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FERC Approves Bondad Expansion, Rejects Allocation Plan

FERC Approves Bondad Expansion, Rejects Allocation Plan

FERC's approval of El Paso's $3.6 million Bondad Line expansion, which would increase capacity by 117 MMcf/d in October, likely will provide some relief to Bondad shippers, who have struggled through many days of constraints and allocations on the San Juan Basin system.

The Commission rejected El Paso's proposed capacity allocation procedure, which would have given new shippers priority rights over existing shippers during constrained periods. And existing shippers won a battle over the max rates for expansion service. FERC sided with protesters Burlington Resources, Southwest Gas and Arizona customers, in rejecting a proposed initial recourse rate that was nearly 9 cents/Dth/d cheaper than the current max rate.

"These provisions together would give project shippers a preferential allocation of constrained capacity on the Bondad system, while current shippers would pay higher Part 284 rates for inferior firm service using the same capacity."

But El Paso clearly won the war. Existing shippers probably won't be too thrilled that the Commission upheld El Paso's negotiated rate contracts, allowing new Bondad shippers to pay at least 7 cents/Dth/d less for the same service provided to existing shippers. Enron and Elm Ridge will be paying $0.0325 and $0.03575/Dth/d, respectively, while existing shippers pay maximum recourse rates of $0.10911/Dth/d.

FERC said pipelines can negotiate rates that are not unduly discriminatory and that treat similarly situated customers similarly. It said El Paso has the authority to agree to rates that are less than the maximum recourse rates paid by other shippers, and protesters did not allege they would incur competitive harm as a result of the negotiated rates. FERC said the cross-subsidization arguments raised by protesters were inappropriate for the current proceeding and because of El Paso's settlement could not be raised again until the end of a 10-year moratorium. FERC had the option of reviewing El Paso's costs and services under a section 5 proceeding but said it was not persuaded that was necessary.

El Paso said yesterday it had not made a decision on whether to move forward with the project or appeal FERC's decision. The project would involve minimum construction, including compression enhancement and replacement at three stations.

Rocco Canonica

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