[Federal Register: September 27, 2007 (Volume 72, Number 187)]
[Proposed Rules]
[Page 54860-54872]
[DOCID:fr27se07-20]

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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 158 and 260

[Docket No. RM07-9-000]

Revisions to Forms, Statements, and Reporting Requirements for
Natural Gas Pipelines

September 20, 2007.
AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking, the Federal Energy
Regulatory Commission (Commission) proposes to amend its financial
forms, statements, and reports for natural gas companies, contained in
FERC Form Nos. 2, 2-A and 3-Q. The proposed revisions reflect the fact
that in the present regulatory environment, where interstate natural
gas pipelines are no longer required to file a triennial restatement of
rates, and the number of filed rate cases has declined sharply, FERC
Form Nos. 2, 2-A, and 3-Q need to be expanded and otherwise revised in
order for the Commission and the public to have sufficient information
to assess the justness and reasonableness of pipeline rates. The
proposed changes will enhance the forms' usefulness by updating them to
reflect current market and cost information relevant to interstate
natural gas pipelines and their customers. In addition, the Commission
proposes to eliminate FERC Form No. 11.

DATES: Comments must be filed on or before November 13, 2007.

ADDRESSES: You may submit comments, identified by Docket No. RM07-9-
000, by one of the following methods:
     Agency Web site: http://www.ferc.gov. Follow the

instructions for submitting comments via the eFiling link found in the
Comment Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically
must mail or hand deliver an original and 14 copies of their comments
to: Federal Energy Regulatory Commission, Office of the Secretary, 888
First Street, NE., Washington, DC 20426. Please refer to the Comment
Procedures Section of the preamble for additional information on how to
file paper comments.

FOR FURTHER INFORMATION CONTACT:
Michelle Veloso (Technical Information), Forms Administration and Data
Branch, Division of Financial Regulation, Office of Enforcement,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, Telephone:<PHONE_NUMBER>, E-mail:
<EMAIL_ADDRESS>
Scott Molony (Technical Information), Regulatory Accounting Branch,
Division of Financial Regulation, Office of Enforcement, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
Telephone:<PHONE_NUMBER>, E-mail<EMAIL_ADDRESS>Jane E. Stelck (Legal Information), Office of Enforcement, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426, Telephone:<PHONE_NUMBER>, E-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Commission proposes to amend its forms, reports and
statements for natural gas companies.\1\ Specifically, the Commission
proposes changes to FERC Form No. 2 (Form 2), Annual report for major
natural gas companies,\2\ FERC Form No. 2-A (Form 2-A), Annual report
for nonmajor natural gas companies,\3\ and FERC Form No. 3-Q (Form 3-
Q), Quarterly financial report of electric utilities, licensees and
natural gas companies.\4\ The Commission is proposing the changes to
improve the forms, reports and statements to provide, in greater
detail, the information the Commission needs to carry out its
responsibilities under the Natural Gas Act (NGA) to ensure that rates
are just and reasonable, and to provide pipeline customers, state
commissions, and the public the information they need to assess the
justness and reasonableness of pipeline rates. The proposed changes
would require pipelines to provide additional information regarding
their sources of revenue and amounts included in rate base, and
identify costs related to affiliate transactions, incremental
facilities, and discounted and negotiated rates. They would be
effective January 1, 2008. Accordingly, companies subject to the new
requirements would file their new Form 3-Q beginning with the first
quarter of 2009 and their new Forms 2 and 2-A in 2009 for calendar year
2008. Finally, the Commission proposes to eliminate the requirement to
file FERC Form No. 11 (Form 11) and to extend the period of time to May
18 of the year following the submittal of annual and quarterly forms to
file the Report of Certification.\5\
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    \1\ Section 10 of the NGA, 15 U.S.C. 717g (1988), authorizes the
Commission to prescribe rules and regulations concerning annual and
other periodic or special reports, as necessary or appropriate for
purposes of administering the NGA. The Commission may prescribe the
manner and form in which such reports are to be made, and require
from natural gas companies specific answers to all questions on
which the Commission may need information.
    \2\ 18 CFR 260.1.
    \3\ 18 CFR 260.2.
    \4\ 18 CFR 260.300.
    \5\ See 18 CFR 158.11. The Commission is concurrently issuing a
Notice of Inquiry (NOI) in Docket No. RM07-20-000, titled Fuel
Retention Practices of Natural Gas Pipelines, seeking comments on
several specific proposals for natural gas pipeline rate recovery of
fuel and lost and unaccounted-for gas. The NOI addresses Commission
policy regarding the method of cost recovery used by pipelines and
seeks comments on whether that policy should be changed. While the
instant proposed rulemaking in Docket RM07-9-000 addresses changes
to the Commission's financial forms, the NOI addresses the method of
recovery of fuel and seeks comments on whether it should change the
current policy and prescribe a uniform recovery method for all
pipelines. Therefore, there is no conflict between the two
proposals.
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II. Background

A. General

    2. The Commission strives to ensure that its reporting requirements
keep pace with the evolution of the natural gas industry. Before the
advent of Order No. 636 and its progeny, interstate natural gas
pipeline companies provided both sales and transportation services.\6\
Gas costs were entered into a

purchased gas adjustment (PGA) account and were periodically adjusted
and passed through to customers. The quid pro quo for the ability to
recover the gas costs through a PGA tracker was the requirement that
the pipelines file to restate their rates every three years. The PGA
regulations, and the triennial filing requirement therein, were
eliminated when the Commission issued a Final Rule that changed
pipeline filing and reporting requirements in the post-Order No. 636
environment.\7 \
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    \6\ See Pipeline Service Obligations and Revisions to
Regulations Governing Self-Implementing Transportation; and
Regulation of Natural Gas Pipelines After Partial Wellhead
Decontrol, Order No. 636, FERC Stats. & Regs. ] 30,939, order on
reh'g, Order No. 636-A, FERC Stats. & Regs. ] 30,950, order on
reh'g, Order No. 636-B, 61 FERC ] 61,272 (1992), order on reh'g, 62
FERC ] 61,007 (1993), aff'd in part and remanded in part sub nom.
United Distribution Cos. v. FERC, 88 F.3d 1105 (D.C. Cir. 1996),
order on remand, Order No. 636-C, 78 FERC ] 61,186 (1997).
    \7\ Filing and Reporting Requirements for Interstate Natural Gas
Company Rate Schedules and Tariffs, FERC Stats. & Regs. ] 31,025
(1995).
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    3. In Order No. 636, the Commission restructured pipeline services
and required pipelines to unbundle their sales and transportation
services. Accordingly, shippers were able to buy gas at the wellhead or
from gas marketers, and purchase pipeline capacity from other shippers
in the secondary market, as well as from the pipeline. Order No. 636
authorized pipelines to make unbundled commodity sales at market-based
rates at the wellhead because it concluded that, after unbundling,
sellers of short-term or long-term gas supplies (whether pipelines or
other sellers) would not have market power over the sale of natural
gas.
    4. In 1995, in Order No. 581, the Commission issued a Final Rule
revising the filing and reporting requirements for interstate natural
gas pipeline companies to reflect the changed regulatory environment of
unbundled pipeline sales for resale at market-based prices and open-
access transportation of natural gas.\8\ The Commission eliminated
outdated reporting requirements but revised Forms 2 and 2-A to provide
financial, rate, and statistical information on transactions that it
deemed more useful in monitoring the restructured industry.\9\
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    \8\ Revisions to Uniform System of Accounts, Forms, Statements,
and Reporting Requirements for Natural Gas Companies, Order No. 581,
FERC Stats. & Regs. ] 31,026 (1995), order on reh'g, Order No. 581-
A, FERC Stats. & Regs. ] 31,032 (1996).
    \9\ Id.
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    5. In 2000, in Order No. 637, the Commission again amended its
regulations in response to the growing development of more competitive
markets for natural gas and the transportation of natural gas.\10\ The
rule revised the Commission's regulatory approach to pipeline pricing
by permitting pipelines to propose peak/off-peak and term
differentiated rate structures. Although the rule did not change the
financial forms, it required pipelines to provide additional data on
their Web sites, including: (1) Information regarding the pipeline's
capacity and released capacity transactions, including names of parties
to the contract, rate charged, and receipt and delivery points; and,
(2) information concerning market affiliates, including an
organizational chart showing the structure of the parent corporation
and the position within that structure of all affiliates. These
additional reporting requirements were designed to provide more
transparent pricing information and to permit more effective monitoring
for the exercise of market power and undue discrimination.\11\
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    \10\ Regulation of Short-Term Natural Gas Transportation
Services, and Regulation of Interstate Natural Gas Transportation
Services, Order No. 637, FERC Stats. & Regs. ] 31,091, clarified,
Order No. 637-A, FERC Stats. & Regs. ] 31,099, reh'g denied, Order
No. 637-B, 92 FERC ] 61,062 (2000), aff'd in part and remanded in
part sub nom. Interstate Natural Gas Ass'n of America v. FERC, 285
F.3d 18 (D.C. Cir. 2002), order on remand, 101 FERC ] 61,127 (2002),
order on reh'g, 106 FERC ] 61,088 (2004), aff'd sub nom. American
Gas Ass'n v. FERC, 428 F.3d 255 (D.C. Cir. 2005).
    \11\ Id. See also 18 CFR 284.13.
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    6. Since the Commission eliminated the triennial restatement of
rates filing requirement in Order No. 636, there has been a decline in
filings under NGA section 4.\12\ Of course, the Commission may, on its
own motion, institute an investigation under NGA section 5 to determine
if pipeline rates are just and reasonable.\13\ The Commission relies
also on section 5 complaints, which may be filed by state public
utility commissions or pipeline customers, to review gas rates outside
of a section 4 rate proceeding. In a section 5 proceeding, the
complainant has the burden of proof and must have access to the
information needed to meet that burden. A section 5 complaint may rely
on Forms 2, 2-A, and 3-Q financial data and that data must be
sufficient to support a complaint.
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    \12\ 15 U.S.C. 717c.
    \13\ 15 U.S.C. 717d.
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    7. Within the past year, two section 5 complaints were filed with
the Commission, both relying on data provided in Forms 2 and 2-A to
argue that the pipelines' rates were unjust and unreasonable.\14\ In
National Fuel, the complainants contended that it had been 11 years
since the Commission had reviewed National Fuel's rates and that during
that time the rates had become unjust and unreasonable.\15\ Relying
upon Forms 2 and 3-Q data, the complainants prepared an analysis for
the most recent three-year period, which allegedly demonstrated
significant excess revenue and an equity return near 20 percent.\16\
National Fuel argued in response to the complaint that the Form 2 data
relied upon by the complainants was not sufficient and that only a
detailed cost and revenue study could provide justification for an
investigation into a pipeline's rates under NGA section 5. Complainants
acknowledged that the lack of certain data in Form 2 hindered the
performance of a full rate analysis, but argued that the complaint,
nonetheless, presented evidence sufficient to initiate an investigation
of National Fuel's rates.\17\
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    \14\ Public Service Commission of New York, Pennsylvania Public
Utility Commission and Pennsylvania Office of Consumer Advocate v.
National Fuel Gas Supply Corp., 115 FERC ] 61,299 (2006) (National
Fuel), order approving uncontested settlement, 118 FERC ] 61,091
(2007); Panhandle Complainants v. Southwest Gas Storage Co., 117
FERC ] 61,318 (2006) (Southwest Gas).
    \15\ National Fuel at P 7.
    \16\ Id.
    \17\ Motion for Leave to Answer and Answer of the Joint State
Agencies to National Fuel Gas Supply Corporation's Answer to
Complaint at 6.
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    8. In its order setting the case for hearing, the Commission found
that the complainants had raised serious questions as to whether the
rates established in 1995 settlements allowed National Fuel to recover
revenue substantially in excess of its costs.\18\ The Commission
rejected National Fuel's contention that a detailed cost and revenue
study is the sole means of justifying an investigation into a
pipeline's rates under section 5, and that Form 2 data could provide
the starting point for such an investigation.\19\ However, the
Commission denied complainants' request for summary disposition, noting
that data extrapolated from Form 2 was, in some cases, unclear and not
adequate to support a summary disposition.\20\
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    \18\ National Fuel at P 37.
    \19\ Id.
    \20\ Id. at P 42.
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    9. On December 21, 2006, the Commission set for hearing another
complaint filed by a group of customers that contended that Southwest
Gas' rates had not been reviewed in 17 years and that during that time,
the rates had become unjust and unreasonable.\21\ Complainants
submitted a cost and revenue study using information from Southwest
Gas' Form 2-A, which allegedly demonstrated that the pipeline was
earning a return on equity as high as 32 percent.\22\ The complainants
sought an immediate rate reduction and a hearing. The Commission found
that

