulations specifying the information that
must accompany oil pipelines' cost-of-service rate filings and
requested changes in depreciation rates, and modifies and streamlines
Form No. 6.
II. Public Reporting Requirement
The Commission estimates the public reporting burden for the
collections of information under the final rule will be reduced for
Form No. 6 by approximately seven percent and will, in effect, remain
unchanged for rate filings, since the Commission is here codifying the
information to be provided which the Commission's staff in the past has
requested from oil pipelines that have made cost-of-service rate
filings. The information will be collected on Form No. 6, ``Annual
Report of Oil Pipeline Companies'' and FERC-550, ``Oil Pipeline Rates:
Tariff Filings.''\3\ These estimates include the time for reviewing
instructions, researching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. The current annual reporting burden
associated with these information collection requirements is as
follows:
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\3\FERC-550 is the designation covering oil pipeline tariff
filings made to the Commission.
Form No. 6: 22,200 hours, 148 responses, and 148 respondents; and
FERC-550: 5,350 hours, 535 responses, and 140 respondents.
The final rule will reduce the existing reporting burden associated
with Form No. 6 by an estimated 1,628 hours annually, or an average of
11 hours per response based on an estimated 148 responses. This
estimate includes the addition of two new schedules, the elimination of
several schedules, and increasing the reporting thresholds for which
oil pipelines must analyze and report certain data.
Comments regarding these burden estimates or any other aspect of
these collections of information, including suggestions for reducing
this burden, can be sent to the Federal Energy Regulatory Commission,
941 North Capitol Street, N.E., Washington, DC 20426 [Attention:
Michael Miller, Information Services Division, (202) 208-1415]; and to
the Office of Information and Regulatory Affairs of OMB (Attention:
Desk Officer for Federal Energy Regulatory Commission), FAX: (202) 395-
5167.
III. Background
On October 22, 1993, the Commission issued a Notice of Inquiry
(NOI) concerning the information to be included by an oil pipeline in a
cost-of-service rate filing, and on potential changes to Form No. 6.\4\
In the NOI, the Commission invited comment on what action would be
appropriate to develop a final rule with respect to cost-of-service
rate filings, whether and to what extent its Form No. 6 should be
revised in light of Order No. 561, and whether and to what extent it
should establish additional requirements with respect to an oil
pipeline's depreciation studies.
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\4\Cost-of-Service Filing and Reporting Requirements for Oil
Pipelines, Notice of Inquiry, 58 FR 58817 (November 4, 1993), IV
FERC Stats. & Regs. Notices 35,528 (October 22, 1993).
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On July 28, 1994, the Commission issued a Notice of Proposed
Rulemaking (NOPR).\5\ In the NOPR, the Commission proposed that oil
pipelines seeking cost-of-service rates would be required to file
specific data conforming to the Order No. 154-B methodology.\6\ The
Commission also proposed to revise and streamline Form No. 6, and
proposed that Form No. 6 data would be filed on an electronic medium.
Finally, the Commission proposed certain rules for oil pipelines
performing depreciation studies. The changes were proposed to be made
effective January 1, 1995.\7\
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\5\Cost-of-Service Filing and Reporting Requirements for Oil
Pipelines, Notice of Proposed Rulemaking, 59 FR 40493 (August 9,
1994), IV FERC Stats. & Regs. Proposed Regulations 32,509 (July
28, 1994).
\6\Opinion No. 154-B methodology is derived from the
Commission's opinions in Williams Pipe Line Company, Opinion No.
154-B, 31 FERCP 61,377 (1985), on rehearing, Opinion No. 154-C,
Williams Pipeline Company, 33 FERC 61,327 (1985); and ARCO Pipe
Line Company, Opinion No. 351, 52 FERC 61,055 (1990), on
rehearing, Opinion No. 351-A, ARCO Pipe Line Company, 53 FERC
61,398 (1990).
\7\Electronic reporting of Form No. 6 was proposed to commence
with the reporting year 1995 reports, due on or before March 31,
1996.
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The Commission received fourteen sets of comments.\8\ After
analyzing those comments as discussed below, the Commission is adopting
the rules proposed in the NOPR, except for the electronic reporting
requirement for Form No. 6, with minor modifications and with
clarifying statements. Although the Commission has procured the
software development tool, the electronic version of the Form No. 6
application has not yet been developed. Therefore, the Commission is
deferring the electronic reporting requirement at this time, pending
development and testing of the necessary electronic version of the Form
No. 6 application. Once that process is complete, the Commission
intends to issue a final rule providing for the electronic filing of
Form No. 6.
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\8\A list of commenters is contained in Appendix A to this
order.
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IV. Cost-of-Service Filing Requirements
The Commission is adding a new Part 346 to its regulations that
sets forth the threshold filing requirements for oil pipelines seeking
to establish initial rates on a cost-of-service basis, or to pursue a
cost-of-service alternative to indexing as a means of establishing just
and reasonable rates. The Commission is also amending sections 342.2
and 342.4 to reflect the addition of Part 346.
A. Authority for Filing Requirements
AOPL argues that the Commission's proposed cost-of-service rate
filing requirements represents an improper attempt to modify the
Interstate Commerce Act's (ICA)\9\ rate filing scheme, ignores the
mandate of the Act of 1992 to reduce regulatory burdens and costs
through streamlined procedures, and imposes undue burdens on pipelines
proposing cost-based rates.\10\ AOPL asserts that a pipeline need only
file a notice of a rate change, not the supporting documents underlying
that rate change, unless its rates have been called into question.\11\
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\9\49 App. U.S.C. 1 (1988).
\10\AOPL, pp. 29-39.
\11\AOPL, pp. 36-39.
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The Commission's filing requirements for oil pipeline rate changes
fully comport with the Act of 1992 and the ICA. The Act of 1992
required the Commission to establish a simplified and generally
applicable ratemaking methodology for oil pipelines in accordance with
the just and reasonable standard of the ICA. Order No. 561 has done so
by adopting an index method. Cost-based rates are a part of this scheme
but are allowed a pipeline only as an alternative to indexing, and only
if the pipeline can meet certain threshold conditions. Thus, the
pipeline must demonstrate at the outset that it meets the substantial
divergence test of Order No. 561--i.e., that there is a substantial
divergence between the actual costs experienced by the pipeline and the
rate resulting from application of the index such that rates at the
indexed ceiling level would preclude the pipeline from charging a just
and reasonable rate.\12\ The threshold filing requirements for cost-of-
service ratemaking adopted in this rule are the means that the
Commission has decided are necessary for a pipeline to make a prima
facia demonstration that it should be allowed to pursue the cost-of-
service alternative as a means of establishing just and reasonable
rates. The materials required to be filed with a cost-of-service
optional filing thus are designed to address the threshold issue of
whether there is such a substantial divergence as to warrant a cost-of-
service filing. A mere notice of rate change alone would fail to show
good cause for a pipeline's departure from indexing, or why it should
be allowed to change its rates outside the basic indexing scheme. As to
AOPL's claim that the cost-of-service filing requirements impose undue
burdens,\13\ a pipeline can always choose not to pursue this
alternative to indexing and stay with rate changes under indexing.
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\12\18 CFR 342.4(a).
\13\AOPL, p. 8.
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Contrary to AOPL's assertion,\14\ the Commission is following the
statutory scheme applicable to oil pipeline rate filings. If a pipeline
desires to depart from the ordinary scheme of rate changes based on the
index and seek rate changes based on its cost of service, it is up to
the pipeline to meet the special circumstances of the rules, and it is
reasonable for the Commission to require a threshold filing from the
pipeline to demonstrate that it does.\15\
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\14\AOPL, p. 36.
\15\Section 12(1) of the ICA provides: ``The Commission is
authorized and required to execute and enforce the provisions of
this chapter.''
