The Federal Energy Regulatory Commission ordered its staff Wednesday to convene a technical conference to address Natural Gas Pipeline Co. of America’s (NGPL) proposed tariff revisions to its creditworthiness standards, noting that the changes being sought “may be unjust, unreasonable, unduly discriminatory or otherwise unlawful.”

Staff was directed to report the results of the conference to FERC within 120 days of the order. In the meantime, the Commission conditionally accepted NGPL’s proposal to tighten its creditworthiness standards, but it suspended the effectiveness of the tariff changes until either April 1, 2003 or a date specified by FERC in a future order, whichever is earlier.

FERC called for the technical conference because of the “numerous substantive concerns” raised by pipeline shippers, who would be most affected by Natural’s efforts to shield its system from credit-risky shippers. Natural’s proposal, among other things, would give the Kinder Morgan-owned pipeline greater latitude in suspending and terminating service for delinquent shippers; require greater proof of a shipper’s credit standing; bar the recall of released capacity by shippers who are delinquent; and would permit the pipeline to take title to gas if a shipper defaults on its payment obligations to Natural.

The Commission rejected shippers’ requests to combine the conference for Natural with the similar conferences that are scheduled for Tennessee Pipeline and Northern Natural Gas, which also have proposed tariff changes to toughen their credit requirements for shippers. “Although many of the tariff provisions proposed by the three pipelines are similar, the reasons why a pipeline would need such provisions, as well as [protesters’] concerns with such provisions, may be unique to a particular proceeding,” the order said [RP03-7].

FERC indicated that generic creditworthy standards may be in order. “The Commission agrees that it could be valuable to develop a generic standard for creditworthiness since shippers would be able to provide the same documents to every pipeline to obtain capacity, and there appears to be value in establishing standards for when a pipeline must provide service to a shipper,” it noted.

The Commission said it “encourages” the industry to begin a process at the North American Energy Standards Board (NAESB) to determine whether consensus standards can be developed for creditworthiness. It has asked the NAESB to file a report by June 1, 2003 on its progress in this area, so FERC can decide whether further action is necessary on individual pipeline proposals.

As for Natural’s creditworthy changes, the Commission said it found particularly “unjust and unreasonable” the pipeline’s proposal to bar shippers from recalling capacity once they have been notified they are delinquent in payment or that their credit status has deteriorated. It further objected to a proposed provision that would permit a credit-risky shipper to continue to receive service from Natural if the pipeline and shipper can “mutually agree” on one of four security options in the tariff.

The form of security to be selected should be the “shipper’s sole choice,” not the pipeline’s, the Commission order said.

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