the complainants' rate study did not support an immediate rate
reduction, but set the matter for hearing.\23\
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    \21\ See Southwest Gas, 117 FERC at P 1.
    \22\ Id.
    \23\ Id. at P 19.
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    10. Against this backdrop, Commission staff initiated a review of
Forms 1, 1-F, 2, 2-A, and 3-Q data in the fall of 2006. As part of this
review, staff met with both filers and users of annual and quarterly
reports for the purpose of reexamining the breadth of data collected by
the forms and to determine the need for additional information,
deletions, or other clarifications. Thereafter, on February 15, 2007,
the Commission issued a Notice of Inquiry (NOI).\24 \
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    \24\ Assessment of Information Requirements for FERC Financial
Forms, Notice of Inquiry, 72 FR 8316 (February 26, 2007), FERC
Stats. & Regs. ] 35,554 (2007). While the outreach meetings
addressed only Forms 1 and 2, the NOI invited comments from filers
and users of Form 6 and 6-Q as well.
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B. Notice of Inquiry

    11. In the NOI, the Commission sought comment on the need for
changes or additions to the financial information reported in the
Commission's quarterly and annual financial reports, FERC Form Nos. 1,
1-F, 2, 2-A, 3-Q, 6 and 6-Q applicable to the electric utility, natural
gas, and oil pipeline industries. Specifically, the Commission asked
commenters to address the question of whether the Commission's
financial reports provide sufficient information to the public to
permit an evaluation of the filers' jurisdictional rates, and whether
these forms should otherwise be modified. The NOI posed 12 general
questions and also invited commenters to raise other questions or
issues that might aid the Commission's assessment of the forms.\25\ The
12 questions are listed in Appendix B to this order.
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    \25\ NOI at P 16.
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    12. On March 28, 2007, the Commission received 35 comments from
FERC Form Nos. 1, 1-F, 2, 2-A, 3-Q, 6 and 6-Q users and jurisdictional
entities that file the reports.\26\ On April 27, 2007, 15 reply
comments were filed. After reviewing the comments, the Commission has
determined that each of the forms merits its own separate review.
Addressing changes or amendments to all of the forms that serve the
electric, gas, and oil pipeline industries in a single proceeding,
would be an unwieldy task with the potential to cause confusion among
the industries, which could delay the Commission's action. Accordingly,
this Notice of Proposed Rulemaking (NOPR) addresses changes, additions,
and amendments to the forms applicable to natural gas companies--Forms
2, 2-A, and 3-Q. Potential changes or amendments to the annual and
quarterly forms applicable to electric utilities and oil pipelines,
Forms 1, 1-F, 6 and 6-Q will be addressed in future orders.
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    \26\ Parties who filed comments and reply comments are listed on
Appendix C.
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C. Comments to Notice of Inquiry

    13. As noted, the Commission received 35 comments and 15 reply
comments in response to the NOI. Eleven initial comments and two reply
comments specifically address Forms 2, 2-A, and 3-Q data.\27\ Not
surprisingly, as a general matter, pipeline customers and state
commissions support revising the forms and pipelines oppose revisions
that would require filing additional information. The Industry
Coalition urges the Commission to revise Form 2 to require additional
detail which, in their view, would permit a proper evaluation of
pipelines' cost-based rates and ensure that those rates are just and
reasonable.\28\ The Industry Coalition asks the Commission to require
greater detail in several areas: (1) Capital structure; (2) deferred
taxes; (3) gas purchases and sales; (4) state income tax rates; (5)
miscellaneous assets; (6) corporate overhead costs; (7) volumes and
revenues associated with discounted and negotiated rate services; (8)
revenues and costs associated with at-risk facilities; and (9)
calculation of the rate of return.\29\
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    \27\ In some instances, comments were filed which addressed more
than one financial form.
    \28\ Initial Comments of the Industry Coalition at 4. The
Industry Coalition is comprised of the American Public Gas
Association, the Independent Petroleum Association of America, the
Natural Gas Supply Association, and the Process Gas Consumers Group.
    \29\ See Industry Coalition Comments at 5-6.
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    14. In addition, the Industry Coalition states that it has
attempted to quantify the burdens and benefits associated with each
proposal and estimates that the burden associated with providing the
additional material would be low to moderate. The Industry Coalition
also asks the Commission to require types of information contained in
Form 2 to be replicated in the quarterly Form 3-Q, to the extent
possible. In addition, the Coalition suggests changes specific to Form
3-Q, including (1) a separate report of fuel used for operation and
maintenance; and (2) information that is consistent with page 520 of
Form 2 related to fuel use.
    15. Several state agencies, including the New York State Public
Service Commission (NYPSC), the Kansas Corporation Commission (KCC),
the Missouri Public Service Commission (MoPSC), and the Public
Utilities Commission of Ohio (PUCO), filed comments recommending
changes to the forms. The KCC claims that current Form 2 data is
inadequate and advocates the reinstatement of a periodic rate refiling
requirement in the three to five year range.\30\ In the absence of such
a requirement, the KCC suggests specific changes to Form 2 which are
similar, in part, to the changes recommended by the Industry Coalition.
KCC's proposals include the following: (1) Calculation of the
pipeline's rate of return; (2) identification of which components of
deferred tax and regulatory asset and liability balances are included
in rate base; (3) detail on miscellaneous current and accrued assets;
(4) detail concerning gas purchase and sales accounts; (5) detail
concerning corporate administrative costs; (6) identification of
revenues associated with negotiated rate contracts and with at-risk
facilities; and (7) information concerning the pipeline's capital
structure.\31\ PUCO requests that debt accounts balances for Form 2 be
shown separately for each debt issuance and asks the Commission to make
the data available in electronic format that can be compared and
analyzed electronically.\32\
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    \30\ KCC Comments at 4. For purposes of this NOPR, the term
``at-risk'' facilities has the same meaning as ``incremental''
facilities.
    \31\ Id. at 7.
    \32\ PUCO Comments at 3.
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    16. The NYPSC asserts that currently the forms contain no
information related to affiliate transactions and recommends that
utilities be required to describe and quantify each type of affiliate
transaction, similar to the requirements adopted in Form 60 for service
companies and recommends that a schedule, modeled on Schedule XVI, be
added to Form 2.\33\ The NYPSC also recommends that each company report
its contributions to other post-employment benefits and pension
funds.\34\ As an alternative to a cost and revenue study, the NYPSC
recommends that the Commission require pipelines to provide a more
detailed breakdown of Accounts 480-484 Sales, according to revenues and
quantities of gas that comprise each sale.\35\ The NYPSC also asks that
pipelines provide additional detailed information, such as billing
determinants for each rate schedule, the separate identification of
revenues and costs associated with trackers or special surcharges, and
the amount of deferred taxes included in rate base for cost-of-service
purposes.\36\
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    \33\ NYPSC Comments at 6.
    \34\ Id. at 7.
    \35\ Id. at 9.
    \36\ Id. at 10-11.

