FERC has granted Panhandle Eastern Pipe Line’s request forrehearing of the capacity-release and penalty issues related to itsproposed hourly firm transportation (HFT) service for gas-firedpower generation facilities.

The Commission also accepted the pipeline’s tariff revisionsimplementing rate schedule HFT, which went into effect, subject torefund, recently. It denied the rehearing requests and protests ofshippers that claimed the new service would degrade existing firmservices, or believed the HFT service should be offered to a widersphere of customers.

The Commission “will accept Panhandle’s restriction of the HFTservice to certain types of customers and will not at this timerequire [the pipeline] to offer the service to other customers,such as customers of LDCs. [FERC] is satisfied that Panhandle’ssystem is not currently equipped to provide service of this natureexcept 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 othercustomers in the future, particularly including customers of LDCsas East Ohio [Gas] has requested.”

Moreover, shippers’ claims that the HFT service will degradePanhandle’s other firm services are “merely speculative,” the ordersaid [RP00-162-001]. “Panhandle has made it clear that it willevaluate requests for this service on a case-by-case basis toensure that other firm services are not adversely impacted.”

In a February order, which conditionally approved the new HFTservice, the Commission directed Panhandle to revise its proposedtariff to reduce the minimum period for capacity releases under HFTto one hour from one day. However, Panhandle argued on rehearingthat it, unlike Reliant Energy Gas Transmission before it, was notseeking a waiver of the Gas Industry Standards Board (GISB)standards to conduct nominations and capacity releases on a hourlybasis.

In fact, it conceded that the name of the new service – hourlyfirm transportation – was something of a misnomer. Rather thanbeing an hourly service, Panhandle said HFT would be a dailyservice providing shippers with enhanced flexibility to receivetheir nominated quantities on an accelerated basis. Panhandleemphasized that its system wasn’t equipped to handle hourlyactivity.

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 addressshipper’s concerns about the possibility of being assessed doublepenalties under the HFT service – an hourly overrun penalty and adaily overrun penalty. “The Commission…..accepts Panhandle’sjustification for the possibility that double penalties might beimposed. As Panhandle has explained, and as the form of HFTagreement confirms, a shipper contracts to remain within daily andhourly limits.”

The Commission said it believes Order 637 will prevent Panhandlefrom abusing this authority. Order 637 requires pipelines to creditto shippers penalty revenues in excess of costs as prescribed undertheir tariffs. “Therefore, Panhandle will not have a financialincentive for imposing the penalties,” the order noted.

FERC also accepted Panhandles proposed overrun penalty, whichwill be the greater of $10 per Dth or 10% of the Weighted AverageIndex price for “North ECAR” as published in Megawatt Daily. Itsaid this would be a “reasonable” deterrent to abuses by electricgeneration shippers, which most likely will be the primarycustomers for the HFT service.

However, “Panhandle must clarify its tariff to ensure thatpenalties will be imposed on HFT shippers only when systemintegrity is in jeopardy. Further…..it must include a provisionfor crediting revenues from penalties, such as that at issue inthis proceeding,” the order said. FERC directed Panhandle to filethese revisions to its tariff within 15 days of the order.

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.