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FERC Denies Complaint Alleging Flawed Auction on Columbia

FERC has denied a complaint in which Pepco Energy Services Inc. (PES) alleged that a November capacity auction conducted by Columbia Gas Transmission was flawed and ultimately led to the rejection of valid bids made by Pepco and capacity being awarded to another shipper.

"The Commission concludes that PES has failed to provide sufficient evidence that the auction was faulty such that reassignment of the capacity or a re-running of the auction is warranted. The Commission does not agree with PES that Columbia treated it differently than other bidders, that Columbia unduly discriminated in the conduct of the auction, or that Columbia violated its tariff by failing to make its Navigator [electronic bulletin board] system available to PES," the agency said in an order issued Tuesday [RP07-107].

The FERC order said Columbia's computer time logs showed that a second bid placed by Pepco Energy, which prompted the complaint, "was entered after the close of the auction," thus making the bid invalid. The agency further said Pepco Energy should have been aware of the risks involved when placing a revised bid in the final minutes of an auction on Columbia, "rather than submitting an initial bid reflecting their true valuation of the capacity."

In the Section 5 complaint filed in December, the Arlington, VA-based energy supplier, a subsidiary of Pepco Holdings Inc, called the Nov. 8 auction on Columbia's Navigator system "fatally flawed," claiming that it failed to accept the company'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 [RP07-107]. As a result, Pepco Energy said it lost out on capacity on Columbia that is "integral" to providing service to its retail customers in the Washington, DC, metropolitan area.

The company urged the Federal Energy Regulatory Commission to order Columbia, the pipeline subsidiary of NiSource Inc., to award capacity to Pepco Energy on which it would have had a winning bid if it had not been for the alleged EBB errors, or declare the auction void and order Columbia to conduct a new auction; and order Columbia to reinstate Pepco Energy on its list of approved bidders.

While FERC denied Pepco Energy's request for reassignment of capacity or a new auction, it ordered Columbia to provide further information before ruling on the company's plea to be reinstated to the pipeline's list of approved bidders. "Columbia maintains that the six-month suspension is mandated by its tariff. However, the Commission does not read the tariff as requiring a mandatory suspension, but as providing Columbia discretion in regard to removal of bidders from its Approved Bidders List," the order said.

"When Columbia has the discretion, as it does here, to provide something less than six-month removal, it must not exercise that discretion in an unreasonable or unduly discriminatory manner. Columbia has provided no explanation of how it customarily exercises that discretion or how its exercise in the circumstances here is reasonable and not unduly discriminatory," it noted.

The Commission directed Columbia to submit within seven days "further explanation as to how this penalty conforms to its customary treatment of similarly situated bidders and how it is a reasonable response in this situation." Removal from Columbia's list of approved bidders bars Pepco Energy from bidding on new capacity that becomes available or taking assignments of released capacity.

Columbia said it removed Pepco Energy from its list of approved bidders after the company refused to execute an agreement for the capacity in the auction on which it was a successful bidder. Pepco Energy claimed it declined the second path of capacity because it was related to the capacity on which it was not a successful bidder.

Columbia said it suffered the loss of $2.2 million of demand charges as a result of Pepco Energy's refusal to execute a service agreement for the capacity it was awarded in the auction.

Pepco Energy noted that its removal from Columbia list of approved bidders will impair its flexibility to accept released capacity on a monthly basis from Washington Gas Light (WGL), which it says is critical for serving its customers on the WGL system. WGL serves gas customers in Virginia, Maryland and Washington, DC.

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