In compliance with a Nov. 7 order, Algonquin Gas Transmission pipeline is seeking to replace its existing two-part firm with one-part volumetric service and institute a new interruptible service on its Boston-area Manchester Street and Brayton Point pipe facilities in an attempt to recoup lost revenues stemming from the bankruptcy of the parent company of a key customer, USGen New England Inc.

The incremental Manchester Street and Brayton Point facilities deliver gas from the Algonquin system to two USGen gas-fired power generation facilities in Massachusetts. USGen had two transportation contracts with the Duke Energy pipeline, totaling 215 MMcf/d, to supply gas to the twin power plants, but these were terminated in September shortly after USGen New England’s parent, National Energy & Gas Transmission (formerly PG&E National Energy Group), filed for Chapter 11 bankruptcy. The bankruptcy and subsequent contract termination essentially left Algonquin holding the bag for the remaining costs of the Manchester Street and Brayton Point facilities, said Gregg E. McBride, Algonquin’s vice president of rates and economic analysis.

Despite the bankruptcy, the two USGen plants still are in operation and are being supplied gas by third-party shippers over Algonquin’s system. However, the pipeline has not been able to collect for the cost of the facilities from these shippers, noted McBride.

In early October, Algonquin initially sought to implement meter access charges and a revenue crediting mechanism as a way to “ameliorate” the impact of the terminated USGen contracts, a proposal that drew sharp attacks from USGen and existing Algonquin shippers. FERC said the proposal was inappropriate and directed the pipeline to seek to recover the costs through a transportation service. FERC, in the later Nov. 7 order, accepted Algonquin’s proposed tariff revisions, subject to the pipeline replacing its two-part firm rates with one-part volumetric rates for firm AFT-1(X-38) and AFT-CL(X-37) service on the Manchester Street and Brayton Point facilities.

In a compliance filing submitted last week, Algonquin proposed a one-part volumetric rate of $0.6138/Dth as a substitute for the existing two-part AFT-1(X-38) rate for firm service on the Manchester Street facilities, based on an annual design throughput of 15,678,484 Dth. It also proposed a one-part volumetric rate of $1.0105/Dth to replace the existing two-part AFT-CL(X-37) rate for firm service on the Brayton Point facilities, based on an annual design throughput of 2,190,000 Dth [RP04-24].

The proposed rates were derived from an overall cost of service of approximately $9.6 million for firm service on the Manchester Street facilities and $2.2 million for service on the Brayton Point facilities for the 12 months ended Sept. 30 of this year, according to Algonquin.

Through the proposed volumetric rates, Algonquin is hoping to recover “approximately the same amount [that it] would have collected under the two-part rate with USGen,” McBride said.

In addition to the volumetric rates, Algonquin is revising its tariff so that existing shippers will not have access to either the Manchester Street or Brayton Point facilities on a secondary basis unless they have executed new contracts for service on those facilities. Algonquin is proposing a new AIT-2 service to provide service on these facilities on an interruptible basis.

The proposed interruptible rates are the 100% load factor rates for the corresponding firm service: $0.6138/Dth for AFT-1(X-38) and $1.0105/Dth for AFT-CL(X-37), Algonquin said.

Between Oct. 10 and Nov. 23, shippers transported more than 800,000 Dth on the Manchester Street facilities and in excess of 19,000 Dth on the Brayton Point facilities, according to Algonquin. A brief transition period would allow Algonquin the opportunity to contact all existing customers who have used these facilities since Oct. 10, and to tender contracts for service under the new rates and/or rate schedule, the pipeline said.

At the direction of FERC, Algonquin also has proposed a revision to its tariff that would require it to refund to those shippers, who will bear the brunt of higher rates, any money it may recover through the USGen bankruptcy proceeding. McBride said Algonquin may file a bankruptcy claim for the remaining costs of the incremental Manchester Street and Brayton Point facilities.

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