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CenterPoint Energy Agrees to Pay Penalty to Resolve FERC Probe

FERC last Monday approved a stipulation and consent agreement ordering CenterPoint Energy Gas Transmission (CEGT), an interstate natural gas pipeline subsidiary of Houston-based CenterPoint Energy Inc., to pay a civil penalty of $270,000 and take other remedial steps for allegedly violating the agency's standards governing the behavior between regulated companies and their affiliates.

The settlement brings to a conclusion an investigation of CEGT that was initiated by FERC's Office of Market Oversight and Investigations (OMOI) in August 2003, the pipeline said. The probe involved a comprehensive review of CEGT's relationship with its marketing affiliates and compliance with various FERC record-keeping and reporting requirements covering the period of Jan. 1, 2001 through Sept. 22, 2004.

Specifically, OMOI alleged that CEGT violated the standards of conduct by disclosing to its market affiliates nonpublic transportation information concerning the availability of interruptible services, the possibility of an operational alert and a potential transportation initiative without contemporaneously disclosing that information to all nonaffiliate shippers on CEGT's system, the order said [IN05-7].

In addition, OMOI alleged that the pipeline failed to strictly enforce tariff provisions; follow the posting and filing requirements related to Index of Customers; properly maintain and archive organizational charts; retain all contracts; follow all of the requirements for transactional reports relating to capacity release; and post capacity from an expiring firm transportation contract that CEGT had with one of its marketing affiliates.

In addition to the penalty, CEGT agreed to implement and follow a compliance plan, which would also apply to its sister pipeline, CenterPoint Energy Mississippi River Transmission Corp. The plan consists of a set of implementation procedures to comply with FERC's Order 2004 [the Standards of Conduct], which regulates behavior between regulated entities and their affiliates.

"After a thorough, 22-month investigation, the OMOI staff took the position that some of CEGT's actions resulted in a limited number of violations of FERC's affiliate regulations or were in violation of certain record-keeping and administrative requirements. OMOI did not find any systematic violations of its rules governing communications or other relationships among affiliates," said Byron Kelly, president and COO of CenterPoint Energy's Pipelines and Gathering Group.

"We have already addressed a number of their concerns and are in the process of implementing the appropriate procedures for those remaining. While we do not believe that a civil penalty was appropriate, we feel that the benefits of settling outweigh the costs of litigation," he noted. CEGT neither admitted nor denied the allegations that were brought against the company.

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