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Panhandle's HFT Service Gets Green Light

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 basis.

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 activity.

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 hourly limits."

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.

Susan Parker

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