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Faculty of Economics

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Littlechild, S.

The Process of Negotiating Settlements at FERC

CWPE1116

Abstract: Interstate gas pipelines and their customers presently settle about 90% of the rate cases set for hearing before the Federal Energy Regulatory Commission (FERC). In recent years, the median time for negotiating settlements and having them approved is about 11 months, compared to several years to complete litigated hearings. This paper explores how this is achieved. FERC has a tight schedule for the hearing process. In contrast to other jurisdictions, FERC Trial Staff play an active role in facilitating negotiation and settlement. They propose a first settlement offer 3 months after a pipeline files for a tariff rate increase. An analysis of the 9 cases over the last two years where full and uncontested settlement was reached shows that discussions led by Trial Staff led to agreement in principle in a median time of 2 ½ months after this first offer, just before testimony would otherwise need to have been filed. It took a further 2 ½ months for the parties to finalise the wording of the settlement and to obtain the judge’s certification that it was uncontested, and 3 months for FERC formally to approve it. FERC’s settlement process has worked successfully and essentially unchanged for over 35 years. It suggests a more active role for the regulatory body than was previously apparent.

Keywords: Regulation, negotiated settlement

JEL Codes: L51 L95

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1116.pdf

EPRG Paper Link: 1105

Open Access Link: https://doi.org/10.17863/CAM.988