Enterprise Products Partners L.P.

SEC Filings

10-K
ENTERPRISE PRODUCTS PARTNERS L P filed this Form 10-K on 02/28/2018
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The ICA prescribes that the interstate rates we charge for transportation on these interstate liquids pipelines must be just and reasonable, and that the rules applied to our services not unduly discriminate against or confer any undue preference upon any shipper.  The FERC regulations implementing the ICA further require that interstate liquids pipeline transportation rates and rules be filed with the FERC.  The ICA permits interested persons to challenge proposed new or changed rates or rules, and authorizes the FERC to investigate such changes and to suspend their effectiveness for a period of up to seven months.  Upon completion of such an investigation, the FERC may require refunds of amounts collected above what it finds to be a just and reasonable level, together with interest.  The FERC may also investigate, upon complaint or on its own motion, rates and related rules that are already in effect, and may order a carrier to change them prospectively.  Upon an appropriate showing, a shipper may obtain reparations (including interest) for damages sustained for a period of up to two years prior to the filing of its complaint.

The rates charged for our interstate liquids pipeline services are generally based on a FERC-approved indexing methodology, which allows a pipeline to charge rates up to a prescribed ceiling that changes annually based on the year-to-year change in the U.S. Producer Price Index for Finished Goods (“PPI”).  A rate increase within the indexed rate ceiling is presumed to be just and reasonable unless a protesting party can demonstrate that the rate increase is substantially in excess of the pipeline’s operating costs.  For the five-year period commencing July 1, 2011 and ending June 30, 2016, we were permitted by the FERC to adjust the indexed rate ceilings annually by the PPI plus 2.65%.  For the five-year period commencing July 1, 2016, the FERC established PPI plus 1.23% as the index.  In any year in which the index is negative due to a decline in the PPI, a pipeline must file to lower its rates if its rates would be above the indexed rate ceiling.  This situation occurred for the year beginning on July 1, 2016 and resulted in the FERC index applicable to our rates reflecting an approximate 2.01% decline.  As an alternative to this indexing methodology, we may also choose to support changes in our rates based on a cost-of-service methodology, by obtaining advance approval to charge “market-based rates,” or by charging “settlement rates” agreed to by all affected shippers.

In June 2013, certain parties filed a complaint at the FERC against Enterprise TE alleging that Enterprise TE’s cancellation of certain distillate and jet fuel transportation services violated a provision of a settlement agreement and requested reinstatement of the transportation services and damages.  In October 2013, the FERC issued an order holding that Enterprise TE violated the provision in the settlement agreement.  While the FERC found that it did not have authority to require Enterprise TE to reinstate the cancelled services, it set the case for an evidentiary hearing to determine if any monetary damages were appropriate.  Certain parties requested rehearing of the FERC’s finding that it lacked authority to reinstate the cancelled services.  In December 2013, Enterprise TE filed a petition for review of the FERC’s October 2013 order with the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”).  Certain parties requested rehearing of the October 2013 order.  In May 2016, the FERC issued an order denying those rehearing requests.  Two of the parties that sought rehearing have filed a petition for review of both the October 2013 order and the May 2016 rehearing order. Enterprise TE has negotiated settlements that have resolved the complaints and has intervened in the pending third party petition for review.  Since Enterprise TE has intervened on behalf of the FERC in the third party petition for review, Enterprise TE voluntarily dismissed its own petition for review at the D.C. Circuit.  We are unable to predict the outcome of the pending third party petition for review, which is set for oral argument before the court in February 2018.

Seaway is charging “committed shipper” rates to shippers who voluntarily agreed under long-term contracts to commit to the transportation of, or nevertheless to pay for (to the extent not transported) the transportation of, a minimum volume of crude oil from Cushing, Oklahoma to the Gulf Coast.  Seaway is also charging “uncommitted shipper” rates to shippers who have not made any long-term contractual commitment to the Seaway Pipeline and instead receive service month-to-month. In March 2013, the FERC issued a declaratory order stating that the charging by a pipeline of voluntarily agreed-to committed shipper rates is consistent with the FERC’s policy of honoring contracts (the “March 2013 Order”).  In light of the March 2013 Order, we believed that Seaway’s committed shipper rates were not at issue in the ongoing rate proceeding, which began in 2012.  However, in September 2013, an administrative law judge (“ALJ”) issued an initial decision in the rate proceeding (the “2013 Initial Decision”) distinguishing the March 2013 Order and recommending that the FERC find, among other things, that Seaway’s committed shipper rates are not just and reasonable and should be re-determined on a cost of service basis along with the uncommitted shipper rates.

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