The Colonial Pipeline is preparing to add a 33.29¢/bl charge to its tariff that would recover the cost of products lost to evaporation or pipeline mixing, replacing a fee that federal regulators said was not sufficiently transparent.
The new product loss allocation (PLA) charge will be the same regardless of haul length, Colonial said in a regulatory filing last week, and will be collected for a year starting on 1 April 2024. Colonial requested the PLA charge last week as part of its compliance with recent orders from the US Federal Energy Regulatory Commission (FERC) that could require substantial changes to the rates customers pay to use the 5,500-mile refined product pipeline.
Colonial, which transports refined products from the US Gulf Coast to markets across the eastern US, has already been collecting a PLA charge that varied depending on haul length. The fee allows the company to recover the costs of product losses, such as fuel quality changes that arise when different batches of products mix within the pipeline.
But shippers, through formal complaints to regulators, said Colonial was not being sufficiently transparent in how it was calculating the fee. FERC agreed in an order last November, when it directed Colonial to abandon the "black box" model it was using to calculate the charge and instead shift to an annual charge disclosed in its tariff.
The 33.29¢/bl charge will remain in place through 31 March 2025, but Colonial said it could seek changes if there is surplus or deficit in product losses that exceeds $25mn, something the company said could occur if fuel prices become volatile. Colonial said it would calculate a new fixed PLA charge at least 30 days before taking effect on 1 April of each year.
Documents filed in rates probe
Colonial, in a separate regulatory filing last week, submitted hundreds of pages of documents and other calculations in response to a comprehensive FERC probe into its rates. Colonial also sent calculations for the "reparations" that would be due to customers that filed formal complaints, but that data has been made confidential.
Colonial last year filed a lawsuit asking a court to throw out FERC's orders related to its rates. Chevron, Phillips 66, American Airlines and other shippers behind the rate complaint have separately asked FERC to reconsider parts of its orders.