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    17. MoPSC suggests that several accounts in Form 2, not currently
required for Form 2-A filers, be added to Form 2-A, including detail of
miscellaneous current accrued liabilities; detail of revenues from
gathering, transmission, and storage; miscellaneous general expense;
and charges for outside consultative services.\37\ For all of these
accounts, the Form 2 has a threshold reporting requirement of $250,000.
MoPSC requests that the schedules be included in Form 2-A and that the
threshold for reporting be lowered to $50,000 or $100,000.\38\
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    \37\ Comments of MoPSC at 5-8.
    \38\ Comments of MoPSC at 7-8.
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    18. Comments opposing revisions, in part or in whole, to the annual
and quarterly financial reports were filed by the Interstate Natural
Gas Association of America (INGAA), the American Gas Association (AGA),
Boardwalk Pipeline Partners, L.P. (Boardwalk), Williston Basin
Interstate Pipeline Co. (Williston), and Washington Gas Light Company
(Washington Gas). INGAA urges the Commission to balance the amount of
information it needs in periodic reports for the purpose of
administering section 5 against the burden it places on the pipelines.
INGAA contends that the information now provided in both Forms 2 and 2-
A is sufficient for the Commission's responsibilities under the NGA.
INGAA notes that in two recent decisions, the Commission relied on
Forms 2 and 2-A data to initiate an investigation of pipeline rates
under section 5.\39\ In addition, INGAA asserts that pipelines file
other reports or postings that provide information supplemental to Form
2, including posting an index of customers and identifying contracts
with negotiated rates. INGAA also contends that pipeline Web sites
provide information on pipeline capacity and discounts awarded.\40\
INGAA states that the Commission should be careful that an expanded
Form 2 does not blur the distinction between sections 4 and 5, thus
shifting the burden of proof established under section 5.\41\ Finally,
INGAA suggests that the Commission should be wary of converting Form 2
from a financial reporting document to the equivalent of an annual cost
and revenue study.\42\ INGAA states that any proposal that would
require additional information not collected in accord with the Uniform
System of Accounts, or reported in a different format, will result in
additional regulatory burdens.
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    \39\ INGAA Initial Comments at 5; National Fuel, 115 FERC ]
61,299, on reconsideration, 115 FERC ] 61,368 (2006) and Southwest
Gas, 117 FERC ] 61,318 (2006).
    \40\ Id. at 6.
    \41\ Id. at 6-7, (citing Public Service Comm'n v. FERC, 866 F.2d
487, 490-91 (D.C. Cir. 1989)).
    \42\ Id. at 7.
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    19. Williston Basin, Boardwalk Pipeline, AGA, and Washington Gas
concur with INGAA that Form 2 data, as now filed, provides sufficient
information to allow users to evaluate pipeline rates. The commenters
echo INGAA's concern that the current Form 2 not be transformed into a
cost and revenue study, and that pipelines not be required to file an
annual mini-rate case, thereby reversing the statutory burden of proof
for section 5.\43\ Williston Basin suggests several technical revisions
and requests that the Commission discontinue the Form 11 and
incorporate that information in the Form 3-Q.\44\ Washington Gas states
that Form 2 should remain as it is, and that if the Commission
determines that more information is needed to monitor rates, a new form
for reporting this ratemaking information should be created.\45\
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    \43\ Boardwalk Pipeline Comments at 5.
    \44\ Williston Basin Comments at 6-7.
    \45\ Washington Gas Comments at 3.
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    20. Only INGAA and Williston Basin filed reply comments. Both
commenters reiterate the assertion that the information contained in
Forms 2 and 3-Q is sufficient to allow the Commission and other users
to adequately evaluate pipeline rates.\46\ In response to the KCC's
complaint that pipeline rate filings have declined since the end of the
triennial rate review, INGAA asserts that pipeline rate filings
continue to be made.\47\ INGAA further asserts that the elimination of
triennial rate review has had beneficial effects: (1) Customer
settlements now dictate the timing of pipeline rate cases; (2) repeal
of the triennial rate review is an incentive for controlling and
reducing pipeline costs; (3) pipeline rates have remained stable for
the last decade and have actually gone down in real (inflation
adjusted) dollars; and (4) the quality of pipeline service has improved
due to the increased flexibility provided by Order No. 637.\48\
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    \46\ Williston Basin Reply Comments at 2; INGAA Reply Comments
at 2.
    \47\ Id. at 7.
    \48\ Id. at 8-9.
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    21. INGAA's reply comments also address specific proposals or
requests for information made by the Industry Coalition, the NYPSC, the
KCC, and MoPSC.\49\ INGAA argues that:
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    \49\ Id. at 9.
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     Some requests, e.g., more detailed information on deferred
taxes and identification of the appropriate capital structure, would
require filers to make the sort of subjective judgment that is involved
in a litigated rate case,\50\
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    \50\ Id. at 10.
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     The forms are currently designed to report what has
actually occurred, and not to make projections based on the data,\51\
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    \51\ Id. at 1.
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     Requiring a rate of return calculation and the detail
requested on gas purchases would turn Form 2 into a mini-rate case,
     Other sources of information are available to the public,
e.g., pipelines' operational sales and purchase reports and fuel
tracker filings,\52\
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    \52\ Id. at 4-5.
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     If the Commission needs additional information from time
to time, that need can be met through the Commission's audit authority
on a case-by-case basis,\53\
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    \53\ Id. at 3.
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     Commenters may review pipelines' operational sales and
purchase reports, cashout reconciliation reports and fuel tracker
filings, all of which are routinely filed by pipelines,\54\
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    \54\ Id. at 13-14.
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     Pipelines already provide details of their effective
income tax rate, and such details are disclosed in the Notes to
Financial Statements and include the total dollar amount for taxes
broken down between current and deferred taxes, and
     Other items, such as the calculation of the income tax of
a particular state changing from a tax based on net income to a tax
based on gross receipts are burdensome to calculate and subjective.\55\
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    \55\ Id. at 15-16.
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    22. INGAA states that its members have no objection to identifying
the entity whose capital structure is now reported on page 218a of Form
2, which provides a computation of the allowance for funds used during
construction (AFUDC), but requiring the pipeline to state whether it
believes this number is appropriate for a rate case would require the
pipeline to speculate on a potentially contentious issue in a fully
litigated rate case.\56\ Generally, INGAA contends that the information
provided in all of the areas identified by the Industry Coalition and
others is already burdensome, and that the information sought is, in
many instances, available elsewhere, e.g., in the pipelines' index of
customers and other information posted on pipelines' Web sites.\57\
INGAA further argues that the proposal to require pipelines to identify
costs and revenues associated

with at-risk facilities could essentially impose a cost and revenue
study obligation for these facilities and should not be required
outside of a section 4 or 5 proceeding.\58\ Similarly, INGAA contends
that a requirement to include billing determinants for each rate
schedule would impose a substantial burden because it would effectively
require the preparation of a schedule equivalent to a Schedule G,
required for a section 4 filing.\59\
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    \56\ Id. at 11-12.
    \57\ Id. at 20.
    \58\ Id. at 22.
    \59\ Id. at 24-25.
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    23. Finally, INGAA suggests that certain items required by Form 2
be deleted as burdensome or of limited usefulness, including: (1) Pages
508-509, Compressor Stations; (2) page 357, Charges for Outside
Professional and Other Consultative Services; and (3) page 261,
Reconciliation of Reported Net Income with Taxable Income for Federal
Income Taxes.

III. Discussion

A. General

    24. The steady decline of section 4 rate filings, the concerns
regarding the adequacy of data in Forms 2 and 2-A expressed in both the
National Fuel and Southwest Gas complaints, and the comments received
in response to the NOI indicate a need to update and supplement Forms
2, 2-A, and 3-Q. While a hiatus in section 4 rate case filings does
not, in every instance, support a conclusion that the pipeline is
earning excess revenues, some pipelines have not filed a section 4 rate
case in more than a decade, and their costs of service and revenues
have gone unreviewed as a consequence.\60\ If shippers cannot readily
access the data they need to make informed assessments regarding the
propriety of the rates charged, they are left without any plausible
means of assessing the justness and reasonableness of those rates and
are forced to accept the information provided at face value or attempt
to initiate expensive and time-consuming section 5 proceedings to
obtain the data.
---------------------------------------------------------------------------

    \60\ The records indicate that as many as 15 major and 20
nonmajor gas pipelines have not filed a section 4 rate case in more
than a decade. Also, although INGAA contends that pipeline rate
cases are quite common, a review of the cases cited by INGAA reveals
that most were filed because prior settlement agreements required
the filing.
---------------------------------------------------------------------------

    25. The proposed additions or changes to Forms 2, 2-A and 3-Q
require a pipeline to provide additional, detailed information
regarding the pipeline's costs and revenues, including a reconciliation
of gas supplied by shippers for compressor fuel and gas losses;
disaggregation of certain cost data; provision of additional
information related to affiliate transactions; and the distinction
between services provided at discounted or negotiated rates and costs
recovered through incremental, as opposed to rolled-in, rates. As noted
above, we believe that all of the proposed changes will better
facilitate the forms users' ability to make a meaningful assessment of
the pipeline's cost of service and current rates. We have endeavored,
however, to achieve a balance between the benefits these changes will
facilitate and the imposition of any additional burden on the
pipelines. Most of the information requested is data that is maintained
by the pipeline and can be transferred to existing and new schedules.
In addition, as discussed below, we are proposing the elimination of
Form 11, which would lessen pipelines' filing requirements.
    26. Several schedules are being added to Form 2-A as well as to
Form 2. The Commission regulates 44 pipelines that are classified as
``nonmajor'' and required to file Form 2-A. It is no less important
that customers of pipelines classified as nonmajor be provided with the
information we propose to add to Form 2. Form 2-A filers now provide
less data than do Form 2 filers. As with Form 2, the information we are
adding to Form 2-A is information we deem necessary to enable
customers, state commissions, and the Commission to assess existing
pipeline rates. Complaints regarding the dearth of data have been made
by customers of both major and nonmajor pipelines and we believe all
are entitled to the same information.\61\
---------------------------------------------------------------------------

