A large negotiated rate contract between Northern Natural andits affiliated Enron North America Corp. made it through FERC lastweek, but not without a promise of further regulatory scrutiny.FERC accepted the deal, which covers about one-third of Northern’sfirm space, on the condition that the pipeline submit a detailedexplanation of how the various pricing options work. The follow-upreview is based largely on a protest filed by Northern shipper GPMGas.

The Commission also granted Northern a waiver of the 30-daynotice requirement for implementing negotiated rate deals, subjectto the pipeline filing detailed information about its affiliatetransaction.

GPM warned FERC that the four complex pricing mechanisms in thedeal gave Enron significant flexibility while making it difficultfor other shippers to determine how the economics compared torecourse rates. Particularly shady, according to GPM, was thehandling of fuel charges. GPM also questioned whether the contractwould recover variable costs. And it said certain contract termsappeared to violate FERC policy on negotiated terms and conditions.

As a result, the Commission conditioned its approval of thetransaction on Northern filing a detailed explanation of the fuelreimbursement provisions under the various pricing options, theproposed method of accounting, and the reasons why the deal doesn’tviolate FERC regulations prohibiting negotiated terms andconditions. Northern must file the information within 15 days. Itscontract, however, became effective Nov. 1.

Rocco Canonica

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