Office of the Ohio Consumers' Counsel

Historical Journal

Financial risk cannot be given to residents

National precedent was set by the Office of the Ohio Consumers' Counsel (OCC) in 1980 after it challenged and won its case against major natural gas pipeline companies and the Federal Energy Regulatory Commission (FERC) regarding the construction of a $900 million coal gasification plant in North Dakota.

The OCC was the only consumer advocate representing the interests of residential utility consumers, out of 90 parties in the case.

Five major natural gas pipeline companies, including Columbia Gas Transmission Corp., requested permission from the FERC to construct the plant, which was designed to convert coal into natural gas, creating the first such commercial plant.

The OCC intervened in the case at the FERC in August 1978 and based its arguments that the financial impacts that would be passed onto residential customers. The pipeline companies requested an "all events" tariff, which would require consumers to pay for the facility even if it never became operational, eliminating all risk for the companies and its shareholders. The synthetic gas was projected to triple, even quadruple the cost of traditionally produced natural gas.

In an initial ruling, the FERC administrative law judge agreed with the OCC that the proposed financing plan was inappropriate. The FERC commissioners, however, overturned the decision and approved construction. The OCC appealed the case to the U.S. Circuit Court of Appeals in Washington D.C.

The OCC reply brief stated that placing the burden of risks and costs on the consumer was unfair and went beyond the powers granted to the FERC. Another major issue in the case centered on the construction period surcharge. Customers would be required to pay for the construction of the plant through a surcharge that would be applied to their current natural gas rates rather than pay capital costs as part of their natural gas rates after the plant begins to produce synthetic gas.

The appellate court ruled unanimously in favor of the OCC saying the financial stipulations of the plant "were certainly not ordered with the interests of ratepayers foremost in mind…."

Next: Disconnection rules designed with insight of OCC