    \61\ See, e.g., Southwest Gas, 117 FERC at P 4 (complaint filed
by Form 2-A users).
---------------------------------------------------------------------------

    27. We have not adopted many of the commenters' proposals. For
example, we reject the KCC's request that we resurrect the triennial
rate restatement requirement for all pipelines and AGA's alternative
suggestion that we create a new form to supplement Form 2.\62\ We
reject as burdensome the Industry Coalition's and the MoPSC's requests
that pipelines not using the rate of return on equity approved in the
pipeline's last rate case provide the calculation and derivation of the
return used at present. We reject also the Industry Coalition's request
that pipelines provide additional information on capital structure used
for ratemaking purposes since it would require the pipeline to
speculate on the pipeline's preferred capital structure.
---------------------------------------------------------------------------

    \62\ See, e.g., Public Service Commission of New York v. FERC,
866 F.2d 487 (D.C. Cir. 1989); see also United Distribution
Companies v. FERC, 88 F.3d 1105, 1175-6 (D.C. Cir. 1996).
---------------------------------------------------------------------------

    28. We acknowledge INGAA's concern that an expanded Form 2 could
blur the distinction between sections 4 and 5, and shift the burden of
proof established under section 5, and we invite commenters to address
this issue. However, the changes proposed herein do not affect existing
rates nor change any rates on file. The requested data is designed to
provide the Commission and pipeline customers with information that
will aid their ability to make a reasonable assessment of a pipeline's
cost of service. Along the same lines, the requested data is not the
functional equivalent of a cost and revenue study. Therefore, the
revised Form 2 will not be used to limit an entity's rights under the
NGA and our regulations. Nor will the revised Form 2 change our
obligation to rule on complaints, petitions, or other requests for
relief based on a full record and substantial evidence.
    29. At the same time, we find no merit in INGAA's argument that
much of the data sought by Form 2 users is available elsewhere, in
forms and filings made before state agencies, the Commission, other
federal agencies, or in the pipeline's tariff. We do not believe that
users should have to piece together and interpret from myriad sources
information that is readily available to the pipeline and can, without
a substantial increase in burden, be incorporated into Forms 2 and 2-A.
Also, much of the information cited by INGAA is not coterminous with
Form 2 data and cannot be used for purposes of comparison.
    30. Additionally, as discussed below, INGAA has requested that the
Commission eliminate three schedules from Form 2. As discussed below,
we reject INGAA's request to eliminate information now reported in Form
2. INGAA first requests that the Commission delete pages 508-509 of
Form 2 which provide details on compressor stations. The schedule shows
plant, expenses, amount of gas and usage in total hours intended to
assist Form 2 users in calculating a depreciation analysis of remaining
life for compressor plant. In addition, some compressor stations are
built as part of expansion projects with incremental rates. The
separation of costs by compressor station is a key element to assist in
determining the appropriate allocations of costs to generate
incremental rates. In addition, in order to provide more clarity
regarding fuel use for compressor stations, we propose to revise pages
508-509 of Form 2 to require pipelines to provide both the

amounts used and expenditures made for gas and electric power.
    31. INGAA asks that the Commission eliminate Page 357, Charges for
Outside Professional and Other Consultative Services. As discussed
below, the Commission is adding a new Page 358 to Forms 2 and 2-A where
information currently provided on Page 357 would be reported. INGAA
asserts that the schedule has no value for ratemaking purposes. The
information required for Page 357, now proposed to be substituted by a
new page 358, allows Form 2 users to identify the annual charges for
outside consulting activities and the identification of associated
company charges. The Commission believes this information is of value
to forms users and the reporting requirement will be retained.
    32. Finally, we reject INGAA's request to eliminate page 261,
Reconciliation of Reported Net Income With Taxable Income for Federal
Income Taxes. The Commission believes page 261 should be retained
because it can provide information as to book and tax timing
differences, thereby indicating if costs are included in the revenue
requirement which may not be deductible for tax purposes. The
reconciliation reflects revenues reported for book purposes which are
not included for income tax purposes. In other words, for example,
AFUDC equity is isolated and can be used as a means of checking the
reasonableness of the AFUDC included in the tax calculation.

B. Overview of FERC Forms 2, 2-A, 3-Q, and 11.

    33. Before describing the proposed changes, the Commission believes
that an overview of Forms 2, 2-A, and 3-Q, as well as a related form
(Form 11) would be helpful. As discussed above, these forms are the
vehicles the Commission uses to obtain financial and certain
operational information from interstate natural gas companies. The
forms provide information concerning a company's past performance and
its future prospects, information compiled using a standard chart of
accounts contained in the Commission's Uniform System of Accounts
(USofA).\63\ The forms contain schedules which include a basic set of
financial statements: Comparative Balance Sheet, Statement of Income
and Retained Earnings, Statement of Cash Flows, and the Statement of
Comprehensive Income and Hedging Activities. Supporting schedules
containing supplementary information are filed, including revenues and
the related quantities of products sold or transported; account
balances for various operating and maintenance expenses; selected plant
cost data; and other information.
---------------------------------------------------------------------------

    \63\ See 18 CFR part 201.
---------------------------------------------------------------------------

    34. Currently, there are 74 Form 2 filers, 44 Form 2-A filers and
118 Form 3-Q filers. The Form 2 is an annual reporting requirement for
``major'' natural gas pipeline companies, i.e., natural gas companies
that transport or store gas in excess of 50 million Dth in each of the
three previous calendar years. The Form 2-A is an abbreviated version
of the Form 2 for ``non-major'' natural gas pipeline companies, i.e.,
natural gas companies that do not meet the filing threshold for Form 2
but have total gas sales or volume transactions exceeding 200,000 Dth
in each of the three previous calendar years. Form 3-Q is a quarterly
filing requirement for filers of Forms 2 and 2-A, which requires gas
companies to file certain Form 2 and 2-A information on a quarterly
basis. The increased frequency of information provided in Form 3-Q
allows for more timely evaluations of the adequacy of existing cost-
based rates and improves the transparency of financial information
submitted to the Commission. Finally, Form 11 is a quarterly filing
made by natural gas companies that transport or store gas in excess of
50 million Dth in each of the three previous years. Filers must report
quantities shipped or stored and revenues received under each rate
schedule for each month of the quarter.

C. Proposed Adjustments to the Annual and Quarterly Reports

    35. The proposed revisions fall into three categories of
information. The first group, ``Acquisition and Disposition of Gas,''
covers revenue data that is not now included in the forms, in
particular, reporting revenue from shipper-supplied gas. The second
group, ``New Rate Policies and Affiliate Transactions,'' pertains to
pipelines' affiliate transactions, discounted or negotiated rates, and
incremental facilities. The third group, ``Rate Base and Other Key
Cost-of-Service Components,'' involves information regarding deferred
income tax expense, state income tax, wages and salaries, and pensions.
All of the proposed changes are reflected in the attached schedules,
Appendix D.
1. Acquisition and Disposition of Gas
a. Shipper-Supplied Gas
    36. As an initial matter, as noted, the issue of the appropriate
rate methodology used by natural gas pipelines for compressor fuel and
lost and unaccounted-for gas is before the Commission in Docket No.
RM07-2-000, Notice of Inquiry, Fuel Retention Practices of Natural Gas
Companies, seeking comments on whether the Commission should prescribe
a uniform method for all pipelines to use in recovering these
costs.\64\ In this NOPR, the Commission is not proposing a change to
the pipelines' recovery methods; rather, it simply is proposing that
pipelines provide forms users with detailed financial data of how each
pipeline accounts for these costs. Therefore, there should be no
conflict between what is proposed here with whatever is proposed in the
RM07-2-000 proceeding.
---------------------------------------------------------------------------

    \64\ See Fuel Retention Practices of Natural Gas Companies,
Notice of Inquiry, Docket No. RM07-20-000, 120 FERC ] 61,255 (2007).
---------------------------------------------------------------------------

    37. The Commission's USofA requires that pipelines electing to
recognize shipper-provided gas as revenue must also recognize an equal
amount of purchased gas expense. Pipelines must credit the appropriate
transportation revenue account (Accounts 489.1 through 489.4) and
record an equal amount in Account 805, Other Gas Purchases. The USofA
also requires that all gas consumed in compressor stations or used for
other operational purposes be recognized in the appropriate expense
accounts in accordance with the existing USofA requirements. Finally,
for those pipelines not electing to recognize all shipper provided gas
as revenue, the Commission requires that the value of gas received from
shippers under tariff allowances that is not consumed in operations nor
returnable to customers through rate tracking mechanisms be credited to
Account 495, Other Gas Revenues, and charged to Account 805. Despite
these accounting and reporting requirements for gas used in operations,
gas lost, and gas sold, Forms 2 and 2-A users cannot readily determine
the disposition and value of any shipper-supplied gas that exceeds the
pipelines' operational needs or the source and cost of any gas acquired
to meet deficiencies in shipper-supplied gas.
    38. The Industry Coalition, NYPSC, and the KCC all request that
pipelines be required to provide details of gas purchases and sales,
including an accounting of gas that pipelines retain from shippers.\65\
The Commission agrees that forms users should have access to this
information in order to assess the sources of revenue recorded for gas
sales by pipelines. With escalating gas prices and a declining number
of full section 4 rate reviews,

the disposition of this gas has become an important item in the
pipeline's cost of transportation.\66\
---------------------------------------------------------------------------

    \65\ See Industry Coalition comments at 5; NYPSC Comments at 10;
KCC Comments at 7.
    \66\ See National Fuel, 115 FERC at P 21.
---------------------------------------------------------------------------

