FERC last week issued a certificate that paved the way for a new pipeline company, NGO Transmission Inc., to acquire 171 miles of existing pipe and storage facilities in central Ohio from a distribution affiliate, but there was a string attached. If it accepts the certificate, NGO Transmission, contrary to its wishes, would become an interstate gas pipeline subject to the agency’s open-access requirements.

NGO Transmission had asked the Commission for a waiver of its open-access regulations, claiming that the transportation and storage services to be provided would be “wholly localized” and would serve only three affiliates — National Gas and Oil Cooperative (NGO Cooperative), a local distribution company (LDC) that sells gas to residential and commercial customers; Producers Gas Sales Inc., which markets gas to industrial customers over NGO Cooperative’s facilities; and NGO Development Corp., which sells gas production to industrial end users, marketers and LDCs, including NGO Cooperative and other Ohio LDCs.

The three NGO affiliates are unregulated at both the state and federal levels. They are owned by Licking Rural Electrification Inc., a rural electric co-op that is exempt from the jurisdiction of Ohio regulators.

NGO Transmission was established for the purpose of acquiring certain pipeline and storage assets of NGO Cooperative, so that the LDC could fully recover the costs of operating its pipeline facilities from receipt points with interstate pipes to its retail territories. As currently structured, NGO Cooperative is unable to recover these costs in its rates.

The pipe and storage assets receive gas from three interstate gas pipelines — Texas Eastern Transmission, Tennessee Gas Pipeline and Dominion Transmission.

If owned and operated by NGO Transmission, the facilities “will transport gas supplies for at least two LDCs and various marketers. Additionally, the facilities will be used to serve many residential, commercial and industrial end users. Accordingly, we find that the subject facilities…should be operated on an open-access basis under Part 284 of the Commission’s regulations,” the order said [CP03-296, CP03-298].

“These multiple customers and customer classes show that, once acquired by NGO Transmission, the subject facilities would be an active part of the interstate gas market and pipeline grid. These customers and customer classes should have open access to multiple suppliers,” it noted.

As an alternative to FERC jurisdiction, the Commission suggested that NGO Transmission be structured to make it subject to the jurisdiction of the Public Utilities Commission of Ohio, which would allow it to qualify as a Hinshaw pipeline. NGO Transmission would escape Commission regulation under this scenario, but it’s unlikely it would be able to fully recover its transportation costs then.

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