Kinder Morgan Inc (NYSE:KMI) issued a statement following the announcement by the FERC. The company is aware of the FERC update of a notice of proposed rule-making on the effect of the Tax Cuts & Jobs Act on FERC-checked rates for oil and natural gas pipelines. As a proposed guideline, it is neither immediate nor final and will be contingent to a public comment process. They plan to offer comments during that procedure, both as an individual firm and through their trade associations.
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Based on the announcement, Kinder Morgan is delighted by FERC’s inclusion of an alternative for firms to submit a statement with the FERC defining why an adjustment to rates to exhibit the Tax Act impact is not required. The competitive setup in which interstate natural gas transmission firms operate is considerably distinct from the historic franchised utility service territory that is still widespread for traditional utilities.
Hence, many of their rates are established pursuant to negotiated rate setups that they consider should not be dependent on adjustment due to alterations in tax law. Also, many of their current transactions are offered at discounted prices that are below maximum tariff prices, several of which would not be affected by a modification in the maximum tariff price. Further, on several of their pipelines they are working under rate settlements that limit deviates to their terms during the course of the settlement.
Kinder Morgan reported that they consider any action by FERC should not impact negotiated rate deals and will not significantly influence assets that are existing cash taxpayers. For those purposes, the ultimate impact and timing of any future rate changes, should they occur, are not anticipated to be material to company’s distributable cash flow. Finally, pertaining to FERC’s separate action removing the master limited partnership tax allowance, they note that company has been formulated as a C-corporation since 2014.
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