    39. The Commission is proposing to add a new schedule entitled
``Shipper-Supplied Gas for the Current Quarter'' (pages 521-A and 521-
B) to Forms 2, 2-A, and 3-Q, which would require the pipeline to
report: (1) The difference between the volume of gas received from
shippers and the volume of gas consumed in pipeline operations each
month; (2) the disposition of any excess and the accounting recognition
given to such disposition including the basis of valuing the gas and
the specific accounts charged or credited; and (3) the source of gas
used to meet any deficiency and the accounting recognition given to the
gas used to meet the deficiency, including the accounting basis of the
gas and the specific account(s) charged or credited. The Commission
also proposes to add page 520 to Form 3-Q in order to provide more
timely reporting of this information. In addition, in order to provide
more clarity for gas purchase activity, we are proposing to require
pipelines to provide in a footnote to page 520, the volumes of gas
purchased applicable to each of the gas purchase expense accounts.\67\
Currently, pipelines must report the dollar amount of gas purchases by
type of purchase on the Gas Operation and Maintenance Expenses schedule
on page 319 of Forms 2 and 2-A, and they are required to report the
related volumes only in the aggregate on the Gas Account--Natural Gas
schedule on page 520.
---------------------------------------------------------------------------

    \67\ 18 CFR part 201, Account Nos. 800-805.
---------------------------------------------------------------------------

b. Other Gas Dispositions
    40. The Commission collects information concerning different types
of gas operating revenue on the schedule entitled Gas Operating
Revenue, pages 300-301 of Forms 2 and 2-A. This schedule currently
combines on one line sales data related to residential, commercial and
industrial, other sales to public authorities, sales for resale and
interdepartmental sales. The Industry Coalition and the KCC request
that pipelines provide greater detail concerning these accounts and be
required to separately identify these costs and provide an accounting
for each.\68\ The Commission agrees that detail concerning these
accounts would provide important data that would enable users to
identify the dispositions of gas acquired by or tendered to the
pipeline and how those transactions may affect the pipeline's cost of
service. Accordingly, the Commission proposes to expand the detail
provided on pages 300-301 of Forms 2 and 2-A to require filers to
report sales amounts reported in Accounts 480 (Residential Sales); 481
(Commercial and Industrial Sales); Account 482 (Other Sales to Public
Authorities); Account 483 (Sales for Resale); and 484
(Interdepartmental Sales).
---------------------------------------------------------------------------

    \68\ Industry Coalition Comments at 5; KCC Comments at 7.
---------------------------------------------------------------------------

    41. Both the Industry Coalition and the KCC seek detail concerning
the types of revenues recorded in Account 495, Other Gas Revenues.
Under the Commission's USofA, pipelines record in Account 495
miscellaneous revenues derived from gas operations not includible in
any of the other gas revenue accounts. Additionally, pipelines are
required to report these revenues on the schedule entitled Other
Revenues (Account 495) on page 308 of Form 2. The descriptions and
aggregations of amounts reported by pipelines on this schedule,
however, do not allow users of the data to obtain a meaningful
understanding of the nature of the business activities from which the
revenues are derived. It is important for users of the data to
understand which customer classes or groups may be affected by the
miscellaneous revenues.
    42. In order to provide additional information, the Commission
proposes to modify the schedule for Account 495, Other Gas Revenues, on
page 308 of Form 2 and add a new schedule to Form 2-A to specify that
the following types of revenues must be separately reported on the
schedule: (a) Commissions on sale or distribution of gas of others; (b)
compensation for minor or incidental services provided for others; (c)
profit or loss on sale of material and supplies not ordinarily
purchased for resale; (d) sales of steam, water, or electricity,
including sales or transfers to other departments; (e) miscellaneous
royalties; (f) revenues from dehydration and other processing of gas of
others except as provided for in the instructions to Account 495; (g)
revenues for rights and/or benefits received from others which are
realized through research, development, and demonstration ventures; (h)
gains on settlements of imbalances receivables and payables; (i)
revenues from penalties earned pursuant to tariff provisions, including
penalties associated with cash-out settlements, and (j) revenues from
shipper-supplied gas.
2. New Rate Policies and Affiliate Transactions
a. Affiliate Transactions
    43. Forms 2 and 2-A filers are required to disclose information
regarding any significant financial changes, including information
regarding sales, transfers or mergers of affiliates in the Notes to
Financial Statements schedule page 122.1. However, forms filers are not
required to provide detailed information regarding affiliate
transactions. The absence of affiliate information makes it impossible
for forms users to determine the type and extent of all affiliate
transactions. In this regard, the NYPSC points out that at present,
Form 2 does not require any reporting related to affiliate
transactions.\69\ NYPSC believes that additional controls and
disclosures of affiliate transactions are needed, not only to ensure
that costs are just and reasonable, but to prevent cross-subsidization
between regulated and unregulated companies.\70\ The Commission agrees
that information concerning the nature and extent of affiliate
transactions is important because these transactions are not conducted
at arms' length and could provide opportunities for inappropriate
cross-subsidization.
---------------------------------------------------------------------------

    \69\ NYPSC's Comments at 6.
    \70\ Id. at 6.
---------------------------------------------------------------------------

    44. To ensure that forms users have access to more detailed
information regarding affiliate transactions, the Commission proposes
several revisions. First, the Commission proposes to add a new
Schedule, page 358, ``Transactions with Associated (Affiliated)
Companies'' that would require filers to report associated (affiliated)
transactions, which include administrative and general costs billed
from the parent. The Commission believes this proposed new schedule
would provide the transparency necessary to improve the detection of
cross-subsidization. Second, on page 358, we propose to add the
requirement that filers report the following: (1) A description of the
good or service transacted; (2) the name of the Associated (Affiliated)
Company; (3) the FERC account charged or credited; and (4) the amount
charged or credited. We propose that where amounts billed to or from
affiliates are based on an allocation process, filers be required to
explain the basis of the allocation in a footnote. This would be a new
schedule for both Forms 2 and 2-A. Finally, we propose to amend the
instructions for page 357, Charges for Outside Professional and Other
Consultative Services, to exclude

associated (affiliated) transactions, and remove the $250,000 threshold
for reporting services. This schedule is already in existence in Form
2, but will be a new addition to Form 2-A.
b. Incremental Pricing Policy
    45. Construction of the interstate natural gas pipeline system
began in earnest in the 1940's. As consumption increased, pipelines
expanded their facilities to meet the growing demand. The majority of
these early expansions involved adding facilities that were integrated
into the pipeline's mainline system and provided benefits to all
customers using the system. For this reason, the cost of those
facilities was considered to be a part of the pipeline's cost of
serving all customers. This ``rolled-in'' approach remained the
predominant rate methodology for new additions to existing pipeline
systems through the early 1990s. Under a predominantly rolled-in rate
regime, financial information reported in Forms 2 and 2-A on an
aggregate company-wide basis was sufficient for Commission oversight of
pipeline rates. The Commission's pricing policy for pipeline capacity
expansions has evolved, due in part to changes in the industry brought
about by Order No. 636, and its predecessor, Order No. 436.\71\ Current
Commission policy requires that a pipeline be prepared to financially
support expansion projects without relying on subsidization from
existing customers.\72\
---------------------------------------------------------------------------

    \71\ Regulation of Natural Gas Pipelines After Partial Wellhead
Decontrol, Order No. 436, FERC Stats. & Regs. ] 30,665 (1985),
vacated and remanded, Associated Gas Distributors v. FERC, 824 F.2d
981 (D.C. Cir. 1987), cert. denied, 485 U.S. 1006 (1998), readopted
on an interim basis, Order No. 500, FERC Stats. & Regs. ] 30,761
(1987), remanded, American Gas Ass'n v. FERC, 888 F.2d 136 (D.C.
Cir. 1989), readopted on an interim basis, Order No. 500-H, FERC
Stats. & Regs. ]30,867 (1989), aff'd in part and remanded in part,
American Gas Ass'n v. FERC, 912 F.2d 1496 (D.C. Cir. 1990), cert.
denied, 498 U.S. 1084 (1991).
    \72\ See Certification of New Interstate Natural Gas Pipeline
Facilities, Statement of Policy, 88 FERC ] 61,227 (1999), order
clarifying policy, 90 FERC ]61,128 (2000), order clarifying policy,
92 FERC ] 61,094 (2000) (Certificate Policy Statement).
---------------------------------------------------------------------------

    46. In concert with this changing pricing policy, the Commission
has granted an increasing number of companies incremental and other
rate treatments for facility expansions.\73\ Under these more recent
pricing methods, new and existing customers pay different rates based
on the cost of the different facilities that provide service to them.
In the individual cases where incremental rates have been approved, the
Commission has required the pipelines to maintain their accounting
records so as to be able to readily identify the facilities and related
costs used to provide service to the customers that pay the incremental
rates.\74\ Until now, the Commission has not required the
disaggregation of costs and revenues associated with incremental rate
treatment in Forms 2 and 2-A. The Industry Coalition believes that a
proper assessment of rates requires that these facilities be considered
separately.\75\ Without this information, they claim that pipeline
customers cannot evaluate the reasonableness of different rates that
are determined from distinct and separate facilities.\76\
---------------------------------------------------------------------------

    \73\ See, e.g., Questar Pipeline Co., 93 FERC ] 61,279 (2000);
Independence Pipeline, et. al., 89 FERC ] 61,283 (1999); and
Transcontinental Gas Pipeline Corp., 76 FERC ] 61,318 (1996).
    \74\ See 18 CFR 154.309.
    \75\ Industry Coalition Comments at 6.
    \76\ Id.
---------------------------------------------------------------------------

