Amoco: MRT's Capacity Auction a Little 'Premature'
Mississippi River Transmission (MRT) may have jumped the gun a
bit when it proposed to hold auctions as part of a new method of
awarding capacity to shippers on its pipeline system. But the
company said it shouldn't be punished for coming up with the idea
prior to the release of FERC's Notice of Proposed Rulemaking
(NOPR), in which short-term capacity auctions are a major issue.
A late protest by Amoco Energy Trading called for the Commission
to reject the plan or at least hold it in abeyance pending the
outcome of the NOPR. Meanwhile, MRT customers are eager for an
expansion of the pipeline system. "Gosh, the NOPR could be
finalized two years from now. We need the tariff changes in place
now," said MRT's Denise Fetsch.
The Commission already has addressed and rejected many of the
issues raised by protesters, MRT told FERC in an answer. In its
mid-September tariff filing, the pipeline proposed changing its
method of awarding capacity on its system to a "net present value"
(NPV) allocation from its current first-come first-served "queue"
approach. The new method was modeled after the recently approved
methodologies used by Texas Eastern and Tennessee, but it also
includes an auction-type process that could be either interactive
"It's not like we're trying to circumvent the NOPR and get ahead
of FERC on this. This is different," said Fetsch. "We're not
talking 'daily auction' here, although we do specify in our filing
that capacity of 31 days or less will be posted for bid for four
hours, capacity longer than 31 days and up to like 92 days will be
posted for a couple of days. It could include a daily auction and
one that will eventually comply with the NOPR. But [it really
wasn't intended] for firm capacity that would become available for
31 days or less."
Bob Trost, MRT's vice president of marketing, said the type of
auction FERC is proposing is "some interactive type thing handled
electronically, and frankly we're not equipped to do that right
now. It would be awfully burdensome to do that. And when I think of
auctions, I think of the short-term, day-to-day stuff. We're really
not selling capacity for that purpose. The reason our filing is
there is because customers want long-term capacity, multi-year
"We don't look for multiple bids coming in from each bidder.
We're basically asking people to submit their best bid. We're not,
in the true sense of an auction, allowing people to top other
people's bids, with all bids visible at all times. Everyone is
confidential until we know who the winner is, at which time we will
publish what the winning bid was. The level of detail and the
criteria will be clearly stated so anyone can [examine it]."
The pipeline has requested that its proposed allocation
methodology become effective Oct. 16, three days prior to an open
season it plans to hold to expand its mainline. MRT hasn't had a
major expansion project since Order 636 was implemented and
currently has no methodology in its tariff for awarding capacity.
It has used a first-come first-served queue to handle requests for
capacity that has become available through expired contracts.
Under the new NPV method, the total economic value to MRT of
accepting a request will be analyzed based on incremental revenues
to MRT. The primary focus of the NPV analysis will be on the rate,
quantity, and term requested. But in determining the NPV, MRT also
will consider factors such as receipt and delivery points and the
cost of construction necessary to accommodate service, the impact
on the operation of MRT's system, whether a request would provide
MRT and its customers access to new markets, turnback capacity,
impact on existing and new customers and the commencement date of
requested service. Any other factors MRT uses to allocate capacity
will be posted for shipper examination on its bulletin board, the
pipeline said. It also has requested to be able to reserve excess
capacity on its system for future expansions.
The pipeline currently is considering expanding its mainline by
110,000 MMBtu/d from Glendale, AR, to its market zone, including
the St. Louis, MO, metropolitan area and points in between. It's
also plans to expand its East line from Trunkline and Natural Gas
Pipeline connections to the market zone by 50,000 MMBtu/d. MRT told
shippers incremental rates will be between $0.17 and $0.40/MMBtu
for the mainline expansion and $0.16 per MMBtu for the East line.
In addition, MRT is considering building a new extension westward
to Washington, MO, and north to Wentzville, MO. The extension would
have a potential capacity of up to 75,000 MMBtu/d at an estimated
incremental rate between $0.13 and $0.17/MMBtu. The expansion
projects are expected to be in service in March 2001.