Legal Definitions - area-rate clause

An area-rate clause is a provision in a long-term gas contract that allows for an automatic increase in the contract price if any regulatory agency prescribes or allows a higher price on gas sold in the area. This clause is commonly used in the oil and gas industry.

For example, if a gas company has a long-term contract with a customer that includes an area-rate clause, and the regulatory agency allows for a higher price on gas sold in the area, the gas company can automatically increase the contract price to reflect the new rate.

Another example would be if a gas company has a long-term contract with a customer that includes an area-rate clause, and the regulatory agency prescribes a higher price on gas sold in the area, the gas company can also automatically increase the contract price to reflect the new rate.

The area-rate clause is also known as the FPC clause.