Conference Ordered for Tetco Settlement Offer
Texas Eastern Transmission's hopes of speedy FERC approval of
its somewhat controversial settlement proposal were dashed last
week when the Commission ordered a settlement judge to convene a
hearing of the pipeline's offer that professes to save its
customers more than $260 million by the end of 2003.
The Commission said it was "encouraged" by the support for
Tetco's settlement offer, but added it also was "concerned by the
comments of the opposing parties, especially as they relate to a
lack of opportunity for them to participate in meaningful
negotiations, the absence of information available to aid them in
their decisions regarding the settlement, and their assertion that
Texas Eastern has not fully explained to them all the assumptions
underlying its offer."
After furnishing this information, all sides may be able to
reach a "reasonable accommodation of their various positions," the
order noted [RP98-198]. The Commission directed the settlement
judge to report back on the status of the negotiations within 45
days. Tetco requested that FERC act quickly on its proposed
settlement so its customers can make "informed decisions" on their
contract termination rights before Oct. 31, 1998.
Among the most contentious issues are claims that much of
Tetco's proposed $65.7 million annual rate reduction is illusory;
that incremental shippers, after their facilities are rolled in,
will receive the lion's share of the rate cut; that Tetco is
attempting to escape its obligation to absorb its gas supply
realignment (GSR) costs; and that the pipeline has overstated the
risk of it assuming the costs for turned-back capacity on its
Under the settlement offer, Tetco has proposed to assume the
"sole risk" for all the costs associated with existing and
potential turned-back capacity on its system until at least Dec.
31, 2003. Based on notices of contract termination received to
date, Tetco projects the costs of turned-back capacity on its
system will jump nine-fold between now and 2003, beginning with $15
million this year and rising to $135 million in 2003.
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