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Tetco Revised Reservation Credits Proposal Attacked

Natural gas pipelines, distributors, producers, industrials and a process consumer group are protesting the revised tariff records that Texas Eastern Transmission LP (Tetco) has submitted to FERC, which would exempt it from providing full reservation charge credits to shippers in cases where it is required to interrupt service to comply with new government safety and environmental regulations.

In an order order issued Sept. 20, the Federal Energy Regulatory Commission (FERC) largely denied Tetco's request for rehearing and directed the Spectra Energy pipeline to eliminate a tariff provision that would exempt it from providing shippers with reservation charge credits during certain non-force majeure interruptions. Tetco submitted proposed tariff changes on Oct. 22 that purportedly complied with the Commission's Sept. 20 order. Comments were due Monday.

"Despite the extensive Commission precedent and Sept. 20 order stating that routine or planned maintenance are non-force majeure events for which the pipeline must provide a full reservation charge credit, Texas Eastern proposes customers receive no reservation charge credit if the repair or maintenance is completed to comply with the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011" that was signed into law earlier this year (see NGI, Jan. 9), said the Municipal Defense Group, which mainly consists of distributor customers along the Tetco system [RP12-318]. "This is contrary to the Sept. 20 order and precedent. The Commission should require Texas Eastern to delete [this] from its tariff record," the group told the Commission.

FERC policy requires that full reservation charges be credited to a shipper when scheduled gas is not delivered due to a non-force majeure or planned maintenance event, since the failure was due to the pipeline's conduct and was within its control. But when a pipeline's failure to deliver gas is due to a force majeure or unplanned maintenance event, all parties should share the financial burden, according to the agency. A pipeline in this case is required to provide a partial reservation charge credit to an affected firm shipper.

"The Commission has previously found that 'scheduled maintenance is a non-force majeure event within the pipeline's control, and therefore the pipeline must provide full reservation charge credits for the nominated amounts not delivered during these non-force majeure outages,'" said Consolidated Edison of New York, Orange and Rockland Utilities Inc, Philadelphia Gas Works and National Grid Gas Delivery Companies.

Tetco "cannot know whether work related to the 2011 act and new PHMSA [Pipeline and Hazardous Materials Safety Administration] initiatives constitute routine maintenance or not, because 'the exact scope of the additional repair and maintenance obligations resulting from the 2011 act and new PHMSA initiatives and orders, while anticipated to be substantial, has not yet been substantial. Until these requirements are clarified and [Tetco] can demonstrate that firm service reductions for firm customers are necessary to fulfill them, the Commission should require [Tetco] to strike" that part of the revised tariff, the gas utilities said.

"When Tetco interrupts service in order to comply with the act, such interruptions should be characterized as a non-force majeure event for which full reservation charge credits are warranted," said a group of major producers and marketers, including ConocoPhillips Co., Shell Energy North America (US), BP America Production, ExxonMobil Gas & Power Marketing and Hess Corp.

The producers cited two cases in which FERC determined that pipelines did not have to provide demand charge credits. "In Paiute Pipeline, the Commission determined that a pipeline is absolved from providing demand charge credits only where an outage is due solely to the conduct of others, not controlled by the pipeline. Similarly, in Rockies Express, the Commission required the pipeline to revise an identical provision to make clear that the pipeline 'is exempted from issuing reservation charge credits only when [its'] failure to schedule or deliver gas was due solely to the conduct of the shipper or operation conditions on upstream or downstream facilities.'" They asked FERC to do the same with Tetco.

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