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Conference Ordered for Tetco Settlement Offer

June 29, 1998
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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 system.

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.

Susan Parker

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