In accordance
with 5 CFR 1320.13, this voluntary information collection is
approved for 6 months as an emergency clearance to meet FERC's data
needs during the five-year review. If the Agency decides to
continue use of the collection past the approved emergency
clearance time period, it must resubmit an ICR to OMB under the
normal PRA clearance process.
Inventory as of this Action
Requested
Previously Approved
01/31/2021
6 Months From Approved
244
0
0
45,872
0
0
0
0
0
FERC-6(PL) covers the One-time
voluntary Re-filing under Docket PL19-4 of Page 700 of Form 6
(Annual Report of Oil Pipeline Companies). [The 60-day metadata
below is for the Notice of Inquiry; the 30-day metadata is for the
Policy Statement.] Page 700 was designed as a summary rate case in
accordance with the Commission’s Opinion 154-B methodology. The
schedule is a calendar year cost of service, starting with the
pipeline’s expenses (lines 1-4) followed by investment or rate base
(line 5). The middle section details the pipeline’s cost of capital
by component and its capital structure (lines 6a-6e). This includes
the pipeline’s estimate of its equity capital costs or ROE. Lastly,
included in the page 700 cost of service is the pipeline’s return
on its rate base (lines 7a-7c), or the rate of return for both debt
and equity times its rate base. The equity return reported in the
2019 FERC Form No. 6’s was over 27 percent of the total oil
pipeline industry’s cost of service. Thus, reflecting the revised
oil pipeline ROE methodology in page 700 data (line 6d) for 2019
may help the Commission better estimate industry-wide cost changes
(line 9) for purposes of the five-year review. As stated above, in
the five-year review the Commission compares the cost changes
between years 2014 and 2019 using page 700 data to measure
industry-wide pipeline cost changes. ROE is an input in costs of
service for oil pipelines on page 700. In light of the Commission’s
recent changes to its oil pipeline ROE methodology, the updated
2019 page 700 data will be useful in considering whether, and if so
how, to reflect the effects of that policy change in the
calculation of the index level that will be in effect for the next
five years. As mentioned above, the effect of not collecting the
revised data could be significant. If this updated ROE data is not
collected, it will not be available for the five-year review. A 50
basis point change in ROE used in the five-year review could change
total industry revenues by approximately $300 million. That
adjustment would be compounded every year over the next five-year
index period. Without this information, the Commission’s index
level may distort investment decisions by sending an improper
incentive. Setting an index level too high may over-stimulate
investment or conversely too low may discourage needed capital
investment.
6/29/20, FERC submitted
letter to OMB requesting emergency processing. FERC-6(PL)
encourages interstate oil pipelines to voluntarily refile, on a
one-time basis, page 700 of their 2019 FERC Form 6 in order to
reflect FERC’s recent Policy Statement on Determining Return on
Equity for Natural Gas & Oil Pipelines (ROE Policy
Statement).The ROE Policy Statement establishes a revised
methodology for determining the return on equity (ROE) used to
calculate oil pipelines’ Annual Cost of Service on page 700 of FERC
Form 6.The refiled page 700 data requested in FERC-6(PL) will be
highly useful to FERC for conducting the five-year review of the
oil pipeline index in 2020. In the Energy Policy Act of 1992,
Congress required FERC to develop a simplified method for changing
oil pipeline rates.In response, FERC established an indexing
methodology that allows oil pipelines to change rates every July 1
based upon an annual industry-wide index that the Commission
publishes in May.FERC reviews the index level every 5 yr.s to
ensure that the index level continues to reflect annual
industry-wide cost changes.In the 5-year review, FERC determines
the differences over the prior five-year period between changes in
costs reported on page 700 &changes in the Producer Price Index
for Finished Goods.In the 2020 5-year review, FERC will measure
pipeline cost changes over the period from 2014-2019 in order to
establish the index level that pipelines will use to adjust their
rates during the 5-year period from 2021-2026.FERC initiated the
2020 5-year review on 6/18/2020 and directed interested persons to
file initial comments on FERC’s proposal by 8/17/2020. Emergency
processing of FERC-6(PL) is essential to the mission of FERC and
the country.Indexing serves as FERC’s primary mechanism for
changing oil pipeline rates consistent with its statutory
obligations.To wit, approximately 81% of oil pipeline rate filings
that FERC receives are submitted pursuant to the indexing
methodology.Accordingly, the index level established in the 2020
5-year review will affect a significant majority of oil pipeline
rate filings between 2021-2026, making it FERC’s most impactful oil
pipeline ratemaking proceeding. Moreover, as discussed above, the
5-year review is a complex proceeding that requires analysis of
page 700 cost data, including ROE, to measure industry-wide cost
changes. In light of FERC’s adoption of a revised methodology for
determining oil pipeline ROEs, it is imperative that FERC receive
updated page 700 data reflecting this revised methodology so that
FERC can determine whether, and if so how, to reflect the effects
of this policy change in the calculation of the index level in the
2020 five-year review. Public harm is reasonably likely to result
if FERC does not receive this updated data in a timely
manner.First, it is critical that the parties in the five-year
review have an opportunity to fully evaluate and consider the
updated data before filing comments in that proceeding on
8/17/2020. Allowing the parties to address this data in their
comments will strengthen the record on which FERC will determine
the index level.Second, it is in the public interest for FERC to
conclude the 5-year review and establish the new index level before
it publishes the annual index in May 2021 that pipelines will use
in index rate filings to be effective 7/1/2021. In the two most
recent 5-year reviews, FERC issued an order establishing the index
level in December of the review year. Timely issuance of the order
establishing the index level provides FERC with sufficient time to
address any requests for rehearing before FERC publishes the annual
index in May 2021. Failure to conclude the 5-year review before
publishing the annual index will cause significant rate uncertainty
across the oil pipeline industry and potentially lead to 2021
annual index increases that are not just and reasonable. This is
reasonably likely to result in public harm.
On March 21, 2019, the Federal
Energy Regulatory Commission issued a notice of inquiry seeking
information and stakeholder views regarding whether, and if so how,
it should modify its policies concerning the determination of the
return on equity (ROE) to be used in designing jurisdictional
public utility rates and whether any changes to the Commission’s
policies concerning public utility ROEs should be applied to
interstate natural gas and oil pipelines. Concurrently with this
Policy Statement, the Commission is issuing Opinion No. 569-A
adopting changes to its policies concerning public utility ROEs.
The Commission finds that, with certain exceptions to account for
the statutory, operational, organizational and competitive
differences among the industries, the policy changes adopted in
Opinion No. 569-A should be applied to natural gas and oil
pipelines. Accordingly, the Commission revises its policy and will
determine natural gas and oil pipeline ROEs by averaging the
results of the Discounted Cash Flow model and the Capital Asset
Pricing Model, but will not use the Risk Premium model. In
addition, the Commission clarifies its policies governing the
formation of proxy groups and the treatment of outliers in
proceedings addressing natural gas and oil pipeline ROEs. Finally,
the Commission encourages oil pipelines to file revised FERC Form
No. 6, page 700s for 2019 reflecting the revised ROE policy.
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
PL19-4_emergency notice_FR2020-14422.pdf
6PL_6_PL19-4_supp state7-6-2020.docx
6(PL) (One-time Re-filing under PL19-4 of Page 700 of Form No. 6 (Annual Report of Oil Pipeline Companies))