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Three Strikes for Northern's LFT Proposal

Three Strikes for Northern's LFT Proposal

Northern Natural Gas has had three or more chances to justify its proposal to offer limited firm throughput (LFT) service on its system, but it has struck out every time, industrial and distributor shippers contend. They have asked FERC to either cast aside the pipeline's proposal for the new service or order radical changes to assuage their concerns.

Their chief concern is that Northern Natural Gas, an affiliate of Enron, simply hasn't proven that it has sufficient unsubscribed firm transportation capacity in its market area to accommodate the proposed LFT service, without infringing on the capacity rights of its existing firm shippers. Given this dearth of firm capacity, a decision to allow the LFT service "could result in curtailments and the serious degradation of service to firm shippers" on Northern Natural's system, Nicor Gas charged.

Northern Natural shippers are worried that the pipeline will "double sell" already-subscribed firm capacity to provide the new LFT service, although Northern Natural assured them at a July technical conference and in supplemental data filed earlier this month that this would never happen. They want the pipeline to put this in writing.

But Northern Natural "adamantly refuses to incorporate this assurance into its tariff language by making LFT a secondary firm service, with priority over interruptible service but subordinate to existing [firm] service," said Reliant Energy Minnegasco [RP00-223].

Under its proposal, Northern Natural said the LFT service would be designed for those shippers that prefer firm service but are able to accommodate periodic service interruptions. The LFT firm service would not be available for up to 10 days each month (Limited Days). FERC accepted the proposal in an order late April, subject to the maximum five-month suspension and refund, but directed Northern Natural to address protesters' concerns and further justify its proposed rate for the LFT service.

Shippers - especially industrials - insist Northern Natural has fallen short of the Commission's directive. The pipeline's LFT proposal "continues to raise significant questions regarding the operational characteristics and parameters of this new service, the effect of this service on existing shippers' rights and the availability of Northern's pipeline capacity from which this new service may be offered," the industrials told FERC.

They are concerned the LFT service would include negotiated terms and conditions for individual customers, which is prohibited by Order 637. Further, industrials said Northern Natural has failed to "address how it would determine when a Limited Day will be called. Northern refuses to include in its tariff the criteria" for this. Citing "little difference" between declaring a "Limited Day" or an operational flow order (OFO), industrials contend the "relevant [tariff] criteria should include, as in the case of OFOs, factors necessary to allow Northern to maintain its system reliability and integrity."

Also, they said the proposal "appears to allow" the pipeline to curtail LFT on an equal basis with other firm services. This "would degrade the priority rights of all of Northern's other existing firm shippers (under rate schedules TF and TFX) because if LFT service is curtailed pro rata with all other firm services, TF and TFX shippers would experience a greater volume curtailment with implementation of LFT service than without the existence of LFT service."

In the event FERC chooses not to reject the proposed LFT service, the Northern Municipal Distributors Group and the Midwest Region Gas Task Force, as well as industrials, have called on the Commission to order Northern Natural to revise its tariff such that firm service shippers would have priority over LFT shippers when it comes to nominations and scheduling at primary or alternate points, and that LFT service would be subject to intra-day bumping by firm shippers. Additionally, LFT should have a lower curtailment priority, the distributor group said. "Only in this way can the rights of firm shippers be fully protected."

Susan Parker

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