FERC yesterday ordered a settlement judge to convene aconference on Texas Eastern Transmission’s settlement proposal thatprofesses to save the pipeline’s customers more than $260 millionby the end of 2003.

The Commission said it was “encouraged” by the wide support forTetco’s settlement offer, but added it also was “concerned by thecomments of the opposing parties, especially as they relate to alack of opportunity for them to participate in meaningfulnegotiations, the absence of information available to aid them intheir decisions regarding the settlement, and their assertion thatTexas Eastern has not fully explained to them all the assumptionsunderlying its offer.”

After furnishing this information, all sides may be able toreach a “reasonable accommodation of their various positions,” theorder noted [RP98-198]. The Commission directed the settlementjudge to report back to it on the status of the negotiations within45 days. Tetco requested that FERC act quickly on its proposedsettlement so its customers can make “informed decisions” on theircontract termination rights before Oct. 31, 1998.

Among the most contentious issues are claims that much ofTetco’s proposed $65.7 million annual rate reduction is illusory,that incremental shippers, after their facilities are rolled in,will receive the lion’s share of the rate cut, that Tetco isattempting to escape its obligation to absorb its gas supplyrealignment (GSR) costs, and that the pipeline has overstated therisk of it assuming the costs for turned-back capacity on itssystem.

Under the settlement offer, Tetco has proposed to assume the”sole risk” for all the costs associated with existing andpotential turned-back capacity on its system until at least Dec.31, 2003. Based on notices of contract termination received todate, Tetco projects the costs of turned-back capacity on itssystem will jump nine-fold between now and 2003, beginning with $15million this year and rising to $135 million in 2003.

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