HOUSTON, March 16, 2018 /CNW/ – Spectra Energy Partners, LP (NYSE: SEP) today provided its preliminary assessment of the potential impacts of the Federal Energy Regulatory Commission's (FERC) recent policy change with respect to the recovery of income tax amounts included in the cost of service pipelines within a master limited partnership (MLP).
On March 15, 2018, FERC changed its long-standing policy on the treatment of income tax amounts included in the rates of pipelines and other entities subject to cost of service rate regulation within an MLP. In its order PL17-1-000, FERC revised a policy in place since 2005 to no longer permit entities organized as master limited partnerships to recover an income tax allowance in their cost of service rates. SEP intends to ask for rehearing of this policy change at FERC.
Roughly 60% of SEP's gas pipeline revenue comes from negotiated or market-based tariffs and therefore not directly affected by the FERC policy revisions. The remaining 40% of gas pipeline revenue is derived from cost of service based tariffs which could be subject to tax recovery disallowance. The liquids assets within SEP are predominantly negotiated tariffs and also not materially affected by the policy revisions.
SEP anticipates no immediate impact to its current gas pipeline cost of service rates as a result of the revised policy and therefore no impact is expected to its previously provided 2018 financial guidance. Any future impacts would only take effect upon the execution and settlement of a rate case. In the event of a rate case, all cost of service framework components would be taken into consideration which we expect to offset a significant portion of any impacts related to the new FERC policy. Any unmitigated impacts are not anticipated to materially change SEP's distributable cash flow outlook beyond 2018.