MLPA Response to FERC Income Tax Allowance Decision
We are disappointed with FERC’s decision to reverse its long-held policy of allowing an income tax allowance in the calculation of cost-of-service rates for MLPs that own interstate pipelines subject to FERC jurisdiction. It is important to note that the degree to which this decision impacts any particular MLP varies depending on the magnitude of their interstate pipeline business as well as the rate structure under which that portion of their business operates. Many interstate pipelines owned by MLPs are operated under contracts with negotiated rates that will not be impacted by this decision. This is especially true for newer pipeline assets where negotiated rates predominate. In addition, there are interstate pipelines with index and other rate structures that are similarly not impacted. Finally, not all MLPs own pipelines that are subject to FERC jurisdiction. As a result, the actual impact of this decision on any particular MLP will vary substantially depending on its particular asset mix and contract structure.
We await the issuance of the Notice of Proposed Rulemaking (NOPR) and will respond accordingly in coordination with our industry partners.