An agreement in principle has been reached at FERC in the complaint filed against Southwest Gas Storage by shippers on affiliate Panhandle Eastern Pipe Line and other parties, which accused the company of charging "unjust and unreasonable" rates for jurisdictional storage services.

The agreement also is expected to cover issues relating to Southwest Gas Storage's $4.7 million rate increase, which the Federal Energy Regulatory Commission (FERC) in early September accepted and suspended for five months to become effective Feb. 1, 2008 (see NGI, Sept. 10). In that order, FERC voted to consolidate Southwest Gas's Section 4 rate case and the contentious Section 5 complaint case [RP07-541, RP07-34].

The two sides have been trying to work out their dispute in an evidentiary hearing before Administrative Law Judge Bruce L. Birchman. On Oct. 26, FERC staff asked that Birchman or Chief Judge Curtis L. Wagner "suspend the procedural schedule [in the hearing] pending the filing of an offer of settlement within 45 days." That request was granted last Monday.

FERC staff said the request to suspend the procedural schedule was unopposed by the parties, and that the agreement in principle resolves all of the issues set for hearing. "All that is said to be required is time to memorialize the agreed-upon principles and terms and conditions. [Under] the circumstances, good cause is present to grant the motion and suspend the trial schedule. I expect the offer of settlement to be filed by Dec. 13," Birchman said. No details of the agreement in principle were disclosed.

The "Panhandle complainants" in their October 2006 complaint alleged that unreasonable rates had allowed Southwest Gas Storage to overrecover its costs by nearly 60% (see NGI, Nov. 20, 2006). While FERC granted complainants' request for an evidentiary hearing and Section 5 investigation, it denied their plea for an immediate interim rate reduction of about $16.9 million.

Southwest Gas Storage is a wholly owned subsidiary of Panhandle Eastern and provider of the majority of underground storage capacity used by Panhandle in rendering both jurisdictional transmission services and a variety of storage services. Panhandle currently is the sole firm customer of Southwest Gas Storage, holding a firm contract for 61 Bcf of storage capacity (essentially the entire capacity of Southwest Gas Storage), and pays Southwest $45 million for those services.

The parties to the complaint included American Forest & Paper Association, American Iron and Steel Institute, American Public Gas Association, Anadarko Petroleum Corp., Anadarko Energy Services Co., Citizens Utility Board of Illinois, ConocoPhillips, ExxonMobil Gas & Power Marketing, Independent Petroleum Association of America and the Process Gas Consumers Group.

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