Mississippi River Transmission (MRT) may have jumped the gun abit when it proposed to hold auctions as part of a new method ofawarding capacity to shippers on its pipeline system. But thecompany said it shouldn’t be punished for coming up with the ideaprior to the release of FERC’s Notice of Proposed Rulemaking(NOPR), in which short-term capacity auctions are a major issue.
A late protest by Amoco Energy Trading called for the Commissionto reject the plan or at least hold it in abeyance pending theoutcome of the NOPR. Meanwhile, MRT customers are eager for anexpansion of the pipeline system. “Gosh, the NOPR could befinalized two years from now. We need the tariff changes in placenow,” said MRT’s Denise Fetsch.
The Commission already has addressed and rejected many of theissues raised by protesters, MRT told FERC in an answer. In itsmid-September tariff filing, the pipeline proposed changing itsmethod of awarding capacity on its system to a “net present value”(NPV) allocation from its current first-come first-served “queue”approach. The new method was modeled after the recently approvedmethodologies used by Texas Eastern and Tennessee, but it alsoincludes an auction-type process that could be either interactiveor silent.
“It’s not like we’re trying to circumvent the NOPR and get aheadof FERC on this. This is different,” said Fetsch. “We’re nottalking ‘daily auction’ here, although we do specify in our filingthat capacity of 31 days or less will be posted for bid for fourhours, capacity longer than 31 days and up to like 92 days will beposted for a couple of days. It could include a daily auction andone that will eventually comply with the NOPR. But [it reallywasn’t intended] for firm capacity that would become available for31 days or less.”
Bob Trost, MRT’s vice president of marketing, said the type ofauction FERC is proposing is “some interactive type thing handledelectronically, and frankly we’re not equipped to do that rightnow. It would be awfully burdensome to do that. And when I think ofauctions, I think of the short-term, day-to-day stuff. We’re reallynot selling capacity for that purpose. The reason our filing isthere is because customers want long-term capacity, multi-yearcommitments.
“We don’t look for multiple bids coming in from each bidder.We’re basically asking people to submit their best bid. We’re not,in the true sense of an auction, allowing people to top otherpeople’s bids, with all bids visible at all times. Everyone isconfidential until we know who the winner is, at which time we willpublish what the winning bid was. The level of detail and thecriteria will be clearly stated so anyone can [examine it].”
The pipeline has requested that its proposed allocationmethodology become effective Oct. 16, three days prior to an openseason it plans to hold to expand its mainline. MRT hasn’t had amajor expansion project since Order 636 was implemented andcurrently has no methodology in its tariff for awarding capacity.It has used a first-come first-served queue to handle requests forcapacity that has become available through expired contracts.
Under the new NPV method, the total economic value to MRT ofaccepting a request will be analyzed based on incremental revenuesto MRT. The primary focus of the NPV analysis will be on the rate,quantity, and term requested. But in determining the NPV, MRT alsowill consider factors such as receipt and delivery points and thecost of construction necessary to accommodate service, the impacton the operation of MRT’s system, whether a request would provideMRT and its customers access to new markets, turnback capacity,impact on existing and new customers and the commencement date ofrequested service. Any other factors MRT uses to allocate capacitywill be posted for shipper examination on its bulletin board, thepipeline said. It also has requested to be able to reserve excesscapacity on its system for future expansions.
The pipeline currently is considering expanding its mainline by110,000 MMBtu/d from Glendale, AR, to its market zone, includingthe St. Louis, MO, metropolitan area and points in between. It’salso plans to expand its East line from Trunkline and Natural GasPipeline connections to the market zone by 50,000 MMBtu/d. MRT toldshippers incremental rates will be between $0.17 and $0.40/MMBtufor the mainline expansion and $0.16 per MMBtu for the East line.In addition, MRT is considering building a new extension westwardto Washington, MO, and north to Wentzville, MO. The extension wouldhave a potential capacity of up to 75,000 MMBtu/d at an estimatedincremental rate between $0.13 and $0.17/MMBtu. The expansionprojects are expected to be in service in March 2001.
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