    47. The Commission agrees with the Industry Coalition, and proposes
to add a new schedule to Forms 2 and 2-A which would provide
information regarding a company's individual rate treatments for
services. The proposed new schedule at page 217, entitled ``Non-
Traditional Rate Treatment Afforded New Projects,'' would report: (1)
The name of the facility; (2) docket number under which the facility
was approved; (3) the type of rate treatment (e.g., incremental or
another rate treatment); (4) the amount of plant in service; (5) the
amount of accumulated depreciation; (6) amount of accumulated deferred
income taxes; (7) amount of operating expenses; (8) the amount of
maintenance expenses; (9) the amount of depreciation expense; (10)
incremental revenues; and (11) other expenses. Because the Commission
already requires the companies to separately account for each rate
treatment, the Commission believes the burden for the company to
identify each facility and the associated costs would be minimal.
c. Discounted Rate Services and Negotiated Rate Services
    48. At present, certain pages in Form 2 require filers to report
the dollar amounts and volumes associated with each type of
transportation service provided. These are pages 300-301, Gas Operating
Revenue; pages 302-303, Revenues from Gas Transportation of Others
Through Gathering Facilities; pages 304-305, Revenues from Gas
Transportation of Others Through Transmission Facilities; 306-307,
Revenues from Storing Gas of Others; and page 308, Other Gas Revenues,
which require filers to report the dollar amounts and volumes
associated with each type of transportation service provided. Form 2
does not, however, require filers to identify the volumes and revenues
applicable to discounted, negotiated, or recourse rates. Both the
Industry Coalition and the KCC believe that this information is
invaluable to shippers because it would allow for the proper assessment
and analysis of adequacy of rates.\77\
---------------------------------------------------------------------------

    \77\ Industry Coalition comments at 6; see also KCC Comments at
7.
---------------------------------------------------------------------------

    49. The Commission permits pipelines to negotiate individualized
rates\78\ which, unlike discounted rates,\79\ are not constrained by
the maximum and minimum rates in the pipeline's tariff.\80\ However,
pipelines must permit shippers the option of paying the traditional
cost-of-service recourse rates in their tariffs, instead of requiring
them to negotiate rates for any particular service.\81\ The Commission
relies on the availability of recourse rates to prevent pipelines from
exercising market power by assuring that the customer can revert to the
just and reasonable tariff rate if the pipeline unilaterally demands
excessive prices or withholds service.\82\ At present, individual
pipelines may provide services from the same facilities using different
rates--negotiated, discounted, or recourse rates. In these
circumstances, the Commission agrees with the Industry Coalition and
the KCC that it is important for the customer and the Commission to
know the level of services provided under each rate structure in order
to protect against cross-subsidization and to ensure that the rate for
recourse service remains just and reasonable. Therefore, we propose to
add a new schedule, page 313, Discounted Services and Negotiated
Services, which would require pipeline filers to report the revenues
and volumes applicable to discount and negotiated rate services
provided during the period.
---------------------------------------------------------------------------

    \78\ Alternatives to Traditional Cost of Service Ratemaking for
Natural Gas Pipelines, 74 FERC ] 61,076, reh'g denied, 75 FERC ]
61,024 (1996), petitions for review denied sub nom. Burlington
Resources Oil & Gas Co. v. FERC, 172 F.3d 918 (D.C. Cir. 1998)
(Alternative Rate Policy Statement); Natural Gas Pipelines
Negotiated Rate Policies and Practices; Modification of Negotiated
Rate Policy, 104 FERC ] 61,134 (2003), order on reh'g and
clarification, 114 FERC ] 61,042 (2006), dismissing reh'g and
denying clarification, 114 FERC ] 61,304 (2006).
    \79\ See 18 CFR 284.10(c)(5).
    \80\ See Northern Natural Gas Co., 105 FERC ] 61,299 (2003)
(clarifying the distinction between discounted and negotiated
rates).
    \81\ A recourse rate is a cost of service based rate for natural
gas pipeline service that is on file in a pipeline's tariff and
available to customers who do not negotiate a rate with the pipeline
company.
    \82\ Negotiated Rate Policy Statement at 61,238-42.

---------------------------------------------------------------------------

3. Rate Base and Other Key Cost-of-Service Components
a. Deferred Income Taxes
    50. The Industry Coalition and the KCC request that the Commission
require pipelines to identify the components of deferred taxes that are
included in the pipeline's rate base.\83\ Both suggest that the
information would provide Form 2 users with an essential element needed
to calculate the pipeline's current rates. At present, Form 2 filers
are required to report only a single line of data for the total
deferred income tax balances related to gas operations on the schedules
titled Accumulated Deferred Income Taxes (Account 190) pages 234-235,
Accumulated Deferred Income Taxes--Other Property (Account 282) pages
274-275, and Accumulated Deferred Income Taxes--Other (Account 283)
pages 276-277. Although Form 2 filers also must identify and report on
these pages the deferred income taxes related to other income and
deductions as well as classification of the total deferred income tax
amounts between federal, state and local income tax, this information
does not provide any significant insight into the source of the
deferred income taxes related to gas operations. Form 2-A filers report
even less information concerning their deferred income tax amounts.
Form 2-A filers report only the total amount of deferred income taxes
(by applicable deferred income tax account) on their balance sheet and
income statement. Unlike Form 2, no additional supporting information
for these amounts is presently required in Form 2-A.
---------------------------------------------------------------------------

    \83\ Industry Coalition Comments at 4; KCC Comments at 7.
---------------------------------------------------------------------------

    51. The Commission agrees that deferred income tax balances are an
important factor in determining rate base and evaluating a pipeline's
earned rate of return. Customers need to know the amount of deferred
tax balances related to gas operations that would be included in the
pipeline's cost of service in order to assess the reasonableness of the
rates currently paid. At present, the level of detail required for
deferred income taxes related to gas operations in both Forms 2 and 2-A
does not provide this information.\84\ Accordingly, the Commission is
proposing to add an instruction to each of the deferred income tax
schedules noted above to require pipelines to provide, in a footnote to
those schedules, a summary of the type and amount of deferred income
taxes reported in the beginning-of-year and end-of-year balances for
deferred income taxes used to develop jurisdictional recourse rates.
These revisions meet the concerns of the Industry Coalition that users
be provided additional information to enable them to calculate the
pipeline's rate base and evaluate the pipeline's current rates.
---------------------------------------------------------------------------

    \84\ In contrast to the single line reported in Form 2, the
deferred income balances are comprised of numerous book and income
tax timing differences, many of which are not used in formulating
jurisdictional rates. See, e.g., Transcontinental Gas Pipe Line
Corporation's general section 4 rate filing in Docket No. RP06-569-
000, Schedule B-1, pages 1-16 (reflecting approximately 120 timing
differences generating deferred income taxes, with only
approximately 15 used in the rate base calculation).
---------------------------------------------------------------------------

    52. The Commission also proposes to add those deferred tax
reporting schedules to Form 2-A so that all pipeline customers, not
just those of larger pipelines, would have this key piece of
information which the Commission believes is essential to an assessment
of the reasonableness of the rates for pipeline service. Also, we
propose a technical correction to each of the deferred income tax
reporting schedules to delete one of the lines for reporting ``other''
deferred income taxes. This will eliminate the confusion caused by
providing two lines for reporting this information.
b. State Income Tax Expense
    53. The KCC and MoPSC ask that filers be required to provide the
pipeline's current effective overall state income tax rate.\85\ Both
argue that the information now provided in Forms 2 and 2-A is
inadequate. Currently, in Form 2, the amount of state income tax paid
or payable for the current year is reported by state on the schedule
titled Taxes Accrued, Prepaid and Charged During Year, Distribution of
Taxes Charged, pages 262-3. The aggregate state deferred income tax for
the entire reporting entity is reported in Form 2 schedules for
accumulated deferred income taxes, as noted above. However, this
information does not readily permit the Commission or the pipeline's
customers to determine the amount of state income tax expense (both
current and deferred) that should be associated with the before-tax net
income generated from the sales of transportation services under more
than one rate structure (e.g., where the pipeline provides
transportation services for some customers on a rolled-in basis and
others on an incremental basis). Since state income taxes are a valid
component of the cost of providing service, the Commission and the
pipeline's customers must be able to determine the amount of state
income tax expense applicable to each of these rate structures in order
to evaluate the reasonableness of the return earned from providing the
disparate services on an after-tax basis. For that purpose, we propose
to add a column Q to the Taxes Accrued, Prepaid and Charged During
Year, Distribution of Taxes Charged schedule on pages 262-3 of Form 2
and to add the same schedule to Form 2-A to require pipelines to report
state and local income tax rates.
---------------------------------------------------------------------------

    \85\ KCC Comments at 7; MoPSC Comments at 4.
---------------------------------------------------------------------------

c. Regulatory Assets and Liabilities
    54. The KCC requests that pipelines identify regulatory asset and
liability balances included in rate base.\86\ Currently, Forms 2 and 2-
A filers are required to report a break-out of regulatory assets and
liabilities on page 232, Other Regulatory Assets, and page 278, Other
Regulatory Liabilities. Commission regulations require companies to
establish regulatory assets and liabilities where future recovery from
rate payers or refund to rate payers is probable. However, during a
rate case the validity of any regulatory asset or regulatory liability
can be challenged. In order to enable Form 2 and 2-A users to determine
which regulatory assets are recovered and which regulatory liabilities
are refunded, the Commission proposes to revise the regulatory asset
schedule by adding footnote citations for each regulatory asset to
identify the regulatory approval to record the item and adding a column
to identify amounts written off during the period as non-recoverable.
In addition, we propose to revise the regulatory liability schedule by
adding footnote citations for each regulatory liability to identify the
regulatory approval to refund the item and adding a column to identify
amounts written off during the period as non-refundable.
---------------------------------------------------------------------------

