With a few minor changes, FERC has approved Natural Gas PipelineCo.’s (NGPL) proposal to establish procedures to reserve certaincategories of existing capacity for future expansions andextensions.

Natural’s plan, subject to certain clarifications and revisions,was consistent with the Commission’s policy of “minimizing the rateimpact of allocating the costs of existing unsubscribed capacity toexisting customers, and it encourages the full utilization ofcapacity by those who value it the most,” the order said[RP99-450].

Moreover, it will permit Natural to “maximize the efficient useof capacity that is or will become available,” as well as “minimizethe cost of construction of new facilities and environmentalimpacts,” the FERC order noted.

According to its proposal, Natural could reserve four types ofexisting capacity for future expansions. These would includecapacity that’s posted on its electronic bulletin board (DART) asunsubscribed, previously subject to a right-of-first-refusal(ROFR), been turned back, or available as a result of expiration ortermination of an existing agreement. Prior to reserving the lattercapacity (expired/terminated agreement), Natural must make thecapacity generally available for bidding through its auctionprocedures. The tariff changes are effective Sept. 1.

Indicated Shippers, which represent producers, argued thatNatural’s proposal would enable the pipeline and/or its affiliatesto circumvent the auction procedures, but FERC disagreed. It saidNatural’s tariff would offer adequate protection against this. Itrequires the pipeline to hold an auction for the “posted capacity”if an existing shipper should submit a bid equal to 50% of theapplicable winter maximum rate or 25% of the summer rate.

And, “potential shippers do have [other] opportunities toacquire ‘posted capacity’ before Natural reserves it for anexpansion project,” the order said. For example, it noted that ROFRcapacity “has already gone through the bidding and matching processbefore Natural can reserve this capacity,” and Natural has proposedto subject capacity that becomes available as a result of aterminated agreement to the auction process prior to reserving it.

Indicated Shippers and the Process Gas Consumers Group, whichrepresents industrial gas users, were concerned the proposal wouldenable Natural to withhold long-term firm transportation capacityfrom the market indefinitely. Specifically, they opposed allowingNatural to reserve capacity until the in-service date of anexpansion project – which could be more than a year.

“The Commission does not find the possibility of the reservationperiod extending up until the in-service date of the projectproblematic because Natural has committed to marketing the reservedcapacity during the interim period,” the order said. “In addition,the capacity being reserved is generally that which has already notbeen sold for various reasons; for example, no long-term interesthas been exhibited for the capacity prior to the reservation of thecapacity, it is already unsubscribed, it is capacity for which aROFR was not exercised or is expired capacity for which there wasno interest in long-term commitments…..”

Susan Parker

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