Saying the gas pipeline’s request was “reasonable,” the Federal Energy Regulatory Commission last week gave the North Baja Pipeline LLC the go-ahead to factor in the value of loaned natural gas when computing collateral requirements for credit-risky shippers.

“Including the value of loaned gas in the collateral protects pipelines and their customers against the risk of a shipper withdrawing gas from the system without replacing or paying for it,” FERC said in its order [RP02-363-003]. But the agency called “excessive” the pipe’s proposal to base the collateral amount on the value of the maximum amount of gas to be loaned over a three-month period. It suggested that North Baja propose a “more reasonable time period.”

In a related order, Kinder Morgan Interstate Gas Transmission LLC (KMIGT) had asked the agency to reconsider a September order that required the pipeline to give a credit-poor shipper 30 days’ notice before it could terminate a capacity release. KMIGT had advocated a 15-day notice period as being more reasonable, but FERC didn’t see it that way [RP02-505-002].

The Commission noted that agency regulations require pipes to give at least a 30-day notice to shippers before terminating service. Moreover, it noted, “30-days’ notice gives the replacement shipper and the Commission an opportunity to take action, if it appears termination of service is not appropriate under the circumstances.” It directed KMIGT to revise its tariff to reflect the appropriate notice period.

Elsewhere in the North Baja order, the Commission deemed “unjust and unreasonable” the pipeline’s tariff provision that requires non-creditworthy transportation shippers to post collateral equal to one year’s worth of reservation charges to continue receiving firm service. FERC said it found this level of security to be “excessive for shippers subscribing to service after the pipeline is in operation,” but it noted it was allowed for “initial firm shippers at the time the project is certificated.”

For shippers — other than a pipeline’s initial shippers at the time of certification — the standard collateral that can be required is three months worth of transportation reservation charges, the agency said.

In the KMIGT order, the Commission also rejected the pipeline’s proposed requirement for non-creditworthy shippers to seek its prior consent before releasing capacity. FERC “finds that the proposed prior consent authority would provide KMIGT with too much discretion to restrict capacity releases and would allow for possible undue discrimination,” the order said.

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