Daily Rules, Proposed Rules, and Notices of the Federal Government
1. The Federal Energy Regulatory Commission (Commission) proposes to modify the reporting requirements on Page 700, Annual Cost of Service Based Analysis Schedule, of FERC Form No. 6, Annual Report of Oil Pipeline Companies (Form 6), to facilitate the calculation of a pipeline's actual rate of return on equity based upon Page 700 data. The modifications to Page 700 include requiring additional information regarding rate base, rate of return, return on rate base, and income taxes.
2. The Commission is responsible for regulating the rates, terms and conditions that oil pipelines charge for transportation under the Interstate Commerce Act (ICA).
3. To assist the Commission in the administration of its jurisdictional responsibilities, the ICA authorizes the Commission to prescribe annual or other periodic reports.
4. Page 700 of Form 6 provides a simplified presentation of an oil pipeline's jurisdictional cost-of-service. Page 700 serves as a preliminary screening tool to evaluate pipeline rates.
5. The Commission proposes to modify Page 700 to more easily enable the calculation of a pipeline's actual rate of return on equity consistent with the ratemaking principles embodied in Opinion 154-B,
6. To provide the data necessary to calculate the actual return on equity, Page 700 must be modified to include additional information related to rate base, rate of return, return on rate base, and income tax rates.
7. The Commission seeks to enhance the information provided on Page 700 related to rate base, rate of return, and return on rate base. The components of an oil pipeline's rate base are governed by the Trended Original Cost Methodology adopted by the Commission in Opinion No. 154-B.
8. Consistent with Opinion No. 154-B, the Commission proposes to enhance the Rate Base information provided on line 5 of Page 700 by adding (1) Rate Base−Original Cost (proposed line 5a), (2) Rate Base−Unamortized Starting Rate Base Write-Up (proposed line 5b), (3) Rate Base−Accumulated Net Deferred Earnings (proposed line 5c). The sum of proposed lines 5a, 5b and 5c comprise the pipeline's Trended Original Cost Rate Base, which is currently reported on line 5 of Page 700 and which the Commission proposes to move to line 5d entitled Total Rate Base−Trended Original Cost−(5a + 5b + 5c).
9. The Commission proposes to require oil pipelines to report the cost of equity and cost of debt components that constitute the overall Weighted Cost of Capital currently reported as “Rate of Return” on line 6, Page 700. Specifically, the Commission proposes to include additional information related to debt and equity capital structure ratios, i.e. (1) Rate of Return−Adjusted Capital Structure Ratio for Long Term Debt (proposed line 6a), (2) Rate of Return−Adjusted Capital Structure Ratio for Proprietary Capital (proposed line 6b).
10. The Commission proposes to require oil pipelines to report additional information related to the Return on Rate Base in line 7. The Return on Rate Base currently reported on line 7 combines the pipeline's return on equity and the portion of the pipeline's return allocated to paying its cost of debt. The
11. The Commission proposes to modify the Page 700 to include the Composite Tax Rate used to determine the “Income Tax Allowance.”
12. The Commission defines the Composite Tax Rate Percentage as the sum, adjusted consistent with Commission policy, of (a) the applicable state income tax rate and (b) a federal income tax rate. As filed on Page 700, the Composite Tax Rate Percentage should reflect the income tax rate used pursuant to Commission's policies to determine the Income Tax Allowance reported on line 8.
13. The Composite Tax Rate Percentage will create a better understanding of the differential between a pipeline's Total Interstate Operating Revenues (line 10) and the pipeline's Total Cost of Service (line 9). Specifically, the Composite Tax Rate Percentage may be used to determine the portion of this differential that is attributable to income taxes under Commission policy, and the portion that may be treated as part of a pipeline's actual return on equity.
