The Federal Energy Regulatory Commission yesterday awarded ANRPipeline a certificate to build a scaled-back expansion of itsmainline system between the Joliet, IL, hub and the market areas insouthwestern Wisconsin.

The Coastal Corp. pipeline initially had proposed adding 194MDth/d in one shot, but decided to scale it down when theCommission placed the certificate for its SupplyLink expansionproject on hold, one shipper dropped out of the project and anotherchose to defer service for a year.

The certificate awarded Wednesday allows ANR to expand itssystem by 109 MDth/d by adding two 10,000 horsepower compressorunits at its Woodstock Compressor Station in Illinois. This willenable ANR to meets its additional contractual obligations of 59MDth/d beginning on Nov. 1, as well as to meet the shipperagreement for deferred service and the projected near-term demandgrowth in Wisconsin, according to the pipeline.

FERC has agreed to defer action on the second half of theexpansion (85 MDth/d), which would include looping and morecompression, until after it votes on ANR’s SupplyLink project. ANRsaid the looping in this phase of the expansion would be anextension of its SupplyLink project.

In addition to citing the Commission’s inaction on SupplyLink,ANR said there no longer was an immediate need for the entire 194MDth/d. One shipper canceled its precedent agreement for 10 MDth/d,while another said it wouldn’t need its 25 MDth/d until November2001 — a year later than originally expected. This has left ANRwith only three shippers who have contracted for only 59 MDth/d ofthe expansion capacity for service to start in November 2000.

“ANR’s proposal…..demonstrates that the expansion facilitiesare necessary to meet the increased demand in growing northernIllinois and Wisconsin natural gas markets,” the FERC order said[CP99-241]. “My fellow cheese-heads in Wisconsin need those gassupplies,” said Chairman James Hoecker, who hails from that state.

It tried to allay some of the concerns of Indicated Shippers andWisconsin LDCs, which feared project costs would be shifted toexisting customers. “Because our certificate policy precludessubsidization of projects, ANR will effectively bear the risk ofcost under-recovery for these facilities under its rate proposal,not ANR’s existing customers,” the order noted.

If ANR should seek to roll in the costs of the expansion in afuture rate case, the Commission cautioned that there would have tobe a “significant change in the relevant facts and circumstancesdemonstrating that actual revenues exceed the costs, so that ANR’sexisting customers will not subsidize the expansion project.”

ANR projects it will have a three-year incremental cost ofservice for the expansion facilities of approximately $11.6million. If the expansion facilities were operating at a 100% loadfactor at a rate of 10 cents/Dth, ANR then would receive about$12.8 million in incremental revenues during the three-year period.But this won’t be the case, according to the order. At leastinitially, the expansion likely will operate at a 54-77% loadfactor based on ANR’s commitments. This means it will receive anestimated revenue of $8.9 million, which is a three-year deficit ofabout $2.7 million.

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