Without admitting any wrongdoing, Transcontinental Gas Pipe Line Corp. has entered into a settlement at FERC to pay a civil penalty of $20 million — the largest in the agency’s history — for violating laws and agency regulations that prohibit interstate natural gas pipelines from giving preferential treatment to marketing affiliates and other sister companies.
The penalty eclipses the previous agency record of $11 million set in 1991 in a case that also involved Houston-based Transco. Transco’s parent, The Williams Companies, announced Monday that it has recorded two additional after-tax charges totaling $18 million for fiscal 2002 due to its settlement with FERC involving Transco and an adjustment related to a petroleum pipeline investment.
The multi-million-dollar penalty was spelled out in a stipulation and consent agreement between FERC’s Division of Enforcement, Office of Market Oversight and Investigations (OMOI), Transco, Williams Energy Marketing & Trading Co. (WEM&T), and the Williams Companies. The money is to be paid in five installments over the next four years, with the first payment due in 30 days. The consent agreement, which FERC approved on Monday, followed an investigation and agency audit of allegations against Transco.
In addition to the penalty, Transco agreed under the settlement to terminate its firm sales merchant function by April 1, 2005, which will cut off one of the means by which it provided preferential treatment to its marketing affiliate, WEM&T.
The consent agreement identified a series of violations involving Transco and WEM&T that occurred in 1999. They included:
Also under the settlement with FERC, WEM&T and other marketing affiliates of Transco will not be able to obtain any new transportation from Transco and certain other affiliated pipelines, or increase the transportation capacity the marketing affiliates hold under existing contracts. Moreover, Transco, certain affiliated pipelines and WEM&T will be subject to a FERC compliance plan for four years to ensure that they do not have preferential access to computer information and that they comply with other agency regulations. The affiliated pipes are Northwest Pipeline, Texas Gas Transmission, Black Marlin Pipeline and Discovery Gas Transmission.
Additionally, WEM&T was ordered to cease by June 1 of this year the use of its nomination optimization program or any related programs that serve to link its computerized trading programs with programs or databases that contain information on Transco customers, according to the order. And The Williams Companies was directed to secure the computer systems and databases of each of its affiliated pipelines.
The consent agreement also called for implementation of a compliance plan, which would provide “detailed procedures” for Transco, Northwest and Texas Gas to maintain security over access to transportation information in their computer systems by their marketing affiliates; to post on the Internet discount and transactional information; to develop and hold standards-of-conduct training; and to retain documents as required by FERC regulations. The compliance plan would be in effect for four years.
Unless they receive prior approval from FERC, The Williams Companies and related companies are barred during the four-year period from creating a marketing affiliate for Transco that would be subject to the agency’s standards of conduct rules.
“This settlement marks the beginning of a new era for the Commission and for the market it oversees. The Commission has the will and the means through our new office to deal quickly and effectively with behavior that undermines the integrity of energy markets,” said OMOI Director William Hederman.
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