14. These modifications to Page 700 will provide information that may be used to calculate a pipeline's actual rate of return on equity. The actual rate of return on equity is determined by dividing (a) the actual return on equity by (b) the equity portion of Trended Original Cost Rate Base reported on line 5d. The actual return on equity is the sum of three components that can be derived using the proposed modifications to Page 700: (a) The return on equity embedded in a pipeline's Page 700 Total Cost of Service (proposed line 7b); (b) the difference, adjusted for taxes, between a pipeline's Total Interstate Operating Revenues (proposed Line 10) and a pipeline's Total Cost of Service (proposed Line 9);
15. Once the actual return on equity has been derived, it may be divided by the equity portion of Trended Original Cost Rate Base. The equity portion of the Trended Original Cost Rate base consists of the Trended Original Cost Rate Base (proposed line 5d) multiplied by the equity component of capital structure (proposed line 6b).
16. These proposed modifications to Page 700 will increase the usefulness of Page 700. Prior to this proposal, any attempt to estimate an oil pipeline's actual return on equity required assumptions regarding several cost of service components, including capital structure (proposed lines 6a and 6b), the composite income tax rate (proposed line 8a), and the return on equity embedded in a pipeline's Page 700 cost of service (proposed line 7b). The Commission believes this additional information will make Page 700 a more useful tool for evaluating a pipeline's rates; however, it welcomes comments as to whether the proposed changes herein are sufficient for the goals we have described above.
17. As discussed herein, the proposed modifications will facilitate the calculation of the actual rate of return on equity based upon Page 700 data. The actual rate of return on equity is particularly useful information when using Page 700 to evaluate a pipeline's rates. The additional information proposed to be reported will impose almost no additional burden on oil pipelines because pipelines already must develop cost of service supporting calculations to determine the Income Tax Allowance, Rate Base, Rate of Return, and Return on Rate Base reported on Page 700. Given these existing requirements, the Commission does not anticipate that these proposed additions to Page 700 of Form 6 will impose a significant burden on oil pipelines.
18. The Commission proposes that the changes to Form 6 are to be effective for reporting in the 2013 Form 6. The 2013 Form 6 must be filed on or before April 18, 2014.
19. The Office of Management and Budget (OMB) regulations require approval of certain information collection requirements imposed by agency rules.
20. The Commission is submitting these reporting requirements to OMB for its review and approval under section
21. The Commission's estimate of the additional Public Reporting Burden and cost related to the proposed rule in Docket RM12-18-000 follow.
22. For the recurring effort involved in filing the data on proposed lines 5a-5c, 6a-6e, 7a-7c, and 8a of Page 700 for 2013 and future years, we estimate that the change in burden is 0.5 hours per year per respondent.
24. Interested persons may obtain information on the reporting requirements by contacting: Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426 [Attention: Ellen Brown, Office of the Executive Director, email:
25. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a significant adverse effect on the human environment.
26. The Regulatory Flexibility Act of 1980 (RFA) generally requires agencies to prepare certain statements, descriptions, and analyses of proposed rules that will have a significant economic impact on a substantial number of small business entities.
27. The Commission does not believe that this proposed rule will have an adverse impact on small entities, nor will it impose upon them any significant costs of compliance. The Commission identified 29 small entities as respondents to the requirements in the proposed rule.
28. The Commission invites interested persons to submit comments on the matters and issues proposed in this notice to be adopted, including any related matters or alternative proposals that commenters may wish to discuss. Comments are due 60 days from publication in the
29. The Commission encourages comments to be filed electronically via the eFiling link on the Commission's web site at
30. Commenters that are not able to file comments electronically must send an original of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE., Washington, DC 20426.
31. All comments will be placed in the Commission's public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters.
32. In addition to publishing the full text of this document in the
33. From the Commission's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.
34. User assistance is available for eLibrary and the Commission's Web site during normal business hours from the Commission's Online Support at 202-502-6652 (toll free at 1-866-208-3676) or email at
By direction of the Commission.
Line 5a is added to read as follows:
Line 5b is added to read as follows:
Line 5c is added to read as follows:
Line 5d is added to read as follows:
Line 6a is added to read as follows:
Line 6b is added to read as follows:
Line 6c is added to read as follows:
Line 6d is added to read as follows:
Line 6e is added to read as follows:
Line 7a is added to read as follows:
Line 7b is added to read as follows:
Line 7c is added to read as follows:
Line 8a is added to read as follows:
Appendix B will not be published in the