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Tetco Disputes Claim Of 'Illusory' Savings

Tetco Disputes Claim Of 'Illusory' Savings

Texas Eastern Transmission contends the "diversity and depth of support" for its settlement offer are proof that the savings it proposes for customers are indeed "real." The settlement savings, which Tetco will reach more than $260 million by 2003, are not "illusory," as some shippers have alleged, the pipeline told FERC last week.

Customers "will receive rate reductions from currently approved rates. They will get rate certainty from Texas Eastern's agreement to bear the risk of capacity turnback until at least Dec. 31, 2003. Historical rate distinctions will be eliminated by the roll-in of incremental services...," the pipeline said in reply comments filed on Friday [RP98-198].

Tetco was responding to customers' concerns that its proposed rate reductions, as opposed to being real, would be realized through an accounting sleight of hand. Customers insist any rate relief would be provided through cuts in the pipeline's depreciation rates, a move which they say would set the stage for much higher system rates in the future. (See NGI, May 25)

These customers have urged FERC to delay approval of the Tetco settlement, but the pipeline says such a move would be costly to the rest of its customers. "At a bare minimum, delay beyond Aug. 1 of this year will cost customers $20 million. If the delay lasts longer, it will postpone the rate reductions and rate certainty provided by the offer of settlement." These would occur because Tetco would be forced to file a Section 4 rate case, which it is hoping to avoid with the settlement, the pipeline noted.

Under the settlement, Tetco proposes to assume "sole risk" for all the costs associated with existing and potential turned-back capacity on its system until Dec. 31, 2003; provide customers a reduction of 10 cents/Dth in long-haul FT-1 rates on a 100% load factor basis; roll in incremental services; and provide an "additional opportunity" for customers to convert from Part 157 service to Part 284 service.

The proposed settlement is supported or not opposed by more than 160 parties, which account for in excess of 90% of Tetco's firm contract demand and represent all segments of the natural gas industry. Tetco urged the Commission not to allow a handful of opponents to hold the proposed settlement "hostage."

Susan Parker

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