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AOPL claims that the pipeline should not be required to establish
an initial case for cost-based rates at the initial filing stage.\16\
It claims that to require the pipeline to shoulder a burden of proof
regarding cost-based rates prior to knowing whether the rate has been
challenged is contrary to any notion of streamlining, and it argues
that the pipeline should not be required to provide extensive threshold
justification for each cost-based rate.\17\ Further, AOPL asserts that
the pipeline may choose some method other than the Opinion No. 154-B
method to justify its cost-based rates, such as a stand-alone cost
showing.
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\16\AOPL, pp. 36-39.
\17\AOPL, p. 37.
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The Commission's cost-of-service filing requirements are not
designed to provide information in sufficient detail for a pipeline to
shoulder its burden of proof regarding cost-based rates if they are
challenged. Rather, the burden is on the pipeline to demonstrate only
that its rates at the index ceiling would substantially diverge from
its actual costs to such an extent that the indexed ceiling rates would
not be just and reasonable. If a pipeline's rates are challenged, it
must demonstrate that the challenged rate, if based on cost, is just
and reasonable, which may include an appropriate rate design and cost
allocation to justify the rate. Additional information can be supplied
by the pipeline to justify its challenged rates, including, if it
chooses, a stand-alone cost showing. This, however, does not negate the
importance of the initial showing that is required of the pipeline in
order to justify departure from indexing.
B. Cost-of-Service Methodology
AOPL and Marathon argue that the Opinion No. 154-B methodology is
inadequate for establishing rates. AOPL asserts that this methodology
has never been used to set individual rates, and continues to argue for
a stand-alone cost methodology.\18\ As explained in Order No. 561, the
regulations providing for an Opinion No. 154-B submission are merely
the filing requirements for the cost-of-service alternative to
indexing. An oil pipeline seeking cost-of-service rate treatment for
some or all of its rates will submit the information required by new
Part 346. Absent challenge to the rates proposed, that is all that is
required of the oil pipeline. Matters of rate design and cost
allocation will be at issue only if the rates are protested and a
hearing is conducted.\19\ As the Commission stated in Order No. 561-A,
the issues of fully-allocated costs for oil pipelines have not been
determined in a fully litigated case by this Commission under the
ICA.\20\ The Commission also stated that proponents of costing
methodologies other than fully-allocated costs will not be precluded
from advocating such methodologies in individual cases.\21\ The
Commission reaffirms that statement here.
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\18\AOPL, pp. 25-28.
\19\The Commission has never established individual rates for
oil pipelines on a cost-of-service basis, since no contested case
has come to the Commission for final decision on issues of cost
allocation and rate design. However, nothing in the Opinion No. 154-
B costing methodology would limit the Commission in deciding how to
allocate costs to establish individual rates.
\20\Order No. 561-A, Regulations Preambles, III FERC Stats. &
Regs. 31,000, at p. 31,107.
\21\IV FERC Stats. and Regs. 31,000, at p. 31,107 (1994).
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Chevron suggests that the filing requirements should include a
requirement that the carrier provide cost allocation and rate design
schedules with its rate filing.\22\ The Commission will not adopt this
recommendation, since there will be no need for allocation and rate
design information except at a hearing on a challenged cost-of-service
rate filing. Thus, the Commission does not believe that a point-to-
point rate showing, for example, is necessary as a filing requirement.
The burden that this requirement would impose is not justified,
particularly since the cost-of-service methodology is an alternative to
indexing, and the initial filing need only show that there is a
substantial divergence between the costs of the pipeline, as reflected
in Statement A, and the revenues that would be produced by the indexed
ceiling rates, as reflected in Statement G.\23\
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\22\Chevron, p. 7.
\23\See 18 CFR 346.2(c) (1) and (7).
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Similar requests are made by Alaska and Total.\24\ These commenters
also request that the Form No. 6 data be provided in such a fashion.
For the same reasons, the Commission will not adopt these suggestions.
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\24\Alaska, pp. 1-2 and the appendices to its comments; Total,
p. 1.
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AOPL urges the Commission to discard Opinion No. 154-B, arguing
that this must have been Congress' intent in passing the Act of
1992.\25\ To the contrary, Congress mandated only that the Commission
establish a simplified and generally applicable ratemaking methodology.
It did not specify what methodology should be used. The Commission has
given full weight to the Congressional intent by providing that
indexing will be the simplified and generally applicable methodology
for oil pipeline ratemaking. Under this scheme, cost of service
continues only as an option that pipelines may choose to use if they
meet the threshold requirement.\26\
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\25\AOPL, p. 19.
\26\See 18 CFR 342.4(a), adopted by Order No. 561-A.
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AOPL further argues that pipelines should be allowed to use a
variety of methods to justify individual rate changes.\27\ Buckeye also
seeks alternatives to indexing for partly competitive pipelines to use
in less competitive markets.\28\ These issues are beyond the scope of
this rulemaking, but parties are free to make proposals in individual
cases.
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\27\AOPL, p. 28.
\28\Buckeye, pp. 2-4.
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ARCO seeks clarification of several items. It first asks that the
Commission require that pipelines seeking to use a cost of service
approach file a full system-wide cost of service. Protestants then
would be required to be specific in their protests.\29\ The Commission
has determined that the Opinion No. 154-B filing will be required for a
cost-of-service filing, and that a cost allocation and rate design
showing would only be required if the pipeline's rates are protested.
This will reduce the burden on the pipeline and the Commission in those
cases where there is no protest. The information required to be filed
by Part 346 of the regulations adopted by this order will be sufficient
for a cost-of-service showing if there are no protests.
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\29\ARCO, p. 3.
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ARCO further requests clarification that, if a pipeline can show
that its total revenue requirement is not being met, it may charge
cost-of-service rates above the index without any other showing, and
that, in that case, no information on point-to-point rates would be
filed except in an investigation.\30\ ARCO is generally correct. All a
pipeline need show to make a prima facie case under the cost-of-service
alternative is that the revenues to be produced by the indexed ceiling
rates substantially diverge from its costs. Upon challenge, however,
the pipeline must provide data supporting its proposed individual
rates, including allocation and rate design. It will not be allowed to
charge rates higher than its properly allocated costs would justify for
any one service.
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\30\ARCO, pp. 3-5.
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ARCO further seeks clarification of when in the process a pipeline
must demonstrate prudence of its costs.\31\ It asserts that a pipeline
should be required to demonstrate prudence only when a serious doubt is
raised. In this, too, ARCO is correct. A protestor must first raise a
reasonable challenge as to the prudence of the pipeline's costs, and
then the pipeline will have the burden of establishing the prudence of
those costs.
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\31\ARCO, pp. 8-9.
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The Commission will continue to use the Opinion No. 154-B
methodology for oil pipelines seeking to use a cost-of-service
methodology.
C. Filing Requirements Adopted
As required by Order No. 561, a pipeline seeking to change rates is
required to file a transmittal letter containing the previous rate for
the same movement or service, the applicable ceiling rate for the
movement in question, and the new proposed rate.\32\ This is all that
is required to justify a rate change within the index.
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\32\18 CFR 342.3(b).
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In this rule, the Commission requires a pipeline to file additional
information if it is filing for a cost-of-service rate above the
indexed rate ceiling, or as support for an initial rate. This
information will permit a pipeline to establish an initial case for
cost-of-service rates. The additional filing requirements provide
sufficient information for a preliminary cost-of-service showing. If
the Commission institutes an investigation into a pipeline's rates,
additional information may be required of the pipeline. The new filing
requirements are set forth in new Part 346 of the Commission's
regulations.
Part 346 also contains the definition of the terms ``base period''
and ``test period.'' The definitions of these terms are consistent with
the definitions of similar terms in the Regulations under the Natural
Gas Act,\33\ applicable to natural gas pipeline companies.
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\33\See 18 CFR 154.63(e)(2)(i).
