On December 18, 2025, FERC maintained that gas pipelines offering service under section 311 of the Natural Gas Policy Act (NGPA) that base their section 311 rates on state-approved rates must nonetheless comply with Straight-Fixed Variable (SFV) rate design or justify a departure from SFV.  Specifically, FERC denied Matterhorn Express Pipeline, LLC’s (Matterhorn) request for rehearing of a prior FERC order accepting Matterhorn’s section 311 filing, subject to the condition that Matterhorn revise its rates to reflect SFV.  FERC explained that Matterhorn’s one-part volumetric rate violated SFV, and Matterhorn had not justified a deviation.

NGPA section 311 permits intrastate pipelines not otherwise subject to FERC’s Natural Gas Act (NGA) jurisdiction to transport natural gas in interstate commerce.  FERC regulations provide that intrastate pipelines may elect to (1) base their section 311 rates on state-approved rates for comparable service, or (2) apply for approval of rates developed especially for section 311 service.  Matterhorn pipeline is a Texas intrastate gas pipeline that sought FERC approval to engage in section 311 service and proposed to base its initial rates on a state-approved rate that included a maximum one-part volumetric rate, plus certain other charges. 

In June 2025, FERC accepted Matterhorn’s section 311 filing, subject to the condition that Matterhorn revise its rates to reflect SFV, which requires a pipeline to charge a firm rate that recovers fixed costs from the demand component and variable costs from the usage component of its rates.  FERC explained that while proposed state-approved section 311 rates are entitled to a rebuttable presumption that they are fair and equitable, they must nonetheless comply with SFV or justify an exception.  FERC stated that it allows certain “limited” exceptions to SFV in instances of market-based rates, unusual competitive circumstances, and settlement rates.  FERC held that Matterhorn’s proposed one-part volumetric rate violated SFV because it did not establish a minimum fixed demand rate and had not justified an exception.  Matterhorn made a compliance filing under protest and filed a request for rehearing.

On rehearing, FERC upheld the requirement of SFV for section 311 rates.  FERC stated that it has routinely applied SFV to NGPA pipelines because they compete with fully FERC-regulated NGA pipelines, which are required to implement SFV.  FERC rejected Matterhorn’s argument that applying SFV to section 311 pipelines “blurs the line” between the NGPA and the NGA and held that its ruling “reflects that the foundational underpinnings of [FERC’s] policies for each type of pipeline are the same.”  Moreover, FERC rejected Matterhorn’s compliance filing, finding that the rates still did not comply with SFV because the rates did not separate out demand and usage components and ordered Matterhorn to make an additional compliance filing consistent with its order. 

Matterhorn appealed FERC’s June 2025 order to the Fifth Circuit Court of Appeals (Case No. 25-60487) where the case remains pending.

FERC’s full order on rehearing, issued in Docket Nos. PR25-11-000 et al., can be accessed here.