Shelley Goldberg, Columnist

That Selloff in Partnership Shares Should Not Have Happened

There are valid reasons to dip back in, despite the seemingly negative tax ruling.

March 28, 2018 at 10:00 AM UTC

Shelley Goldberg is an investment adviser and environmental sustainability consultant. She has worked as a commodities strategist for Brevan Howard Asset Management and Roubini Global Economics.

Some pipeline companies won't be affected.
Photographer: Barry Williams/Getty Images

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A March 15 ruling on master limited partnerships could reduce electric and natural gas bills for energy consumers in parts of the U.S. But investors in MLPs aren’t rejoicing. In fact, they dumped their positions, even though this market still shows potential.

The ruling by the Federal Energy Regulatory Commission would no longer allow interstate natural gas and oil pipeline MLPs to recover an income-tax allowance in their cost-of-service rates. The policy revision was a response to a U.S. Court of Appeals ruling that the FERC “failed to demonstrate there was no double recovery of income tax costs” when the court permitted an MLP to recover both an income tax allowance and a return on equity while setting rates. MLPs had been able to claim a cost-of-service allowance, but the FERC insisted that some pipelines were artificially increasing their costs, which boosted rates.