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Viking Begs FERC Not to 'Silence Debate' on Pricing Plan

January 10, 2000
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Viking Begs FERC Not to 'Silence Debate' on Pricing Plan

Viking Gas Transmission has appealed to FERC not to "silence debate" on a limited Section 4 proposal that would allow it to charge higher incremental rates for historically lower-priced capacity as it opens up on its system, without having to file a full-scale rate case.

The Commission overwhelmingly rejected the pipeline's proposal in November, saying it was barred by a rate settlement that Viking had worked out with its customers last May. Under the settlement, "Viking agreed with its customers to a gradual rolling-in of the costs of Viking's expansion facilities with a specific rate schedule," and it agreed to freeze rates until the pipeline filed its next general rate case" in 2001, the FERC order said. As a result, it "appears" Viking's incremental pricing proposal, the Commission concluded then, can only be implemented by filing a general Section 4 rate case.

In seeking rehearing, Viking contends FERC has misread the terms of its settlement. "The settlement contains a broad reservation --- which the Commission did not consider --- permitting Viking to make limited Section 4 changes to rates, terms or conditions in its tariff during the term of the settlement, providing such changes, as here, do not interfere with the phased roll-in of two expansions agreed to under the settlement."

The Commission's suggestion that Viking's proposal would be "best suited" for implementation in a general Section 4 rate case not only conflicts with FERC regulations, but has the "unintended perverse consequence" of barring the implementation of the Commission's new policy statement for new pipeline construction. Under that policy statement, FERC indicated it would be appropriate for pipelines' that have multiple levels of rates for firm capacity to "roll-up" the rates over time as new expansion projects are built, according to Viking.

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

"While the 45.01 cent rate is significantly higher than the system average rate of 11.57 cents established in Viking's settlement, a full roll-up would only increase the system average rate from 11.57 cents to 12.87 cents because the investment in the FT-D expansion is relatively small compared to the overall investment in Viking," the pipeline told the Commission [RP00-35].

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

Susan Parker

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