FERC gave CNG Transmission a slap on the hand and ordered it tohonor North American Energy Conservation’s (NAEC) right of firstrefusal (ROFR) on 13,350 Dth/d of firm transportation capacity for atleast one year. But the Commission also intends to take a closer lookat CNG’s capacity reservation and posting practices and wants thepipeline to explain why it discriminated against NAEC in awarding thecapacity to another shipper (see Daily GPI, Sept. 8).

CNG awarded the capacity to TXU Energy following a brieffour-day posting during the first week in August despite receivinga letter from NAEC on Aug. 6 indicating that the company wanted toexercise its ROFR for a portion of the capacity, which was undercontract until Nov. 1. In its complaint against CNG, filed on Aug.20, NAEC also said it matched the highest bid for the longest termand should have been awarded the contract extension.

CNG, however, argued that the contract terms were for less thana full year and as a result did not qualify for the ROFR. But theCommission found that to be inaccurate because NAEC originally bidon capacity under a 15-month term before being told by CNG to signseparate short-term agreements covering storage and transportationservices.

“Executing two separate agreements does not change the fact thatthe shipper and the pipeline have agreed to 15 months of continuingfirm transportation service,” FERC said. “Pipelines should not bepermitted to use the expedient of requiring shippers to sign twoless-than-one-year agreements as a way to avoid the imposition ofthe right of first refusal.”

CNG also had argued that NAEC did not give reasonable noticethat it wanted to exercise its ROFR because it submitted a letterto CNG on the last day of a four-day bid posting. But theCommission noted that Aug. 6 was “well before” the contractexpiration date of Nov. 1. It also found CNG violated its owntariff, which requires the pipeline to post long-term agreementcapacity for a bidding period of at least 30 days.

“NAEC’s complaint raises several troubling questions about CNG’scapacity reservation and posting practices,” FERC said. “…CNG isdirected to file an explanation, together with copies of anyrelevant, executed contracts, as to how this practice comports withCNG’s tariff and with Commission policy and regulations.”

Regarding any harm done to TXU because the capacity it wasawarded now must be returned to NAEC, the Commission said CNG andTXU “should have been aware [when NAEC submitted its ROFR letter]that TXU may be harmed” if FERC found NAEC’s claim to be correct.

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