At-Risk Condition Sought for 2nd ANR Expansion
Several Wisconsin utilities and gas producers have asked FERC to
play it cautious when reviewing ANR Pipeline's application for a
second capacity expansion of its existing system through northern
Illinois and southern Wisconsin markets.
Although not opposed to the expansion, Wisconsin Fuel &
Light, Wisconsin Gas, Wisconsin Public Service Corp., Burlington
Resources Oil & Gas and Texaco Natural Gas want the Commission
to put ANR at-risk for any costs that might result from the
under-utilization of capacity on the 194,000 Dth/d project. They
contend that ANR hasn't shown adequate market support to justify
rolling in the $37.5 million cost of the facilities.
The utilities believe the Midwest pipeline also should be held
at-risk for its decision to charge expansion shippers less for firm
service over its mainline from Joliet, IL, to southern Wisconsin
(100% load factor rate of 10 cents/Dth plus commodity charges, ACA
and fuel) than what existing shippers pay for identical service
over the same facilities (14 cents/Dth). The producers asked that
ANR be required to charge incremental rates for the expansion
capacity, and that the rates include both reservation and commodity
In its application, which was filed in early March, ANR said it
had signed precedent agreements with shippers for 94,000 Dth/d of
the firm expansion capacity, but Burlington and Texaco adjusted
that figure downwards because one of the agreements reportedly has
not yet received corporate approval.
"Thus, at most, only 43% (84,000 Dth/d) of the total capacity of
the expansion project is committed under binding precedent
agreements. The question this raises is whether a 43% commitment is
adequate to justify the Commission's approval of the project.
The...answer to this question is 'no' unless the certificate is
conditioned to require ANR to bear the risk of under-utilization of
the incremental capacity," Burlington and Texaco said in their
joint filing [CP99-241].
They estimated that more than half of ANR's proposed expansion
capacity (100,000 Dth/d) was not under any kind of shipper
agreement - binding or otherwise. Still, ANR contends the entire
project (looping, compression and associated facilities) is needed
to meet anticipated market growth along its existing system from
Joliet to southern Wisconsin. It noted that its current peak-day
entitlements in Wisconsin are 2.2 MMDth/d, and that gas demand in
the state grew at an annual rate of 2.6% during the past decade.
But Burlington and Texaco don't think evidence of past growth is
enough to justify the proposed expansion - without an at-risk
condition. "...ANR arbitrarily assumes that this same growth rate
can be applied to future increases in demand in the Wisconsin
market, [But] ANR's arbitrary assumptions as to future growth are
not probative." Nor were they convinced, they said, by ANR's claim
that much of the uncommitted expansion capacity would be needed to
serve anticipated increases in gas-fired power generation.
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