FERC reaffirmed most of its initial decisions in Order 637 onrehearing yesterday, making minor adjustments toright-of-first-refusal (ROFR) and the reporting and postingrequirements of the major natural gas rule.

“…..[O]n balance this is a solid, well-reasoned [rehearing]order that retains the character of the original order,” saidCommissioner William Massey.

With respect to ROFR, the Commission clarified that shipperswith multi-year contracts for seasonal-only service will retainROFR. “I agree with petitioners that this modification isconsistent with the purpose of the right-of-first-refusalprotection, and that it will afford captive customers thecontractual flexibility they need,” noted Commissioner LindaBreathitt.

However, FERC denied rehearing on ROFR pricing, or the so-calledroll-up policy. “One of the primary arguments [favoring rehearingwas] that this policy will result in large rate increases tocaptive customers at the end of their contracts,” she said.

But “the policy we have established [in Order 637] containsprotections for captive customers. The pipeline cannot charge ahigher rate [to an existing shipper] unless its expansion is fullysubscribed and there is another bid for capacity at a rate abovethe vintage maximum rate paid by the shipper,” Breathitt said.

“It is not expected that [this] pricing policy will result infrequent or large increases for captive customers since any rateincrease will be limited to what another shipper is willing to payfor the service.”

In response to comments from the Natural Gas Supply Association,Amoco Production and other shippers that “posting availablecapacity on a daily basis is not adequate. the order on rehearingwill now require that this information be posted within one hour ofclose of the normal evening and intra-day nomination cycles,” saidMassey.

“This change will enhance the ability of shippers to note thelevel of operationally available capacity in order to respond tonomination opportunities that may arise during the gas day,” henoted.FERC also changed the time in which pipelines must filetransactional reports, said Massey, adding that he regarded this tobe an “unfortunate retreat” from Order 637.

The order “would alter the timing of the contemporaneous postingof transactional information from the time of contract execution tothe time of the first nomination prior to gas flow. It may appearto be a small change to some, but it is one that I stronglypreferred not to make.”

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