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FERC Continues Crackdown on Capacity-Release Violators

Southern Company Services (SCS) agreed to pay $350,000 as FERC continued its crackdown last week on violators of the agency's capacity-release rules, including the shipper-must-have-title (SMHT) requirement and the prohibition on buy-sell transactions.

The stipulation and consent agreement order, which was negotiated with the Federal Energy Regulatory Commission's (FERC) Office of Enforcement (OE), requires Atlanta-based SCS to pay the civil penalty to the U.S. Treasury within 10 days of the order, and to submit semiannual monitoring reports to OE for a period of one year with the option of a second year at OE staff's discretion. The agency's investigation was prompted by SCS' report of probable violations.

FERC's latest action came one week after it ordered four energy companies and affiliates to pay nearly $10 million, as well as disgorge almost $250,000 in unjust profits plus interest, for circumventing the agency's posting and bidding requirements for released capacity, violating SMHT requirements and ignoring the prohibition on buy-sell transactions (see NGI, July 6).

SCS engaged in 128 buy-sell transactions in which it purchased a counterparty's natural gas supply at a pipeline receipt point, took title to the gas at that point, transported the gas using SCS' firm transportation capacity, and then resold the gas on a delivered basis to the counterparty at a pipeline delivery point, at which point the counterparty retook title, according to the consent agreement [IN09-22].

The 128 transactions occurred between January 2005 and December 2007, and resulted in the transportation and sale of 7.3 Bcf in violation of the Commission's buy-sell prohibition, the OE said. As a result of the transactions SCS netted $1.6 million, all of which was credited to the customers of SCS' retail operating companies: Alabama Power Co., Georgia Power Co., Giulf Power Co. and Mississippi Power Co. Another affiliate, Southern Power Co., caters only to wholesale customers. SCS serves as central purchasing agency for all of its electric operating companies.

"SCS' buy-sell transactions circumvented and frustrated the Commission's open-access transportation policies requiring releases of capacity from one shipper to another to be subject to certain posting and competitive bidding requirements," the consent order said.

The OE staff also found that SCS violated the agency's SMHT rules, which requires a shipper to hold both the title to the gas and the transportation capacity on a pipeline when shipping supply. Between January 2005 and December 2007, SCS on behalf of its affiliates transported 8 Bcf of natural gas on two interstate pipelines in violation of the SMHT rules, the consent order noted.

FERC cited 572 occasions where SCS primarily either shipped gas owned by one of its operating companies using transportation capacity held by affiliate Southern Company Gas or SCS shipped gas owned by Southern Company Gas using transportation capacity held by one of the operating companies.

"SCS did not receive unjust profits from these transactions. Nevertheless, violations of the shipper-must-have-title requirement interfere with the Commission's oversight of natural gas markets and with the Commission's goal of market transparency," the order said.

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