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El Paso Shippers Protest Pipeline's Rate Proposal

Scores of El Paso Natural Gas shippers have called on FERC to reject the pipeline's tariff compliance filing submitted earlier this month, saying it "goes well beyond" the changes ordered by the agency.

In protests filed at FERC last week, industrial gas customers, municipal distributors, power generators, local distribution companies and producers said the El Paso Corp. pipeline's compliance filing exceeded what FERC required in a March 20 order, which directed the pipeline to file tariff sheets reflecting the continued application of the rate caps that were contained in a 1996 rate settlement between El Paso and its customers, adjusted for inflation.

The shippers said FERC's March order did not allow El Paso to propose rate hikes for any of its shippers, including those that weren't eligible for rate caps under the settlement. But they say that's exactly what the pipeline did. El Paso's compliance filing "combines the changes actually required to comply with the March 20 order with a Section 4 rate increase request applicable in part to the very shippers who are supposed to be protected by the compliance filing," said the Public Service Company of New Mexico and Texas Gas Service Co. in a joint protest.

As required, the pipeline proposed continuing the rate caps that were agreed to in the 1996 settlement, they noted. El Paso estimated that the continuation of the rate caps would reduce its revenue by about $24.6 million. "To avoid the resulting revenue loss, El Paso filed additional tariff sheets to increase its uncapped rates to a level that would permit recovery of the $24.6 million" from shippers that did not qualify for the lower settlement rates, the two utilities told FERC.

Shippers eligible for capped settlement rates are those who had transportation service agreements in effect with El Paso from Dec. 31, 1995 through Jan. 1, 2006.

"The March 20 order did not authorize or require El Paso to increase its rates for services that are not subject to the 1996 settlement rate caps," the utilities said [RP05-422-010]. "The Commission did acknowledge the question [of] whether other shippers could be allocated through a discount adjustment [the] cost associated with the rate cap, but stated [that] was a question to be resolved at the hearing...Acknowledging that issues regarding discount adjustments may be decided at hearing is a far cry from ordering an increase in rates to reflect a discount adjustment."

Phelps Dodge Corp. and Apache Nitrogen Products Inc. called "El Paso's inclusion of such increased charges [for ineligible shippers] in this compliance filing...unlawful," and called on the Commission to scrap the proposed hikes.

New Harquahala Generating Co. LLC also protested the proposed rate hike for nonqualifying shippers on El Paso and asked the agency to reject it. "In the alternative, if the Commission determines that it authorized El Paso to further increase rates to nonqualifying shippers, then New Harquahala urges the Commission to grant rehearing because El Paso has not satisfied its burden of filing a prima facie case under the Commission's discount adjustment policy to effect such a cost shift and discriminatory rate increase."

El Paso had argued that FERC's changes to the settlement and its actions in the full requirements-contract demand allocation proceeding had abrogated the 1996 settlement that capped transportation rates for eligible shippers. But the Commission rejected the argument, saying that the rate cap protections would remain in effect for all eligible shippers until and unless they choose to terminate their existing firm transportation agreements.

The pipeline's shippers also objected to El Paso's request to reinstate the rate cap effective April 4. The shippers proposed that the effective date be Jan. 1 to allow for refunds to shippers who have been paying uncapped rates since then.

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