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Tennessee's Eastern Express Project Wins Certificate

Tennessee's Eastern Express Project Wins Certificate

FERC last week awarded Tennessee Gas Pipeline a certificate for its Eastern Express Project 2000 after it had satisfied all of the requirements of the new policy statement on gas pipeline construction.

The project will expand the pipeline's system by 288,000 Dth/d in Zone 6, providing an outlet for natural gas transported over the joint Maritimes & Northeast Pipeline/Portland Natural Gas Transportation System (PNGTS) facilities in the New England region. Tennessee's system will be expanded from where it will interconnect with the PNGTS/Maritimes joint system at Dracut and Haverhill, MA, to delivery points at Milford and Meriden, CT, and Mendon, MA.

".....[W]e find Tennessee's proposed project can proceed without subsidies from its existing customers, and expect it to provide public benefits without adverse impacts," the order said [CP99-262]. Additionally, FERC said the pipe could roll in the costs of the $28 million project in its next rate case barring "a significant change in the relevant facts and circumstances." Rolling in the costs will result in a rate decrease for existing shippers in Zone 6, Tennessee said.

Rolled-in pricing of the Eastern Express project is consistent with the Sept. 15 policy statement for another reason. The policy specified that such pricing would be permitted "in cases of inexpensive expansibility made possible by earlier, costly construction," the order noted. "This is such a case.".

The Commission also approved the proposed negotiated rates for the expansion shippers, which Tennessee said would be less than existing transportation rates for recourse shippers. "Under [our] policy.....the revenue shortfall due to the lower negotiated rates cannot be recovered from existing shippers. Therefore, our policy is to permit negotiated rates at lower than recourse rates in all cases, even to affiliates, and not only when lower rates are needed to compete for business," the order said.

Also favorable were Tennessee's binding precedent agreements for 173,000 Dth (60%) of the proposed 288,000 Dth/d capacity, FERC said. These precedent agreements "demonstrate that the estimated revenues from the proposed project exceed the cost of service by $43,084,914 over the ten-year primary period, and that the annual revenues will exceed annual costs in each of these ten years. Since the long-term project revenues exceed the project costs, it will not be subsidized by existing customers."

The Commission said it would require Tennessee to execute firm contracts "equal to the capacity in which Eastern Express Project 2000 shippers have committed themselves" before it can begin construction on the expansion.

Because the expansion will be accomplished mostly through additional compression, the FERC order said Tennessee's project "minimizes potential landowner objections.....and no eminent domain authority will be required."

Susan Parker

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