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Buckeye To Defend Rates Against Airlines' Complaint

For over two decades, all of Buckeye Pipeline's interstate rates have been set under an innovative competitive rate program approved by FERC in 1991. This program caps annual rate increases in markets that FERC found to be competitive and links rate increases in other markets to those capped competitive rates. In contrast, under FERC's subsequent regulations standardizing the setting of market-based rates, there are no caps on rates in competitive markets. When it approved the program in 1991, FERC determined that 15 of the 20 markets then served by Buckeye Pipeline were competitive and four were not competitive. FERC made no determination regarding whether the remaining market – New York City – was competitive. Buckeye Pipeline believes that the New York City market is competitive and intends to file an application with FERC seeking authority to charge market-based rates for jet fuel deliveries to the New York City airports.

During the 21 years the competitive rate program has been in place prior to the filing of the complaint, Buckeye Pipeline has received just two challenges to its rates – a 2011 Delta protest that was resolved without FERC action and a March 2012 protest by Delta. In response to Delta's 2012 protest, FERC issued an order on March 30, 2012 rejecting Buckeye Pipeline's proposed rate increases and providing that it would review the competitive rate program. The order further directed Buckeye to justify why the program should be continued and invited any interested customers to file comments. Buckeye Pipeline responded, presenting data indicating that the competitive rate program has performed in line with industry experience and overall cost trends and should be maintained. In response to FERC's invitation to Buckeye Pipeline's customers, Delta filed substantive comments opposing the program, three airlines and a committee representing jet fuel consumers at John F. Kennedy airport filed comments supporting Delta, and three companies intervened without taking a position for or against the competitive rate program. FERC has not yet issued a decision in this proceeding.

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