Midwest Cogeneration Facilities Win Complaint Against Northern Natural
The Federal Energy Regulatory Commission said letter agreements that Northern Natural Gas pipeline negotiated to provide transportation service to cogeneration plants in Minnesota and Wisconsin contained "material deviations" from its pro forma service agreements and should have been filed with the Commission. Some of the provisions in the letter agreements were unlawful as well, the agency noted.
As a result, FERC granted a complaint filed by LSP-Cottage Grove LP and LSP-Whitewater Ltd. Partnership, which claimed that Northern Natural had billed them for $1.7 million in unwarranted surcharges for transportation between January and March 2003 to serve two 262 MW combined cycle cogeneration plants in the Midwest.
FERC in the order, which was issued on Dec. 30, said it would not permit Northern Natural to recover the charges because a provision in the letter agreements "is an unlawful material deviation from the applicable form of service agreement, which Northern Natural failed to file with the Commission, and improperly restricts competition."
In the September 2003 complaint, Cottage Grove and Whitewater accused the MidAmerican Energy pipeline of violating the letter agreements and of attempting to collect rates that were greater than the maximum rates in its tariff. The companies asked FERC to bar Northern Natural from collecting the surcharges [RP03-604]. The billing feud had prompted the Commission to question the propriety of the letter agreements, which were negotiated in 1995.
The Commission in the Dec. 30 order singled out two provisions in the letter agreements that were anti-competitive: 1) one provision discouraged complainants from buying gas supplies on other pipeline systems and from using transportation on other pipeline systems; and 2) a second provision restricted complainants' use of released capacity. Both provisions are material deviations and are unlawful, the agency order said.
"The Commission finds it unlawful for Northern Natural to discourage the use of transportation provided by others as it does [in the] letter agreements. These provisions are contrary to Commission policy and regulations and are null and void. Therefore, Northern Natural cannot enforce [the two anti-competitive provisions] and the Commission accordingly grants the complaints filed by Cottage Grove and Whitewater," the order said.
FERC directed Northern Natural to revise its 1995 letter agreements with Cottage Grove and Whitewater to reflect the changes that the agency ordered, and to file them within 30 days.
The Commission also rejected Northern Natural's proposed amendments to complainants' service agreements for firm transportation that would supersede the 1995 letter agreements and other proposed amendments to their service agreements for interruptible and storage service [RP05-70]. FERC concluded that a key provision in the amendments, which were filed in November 2004, would require the shippers to pay for interruptible service in Northern Natural's Field Area, regardless of whether the shippers would use that service, and that "such a provision is anti-competitive."
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