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Ratemaking & Regulatory Policy

The Brattle Group has assisted both pipeline applicants and shippers in many natural gas and oil pipeline rate proceedings over the past twenty-five years. We have a keen understanding of the ratemaking and regulatory policy issues affecting the natural gas and oil pipeline industries at both state/provincial and federal levels. We understand the practical details of regulatory accounting as well as the broader issues surrounding adequate investor returns, appropriate price signals, proper rate design, and the need for economic efficiency.  Our testimony experience on major regulatory policy issues is also extensive, and we often provide economic analysis on issues of industry restructuring, access, prudence, and stranded cost recovery.

In ratemaking, we have extensive experience with all aspects of traditional cost of service analysis as well as alternative methods such as market-based rates, incentive regulation, and negotiated rates. Our work in cost-of-service proceedings spans the full spectrum of issues that typically arise in such proceedings, including cost of service, cost allocation, rate design, rate base derivation, appropriate operations and maintenance expense levels (including parent company overhead cost allocations), allowed return, test year billing determinants, appropriate treatment of discounts, and analysis of business risk. We also have extensive experience analyzing pipeline applications for market-based rates. We have assisted clients in settlement negotiations by modeling the transportation rates of the pipeline and analyzing the sensitivity of rates to alternative rate designs or cost of service assumptions.  We offer insights into unanticipated effects of provisions being proposed by opposing parties and we provide creative thinking about ways to structure settlement terms.


Below is a list of representative engagements for our Ratemaking & Regulatory Policy practice.

Market-based rates

On behalf of an oil refiner, we presented testimony before the Federal Energy Regulatory Commission (FERC) analyzing the market power held by a refined petroleum products pipeline seeking market-based rates.  Our analysis focused on the competitiveness of alternatives to the pipeline from the refiner’s perspective and the ability of the pipeline to increase prices in its destination markets.  This analysis focused on the competitiveness of several geographic markets as well as how contracting between entities affects the substitutability of alternatives in the market.

Natural gas and oil pipeline ratemaking

We have extensive experience in preparing as well as evaluating pipeline cost of service studies. In the context of rate proceedings, The Brattle Group has modeled the transportation rates of several natural gas and oil pipelines including El Paso Natural Gas, Tennessee Gas Pipeline, TransCanada Pipeline, Florida Gas Transmission, Iroquois Gas Transmission, SFPP, Enterprise Teppco, Buckeye, SoCalGas, Pacific Gas & Electric, British Gas and Gaz Metropolitain. We have testified in numerous proceedings regarding rate base derivation, appropriate operations and maintenance expense levels (including parent company overhead cost allocations), allowed return, test year billing determinants, and the appropriate treatment of discounts.  We have also analyzed and addressed cost allocation procedures in testimony, including allocation between non‑jurisdictional and jurisdictional activities, as well as amongst separate jurisdictional systems.  Our work often involves testifying as to the appropriate rate design methodology.

Regulatory investigations

In analyzing PG&E’s Gas Transmission & Storage (GT&S) business’ 1997-2010 operations & maintenance expenses and capital expenditures, Brattle experts found that its actual spending exceeded the adopted amounts that were provided for in revenue requirements and rates. We also found that GT&S’ profitability during this time was largely due to its success in selling at-risk storage services and not due to alleged spending reductions.

Damages resulting from discrimination by an oil pipeline

In a dispute between an oil pipeline and a shipper, we submitted an expert report on behalf of the shipper, BP Products North America (“BP”). Our report calculated the damages to BP as a result of the oil pipeline’s discriminatory conduct that reduced BP’s allocation of pipeline capacity and required BP to purchase more expensive crude oil on alternative pipeline routes.

Business risk

The Brattle Group has sponsored testimony on behalf of interstate pipelines and local distribution companies evaluating business risk, including AltaGas, ANR Pipeline, ATCO Gas, Enbridge Gas Distribution, Gas Transmission Northwest, Gaz Métro, Kern River Gas Transmission, Nova Gas Transmission, TransCanada Mainline, Trans Québec & Maritimes Pipeline, and Union Gas Limited.  This testimony has been submitted in regulatory proceedings to determine these companies’ cost of capital and allowed rates of return.  Our testimony has analyzed the competitive and regulatory environment in which the companies operate and how this environment impacts the companies’ market position and business risk.

Rate design

We worked on behalf of Southern California Edison (SCE) in El Paso Natural Gas Company’s (El Paso’s) 2010 rate proceeding (RP10-398) as well as in Texas Gas’ complaint proceeding involving El Paso’s fuel rate design (RP10-951).  In RP10-398, we filed testimony demonstrating that El Paso’s zone of delivery rate design methodology and its use of contract path mileages for cost allocation purposes were outdated and led to unjust and unreasonable rates.  Our analysis suggested that distance was no longer a strong explanatory factor of costs on the El Paso system and that a postage stamp rate design made sense.  In RP10-951, a Brattle principal filed testimony on behalf of SCE arguing that the zone of delivery fuel charge rate designs proposed by Texas Gas and FERC Staff were unjust and unreasonable and that El Paso’s existing postage stamp fuel charge rate design was just and reasonable as supported by the factual evidence regarding El Paso’s system operations and characteristics.

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