FERC has approved Ruby Pipeline’s requests to revise upward its initial rates for firm long-term transportation service to recover anticipated higher project costs, and to revise its initial in-kind fuel retention rate downward to reflect an expected decrease in projected fuel consumption when the pipeline starts up. The pipeline has sought approval from the Federal Energy Regulatory Commission (FERC) to begin service on Wednesday, but the agency has not responded (see Daily GPI, July 14).

Ruby Pipeline’s request for an increase in the initial in-kind fuel retention rate is based on a projected hike of $590 million in the pipeline’s project costs to $3.55 billion. Ruby cited “delays experienced in obtaining authorizations and permitting, additional necessary cultural resources survey and mitigation work, and litigation” as the reasons for its revised estimate. As a result of these factors, Ruby said project construction was delayed by about three months, causing the El Paso Corp. pipeline to incur “significantly higher costs.”

To recover the higher project costs, the Commission approved Ruby’s proposal to increase its initial recourse rate for firm long-term transportation services, which consists of a monthly reservation rate of $34.586/Dth and a commodity charge of $0.0100/Dth delivered. This compares to the initially proposed monthly reservation charge of $30.998/Dth and a commodity rate of $0.0150/Dth.

The pipeline said it also expects to revise its charges for other services, including short-term firm transportation, interruptible transportation, park and loan, and swing service.

“Ruby maintains that should the final project costs prove to be materially less than the revised estimate of $3.55 billion, it will seek Commission authorization to lower its rates to accurately reflect the final project costs,” the order said [CP09-54]. The 680-mile, 42-inch diameter pipeline, which FERC approved in April 2010, will transport natural gas from an existing supply hub at Opal, Wyoming, to interconnections near Malin, OR.

In order to avoid an overcollection for fuel, FERC also approved Ruby’s request to decrease its initial in-kind fuel retention rate to 0.05% from 0.552%. However, Ruby said it is not seeking to revise its previously approved lost and accounted for retention rate of 0.15% or to change its fuel mechanism.

“Ruby states that its initial fuel and lost and accounted for rates were based on an assumed 90% pipeline throughput load factor based on the facility design capacity. Ruby now anticipates an approximate pipeline throughput load factor of less than 60% for the first several months following commencement of operations. Ruby maintains that, while long-term demand for gas in the project area remains strong, near-term pipeline utilization is expected to be lower than expected,” the order said.

“With the anticipated lower throughput levels, Ruby asserts that it will be able to operate its pipeline system without the need for its gas compressors for a significant period of time and can rely exclusively on the electric-driven compressor at [its] Roberson Creek compressor station.,” and thus requested the downward adjustment to its in-kind fuel retention rate.

The Ruby Pipeline, which has a capacity of 1.5 Bcf/d and is expandable to 2 Bcf/d, is designed to operate at a maximum allowable operating pressure (MAOP) of 1,440 psig. But it asked FERC for permission to place its pipeline into service at an MAOP of 1,296 psig until it s receives the approval of the Pipeline and Hazardous Materials Safety Administration to operate at the higher pressure. Ruby said it will be able to meet all of its current contractual obligations for firm transportation at the reduced MAOP.

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