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Critics: Transwestern Order 'Inconsistent'

Critics: Transwestern Order 'Inconsistent'

In what appeared to be an unremarkable decision, FERC this week rejected a proposal that would have allowed Transwestern Pipeline to negotiate and share in the revenues that shippers would receive for releasing capacity on its system. But the ruling piqued the interest of some, especially shippers that were caught in a capacity squeeze when Dynegy Inc. contracted for much of the capacity on El Paso Natural Gas.

Ironically, the Commission agreed with a protest of Dynegy, which argued that Transwestern's revenue-sharing proposal would result in an "unjust and unreasonable windfall" for the pipeline, and would give Transwestern shippers "less monetary incentive" to release capacity in competition with pipeline capacity [RP99-335].

In the order, FERC held that Transwestern's proposed revenue-sharing arrangement for capacity releases "could certainly have the effect of minimizing the incentives" of the pipeline and releasing shippers to compete. The Commission indicated it would reconsider the pipeline's proposal it were tied to a negotiated deal. However, it added that Transwestern's ability to do so would be subject to the outcome of FERC's notice of proposed rulemaking on the short-term transportation market [RM98-10].

Sources contend the Commission's decision in Transwestern was "inconsistent" with its order approving the revenue-sharing arrangement in the Dynegy-El Paso contracts, which permitted the Houston-based marketer to reap revenues from El Paso's sales of interruptible capacity in the event the pipeline exceeded a certain threshold. Critics claimed the arrangement provided El Paso with a disincentive to sell IT in competition with firm transportation on its system, but the Commission disagreed.

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