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NGPL Discount Plan Gets Nod from FERC

NGPL Discount Plan Gets Nod from FERC

Natural Gas Pipeline Company of America's (NGPL) proposal to specify certain types of discounts in its tariff and avoid seeking up-front FERC approval for each transaction scored a partial victory. But nearly identical proposals of three El Paso Energy pipelines were rejected as being too vague, and the trio was told to try again.

In its July 1 filing, Natural proposed a number of tariff changes to its pro forma service agreements that would enable it to tailor discount rates to specific market and business conditions. By using a cookie-cutter approach, the pipeline had sought to escape filing each individual discount deal up front that deviated from the terms and conditions of its pro forma service agreements.

The Commission approved several of Natural's volume-related discount provisions but excluded provisions concerning capacity segmentation and rate components [RP98-310]. As a result of the order, NGPL contracts that discount specific volumes in conformance with the examples listed in the pipeline's revised pro forma agreements will not have to be submitted to FERC prior to a discount taking effect. A discount still must be posted at the Commission after the fact, however.

In separate orders, FERC found that the types of discounts listed in the proposed amended rate schedules of Tennessee Gas Pipeline (RP98-332), Midwestern Gas Transmission (RP98-327) and East Tennessee Natural Gas (RP98-333) were "overly broad and ill-defined" to the point that "almost any discount arrangement entered into could fall within this list."

The three El Paso Energy pipelines had asked the Commission to amend their firm rate schedules and related transportation agreements to reflect several types of discounts: 1) point-specific; 2) volume specific; 3) discounts based on a variable reservation/commodity charge allocation; and 4) authorized overruns. They also sought to revise their IT rate schedules and related transportation agreements.

FERC, however, left open the door for Tennessee, Midwestern and East Tennessee to re-file their proposals to "specifically define each type of discount proposed...For example, [a] pipeline could list in its tariff specific types of volume-related discounts it may grant such as 1) a specified discounted rate will apply only if specified volumes are achieved, and 2) a specified discounted rate will apply in a specified relationship to the volumes actually transported."

Susan Parker

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