Starting July 1, oil and liquids pipelines regulated by Federal Energy Regulatory Commission (FERC) and charging “index” rates will be permitted to increase their rates by just over 1.4% (red circle in chart below). Index rates remain the most popular form of ratemaking for interstate oil and liquids pipelines.
This year, FERC’s index rate formula, Producer Price Index for Finished Goods (PPI-FG) minus 0.55%, resulted in a positive 0.01429. As a result, liquids pipelines must multiply their July 1, 2025, through June 30, 2026, index ceiling levels by 1.014290 to calculate their index ceiling levels effective July 1, 2026 through June 30, 2027.
While recent annual increases have been moderated, they come on the heels of two historically large inflation-driven adjustments. FERC issued an order reinstating index levels in September 2024, and the July index rate — which exceeded 14% — marked the largest increase since FERC adopted its current methodology in 1992. That followed a nearly 10% increase the year before.
The PPI-FG is tied to inflation trends, and FERC reviews the index level every five years to ensure it reflects changes in industry costs. The result is a framework that is backwards-looking because it relies on historical costs but updated annually to reflect inflationary changes. For more on the methodology, see You Really Got Me.
