A plea by two Enron affiliates for a limited waiver of thecapacity-release regulations and the “shipper-must-have-title”policy was met with a chilly reception from gas producers,industrial customers and state interests at FERC.

Enron Capital &amp Trade Resources and Enron Energy Services areseeking the waiver to allow them to transfer title to gas beingtransported on five New York State-bound pipelines to end-usecustomers prior to the gas actually reaching the state boundaries.The waiver is needed, they insist, for them to compete on equalfooting with other gas suppliers that are transferring the titleoutside of New York State to elude the state’s gross receipts taxand thus undercut competitors’ gas prices.

Enron’s petition is based on a “mistaken and faultyinterpretation” that a waiver is needed to permit “in-transit”transfer titles, the Process Gas Consumers Group (PGC) said, addingthat no policy presently exists to prohibit the transfers. FERCshould either take no action at all on Enron’s petition or simplyclarify the “permissibility” of in-transit title transfers, thegroup of industrial customers noted [RP98-220].

“However, the last thing this Commission should be doing isaltering industry practices in order to cause state taxes to beapplied to natural gas transactions. The fact is that the New Yorklegislature is perfectly capable of addressing any perceived taxdisparity if it chooses to do so,” the PGC told FERC in a limitedprotest on May 29th [RP98-220]. Indeed, the legislature did thiswhen it imposed a “gas importers tax” on users of gas purchasedoutside of the state.

“If state legislatures choose not to tax the seller in suchtransactions, it is their business. Prohibiting in-transit titletransfers to address an alleged tax disparity would unnecessarilyand wrongly put the Commission into the state taxation business,,”the industrial users warned. “If Enron does not approve of NewYork’s statutory taxation policy, then it should take this issue upat the state level, not through a federal agency ‘back door,'” thePGC said.

Any Commission action “interfering” with in-transit titletransfers could conceivably have “tax implications” for gasdeliveries into other states served by the five pipelines, andpossibly others, the industrial customers said. Moreover, imposing”new tax burdens on marketers could also interfere with marketers’sales practices, and it could undermine the liquidity of gasmarkets by discouraging sales to particular markets or triggeringmultiple taxation.”

The PGC further argued that there was nothing in the fivepipelines’ tariffs that prohibited them from making in-transittitle transfers to their customers. The pipelines’ tariffs onlyrequired that they have title at the time of delivery into thepipeline. The pipelines include CNG Transmission, Columbia GasTransmission, National Fuel Gas Supply, Tennessee Gas Pipeline andTranscontinental Gas Pipe Line.

Producers also took issue with Enron’s petition for a limitedwaiver. They objected because it would require an exception to the”shipper-must-have-title” policy, which they say is critical toFERC’s capacity-release program. “Such exceptions, if granted here,could lead to such further additional waivers that the entirecapacity-release program could be severely undermined – essentiallyresulting in a reversion to capacity brokering in fact, if not inname,” said Burlington Resources Oil &amp Gas and Exxon Corp.Industrial customers disagreed with producers on this point.”…[W]hether title transfers at the city or upstream within thepipeline is not a capacity-release issue at all,” the PGC said.

The New York Public Service Commission declined to take aposition on the requested waiver, but noted that an exception tothe “shipper-must-have-title” rule would have “far broaderimplications” on retail-access programs than this limited requestby Enron, particularly given the “incipient nature” of retailaccess nationwide.

The Enron affiliates are seeking the waiver for gas beingshipped to their New York commercial and industrial customers onthe five pipelines. If the Commission should deny their waiver,they have asked it to clarify that all shippers must have title inthe future, and to put an end to all in-transit transfers without acapacity release. Susan Parker

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