FERC Thursday ruled that primary firm (releasing) shippers and asset manager replacement shippers are not "similarly situated" in every respect, and thus pipelines are not automatically required to provide asset manager replacement shippers with the same discounted or negotiated usage or fuel charges that they give releasing shippers.
"Several parties to the Order 712 compliance proceedings questioned whether pipeline tariffs should include provisions allowing asset manager replacement shippers to receive the same discounts provided to the primary firm shipper for the purpose of facilitating an asset management agreement (AMA)...The Commission will not establish a blanket requirement that pipelines must always provide the same discounted or negotiated usage or fuel charges to an asset manager replacement shipper that it has provided to the primary shipper," the Federal Energy Regulatory Commission (FERC) said in the order [RP09-79, et al].
"Instead the Commission determines that pipelines should apply the Commission's existing selective discounting policy on a case-by-case basis in deciding whether to grant a discounted or negotiated usage or fuel charge to an asset manager replacement shipper," it noted.
In June 2007 FERC lifted restrictions to encourage the creation of AMAs. Under such a contract arrangement, an asset manager agrees to manage the supply portfolio and/or pipeline and storage capacity of an energy company, such as a local distribution company. AMAs represent a relatively new development in the natural gas industry (see NGI, June 23, 2008).
While pipelines are not required to extend the same discounted usage or fuel charges to asset manager replacement shippers, "pipelines are, and remain, subject to the Commission's general policy that selective discounts and negotiated rates must be given on a not unduly discriminatory basis to similarly situated shippers," the order said.
FERC cited two instances where discounted rates would be warranted for asset managers. "In the situation where the pipeline has given the releasing shipper a discount at its delivery point and the asset manager uses the released capacity to provide deliveries to the releasing shipper at that point, the asset manager really is stepping into the shoes of the releasing shipper. In that situation, the Commission cannot envision a scenario where the asset manager replacement shipper would not be deemed to be similarly situated to the releasing shipper.
"Indeed, even some of the pipelines recognize that in such a situation, the asset manager should receive the same discounted or negotiated usage or fuel charge as the releasing shipper," the order noted.
Moreover, "in the situation where an asset manager replacement shipper may not be using the capacity to fulfill its delivery/purchase obligation under an AMA but uses the same points at which the releasing shipper was granted a discounted or negotiated usage or fuel rate, it seems reasonable that the asset manager would be considered similarly situated to the releasing shipper and entitled to the same rates.
"In general in situations where the pipeline granted the releasing shipper a discounted/negotiated usage or fuel charge limited to a particular point, then the replacement shipper is likely to be similarly situated for purposes of service at that point, and the pipeline will not be prejudiced by providing those same terms to the replacement shipper," the order said.
But "the Commission is not convinced...that an asset manager is necessarily similarly situated to the releasing shipper in every AMA situation...For example, in a situation where the pipeline gave the releasing shipper a discounted or negotiated usage/fuel charge not limited to particular points, the asset manager would likely make greater use of secondary points than the pipeline anticipated the releasing shipper would.
"In the same way, if an asset manager replacement shipper is not using the capacity to fulfill its obligation under the AMA and is using points other than those where the pipeline granted the releasing shipper point specific discounts, then the asset manager may not be similarly situated to the releasing shipper," FERC said.
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