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Amoco: MRT's Capacity Auction a Little 'Premature'

Amoco: MRT's Capacity Auction a Little 'Premature'

Mississippi River Transmission (MRT) may have jumped the gun a bit when it proposed to hold auctions as part of a new method of awarding capacity to shippers on its pipeline system. But the company said it shouldn't be punished for coming up with the idea prior to the release of FERC's Notice of Proposed Rulemaking (NOPR), in which short-term capacity auctions are a major issue.

A late protest by Amoco Energy Trading called for the Commission to reject the plan or at least hold it in abeyance pending the outcome of the NOPR. Meanwhile, MRT customers are eager for an expansion of the pipeline system. "Gosh, the NOPR could be finalized two years from now. We need the tariff changes in place now," said MRT's Denise Fetsch.

The Commission already has addressed and rejected many of the issues raised by protesters, MRT told FERC in an answer. In its mid-September tariff filing, the pipeline proposed changing its method of awarding capacity on its system to a "net present value" (NPV) allocation from its current first-come first-served "queue" approach. The new method was modeled after the recently approved methodologies used by Texas Eastern and Tennessee, but it also includes an auction-type process that could be either interactive or silent.

"It's not like we're trying to circumvent the NOPR and get ahead of FERC on this. This is different," said Fetsch. "We're not talking 'daily auction' here, although we do specify in our filing that capacity of 31 days or less will be posted for bid for four hours, capacity longer than 31 days and up to like 92 days will be posted for a couple of days. It could include a daily auction and one that will eventually comply with the NOPR. But [it really wasn't intended] for firm capacity that would become available for 31 days or less."

Bob Trost, MRT's vice president of marketing, said the type of auction FERC is proposing is "some interactive type thing handled electronically, and frankly we're not equipped to do that right now. It would be awfully burdensome to do that. And when I think of auctions, I think of the short-term, day-to-day stuff. We're really not selling capacity for that purpose. The reason our filing is there is because customers want long-term capacity, multi-year commitments.

"We don't look for multiple bids coming in from each bidder. We're basically asking people to submit their best bid. We're not, in the true sense of an auction, allowing people to top other people's bids, with all bids visible at all times. Everyone is confidential until we know who the winner is, at which time we will publish what the winning bid was. The level of detail and the criteria will be clearly stated so anyone can [examine it]."

The pipeline has requested that its proposed allocation methodology become effective Oct. 16, three days prior to an open season it plans to hold to expand its mainline. MRT hasn't had a major expansion project since Order 636 was implemented and currently has no methodology in its tariff for awarding capacity. It has used a first-come first-served queue to handle requests for capacity that has become available through expired contracts.

Under the new NPV method, the total economic value to MRT of accepting a request will be analyzed based on incremental revenues to MRT. The primary focus of the NPV analysis will be on the rate, quantity, and term requested. But in determining the NPV, MRT also will consider factors such as receipt and delivery points and the cost of construction necessary to accommodate service, the impact on the operation of MRT's system, whether a request would provide MRT and its customers access to new markets, turnback capacity, impact on existing and new customers and the commencement date of requested service. Any other factors MRT uses to allocate capacity will be posted for shipper examination on its bulletin board, the pipeline said. It also has requested to be able to reserve excess capacity on its system for future expansions.

The pipeline currently is considering expanding its mainline by 110,000 MMBtu/d from Glendale, AR, to its market zone, including the St. Louis, MO, metropolitan area and points in between. It's also plans to expand its East line from Trunkline and Natural Gas Pipeline connections to the market zone by 50,000 MMBtu/d. MRT told shippers incremental rates will be between $0.17 and $0.40/MMBtu for the mainline expansion and $0.16 per MMBtu for the East line. In addition, MRT is considering building a new extension westward to Washington, MO, and north to Wentzville, MO. The extension would have a potential capacity of up to 75,000 MMBtu/d at an estimated incremental rate between $0.13 and $0.17/MMBtu. The expansion projects are expected to be in service in March 2001.

Rocco Canonica

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