Ozark Sale Final, Owner Fighting FERC Over Rates
The sale of Ozark Gas Transmission to an Enogex affiliate has
been completed, but it remains to be seen whether the FERC will
bless Enogex with the rates it seeks for an interstate pipeline
composed of the combination of Ozark and its currently
non-jurisdictional NOARK Pipeline.
Ozark seller Dynegy said it expects a $27 million pretax gain on
the sale of Ozark for $55 million. Dynegy acquired Ozark in 1995.
"The sale of the Ozark Gas Transmission System is consistent with
our plans to redeploy capital from the sale of non-strategic assets
to our wholesale gas and power business," said Dynegy CEO Chuck
Enogex plans to combine Ozark with its NOARK Pipeline to create
a new interstate system, Enogex Interstate. However, the company is
wrangling with the Federal Energy Regulatory Commission over the
transportation rates it will be allowed to charge. The Commission
generally approved Enogex Interstate's two-stage plan to acquire
Ozark and combine it with NOARK. Enogex Interstate proposed to use
Ozark's existing rates for the combined system and sought rolled-in
treatment of the costs of the combination. However, the Commission
established initial rates "that are substantially lower than
Ozark's existing rates for the services Enogex Interstate has been
authorized to continue." Enogex complains in a request for
rehearing that the FERC derived initial rates using the aggregate
maximum capacity of the combined Ozark-NOARK system and selected
elements of cost data submitted by Enogex to justify roll-in of the
NOARK system and integration facilities.
Enogex maintains the FERC ignored precedent in not authorizing
Enogex Interstate to continue using Ozark's existing
Commission-approved rates. Also, even if the Commission had basis
for requiring adoption of new rates, it erred in their calculation.
"By treating Enogex Interstate as a 'new interstate pipeline' for
some purposes, but not for others, the Order attributes overstated
billing determinants and an understated return on equity to Enogex
The Commission authorized Enogex Interstate to charge a maximum
base reservation rate of $6.3412/Dth and a maximum/minimum base
usage rate of $0.0125/Dth for firm service. Because the FERC chose
to establish initial rates, it dismissed the pipeline's request for
advanced determination of rolled-in rate treatment of the costs for
dedicating NOARK to interstate service and constructing facilities
to integrate Ozark and NOARK.
Enogex is seeking FTS rates of $7.3087/Dth for the maximum base
reservation rate, $0.0134/Dth for the maximum/minimum base usage
rate; and ITS rates of $0.2537/Dth for the maximum base rate, and
$0.0134/Dth for the minimum. Should the Commission continue to
derive initial rates for Enogex Interstate, the pipeline wants it
to use a return on equity of 13.5% and a utilization factor of 90%,
"which approximates the effect of combining the utilization factor
embedded in Ozark's existing rates with a capacity factor relating
to the NOARK 'expansion' facilities of 95%."
Joe Fisher, Houston
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