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FERC Approves Consent Accord Resolving Alleged Tetco Affiliate Abuse, Other Infractions

The Federal Energy Regulatory Commission last week approved a stipulation and consent agreement with Duke Energy's Texas Eastern Transmission LP (Tetco) resolving charges that the pipeline committed violations of agency rules governing the behavior between regulated natural gas transmission facilities and their marketing affiliates, along with numerous other infractions.

The agreement was brokered between the staff of FERC's Division of Investigations and Enforcement, Office of Market Oversight and Investigations (OMOI), Tetco and four affiliated marketers -- Duke Energy Marketing America LLC, Duke Energy Trading and Marketing LLC (DETM), Duke Energy Marketing Canada Corp. and DETM Marketing Northeast LLC.

Under the agreement, Tetco has been ordered to pay the federal government $500,000 and to follow a strict three-year compliance plan in a number of areas. The compliance plan requires Tetco to create and implement procedures relating to training, posting and maintaining discount information, index of customers, organizational charts, document retention and maintenance of contracts, enforcing tariff provisions, access to work areas and databases, reporting non-conforming contract terms and conditions, affiliate access to customer information, and prevention of the disclosure of non-public transmission information to energy affiliates [IN05-4, PA03-14]. The pipeline also agreed to perform quarterly audits in many of the areas to ensure compliance.

In addition, the agreement directs Tetco to review its current transportation service contracts to identify any agreements with material deviations that have not previously been reported to the Commission. The pipeline is required to file each of those agreements with FERC and provide OMOI with a list of unfiled service agreements for which it determined that the deviations were not material.

The FERC action is the result of a preliminary agency investigation and operational audit of the pipeline, which covered activities from Jan. 1, 2002 through Sept. 21, 2004.

Notably, Tetco was alleged to have improperly shared information about non-affiliate shippers with marketing affiliates; given affiliates preference in creditworthiness scoring; not filed service contracts containing material deviations; and committed alleged violations related to discounts and retention of contracts, as well as other infractions, the order said.

The facts stipulated in the agreement included "instances in which an employee of Texas Eastern provided a marketing affiliate employee with information regarding the availability of interruptible capacity for same-day or next-day service in response to an inquiry from the marketing affiliate employee; instances in which Texas Eastern removed DETM's electronic access to transportation information for certain non-affiliated shippers days or weeks after learning that DETM was no longer acting as an agent for the shippers; instances in which Texas Eastern enabled DETM to have access to accounts on Texas Eastern's LINK system relating to non-affiliated shippers before Texas Eastern obtained a written 'Designation of Agent' form for DETM from those shippers; two discount rate agreements containing terms that were not in Texas Eastern's tariff that it had not reported to the Commission; and a creditworthiness evaluation model that contained an option to score an additional point for an affiliate," the order noted.

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