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The oil pipeline must file the following statements and supporting
work papers to support either an initial rate developed on a cost-of-
service basis or a change in rates using the cost-of-service
methodology.
Statement A--Total Cost of Service
This statement shows the calculation of the Total Cost of Service
for a pipeline.
Statement B--Operation and Maintenance
This statement shows the operation, maintenance, administrative and
general expenses, and depreciation and amortization expenses.
Statement C--Overall Return on Rate Base
This statement shows the derivation of the return on rate base
consisting of deferred earnings, equity and debt ratios, weighted cost
of capital, and costs of debt and equity.
Statement D--Income Taxes
This statement shows the calculation of the Income Tax Allowance.
Statement E--Rate Base
This statement shows the calculation of the return rate base
required by the Opinion No. 154-B methodology to derive the cost of
service.
Statement F--Allowance for Funds Used During Construction
This statement shows the calculation of the Allowance for Funds
Used During Construction (AFUDC).
Statement G--Revenues
This statement shows the revenues at the effective, proposed, and
indexed ceiling rates.
Details of the various statements and supporting schedules are
found in new Part 346 of the regulations.
V. Form No. 6 Revisions
In the NOPR, the Commission proposed several changes to Form No. 6,
the Annual Report for Oil Pipelines. These changes were proposed to
provide information that would be necessary for the implementation of
Order No. 561, and to update and streamline the information required of
oil pipelines.
A. New Schedule
A new schedule, page 700, Annual Cost of Service Based Analysis
Schedule, was proposed to be added to Form No. 6 showing basic
information needed for a review of rate filings made within the index
cap. The new schedule would require each pipeline company to report, as
of the end of the reporting year and the immediately preceding year,
its Total Annual Cost of Service (as calculated under the Order No.
154-B methodology), operating revenues, and throughput in barrels and
barrel-miles. This schedule would permit a shipper to compare proposed
changes in rates against the change in the level of a pipeline's cost
of service. It would also permit a shipper to compare the change in a
shipper's individual rate with the change in the pipeline's average
company-wide barrel-mile rate. Underlying calculations of and
supporting data for these figures need not be reported in Form No. 6.
Of course, the oil pipeline will be expected to be consistent in its
application of the Opinion No. 154-B methodology from year to year to
permit valid comparisons of data from one year to the next. If it makes
major changes in its application of the methodology, it must report
that it has done so, and recalculate the prior year's cost of service
to reflect such a change. While the Commission believes that the
Opinion No. 154-B methodology is well-defined and for the most part
generally understood in the industry, it is modifying the instructions
for page 700 to require that the pipeline describe any change in
application of Opinion No. 154-B made from past years in its
calculation of total cost of service, and to require that the changed
application be reflected on page 700 for the calculation of the total
cost of service for the prior reporting year as well.
The commenters supporting the use of page 700 recommended that the
pipeline be required to report its cost of service on each separate
system operated by the pipeline.\34\ Moreover, some commenters
recommended that substantial additional information be required on page
700, setting forth in detail additional information and the assumptions
used in the calculations.\35\ Alberta recommended that the cost-of-
service reporting requirements be implemented for Form No. 6 expense
and income statements to streamline shipper review of the individual
cost components, thereby making the information contained in page 700
consistent, from an accounting standpoint, with the other information
contained in Form No. 6.\36\
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\34\Total, pp. 1-2, Alaska, p. 2, Chevron, pp. 3-5.
\35\Chevron, p. 5, Alaska, pp. 1-2, Alberta, pp. 2-3.
\36\Alberta, p. 2.
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The pipelines, on the other hand, strenuously objected to the use
of page 700 as a rate review tool and as a monitoring tool, asserting
that it is misleading, burdensome, and duplicative.\37\
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\37\AOPL, pp. 8-15, ARCO, pp. 9-14, Marathon, pp. 1-4.
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Contrary to what appears to be the assumption by most commenters,
page 700 is designed to be a preliminary screening tool for pipeline
rate filings. It is not intended to be the information which, in
itself, either forms the basis of a Commission decision on the merits
of a pipeline filing, or demonstrates that the pipeline's proposed or
existing rates are just and reasonable. Rather, it should provide a
means whereby a shipper can determine whether a pipeline's cost of
service or per-barrel/mile cost is so substantially divergent from the
revenues produced by its rates to warrant a challenge that requires the
pipeline to justify its rates. Therefore, the additional information
suggested by the commenters--e.g., specifying the achieved rate of
return, rate of return assumptions, and the debt and equity
components--will not be required.
Moreover, the Commission is not here attempting to require a
pipeline to demonstrate with precision its cost-of-service attributable
to each individual pipeline system it operates. If the pipeline seeks a
cost-of-service rate for some or all of its rates, it will be required
at that time to demonstrate that its properly allocated costs justify
such rate treatment. This, however, will be left to individual cost-of-
service rate filings, not required as a part of Form No. 6, which is
and shall remain primarily a financial report.
Requests that the pipelines be required to file separate cost-of-
service information for each individual system are denied. Likewise,
the recommendations of the pipelines that page 700 be discarded will be
denied. The Commission finds that the information contained in a single
place in Form No. 6 will be useful in its monitoring of the performance
of the index, and that the information may indeed be useful as a
``substantial divergence'' screen, as suggested by TE Products
Pipeline.\38\ Any additional burden should be minimal on the pipelines
in deriving an Opinion No. 154-B cost of service on an annual basis,
since much of the basic information is available in its Form No. 6. As
explained above, the use of the page 700 should be limited and should
not be misleading. As Marathon and AOPL point out, some of the
information is already included in other schedules in Form No. 6.
However, the Commission finds that having the information displayed on
a single page 700 will make it easier for the Commission and other
interested parties to analyze.
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\38\TE Products, p. 1.
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Davis\39\ suggests that the Commission define ``substantial
divergence as being a percentage [variation] * * *.'' The Commission
will not adopt this suggestion, inasmuch as what constitutes a
``substantial divergence'' may depend on factors other than a simple
percentage variation in costs and revenues. Therefore, the Commission
concludes that whether a substantial divergence exists should be
determined on the facts of individual cases, not generically.
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\39\Davis, p. 2.
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Chevron suggests that use of page 700 is likely to be meaningless
as a monitoring tool, since the Commission is likely to get numerous
interpretations of how the Opinion No. 154-B methodology should be
implemented, thereby resulting in a compilation that does not reflect
actual changes in costs on an industry-wide basis.\40\ As previously
stated, the Commission will require that any change in application of
the Opinion No. 154-B methodology from one year to the next be
described and reflected in the total cost of service calculations
appearing on page 700. Moreover, the compilation of data from page 700
will be only a part of the evidence used by the Commission for
monitoring how the index tracks industry cost changes.
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\40\Chevron, p. 5.
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Upon consideration of the comments, the Commission has determined
that Form No. 6 should contain information that will permit its use for
a number of purposes: Reviewing changes in rates made by use of the
index, monitoring existing rates, and analyzing and auditing finances.
At present, the primary focus of Form No. 6 is on financial accounting
information that is gathered based on accounting principles which are
different in some respects from the ratemaking principles used to
establish rates for oil pipelines. To serve as a tool to evaluate the
performance of the index and future changes in oil pipeline rates using
the index methodology, Form No. 6 will be revised to include additional
information.
Revisions to Form No. 6 are needed to provide at least a
preliminary basis for shipper assessments of filed rate changes under
Order No. 561. Form No. 6 data should be complete enough to enable an
evaluation of whether a proposed rate change under indexing
substantially exceeds the pipeline's changes in costs. As currently
structured, Form No. 6 does not provide sufficient information to do
this.
Only limited additional information is needed in Form No. 6 to
permit adequate preliminary review of a pipeline's cost-of-service
showings, and to permit shipper comparison of indexed rate changes with
changes in costs incurred. Thus, the single new schedule will be added
to Form No. 6.
