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FERC Approves Settlement of Rate Complaint Against National Fuel

FERC Friday approved a settlement of a complaint brought last year by several Pennsylvania and New York agencies alleging that interstate pipeline National Fuel Gas Supply Corp. was charging unfair rates and profiteering from the sale of retained gas.

The Section 5 Natural Gas Act complaint was filed last April by the New York Public Service Commission, the Pennsylvania Public Utility Commission and the Pennsylvania Office of Consumer Advocate. It alleged that National Fuel's transportation rates had become "unjust and unreasonable" over the past 11 years since FERC reviewed a 1995 settlement that established the rates. As a result of its rates, the agencies claimed that Natonal Fuel earned excess revenues of $30 million for each year in the 2003-2005 period.

The agencies further accused Williamsville, NY-based National Fuel of retaining more than twice as much fuel from its shippers than was necessary to operate its system and was selling the excess on the spot markets and keeping the revenue. They estimated that National Fuel recovered up to $23 million a year during the 2000-2004 period from selling excess retained gas.

The settlement, which was certified by a FERC administrative law judge in December, establishes a five-year moratorium (subject to exceptions) on National Fuel's transportation and storage rates, prohibiting the pipeline from making any Section 4 or Section 5 rate changes prior to Dec. 1, 2011 (see Daily GPI, Dec. 21, 2006). It also cuts the pipeline's retained gas allowances on transportation services to 1.4% from 2%, amounting to a reduction in excess "efficiency gas" or retained gas quantities of approximately 1,500,000 Dth/year, the company said.

The agreement, which could take effect as early as March 1, requires National Fuel to make refunds to supporting shippers for excess gas retained since Dec. 1, 2006 (the difference between 1.4% and 2%). Since no shipper contested the settlement, the refunds could conceivably go to all National Fuel shippers.

Under the settlement, National Fuel is authorized to continue selling the efficiency gas and retain the proceeds. The settlement makes no change to the pipeline's rates except for the agreed-upon change to its gas retention allowance, according to the company.

The Federal Energy Regulatory Commission approved the uncontested settlement without making any changes. Both Commissioners Suedeen Kelly and Jon Wellinghoff dissented in part, saying they opposed the agency's decision to grant the parties' request that FERC apply the higher "public interest" standard of review in the event it is asked to consider changes to the settlement in the future.

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