The FERC majority last week approved a settlement that not onlygives customers on Texas Gas Transmission lower rates and refunds,but also clears the way for NorAm Gas Transmission, a non-shipperand pipeline competitor, to have an evidentiary hearing on twodeferred rate-related issues in the case. Commissioner LindaBreathitt dissented in part, saying the ruling set a dangerousprecedent for other rate settlement cases.

Since NorAm is neither a current shipper on the Texas Gas systemnor is it likely to become one in the future, Breathitt said shequestioned “the equity and sense of allowing a non-shipper andcompetitor to interfere with an otherwise uncontested rate-decreasesettlement.” She noted shippers that “agreed to settle the ratecase will be forced to participate in the [NorAm] hearing toprotect their rights,” and subsequently will incur additional legalexpenses. The bottom line is that the majority ruling “essentiallyreduces or eliminates the benefits of the settlement to shipperswho actually use the Texas Gas system.”

Also, “…I am concerned about the adverse effect the majority’sdecision might have on pipelines and their shippers’ ability toresolve rate cases through settlements” in the future.

The Commission overturned the ruling of an administrative lawjudge (ALJ), who held NorAm wasn’t entitled to an evidentiaryhearing on the so-called “NorAm issues” – such as whether aseparate production-area rate zone should exist on the Texas Gassystem with a separate production-area cost of service. In itsdecision, however, FERC noted that Texas Gas had agreed in its lastrate case to resolve the “NorAm issues” in its current rate case.

Breathitt argued that FERC contradicted a 1987 precedent set bythe D.C. Circuit Court of Appeals. That case, she said, held that”a contesting party did not have the right to a hearing asnon-shipper but instead had only a future right to a hearing if andwhen it became a direct ratepayer.” She noted the Commission hadapplied the court’s ruling in a Northwest Pipeline case last year.

Susan Parker

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