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
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