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Pipe Y2K Plans Have Shippers Worried

Pipe Y2K Plans Have Shippers Worried

Dynegy Inc. told FERC last week it's becoming alarmed at the growing number of varying Y2K contingency plans being filed by pipelines. The Commission should agree to allow one set of procedures for the entire industry, Dynegy suggested. Otherwise there could be a state of panic on New Year's eve when shippers have to deal with multiple sets of Y2K emergency nomination procedures.

Y2K contingency plans have been filed by Transcontinental Gas Pipelines, Natural Gas Pipeline Company of America and the rest of the Kinder Morgan (formerly KN Energy) family of pipelines, TransColorado Gas Transmission, Columbia's transmission companies and a group of pipelines owned by Southern Natural Gas. All seek waivers of FERC regulations and nominations procedures to implement some form of emergency nomination plans in case there are computer shutdowns or other Y2K-related problems on Jan. 1. All the proposals, however, differ in certain ways.

For example, Columbia proposes to suspend the 5 p.m. CCT (Intraday 2) and 6 p.m. CCT (Evening) nomination cycles on Dec. 31 "in order to allow the Columbia pipelines adequate time to perform the necessary computer system back-ups and system status checks....." Meanwhile, NGPL, KNI, Trailblazer, Stingray and the other Kinder Morgan pipelines are proposing a "surgical strike" to remove four nominations cycles: the two evening noms on Friday Dec. 31 and the two morning noms periods on Saturday Jan. 1. The Kinder Morgan pipes said they "have no reason to believe that their transition to Y2K will not be entirely successful." It's just a precaution. Besides, "no shipper will be unduly inconvenienced; shippers still will have sufficient opportunities to make nominations for the gas days affected" through the two nomination periods left on each of those days, the pipelines told FERC.

Cibola Energy Services called it a "potentially dangerous cure for a presumptively healthy patient... Natural describes its proposal as a 'surgical strike.' In fact that proposal is more aptly characterized as a scatter shot attack on the Y2K enemy that Natural claims already to have defeated. Natural's suspension of nomination rights does, however, pose the potential for significant collateral damage to Natural's shippers and the markets they serve."

Dynegy agreed, adding that it is concerned that to the extent each pipeline comes up with its own plan, "a hectic time of the year during the winter heating season will become even more hectic for schedulers trying to remember the details and intricacies of each pipelines Y2K contingency plan. In addition, the national pipeline grid that the industry has endeavored to create will unravel when the nominations cannot be confirmed due to different business rules being applied along the grid.

"In order to avoid any additional, unnecessary confusion on the part of shippers on these various pipeline systems, the Commission should require Applicants' plan and all future Y2K contingency plans to adopt" one methodology. Dynegy also suggested the Commission require all pipelines to file their requests by Nov. 1 and include in them a waiver of imbalance penalties and a plan to perform after-the-fact reallocation to match scheduled capacity with actual shipper use. Dynegy noted the Commission already told Transco it could not impose penalties for imbalances created during the contingency period.

Furthermore, Dynegy suggested, the Commission should require that pipelines accept nominations by phone, fax and over the Internet so that shippers who have experienced Y2K problems of their own have some flexibility to deal with the situation.

Rocco Canonica

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