FERC Oil & Liquids Pipeline Index Rates Take a Breather

When the calendar flipped from June to July, it did more than just close the book on the first half of 2023, it also allowed some oil pipelines regulated by the Federal Energy Regulatory Commission (FERC) to increase their rates by more than 13%. Yes, you read that correctly. This is the largest increase in the index rate since FERC initiated its current methodology in 1992 and follows last year’s increase of almost 9%. In today’s RBN blog, we look at what’s going on with index rates at FERC and what it means for producers and shippers alike.

On Thursday, June 18, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (NOI) to reset the index that’s used to make annual changes to the rate ceilings for interstate pipelines that transport crude oil, refined products, and other hydrocarbon liquids. Every year, the highest rate an indexed oil pipeline can charge goes up or down — almost always up — using the FERC index. The commission’s new proposal, which would become effective in July 2021, follows an already-approved index adjustment that will take effect a week from Wednesday, on July 1. Taken together, the two changes would reduce the maximum annual increase in the rate ceiling from more than 4% now to less than 1%, which could have a major impact on liquids pipeline owners. Today, we discuss the NOI, the meaning of the pipeline index, where it came from, and where it might be headed.