FERC Approves Bondad Expansion, Rejects Allocation Plan
FERC's approval of El Paso's $3.6 million Bondad Line expansion,
which would increase capacity by 117 MMcf/d in October, likely will
provide some relief to Bondad shippers, who have struggled through
many days of constraints and allocations on the San Juan Basin
The Commission rejected El Paso's proposed capacity allocation
procedure, which would have given new shippers priority rights over
existing shippers during constrained periods. And existing shippers
won a battle over the max rates for expansion service. FERC sided
with protesters Burlington Resources, Southwest Gas and Arizona
customers, in rejecting a proposed initial recourse rate that was
nearly 9 cents/Dth/d cheaper than the current max rate.
"These provisions together would give project shippers a
preferential allocation of constrained capacity on the Bondad
system, while current shippers would pay higher Part 284 rates for
inferior firm service using the same capacity."
But El Paso clearly won the war. Existing shippers probably
won't be too thrilled that the Commission upheld El Paso's
negotiated rate contracts, allowing new Bondad shippers to pay at
least 7 cents/Dth/d less for the same service provided to existing
shippers. Enron and Elm Ridge will be paying $0.0325 and
$0.03575/Dth/d, respectively, while existing shippers pay maximum
recourse rates of $0.10911/Dth/d.
FERC said pipelines can negotiate rates that are not unduly
discriminatory and that treat similarly situated customers
similarly. It said El Paso has the authority to agree to rates that
are less than the maximum recourse rates paid by other shippers,
and protesters did not allege they would incur competitive harm as
a result of the negotiated rates. FERC said the cross-subsidization
arguments raised by protesters were inappropriate for the current
proceeding and because of El Paso's settlement could not be raised
again until the end of a 10-year moratorium. FERC had the option of
reviewing El Paso's costs and services under a section 5 proceeding
but said it was not persuaded that was necessary.
El Paso said yesterday it had not made a decision on whether to
move forward with the project or appeal FERC's decision. The
project would involve minimum construction, including compression
enhancement and replacement at three stations.
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