A subsidiary of Calpine Corp. has asked FERC to intervene in a dispute over what it claims are “excessive” collateral demands made by El Paso’s Southern Natural Gas pipeline for service on its 114-mile South System II Expansion project.

In a complaint filed at the Commission, Houston-based Calpine Energy Services LP (CES), a developer of natural gas-fired generation, said it has had to provide collateral assurances of $21 million to secure 65 MMcf/d of firm transportation capacity on the expansion, which still is under construction and expected to go into service in June. In effect, it has been required to pre-pay 30 months of demand charges to guarantee the delivery of gas to two generation projects in South Carolina and Georgia, according to the company.

Once the pipe expansion is completed and in service, Calpine Energy claims the pipeline has indicated it may require the generation developer to continue to maintain the $21 million collateral level, possibly throughout the entire 15-year term of its service agreement.

Southern Natural demanded the collateral after it deemed Calpine Energy to be a “non-creditworthy” shipper. Calpine provided the collateral assurance in the form of a surety bond last summer.

Calpine Energy projects it will pay about $300,000 a year to maintain the surety bond, and estimates its “annual opportunity costs” associated with the collateral are between $1.5 million and $3 million. It urged FERC to act on its complaint on a “fast-track” basis to “forestall these non-recoupable costs from continuing to accumulate.”

The alleged “exorbitant collateral demands” violate Calpine Energy’s service agreement with Southern Natural, the pipeline’s tariff and the Federal Energy Regulatory Commission’s creditworthiness standards, Calpine Energy contends.

Specifically, Calpine Energy said its service agreement “plainly states” that Southern Natural’s tariff provisions, which it claims limit collateral demands on a non-creditworthy shipper to three months’ worth of charges, “would govern during…both the construction and in-service periods” of the South System II expansion.

While several recent FERC orders would permit a pipeline to collect collateral of up to 12 months of reservation charges during a project’s construction phase, Calpine Energy contends this would apply only “if ‘unique circumstances,’ such as project financing, exist.” The agency also may give pipes greater collateral leeway to cover the cost of certain minor new facilities, such as taps and connections, it believes.

But the company said Southern Natural’s expansion was not project financed, and it said it “[was] unaware of any other circumstances that might justify such an enhanced collateral obligation” during the construction phase of the project. Also, it pointed out that the South System II project was a mainline expansion, and did not involve minor new facilities like taps.

Once construction is finished and the expansion is in service, Commission policy would limit Southern Natural’s collateral demand on Calpine Energy to a standard three months’ worth of reservation charges, Calpine Energy said. Even if the pipeline were authorized to impose a 12-month collateral obligation during the construction phase, “Commission policy regarding both creditworthiness and the non-discriminatory treatment of similarly-situated shippers requires that [Southern Natural] reduce CES’ obligation to three months once service has commenced.”

Calpine Energy said it contacted FERC’s Enforcement Hotline to help resolve the dispute. But “staff has been unable to mediate successfully the ongoing series of disputes between CES and [Southern Natural]. Furthermore, repeated efforts by CES to work out a mutually agreeable resolution of this matter with [the pipeline] have been unsuccessful.”

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