FERC Monday approved a stipulation and consent agreement that requires South Jersey Gas Co. and South Jersey Resources LLC to pay more than $1 million in civil penalties and disgorged profits to resolve violations of the agency's open-access transportation program, including failure to comply with shipper-must-have-title (SMHT) requirement and post capacity releases for bidding.
The agreement, brokered between the Federal Energy Regulatory Commission's Office of Enforcement (OE) and the two companies, requires South Jersey Gas and South Jersey Resources to pay a $950,000 civil penalty to the U.S. Treasury within 10 days of the order, and to disgorge $120,550.69, plus interest, and submit semiannual monitoring reports to OE for a period of one year.
South Jersey Gas, a local distribution company serving southern New Jersey, and South Jersey Resources, a gas marketing firm headquartered in Bedford, TX, are part of Folsom, NJ-based South Jersey Industries, an energy services holding company.
OE said its investigation of the South Jersey firms arose out of OE's probe of Constellation NewEnergy -- Gas Division, which self-reported that it engaged in "flipping" transactions as a replacement shipper. South Jersey Gas was the releasing shipper in some of Constellation's flipping transactions.
Flipping is typically a series of short-term releases of discounted rate capacity to two or more affiliated replacement shippers on an alternating monthly basis, without complying with FERC's posting and bidding requirements. Agency regulations require that a shipper releasing firm capacity for a term longer than 31 days and at a price less than the maximum tariff rate must post the capacity for competitive bidding on a pipeline's electronic bulletin board.
OE said it found that South Jersey Gas improperly released 36.1 Bcf of discounted rate capacity through flipping transactions between January 2005 and October 2007, and that South Jersey Gas did not post the capacity released for bidding.
Moreover, the OE said South Jersey Resources violated the SMHT requirement between November 2007 and July 2008 when it transported 1.6 Bcf of South Jersey Resources-titled gas on three interstate pipelines using the transportation capacity of an unaffiliated third party. The SMHT requirement says all shippers must have title to the gas at the time the gas is tendered to the pipeline or storage transporter and while it is being transported or held in storage by the transporter.
South Jersey Gas also violated the Commission's prohibition on buy/sell transactions between July 2005 and December 2007 when it purchased 2 Bcf of other parties' gas, transported or stored that gas using its capacity on Transcontinental Gas Pipe Line, and then sold equivalent volumes of gas back to the parties at the delivery point, according to FERC.
Under Commission regulations, a prohibited buy/sell transaction is a commercial arrangement where a shipper holding interstate pipeline capacity buys gas at the direction of, on behalf of or directly from another entity (an end-user, for example), ships that gas using its interstate pipeline capacity, and then resells an equivalent quantity of gas to the downstream entity at the delivery point.
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