Register Today for Courses in Cost of Service and Rate Design for Natural Gas Interstate Pipeline Companies (January 26th-27th)
Brown, Williams, Moorhead & Quinn, Inc.

While much has changed at the Federal Energy Regulatory Commission (FERC) over the past decades with respect to regulation of the interstate natural gas pipeline industry, cost-of-service ratemaking has remained a constant.

Despite its willingness to rely on market forces to address many issues in the industry, FERC still relies on cost-of-service principles in litigated section 4 rate cases (both full and limited cases) to set just and reasonable rates for pipeline services.

The industry the Commission regulates is very dynamic and the Commission is studying whether traditional cost-of-service ratemaking is the best way to set rates for pipeline services in the future.  The Cost of Service Manual is intended to be an introduction to cost-of-service ratemaking which remains the primary methodology used by the Commission to establish just and reasonable rates.

There are essentially 5 steps involved in cost-of-service ratemaking:

  1. Establishing a revenue requirement, or cost-of-service
  2. Functionalizing the cost-of-service
  3. Cost Classification
  4. Cost Allocation
  5. Rate Design

Each of these steps are explained in further detail and show examples of each step by using an illustrative pipeline.

BWMQ believes this document will prove invaluable to company analysts that are preparing to litigate section 4 rate cases at the FERC.


If you would like to obtain a subscription to this manual or would like further information, contact:

Barry E. Sullivan, President of BWMQ at 202-775-8994.