TransCanada expects no material impact from FERC’s proposed tax actions

TransCanada Corporation recently said that it does not expect any material impact from changes to the treatment of income taxes for ratemaking purposes recently proposed by the Federal Energy Regulatory Commission (FERC).

FERC’s recently revised policy statement would disallow master limited partnerships (MLPs) to recover an income tax allowance in their cost of service rates. A recent notice of proposed rulemaking (NOPR) would evaluate and address impacts to pipeline tariffs of recent income tax rate changes enacted through the Tax Cuts and Jobs Act of 2017.

According to TransCanada, approximately 50 percent of its U.S. Natural Gas Pipelines 2018 revenue comes from negotiated or discounted tariffs. The company expects this percentage to grow to 65 percent in 2019. Because of this, the company said, its revenues would not be materially impacted.

The company also noted that FERC recently approved a rate reduction due to the corporate tax rate changes on the Columbia Gas Transmission system.

“As noted previously in its annual disclosure documents and on its fourth quarter 2017 results call, TransCanada expects a modest increase in earnings and no fundamental change to its EBITDA guidance, payout metrics, financial flexibility or funding plans through 2020 as a result of U.S. Tax Reform,” TransCanada said. “Furthermore, given that a sizeable portion of our U.S. Natural Gas Pipelines portfolio is held in corporate form, including ANR, Columbia Gas and Columbia Gulf, along with the composition of its revenue base and level of ownership in TC PipeLines, LP, changes to FERC’s tax allowance policy for MLPs are not expected to have a material financial impact on the Company.”

TransCanada also said plans to file comments with FERC both individually and through trade organizations after reviewing details of the actions. FERC is expected to issue final orders in summer or early fall 2018.