The Trump administration promised to put wind in the sails of the fossil fuels industry, but the Federal Energy Regulatory Commission (FERC) has failed to resolve a key issue regarding the liquids pipeline rate index, under which the commission adjusts the rates charged to shippers on FERC-regulated crude oil, refined products and NGL pipelines. In today’s RBN blog, we’ll review the recent history of the rate index, why it moved sharply higher (and then lower) in recent years, and what lies ahead.
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For decades, the rates for transporting fossil fuel liquids — “oil” for short in this instance — on interstate pipelines were regulated by the Interstate Commerce Commission. That changed in 1977, when regulatory oversight for oil, refined products and NGL pipelines was transferred to FERC. Then, with the Energy Policy Act of 1992, FERC was directed to develop a simpler, more streamlined approach to rate regulation. As we explained in Now Here You Go Again, Congress said that FERC should add flexibility and reduced regulation and efficiency in oil pipeline rates. FERC complied with the law by issuing Opinion No. 561, which established the rate index approach.
These days, the vast majority of all liquids-pipeline rates are capped based on the index, meaning that in markets where competition doesn’t push the rates lower than the cap, the indexed rate is what’s charged.
FERC determines the annual oil pricing index rate for pipelines (orange line and bottom row in table in Figure 1 below) by using the following formula: the annual change in the Producer Price Index for Finished Goods (PPI-FG) plus an “adjustment factor” or ”adder” (which can be positive or negative) that is calculated by FERC every five years. FERC publishes this annual index figure, which is effective for the period of July 1-June 30, after the Bureau of Labor Statistics (BLS) publishes the final PPI-FG in May each year.
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About the song
“Drifting” was written by Jimi Hendrix and appears as the third song on side one of his first posthumous studio album, The Cry of Love. The song is a gentle love ballad featuring Hendrix’s poetic lyrics, such as: “drifting on a sea of forgotten teardrops, on a lifeboat sailing for your love.” The music is embellished by Hendrix’s soulful guitar and Buzzy Linhart’s vibraphone musings. Personnel on the record were: Jimi Hendrix (vocals, guitar), Billy Cox (bass), Mitch Mitchell (drums) and Buzzy Linhart (vibraphone).
The Cry of Love was Hendrix’s first posthumous album release. It served as what was to be his planned fourth studio album before he died in 1970. Most of the album was recorded at his then-new Electric Lady Studio in New York City (which is still in operation today). Produced by Jimi Hendrix, Eddie Kramer and Mitch Mitchell, the album was released in March 1971. It went to #3 on the Billboard 200 Albums chart and has been certified Platinum by the Recording Industry Association of America. Two singles were released from the LP.
Jimi Hendrix was an American rock guitarist, singer and songwriter. Born in Seattle, Hendrix had played all over the U.S. before being discovered at the Cafe Wha nightclub in New York City in July 1966 by The Animals’ bassist, Chas Chandler. Under Chandler’s tutelage, Hendrix moved to London and formed the Jimi Hendrix Experience, changing the trajectory of how an electric guitar was played forever. He released three studio albums, three live albums, two compilation albums and 14 singles before his death. Posthumously, 13 studio albums, two soundtrack albums, 28 live albums and 28 singles have been released. Hendrix is a member of the Rock and Roll Hall of Fame, U.K. Music Hall of Fame and Rhythm and Blues Music Hall of Fame, and has a star on the Hollywood Walk of Fame. The Museum of Pop Culture in Seattle has the largest collection of Hendrix artifacts and memorabilia in the world. Jimi Hendrix died in London in September 1970 at 27.
"About the Song" -- written by Mickey McMahan , RBN Director of Musicology
