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Columbia Gas Disputes Allegations of Flawed Capacity Auction

Columbia Gas Transmission Corp. has disputed allegations made by Pepco Energy Services Inc. (PES) earlier this month that a November capacity auction conducted by the pipeline was faulty and ultimately led to the rejection of valid bids submitted by PES and the sought-after capacity being awarded to another shipper.

In a Section 5 complaint filed at the agency, Pepco Energy said the auction, which closed Nov. 8 and was conducted on Columbia's electronic bulletin board (EBB), Navigator, was "fatally flawed." It claimed that the EBB failed to accept Pepco Energy's valid bids in the closing minutes of the auction, and on some bids failed to recognize Pepco Energy representatives as the bidders and mistakenly transformed the company's "unique" login information and password into data associated with a different bidder (see Daily GPI, Dec. 15). As a result, Pepco Energy said it lost out on capacity on Columbia that is "integral" to serving retail customers in the Washington, DC, metropolitan area [RP07-107].

But Columbia Gas, a pipeline subsidiary of NiSource Inc., contends that Pepco Energy's bids were too late. "PES failed to timely submit what it claims were its desired last bids...at the closing time of capacity auction #58435, an auction that had been open for bidding for seven days. PES alleges that 'at approximately 8:58 a.m. CST' it learned that it had been outbid, and then attempted twice to submit a last bid. Columbia's Navigator system web-server indicates PES' last bid attempts were too late. The only two post entries by PES after 8:58 a.m. CST were received at 9:00:03 CST and 9:00:41 a.m. CST -- after the close of the auction. Consequently, PES' complaint must be dismissed," Columbia Gas told FERC.

Even if PES had timely submitted its desired last bids, "it is extreme speculation on PES' part in its complaint to argue that it would have won the capacity auction," the pipeline said.

"In response to concerns expressed by PES, Columbia examined Navigator shortly after the close of the auction for any indication that Navigator was not working properly. Columbia delayed the award of the auctioned capacity to other parties for PES' benefit until Columbia completed that review. Contrary to PES' allegations, Columbia's Navigator system logs -- and technical support personnel observing Navigator at the close of the auction period in question -- indicated that Navigator was working properly throughout the duration of all the auctions ending on the morning of Nov. 8, 2006." In fact, Columbia noted that PES was a winning bidder in another auction (#58436) that was being conducted at the same time.

Arlington, VA-based Pepco Energy Services, a subsidiary of Pepco Holdings Inc., urged the Federal Energy Regulatory Commission to order the pipeline to award capacity on which it would have had a winning bid if it had not been for the alleged EBB errors; order Columbia to reinstate Pepco Energy on its list of approved bidders; or in the alternative, declare the auction void and order Columbia to conduct a new auction. Pepco Energy asked the Commission to act on the complaint under its fast-track procedures.

It has tried to resolve the matter with Columbia in a "reasonable manner, but without success," Pepco Energy said. "In response, not only has Columbia denied what would have been a winning bid for the Leach-to-Loudoun [Virginia] capacity, Columbia has notified [Pepco Energy] that it was removing [it] from its Approved Bidders List [ABL] for a period of six months," Pepco Energy said in its complaint. It also noted that Columbia has banned Pepco Energy from participating in capacity releases on the pipeline -- a move that Pepco Energy said makes it difficult to serve its customers on the Washington Gas Light distribution system.

"Contrary to PES' allegations, its removal from the...ABL was not precipitous or retaliatory. It was the result of PES rejecting its award of capacity in auction #58436," Columbia Gas said. "PES fails to mention that it was not removed from the ABL until after Columbia personnel called PES to fully explain that being removed from the ABL meant PES could not participate in capacity auctions or capacity-release transactions. [And] it was not until several days later that PES called Columbia to admit that it had forgotten that it needed to participate in capacity-release transactions on Columbia," the pipeline noted.

"Columbia suffered the loss of $2.2 million of demand charges alone as a result of PES' refusal to execute a service agreement for the capacity it was awarded in auction #58436," it said.

Lastly, Columbia Gas said that any confusion over Pepco Energy's login information and password was the fault of Pepco Energy itself. "Several PES employees were logged into Navigator using a single Navigator identification number and password -- a practice PES has been specifically advised by Columbia to not engage in," the pipeline said.

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