Northwest Pipeline has flouted FERC’s turn-back policy by imposing an “unreasonable and fundamentally defective” turn-back fee requirement that blocked shippers from shedding more than 200,000 Dth/d of unused and unwanted pipeline transportation capacity on its system, complained two Duke Energy subsidiaries.

This capacity, if it had been accepted by Northwest Pipeline for turn-back, “would dramatically reduce the size, scope, cost and environmental impact” of a capacity replacement project (CRP) that the Department of Transportation (DOT) has ordered the pipeline to carry out, said Duke Energy Trading and Marketing LLC (DETM) and Duke Energy Marketing America LLC (DEMA).

The DOT ordered the replacement of existing pipe after finding “extensive corrosion problems” along a 268-mile portion of the Northwest Pipeline’s 26-inch line between Sumas and Washougal in Washington State.

The policy of the Federal Energy Regulatory Commission required Northwest to first solicit turned-back capacity from existing shippers to minimize the project’s scope, cost and environmental impact. Six shippers on Northwest’s Evergreen expansion, including DETM and DEMA, sought to turn back “large amounts of long-term capacity” to Northwest (totaling some 217,000 Dth/d of the 360,000 Dth/d of pipeline capacity that had to be replaced), but Northwest “actively blocked its turn-back by demanding on a ‘take-it-or-leave-it’ basis the payment of unreasonable and unsupported turn-back fees by Evergreen shippers,” the Duke Energy units said [RP04-386].

Northwest tried to assess a turn-back fee of $24 million on DETM alone, they noted. “Northwest’s turn-back fee demands were not supported with adequate information, and Northwest rebuffed efforts by DETM and DEMA to obtain basic information required to evaluate the validity of the requested turn-back fee…The turn-back fee proposals were presented as a ‘take-it-or-leave-it’ proposition, with no ability to negotiate, much less challenge, the proposed level,” the Duke Energy companies noted.

“If unremedied by the Commission, the end result will be rather stark: Northwest will have inefficiently overbuilt the [replacement project] by more than 200,000 Dth/d. And Northwest’s shippers…will bear the adverse impact of this wasteful construction.”

The “re-marketing open season” and “reverse open season” held by Northwest Pipeline to solicit turned-back capacity to reduce the scope of the CRP were “near complete failures, with the former (owing to unreasonable bidding restrictions) resulting in no re-marketed capacity whatsoever, and the latter resulting in a 94% failure rate, where only 13,000 Dth out of a total of 217,500 Dth that shippers sought to return was accepted by Northwest,” the Duke Energy subsidiaries told FERC.

They called on the Commission to require Northwest to revise its proposed pipeline tariff to make its reversed open-season process and methodology comport with agency policy, to invalidate the outcome of the earlier CRP reverse open-season, and to hold a new reverse open-season for the CRP consistent with the revised tariff.

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