In compliance with a major rate settlement approved by FERC inDecember, Kinder Morgan Interstate Gas Transmission LLC (KMI)earlier this week reported it paid a whopping $32.6 million inrefunds to customers on its mainline and Buffalo Wallow system lastmonth.

The refunds, which were disbursed on March 20, compensated thepipeline’s customers for the difference between the rates theyactually paid and those they would have paid had the settlementrates been in effect during the period of Aug. 1, 1998 through Dec.31, 1999. The settlement rates reflected a total cost of service of$109.7 million.

The huge refund payment comes only weeks after FERC slappedKinder Morgan with a $5.1 million civil penalty for grossviolations involving the marketing-affiliate standards under Order497, which requires pipes and their marketing affiliates tofunction independently of each other. The Commission also orderedthe company, which inherited the affiliate abuse problems when itacquired KN Energy, to make refunds of $674,428 as part of aconsent agreement.

The report revealed that KMI made refunds to about 70 customerslast month, including several of its affiliates. Some of thebiggest refunds went to KN Marketing LP/ Rockies ($11.7 million),Midwest Energy Inc. ($5.5 million), KN Gas Services ($5.3 million),Wildhorse Energy ($2.2 million), Chevron U.S.A. Production Co.($1.4 million) and UtiliCorp United Inc. ($1.1 million).

Kinder Morgan was sole or part owner of three companies — KNMarketing, KN Gas and Wildhorse — during the August 1998-December1999 period. It has since sold some of the assets as part of itsconsent agreement with FERC.

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