Legal Definitions - FPC clause

Definition: An FPC clause, also known as 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.

Example: Let's say a gas company signs a long-term contract with a customer to sell gas at a fixed price for the next 10 years. However, if the regulatory agency in the area allows for a higher price on gas, the FPC clause in the contract would permit the gas company to increase the contract price accordingly.

This clause is important for gas companies because it protects them from losing money if the cost of producing and selling gas increases due to regulatory changes. It also ensures that they can continue to provide gas to their customers at a fair price.