The use of trended original cost to establish a rate base for oil
pipelines, as required by the Opinion No. 154-B methodology, entails
complex calculations to derive annual figures for equity and equity
returns for ratemaking purposes. This calculation will differ from the
book equity figures contained in Form No. 6, which are required for
financial reporting purposes. To require the display of these
calculations in Form No. 6 would be cumbersome and not be of
significant benefit in a shipper's determination of whether to protest
a pipeline's indexed rate filing.\41\ In any event, if a shipper
protest results in a cost-of-service justification by the pipeline, the
underlying calculations would be available.
---------------------------------------------------------------------------
\41\For a discussion of the differences in the equity and equity
return figures contained in Form No. 6 and the use of those figures
for ratemaking purposes under the Opinion No. 154-B methodology, see
Supplemental Brief of AOPL filed in Docket No. RM93-11-000 on
January 21, 1994, at 11-12.
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The changes to Form No. 6 will be effective for reporting year
1995. The 1995 Form No. 6 must be filed on or before March 31, 1996.
The new schedule appearing on page 700 therefore would not be required
for Form No. 6 filings until March 31, 1996, for reporting year 1995.
In the interim, a verified copy of this new schedule for calendar years
1993 and 1994 is required to be prepared separately and filed
concurrently with the first indexed rate change filing made by a
pipeline after January 1, 1995, or by March 31, 1995, whichever is
earlier. For index rate change filings made early in 1995, complete
data may not be available. In this instance, a 1994 schedule shall be
prepared utilizing the most recently available data annualized for
1994. By March 31, 1995, a new 1994 schedule must be submitted, using
the actual 1994 data.
This will provide shippers with the necessary information for an
analysis of proposed indexed rate changes after January 1, 1995, the
effective date of the regulations in Order No. 561. In addition, as
discussed below, the information on this page will become part of the
Commission's evaluation of the effectiveness of the index. Accordingly,
the Commission will amend Sec. 342.3(b) of the regulations to require a
verified copy of a schedule containing the information contained on
page 700 for calendar years 1993 and 1994 to be filed with the first
indexed rate change filing made after January 1, 1995, or by March 31,
1995, whichever is earlier.
In Order No. 561, the Commission stated it would monitor the
effectiveness of the index in tracking industry costs. These reviews
will occur every five years, commencing July 1, 2000.\42\ Page 700,
together with other information contained in Form No. 6, will permit
the Commission to use the Form No. 6 data to help fulfill this
commitment. Since the Total Cost of Service, for example, is derived
from all of the components of a pipeline's costs and capital
properties, this figure, when used in conjunction with other Form No. 6
information, will provide details on general trends affecting each
company.
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\42\III FERC Stats. & Regs. 30,985 (1993), at 30,947.
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B. Other Revisions to Form No. 6
Since the regulatory responsibility for oil pipelines was
transferred to this Commission from the Interstate Commerce Commission
in 1977, only cosmetic changes have been made to Form No. 6, other than
the addition of a Statement of Cash Flows. In addition to the addition
of Page 700, which is primarily designed to conform with Order No. 561,
the Commission proposed in the NOPR other changes to make Form No. 6 a
more useful report. As discussed below, some of the information
proposed in the NOPR will not be required by this final rule.
AOPL and Marathon\43\ argue that the information to be contained on
pages 102-103, Corporate Control, is of no value to the Commission.
However, in the Commission's view, it is necessary to have information
about vertical control of the pipelines for proper rate regulation to
ensure against improper cost shifting and for the purpose of analyzing
property transactions between affiliates. The suggestion to delete this
information is denied.
---------------------------------------------------------------------------
\43\AOPL, p. 18; Marathon, p. 3.
---------------------------------------------------------------------------
AOPL and ARCO\44\ argue that the information regarding officer
salaries requested on page 104, Principal General Officers, is not
needed by the Commission. On further reflection, the Commission agrees,
and the changes proposed to page 104 will not be adopted.
---------------------------------------------------------------------------
\44\AOPL, pp. 18-19; ARCO, pp. 14-15.
---------------------------------------------------------------------------
AOPL and Marathon\45\ recommend that the information proposed on
pages 230-231, Analysis of Federal Income & Other Taxes Deferred, and
pages 108-109, Important Changes During the Year, be combined with
pages 122-123, Notes to Financial Statements. AOPL also suggests that
the information proposed for collection by the NOPR on pages 230-231
should be limited to present GAAP reporting requirements. The
Commission does not agree. As to AOPL's suggestion that the information
required on pages 230-231 be presented in accordance with GAAP
reporting requirements and combined with the Notes to Financial
Statements, the Commission considers the deferred tax schedule on pages
230-231 to be a necessary supporting schedule to the financial
statements. Although the notes to financial statements are the
appropriate place to disclose significant financial effects on a
company of recently enacted income tax laws and regulatory actions, the
deferred tax schedule is designed to present details, using a uniform
format, on each significant item which causes a temporary difference
between taxable income and pretax accounting income. This schedule,
like the Form No. 6 carrier property and operating expense account
schedules, permits a detailed analysis of the various charges and
credits which comprise the balances of the current and noncurrent
deferred income tax assets and liabilities. The latter are presented in
the financial statements only as a single asset or liability balance
for current and noncurrent deferred income taxes. Moreover, the
information contained on pages 108-109 may not be appropriate for notes
to financial statements, such as properties added or changes to
franchise rights. These pages are for reporting of different types of
information than changes to the financial condition of the pipeline,
even though they may impact the financial condition.
---------------------------------------------------------------------------
\45\AOPL, pp. 18-19; Marathon, p. 3.
---------------------------------------------------------------------------
AOPL and Marathon\46\ recommend that page 350, Employees and Their
Compensation, be deleted. The Commission agrees, since the information
as to salary expense is available in a different format elsewhere in
Form No. 6.
---------------------------------------------------------------------------
\46\AOPL, p. 19; Marathon, p. 3.
---------------------------------------------------------------------------
Based on the comments received on the NOPR and review of the
current schedules in Form No. 6, the Commission will make several
changes to the annual report for oil pipelines. To simplify the Form
No. 6 data, the Commission will delete information not relevant to the
Commission's regulatory responsibilities under the ICA. The Commission
will also modify certain Form No. 6 financial statements to a
comparative format by requiring two years of data to enhance their
usefulness and to conform the Form No. 6 data formats to the formats of
FERC Form Nos. 1\47\ and 2\48\ (Form Nos. 1 and 2) for electric
utilities and natural gas pipeline companies, respectively.
---------------------------------------------------------------------------
\47\Annual Report of Major Electric Utilities, Licensees, and
Others.
\48\Annual Report of Natural Gas Companies.
---------------------------------------------------------------------------
The Commission will change the format of several schedules to
accommodate electronic filing and reporting requirements for Form No. 6
similar to that used for Form No. 1. When a rule adopting an electronic
filing requirement is issued, electronic filing of Form No. 6
information, similar to that for Form No. 1, should reduce the
reporting burden for both large and small pipelines. Financial
information reported electronically should also aid the Commission in
conducting reviews of the pipeline companies and the rates charged.
The Commission will eliminate unneeded schedules or individual data
elements, and will modify certain schedules so they will contain more
useful and relevant data. A sample copy of the revised pages in Form
No. 6 are attached as Appendix B.
Other than as discussed above, the Commission is adopting the
changes to Form No. 6 as proposed in the NOPR. The specific changes the
Commission adopts are:
Page 102--Corporate Control Over Respondent
Some format modifications are made for electronic reporting
purposes to better report vertical control of respondent from the
immediate parent to ultimate controlling parent company.
Page 103--Companies Controlled by Respondent
This is a new schedule added as new page 103, similar to the
schedules currently in Form Nos. 1 and 2, to report all subsidiaries
directly controlled by a respondent.
