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Simple English definitions for legal terms
area-rate clause
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A quick definition of 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 means that if the price of gas goes up in the area, the contract price will also go up. It is also known as an FPC clause.
A more thorough explanation:
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.