PG&E Transmission, Northwest Corp. (PG&E-GTN) was correct last fall when it determined that Denver, CO-based marketer, e prime Inc., was no longer creditworthy under the pipeline’s tariff guidelines, and threatened to suspend service to the company, according to FERC. However, the agency has deferred ruling on whether PG&E-GTN had the authority to demand from e prime a 12-month pre-payment of charges to continue as a shipper.

In an order issued Jan. 24, the Commission said it will decide the issue once PG&E-GTN furnishes it with a 1993 loan agreement from its lenders, which the pipeline claims explicitly requires non-creditworthy shippers to post collateral for one year’s worth of demand charges. FERC ordered the pipeline to file the “supporting documentation” by the end of last week. At that time, the Commission “will…determine the appropriateness of the 12-month pre-payment requirement imposed on e prime,” according to the order [RP03-41].

Meanwhile, the agency said PG&E-GTN could hold onto the collateral paid by e prime last Oct. 4. e prime contracts for 20,000 Dth/d of firm service on the pipeline.

In related developments last week, FERC approved collateral requirements for Northern Natural Gas Co. and Tennessee Gas Pipeline that were far below that being sought by PG&E-GTN (See related story).

The PG&E-GTN order was in response to a complaint brought by e prime in late October, accusing the pipeline of violating the creditworthiness criteria in its own tariff and Commission regulations by demanding that the marketer pre-pay $1.5 million in reservation charges for a one-year period, or face suspension of service. At the time, e prime told FERC it “had no choice but to accede to [PG&E-GTN’s] demand” for $1.5 million of collateral, given that it was unable to “identify a commercially reasonable alternative” to PG&E-GTN’s service in the “short time allowed” by the pipeline (See NGI, Nov. 4, 2002).

PG&E-GTN’s action violated the pipeline’s tariff because e prime’s parent, Minnesota-based Xcel Energy Inc., had an overall corporate credit rating of BBB from Standard & Poor’s, the marketer charged. But PG&E-GTN argued that the “decisive” credit rating involved Xcel’s senior unsecured debt for individual bonds, which had been downgraded to BBB- last June by S&P — one notch below the rating required of shippers on PG&E-GTN to be creditworthy.

“It appears that the issue revolves around whether PG&E-GTN should accept Xcel’s BBB issuer credit rating or has PG&E-GTN correctly relied on the BBB- rating pertaining to unsecured debt for individual bonds,” the order said. The Commission sided with the pipeline, noting that its tariff requires shippers to meet “at least a long-term bond (or other senior debt) rating of BBB” as determined by S&P or any other recognized U.S. or Canadian debt rating service.

The FERC order further said PG&E-GTN has authority to discontinue service to shippers who after a “reasonable period” fail to establish or confirm their creditworthiness. And, the “discretion as to what a reasonable period of time is” rests with the pipeline. It noted PG&E-GTN is not required under its tariff to notify e prime 15 days prior to terminating service based on creditworthiness grounds, as the marketer claimed.

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