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Dominion Resources, CNG Told to Widen Order 497 Scope

Dominion Resources, CNG Told to Widen Order 497 Scope

FERC has sent Dominion Resources and its merged partner, Consolidated Natural Gas (CNG), back to the drawing board to expand the scope of the pipeline marketing affiliate rule to apply to all energy affiliates within their corporate family.

When the Commission approved the marriage of Dominion Resources and CNG last November, it did so on the condition that the companies would require their entire corporate family to comply with the standards of conduct under Order 497, which historically have been used to deter the sharing of competitive information or the showing of favoritism by interstate gas pipelines to their gas marketing affiliates. (See NGI, Nov. 15) But FERC broadened the use of the standards with this decision to also include transactions between pipelines and their electric affiliates.

In their compliance filing, Dominion Resources and CNG --- which completed their merger in January --- proposed that the Order 497 standards should apply to only CNG Transmission's (CNGT) transactions with affiliates "engaged in the wholesale merchant [energy] function." They pointed out that FERC limited the Order 497 restrictions to affiliates with an "electric power merchant function" in its decision on the merger of Pacific Enterprises and Enova Corp. in June 1998.

That may be so, the Commission said, but the two mergers are completely different. "...[I]n contrast to the circumstances in Enova, the universe of energy companies affiliated with CNGT is broader. Specifically, unlike the affiliates of Pacific Enterprises or Enova, a number of CNG's affiliates are separate gas local distribution companies (LDCs) for which the standards of conduct proposed by [the merged parties] would not apply."

If FERC were to accept the compliance filing of Dominion Resources and CNG as is, "a CNG-affiliated LDC could be used to engage in some of the improper sharing of competitively-sensitive information and other abuses.....that we intended to prevent by our requirements in the merger order," the Commission said in its decision last week [EC99-81-001].

FERC directed the two merged companies to file a new compliance filing within 30 days of the order, requiring CNGT to apply the Order 497 standards to all transactions with energy companies that it is now affiliated with as a result of the merger. CNGT is the major interstate pipeline subsidiary of the merged company.

Susan Parker

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