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Enron Plea for Limited Waiver Elicits Boos

Enron Plea for Limited Waiver Elicits Boos

A plea by two Enron affiliates for a limited waiver of the capacity-release regulations and the "shipper-must-have-title" policy was met with a chilly reception from gas producers, industrial customers and state interests at FERC.

Enron Capital &amp Trade Resources and Enron Energy Services are seeking the waiver to allow them to transfer title to gas being transported on five New York State-bound pipelines to end-use customers prior to the gas actually reaching the state boundaries. The waiver is needed, they insist, for them to compete on equal footing with other gas suppliers that are transferring the title outside of New York State to elude the state's gross receipts tax and thus undercut competitors' gas prices.

Enron's petition is based on a "mistaken and faulty interpretation" that a waiver is needed to permit "in-transit" transfer titles, the Process Gas Consumers Group (PGC) said, adding that no policy presently exists to prohibit the transfers. FERC should either take no action at all on Enron's petition or simply clarify the "permissibility" of in-transit title transfers, the group of industrial customers noted [RP98-220].

"However, the last thing this Commission should be doing is altering industry practices in order to cause state taxes to be applied to natural gas transactions. The fact is that the New York legislature is perfectly capable of addressing any perceived tax disparity if it chooses to do so," the PGC told FERC in a limited protest on May 29th [RP98-220]. Indeed, the legislature did this when it imposed a "gas importers tax" on users of gas purchased outside of the state.

"If state legislatures choose not to tax the seller in such transactions, it is their business. Prohibiting in-transit title transfers to address an alleged tax disparity would unnecessarily and wrongly put the Commission into the state taxation business,," the industrial users warned. "If Enron does not approve of New York's statutory taxation policy, then it should take this issue up at the state level, not through a federal agency 'back door,'" the PGC said.

Any Commission action "interfering" with in-transit title transfers could conceivably have "tax implications" for gas deliveries into other states served by the five pipelines, and possibly others, the industrial customers said. Moreover, imposing "new tax burdens on marketers could also interfere with marketers' sales practices, and it could undermine the liquidity of gas markets by discouraging sales to particular markets or triggering multiple taxation."

The PGC further argued that there was nothing in the five pipelines' tariffs that prohibited them from making in-transit title transfers to their customers. The pipelines' tariffs only required that they have title at the time of delivery into the pipeline. The pipelines include CNG Transmission, Columbia Gas Transmission, National Fuel Gas Supply, Tennessee Gas Pipeline and Transcontinental Gas Pipe Line.

Producers also took issue with Enron's petition for a limited waiver. They objected because it would require an exception to the "shipper-must-have-title" policy, which they say is critical to FERC's capacity-release program. "Such exceptions, if granted here, could lead to such further additional waivers that the entire capacity-release program could be severely undermined - essentially resulting in a reversion to capacity brokering in fact, if not in name," said Burlington Resources Oil &amp Gas and Exxon Corp. Industrial customers disagreed with producers on this point. "...[W]hether title transfers at the city or upstream within the pipeline is not a capacity-release issue at all," the PGC said.

The New York Public Service Commission declined to take a position on the requested waiver, but noted that an exception to the "shipper-must-have-title" rule would have "far broader implications" on retail-access programs than this limited request by Enron, particularly given the "incipient nature" of retail access nationwide.

The Enron affiliates are seeking the waiver for gas being shipped to their New York commercial and industrial customers on the five pipelines. If the Commission should deny their waiver, they have asked it to clarify that all shippers must have title in the future, and to put an end to all in-transit transfers without a capacity release. Susan Parker

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