In another key order addressing the scope of pipeline collateral demands, the Federal Energy Regulatory Commission last week said PG&E Gas Transmission-Northwest (PG&E-GTN) could not require non-creditworthy shippers on its system to pay a year’s worth of reservation charges as collateral to continue receiving transportation service.

PG&E-GTN claims it possessed the power to demand the high collateral amount from Denver, CO-based marketer, e prime Inc., under a 1993 loan agreement with its lenders. But FERC noted the 1993 loan agreement was superseded by a new agreement in 1995, which deleted the requirement that PG&E-GTN collect one year’s worth of charges from non-creditworthy shippers as security.

The FERC policy in effect at the time when PG&E-GTN demanded that e prime pay collateral last September required non-creditworthy shippers to pay only three months of reservation charges, the agency order said [RP03-41-001]. “Therefore, the Commission directs PG&E-GTN to refund the remaining portion of e prime’s cash deposit that exceeds three months of reservation charges, including interest.”

The latest agency ruling conforms with a recent decision involving North Baja Pipeline LLC, which labeled the pipeline’s demand for a year’s worth of security charges “excessive.”

Calpine Corp., which also protested PG&E-GTN’s use of the 1993 loan document to back its collateral demand, called on the Commission to impose a fine on the pipeline. But the agency rejected the request, noting that it “[was] not the subject of the complaint” brought by e prime.

The marketer filed a complaint last October, accusing PG&E-GTN of violating the creditworthiness criteria of its own tariff and agency regulations by demanding that it pre-pay $1.5 million in reservation charges, or face suspension of service. E prime paid the collateral amount to continue its agreement for 20,000 Dth/d of service.

Moreover, e prime argued that it shouldn’t have been deemed non-creditworthy by the pipeline because its parent, Minnesota-based Xcel Energy Inc., had an overall corporate credit rating of BBB from Standard & Poor’s (S&P) at the time, and provided PG&E-GTN with a guarantee to assure e prime’s financial performance under its contract with the pipeline. But PG&E-GTN said it based its rating of Xcel on the company’s senior unsecured debt for individual bonds, which had been downgraded to BBB- last June by S&P — one notch below PG&E-GTN’s tariff requirement for creditworthiness.

In a January order, the Commission sided with PG&E-GTN in the dispute, saying that the pipeline had correctly determined that e prime was no longer creditworthy under its tariff guidelines. FERC, however, deferred ruling on how much collateral PG&E-GTN could require from the marketer until after it examined the 1993 loan agreement.

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