FERC’s Office of Administrative Law Judges is quickly responding to the Commission’s order last week for a hearing to determine whether Transwestern Pipeline exercised market power last winter. Acting Chief ALJ William J. Cowan already has scheduled a prehearing conference for Friday (Aug. 3), and has designated ALJ Jacob Leventhal as the presiding judge in the case.

The Commission last week called for an ALJ hearing to ascertain whether Transwestern exercised market power in awarding negotiated-rate contracts that led to shippers being charged up to $27/MMBtu in February, when the effective maximum rate allowed under its tariff for firm transportation service to the California border was only 38 cents/MMBtu (see Daily GPI, July 26).

The order directed an ALJ to convene a pre-hearing conference within 10 days, and to issue an initial decision on the matter within 60 days. The hearing is expected to focus on three issues: 1) whether Transwestern capacity was advertised and awarded in a fair manner; 2) whether the rates negotiated were the result of the exercise of market power; and 3) why the capacity awarded was available without interruption, while recourse service was not available. “In addition, I have a question [as to] why shippers agreed to such rates when much lower recourse rates should have been available under our negotiated-rate program,” said Commissioner Linda Breathitt last week.

The shippers that entered into the negotiated-rate transactions with Transwestern were Richardson Products Co., Sempra Energy Trading Corp., BP Energy Co., Astra Power LLC and Reliant Energy Services.

FERC’s action last week followed a show-cause order that was issued in March, directing Transwestern to explain how it had firm capacity available on its pipeline to move gas under the negotiated-rate transactions then, and why its actions in entering into the negotiated-rate agreements didn’t violate Commission regulations and policy regarding firm transportation service and negotiated-rate agreements.

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