Shippers Seek Modifications in MRT's Auction Proposal
Caught in the midst of heated criticism of FERC's proposed
auction mechanism, Mississippi River Transmission (MRT) is
defending its proposed new auction procedures from attack by
marketers and producers.
Although the St. Louis, MO-based pipeline subsidiary of Reliant
Energy has made "numerous concessions" in its proposed tariff
revisions that would result in a "more functional auction"
mechanism, Dynegy Marketing and Trade said it still had a number of
concerns with MRT's initiative.
It called on the Commission to require MRT to 1) adopt an open,
interactive auction process, or, at a minimum, to adopt a single
auction process; 2) designate in its tariff what "other factors"
MRT would consider in awarding available firm capacity; 3) remove
the provision allowing MRT to aggregate bids when awarding
capacity; 4) exclude prearranged deals from auctions if they are
for a term of one year or less; 5) post any applicable reserve
price; and 6) clarify that bids can be withdrawn prior to the end
of an open season [RP98-404-003].
Additionally, Dynegy asked FERC to state unequivocally that
MRT's auction process would not serve as a "precedent" for
resolving the issues that have been raised in the mega-notice of
proposed rulemaking (NOPR) on short-term transportation services
[RM98-10]. The pipeline's auction proposal would permit it to award
capacity based on the net present value (NPV) of a bid rather than
based on its current first-come, first-served approach. FERC
already has accepted and suspended the filing to be effective March
17, but Dynegy and others have taken issue with certain tariff
revisions sought by MRT.
Dynegy contends that an open, interactive auction process on
MRT's system - as opposed to a sealed bidding system - would help
to provide the transparency needed in the marketplace. Also, it
would ensure that MRT's bidding procedures "are above-board, and
that the capacity actually is going to the bidder that values it
the most." In the alternative, Dynegy asked that MRT be limited to
one type of auction procedure for all auctions. The pipeline, on
the other hand, wants the discretion to use either open or closed
"...[I]f every pipeline across the country decides to join MRT
in implementing two very different auction procedures, it will be
difficult, it not impossible, for nationwide marketers like Dynegy
to learn all of the procedures to be able to compete effectively in
the auction process," the Houston-based marketer said.
MRT's claim that it would consider "other objective and
non-discriminatory factors" when awarding available firm capacity
also sent up a red flag with Dynegy. "Dynegy is concerned that
MRT's 'other factors' are not defined in the tariff, and they would
give MRT discretion to favor certain shippers." This would be
contrary to the mega-NOPR, the marketer said, in which FERC favored
prior disclosure of auction procedures in pipeline tariffs.
Furthermore, it urged the Commission to reject a proposal that
would permit MRT to aggregate two or more bids and award the
available capacity to the combination of requests that results in
the highest incremental revenues to the pipeline. "This provision
either will result in aggregated shippers who may not place the
highest value on the capacity nevertheless receiving the capacity,
or a single shipper having to pay extra to take more capacity, or
to take capacity for a longer term in order to receive the
capacity," Dynegy said.
Amoco Production and Amoco Energy Trading criticized MRT's
proposed tariff changes in its auction procedures as being "overly
broad and vague," saying they would give the pipeline "too much
discretion in the way that auctions are conducted."
The Missouri Public Service Commission focused its protest on
the tariff provisions for pre-arranged deals. These would require
the pipeline to post the terms of all pre-arranged deals so that
other shippers could bid, but would give the pre-arranged customer
the chance to match any higher bids that are received.
"This arrangement all but guarantees the pre-arranged customer
will obtain the capacity," the state commission said. "Rather than
fostering real competition, this provision is...likely to have a
dampening effect on the number of parties willing to bid for the
available capacity against the pre-arranged customer." Moreover, it
opens up an opportunity for abuse by the pipeline, the Missouri PSC
said. "For example, if MRT were to negotiate with an affiliate
company for capacity, the affiliate, in having the right to match a
high bid, would be virtually assured of winning the capacity."