Marketers lost a battle against LDCs last month when theMichigan Public Service Commission (MPSC) sided with MichiganConsolidated Gas (MichCon) and Consumers Energy in a dispute overfees charged for tracking title to gas that changes hands on theLDCs’ systems. The MPSC found it had no jurisdiction to regulatetitle transfer tracking fees. As of Friday, the marketers had notdecided whether to appeal the decision, which they need to do bytoday.

The commission said since gas can move without title transfersand without utilities tracking transfers, the transfers are notintegral to gas transportation. “Rather, they can be viewed asseparate and distinct from the transportation service, and thetitle transfer tracking service offered by the utilities can beviewed as incidental to and not essential for the transportation ofgas.” In its order – which contradicted a staff recommendation forregulated title transfer fees – the MPSC said the marketers’argument put them in a dubious position on several counts.

“If they argue that the title transfer service should beregulated because it relates to the sale and purchase of gas, theymay find themselves, as buyers and sellers in that market, subjectto regulation by the commission. If they assert that the market isa wholesale market not subject to commission regulation, theargument begs the question why the commission can or shouldregulate an ancillary service in that unregulated market. If theyargue that the title transfer service should be regulated becauseit relates to the transportation of gas, which the commission doeshave jurisdiction to regulate, they face the arguments that thetitle transfers, by definition, do not involve any transportationof gas and are not sufficiently related to the transportationfunction to confer jurisdiction on the commission.”

Marketers involved in the case are Dynegy, LG&ampE NaturalMarketing, Coastal Gas Marketing, Westcoast Gas Services, andAquila Energy Marketing. “We were disappointed in the commission’sdecision, and we believe there will be huge ramifications toMichigan consumers by virtue of reducing competition in themarketplace and increased pricing,” said Dynegy spokeswomanJennifer Rosser. “We also believe that this is a decision basedupon facts not appropriately accounted for in the commission. Forexample, the lack of competition to provide the title transfertracking service.”

Dynegy spokeswoman Maripat Sexton said Dynegy and othermarketers believe Michigan’s fees will cause sellers to avoidMichigan in favor of other markets where there are no titletransfer tracking fees, thus driving up prices in Michigan.

Consumers Energy spokesman Charles MacInnis said his company’sargument all along was marketers didn’t have to use the titletransfer tracking service. “It’s optional.” He said the companywouldn’t say the total amount its collected in fees since theirimplementation Oct. 1, 1996, which is also when MichCon begancharging its fees. However, in June 1997, he told NGI during thefirst six months of the collection period the LDC collected about$250,000 (See NGI June 16, 1997).

Consumers charges half a cent per MMBtu for the first 10,000MMBtu, four-tenths of a cent for the next 40,000 MMBtu, andtwo-tenths of a cent thereafter for each title transfertransaction. MichCon charges one cent/Mcf per day.

Mark Gurley, Aquila senior vice president for trading and riskmanagement, said his company would be willing to pay the fees ifthey were more reflective of the utilities’ actual cost ofproviding the service. “The fact that the cost is one penny perMMBtu is rather outrageous, and we think that reasonable costs forthat type of service are much, much less than that. It’s ouropinion that it’s somewhere south of a tenth of a cent.” BradKibbe, Aquila director of trading said his company also wantseveryone in the daisy chain to pay the fee. Currently excluded aremarketers making the last sale to end-use customers. He said whenthe utilities’ file their next rate cases, the MPSC should see thatrevenue from title transfer tracking fees is credited back toend-users. And revenue from the fees has grown since they wereinstituted, Kibbe said Aquila is now paying about $40,000 a monthin title transfer tracking fees to both utilities.

A packet of gas can change hands as many as 15 times onConsumers, MacInnis said. “You can go from zero to one, to a dozento 15 with the same party in and out more than once in someinstances. One, two, and three is more the norm, but it canincrease significantly from there.”

Joe Fisher, Houston

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