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Southern Company Opposed to Gulf South, Petal Merger

Southern Company, the nation's fourth-largest electric utility, is urging FERC to reject a proposed merger between Gulf South Storage Pipeline Co. LP and Petal Gas Storage LLC, arguing that such a merger would be detrimental to its more than 4.4 million retail customers.

On Tuesday, Scott Grover, an attorney with Balch & Bingham LLP of Birmingham, AL, filed a protest, motion to intervene and an alternative motion to consolidate with FERC on behalf of the Atlanta-based utility.

Gulf South and Petal filed a joint application with the Federal Energy Regulatory Commission on May 1 [CP14-473], seeking authorization for Gulf South to consolidate Petal's jurisdictional natural gas storage and transportation facilities into the former's existing interstate natural gas operations.

Grover said a request by Gulf South and Petal to expedite approval of the merger by Nov. 20 would eliminate certain leases signed before the commencement date for a majority of service agreements tied to the Southeast Market Expansion Project, which FERC approved last November [CP13-96] (see Daily GPI,Nov. 18, 2013).

"Gulf South and Petal claim that the proposal is required by the public convenience and necessity," Grover said, but added that Southern Company "does not believe that the applicants have done what they could have done to eliminate or minimize the adverse effects the project might have on existing customers like Southern Company."

Southern Company is the largest single firm capacity holder in both the Petal Storage Field and the Petal Storage Pipeline. The utility said Petal currently offers separate firm storage and transportation rate schedules, as well as separate rates for interruptible storage and transportation service.

But the utility said that under the current merger proposal, Gulf South would combine the services and create firm and interruptible storage services with an optional transportation component, while storage and transportation services would be under consolidated rates schedules.

"The aggregation of these two distinct services under a single rate umbrella does not, in Southern Company's view, preserve the status quo, and Gulf South has not explained the need for the adoption of such a scheme or how it will create efficiencies to the benefit of Petal's existing customers," Grover said. "To the contrary, Southern Company is concerned that such an aggregation could impede the orderly administration of the separate storage and transportation rights..."

"These inconsistencies and the associated ambiguity...are harmful to current Petal customers."

Grover said Southern Company is also opposed to the merger because Petal's existing customers would lose priority rights established under the Petal tariff after transitioning to the Gulf South tariff.

"The merger and proposed tariff changes would not preserve...[the] current level of service priority to Petal's existing firm storage and transportation customers," Grover said. "Rather, under Gulf South's tariff, customers holding storage or transportation service rights of lower priority that nominate that service during the timely or evening cycles cannot be displaced by a later nomination by a customer holding firm service and nominating what otherwise would have been a higher priority schedule."

Southern Company also argues the proposed merger would negatively impact storage nomination flexibility Petal's customers currently enjoy under the Petal tariff. Gulf South's tariff also doesn't require customers to provide their own insurance coverage for their gas in the Petal Storage Field, and the two tariffs differ "significantly" over Reservation Charge Credits.

The utility said that if FERC doesn't reject the merger application, it suggested consolidating the proceedings with two additional ongoing proceedings [RP14-822 and RP14-823], "so that the parties can either reach a settlement addressing all issues or, if the matter proceeds to litigation, the issues can all be heard together and [FERC] can reach a comprehensive resolution of the matter."

Southern Company's subsidiaries -- Alabama Power, Georgia Power, Gulf Power, Mississippi Power and Southern Power -- collectively own and operate more than 42,000 MW of power generation capacity in the region, a substantial portion of which is gas-fired.

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