Producers Protest Capacity Deals on Transwestern

Indications of the shortage of pipeline capacity to California showed up again recently in a protest filed by producers against deals made by Transwestern Pipeline with two shippers for gas transportation in February. The producers claim others did not have a meaningful opportunity to bid on capacity and that it was sold outside the tariff rate structure.

The producers, characterized as Indicated Shippers, called on the Federal Energy Regulatory Commission to force disclosure of the terms and conditions of negotiated rate contracts between Transwestern and Sempra Energy Trading and Richardson Products Co. The Shippers said it appeared Transwestern had (1) failed to offer transportation service under recourse rates for a meaningful period of time prior to executing negotiated rate contracts; (2) negotiated terms and conditions of service not permitted under Order 637; and (3) had failed to comply with disclosure requirements under the negotiated rates policy.

The shippers, including BP Amoco, Burlington Resources, Conoco, Exxon Mobil, Marathon, and Texaco, said they were concerned that Transwestern had exercised market power "in the context of unprecedented demand in the California market and capacity constraints on interstate pipelines serving the California market." FERC staff also has questioned the transactions, requesting further information and asking why Sempra and Richardson would pay a negotiated rate or more than the maximum recourse rate in the tariff.

It also is not clear how and when Transwestern posted the available space, they said. The Shippers complained that Transwestern's capacity posting procedures are inadequate.

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