One of two distinct mechanisms for passthrough of take-or-pay buyout costs of interstate natural gas pipelines. The first is pursuant to the Commission's historic policy of permitting prudently incurred costs to be recovered in the sales commodity rate. The second, alternate method was developed in Order No.500. The EQUITABLE SHARING MECHANISM, is available to open access pipelines which agree to an equitable sharing of take-or-pay costs and permits them to recover costs over a specified amortization period, such as five years. Where a pipeline agrees to absorb from 25 to 50 percent of take-or-pay costs, the Commission permits the pipeline to recover through a fixed charge an amount equal to, but not greater than, the amount absorbed. Any remaining costs up to 50 percent of total buyout and buydown costs may be recovered either through a commodity rate surcharge or a volumetric surcharge on total throughput. Fixed charges are allocated among firm sales customers in accordance with the PURCHASE DEFICIENCY METHODOLOGY. See BASE PERIOD and DEFICIENCY PERIOD.

This definition is in context to Natural Gas. See more contextual defintions for Equitable Sharing Mechanism.