The Federal Energy Regulatory Commission last week ordered CenterPoint Energy Gas Transmission to show cause why its ability to enter into negotiated-rate contracts with its customers should not be suspended or revoked in light of agency staff’s findings that the pipeline failed to inform the Commission of a slew of material deviations in the contracts over an almost six-year period.

Between Oct. 21, 1997 and April 1, 2003, a FERC staff audit concluded that CenterPoint Energy did not report all of the non-conforming terms and conditions in 76 negotiated-rate contracts that were still in effect on or after Jan. 1 of this year, the show-cause order said [IN03-11]. In addition, staff found that the pipeline failed to post the information on the Internet.

If the Commission should suspend the negotiated-rate authority of CenterPoint Energy, it would mark the second such action by the agency. In July 2002, it suspended for a year Transwestern Pipeline Co.’s authority to negotiate rates based on basis differentials for overcharging transportation customers during the California energy crisis in 2000-2001 (see NGI, July 22, 2002).

CenterPoint Energy’s actions violated FERC regulations, which require any contract or executed service agreement that “deviates in any material aspect from the form of service agreement in the pipeline’s tariff” to be filed with the Commission. They also ran counter to the agency’s 1996 policy statement that requires such filings to include a summary of the negotiated-rate contract, or “complete contract documentation,” the order said.

Examples of some non-conforming terms and conditions that were unreported by the pipeline included: CenterPoint Energy’s offering a multi-year firm seasonal transportation service for summer that was not offered under its tariff; a provision permitting the pipeline to re-designate delivery points if a shipper supported a proceeding at FERC challenging CenterPoint Energy’s recourse rates; and a clause providing for early termination of contracts, the order said.

Citing the “widespread nature of possible violations” against CenterPoint Energy, the Commission said it will consider four remedies against the pipeline: 1) suspend or revoke its authority to enter into negotiated-rate contracts; 2) require all of CenterPoint Energy’s negotiated-rate contracts to be pre-approved by the agency before they can take effect; 3) award any unreported preferential non-conforming terms and conditions to all similarly situated shippers; and 4) implement a strict compliance plan to ensure that all non-conforming terms and conditions in the pipeline’s future negotiated-rate contracts are reported to the Commission. FERC ordered CenterPoint Energy to respond to the show-cause order within 30 days.

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