The D.C. Court of Appeals last week rejected a challenge bySouthwest Gas Corp. to the capacity-release program of El PasoNatural Gas.

Specifically, the court found the capacity rights of the LasVegas, NV-based LDC, a customer on El Paso prior to 1991, did nothave priority over the capacity rights of the expansion shippers,which were added to the pipeline’s system post-1991, at Southwest’sdesignated delivery points on the pipeline at Topock, NV.

Southwest raised this argument in response to FERC orders in1992 that gave the expansion shippers the authority to sell theirrights to capacity at the Topock delivery points to other shipperson the secondary market. In deference to the LDC, however, theCommission ruled then that expansion shippers wanting to use thedelivery points would have to first make arrangements withSouthwest, the sole owner of the facilities at the points.

“Insofar as the petition rehashes the issue previouslylitigated” by Southwest in 1992 “we already ruled in [that case]that Southwest has not demonstrated that the Commission’s decisioninjured it in fact and thus made it an aggrieved party…,” wroteCircuit Judge David Sentelle in the June 2nd court opinion [Nos.93-1627, 94-1310]. “The present petition adds nothing new, nor doesit change our view,” he said, adding that Southwest’s argumentswere “rather confused and confusing.”

Further upholding the Commission, the court rejected Southwest’sarguments that it had “historic” or “vested” rights at the Topockdelivery points. FERC “not only reasonably but correctly points outthat Southwest had no such rights because the flexibility availableunder El Paso’s [capacity-release] proposal did not exist beforeOrder 636 restructuring,” the court noted.

Moreover, the appellate judges agreed with FERC’s decision todeny Southwest the use – at no extra charge – of the CaliforniaTopock delivery points as receipt points, a move that would haveenabled the LDC to deliver gas to its system in southern Nevada bybackhaul. The Commission said the delivery points were downstreamfrom Southwest’s contract zone, requiring the LDC to pay anadditional zonal charge.

The court also let stand FERC’s ruling requiringfull-requirements customers, such as Southwest, to limit theircapacity releases on El Paso to a specific level, and to designatein advance the amount of capacity they plan to release at eachdelivery point. The Commission said it took this action to preventfull-requirements customers from being able to tie up capacity onall delivery points and gain an unfair competitive advantage.Southwest argued that FERC’s ruling was “arbitrary and capricious,”but the court found it to be neither.

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