High Cash Distributions of Master Limited Partnerships May Set Regulated Equity Return to Natural Gas Pipelines

July 27, 2007

In a July 19 proposed Policy Statement, the Federal Energy Regulatory Commission (FERC) floats the idea of substituting cash distributions that natural gas pipelines, organized as master limited partnerships (MLP), make to their partners for the corporate dividends that the agency uses in discounted cash flow (DCF) analyses to set regulated equity returns for natural gas pipeline companies.  The industry has long requested and anticipated this policy development since, increasingly, natural gas pipelines (like their oil pipeline cousins) have switched from traditional C-corporations to lower-taxed MLPs — from twice-taxed corporate dividends to once-taxed MLP cash distributions that tend to be higher.  If the Policy Statement is adopted, it may also affect equity returns of electric transmission systems, a number of which are considering switching from C-corporations to (MLP-comparable) real estate investment trusts (REIT).  To be considered, public comments on the proposed Policy Statement must be submitted within 30 days of publication in the Federal Register — sometime in late August.  A final Policy Statement is expected before year’s end. 

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posted Tuesday, July 24, 2007 11:51 AM by  Jennifer Rinker  

House Weighs Federal "Smart Grid" and Other Efficiency Enhancements 

Among energy initiatives that Congress is considering this summer, one would highlight smart grid technology on the national stage.  In hopes of not only making the U.S. grid more reliable and efficient, but also more secure and independent—often-used phrases in Congressional energy circles—the Energy and Commerce Committee approved one measure that would establish a federal Grid Modernization Commission to implement smart grid technologies. 

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posted Monday, July 23, 2007 10:30 AM by Andrea Kells