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MPSC: LDCs Can Charge for Tracking Gas Title

MPSC: LDCs Can Charge for Tracking Gas Title

Marketers lost a battle against LDCs last month when the Michigan Public Service Commission (MPSC) sided with Michigan Consolidated Gas (MichCon) and Consumers Energy in a dispute over fees charged for tracking title to gas that changes hands on the LDCs' systems. The MPSC found it had no jurisdiction to regulate title transfer tracking fees. As of Friday, the marketers had not decided whether to appeal the decision, which they need to do by today.

The commission said since gas can move without title transfers and without utilities tracking transfers, the transfers are not integral to gas transportation. "Rather, they can be viewed as separate and distinct from the transportation service, and the title transfer tracking service offered by the utilities can be viewed as incidental to and not essential for the transportation of gas." In its order - which contradicted a staff recommendation for regulated title transfer fees - the MPSC said the marketers' argument put them in a dubious position on several counts.

"If they argue that the title transfer service should be regulated because it relates to the sale and purchase of gas, they may find themselves, as buyers and sellers in that market, subject to regulation by the commission. If they assert that the market is a wholesale market not subject to commission regulation, the argument begs the question why the commission can or should regulate an ancillary service in that unregulated market. If they argue that the title transfer service should be regulated because it relates to the transportation of gas, which the commission does have jurisdiction to regulate, they face the arguments that the title transfers, by definition, do not involve any transportation of gas and are not sufficiently related to the transportation function to confer jurisdiction on the commission."

Marketers involved in the case are Dynegy, LG&ampE Natural Marketing, Coastal Gas Marketing, Westcoast Gas Services, and Aquila Energy Marketing. "We were disappointed in the commission's decision, and we believe there will be huge ramifications to Michigan consumers by virtue of reducing competition in the marketplace and increased pricing," said Dynegy spokeswoman Jennifer Rosser. "We also believe that this is a decision based upon facts not appropriately accounted for in the commission. For example, the lack of competition to provide the title transfer tracking service."

Dynegy spokeswoman Maripat Sexton said Dynegy and other marketers believe Michigan's fees will cause sellers to avoid Michigan in favor of other markets where there are no title transfer tracking fees, thus driving up prices in Michigan.

Consumers Energy spokesman Charles MacInnis said his company's argument all along was marketers didn't have to use the title transfer tracking service. "It's optional." He said the company wouldn't say the total amount its collected in fees since their implementation Oct. 1, 1996, which is also when MichCon began charging its fees. However, in June 1997, he told NGI during the first six months of the collection period the LDC collected about $250,000 (See NGI June 16, 1997).

Consumers charges half a cent per MMBtu for the first 10,000 MMBtu, four-tenths of a cent for the next 40,000 MMBtu, and two-tenths of a cent thereafter for each title transfer transaction. MichCon charges one cent/Mcf per day.

Mark Gurley, Aquila senior vice president for trading and risk management, said his company would be willing to pay the fees if they were more reflective of the utilities' actual cost of providing the service. "The fact that the cost is one penny per MMBtu is rather outrageous, and we think that reasonable costs for that type of service are much, much less than that. It's our opinion that it's somewhere south of a tenth of a cent." Brad Kibbe, Aquila director of trading said his company also wants everyone in the daisy chain to pay the fee. Currently excluded are marketers making the last sale to end-use customers. He said when the utilities' file their next rate cases, the MPSC should see that revenue from title transfer tracking fees is credited back to end-users. And revenue from the fees has grown since they were instituted, Kibbe said Aquila is now paying about $40,000 a month in title transfer tracking fees to both utilities.

A packet of gas can change hands as many as 15 times on Consumers, MacInnis said. "You can go from zero to one, to a dozen to 15 with the same party in and out more than once in some instances. One, two, and three is more the norm, but it can increase significantly from there."

Joe Fisher, Houston

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