Gulfstream, INGAA Hit FERC's New Policy

A policy change directed at construction funding on newly formed, project-financed pipelines, which showed up for the first time in FERC's certificate order for Gulfstream Natural Gas System, "constitutes flawed policy and lacks reasoned decision-making," the pipeline said (see NGI, Feb. 26).

In a petition for rehearing filed last Monday, Gulfstream said the move to require it to use its post-construction, overall rate of return as its rate for the allowance for funds used during construction (AFUDC) failed to recognize the additional risks in a new construction project that are not borne by an operating pipeline.

The Interstate Natural Gas Association of America (INGAA) filed its own rehearing request, agreeing that FERC's "decision to change its policy from requiring newly formed, project-financed pipelines to use the project financing approach for calculating AFUDC in favor of a post in-service analysis constitutes flawed policy."

Further, the order (CP00-6-000) authorizing the $1.7 billion, 744-mile pipeline running from Alabama through the Gulf of Mexico to Florida "sends a signal that discourages, rather than encourages, major new pipeline projects." INGAA said FERC gave no reason for the policy change, which directly contradicts recent statements regarding "the critical need for new pipeline capacity, including orders issued to streamline the certificate application process and to implement other policies and practices that encourage and facilitate new pipeline construction."

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