    \86\ KCC Comments at 7.
---------------------------------------------------------------------------

d. Distribution of Salaries and Wages
    55. The Distribution of Salaries and Wages schedule of Form 2,
pages 354-355, requires natural gas companies to report the
distribution of total salaries and wages for the year, segregated
according to particular operating functions of the company. The
schedule allows users of the forms to review and analyze the payroll
distribution of the company. However, the schedule does not provide for
the recording of payroll costs billed to the company by affiliated
companies. Both the KCC and the Industry Coalition request that the
Commission require pipeline companies to provide more information on
pipeline

overhead and shared service costs.\87\ Based on our experience in
section 4 rate cases, natural gas company affiliates have become a
larger cost of operations for many natural gas companies as these
affiliated companies are increasingly providing the workforce for the
natural gas company's operations. The salary and wage expenses that
affiliated companies charge to the natural gas companies are not
currently reported in the Distribution of Salaries and Wages schedule
by all filers of Form 2. As a consequence, an important tool used for
evaluating the reasonableness of the level of salaries and wages
charged to pipeline operations, and thus included in the cost of
service, is compromised.
---------------------------------------------------------------------------

    \87\ Industry Coalition Comments at 6; KCC Comments at 7.
---------------------------------------------------------------------------

    56. To enhance the usability of the Distribution of Salaries and
Wages schedule, the Commission proposes to add an instruction and a new
column that would require all filers of Form 2 to report salaries and
wages billed by affiliates or affiliated service companies separately
from other salary and wage distributions. The new column to pages 354-
355 would be titled ``Payroll Billed by Affiliated Companies.''
Requiring natural gas companies to file this payroll distribution
information would allow the forms user to determine the level of
salaries and wages included in the natural gas company's operations and
maintenance expenses, make valid comparisons of the amounts between
entities and periods, and better assess the reasonableness of the
levels for cost of service purposes.
e. Employee Pensions and Benefits
    57. NYPSC requests that pipelines be required to report information
concerning pension and other post-employment benefits.\88\ NYPSC states
that presently, Form 2 does not require any reporting related to these
expenses, and believes that these expense components are material to a
rate assessment.\89\ Presently, the USofA requires pipelines to record
the cost of pension and other employee benefits in Account 926,
Employee Pensions and Benefits. Instruction 3 to page 122.1, Notes to
Financial Statements, requires filers to furnish details on their
pension plans, post-retirement benefits other than pensions (PBOPS),
and post-employment benefit plans, including the current year's cash
contribution to each plan. Despite these accounting and disclosure
requirements, information about the costs of the various employee
benefit plans charged to expense each period is not readily available
in Forms 2 and 2-A. This is due to the complexity of the disclosure
requirements for defined PBOP's, the participation by pipelines in
multi-employer benefits plans in which they are assigned a portion of
the cost of the total plan, and the flexibility in how information is
displayed and described in a footnote disclosure.
---------------------------------------------------------------------------

    \88\ NYPSC Comments at 7.
    \89\ Id.
---------------------------------------------------------------------------

    58. We agree that it is important that forms users be able to
identify the types and costs of employee benefits. Therefore, we
propose to amend Instruction 3 to page 122.1 to require filers that
participate in multi-employer post-retirement benefit plans to disclose
the amount of cost recognized in the filer's financial statements for
each plan for the period presented and the basis for determining the
filer's share of the total plan costs. In addition, we are proposing to
add a schedule entitled Employee Pensions and Benefits, page 352, to
both Forms 2 and 2-A, to provide additional details about the types and
costs of benefits provided to employees. The Commission believes that
requiring pipelines to provide this level of detail would permit forms
users to assess the cost of employee benefits and better compare this
information between periods and entities.
f. Asset Retirement Obligation (ARO)
    59. The Commission amended its regulations in Order No. 631 to
update the accounting and financial reporting requirements for asset
retirement obligations (ARO) under its USofA for public utilities and
licensees, natural gas and oil pipeline companies.\90\ An asset
retirement obligation is a liability resulting from a legal obligation
to retire or decommission a plant asset. Recently, some pipelines have
sought to recover ARO costs in their overall cost of service.\91\ As a
result of this increasing trend, the Commission believes that it has
become increasingly important to make the accounting for AROs more
transparent to the users of the financial statements as the statements
currently do not provide the level of detail required to perform a
thorough analysis of a company's asset retirement obligations.
---------------------------------------------------------------------------

    \90\ Accounting, Financial Reporting, and Rate Filing
Requirements for Asset Retirement Obligations, Order No. 631, 68 FR
19610 (April 21, 2003), FERC Stats. & Regs. ] 31,142, order on
reh'g, Order No. 631-A, 104 FERC ] 61,183 (2003).
    \91\ See, e.g., Transcontinental Pipe Line Corporation, 116 FERC
] 61,314 (2006); Dominion Cove Point LNG, LP, 116 FERC ] 61,110
(2006).
---------------------------------------------------------------------------

    60. The Commission is proposing to add a new instruction to the
Notes to the Financial Statements schedule, page 122.1. The new
instruction would require natural gas companies to disclose: (1)
Details on the initial accounting for asset retirement obligations; (2)
any subsequent changes in the measurement or method of accounting for
the obligations; and (3) the final accounting for the settlement of the
obligations, including recognition of any gains or losses on the
settlement. In addition, it would require identification of ARO costs
that are recovered through rates and placed into funding mechanisms or
deposit accounts, (e.g., trust funds, insurance policies, surety
bonds).
    61. Account No. 824 of the USofA requires pipelines to maintain
records of costs incurred in operating underground storage plant and
other underground storage expenses, not includable in other accounts,
including research and development expenses. Account No. 859 requires
that pipelines maintain records of the costs of labor, material used
and expenses incurred in operating transmission system equipment and
transmission system expenses not includable in other accounts,
including research and development expenses. This information is
currently not provided in Form 2. We invite comments on whether
research and development expenditures included in Account Nos. 824 and
859 should be reported in Form 2.

D. Proposed Elimination of Form 11

    62. Williston Basin suggested that Form 11, Natural Gas Pipeline
Company Quarterly Statement of Monthly Data be eliminated and that the
information required by Form 11 be reported in Form 3-Q.\92\ Form 11 is
a quarterly filing made by natural gas companies whose gas transported
or stored for a fee exceeded 50 million Dth in each of the three
previous years.\93\ The form collects information concerning selected
revenues and associated quantities for each month by applicable rate
schedule. The data is submitted electronically on a quarterly basis.
The Commission requests that Form 11 users advise whether the
information reported in the form is relied upon by pipeline shippers,
and, specifically, how the data is used. In addition, both filers and
users of Form 11 are asked to respond whether the information reported
in Form 11 could, alternatively, be incorporated into Form 3-Q.
---------------------------------------------------------------------------

    \92\ Williston Basin Comments at 7.
    \93\ See 18 CFR 260.3.
---------------------------------------------------------------------------

E. Proposed Adjustments to the CPA Certification Statement

    63. Each natural gas company not classified as Class C or D prior
to

January 1, 1984, is required to file with the Commission a letter or
report of an independent accountant certifying approval, together with
the filing of the applicable Form 2 or 2-A.\94\ The Commission's
regulations require that an independent certified public accountant
test for compliance in all material respects with the USofA and
published accounting releases for those schedules listed in the General
Instructions of the applicable Form 2 or 2-A.\95\ Natural gas companies
that file a Form 2 or 2-A are required to file the Certified Public
Accountant's (CPA) Certification Statement on April 18 of the following
calendar year.
---------------------------------------------------------------------------

    \94\ See 18 CFR 158.11. The C and D classifications refer to
pipelines now defined as Nonmajor. See 18 CFR part 201 General
Instructions.
    \95\ See 18 CFR 158.10.
---------------------------------------------------------------------------

    64. The Commission proposes to extend the filing date for the CPA
Certification Statement until May 18 of the following calendar year for
natural gas companies. This proposal would reduce the filing and
administrative burden by allowing more time for the company and the
certified public accountant to identify and resolve issues that may
arise during the course of the examination.

F. Miscellaneous Issues

    65. The NOPR posed two questions that are not directly related to
the forms. The first is whether interstate pipelines should be required
to notify the Commission when their total sales or transactions fall
below the minimum thresholds established in the Commission's
regulations such that the pipeline believes that it is no longer
subject to the filing requirements.\96\ The KCC and MoPSC responded
that the Commission should require such notification.\97\ MoPSC
observes that this requirement would allow the Commission and the
public to determine if a report is late or no longer required.\98\
INGAA and Williston Basin stated that they did not object to this
requirement. The Commission agrees that notification of non-filing
status would be helpful to the Commission and users of Forms 2 and 2-A.
Accordingly, at such time as a pipeline now subject to the reporting
requirements in either Form 2 or 2-A has, in three consecutive years,
experienced volumes and transactions below the threshold levels
specified in the Commission's regulations and believes that they are no
longer required to file a Form 2 or 2-A, must notify the Commission of
this change. The pipeline must file the notification on the date that
the form would otherwise be due.
---------------------------------------------------------------------------

    \96\ See 18 CFR 260.1 and 260.2.
    \97\ KCC Comments at 8; MoPSC Comments at 10.
    \98\ MoPSC Comments at 10.
---------------------------------------------------------------------------

    66. The Commission also asked commenters whether the Commission
should require a showing of good cause before granting an extension of
time in which to file the required reports. Both MoPSC and the KCC
support such a requirement.\99\ The Commission agrees that any request
for an extension of time in which to comply with Commission regulations
or a Commission order must show good cause. Without such a showing, the
request may not be granted. The Commission staff is monitoring filers'
timely compliance with the reporting requirements and will continue to
do so.
---------------------------------------------------------------------------

    \99\ Id. See KCC Comments at 8.
---------------------------------------------------------------------------

