Even Adverse Decision in Panhandle Eastern Rate Case May be Favorable for Industry

What’s the issue?

Panhandle Eastern has adopted a very aggressive litigation style in its rate case that makes settlement of that case very unlikely.

Why does it matter?

Many of the issues that remain are ones where the judge will need to simply pick one side’s view over the other, and that will include choosing between the views of the parties regarding a proper ROE, which is critical to the industry as this case may essentially establish an ROE floor.

What’s our view?

We expect that the judge will generally side with the FERC staff on the contentious issues. However, even FERC staff has recommended a return on equity of 12.01%. FERC uses the ROE from the last litigated case for various other purposes, and since the previous litigated case resulted in a 10.55% ROE, a decision that allows a 12.01% ROE may help the rest of the industry by essentially raising the ROE floor by almost 1.5%.

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