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FERC Conditionally Stamps Northern-Enron Deal

FERC Conditionally Stamps Northern-Enron Deal

A large negotiated rate contract between Northern Natural and its affiliated Enron North America Corp. made it through FERC last week, but not without a promise of further regulatory scrutiny. FERC accepted the deal, which covers about one-third of Northern's firm space, on the condition that the pipeline submit a detailed explanation of how the various pricing options work. The follow-up review is based largely on a protest filed by Northern shipper GPM Gas.

The Commission also granted Northern a waiver of the 30-day notice requirement for implementing negotiated rate deals, subject to the pipeline filing detailed information about its affiliate transaction.

GPM warned FERC that the four complex pricing mechanisms in the deal gave Enron significant flexibility while making it difficult for other shippers to determine how the economics compared to recourse rates. Particularly shady, according to GPM, was the handling of fuel charges. GPM also questioned whether the contract would recover variable costs. And it said certain contract terms appeared to violate FERC policy on negotiated terms and conditions.

As a result, the Commission conditioned its approval of the transaction on Northern filing a detailed explanation of the fuel reimbursement provisions under the various pricing options, the proposed method of accounting, and the reasons why the deal doesn't violate FERC regulations prohibiting negotiated terms and conditions. Northern must file the information within 15 days. Its contract, however, became effective Nov. 1.

Rocco Canonica

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