On February 19, 2026, FERC dismissed a complaint filed by Baltimore Gas and Electric Company (BGE) against Transcontinental Gas Pipe Line Company, LLC (Transco) asserting that BGE had a contractual right to challenge its negotiated rate with Transco pursuant to section 5 of the Natural Gas Act (NGA). FERC held that BGE contractually waived its NGA section 5 rights with respect to its negotiated rate, and BGE therefore was required to pay the negotiated rate.

In 2019, Transco held an open season for a Regional Energy Access Expansion (REA Project). BGE submitted a non-conforming bid that Transco agreed to accommodate, and the parties executed a precedent agreement (Precedent Agreement).  The Precedent Agreement gave BGE the option to select a negotiated rate or a recourse rate that was subject to change based on the actual costs of the REA Project and future Transco rate proceedings. BGE selected a negotiated rate, and Attachment A to the Precedent Agreement stated that BGE’s negotiated reservation rate under the anticipated service agreement between the parties would be $0.745 per Dekatherm (Dth) per day.

In 2021, Transco filed an application with FERC for a certificate of public convenience and necessity for the REA Project with a proposed recourse rate of $0.50550 Dth/day. In January 2023, after FERC issued the REA Certificate Order, Transco provided a service agreement (Service Agreement) to BGE for execution.  The Service Agreement incorporated the $0.745 Dth/day negotiated reservation rate set forth in Attachment A to the Precedent Agreement. In response, BGE informed Transco that it intended instead to elect the recourse rate. Transco rejected BGE’s position.  However, to avoid delaying the REA Project, the parties agreed to a version of the Service Agreement that included, in Article V, a memorialization of the parties’ agreement to defer resolution of the rate dispute.

In 2024, Transco filed a general rate case that, among other things, proposed further reducing the REA recourse rate to roughly $0.36 Dth/d.  After seeking to challenge its negotiated rate in the context of Transco’s general rate case, BGE filed a complaint with FERC.  In its complaint, BGE asserted that Article V of the Service Agreement preserved its right to challenge the continuing applicability of the negotiated rate and that the negotiated rate was unjust and unreasonable because it reflected a markup of over 100% above Transco’s fully compensatory recourse rate. In response, Transco argued that Article V of the Service Agreement did not grant BGE a contractual right to challenge the differential between the negotiated rate and the recourse rate, nor did it grant BGE a right to challenge the “continuing” applicability of BGE’s negotiated rate as compared to the recourse rate, which would inevitably change in future proceedings.

FERC rejected BGE’s complaint, explaining that the relevant legal inquiry was one of contract interpretation, not whether the negotiated rate was just and reasonable.  Specifically, FERC framed the question as whether the negotiated rate set forth in the Service Agreement applied to the Precedent Agreement. FERC held that BGE failed to provide any support for the proposition that it had the right to change, at the time it executed the Service Agreement, from the negotiated rate agreed to in the Precedent Agreement to a recourse rate. In addition, FERC rejected BGE’s argument that Article V of the Service Agreement gave BGE the right to challenge the justness and reasonableness of the negotiated rate. On this point, FERC concluded that the narrow issue preserved by Article V of the Service Agreement was BGE’s right to seek a FERC ruling as to whether the negotiated rate applied to the Service Agreement in light of the dispute between BGE and Transco at the time of executing the Service Agreement. Because BGE failed to explain why it should be allowed to opt out of the contractual commitments it entered into under the Precedent Agreement, FERC held that BGE is required to pay the negotiated rate established in the Precedent Agreement and carried forward into the Service Agreement.

FERC’s order, issued in Docket No. RP25-1189-000, can be accessed here.