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Verification of Trunkline Gas Company's Incremental Pricing Data

EMD-79-39 Published: Aug 27, 1979. Publicly Released: Aug 27, 1979.
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Highlights

Information submitted to the Federal Energy Regulatory Commission (FERC) in liquefied natural gas (LNG) proceedings by Trunkline LNG Co. was subjected to a verification examination by GAO. The question involved the requirement that high-cost natural gas be incrementally priced to certain users, except for LNG imported under projects certificated by FERC before May 1, 1978. This exception covered Trunkline, and, although GAO did not challenge FERC Opinion 796A, which required rolled-in, or averaged, pricing, it did conclude that the data supplied by Trunkline, upon which FERC relied in reaching its decision, was inadequate. FERC ordered Trunkline in June 1977 to sell imported LNG at rolled-in prices, modifying its earlier order stipulating incremental pricing. The change was the result of a determination that a supplemental gas supply project proposed by Trunkline was in the public interest and its economic viability shoud be ensured. For its part, Trunkline claimed inability to finance the project if selling prices had to be incremental, because few of its customers would buy at actual cost. FERC concluded that rolled-in pricing was a necessary ingredient of the project's financeability, which was consistent with its decisions in other cases.

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