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FERC OKs Rate Hike for Tetco's New Jersey-New York Expansion

With less than a month to go before the start-up of Texas Eastern Transmission's (Tetco) New Jersey-New York expansion, FERC has approved a request to increase Tetco's initial reservation recourse rate for service on the expansion based on a projected 40% hike in its first-year cost of service.

In May 2012 the Federal Energy Regulatory Commission (FERC) authorized a firm reservation recourse rate of $18.666/Dth per month as an initial resource rate for service on the New Jersey-New York project. The rate was based on Tetco's then-projected first-year total cost of service of $179.2 million (see Daily GPIMay 23, 2012).

However, Tetco and Algonquin Gas Transmission LLC, a partner in the project, in September sought the green light to increase the firm incremental reservation recourse rate to $26.060/Dth per month to reflect the anticipated larger first-year cost of service of $250.2 million, which would include $243 million for the facilities constructed by Tetco and the $6.6 million annual cost of leased capacity. Both Tetco and Algonquin are owned by Houston-based Spectra Energy.

The companies said the increased total cost of service primarily reflects contracted labor costs associated with the Texas Eastern extension that exceeded the contingency established for such costs. "They also noted that the lease agreement between Texas Eastern and Algonquin has been amended to reduce Texas Eastern's fixed annual lease payment to Algonquin from $11.8 million to $6.6 million to reflect a net decrease in capital costs related to leased capacity."

When completed, the expansion would provide an additional 800 MMcf/d of transportation capacity into the New Jersey-New York region, with 730,000 Dth/d able to be sourced from receipt points on Algonquin's system near Ramapo, NY, and Mahwah, NJ. In addition, up to 100,000 Dth/d could be sourced from a receipt point on Tetco's system in Lambertville, NJ. The 15.2-mile, 30-inch diameter pipeline will extend from Staten Island, NY, through the cities of Bayonne and Hoboken in New Jersey, and terminate at a new interconnection in lower Manhattan.

The embattled project has been fending off attacks from New Jersey and environmental officials for years. It has been opposed by top officials in the state -- including Gov. Chris Christie (see Daily GPIJan. 24, 2011Dec. 29, 2010) -- but it has received solid support in New York (see Daily GPISept. 1, 2011). 

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