FERC’s Cost Recovery Mechanism for Modernization of Natural Gas Pipelines

FERC’s 2015 rule allowed pipeline operators to recover repair and replacement costs annually, rather than waiting for the next rate case. This addressed an incentive problem in pipeline maintenance, where pipeline operators face some disincentive to investing substantially in repairs while they cannot recoup immediately. While FERC’s rule applies to interstate pipelines, LPDD recommends that each state pass an analogous rule for intrastate pipelines.