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.
table that charts list comparision
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 Commissionâs Opinion 154-B methodology. The schedule is a calendar year cost of service, starting with the pipelineâs expenses (lines 1-4) followed by investment or rate base (line 5). The middle section details the pipelineâs cost of capital by component and its capital structure (lines 6a-6e). This includes the pipelineâs estimate of its equity capital costs or ROE. Lastly, included in the page 700 cost of service is the pipelineâs 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. 6âs was over 27 percent of the total oil pipeline industryâs 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 Commissionâs 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 Commissionâs 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 FERCâs 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 pipelinesâ 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 FERCâs proposal by 8/17/2020.
Emergency processing of FERC-6(PL) is essential to the mission of FERC and the country.Indexing serves as FERCâs 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 FERCâs 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 FERCâs 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 Commissionâs 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))