Tennessee's Eastern Express Project Wins Certificate
FERC last week awarded Tennessee Gas Pipeline a certificate for
its Eastern Express Project 2000 after it had satisfied all of the
requirements of the new policy statement on gas pipeline
The project will expand the pipeline's system by 288,000 Dth/d
in Zone 6, providing an outlet for natural gas transported over the
joint Maritimes & Northeast Pipeline/Portland Natural Gas
Transportation System (PNGTS) facilities in the New England region.
Tennessee's system will be expanded from where it will interconnect
with the PNGTS/Maritimes joint system at Dracut and Haverhill, MA,
to delivery points at Milford and Meriden, CT, and Mendon, MA.
".....[W]e find Tennessee's proposed project can proceed without
subsidies from its existing customers, and expect it to provide
public benefits without adverse impacts," the order said
[CP99-262]. Additionally, FERC said the pipe could roll in the
costs of the $28 million project in its next rate case barring "a
significant change in the relevant facts and circumstances."
Rolling in the costs will result in a rate decrease for existing
shippers in Zone 6, Tennessee said.
Rolled-in pricing of the Eastern Express project is consistent
with the Sept. 15 policy statement for another reason. The policy
specified that such pricing would be permitted "in cases of
inexpensive expansibility made possible by earlier, costly
construction," the order noted. "This is such a case.".
The Commission also approved the proposed negotiated rates for
the expansion shippers, which Tennessee said would be less than
existing transportation rates for recourse shippers. "Under [our]
policy.....the revenue shortfall due to the lower negotiated rates
cannot be recovered from existing shippers. Therefore, our policy
is to permit negotiated rates at lower than recourse rates in all
cases, even to affiliates, and not only when lower rates are needed
to compete for business," the order said.
Also favorable were Tennessee's binding precedent agreements for
173,000 Dth (60%) of the proposed 288,000 Dth/d capacity, FERC
said. These precedent agreements "demonstrate that the estimated
revenues from the proposed project exceed the cost of service by
$43,084,914 over the ten-year primary period, and that the annual
revenues will exceed annual costs in each of these ten years. Since
the long-term project revenues exceed the project costs, it will
not be subsidized by existing customers."
The Commission said it would require Tennessee to execute firm
contracts "equal to the capacity in which Eastern Express Project
2000 shippers have committed themselves" before it can begin
construction on the expansion.
Because the expansion will be accomplished mostly through
additional compression, the FERC order said Tennessee's project
"minimizes potential landowner objections.....and no eminent domain
authority will be required."
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