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Court Upholds El Paso Capacity-Release Rulings

June 8, 1998
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Court Upholds El Paso Capacity-Release Rulings

The D.C. Court of Appeals last week rejected a challenge by Southwest Gas Corp. to the capacity-release program of El Paso Natural Gas.

Specifically, the court found the capacity rights of the Las Vegas, NV-based LDC, a customer on El Paso prior to 1991, did not have priority over the capacity rights of the expansion shippers, which were added to the pipeline's system post-1991, at Southwest's designated delivery points on the pipeline at Topock, NV.

Southwest raised this argument in response to FERC orders in 1992 that gave the expansion shippers the authority to sell their rights to capacity at the Topock delivery points to other shippers on the secondary market. In deference to the LDC, however, the Commission ruled then that expansion shippers wanting to use the delivery points would have to first make arrangements with Southwest, the sole owner of the facilities at the points.

"Insofar as the petition rehashes the issue previously litigated" by Southwest in 1992 "we already ruled in [that case] that Southwest has not demonstrated that the Commission's decision injured it in fact and thus made it an aggrieved party...," wrote Circuit Judge David Sentelle in the June 2nd court opinion [Nos. 93-1627, 94-1310]. "The present petition adds nothing new, nor does it change our view," he said, adding that Southwest's arguments were "rather confused and confusing."

Further upholding the Commission, the court rejected Southwest's arguments that it had "historic" or "vested" rights at the Topock delivery points. FERC "not only reasonably but correctly points out that Southwest had no such rights because the flexibility available under El Paso's [capacity-release] proposal did not exist before Order 636 restructuring," the court noted.

Moreover, the appellate judges agreed with FERC's decision to deny Southwest the use - at no extra charge - of the California Topock delivery points as receipt points, a move that would have enabled the LDC to deliver gas to its system in southern Nevada by backhaul. The Commission said the delivery points were downstream from Southwest's contract zone, requiring the LDC to pay an additional zonal charge.

The court also let stand FERC's ruling requiring full-requirements customers, such as Southwest, to limit their capacity releases on El Paso to a specific level, and to designate in advance the amount of capacity they plan to release at each delivery point. The Commission said it took this action to prevent full-requirements customers from being able to tie up capacity on all delivery points and gain an unfair competitive advantage. Southwest argued that FERC's ruling was "arbitrary and capricious," but the court found it to be neither.

Susan Parker

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