Viking Gas Transmission has appealed to FERC not to “silencedebate” on a limited Section 4 proposal that would allow it tocharge higher incremental rates for historically lower-pricedcapacity as it opens up on its system, without having to file afull-scale rate case.

The Commission overwhelmingly rejected the pipeline’s proposalin November, saying it was barred by a rate settlement that Vikinghad worked out with its customers last May. Under the settlement,”Viking agreed with its customers to a gradual rolling-in of thecosts of Viking’s expansion facilities with a specific rateschedule,” and it agreed to freeze rates until the pipeline filedits next general rate case” in 2001, the FERC order said. As aresult, it “appears” Viking’s incremental pricing proposal, theCommission concluded then, can only be implemented by filing ageneral Section 4 rate case.

In seeking rehearing, Viking contends FERC has misread the termsof its settlement. “The settlement contains a broad reservation —which the Commission did not consider — permitting Viking to makelimited Section 4 changes to rates, terms or conditions in itstariff during the term of the settlement, providing such changes,as here, do not interfere with the phased roll-in of two expansionsagreed to under the settlement.”

The Commission’s suggestion that Viking’s proposal would be”best suited” for implementation in a general Section 4 rate casenot only conflicts with FERC regulations, but has the “unintendedperverse consequence” of barring the implementation of theCommission’s new policy statement for new pipeline construction.Under that policy statement, FERC indicated it would be appropriatefor pipelines’ that have multiple levels of rates for firm capacityto “roll-up” the rates over time as new expansion projects arebuilt, according to Viking.

Viking said its proposal sought to do just that. It wouldincrementally price turned-back capacity, permanent capacityreleases, contract renewals and right-of-first-refusal capacity ata level warranted by the market. The price for such capacity wouldbe capped at the FT-D rate of 45.01 cents/Mcf, Viking’s highest.The pipeline had fetched that rate for firm service from theCanadian border to Marshfield, WI, on its latest expansion.

“While the 45.01 cent rate is significantly higher than thesystem average rate of 11.57 cents established in Viking’ssettlement, a full roll-up would only increase the system averagerate from 11.57 cents to 12.87 cents because the investment in theFT-D expansion is relatively small compared to the overallinvestment in Viking,” the pipeline told the Commission [RP00-35].

Viking currently has four different levels of firm rates on itssystem, and it says it offered the proposal in an attempt toachieve some form of uniformity in firm rates, as well as in itsrates for interruptible, capacity release and authorized overruntransportation (AOT) services. The pipeline proposed to refund 90%of the excess revenues to shippers paying the higher incrementalrates for the firm, IT and AOT services. With temporary releases,the releasing shippers would keep whatever additional revenues theyreaped.

Susan Parker

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