Six Tennessee Contracts Get FERC Okay Again
FERC has upheld an order approving Tennessee Gas Pipeline's new
transportation service agreements with six shippers, casting aside
producer arguments that the contracts included negotiated terms and
conditions and raised right-of-first-refusal (ROFR) issues.
Indicated Shippers, which represent major producers, argued the
contracts included "partial rate zone turnback provisions" that
were negotiated terms and conditions not offered to other firm
shippers on Tennessee's system. Moreover, the producer group
insisted such provisions will frustrate the underlying purpose of
the ROFR regulations, as well as will amount to an invalid exercise
of the shippers' ROFR.
FERC initially approved the contracts in early October, but gave
Indicated Shippers and other parties a second chance to comment on
the agreements after they had a chance to review information that
previously wasn't available. Nevertheless, the Commission majority
again accepted the Tennessee contracts without condition.
"Indicated Shippers have raised nothing in their protest to warrant
any change in our action," the order said [RP96-312-018].
Commissioners William Massey and Linda Breathitt dissented on the
negotiated-rate issue, as they did in the original order.
In all six agreements, firm shippers had exercised rights to
extend their contracts under a unique tariff provision that stemmed
from a 1997 settlement between Tennessee and existing long-term
firm shippers. "Thus, since the extensions are pursuant to
negotiated contract term extension agreements, the.....contract
extensions [at issue] are not subject to the Commission's ROFR
regulations," the order noted. "Therefore, Indicated Shippers'
argument that the contracts raise ROFR issues.....[is] without
Nor did the contracts provisions deviate from Tennessee's tariff
or constitute a shift in Commission policy by allowing pipes to
negotiate terms and conditions of service, as Indicated Shippers
had claimed, the order said. Rather, they were "mere contract
extensions," it noted. "The parties to contracts may negotiate
changes in points, volumes, rates and the term of the contract and,
unless operating conditions are changed (which is not the case
here), such changes are not considered changes in service."
Specifically, the changes in primary points under the contracts at
issue "are not precluded by any Commission policy on negotiated
rates; nor are they barred by anything in Tennessee's tariff."
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