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Consumers Energy, FERC Agree on No-Fault Settlement

Consumers Energy, FERC Agree on No-Fault Settlement

In a case that points up the marketplace failure of FERC's capacity release rules, Consumers Energy and the Commission's enforcement section have come to a no-fault agreement over charges Consumers collected payments in excess of maximum lawful rates for upstream pipeline capacity released to shippers.

In a stipulation and consent agreement with FERC, Consumers neither admitted nor denied violations were involved in payments made by seven shippers as part of "joint commodity sharing arrangements." Consumers, however, agreed to pay $100,000 to the U.S. Treasury to cover costs of the Federal Energy Regulatory Commission staff investigation. The Michigan utility, which collected $541,000 in excess of maximum pipeline rates from the shippers, also pledged going forward not to engage in any similar transactions which would in the future be considered in violation of section 284.243(h) (1) of the Commission's regulations. The shippers waived their right to refunds.

Consumers had argued its actions were lawful under the Natural Gas Act, and, in fact, were commonplace in the "gray market" surrounding capacity release. The Commission itself has acknowledged the existence of the gray market in which commodity and capacity are bundled to avoid FERC restrictions on pure capacity release transactions. Those who advocate changing the capacity release rules have argued that limiting the price that can be paid for the released capacity to the pipeline's maximum lawful rate does not allow the market to clear in cases where there is excess demand for the space.

Consumers said the commodity revenue sharing had been proposed by the shippers. The utility "neither devised nor insisted upon this type of joint commodity marketing arrangement as a condition of its release of capacity. In agreeing to these contracts, CEC believed it was lawfully and prudently responding to the needs of customers for a competitively priced, delivered gas supply in the markets being served by the replacement shippers." Consumers said it had gotten the impression from the shippers they had similar deals with others for released capacity.

The transactions first came to light in proceedings before the Michigan Public Service Commission where it was argued the excess revenue derived should be credited to Consumers' customers thereby reducing the retail rates.

Ellen Beswick

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ISSN © 2577-9877 | ISSN © 1532-1266
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