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At-Risk Condition Sought for 2nd ANR Expansion

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 charges.

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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