TC PipeLines, LP Provides Initial Response to FERC Orders
March 19 2018 - 7:00AM
News Release – TC PipeLines, LP (NYSE:TCP) (the Partnership) today
provided its preliminary assessment of the potential impacts of the
Federal Energy Regulatory Commission's (FERC) recent pronouncements
regarding interstate and intrastate natural gas pipeline rate
changes relating to federal income tax rates and its policy
revision with respect to the recovery of income tax amounts
included in the cost of service rates of certain natural gas
pipelines within a master limited partnership (MLP).
On March 15, 2018, FERC issued a Notice of Proposed Rulemaking
(NOPR) and revised policy statement to address the treatment of
income taxes for ratemaking purposes. There are two separate
avenues for these changes to be addressed: the first is a NOPR
which focuses on evaluating and addressing impacts to pipeline
tariffs in regards to income tax rate changes enacted through the
Tax Cuts and Jobs Act of 2017; and the second is the revision to
FERC’s long-standing income tax allowance policy to no longer
permit MLPs to recover an income tax allowance in their cost of
service rates. Industry comments on the NOPR will be due within 30
days. The Partnership plans to file comments through our trade
organizations and in tandem with our sponsor, TransCanada
Corporation. Once the public comment period is complete, we expect
FERC to issue final order(s) sometime later this summer or in early
fall. The Partnership is also evaluating the impact of FERC’s
revised MLP policy statement on the partially-owned pipeline assets
it holds and may seek clarification or reconsideration on the
treatment of such ownership interests. We will communicate
additional information to investors after we complete our
evaluation of the impacts and the final FERC order.
Given both the timing for FERC to issue a final order(s) and the
potential subsequent preparation of rate cases and/or settlements
with customers, the Partnership does not anticipate any material
financial impacts to its natural gas pipeline cost of service rates
to take effect in the near-term as a result of the revised FERC tax
policy. Notwithstanding the uncertainty around the timing for any
direct action to any one pipeline following the implementation of
the final order(s), we believe that any future impacts would only
take effect prospectively upon the completion or settlement of a
rate case, including those that may be initiated by the FERC or
customers. Under existing settlements, our pipelines have no
requirement for a rate case proceeding until 2022. In the event of
a rate case, all cost of service framework components would be
taken into consideration, which may act to offset a portion of any
impacts related to the new FERC policy.
We believe that the FERC’s actions will not substantively impact
negotiated or non-recourse rates. It is important to note that in
2017, about 45 percent of the Partnership’s revenues came from
non-recourse rate contracts. The remaining approximately 55 percent
of natural gas pipeline revenues were derived from cost of
service-based rates which would be subject to tax recovery
disallowance. We note that this percentage of negotiated or
non-recourse revenue is set to climb to over 50 percent as the
Partnership’s growth projects come on line between now and
2020.
Important details of implementing the new revised policy
statement require further clarification and the Partnership will
continue to assess the financial impacts as more information
becomes available.
About TC PipeLines, LP
TC PipeLines, LP is a Delaware master limited
partnership with interests in eight federally regulated U.S.
interstate natural gas pipelines which serve markets in the
Western, Midwestern and Northeastern United States. The Partnership
is managed by its general partner, TC PipeLines GP, Inc., a
subsidiary of TransCanada Corporation (NYSE:TRP). For more
information about TC PipeLines, LP, visit the Partnership’s website
at www.tcpipelineslp.com.
Forward-Looking Statements
Certain non-historical statements in this
release relating to future plans, projections, events or conditions
are intended to be “forward-looking statements”. These
statements are based on current expectations and, therefore,
subject to a variety of risks and uncertainties that could cause
actual results to differ materially from the projections,
anticipated results or other expectations expressed in this
release, including, without limitation to the final costs of
compliance with newly enacted regulations, the timing, terms and
closing of future acquisitions of additional natural gas pipeline
assets and the ability of these assets to generate ongoing value to
our unitholders, overall increase in the allocated management and
operational expenses on our pipeline systems as performed by
TransCanada, impact of potential impairment charges, decreases in
demand on our pipeline systems, increases in operating and
compliance costs, the outcome of rate proceedings, the impact of
recently issued and future accounting updates and other changes in
accounting policies, FERC’s final rules implementing the Tax Cuts
and Jobs Act enacted on December 22, 2017, our ability to identify
and complete expansion and growth opportunities, operating hazards
beyond our control, disruption in the debt and equity markets
that negatively impacts the Partnership’s ability to finance its
capital spending. These and other factors that could cause future
results to differ materially from those anticipated are discussed
in Item 1A in our Annual Report on Form 10-K for the year-ended
December 31, 2017 filed with the Securities and Exchange Commission
(the SEC), as updated and supplemented by subsequent filings with
the SEC. All forward-looking statements are made only as of the
date made and except as required by applicable law, we undertake no
obligation to update any forward-looking statements to reflect new
information, subsequent events or other changes.
Media
Inquiries:
Scott Castleman304.357.2128 or 800.608.7859
Unitholder and Analyst Inquiries:
Rhonda
Amundson
877.290.2772
investor_relations@tcpipelineslp.com
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