Page 105--Directors
This schedule is modified to delete the instructions at the top of
the page and information required at lines 21 through 23. The deleted
material is replaced with similar instructions at the top of the
schedule and ``Title'' is inserted in addition to ``Name of Director''
in column (a). This will make the format the same as Form Nos. 1 and 2.
Pages 106 and 107--Voting Powers of Security Holders
This schedule is deleted because it is not needed for Commission
regulatory purposes.
Pages 108 and 109--Important Changes During the Year
The current format is replaced with instructions similar to Form
Nos. 1 and 2.
Pages 110, 111 and 113--Comparative Balance Sheet Statement
Page 114--Income Statement
Page 118--Appropriated Retained Income
Page 119--Unappropriated Retained Income Statement
Pages 120 and 121--Statement of Cash Flows
The Commission has modified these financial statements to require
that data be presented on a comparative basis (i.e., for two years) to
enhance the usefulness of these financial statements. The Commission
has deleted from page 119 the schedule showing Dividend Appropriations
of Retained Income, because it is not needed for Commission regulatory
purposes.
Page 117--Working Capital
This schedule is deleted because it is not needed for Commission
regulatory purposes.
Pages 122 and 123--Notes to Financial Statements
The Commission has added new instructions which will require
statements of a company's accounting practices and policies (with
specific reference to such matters as income taxes, pensions, and post-
retirement benefits); and significant matters concerning acquisitions
and sales, significant contingencies, and liabilities existing at the
end of the year, and other matters that will materially affect company
operations.
Page 200--Receivables From Affiliated Companies
The reporting thresholds in Instruction No. 2 are raised from
$100,000 to $500,000.
Page 201--General Instructions Concerning Schedules 202-205
The Commission has modified these instructions to conform with Form
Nos. 1 and 2 by deleting the subclassifications presently required.
Pages 206 and 207--Other Investments
Pages 208 and 209--Securities, Advances and Other Intangibles Owned or
Controlled Through Nonreporting Carrier and Noncarrier Subsidiaries
These schedules are deleted because they are not needed for
Commission regulatory purposes.
Page 211--Instructions for Schedule 212-213
The Commission has modified the footnote to Instruction No. 3 to
require that a respondent identify the original cost of property
purchased or sold. This information is useful in the analysis of
carrier property transactions between oil pipeline companies. In
addition, the reporting thresholds in Instruction Nos. 3 and 5 are
raised from $50,000 and $100,000 to $250,000 and $500,000,
respectively.
Pages 218 and 219--Amortization Base and Reserve
The reporting thresholds in Instruction No. 4 are raised from
$10,000 to $100,000.
Page 220--Noncarrier Property
The reporting thresholds in Instruction No. 2 are raised from
$100,000 to $250,000.
Page 221--Other Deferred Charges
The reporting thresholds in the instruction are raised from
$100,000 to $250,000.
Page 225--Payables to Affiliated Companies
The reporting thresholds in Instruction Nos. 2 and 3 are raised
from $100,000 to $250,000.
Pages 230 and 231--Analysis of Federal Income and Other Taxes Deferred
The Commission has replaced the current reporting format with
instructions that require an analysis of the respondent's current and
non-current deferred income tax assets and liabilities.
Pages 250 and 251--Capital Stock
The current schedules are replaced with schedules and instructions
similar to Form No. 2.
Pages 302 through 304--Operating Expense Accounts
``Operating Ratio'' at line 23 is deleted because it is not needed
for Commission regulatory purposes.
Page 336--Interest and Dividend Income
The reference to Schedule pages 206 to 207 at line 2 is deleted
because these pages are eliminated.
Page 337--Miscellaneous Items in Income and Retained Income Accounts
for the Year
The reporting thresholds in Instruction No. 2 are raised from
$100,000 to $250,000.
Page 351--Payments for Services Rendered by Other Than Employees
The reporting thresholds in Instruction No. 1 are raised from
$30,000 to $100,000.
Finally, since the Commission has deferred the requirement that oil
pipelines file Form No. 6 on an electronic medium, in addition to paper
filing, Sec. 385.2011 of Part 385 of Title 18 of the Code of Federal
Regulations will not be changed as proposed in the NOPR at this time.
The Commission will issue a final rule on this subject at an
appropriate time.
VI. Depreciation
A. Discussion of Comments
In Order No. 561, the Commission stated that it would be the
pipelines' responsibility in the future to perform depreciation studies
to establish revised depreciation rates for oil pipelines. The
Commission further stated that the specific requirements for such
studies would be developed in this proceeding.\49\ In the NOPR, the
Commission proposed a new Part 347 to its regulations, encompassing the
information required to be submitted by oil pipeline companies to
establish revised depreciation rates.
---------------------------------------------------------------------------
\49\III FERC Stats. & Regs, 30,985 (1993), at 30,967-8.
---------------------------------------------------------------------------
Several commentors provided comments concerning the process for the
establishment and/or changing of depreciation rates for common carrier
property. Based upon a review of these comments, several modifications
will be made to the regulations as proposed in the NOPR.
One commentor\50\ suggested that the transmittal letter, which
submits a request for new or changed depreciation rates, only be filed
with the Commission and not sent to all shippers and subscribers. The
Commission disagrees. It will continue to require the transmittal
letter to be sent to all shippers and subscribers. Depreciation rates
as set or as subsequently modified can have a considerable effect on a
pipeline's rates; and as such, shippers need to be kept informed as to
when the rates are being requested to be established or changed. As
Davis states, ``To apprise shippers and subscribers of the change in
the depreciation rate is alerting them that a forthcoming rate change
could be challenged on the basis of the rate of depreciation.''\51\ If
a change in the tariff rate is requested resulting from an approved
change in the underlying depreciation rates, then protests filed
because of a lack of adequate information about the change in
depreciation rates could be prevented.
---------------------------------------------------------------------------
\50\Davis, p. 2.
\51\Id.
---------------------------------------------------------------------------
Modifications to the proposed regulations (18 CFR 347.1) which
delineate the information which should be filed when seeking to
establish or change depreciation rates have been requested by several
commentors.\52\ As to those claims that certain data are not available,
the Commission has provided in Sec. 347.1(e) for consideration of
individual circumstances. Section 347.1(e) states, in part:
---------------------------------------------------------------------------
\52\Davis, Marathon, and AOPL.
Modifications, additions, and deletions to these data elements
should be made to reflect the individual circumstances of the
---------------------------------------------------------------------------
carrier's properties and operations. [emphasis added]
This statement allows for the modification of the data elements for
individual pipelines to account for, among other things, information
which is not available to the pipeline. Therefore, a pipeline which
does not have up-to-date engineering maps\53\ could submit ``simplified
maps or drawings that contain such information * * *.'' Where
information is not available, that data element may be omitted by
simply stating that the information is not available.
---------------------------------------------------------------------------
\53\See Davis, pp. 3-4.
---------------------------------------------------------------------------
The comments concerning oil field reserve and production
information\54\ are well taken and that portion of the regulations [18
CFR 347.1(e)(5)(ix)] is modified from that previously proposed to
require only that the pipeline disclose the fields or areas from which
crude oil is obtained.
---------------------------------------------------------------------------
\54\Davis, pp. 4-5, Marathon, pp. 5-6, and AOPL, pp. 40-41.
---------------------------------------------------------------------------
Similarly, the comments concerning the proprietary nature of
individual shipper information are also well taken.\55\ The portion of
the proposed regulations in 18 CFR 347.1(e)(vi) is modified to require
that pipelines supply only a list of shipments and their associated
receipt points, delivery points, and volumes for the most current year.
Such information shall be provided in such a format to prevent
disclosure of information which would violate the ICA.
---------------------------------------------------------------------------
\55\Davis, p. 4; AOPL, pp. 41-42.
