A major interstate natural gas pipeline group has called on FERC to “reconsider and revise” its approach to reservation charge crediting, claiming that it is not right to require pipelines to credit reservation charges for outages that occur during systemic upgrades to comply with the new pipe safety act and environmental laws.
Specifically, the Interstate Natural Gas Association of America (INGAA) urged the Federal Energy Regulatory Commission (FERC) to retract a mid-February order, which requires Texas Eastern Transmission LP (Tetco) to revise its tariff to conform with the agency’s policy on reservation charge crediting or show cause why it should not be required to do so [RP12-318]. Under the existing policy, credit reservation charges are owed pipeline shippers when their service is interrupted by safety and environmental upgrades on a system, as well as scheduled maintenance.
“The Commission should retract its Texas Eastern order and refrain from issuing similar show-cause orders in the future,” wrote INGAA President Donald Santa in a letter to FERC Chairman Jon Wellinghoff.
“INGAA urges the Commission to recognize that reservation charge credits are not warranted for prudent, scheduled outages prompted by pipeline safety and environmental compliance. The level of pipeline safety and environmental work that will be performed in the immediate future is enormous.
“Enactment of the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011 leaves no doubt that natural gas transmission pipelines will be subject to a series of new mandates that will be implemented by the [Department of Transportation’s] Pipeline and Hazardous Materials Safety Administration,” Santa said.
Gas pipeline will be undergoing an “unprecedented level” of testing, retooling, maintenance and other work affecting system deliverability, according to Santa. “At the same time, additional work…may be required to meet evolving environmental requirements. All these activities will require temporarily taking lines out of service or otherwise reducing deliverability.”
Under FERC’s current approach to reservation charge crediting to shippers, all these safety/environmental compliance acuities, “as well as prudent, scheduled maintenance, are considered expected, controllable and avoidable, and the pipeline must provide reservation charge credits for any resulting reductions in service,” Santa noted.
He called on FERC to change its policy, recognizing that credits are not warranted for prudent, scheduled outages prompted by pipeline safety and environmental compliance. “Alternatively the Commission should establish a separate policy that treats these outages as force majeure events or creates a crediting exemption that operates as if these outages are force majeure events.”
In the mid-February order, FERC said “at least a prima facie showing” had been made by Indicated Shippers, a group of producers, that Tetco’s existing reservation charge crediting provisions are unjust and unreasonable. As a result, it opened a Section 5 proceeding into the pipeline’s reservation charge crediting provisions.
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