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Dominion, CNG Told to Extend Order 497 Scope
FERC sent Dominion Resources and its merged partner,Consolidated Natural Gas (CNG), back to the drawing board last weekto expand the scope of the pipeline marketing-affiliate rule toapply to all energy affiliates within their corporate family. Thisaction is in keeping with the Commission’s crackdown on abusesbetween pipelines and affiliates.
When the Commission approved the marriage of Dominion Resourcesand CNG last November, it did so on the condition that thecompanies would require their entire corporate family to complywith the standards of conduct under Order 497, which historicallyhave been used to deter the sharing of competitive information orthe showing of favoritism by interstate gas pipelines to their gasmarketing affiliates. But FERC broadened the use of the standardsin the November ruling to also apply to transactions betweenpipelines and their electric affiliates.
In their compliance filing, Dominion Resources and CNG — whichcompleted their merger in January — proposed that the Order 497standards should apply to only CNG Transmission’s (CNGT)transactions with affiliates “engaged in the wholesale merchant[energy] function.” They pointed out that FERC limited the Order497 restrictions to affiliates with an “electric power merchantfunction” in its decision on the merger of Pacific Enterprises andEnova Corp. in June 1998.
That may be so, the Commission said, but the two mergers arecompletely different. “…[I]n contrast to the circumstances inEnova, the universe of energy companies affiliated with CNGT isbroader. Specifically, unlike the affiliates of Pacific Enterprisesor Enova, a number of CNG’s affiliates are separate gas localdistribution companies (LDCs) for which the standards of conductproposed by [the merged parties] would not apply.”
If FERC were to accept the compliance filing of DominionResources and CNG as is, “a CNG-affiliated LDC could be used toengage in some of the improper sharing of competitively-sensitiveinformation and other abuses…..that we intended to prevent by ourrequirements in the merger order,” the Commission said in itsdecision last week [EC99-81-001].
FERC directed the two merged companies to file a new compliancefiling within 30 days of the order, requiring CNGT to apply theOrder 497 standards to all transactions with energy companies thatit is now affiliated with as a result of the merger.
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