Shippers Protest Dominion Transmission's Proposed ROFR Changes
Dominion Transmission Inc.'s (DTI) proposed tariff filing would "undermine" FERC's right-of-first-refusal (ROFR) policy by allowing the pipeline to extend expiring shipper service agreements without first giving competitors a chance to bid on the capacity under those agreements, said Shell NA LNG LLC and other shippers on the pipeline.
"Allowing DTI to grant extensions of service agreements [of 12 months or more] behind closed doors clashes with the Commission's ROFR policies. The ROFR process is transparent and open, allowing other shippers to bid for available capacity, and requires a pipeline to award capacity to the customer that values it the most," Shell NA LNG told FERC in its protest [RP05-51].
But Dominion Transmission's proposed contract extension approach would be the antithesis of that, Shell said. "The operator does not post the available capacity. Other interested parties do not get an opportunity to bid for the capacity. The operator does not evaluate which bid has the highest value. And the operator is not required to award the capacity to the entity that values it the most. In short, contract extensions completely void the Commission's pro-competitive safeguards."
Shell called the ROFR the "cornerstone" of FERC's competitive, open-access transportation policy. The Commission's ROFR rule gives an existing shipper whose contract is set to expire an opportunity to match a competitor's bid up to a pipeline's maximum rate in order to retain the capacity.
A number of gas distribution companies owned by NiSource Inc. took issue with DTI's proposal requiring a shipper to notify the pipeline of its intent to retain its option to exercise its ROFR within one month from the date that either party gives notice of termination. "Since shippers need to assess relatively current market conditions before deciding whether to exercise ROFR rights, they should not be required to provide such notice to DTI more than six months prior to the expiration of the...agreement."
Baltimore Gas and Electric (BGE) said it was troubled by the fact that the "timing of the notice of termination" varied by rate schedules under DTI's proposal, which could mean that the pipeline could notify a shipper of termination anywhere from 12 to 24 months in advance of contract expiration. This "would immediately trigger the one-month period in which the customer would have to make a decision about exercising its ROFR," the utility said.
"It appears unreasonable that such important decisions must be made so quickly and so remotely from the actual expiration of the contract when the customer is perhaps unable to adequately gauge its needs that far in advance," BGE noted.
The NiSource companies also opposed a proposal that calls for the entire bidding process to be completed more than 11 months before the expiration of a contract, and if there was at least one acceptable competing bid, a shipper exercising its ROFR would then be required to execute a new service agreement within 15 business days after receiving the required notice from DTI.
"That provision would likewise unreasonably restrict a firm shipper's ROFR rights...[A shipper] should not be required to execute a new service agreement with DTI prior to 60 days before the expiration of [an] existing agreement," they said.
Noting that Dominion Transmission is proposing an "almost complete overhaul" of its tariff provisions governing the allocation of capacity on its system, BGE suggested that the issues would be "best examined" in a technical conference.
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