In upholding the rolled-in rate settlement of PG&E GasTransmission Northwest Corp., the Federal Energy RegulatoryCommission ruled last week that replacement shippers who receivedpermanent releases of older, pre-expansion capacity were similarlysituated to the system’s expansion shippers and, therefore, shouldbe charged similar rates.

The decision was in response to replacement shippers’ argumentsthat they should be entitled to the same lower rate enjoyed byPacific Gas & Electric, which permanently releasedpre-expansion capacity to them in 1994-1995 after the PG&E GasTransmission expansion went into service. The Commission rejectedtheir reasoning on the grounds that a low, pre-expansion rate forreplacement shippers would not be fair to the expansion shippers.

“…[[I]t would appear to be unduly discriminatory to permitpost-expansion replacement shippers taking permanent releases toqualify for a lower maximum rate than the pipeline’s expansionshippers,” the order said [RP94-149-007]. FERC “finds that when apre-expansion shipper on a system with incremental ratespermanently releases its capacity, its replacement shipper shouldbe subject to the same incremental, expansion rates as thepipeline’s expansion shippers,” it noted.

“Whether a shipper obtains capacity after an expansion bycontracting directly with the pipeline or [by] taking a permanentcapacity release, it is only because of the expansion that there issufficient capacity for all the post-expansion shippers to beserved. Thus, both sets of post-expansion shippers appear tobenefit equally from the expansion.”

Although FERC’s “evolving policy could justify requiringreplacement shippers to pay PG&E [Gas Transmission’s] higher,expansion rate since they obtained their capacity after the 1993expansion,” the settlement makes it easier on them – it furnishesreplacement shippers with a lower, rolled-in rate and providesadditional mitigation, the order noted. The settlement,particularly for replacement shippers, is a “better result thanany…they could obtain by continued litigation of the rolled-invs. incremental rate issues.” It calls for all customers ofPG&E Gas Transmission, formerly Pacific Gas Transmission, topay fully rolled-in rates by the year 2004, which replacementshippers hotly contested.

©Copyright 1998 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press,Inc.