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ALJ Says Transco Proposal for Base Gas Replenishment 'Unjust'

A FERC administrative law judge (ALJ) called "unjust and unreasonable" Transcontinental Gas Pipe Line's (Transco) proposal to hold incoming customers at its Washington Storage Field in Louisiana responsible for the higher costs for replenishing base gas when exiting customers exercise their option to buy facility base gas at low historic prices.

At issue in the case is whether South Jersey Resources Group and Fortis Energy Marketing Trading GP should be held accountable for the higher base gas replenishment costs after PSEG Energy Resources and Trade LLC and South Jersey Gas Co. exercised their rights under Rate Schedule Washington Storage Service-Open Access (WSS-OA) to buy 3.32 million Dth of base gas in connection with the release of their storage service to Fortis and South Jersey.

Transco seeks to recover only from new buyers any increase in the cost of service attributable to Transco's replenishment of base gas to serve them when they contract for capacity vacated, through termination or permanent capacity release, by a terminating buyer at the storage facility in St. Landry Parish, LA. The issue involving Fortis and South Jersey Gas was unresolved in a settlement approved by the Federal Energy Regulatory Commission (FERC) in March, and was reserved for litigation.

"It is found and concluded that Transco's proposal under [the Natural Gas Act] Section 4 to establish incremental rates under Rate Schedule WSS-OA applicable to Fortis and South Jersey to recover Transco's cost of purchasing replenishment base gas is unjust and unreasonable and unduly discriminatory and preferential," said ALJ Steven A. Glazer in his initial decision issued on Nov. 21.

Rather, he ruled it is "just and reasonable and not unduly discriminatory or preferential to roll in the cost of purchasing replenishment base gas to the storage rate for all Rate Schedule WSS-OA customers equally, including Fortis and South Jersey." The Federal Energy Regulatory Commission can either accept or reject Glazer's decision in full or in part.

The proceeding has been closely watched by utilities and local distribution companies around the nation, several of which are customers of the Washington Storage Field.

Transco argued that rolling in the costs of the replacement base gas was inappropriate because the service that the non-incremental (existing) WSS customers would receive after the base gas replacement would be identical to the service that they received prior to the sale of base gas to PSEG and South Jersey Gas. Rolling in the replenishment costs would result in non-incremental customers subsidizing Fortis and South Jersey, the pipeline said.

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