---------------------------------------------------------------------------
Further, as requested by AOPL,\56\ all information submitted
pursuant to 18 CFR 347.1 will be publicly available unless specific
confidential treatment is sought by the filing carrier.
---------------------------------------------------------------------------
\56\AOPL, p. 40, n. 69.
---------------------------------------------------------------------------
B. Depreciation Regulations Adopted
Other than as discussed above, the Commission is adopting
depreciation regulations as proposed in the NOPR. The Commission adopts
the following regulations as new Part 347 of the Commission's
regulations, which requires the following information to be filed by
oil pipeline companies to justify a request for either new or changed
carrier account depreciation rates:
a. A brief summary of the general principles on which the proposed
depreciation rates are based (e.g., why the economic life of the
pipeline section is less than the physical life).
b. An explanation of the organization, ownership, and operation of
the pipeline.
c. A table of the proposed depreciation rates by primary carrier
account.
d. An explanation of the average remaining life on a physical basis
and on an economic basis.
e. The following specific background data would be submitted
concurrently with any request for new or changed property account
depreciation rates for oil pipelines:\57\
---------------------------------------------------------------------------
\57\All of the information listed here may not be appropriate
and thus could be omitted from the filing. For example, if the
pipeline carries only crude oil, information requested concerning
petroleum products would not be needed.
---------------------------------------------------------------------------
(1) Up-to-date engineering maps of the pipeline including the
location of all gathering facilities, trunkline facilities, terminals,
interconnections with other pipeline systems, and interconnections with
refineries/plants. These maps must indicate the direction of flow.
(2) A brief description of the pipeline's operations and an
estimate of any major near-term additions or retirements including the
estimated costs, location, reason, and probable year of transaction.
(3) The present depreciation rates being used, by account.
(4) For the most current year available and for the two prior
years, a breakdown of the throughput (by type of product, if
applicable) received from each source (e.g., name of well, pipeline
company) at each receipt point and throughput delivered at each
delivery point.
(5) The daily average throughput (in barrels per day) and the
actual average capacity (in barrels per day) for the most current year,
by line section.
(6) A list of shipments and their associated receipt points,
delivery points, and volumes (in barrels) by type of product (where
applicable) for the most current year.
(7) For each primary carrier account, the latest month's book
balances for gross plant and accumulated reserve for depreciation.
(8) An estimate of the remaining life of the system (both gathering
and trunk lines) including the basis for the estimate.
(9) For crude oil, a list of the fields or areas from which crude
oil is obtained.
(10) If the proposed depreciation rate adjustment is based on the
remaining physical life of the properties, the Service Life Data Form
(FERC Form No. 73) through the most current year. This may only require
an updating from the last year for which information was filed with the
Commission.
(11) Estimated salvage value of properties by primary carrier
account.
An oil pipeline company is required to provide this, and any other
information it deems pertinent, in sufficient detail to fully explain
and justify its proposed rates. Any modifications, additions, and
deletions to these data elements should only be made to reflect the
individual circumstances of the pipeline's properties and operations,
and must be accompanied by a full explanation of why the modifications,
additions, or deletions are being made.
VII. Other Issues
In addition to the issues discussed above, certain other issues
were raised by the commenters. The TAPS Carriers seek clarification on
whether they must file page 700 of Form No. 6 in their annual reports.
For consistency, the Commission will require that page 700 be included
in the Form No. 6 filing, but the information required need not be
submitted by those entities excluded, for ratemaking purposes, from the
Act of 1992.58 Page 700, as indicated above, is a tool to assist
in the analysis of rate changes and cost changes brought about by the
rate methodologies of Order No. 561, which was issued to conform with
the Act of 1992. Since certain entities, such as the TAPS Carriers, are
excluded from its provisions, no useful purpose would be served by
having the exempted entities submit the information required on page
700.
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\5\8Section 1804(2)(B) of the Act of 1992 excludes from the
provisions of the Act, for ratemaking purposes, TAPS and any
pipeline delivering oil directly or indirectly to TAPS.
---------------------------------------------------------------------------
Chevron objects to the use of a test year comprised of nine months
of known and measurable changes after the last month of available
actual experience utilized in a cost-of-service rate filing. It argues
that the Commission's natural gas regulations, which have the same
nine-month period ``factors into the nine-month adjustment period the
fact that the gas pipeline's rate filing will be protested by its
customers and suspended by the Commission for the statutory five-month
period.'' It asserts that oil pipeline rates are typically suspended
for only one day, and by allowing the full nine-month period, the
pipeline may recover costs five months before the costs are
incurred.59 Chevron suggests that the Commission not allow changes
that occur outside a three-month period, or which do not take place
before the rate goes into effect, whichever is later.60 The
Commission will not adopt this proposed change. The nine months of
known and measurable changes applied to the base period to arrive at
the test period is a method long established and utilized in natural
gas pipeline regulation. The nine-month period is appropriate in
establishing rates which are prospective in nature and which will be in
effect into the future. Only ``known and measurable'' changes are
properly allowed to be included. By including these changes, the
resulting test period correctly reflects the best projection of the
actual circumstances which will be in effect under which the proposed
rates of the pipeline are filed. Moreover, there is no basis for
Chevron's suggestion that the nine-month period factors into account a
five-month suspension period, especially as Sec. 154.63(e)(2)(i)
provides for a test period up to nine months beyond the date of filing.
---------------------------------------------------------------------------
\5\9Chevron, p. 6.
\6\0Chevron, p. 7.
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VIII. Environmental Analysis
Commission regulations require that an environmental assessment or
an environmental impact statement be prepared for Commission action
that may have a significant adverse effect on the human
environment.61 The Commission categorically excludes certain
actions from this requirement as not having a significant effect on the
human environment.62 No environmental consideration is necessary
for the promulgation of a rule that does not substantially change the
effect of the regulation being amended, or that involves the gathering,
analysis, and dissemination of information, or the review of oil
pipeline rate filings.63 Because this final rule involves only
these matters, no environmental consideration is necessary.
---------------------------------------------------------------------------
\6\1Regulations Implementing the National Environmental Policy
Act, 52 FR 47897 (Dec. 17, 1987); FERC Stats. and Regs., Regulations
Preambles 1986-1990, 30,783 (1987).
\6\218 CFR 380.4.
\6\318 CFR 380.4(a).
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IX. Regulatory Flexibility Act Certification
The Regulatory Flexibility Act64 generally requires the
Commission to describe the impact that a rule would have on small
entities or to certify that the rule will not have a significant
economic impact on a substantial number of small entities. An analysis
is not required if a rule will not have such an impact.65
---------------------------------------------------------------------------
\6\45 U.S.C. 601-612.
\6\55 U.S.C. 605(b).
---------------------------------------------------------------------------
Pursuant to section 605(b), the Commission certifies that the rules
and amendments will not have a significant impact on a substantial
number of small entities. The pipelines subject to this rule are not
small entities.
X. Information Collection Requirements
The Office of Management and Budget's (OMB) regulations at 5 CFR
1320.14 (footnote) require that OMB approve certain information and
recordkeeping requirements imposed by an agency. The information
collection requirements in this final rule are contained in FERC-6
``Annual Report of Oil Pipeline Companies'' (1902-0022) and FERC-550
``Oil Pipeline Rates: Tariff Filings'' (1902-0089).
The Commission uses the data collected in these information
requirements to carry out its regulatory responsibilities pursuant to
the Interstate Commerce Act (ICA), the Act of 1992, and delegations to
the Commission from the Secretary of Energy. The Commission's Office of
Pipeline Regulation uses the data for the analysis of all rates, fares,
or charges demanded, charged, or collected by any pipeline common
carrier in connection with the transportation of petroleum and
petroleum products and also as a basis for determining just and
reasonable rates that should be charged by the regulated pipeline
company.
