Panhandle's HFT Service Gets Green Light
FERC has granted Panhandle Eastern Pipe Line's request for
rehearing of the capacity-release and penalty issues related to its
proposed hourly firm transportation (HFT) service for gas-fired
power generation facilities.
The Commission also accepted the pipeline's tariff revisions
implementing rate schedule HFT, which went into effect, subject to
refund, recently. It denied the rehearing requests and protests of
shippers that claimed the new service would degrade existing firm
services, or believed the HFT service should be offered to a wider
sphere of customers.
The Commission "will accept Panhandle's restriction of the HFT
service to certain types of customers and will not at this time
require [the pipeline] to offer the service to other customers,
such as customers of LDCs. [FERC] is satisfied that Panhandle's
system is not currently equipped to provide service of this nature
except at delivery points with only one customer."
However, it directed Panhandle to file a report assessing the
"practicality of expanding the availability of HFT service to other
customers in the future, particularly including customers of LDCs
as East Ohio [Gas] has requested."
Moreover, shippers' claims that the HFT service will degrade
Panhandle's other firm services are "merely speculative," the order
said [RP00-162-001]. "Panhandle has made it clear that it will
evaluate requests for this service on a case-by-case basis to
ensure that other firm services are not adversely impacted."
In a February order, which conditionally approved the new HFT
service, the Commission directed Panhandle to revise its proposed
tariff to reduce the minimum period for capacity releases under HFT
to one hour from one day. However, Panhandle argued on rehearing
that it, unlike Reliant Energy Gas Transmission before it, was not
seeking a waiver of the Gas Industry Standards Board (GISB)
standards to conduct nominations and capacity releases on a hourly
In fact, it conceded that the name of the new service - hourly
firm transportation - was something of a misnomer. Rather than
being an hourly service, Panhandle said HFT would be a daily
service providing shippers with enhanced flexibility to receive
their nominated quantities on an accelerated basis. Panhandle
emphasized that its system wasn't equipped to handle hourly
Given Panhandle's clarification, the Commission said it was
"appropriate for HFT capacity to be released only on a daily basis"
instead of an hourly basis.
In the February order, FERC also ordered Panhandle to address
shipper's concerns about the possibility of being assessed double
penalties under the HFT service - an hourly overrun penalty and a
daily overrun penalty. "The Commission.....accepts Panhandle's
justification for the possibility that double penalties might be
imposed. As Panhandle has explained, and as the form of HFT
agreement confirms, a shipper contracts to remain within daily and
The Commission said it believes Order 637 will prevent Panhandle
from abusing this authority. Order 637 requires pipelines to credit
to shippers penalty revenues in excess of costs as prescribed under
their tariffs. "Therefore, Panhandle will not have a financial
incentive for imposing the penalties," the order noted.
FERC also accepted Panhandles proposed overrun penalty, which
will be the greater of $10 per Dth or 10% of the Weighted Average
Index price for "North ECAR" as published in Megawatt Daily. It
said this would be a "reasonable" deterrent to abuses by electric
generation shippers, which most likely will be the primary
customers for the HFT service.
However, "Panhandle must clarify its tariff to ensure that
penalties will be imposed on HFT shippers only when system
integrity is in jeopardy. Further.....it must include a provision
for crediting revenues from penalties, such as that at issue in
this proceeding," the order said. FERC directed Panhandle to file
these revisions to its tariff within 15 days of the order.