A group of industrial gas customers last week called on FERC to “reject outright” Northern Natural Gas Co.’s proposed tariff changes that seek to inoculate the pipeline against credit-risky shippers.
Northern Natural has proposed “one-sided and overly broad…creditworthiness provisions” that would “strip shippers of service rights, intrude upon bankruptcy procedures and unfairly impose significant additional administrative and financial burdens and costs on shippers,” said the Industrial group, which included the American Iron and Steel Institute, Alcoa Inc., EVTAC Mining, United States Gypsum Co. and USG Interiors Inc. [GT02-38].
In its Aug. 23 filing, the MidAmerican Energy pipeline proposed that U.S. shippers on its system have “investment grade” ratings of at least “BBB-” by Standard & Poor’s or “Baa3” by Moody’s Investors Service, and that Canadian shippers (not rated by either S&P or Moody’s) possess a rating of “BBB(low)” by Dominion Bond Rating Services or “B++(low)” by Canadian Bond Rating Service. The creditworthiness of shippers not rated by any of the four agencies would be based on their parent company’s credit rating.
The proposed changes, if approved by FERC, also would give Northern Natural broad access to other credit information about its shippers, and the ability to terminate a shipper’s contract for failure to supply “adequate assurance” of its creditworthiness, take title to a defaulting shipper’s gas on Northern Natural’s system, and dissolve all contracts if a shipper defaults on a single Northern Natural contract.
These credit revisions would give Northern Natural an “unprecedented amount of discretion” over its shippers,” the Industrial customers said. “Northern could, for any reason, demand credit-related information from any shipper, even one with a solid history of payment of its bills for Northern’s services. Such unfettered discretion could lead to harassment and discrimination.”
This would directly conflict with existing Commission regulations, which bar pipelines from applying their creditworthiness standards on an “unduly discriminatory basis,” the group noted.
A number of other interstate gas pipelines, including Natural Gas Pipeline Co. of America and Tennessee Pipeline, have asked FERC to approve similar changes to their credit provisions in light of the liquidity squeeze and ongoing credit downgrades in the energy industry. A group of producers and marketers last week asked the Commission to launch a proceeding to consider generic credit standards for pipelines, rather than address each pipe proposal separately (See NGI, Sept. 2).
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