FERC last week gave Transcontinental Gas Pipe Line the go-aheadto build a $1.2 million lateral and associated facilities in NorthCarolina over the objections of state regulators, who argued thefacilities would constitute a bypass of a local distributioncompany.

The proposed facilities would directly link Transco with aplanned gas-fired generation facility to be built by RockinghamPower L.L.C., which has a contract to begin supplying Duke Powerwith power in July 2000. The lateral would provide RockinghamPower, an affiliate of Dynegy Marketing and Trade, with about 222MMcf/d of natural gas. Dynegy asked Transco to build the facilitiesso it could supply gas to its affiliate.

The North Carolina Utilities Commission (NCUM) opposed theconstruction of the Transco line, claiming it would result in abypass of LDC NUI-North Carolina Gas Division and ultimately wouldlead to economic harm and threaten its customer base. But FERCthought otherwise given Rockingham’s status as a new customer.”…[T]he Commission has previously recognized that pipelineservice to new customers who are not currently receiving gasservice from an LDC does not constitute a bypass of the LDC,” theorder said [CP99-278].

Dynegy said it had separately negotiated with NUI-North Carolinaabout possibly building a direct interconnection with Transco orabout providing a gas transportation service to Rockingham’splanned facility. But it found that NUI-North Carolina couldn’tprovide the needed service. It doesn’t have any pipeline in theground near Rockingham Power’s proposed site, and its systemdoesn’t have sufficient capacity to meet Rockingham Power’s needs,according to Dynegy.

Transco expects to begin construction of the 200-feet lateraland metering station this month, and has targeted completion forDec. 1.

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