The Office of Economic Policy uses the data in its functions
relating to the administration of the ICA and the Act of 1992. The
Commission's Office of Chief Accountant uses the data collected in Form
No. 6 to carry out its compliance audits and for continuous review of
the financial conditions of regulated companies.
Because of the proposed revisions to both FERC-550 and Form No. 6,
and the expected reduction in public reporting burden of the latter,
the Commission is submitting a copy of the final rule to OMB for its
review and approval. Interested persons may obtain information on these
reporting requirements by contacting the Federal Energy Regulatory
Commission, 941 North Capitol Street, NE, Washington, DC 20426
[Attention: Michael Miller, Information Services Division, (202) 208-
1415]. Comments on the requirements of this rule can be sent to the
Office of Information and Regulatory Affairs of OMB (Attention: Desk
Officer for Federal Energy Regulatory Commission), Washington, DC
20503, FAX: (202) 395-5167.
IX. Effective Dates
This final rule will be effective January 1, 1995.
List of Subjects in 18 CFR Parts 342, 346, and 347
Pipelines, Reporting and recordkeeping requirements.
By the Commission.
Lois D. Cashell,
Secretary.
In consideration of the foregoing, Chapter I, Title 18, Code of
Federal Regulations, is amended as set forth below.
PART 342--OIL PIPELINE RATE METHODOLOGIES AND PROCEDURES
1. The authority citation for Part 342 is revised to read as
follows:
Authority: 5 U.S.C. 571-83; 42 U.S.C. 7101-7532; 49 U.S.C.
60502; 49 App. U.S.C. 1-85.
2. Section 342.2 is amended by revising paragraph (a) to read as
follows:
Sec. 342.2 Establishing initial rates.
* * * * *
(a) Filing cost, revenue, and throughput data supporting such rate
as required by Part 346 of this chapter; or
* * * * *
3. Section 342.3 is amended by revising paragraph (b) to read as
follows:
Sec. 342.3 Indexing.
* * * * *
(b) Information required to be filed with rate changes. The carrier
must comply with Part 341 of this chapter.
(1) Carriers must specify in their letters of transmittal required
in Sec. 341.2(c) of this chapter the rate schedule to be changed, the
proposed new rate, the prior rate, and the applicable ceiling level for
the movement. No other rate information is required to accompany the
proposed rate change.
(2) On March 31, 1995, or concurrently with its first indexed rate
change filing made on or after January 1, 1995, whichever first occurs,
carriers must file a verified copy of a schedule for calendar years
1993 and 1994 containing the information required by page 700 of the
1995 edition of FERC Form No. 6. If actual data are not available for
calendar year 1994 when the rate change filing is made, the information
for calendar year 1994 must be comprised of the most recently available
actual data annualized for the year 1994. A schedule containing the
information comprised of actual data for calendar year 1994 must be
filed not later than March 31, 1995. Thereafter, carriers must file
page 700 as a part of their annual Form No. 6 filing.
* * * * *
4. Section 342.4 is amended by revising paragraph (a) to read as
follows:
Sec. 342.4 Other rate changing methodologies.
(a) Cost-of-service rates. A carrier may change a rate pursuant to
this section if it shows that there is a substantial divergence between
the actual costs experienced by the carrier and the rate resulting from
application of the index such that the rate at the ceiling level would
preclude the carrier from being able to charge a just and reasonable
rate within the meaning of the Interstate Commerce Act. A carrier must
substantiate the costs incurred by filing the data required by Part 346
of this chapter. A carrier that makes such a showing may change the
rate in question, based upon the cost of providing the service covered
by the rate, without regard to the applicable ceiling level under
Sec. 342.3.
* * * * *
5. Part 346 is added to subchapter P to read as follows:
PART 346--OIL PIPELINE COST-OF-SERVICE FILING REQUIREMENTS
Sec.
346.1 Content of filing for cost-of-service rates.
346.2 Material in support of initial rates or change in rates.
Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C.
1-85.
Sec. 346.1 Content of filing for cost-of-service rates.
A carrier that seeks to establish rates pursuant to Sec. 342.2(a)
of this chapter, or a carrier that seeks to change rates pursuant to
Sec. 342.4(a) of this chapter, must file:
(a) A letter of transmittal which conforms to Secs. 341.2(c) and
342.4(a) of this chapter;
(b) The proposed tariff; and
(c) The statements and supporting workpapers set forth in
Sec. 346.2.
Sec. 346.2 Material in support of initial rates or change in rates.
A carrier that files for rates pursuant to Sec. 342.2(a) or
Sec. 342.4(a) of this chapter must file the following statements,
schedules, and supporting workpapers. The statements, schedules, and
workpapers must be based upon an appropriate test period.
(a) Base and test periods defined. (1) For a carrier which has been
in operation for at least 12 months:
(i) A base period must consist of 12 consecutive months of actual
experience. The 12 months of experience must be adjusted to eliminate
nonrecurring items (except minor accounts). The filing carrier may
include appropriate normalizing adjustments in lieu of nonrecurring
items.
(ii) A test period must consist of a base period adjusted for
changes in revenues and costs which are known and are measurable with
reasonable accuracy at the time of filing and which will become
effective within nine months after the last month of available actual
experience utilized in the filing. For good cause shown, the Commission
may allow reasonable deviation from the prescribed test period.
(2) For a carrier which has less than 12 months' experience, the
test period may consist of 12 consecutive months ending not more than
one year from the filing date. For good cause shown, the Commission may
allow reasonable deviation from the prescribed test period.
(3) For a carrier which is establishing rates for new service, the
test period will be based on a 12-month projection of costs and
revenues.
(b) Cost-of-service summary schedule. This schedule must contain
the following information:
(1) Total carrier cost of service for the test period.
(2) Throughput for the test period in both barrels and barrel-
miles.
(3) For filings pursuant to Sec. 342.4(a) of this chapter, the
schedule must include the proposed rates, the rates which would be
permitted under Sec. 342.3 of this chapter, and the revenues to be
realized from both sets of rates.
(c) Content of statements. Any cost-of-service rate filing must
include supporting statements containing the following information for
the test period.
(1) Statement A--total cost of service. This statement must
summarize the total cost of service for a carrier (operating and
maintenance expense, depreciation and amortization, return, and taxes)
developed from Statements B through G described in paragraphs (c) (2)
through (7) of this section.
(2) Statement B--operation and maintenance expense. This statement
must set forth the operation, maintenance, administration and general,
and depreciation expenses for the test period. Items used in the
computations or derived on this statement must consist of operations,
including salaries and wages, supplies and expenses, outside services,
operating fuel and power, and oil losses and shortages; maintenance,
including salaries and wages, supplies and expenses, outside services,
and maintenance and materials; administrative and general, including
salaries and wages, supplies and expenses, outside services, rentals,
pensions and benefits, insurance, casualty and other losses, and
pipeline taxes; and depreciation and amortization.
(3) Statement C--overall return on rate base. This statement must
set forth the rate base for return purposes from Statement E in
paragraph (c)(5) of this section and must also state the claimed rate
of return and the application of the claimed rate of return to the
overall rate base. The claimed rate of return must consist of a
weighted cost of capital, combining the rate of return on debt capital
and the real rate of return on equity capital. Items used in the
computations or derived on this statement must include deferred
earnings, equity ratio, debt ratio, weighted cost of capital, and costs
of debt and equity.
(4) Statement D--income taxes. This statement must set forth the
income tax computation. Items used in the computations or derived on
this statement must show: return allowance, interest expense, equity
return, annual amortization of deferred earnings, depreciation on
equity AFUDC, underfunded or overfunded ADIT amortization amount,
taxable income, tax factor, and income tax allowance.
