Although El Paso was granted a waiver that allows it to begin collecting revenue from its $70 million transportation contracts with NGC Corp. effective Jan. 1 subject to refund, FERC has called for a technical conference on the strongly protested issue. The Commission found few problems with the contracts, including those for smaller amounts of capacity with three other shippers. But because the contracts were so complex, so hotly protested and cover such a large amount of capacity, they deserve a closer look, the Commission said.

NGC’s three contracts, signed in November, cover 1.3 Bcf/d of El Paso’s westbound firm transportation capacity, which was returned to El Paso mainly by Pacific Gas and Electric Co. in December. Much smaller capacity packages were purchased by Williams Energy Services, West Texas Gas Co. and Western Gas Resources. In total, they represent more than 35% of the pipeline’s firm transportation capacity. All of the contracts are at discounted reservation rates. NGC, for example, is obligated to pay reservation charges on only 50% of the total contracted capacity in the first year of the two-year contract and on only 72% in the second year.

Protesting El Paso shippers, including Amoco Energy Trading, Amoco Production, Burlington Resources, Phillips Petroleum and Phillips Gas Marketing, claimed the pipeline tied the NGC contracts illegally during the competitive bidding process and engaged in other coercive action. But the Commission said the protesters didn’t provide enough evidence of that and therefore decided not to reject or modify El Paso’s filing. It left open the possibility of discussing those issues at the technical conference.

Also to be discussed are the “provisions pertaining to the reservations charge reductions.” However, FERC said NGC’s minimum take provisions “are acceptable” and are part of “rate design” rather than a negotiated “term or condition,” which protesters pointed out are prohibited by Commission policy.

One provision of the NGC contracts the Commission found unclear was the IT revenue crediting component. El Paso proposes to credit NGC with IT revenues under certain circumstances, but the pipeline’s recent universal settlement calls for IT revenues to go to certain existing firm shippers. “It is not clear from the materials [filed] exactly how the IT revenue crediting contained in the NGC contracts would function,” FERC said.

In addition, the Commission said the protesting parties should be “afforded an opportunity to more clearly explain why they believe that the contracts at issue here are anti-competitive.”

Commission staff will convene the technical conference and report the results to the Commission within 120 days of the Jan. 23 order.

Rocco Canonica

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