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Williams Gets One More Shot to Settle GSR Costs

Williams Gets One More Shot to Settle GSR Costs

FERC earlier this week gave Williams Gas Pipelines Central one more chance to settle the lingering, controversial cost-recovery issues arising from the reformation of three of its gas supply contracts for production in Colorado.

The order, which was approved notationally on Wednesday, assigned a settlement judge to the proceeding and gave Williams and protesters 30 days to resolve the issues [RP99-257]. Reflecting the sentiment of the entire Commission, Commissioner Curt Hebert Jr. warned that he would not vote to grant an extension if a settlement wasn't reached at the end of the 30-day period. Instead, FERC said it "will promptly resolve the pending prudence and eligibility issues" pertaining to Williams' request for recovery of gas supply realignment (GSR) costs.

In September 1997, the Commission denied recovery of the costs associated with the Colorado contracts, saying Williams had not entered into them prudently. The company's request for rehearing of that order is now pending before FERC in a related docket [RP94-365].

An administrative law judge already has issued an initial decision not favorable to Williams.

This week's "order does give the parties one more limited opportunity to reach a settlement in not only this case, but in the 14 proceedings in which Williams' has sought recovery of pricing differential costs and buyout costs associated with the Colorado contracts," said Commissioner Linda K. Breathitt.

"These cases involve issues as to whether these contracts were prudently entered into by Williams as well as whether the costs are eligible for recovery as GSR costs," she noted. Breathitt estimated the total GSR costs at stake are almost $180 million without interest.

In March, Williams filed revised tariff sheets to recover about $126 million of the GSR costs in connection with the three Colorado contracts: the Lockridge contract, the Yuma County Oil Co. contract and the JER Partnership contract.

About 95% of the GSR costs ($114.5 million) involve the Lockridge contract. The Commission suspended the Williams' revised tariffs, saying they "have not been shown to be just and reasonable..." The tariffs are to become effective on the earlier of Sept. 1 of this year or when the suspension is lifted by another order.

Williams contends that it prudently incurred the GSR expenses when it assigned its obligation under the Lockridge contract to a non-affiliated third party, and its other two supply contracts to an affiliate.

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