Iroquois Gas Transmission System plans to ask FERC for a Feb. 5 start-up date for its Eastchester Extension that crosses Long Island Sound into New York City, bringing to life a project that has been in the works for nearly four years, a pipeline spokeswoman said. But even before a molecule of gas has flowed, Iroquois is coming under fire for a proposal to double the transportation rates for service on the extension.

The extension of the Iroquois system will supply as much as 230,000 Mcf/d of Canadian gas to generation customers and traditional gas users in the New York City market. The 36.5-mile pipeline extends from Iroquois’ existing mainline at North Point, Long Island, across the Long Island Sound to Hunts Point in the South Bronx, north of Manhattan.

The extended line initially had been targeted for start-up nearly a year ago, but the in-service date was pushed backed because “we…had to do some extra work on the line,” specifically on the marine portion running across Long Island Sound, said Iroquois spokeswoman Anita Flanagan. FERC certificated the Iroquois Eastchester Extension in December 2001, but actual construction did not begin until a year later in November 2002, according to Flanagan.

As the start-up date approaches, Iroquois has asked FERC for the green light to double its rate on the extension to 84 cents/Dth on a 100% load factor basis, prompting protests from New York regulators and a key customer — Consolidated Edison Co. of New York Inc.

“This dramatic increase of approximately 100% above existing rates [42 cents/Dth that FERC approved] raises a number of serious issues requiring a full investigation, and hearings before an Administrative Law Judge,” the New York Public Service Commission told FERC [RP04-136]. In addition, it asked the Commission to suspend the proposed rates for the maximum period of five months from the date of in-service, and subject them to full refund down to the initial rate level.

The proposed rate increase is due to the “stunning” cost overruns for the Iroquois Eastchester project, and the pipeline’s request for a 14.9% return on equity, the New York regulators said.

Con Edison said the construction costs of the project, which were initially estimated at $174 million, have nearly doubled in the four years since the project was first proposed. “Iroquois now estimates that the project will cost $334 million; it says that less than one-half of the Easterchester capacity is under contract at maximum (recourse) rates; and it now proposes an Eastchester demand rate of $25.6835/Dth, more than twice its demand rate for [Iroquois’] Inter-Zone services. This results in a unit rate of $0.84444.”

This is well above the so-called “rate-out” amount that would have permitted Eastchester shippers to terminate their precedent agreements on 30-days’ written notice if Iroquois had proposed the increase in an incremental rate filing during the Eastchester certificate proceeding, Con Edison said. But the pipeline never proposed incremental rates, even after FERC rejected rolled-in rate treatment for the project, the utility noted. It asked the Commission to dismiss Iroquois’ rate proposal.

“In the event the Commission does not reject Iroquois’ rate filing, Con Edison requests the [agency] to suspend the effective date of the increase for the maximum five-month period and to establish a hearing as to each element of Iroquois’ claimed justification for doubling the rates for the Eastchester service.”

Iroquois Gas Transmission, a partnership of 10 U.S. and Canadian energy firms, owns and operates a 375-mile interstate pipeline extending from the U.S.-Canadian border at Waddington, NY, through western Connecticut to Long Island.

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