13. Market-Based Rates

Pursuant to Pub. Util. Code §§ 451 and 454, the Commission has authority to establish rates and conditions of service for fuel pipelines under its jurisdiction. Applicant intends to operate its jet fuel pipeline as a common carrier. Applicant seeks Commission authorization to establish market-based rates for its transportation of jet fuel to shippers, through arm's-length negotiations. Applicant states that it will offer the same negotiated rate to all shippers and will publish and maintain on file with the Commission at all times the most current transportation rates. Such rates could be increased or decreased periodically without Commission review or approval.

Applicant states that negotiated market-based rates are appropriate in this case for several reasons. First, applicant states that it will be unable to exercise market power over its shippers to prevent them from using other transportation services. Currently, the airline companies likely to become shippers on the proposed pipeline are served by tank trucks. According to applicant, the possibility of such tank truck service will remain as a competitive pressure on applicant's transportation services.

Second, applicant states that its potential customers are sophisticated airline companies familiar with negotiating fuel transportation services. Finally, according to applicant, it will offer its transportation services on an open, non-discriminatory basis as a common carrier. Applicant will file its rates with the Commission and will offer its transportation services and charges on the same terms to all potential shippers.

If market-based rates are authorized, applicant requests a waiver of General Order (G.O.) 96-A, Section IX, Contracts Authorized by Tariff Schedules, and Section X, Contracts and Services at Other Than Filed Tariff Schedules, to the extent those provisions require that such contracts shall at all times be subject to modification by the Commission. In addition, because the petroleum fuel transportation industry typically uses the FERC form of tariff schedule, applicant asks that the Commission authorize it to use a FERC-style format rather than the format set forth in Section II of G.O. 96-A.

Finally, applicant asks that the Commission grant it an exemption from the provisions of G.O. 96-A, Sections III, IV, V, VI and VII, to the extent that those provisions are inapplicable to a market-based rate or FERC-style tariff schedule format.

We note that the Commission in the past has authorized market-based rates for independent storage facilities where it is clear that an operator will be unable to exercise market power over its shippers. (See, Re Wild Goose Storage, Inc., D.97-06-091; Resolution O-0028 Pacific Pipeline System Inc).