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FERC Rejects El Paso Compliance Rate Filing, Orders Changes

FERC last Wednesday rejected El Paso Natural Gas' hotly disputed compliance tariff filing that was submitted in late April, agreeing with shippers that the pipeline failed to follow many of the agency's directives that were contained in an earlier order.

"Upon review of the tariff sheets, the Commission finds that El Paso's filing does not comply with the March 23 order with regard to a number of significant issues. Further, El Paso has included in its compliance filing additional tariff changes not approved in the March 23 order, as well as other materials and argument that go beyond the scope of a compliance filing," the order said [RP05-422-012, RP05-422-013].

The Federal Energy Regulatory Commission ordered the pipeline, a subsidiary of El Paso Corp., to refile within 10 days a comprehensive set of tariff sheets that comply with last Wednesday's order and the March 23 order.

The Commission concurred with the position of El Paso shippers who argued that the compliance rate filing flagrantly disregarded the agency's March order and was another attempt by the pipeline to cloud an already complex rate case (see NGI, May 15). They particularly took issue with El Paso's claim that the FERC order was murky on whether the pipeline's daily scheduling penalty was rejected. The shippers countered that the Commission was quite "clear and unequivocal" on this point.

"The March 23 order was clear in rejecting El Paso's proposal to impose daily scheduling penalties and directing El Paso to refile tariff sheets eliminating provisions for daily scheduling penalties," the FERC order said. The Commission chided the pipeline for attempting to reargue its case in the compliance filing as well. "A compliance filing is not an appropriate vehicle for the pipeline to provide additional argument or justification for its proposal," it noted.

The Commission also rejected El Paso's attempt to place new limitations on Hourly Entitlement Enhancement Nominations (HEEN) service for firm transportation, hourly firm transportation, no-notice transportation hourly and no-notice transportation daily service shippers. "These changes are beyond the scope of a compliance filing and thus must be rejected in this proceeding without prejudice to El Paso filing the tariff changes in a new Section 4 filing," the order said.

In addition, FERC ordered the pipeline to revise its tariff to make unauthorized overruns during both critical and noncritical conditions eligible for revenue crediting. It also directed El Paso to clarify the distinction between scheduling penalties and overrun charges to ensure that under "no circumstances" will shippers be subject to two penalties for the same deliveries.

Moreover, "the Commission finds that El Paso's proposed tariff sheets fail to fully comply with the March 23 order in several respects in regard to safe harbor tolerances. In several of its proposed tariff sheets, El Paso imposes a daily limit of 2,000 Dth on hourly imbalances. This provision implies that daily and hourly tolerances are interrelated, a conclusion which would allow El Paso to charge a penalty to a shipper who stayed within its safe harbor tolerance each hour but exceeded the daily absolute tolerance level. Thus, it is inconsistent with the Commission's determination that shippers are entitled to an hourly safe harbor tolerance of the greater of 7% or 100 Dth per hour for each hour of the day," the order said.

"Furthermore, the Commission finds that El Paso's proposed tariff language regarding the relationship between proportional and absolute tolerances lacks sufficient clarity to support compliance with the March 23 order," it noted.

FERC also took issue with El Paso's unauthorized overrun penalty amounts for noncritical periods for firm, firm hourly, no-notice daily and no-notice hourly service. The amounts do not comply with the March 23 order, which established two times the interruptible rate as the appropriate level for unauthorized overrun penalties in noncritical periods, the agency said. FERC ordered the pipeline to file revised tariff sheets that reflect the appropriate amount.

In addition, "the Commission finds that El Paso's use of the words 'not more than' and 'not less than' in describing its penalty levels is inconsistent with Commission precedent. In the past the Commission has rejected proposals by other pipelines seeking to create negotiated penalty levels. Therefore, the Commission will require El Paso to revise its tariff sheets to indicated fixed levels for penalties."

FERC said El Paso's force majeure provisions failed to comply with the March order as well. "El Paso's revised language does not clearly state that scheduled maintenance and maintenance that is within El Paso's control, even if related to unplanned force majeure events, is not a force majeure event in and of itself. The Commission concludes that El Paso has not complied with the Commission's directive to treat scheduled maintenance and repairs as nonforce majeure events. The Commission directs El Paso to modify its tariff accordingly."

Lastly, El Paso failed to include a "provision stating that it will exercise reasonable diligence to schedule maintenance so as to minimize or avoid service interruptions, as required by the Commission," the order said.

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