Seeking a generic response to the restraints on competitionposed by pipelines’ bundling of production area costs into marketarea rates, FERC has asked parties in cases involving threepipelines delivering to the East Coast to respond to itstransportation rulemaking.

At issue is the viability of market centers and whether or notthe pipelines’ bundled costs make it prohibitively expensive toship on one pipeline in the production area and then switch to oneor more other pipelines on the way to eastern markets.

Orders voted out by the Commission Wednesday call on parties incases involving Tennessee Gas Pipeline (RP95-112-023) and TexasEastern Transmission (RS92-11-023) to address the issues in theirrespective cases by filing comments by the same Jan. 22 date thatcomments are due in the transportation NOPR. The parties are toadvise the Federal Energy Regulatory Commission whether itsproposals in the NOPR to auction short-term capacity and improvecapacity segmentation would answer complaints which initially wereraised by NorAm Gas Transmission. FERC will consider comments filedin the cases at the same time it is considering its generic NOPR.

The Commission orders last week were in response to a remandlast July by the U.S. Court of Appeals for the District of ColumbiaCircuit in the Tennessee case. The Commission then requested theremand of two cases on appeal to the court involving similar issueson Texas Eastern.

FERC said that because of the pipelines’ systemwidecost-of-service, “it has been argued that a shipper on a long-linepipeline has an incentive to purchase gas from the supply basinsattached to the pipeline’s production area facilities because theyalready are paying for these facilities. Thus it is argued ashipper is likely to use one pipeline for its entire haul ratherthan ship on one pipeline in the production area and on anotherpipeline in the market area.” On Tennessee NorAm was specificallyconcerned with the development of a market center at Perryville,LA. The Texas Eastern complaint related to the shift of a zoneboundary that it was claimed would inhibit development of a marketcenter at Longview-Atlanta, TX.

In the case of Texas Gas (RP97-344-011) the Commission deniedrehearing of its call for an evidentiary hearing on the so-called”NorAm issues,” including the tie-in of costs and rates forproduction area transportation with the rest of the pipelinesystem. The Commission had earlier approved a settlement for therest of the parties, but remanded the case to an ALJ to settle theissues for the dissenting party, NorAm. It defended its action overthe objections of Commissioner Linda Breathitt, who objected to thefull hearing process for Texas Gas, while the other two pipelineswere subjected only to a paper hearing. The order noted NorAm hadbeen promised a hearing on the issue in a previous rate case andsaid “it would be beneficial to have a specific record developedhere on those issues, particularly if it turns out that theproposals in the NOPR do not provide a complete solution….”

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