FERC has “preliminarily determined” that Atmos Energy Corp. and two affiliates committed capacity release violations within the past decade.

Specifically, the Commission’s Office of Enforcement (OE) has alleged that Dallas-based Atmos Energy and subsidiaries Atmos Energy Marketing Inc. (AEM) and Trans Louisiana Gas Pipeline violated the agency’s ban on “flipping,” while AEM violated the Federal Energy Regulatory Commission’s (FERC) shipper-must-have-title (SMHT) requirement and the associated FERC gas tariffs of various pipelines. No penalties have been assessed at this stage.

Atmos Energy is one of the largest natural gas distribution utilities in the United States, serving about 3.2 million customers in 12 states. AEM and Trans Louisiana provide natural gas management and marketing services to Atmos Energy’s utility operations and hold transportation and storage capacity in their own name on more than 27 pipelines.

In a notice alleging the violations, the OE staff said AEM violated Commission regulations when it released, on its own behalf or on behalf of others, capacity through flipping. Flipping refers to transactions that avoid the posting and bidding requirements for discounted rate firm capacity and typically involves a series of short-term releases of discounted rate capacity to two or more affiliated replacement shippers on an alternating monthly basis, without complying with the posting and bidding requirements.

AEM and Trans Louisiana were accused by OE of acquiring capacity through flipping, either on their own behalf or acting for others. The flipping activity allegedly continued through January 2008 and involved the release and/or acquisition by flipping of 26.1 Bcf.

According to OE, some of AEM’s and Trans Louisiana’s flipping transactions involved the use of defunct companies not affiliated with Atmos Energy, a practice of which high-level personnel of the two companies were aware. The personnel “knew of and strategized in the use of flipping as a way to continue discounted rate releases,” the notice said.

As for the SMHT violations, AEM is alleged to have shipped 297.8 Bcf of gas titled in its name but using other companies’ capacity rights. Commission policy requires shippers on interstate natural gas pipelines to hold title to the gas they are transporting at the time gas is delivered to the pipeline and while it is being shipped on the pipeline. The policy is intended to promote pipeline open-access and prevent undue discrimination in both primary and secondary markets for natural gas transmission capacity, according to the agency.

AEM high-level personnel were aware of the SMHT violations since 2004, according to the OE notice.

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