FERC Approves TGP Settlement

FERC last week approved a contested settlement in which Tennessee Gas Pipeline agreed to offer discounted transportation rates to shippers using the Perryville, LA, hub. This action is intended to further the development of Perryville as a market center.

The settlement was supported or not opposed by a majority of Tennessee's customers involved in the proceedings. Only the KeySpan Delivery Companies and the New York Public Service Commission (NYPSC) objected to the deal.

While the two companies did not oppose the "primary practical consequence" of the settlement --- the discounted transportation rate on Tennessee at Perryville --- they seriously doubted it would resolve what they saw as the greater problem: that Tennessee's rate structure potentially inhibits the development of market centers.

In last Wednesday's order, the FERC found that KeySpan and the NYPSC could not challenge the portion of the settlement that dealt with the potential anticompetitive effects of Tennessee's rate structure "because they were non-contesting parties to [a] 1996 settlement" between the pipeline and its customers. "KeySpan and the NYPSC are, in essence, seeking to revoke their consent to the 1996 settlement after having received all of that settlement's benefits," the order said. The latest settlement is a resolution of the concerns raised by Reliant Energy Gas Transmission during the negotiations of the 1996 settlement, which it contested. Reliant argued that Tennessee's use of a system-wide cost of service improperly included production-area costs in its market-area rates, which it claimed curbed the development of market centers at Tennessee interconnections with competing pipelines.

Susan Parker

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