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
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
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.
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