FERC liked what it did with interconnections on the electricside so much that it figured why not try it out on natural gas. Andthat’s exactly what the Commission did last week — it issued anew policy for hooking up to the interstate gas pipeline grid.

By a unanimous vote, the Commission departed from its prior testunder which a party (shipper, storage company, market center et al)seeking an interconnection had to show that it was “similarlysituated” to other parties that previously were permitted to hookup to the pipeline. In its place, FERC adopted a new five-steptest.

“By abandoning the old similarly situated test for a newinterconnection policy, I think we take another step in maximizingthe use of the interstate pipeline grid,” said Chairman James J.Hoecker at last Wednesday’s Commission meeting.

The FERC decision called the new policy a “sensible step”because it “supplements and enhances” the long-standing requirementthat an open-access pipeline must provide transportation for anyparty seeking service at an existing interconnection whensufficient capacity is available on the pipeline’s system.

In order to interconnect with a pipeline, the new policyrequires: 1) a party seeking interconnection must be willing tobear the cost of construction if the pipeline performs the task. Orin the alternative, the party seeking interconnection couldconstruct the facilities itself in compliance with the pipeline’stechnical requirements; 2) the proposed interconnection must notadversely affect pipeline operations; 3) it and any resultingtransportation must not diminish service to existing customers; 4)it must not cause the pipeline to be in violation of anyenvironmental or safety laws or regulations; and 5) it must notcause the pipeline to be in violation of its right-of-wayagreements or any other contractual agreements.

The five steps were spelled out in an order involving PanhandleEastern Pipe Line. The case was remanded by the U.S. Court ofAppeals for the District of Columbia for FERC to provide furtherexplanation as to why it departed from its accepted interconnectionprocedure in earlier orders [RP97-29]. In those orders, theCommission approved revisions to Panhandle’s tariff, which ineffect bound the pipeline to grant interconnections to partiesmeeting certain terms, regardless of whether they were similarlysituated or not. The Commission last week stuck to its previousrulings in Panhandle based on the new policy, which it said will beapplied to all future gas pipeline interconnection cases.

Commissioner William Massey believes the new policy will be avast improvement over the “similarly situated” test. “In myopinion, [that] test led to the unfortunate result that pipelineswere hesitant to provide hook-ups for fear to do so would open thefloodgate for [more] hook-ups…..”

The new policy prohibits a pipeline from denying a party aninterconnection based solely on economic grounds, but it”acknowledges that economic issues could arise that the Commissionmight need to address,” said Commissioner Linda Breathitt.

“For example, there may be instances in which shippers may beable to bypass part of a pipeline’s system so that the pipelinerecovers fewer costs from those customers than it would if [the]shippers were required to utilize existing connections. This orderdoes not preclude consideration of economic arguments on acase-by-case basis where [pipelines] experiencing losses proposeand can justify some kind of mitigation or remedy,” she noted.

Hoecker agreed interstate pipelines would be able to “raise theissue of revenue losses,” but he added this only would be”appropriate in extraordinary kinds of cases.” Under nocircumstance does the new policy permit pipes to chargeinterconnection or access fees, Massey said, adding they “couldhave the anti-competitive effect of deterring interconnections.”

The order further calls for pipelines to develop “reasonabletime frames” for pipelines to respond to parties’ requests forinterconnections.

Susan Parker

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