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Transco Defends Discount Practices, But Vows to Revise Tariff to Allay FERC Concerns if Necessary

Transco Defends Discount Practices, But Vows to Revise Tariff to Allay FERC Concerns if Necessary

Transcontinental Gas Pipe Line Corp. contends that its existing tariff provisions governing discount rates at secondary transportation points fully comply with the Federal Energy Regulatory Commission's discount policy. But if necessary, the Williams pipeline said it is willing to remove certain words from its tariff to quell agency concerns about its discounting practices.

FERC in mid-December expressed interest in the discounting practices of Transco and Trunkline Gas Co., and ordered the two pipelines to explain how their currently effective tariff provisions on discounting rates at secondary points were consistent with Commission policy (see Daily GPI, Dec. 23, 2003). Transco's response was filed Monday [RP04-57].

The Commission raised questions about Transco's and Trunkline's discount rates in a Dec. 19 rehearing decision involving Horizon Pipeline Co. LLC. In that ruling, the agency upheld a June 4 order rejecting Horizon's proposal to negotiate deep discounts at primary transportation points but only minor discounts at secondary points [RP02-153-004].

The Horizon proposal, if allowed, "could discourage a shipper from segmenting or releasing capacity in competition with the pipeline's primary service, since substantially higher rates would apply to those transactions," the order said.

In its reply to FERC, Transco said it "discounts its firm transportation rates infrequently, and when it does, [its] discount agreement specifies the discount to its firm transportation reservation rate that applies to the shipper's firm transportation contract path. In other words, the discount agreement specifies the discounted rate that applies to firm transportation from the receipt point...to the delivery point under the shipper's service agreement, and Transco does not specify in the discount agreement different discounted rates that apply to different points within the shipper's firm transportation path."

As a practical matter, "there is no 'alternate point...expressly provided for in its discount agreement' that could preclude a shipper from taking advantage of the application of the rebuttable presumption" under the Commission's discount policy, the Williams pipeline said.

FERC has established a rebuttable presumption that a shipper holding a discount at a point will retain the discounted rate if it moves gas to another point -- whether through segmentation, capacity release or the use of flexible receipt or delivery point rights -- at which the pipeline has granted a discount for its transportation services.

The pipeline can rebut the presumption if it can show that a shipper seeking to move its discount is not similarly situated to other shippers receiving a discount at the alternative point.

The tariff provision, which sparked FERC's interest, specifically provides for that rebuttable presumption "along with a procedure for processing [shipper] requests to retain discounts" prior to a nomination to use an alternate point, Transco said.

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