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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