FERC has sent Dominion Resources and its merged partner,Consolidated Natural Gas (CNG), back to the drawing board to expandthe scope of the pipeline marketing affiliate rule to apply to allenergy 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 — whichcompleted their merger in January — proposed that the Order 497standards 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 Order497 restrictions to affiliates with an “electric power merchantfunction” in its decision on the merger of Pacific Enterprises andEnova Corp. in June 1998.

That may be so, the Commission said, but the two mergers arecompletely different. “…[I]n contrast to the circumstances inEnova, the universe of energy companies affiliated with CNGT isbroader. Specifically, unlike the affiliates of Pacific Enterprisesor Enova, a number of CNG’s affiliates are separate gas localdistribution companies (LDCs) for which the standards of conductproposed by [the merged parties] would not apply.”

If FERC were to accept the compliance filing of DominionResources and CNG as is, “a CNG-affiliated LDC could be used toengage in some of the improper sharing of competitively-sensitiveinformation and other abuses…..that we intended to prevent by ourrequirements in the merger order,” the Commission said in itsdecision last week [EC99-81-001].

FERC directed the two merged companies to file a new compliancefiling within 30 days of the order, requiring CNGT to apply theOrder 497 standards to all transactions with energy companies thatit is now affiliated with as a result of the merger. CNGT is themajor interstate pipeline subsidiary of the merged company.

Susan Parker

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