Dominion Resources, CNG Told to Widen Order 497 Scope
FERC has sent Dominion Resources and its merged partner,
Consolidated Natural Gas (CNG), back to the drawing board to expand
the scope of the pipeline marketing affiliate rule to apply to all
energy affiliates within their corporate family.
When the Commission approved the marriage of Dominion Resources and CNG last
November, it did so on the condition that the companies would require their
entire corporate family to comply with the standards of conduct under Order
497, which historically have been used to deter the sharing of competitive
information or the showing of favoritism by interstate gas pipelines to their
gas marketing affiliates. (See NGI, Nov. 15)
But FERC broadened the use of the standards with this decision to also include
transactions between pipelines and their electric affiliates.
In their compliance filing, Dominion Resources and CNG --- which
completed their merger in January --- proposed that the Order 497
standards should apply to only CNG Transmission's (CNGT)
transactions with affiliates "engaged in the wholesale merchant
[energy] function." They pointed out that FERC limited the Order
497 restrictions to affiliates with an "electric power merchant
function" in its decision on the merger of Pacific Enterprises and
Enova Corp. in June 1998.
That may be so, the Commission said, but the two mergers are
completely different. "...[I]n contrast to the circumstances in
Enova, the universe of energy companies affiliated with CNGT is
broader. Specifically, unlike the affiliates of Pacific Enterprises
or Enova, a number of CNG's affiliates are separate gas local
distribution companies (LDCs) for which the standards of conduct
proposed by [the merged parties] would not apply."
If FERC were to accept the compliance filing of Dominion
Resources and CNG as is, "a CNG-affiliated LDC could be used to
engage in some of the improper sharing of competitively-sensitive
information and other abuses.....that we intended to prevent by our
requirements in the merger order," the Commission said in its
decision last week [EC99-81-001].
FERC directed the two merged companies to file a new compliance
filing within 30 days of the order, requiring CNGT to apply the
Order 497 standards to all transactions with energy companies that
it is now affiliated with as a result of the merger. CNGT is the
major interstate pipeline subsidiary of the merged company.
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