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Alliance Fined for Trying to Mislead Shippers on Unsubscribed Capacity
Alliance Pipeline has agreed to pay a civil penalty of $500,000 for violating FERC regulations with respect to capacity auctions two years ago, specifically giving shippers a misleading impression about the amount of unsubscribed capacity on its system.
In 2010 Alliance — which is jointly owned by Enbridge Inc. and Fort Chicago Pipeline II U.S. LP (now Veresen Inc.) — feared that its customers would see unsubscribed capacity on its system as an indication of the pipeline capacity’s reduction in value and a reason not to renew their contracts, the Federal Energy Regulatory Commission (FERC) said Friday in an order approving a stipulation and consent agreement [IN13-3].
Alliance’s CEO “thus sought to have its parent companies purchase the unsubscribed capacity, even though it believed that doing so would likely increase the parents’ financial losses, to avoid negative perceptions of Alliance that would result from non-placement of that capacity,” FERC noted.
In an e-mail dated March 11, 2010, the CEO estimated that purchasing turned-back capacity would have cost the parent companies around $1.1 million, but he added that it “seems like a reasonable price to pay to avoid the…owner issues of stranded capacity,” the FERC order said.
“Had the owners…implemented this plan, it could have created a misleading impression with existing shippers on Alliance about the value of Alliance’s overall capacity. The threat was ultimately alleviated because, by the time of the auction in late May 2010, the owners concluded that they would reduce, rather than increase, their losses by having an affiliate engage in the transaction.”
The new affiliate, Sable NGL Services LP, was created by the parent companies. Sable was the only bidder in the May 2010 auction, winning all of the capacity. BP Canada subsequently filed a protest, which resulted in the FERC investigation.
FERC’s Office of Enforcement determined that Alliance violated provisions of the Commission’s standards of conduct for transmission providers by disclosing information to employees of a marketing affiliate of Sable, Tidal US; by failing to provide information regarding the availability of additional capacity at upstream receipt points to other market participants at the time it supplied the same information to the owners; and accepting Sable’s bid when Sable failed to appear on Alliance’s approved bidders’ list as required.
In addition to the civil penalty, Alliance is required to provide FERC enforcement with semi-annual compliance reports for a period of one year.
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