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

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

In the order, FERC held that Transwestern’s proposedrevenue-sharing arrangement for capacity releases “could certainlyhave the effect of minimizing the incentives” of the pipeline andreleasing shippers to compete. The Commission indicated it wouldreconsider the pipeline’s proposal it were tied to a negotiateddeal. However, it added that Transwestern’s ability to do so wouldbe subject to the outcome of FERC’s notice of proposed rulemakingon the short-term transportation market [RM98-10].

Sources contend the Commission’s decision in Transwestern was”inconsistent” with its order approving the revenue-sharingarrangement in the Dynegy-El Paso contracts, which permitted theHouston-based marketer to reap revenues from El Paso’s sales ofinterruptible capacity in the event the pipeline exceeded a certainthreshold. Critics claimed the arrangement provided El Paso with adisincentive to sell IT in competition with firm transportation onits system, but the Commission disagreed.

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