Sec. 11 AAC 25.180 - Transportation contracts not at arm's length - Alaska mainline and Canada mainline

ยง 11 AAC 25.180. Transportation contracts not at arm's length - Alaska mainline and Canada mainline

(a) If a lessee, its marketing affiliate, or any affiliate other than a transportation affiliate transports qualified gas on the Alaska mainline or Canada mainline and that pipeline is a transportation affiliate, the cost of transportation must be the allowable actual and reasonable cost, as determined under (b) - (m) of this section, 11 AAC 25.160, and 11 AAC 25.210, of transportation provided by the pipeline that is the transportation affiliate. However, if the circumstances described in (n) of this section occur, the amount determined under that subsection must be used as the cost of transportation.

(b) If calculating allowable actual and reasonable cost in accordance with (b) - (m) of this section, the lessee, without regard to whether a pipeline is subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC), and except as provided in (c) - (m) of this section, shall calculate that cost in accordance with the FERC Cost-of-Service Rates Manual, dated June 1999, the FERC Order Issuing Clarification and Granting Rehearing in Southern Natural Gas Co., 130 FERC Para. 61,193 (Docket nos. CP09-36-002, CP09-40-001, and AD10-3-000, March 18, 2010), and the FERC Order Granting Rehearing in Florida Gas Transmission Co., 130 FERC Para. 61,194 (Docket nos. CP09-17-001, AC08-161-002, and AD10-3-000, March 18, 2010). The FERC documents listed in this subsection are adopted by reference for purposes of this section, except as provided in (c) - (m) of this section.

(c) The cost of transportation under (b) - (m) of this section is determined by first identifying the term of years and profile for capital recovery in the transportation services agreement under which qualified gas is shipped. If those terms match the terms offered in the plan for conducting an open season for the Alaska mainline, the negotiated rate generated by those terms under the plan for conducting an open season for the Alaska mainline, as modified under (b) and (d) - (m) of this section, is the cost of transportation used to calculate the transportation allowance, unless the negotiated rate generated under the plan for conducting an open season for the Alaska mainline, as modified under (b) and (d) - (m) of this section, is greater than the amount determined under (n) of this section, in which case the amount determined under (n) of this section is the cost of transportation.

(d) If the transportation services agreement under which the qualified gas is shipped does not set out a profile for capital recovery, or sets out a term of years and profile for capital recovery other than one offered in the plan for conducting an open season for the Alaska mainline, depreciation must be calculated to recover capital investment over the economic life of the pipeline, and must be calculated using annual composite depreciation percentages that result in levelized rates over the life of the transportation services agreement and that recover that part of total capital investment that is the greater of 4/5 or the percentage that equals the ratio of the original term of years in the transportation services agreement to the economic life of the pipeline. In this calculation, the economic life must be the estimated useful life used to calculate the initial recourse rate for the pipeline.

(e) In the absence of long-term debt actually issued for the Alaska mainline or Canada mainline, as applicable, a lessee shall compute the return on the part of the capital investment treated as financed with long-term debt using the weighted average of the cost of long-term debt for the proxy group designated by the department under 11 AAC 25.190(j). After the commencement of commercial operations of the Alaska mainline or Canada mainline, as applicable, at least 75 percent of the capital investment must be treated as financed with long-term debt, unless the applicable transportation services agreement provides for a higher percentage debt, in which case the higher percentage must be used.

(f) Capital investment must be the properly allocable part of the lower of capital investment

(1) that would be properly reportable on FERC Form 2 if the pipeline were subject to FERC jurisdiction;

(2) that is prudently incurred, as determined by the regulatory agency with jurisdiction over the pipeline; or

(3) allowed under the applicable transportation services agreement.

(g) A change in ownership of an asset does not alter the original cost valuation of capital investment.

(h) An allowance for funds used during construction (AFUDC) must be calculated consistent with the FERC Cost-of-Service Rates Manualadopted by reference in (b) of this section, except to the extent modified by this section. AFUDC begins to accrue no earlier than the time certificate pre-filing commences under 18 C.F.R. 157.21(e). AFUDC must be compounded annually, and not more frequently. For purposes of determining AFUDC, 70 percent of the capital investment must be treated as financed with long-term debt for the period before the commencement of commercial operations of the Alaska mainline or Canada mainline, as applicable, unless the applicable transportation services agreement provides for a higher percentage debt, in which case the higher percentage must be used.

(i) An allowance for the cost to dismantle and remove the pipeline and for restoration after removal of the pipeline may be taken only if specifically identified and approved by the regulatory agency with jurisdiction over the pipeline in an applicable tariff for the pipeline.

(j) Tax depreciation used to calculate accumulated deferred income taxes for the Alaska mainline is seven years for all depreciable property, consistent with 26 U.S.C. 168. Tax depreciation used to calculate accumulated deferred income taxes for the Canada mainline is the terms of years set out in the federal income tax laws of Canada for depreciation of pipeline property.

(k) Operating and maintenance expenses may not include ad valorem taxes or any other cost otherwise recoverable under (b) and (d) - (m) of this section. Operating and maintenance expenses must be the properly allocable part of the lower of operating and maintenance expenses

(1) that would be properly reportable on FERC Form 2 if the pipeline were subject to FERC jurisdiction;

(2) that are prudently incurred, as determined by the regulatory agency with jurisdiction over the pipeline; or

(3) allowed under the applicable transportation services agreement.

(l) Except for refunds and surcharges permitted by the regulatory agency with jurisdiction over the pipeline, an adjustment may not be made for recoveries in the prior period that exceed or are less than the transportation affiliate's allowable actual and reasonable cost as determined under (c) - (i) of this section.

(m) Per-unit transportation costs for transportation of qualified gas by a transportation affiliate must be based on a 100 percent load factor of certificated capacity even if the capacity is not used at a 100 percent load factor.

(n) If the cost of transportation calculated under (b) - (m) of this section is greater than the amount the lessee or its affiliate actually pays for transportation, the amount actually paid and not the cost of transportation calculated under (b) - (m) of this section shall be used by the lessee in calculating the monthly value of the state's royalty share of qualified gas.

(o) In this section, "plan for conducting an open season for the Alaska mainline" means the original plan as filed by TransCanada Alaska Company, LLC with FERC in Docket No. PF09-11-001 on January 29, 2010.

(Eff. 5/29/2010, Register 194)

Authority:AS 38.05.020

AS 38.05.180

AS 43.90.310

The following state regulations pages link to this page.