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Pipelines Object to Plea for Order 712 Discount Pass-through

A number of natural gas pipelines have filed with the Federal Energy Regulatory Commission (FERC), objecting to demands from shippers that under the new Order 712 capacity release program pipelines be required to pass discounted usage charges through to asset manager replacement shippers.

"Orders 712 and 712-A did not even discuss -- let alone direct -- the pass-through of discounted commodity and fuel rates to an asset manager," Colorado Interstate Gas (CIG) said in response to a filing by Atmos Energy Corp.

Atmos claims that failure to pass through discounts assigned to permanent shippers to replacement shippers would impede asset management transactions since it would make the transactions more expensive. This is not in the spirit of Order 712, which sought to increase the flexibility of the market, the distributor said.

But CIG argues that it is well established Commission policy under regular capacity release rules that the usage charge to be paid by a replacement shipper is a matter between the replacement shipper and the pipeline. Thus "the releasing shipper cannot bind a pipeline to accept any particular usage charge from the replacement shipper." Further, the pipeline points out that its rates are straight-fixed-variable, which does not allow the pipeline to discount fuel or usage.

CIG, along with Texas Gas Transmission and El Paso Natural Gas, told the Commission that the way to explore Atmos' request would be through a rulemaking since the distributor has filed the same demand for flow-through discounts in numerous pipeline cases. "This is a matter of general policy that should be implemented uniformly across pipelines rather than on a pipeline-specific basis."

Order 712 removes the maximum rate ceiling on capacity release transactions of one year or less and exempts asset management arrangements and releases under state-approved retail access programs from generally applicable bidding requirements and the prohibition on tying (see NGI, Nov. 24, 2008). Other shippers are protesting pipelines' refusal to pass through refunds to replacement shippers that otherwise would have been paid to releasing shippers (see NGI, Feb. 16).

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