(5) Statement E--rate base. This statement must set forth the
return rate base. Items used in the computations or derived on this
statement must include beginning balances of the rate base at December
31, 1983, working capital (including materials and supplies,
prepayments, and oil inventory), accrued depreciation on carrier plant,
accrued depreciation on rights of way, and accumulated deferred income
taxes; and adjustments and end balances for original cost of
retirements, interest during construction, AFUDC adjustments, original
cost of net additions and retirements from land, original cost of net
additions and retirements from rights of way, original cost of plant
additions, original cost accruals for depreciation, AFUDC accrued
depreciation adjustment, original cost depreciation accruals added to
rights of way, net charge for retirements from accrued depreciation,
accumulated deferred income taxes, changes in working capital
(including materials and supplies, prepayments, and oil inventory),
accrued deferred earnings, annual amortization of accrued deferred
earnings, and amortization of starting rate base write-up.
(6) Statement F--allowance for funds used during construction. This
statement must set forth the computation of allowances for funds used
during construction (AFUDC) including the AFUDC for each year
commencing in 1984 and a summary of AFUDC and AFUDC depreciation for
the years 1984 through the test year.
(7) Statement G--revenues. This statement must set forth the gross
revenues for the actual 12 months of experience as computed under both
the presently effective rates and the proposed rates. If the presently
effective rates are not at the maximum ceiling rate established under
Sec. 342.4(a) of this chapter, then gross revenues must also be
computed and set forth as if the ceiling rates were effective for the
12 month period.
6. Part 347 is added to subchapter P to read as follows:
PART 347--OIL PIPELINE DEPRECIATION STUDIES
Sec.
347.1 Material to support request for newly established or changed
property account depreciation studies.
Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C.
1-85.
Sec. 347.1 Material to support request for newly established or
changed property account depreciation studies.
(a) Means of filing. Filing of a request for new or changed
property account depreciation rates must be made with the Secretary of
the Commission. Filings made by mail must be addressed to the Federal
Energy Regulatory Commission with the envelope clearly marked as
containing ``Oil Pipeline Depreciation Rates.''
(b) Number of copies. Carriers must file three paper copies of each
request with attendant information identified in paragraphs (c) through
(e) of this section.
(c) Transmittal letter. Letters of transmittal must give a general
description of the change in depreciation rates being proposed in the
filing. Letters of transmittal must also certify that the letter of
transmittal (not including the information to be provided, as
identified in paragraphs (d) and (e) of this section) has been sent to
each shipper and to each subscriber. If there are no subscribers,
letters of transmittal must so state. Carriers requesting
acknowledgement of the receipt of a filing by mail must submit a
duplicate copy of the letter of transmittal marked ``Receipt
requested.'' The request must include a postage paid, self-addressed
return envelope.
(d) Effectiveness of property account depreciation rates. (1) The
proposed depreciation rates being established in the first instance
must be used until they are either accepted or modified by the
Commission. Rates in effect at the time of the proposed revision must
continue to be used until the proposed revised rates are approved or
modified by the Commission.
(2) When filing for approval of either new or changed property
account depreciation rates, a carrier must provide information in
sufficient detail to fully explain and justify its proposed rates.
(e) Information to be provided. The items delineated in paragraphs
(e) (1) through (5) of this section are the data to be provided as
justification for depreciation changes. Modifications, additions, and
deletions to these data elements should be made to reflect the
individual circumstances of the carrier's properties and operations.
(1) A brief summary relating to the general principles on which the
proposed depreciation rates are based (e.g., why the economic life of
the pipeline section is less then the physical life).
(2) An explanation of the organization, ownership, and operation of
the pipeline.
(3) A table of the proposed depreciation rates by account.
(4) An explanation of the average remaining life on a physical
basis and on an economic basis.
(5) The following specific background data must be submitted at the
time of and concurrently with any request for the establishment of, or
modification to, depreciation rates for carriers. If the information
listed is not applicable, it may be omitted from the filing:
(i) Up-to-date engineering maps of the pipeline including the
location of all gathering facilities, trunkline facilities, terminals,
interconnections with other pipeline systems, and interconnections with
refineries/plants. Maps must indicate the direction of flow.
(ii) A brief description of the carrier's operations and an
estimate of any major near-term additions or retirements including the
estimated costs, location, reason, and probable year of transaction.
(iii) The present depreciation rates being used by account.
(iv) For the most current year available and for the two prior
years, a breakdown of the throughput (by type of product, if
applicable) received with source (e.g. name of well, pipeline company)
at each receipt point and throughput delivered at each delivery point.
(v) The daily average capacity (in barrels per day) and the actual
average capacity (in barrels per day) for the most current year, by
line section.
(vi) A list of shipments and their associated receipt points,
delivery points, and volumes (in barrels) by type of product (where
applicable) for the most current year. The submitted data must be
presented in a format which will protect any individual shipper
information, the release of which would violate Section 15(13) of the
Interstate Commerce Act (49 App. U.S.C. 15(13)).
(vii) For each primary carrier account, the latest month's book
balances for gross plant and for accumulated reserve for depreciation.
(viii) An estimate of the remaining life of the system (both
gathering and trunk lines) including the basis for the estimate.
(ix) For crude oil, a list of the fields or areas from which crude
oil is obtained.
(x) If the proposed depreciation rate adjustment is based on the
remaining physical life of the properties, a complete, or updated, if
applicable, Service Life Data Form (FERC Form No. 73) through the most
current year.
(xi) Estimated salvage value of properties by account.
Note: These Appendices will not appear in the Code of Federal
Regulations.
Appendix A--Comments Received
Alaska, State of (Alaska)
Alberta Department of Energy (Alberta)
Association of Oil Pipelines (AOPL)
ARCO Pipe Line Company and Four Corners Pipe Line Company (ARCO)
Buckeye Pipe Line Company, L.P. (Buckeye)
Chevron U.S.A. Products Company (Chevron)
Davis, Glenn E. (Davis)
Indicated TAPS Carriers and Kuparuk Transportation Company (TAPS
Carriers)
Lakehead Pipe Line Company (Lakehead)
Marathon Pipe Line Company (Marathon)
National Council of Farmer Cooperatives (NCFC)
Petrochemical Energy Group (PEG)
Texas Eastern Products Pipeline Company, L.P. (TEPPCO)
Total Petroleum, Inc. (Total)
Appendix B--Revised Sheets For Form No. 6: Annual Report of Oil
Pipeline Companies
This Appendix B contains the pages from Form No. 6 which are
revised in the Commission's Final Rule, Docket No. RM94-2-000.
Appendix B.--Form No. 6 Schedules Revised\1\
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Title Page No.
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Control Over Respondent..................................... 102
Companies Controlled by Respondent.......................... 103
Directors................................................... 105
Important Changes During the Year........................... 108-109
Comparative Balance Sheet Statement......................... 110-113
Income Statement............................................ 114
Appropriated Retained Income................................ 118
Unappropriated Retained Income Statement.................... 119
Statement of Cash Flows..................................... 120-121
Notes to Financial Statements............................... 122-123
Receivables From Affiliated Companies....................... 200
General Instructions Concerning Schedules 202 Through 205... 201
Instructions for Schedules 212-213.......................... 211
Amortization Base and Reserve............................... 218-219
Noncarrier Property......................................... 220
Other Deferred Charges...................................... 221
Payables to Affiliated Companies............................ 225
Analysis of Federal Income and Other Taxes Deferred......... 230-231
Capital Stock............................................... 250-251
Operating Expense Accounts (Account 610).................... 302-304
Interest and Dividend Income................................ 336
Miscellaneous Items in Income and Retained Income Accounts
for the Year............................................... 337
Payments for Services Rendered by Other Than Employees...... 351
Annual Cost of Service Based Analysis Schedule.............. 700
------------------------------------------------------------------------
\1\Copies of these revised sheets are not being published in the Federal
Register, but are available in copies of this order from the
Commission's Public Reference Room.
[FR Doc. 94-27621 Filed 11-15-94; 8:45 am]
BILLING CODE 6717-01-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.