IV. Information Collection Statement

    67. The following collections of information contained in this
proposed rule have been submitted to the Office of Management and
Budget for review under Section 3507(d) of the Paperwork Reduction Act
of 1995.\100\ The Commission solicits comments on the Commission's need
for this information, whether the information will have practical
utility, the accuracy of the burden estimates, ways to enhance the
quality, utility and clarity of the information to be collected or
retained, and any suggested methods for minimizing respondents' burden,
including the use of automated information techniques.
---------------------------------------------------------------------------

    \100\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    Estimated Annual Burden:
    The Commission estimates that on average it will take respondents
from fifty-nine to one hundred and fifty-six hours to comply with the
proposed requirements. Most of the additional information required to
be reported is already compiled and maintained by the pipelines, and
will not substantially increase the existing reporting burden. This
will result in total hours for the following collections of
information:

----------------------------------------------------------------------------------------------------------------
                                                     Change in the
     Data collection form           Number of       number of hours  Filing periods   Change in the total annual
                                   respondents      per respondent                              hours
(a)                             (b)..............  (c).............             (d)  (e)=(b)x(c)x(d)
----------------------------------------------------------------------------------------------------------------
FERC Form 2...................  74...............  50..............               1  3700
FERC Form 2-A.................  44...............  135.............               1  5940
FERC Form 3-Q.................  118 (74m,44nm)...  7...............               3  2478 (1554m,924nm)
FERC Form 11..................  74...............  -3..............               4  (-888)
Relevant Totals...............  .................  59m,156nm.......  ..............  11,230 (4366m,6864nm)
----------------------------------------------------------------------------------------------------------------
nm=nonmajor company.
m=major company.

    Information Collection Costs: The Commission seeks comments on the
costs to comply with these requirements. As most of the required data
is already maintained by the pipelines, the Commission estimates that
the collection costs will not be overly burdensome.
    Title: FERC Form No. 2, ``Annual Report of Major Natural Gas
Companies''; FERC Form No. 2-A, ``Annual report for Nonmajor public
utilities and licensees''; FERC Form No. 3-Q, ``Quarterly financial
report of electric utilities, licensees, and natural gas companies.''
    Action: Proposed information collection.
    OMB Control Nos. 1902-0028 (Form 2); 1902-0030 (Form 2-A); 1902-
0205 (Form 3-Q), and 1902-0032 (Form 11).
    Respondents: Businesses or other for profit.
    Frequency of responses: Annually and quarterly.
    Necessity of the information: The information maintained and
collected under the requirements of Part 141 is essential to the
Commission's oversight duties. The data now reported in the forms does
not provide sufficient information to the Commission and the public to
permit an evaluation of the filers' jurisdictional rates. Since the
triennial restatement of rates

requirement was abolished and pipelines are no longer required to
submit this information, the need for current and relevant data is
greater than in the past. The information collection proposed in the
NOPR will increase the forms' usefulness to both the public and the
Commission. Without this information, it is difficult for the
Commission and the public to perform an assessment of pipeline costs,
and thereby help to ensure that rates are just and reasonable.
    Internal Review: The Commission has reviewed the proposed changes
and has determined that the changes are necessary. These requirements
conform to the Commission's need for efficient information collection,
communication, and management within the energy industry. The
Commission has assured itself, by means of internal review, that there
is specific, objective support associated with the information
requirements.
    68. Interested persons may obtain information on the reporting
requirements by contacting: Federal Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426 [Attention: Michael Miller,
Office of the Chief Information Officer, phone<PHONE_NUMBER>, fax:
(202) 273-0873, e-mail<EMAIL_ADDRESS>
V. Environmental Analysis

    69. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\101\ No
environmental consideration is necessary for the promulgation of a rule
that addresses information gathering, analysis, and dissemination,\102\
and, also, addresses accounting.\103\ No environmental consideration is
raised by the promulgation of a rule that is procedural or does not
substantially change the effect if legislation or regulations being
amended, and therefore, fall under these exclusions.\104\ These
proposed rules, if finalized, involve information gathering, analysis,
and dissemination. Consequently, neither an Environmental Impact
Statement nor an Environmental Assessment is required.
---------------------------------------------------------------------------

    \101\ See Regulations Implementing the National Environmental
Policy Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987) FERC Stats. &
Regs. ]30,783 (1987).
    \102\ See 18 CFR 380.4(a)(5).
    \103\ See 18 CFR 380.4(a)(16).
    \104\ See 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    70. The Regulatory Flexibility Act of 1980 (RFA)\105\ requires
rulemakings to contain either a description and analysis that the rule
will have on small entities or a certification that the rule will not
have a significant economic impact on a substantial number of small
entities.\106\ Under the industry standards used for purposes of the
RFA, a natural gas company qualifies as a ``small entity'' if it has
annual revenues of $6.5 million or less. Most companies regulated by
the Commission do not fall within the RFA's definition of a small
entity.\107\ Thus, most interstate natural gas companies to which the
rules proposed herein, if finalized, would not fall within the RFA's
definition of small entities. Consequently, the rules proposed herein,
if finalized, will not have a significant economic effect on a
substantial number of small entities.
---------------------------------------------------------------------------

    \105\ 5 U.S.C. 601-612.
    \106\ Id.
    \107\ 5 U.S.C. 601(3).
---------------------------------------------------------------------------

VII. Comment Procedures

    71. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due on or before November 13, 2007. Comments
must refer to Docket No. RM07-9-000 , and must include the commenter's
name, the organization he or she represents, if applicable, and his or
her address.
    72. The Commission encourages comments to be filed electronically
via the eFiling link on the Commission's Web site at http://www.ferc.gov.
 The Commission accepts most standard word processing

formats, and commenters may attach additional files with supporting
information in certain other file formats. Commenters filing
electronically do not need to make a paper filing.
    73. Commenters who are not able to file comments electronically
must send an original and 14 copies of their comments to: Federal
Energy Regulatory Commission, Office of the Secretary, 888 First
Street, NE., Washington, DC, 20426.
    74. All comments will be placed in the Commission's public files
and may be viewed, printed, or downloaded remotely as described in the
Document Availability section below. Commenters on this notice of
proposed rulemaking are not required to serve copies of their comments
on other commenters.

VIII. Document Availability

    75. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's home page (http://www.ferc.gov) and

in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington DC 20426.
    76. From the Commission's home page on the Internet, this
information is available in the Commission's document management
system, eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
    77. User assistance is available for eLibrary and the Commission's
Web site during normal business hours. For assistance, please contact
FERC Online Support at 1-866-208-3676 (toll free) or<PHONE_NUMBER> or e-
mail at<EMAIL_ADDRESS>or the Public Reference Room at
(202) 502-8371, TTY<PHONE_NUMBER>. E-mail at
<EMAIL_ADDRESS>

List of Subjects

18 CFR Part 158

    Natural gas, Reporting requirements.

18 CFR Part 260

    Natural gas, Reporting requirements.

    By direction of the Commission.

    Commissioner Wellinghoff concurring with a separate statement
attached.
Kimberly D. Bose,
Secretary.

    In consideration of the foregoing, the Commission proposes to amend
parts 158 and 260 of Title 18 of the Code of Federal Regulations, as
set forth below:

PART 158--ACCOUNTS, RECORDS, MEMORANDA AND DISPOSITION OF CONTESTED
AUDIT FINDINGS AND PROPOSED REMEDIES

    1. The authority citation for part 158 continues to read as
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7102-7352.

    2. Section 158.11 is revised to read as follows:

Sec.  158.11  Report of certification.

    Each natural gas company not classified as Class C or Class D prior
to January 1, 1984 shall file with the

Commission by May 18 of the following calendar year, a letter or report
of the independent accountant certifying approval, covering the
subjects and in the format prescribed in the General Instructions of
the applicable Form No. 2 or Form No. 2-A. The letter or report shall
also set forth which, if any, of the examined schedules do not conform
to the Commission's requirements and shall describe the discrepancies
that exist. The Commission shall not be bound by the certification of
compliance made by an independent accountant pursuant to this
paragraph.

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

    1. The authority citation for part 260 continues to read as
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

Sec.  260.3  [Removed]

    2. Section 260.3 is removed.

WELLINGHOFF, Commissioner, concurring:

    The adequacy of data reported in Forms 2, 2-A and 3-Q has been
questioned for years. Based on the comments received in response to
the NOI in this proceeding, the need to update and supplement these
forms is clear. Today, we propose modifications that should correct
many deficiencies in these forms.
    We have endeavored to make the changes necessary to provide the
data needed by the Commission to carry out our responsibility, and
for the form users to effectively exercise their rights, under NGA
Section 5. Most of the information requested is data that is
maintained by the pipeline and can readily be transferred to
existing and new schedules. Conversely, I do not believe that we
have blurred the distinction between NGA sections 4 and 5, a concern
expressed by some commenters. I urge parties in their comments to
focus on whether our proposed modifications have struck the proper
balance.
    I also have a specific request for comment. As noted, these
forms are the vehicles the Commission uses to obtain financial and
certain operational information from pipelines. The forms provide
information concerning a pipeline's past performance and its future
prospects. For example, a pipeline is currently required to provide
a statement and system map identifying and detailing all important
changes in the facilities it operates.\108\ I propose that pipelines
submit an Energy Efficiency Statement as well. I believe advancement
of energy efficient infrastructure is critical to help address the
energy crisis our country faces. The Energy Efficiency Statement
would describe how the pipeline has incorporated efficiency in the
facility changes it reports. Such transparency will be useful in
encouraging energy efficiency improvements by pipelines and more
broadly disseminating the best practices throughout the industry.
---------------------------------------------------------------------------

    \108\ General Corporate Information and Financial Statements,
Important Changes during the Year and Gas Plant Statistical Data,
System Map.
---------------------------------------------------------------------------

    For this reason, I respectfully concur.

Jon Wellinghoff,

Commissioner.
 [FR Doc. E7-19015 Filed 9-26-07; 8:45 am]

BILLING CODE 6717-01-P