Tennessee Tariff Will Block Unbundling in MA, LDC Says

A small Massachusetts local distributor last week asked FERC to waive a Tennessee Gas Pipeline tariff restriction on capacity releases that it claims could "frustrate" the drive towards competition in the state's natural gas market.

In a complaint filed last Monday, Fitchburg Gas and Electric Light argued it would be penalized by the pipeline --- specifically, its daily withdrawal capability from storage could be cut by more than half this winter --- if it assigns firm upstream pipeline and/or storage capacity to competing marketers so they can serve former LDC sales customers as ordered by the Massachusetts Department of Telecommunications and Energy (DTE).

Fitchburg Gas of Fitchburg, MA, has asked the Commission to act on its complaint by Dec.1, the day the DTE has ordered mandatory capacity assignment to begin in the state. Although the LDC was the only complainant, it believes "it is likely that other shippers will join."

At the center of the dispute is Tennessee's rate schedule for firm storage services, which presents storage customers with a Hobson's Choice - either forfeit their rights to release capacity upstream of storage or become subject to so-called "Ratchet II" limitations on storage withdrawal during the winter months. Fitchburg said it asked Tennessee for a "limited waiver" of the tariff restriction against capacity releases so that it could assign capacity to marketers, but it noted that the pipeline refused.

Currently, Fitchburg is able to withdraw a maximum of 4,807 Dth from storage on Tennessee's system daily. However, that number would be sliced to 47%, or to 2,278 Dth/d, during Dec.-Feb. once Fitchburg Gas begins assigning its capacity to third-party marketers in compliance with the DTE directive, said David K. Foote, senior vice president with the LDC.

Fitchburg Gas contends the tariff restriction benefits one party only --- Tennessee. "With the tariff restrictions in place, Tennessee will have the opportunity to remarket the excess deliverability no longer available to the storage shipper forced to assign capacity by virtue of its state unbundling program. Alternatively, if the shipper elects the excess [storage] deliverability, Tennessee faces less competition in the secondary market because the shipper will not be able to release its Zone 0-4 capacity," it said.

In the event FERC rejects the waiver request, in effect allowing Tennessee to cut the LDC's storage withdrawal capability in half, Foote said Fitchburg Gas would be forced to buy higher priced gas on the spot market to fill its firm transportation capacity (4,807 Dth/d) between market-area storage and its citygate.

"Instead of being able to fill all that transport with gas that we have in storage, we would have to buy gas in the market area" during the winter heating season that would be "far more expensive," he said. The LDC estimated it would face an increase in gas costs ranging from $27,300 to $158,730 on an annual basis.

The higher costs would apply to all shippers behind Fitchburg's citygate --- "whether they continue to purchase their gas from Fitchburg or switch to a marketer," the distributor told FERC.

Susan Parker

©Copyright 2000 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.