Tulsa’s Williams has filed a settlement agreement with the Federal Energy Regulatory Commission over a pending rate case of its Transcontinental Gas Pipe Line Company, LLC.
Under the Stipulation and Agreement with FERC, Williams agreed to a rate moratorium good through August of 2021. In filing the settlement, Williams indicated it expects FERC approval in the second quarter of 2020.
“The Settlement provides rate certainty for customers while allowing Transco to recover its costs, safely and reliably operate its infrastructure, and expand to meet the needs of its customers,” stated Williams in the announcement.
Including revenue impacts and other related accounting entries, Williams expects approximately $76 million favorable impact to EBITDA in 2020 versus 2018 (the last full year with no rate case effect), which was included in 2020 guidance provided at Williams’ Analyst Day on Dec. 5, 2019.
“Overall, we are pleased with the outcome of the Settlement and very appreciative of our customers’ interactions throughout the process,” said Micheal Dunn, Executive Vice President and Chief Operating Officer of Williams. “The Settlement provides a fair return to Transco on its base service and also provides value to shippers, as evidenced by the recent remarketing of available Transco capacity that resulted in a new 82-year commitment with the successful shipper.”
The Transco rate case was initiated in August 2018 to comply with a filing obligation under a prior settlement and to recover costs associated with increased capital expenditures and operations and maintenance expenses. As part of the Settlement, Transco and the interveners agreed to a comprehensive “black box” resolution for the cost of service, rate design, cost classification and allocation to achieve an acceptable outcome for all parties.
While the Settlement includes a 12.5% ROE for cost-based recourse rates offered on future infrastructure expansions projects, the Settlement does not impact Transco’s existing negotiated rate contracts, which make up 51% of 2019 revenue, or Transco’s ability to offer negotiated rate contracts for future infrastructure expansion projects that can exceed 12.5% return on equity.
Under the terms of the Settlement, Transco and the parties have agreed to a rate moratorium through Aug. 31, 2021. In addition, Transco has agreed to file a new rate case no later than Aug. 30, 2024.
The Settlement also provides that following implementation of the Settlement, a Technical Working Group comprised of shippers and Williams representatives will address, among other things, emissions reductions and modernization on the Transco system, and Transco can propose a surcharge mechanism with shipper and FERC agreement without a rate case after the moratorium.