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.
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