Both BP America Production Co. and affiliate BP Energy Co. last week said while they welcomed the construction of the Entrega Gas Pipeline to boost pipeline takeaway capacity in the Rocky Mountain region, they objected to Entrega’s proposal to impose a single set of transportation rates on all shippers regardless of the distance traveled on the pipeline.

In place of one set of transportation rates, EnCana Corp.’s Entrega “should adopt distance-based rates to ensure that the transportation charge paid by a shipper reflects the portion of the system that the shipper relied on,” the two BP companies told the Commission [CP04-415].

The proposed 1.3 Bcf/d pipeline would bring gas from the Piceance Basin in northwestern Colorado through the Wamsutter Basin and Hub, and other supply areas, to the Cheyenne gas trading hub in northeastern Colorado, where several proposed and existing eastbound pipelines converge.

“Distance rates are needed to ensure that shippers whose receipt point is at Wamsutter…do not pay for the 136 miles of upstream facilities that these shippers do not use. Otherwise, the Wamsutter shippers, along with other shippers that use only a portion of the Entrega system, will be forced to subsidize shippers that move gas across the entire Entrega system,” they said.

Entrega’s proposed rate structure also could inhibit the development of a flourishing hub at Wamsutter, the BP companies noted. “For all of these reasons, the Commission should require Entrega to adopt transportation rates that are mileage-sensitive.”

The BP affiliates also said they opposed Entrega’s proposal to credit to firm shippers only 50% of the net revenue from four interruptible services. The Federal Energy Regulatory Commission requires the pipeline to credit 90% of the net interruptible service revenue, instead of the 50% advocated by Entrega.

“The Commission recognizes that retention of 10% of net revenue gives the pipeline sufficient incentive to maximize interruptible throughput. Allowing Entrega to retain 50% of the interruptible revenue would let the pipeline reap a windfall at the expense of shippers,” they noted.

Entrega wants to calculate its rates based on a capital structure with an equity ratio of 65%, according to the BP companies. Instead, an imputed capital structure should be used, with an imputed equity ratio of no more than 50%, they said. The BP affiliates also called Entrega’s proposed 12% return on equity “way too high.” They suggested that the return on equity not exceed 9.57%.

They further objected to the restrictions that Entrega has proposed on reservation charge credits. The pipeline said it will provide a reservation charge credit in the event of a service disruption due to planned maintenance, but it noted that the credit would not apply for the first 15 days of the service disruption, and that shippers would only be given partial credit (equal to just 52% of the reservation charge) if the curtailment extends for more than 30 days.

“There is no justification for these restrictions on the reservation charge credit. A shipper pays a hefty fixed reservation charge of 40 cents per Dth for firm service to reserve capacity on the primary flow path from its primary receipt point to its primary delivery point. A pipeline can only sell capacity on a firm basis if the capacity will be available for the duration of the firm service commitment, taking into account planned maintenance. If the pipeline is unable to satisfy this firm service commitment, the shipper is not getting what it paid for.”

In addition, the BP companies took issue with Entrega’s proposal stating that a reservation charge credit would be the “sole and exclusive remedy” if the pipeline fails to provide firm transportation service, unless damages incurred by shippers are shown to be the result of “gross negligence or willful misconduct” by Entrega.

“This would excuse Entrega from liability for damage…caused by Entrega’s simple negligence,” they said. “Curtailment could have serious financial consequences on shippers. Consequently, shippers should be able to seek damages in a civil lawsuit or Commission proceeding to compensate the shippers for this financial harm.”

Nor should shippers be required to flow natural gas on a uniform basis at every receipt and delivery point, as Entrega has proposed, the two companies said. “A uniform hourly flow requirement is unrealistic at both receipt and delivery points. There are frequent fluctuations in pressures at production wells, and these fluctuations preclude a producer from delivering gas into a gathering or pipeline system at a uniform hourly rate.”

The BP companies also objected to Entrega’s proposal to subject segmentation on its system to a “thermal floor requirement.” Specifically, the pipeline’s proposed tariff calls for the thermal content of gas being received at segmented points to be no less than the thermal content of gas received at the original receipt point under a shipper’s transportation service agreement, they noted.

“This thermal floor requirement is unjustified because it would undermine the Commission policy that gives shippers comprehensive segmentation rights,” they told the agency.

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