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Boston Gas Calls for Closer Scrutiny of Maritimes

Boston Gas Calls for Closer Scrutiny of Maritimes

The only non-affiliated shipper that has signed up for firm transportation service on the Maritimes &amp Northeast Pipeline project clearly is regretting it now. Boston Gas told FERC last week a request by Maritimes in January to amend its pipeline certificate, eliminate about 140 miles of laterals in Maine and raise its mainline rates 61% because of the loss of numerous U.S. markets shows a lapse in rationality.

Rather than raising its rates to such a degree that the project becomes uneconomic for its shippers, the sponsors should downsize the pipeline and should be placed at risk for the cost of unsubscribed capacity, Boston Gas told the Commission. Maritimes should not be allowed to make the same mistake twice. The pipeline already admitted a previous rate increase on its proposed U.S. laterals made service uneconomic for potential end users in Maine, the utility added.

Maritimes informed the Commission in January that "market changes" in Canada, Maine and Massachusetts forced it to propose phasing in or deferring about 140 miles of U.S. pipeline laterals. Maritimes said it was caught off guard by markets in eastern Canada, which matured more rapidly than originally anticipated. But it also said its lateral line rate hikes-which more than doubled transportation costs-were partly to blame for the loss of most of its Maine markets.

"The market demand that the Commission relied upon in issuing the [Maritimes] certificate is in free fall," and the risk and financial burden of the project is being shifted to Boston Gas, the company said of Maritimes recent application to amend its certificate (Dockets CP96-178-008, CP96-809-007, and CP97-238-008).

"At the time the Commission made its determination regarding the market support for the project, there were 17 shippers that had executed precedent agreements for long-term firm service on Maritimes' system. These shippers included significant numbers of entities that were not affiliated with Maritimes or with the Sable Island Project Partners. In stark contrast, Maritimes current...application shows it has obtained firm service agreements from only four shippers and only one of those, Boston Gas, is not affiliated with Maritimes or any of the Sable Island Partners."

The pipeline still has signed precedent agreements for 360,000 MMBtu/d, or 82% of the expected full capacity, including agreements with Boston Gas (43,200 Dth/d), Mobil Natural Gas (185,335 Dth/d), Salmon Resources (100,000 Dth/d) and another company (30,240 Dth/d). It also has a backstop agreement with Mobil for an additional 174,665 Dth/d. However, Boston Gas said the level of market support is inadequate and the project should be downsized.

In its motion to intervene, protest, request for expedited evidentiary hearing and request for stay, the Boston-based gas distributor requested that the Commission stay the authority granted to Maritimes in its July 1998 certificate and prohibit the pipeline from building the project until its size has been re-evaluated in an evidentiary hearing.

In the hearing, Maritimes also should be required to demonstrate that the majority of the gas will not be delivered to Canadian markets, Boston Gas said. There is a "high probability" Canadian markets will soak up much of the Sable Island production, and as a result most of the proposed downstream pipeline project will not be utilized.

The utility warned the Commission that Maritimes also has significantly altered its backstop agreement with affiliate Mobil, placing less risk of unsubscribed capacity on its affiliate. Because the backstop agreement was a major factor in FERC's approval of the project, the commission should reevaluate the project now that the backstop agreement has been changed, the utility said.

Other troubling aspects of the project that have come to light, Boston Gas said, include the negotiated rate caps and revenue sharing provisions the pipeline granted its affiliates. Boston Gas said it was not offered the same terms of service, which constitutes a violation of FERC's affiliate rules.

Rocco Canonica

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