In 2001, Colonial Pipeline Company (respondent and NERA client) was granted market-based ratemaking authority in the US Gulf Coast by the Federal Energy Regulatory Commission (FERC), which is a light-handed form of regulation and alternative to requiring strict cost-based transportation rates. In 2018, numerous major oil company pipeline shippers (complainants) brought a FERC complaint against Colonial, alleging that it lacked competition and was exerting market power. This case is a regulatory complaint case involving whether Colonial has the ability to exercise market power in the US Gulf Coast. 

As experts for the respondent, Julie M. Carey and the NERA team were asked to review, analyze, and respond to the complainants’ and FERC staff expert testimony that presented market competition analyses evaluating the competitive alternatives available to refineries and pipeline shippers. NERA’s role was to review, analyze, and respond to these experts’ assumptions, calculations, and opinions concerning the competitive dynamics in the relevant geographic and product markets, which heavily relied on many unsupported assumptions about competitive alternatives, refined product prices, limited real-world market information, and inappropriate theoretical presentations. In response, NERA expert Julie M. Carey presented a detailed netback analysis and substantial economic evaluation in support of the competitive alternatives in the relevant product and geographic markets. NERA experts supported counsel throughout the approximately four-week hearing.

NERA’s expert testimony outlined the opposing experts’ unsupported assumptions and methodology and their consequences in significantly understating market competition. Ms. Carey’s testimony demonstrated that opposing experts’ analyses were incomplete, inconsistent, and inaccurate in depicting the competitive landscape of transportation alternatives serving the market and that their analyses departed from relevant economic principles, which resulted in the erroneous conclusion of market power. The testimony also demonstrates a continuously competitive market for Colonial since it was originally authorized market-based ratemaking authority in 2001.

NERA’s analysis was key to the success of the US Gulf Coast case for the client. The FERC deemed Colonial Pipeline Company did not to have market power in the US Gulf Coast on 16 November 2023, dismissing the complaint with respect to this market.