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ALJ Certifies Settlement of Complaint Against National Fuel

An administrative law judge (ALJ) Wednesday recommended FERC approval of a settlement that resolves a number of issues raised in a complaint brought earlier this year by several Pennsylvania and New York agencies against National Fuel Gas Supply Corp.

The Section 5 Natural Gas Act complaint was filed in April by the New York Public Service Commission, the Pennsylvania Public Utility Commission and the Pennsylvania Office of Consumer Advocate. It alleged that National Fuel's transportation rates had become "unjust and unreasonable" over the past 11 years since FERC reviewed a 1995 settlement that established the rates. As a result of its rates, the agencies claimed that the interstate natural gas pipeline earned excess revenues of $30 million for each year in the 2003-2005 period.

The agencies further alleged that National Fuel was retaining more than twice as much fuel from its shippers than was necessary to operate its system and was selling the excess on the spot markets and keeping the revenue. They estimated that National Fuel recovered up to $23 million a year during the 2000-2004 period from selling excess retained gas.

"As to the issues arising from the sales of excess retained gas and the issues related to the cost of capital, [the settlement] expresses the understanding that all issues that were set for hearing or could have been raised are resolved by negotiated resolution," said ALJ Joseph R. Nacy in certifying the uncontested offer of settlement to FERC [RP06-298].

The settlement, which extends through Nov. 30, 2011, establishes a five-year moratorium (subject to exceptions) on National Fuel's transportation and storage rates, prohibiting the pipeline from making any Section 4 or Section 5 rate changes prior to Dec. 31, 2011. The agreement, which could take effect as early as Feb. 1, 2007, also calls for National Fuel to make refunds to supporting shippers for excess gas retained during the months of December and January, at a minimum. Since no shipper contested the settlement, the refunds could conceivably go to all National Fuel shippers, a source involved in the settlement talks said.

Under the settlement, the fuel retainage rates on transportation would be reduced to 1.4% from 2%, while the fuel retainage rates for storage would remain unchanged. .

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