Liquefied natural gas rates are prices that natural gas companies charge for transportation or sale of liquefied natural gas (LNG). LNG is natural gas that is cooled to its liquid state for safer and easier transportation or storage. Rates for transporting liquefied natural gas (LNG) are regulated by the Federal Energy Regulatory Commission (FERC) to ensure fair pricing and safe and efficient trade practices.
The Natural Gas Act ("NGA"; 15 U.S.C. § 717) imposes requirements for those rates. NGA § 3(e)(4) states that FERC-approved projects “shall not result in subsidization of expansion capacity by existing customers, degradation of service to existing customers, or undue discrimination against existing customers as to their terms or conditions of service at the facility.” The critical element in reviewing rate design, particularly incremental rates, is to ensure that there is a proper assignment of costs and that the respective shippers pay for the service they receive and the project can proceed without subsidies from the pipeline’s existing customers.
The FERC can also decrease LNG rates if it finds a natural gas company is charging an unjust rate or conducts behavior resulting in an unjust rate according to 15 U.S.C. § 717d. The FERC can increase LNG rates in rare instances to accommodate a natural gas company’s new schedule. If the FERC does not have enough information to decrease an LNG rate, it has the authority to conduct an investigation to determine whether the natural gas company’s rate is justified.
For more information, see:
- Department of Energy (DOE): https://www.energy.gov/fecm/liquefied-natural-gas-lng
- The DOE explains LNG’s function and trade.
[Last updated in June of 2023 by the Wex Definitions Team]