FERC liked what it did with interconnections on the electricside so much that it figured why not try it out on natural gas. Andthat’s exactly what the Commission did yesterday — it issued anew policy for hooking up to the interstate gas pipeline grid.

By a unanimous vote, the Commission departed from its prior testunder which a shipper seeking an interconnection had to show thatit was “similarly situated” to other shippers that previously werepermitted to hook up to the pipeline. In its place, FERC adopted anew five-step test to provide shippers with greater access to theinterstate pipeline grid.

“By abandoning the old similarly situated test for a newinterconnection policy, I think we take another step in maximizingthe use of the interstate pipeline grid,” said Chairman James J.Hoecker at Wednesday’s Commission meeting.

In order to interconnect with a pipeline, the new policyrequires the following: 1) a shipper seeking interconnection mustbe willing to bear the cost of construction if the pipelineperforms the task, or in the alternative, the shipper seekinginterconnection could construct the facilities itself in compliancewith the pipeline’s technical requirements; 2) the proposedinterconnection must not adversely affect pipeline operations; 3)the proposed interconnection and any resulting transportation mustnot diminish service to the pipelines’ existing customers; 4) theproposed interconnect must not cause the pipeline to be inviolation of any environmental or safety laws or regulations; and5) the proposed interconnection must not cause the pipeline to bein violation of its right-of-way agreements or any othercontractual agreements.

The five steps were spelled out in an order involving PanhandleEastern Pipe Line, which the U.S. Court of Appeals for the Districtof Columbia remanded to FERC to explain why it departed from itsaccepted interconnection procedure in the case [RP97-29]. TheCommission yesterday stuck to its previous rulings in Panhandlebased on the new policy, which it said will be applied to allfuture gas pipeline interconnection cases.

Commissioner William Massey believes the new policy is a vastimprovement over the “similarly situated” test. “In my opinion,[that] test led to the unfortunate result that pipelines werehesitant to provide hook-ups for fear to do so would open thefloodgate for [more] hook-ups…..”

The new policy prohibits a pipeline from denying a shipper aninterconnection based solely on economic grounds, but it”acknowledges that economic issues could arise that the Commissionmight need to address,” said Commissioner Linda Breathitt.

“For example, there may be instances in which shippers may beable to bypass part of a pipeline’s system so that the pipelinerecovers fewer costs from those customers than it would if [the]shippers were required to utilize existing connections. This orderdoes not preclude consideration of economic arguments on acase-by-case basis where [pipelines] experiencing losses proposeand can justify some kind of mitigation or remedy,” she noted. “Icould not have supported an order that did not express ourwillingness to entertain such requests” by pipelines.

Hoecker agreed interstate pipelines would be able to “raise theissue of revenue losses,” but he added this only would be”appropriate in extraordinary kinds of cases.” Under nocircumstance does the new policy permit pipes to chargeinterconnection or access fees, Massey said, adding they “couldhave the anticompetitive effect of deterring interconnections.”

Although she supported the new policy, Breathitt believes theCommission in some interconnection cases will be forced to take amore expansive view. In certain “discrete instances,” she said “theCommission may be faced with circumstances that could warrant alook at the impact of an interconnection on an existing pipelineinfrastructure.” Such a review, she said, would be consistent withFERC’s new policy statement for certificating pipeline projects. “Ibelieve it is important for the Commission to take into account allrelevant arguments in order to reach balanced decisions [on]expansion and access to the pipeline grid.”

The order further calls for pipelines to develop “reasonabletime frames” for pipelines to respond to shippers’ requests forinterconnections. “I think it’s imperative that pipelines berequired to address requests for [interconnects] without unduedelay. It would be inconsistent with the Commission’s open accesspolicy for this process to be gamed in any way,” Massey said.

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