FERC last week rejected Koch Gateway Pipeline’s proposed tariffrevision that would have required its shippers to obtain itsapproval before nominating out of balance. Koch sought the changeto remedy imbalances on its system, but the Commission said itcouldn’t approve it “absent clear evidence” of “real operationalproblems.”

Koch Gateway failed to justify the need for the proposed tariffchange, according to FERC. “Its statements that certain customershave abused its procedures and that it is suffering operationaldifficulties are unsupported by any specific examples,” the ordersaid [RP99-454]. It also pointed out that Koch’s existing tariffalready gives the pipeline the ability to maintain operationalintegrity of its system by matching receipts to deliveries.

“Second, Koch has failed to explain the procedures by which ashipper would receive Koch’s prior approval before submittingnominations to adjust imbalances,” it said. “Third, Koch has notexplained what criteria it would use to decide to grant approvalfor an out-of-balance nomination.” And if shippers’ claims aboutthe drawbacks associated with Koch’s metering equipment are true,”it seems that Koch would not have the information necessary tomake a reasoned decision about an out-of-balance nomination.”

The Commission was more kind to Koch’s proposal to create aseparate right-of-first-refusal (ROFR) process solely for itsmarket-based storage services. Specifically, FERC approved thepipeline’s proposed tariff changes, to become effective Sept. 1,that would allow it to establish an interactive auction on theInternet for parties to bid on various packages of firm storageservice (FSS) capacity. The Commission directed the pipeline tosubmit a status report on its new auction process by May 1, 2000,giving participants a chance to comment.

It also directed Koch to provide bidders with more data on theorder in which FSS packages will be selected to be auctioned off.”The order by which the packages are auctioned could affect pricingand the rate the ROFR customer must match. Since Koch’s affiliateis a major holder of storage capacity on the system, moreinformation on the sequence selection is needed. Koch’sannouncement disclosing the sequential order of packages must alsoprovide a detailed description of the ‘non-discriminatory’ processto determine the sequence,” the order said [RP99-455].

The Commission supported Koch’s proposals to give bidders atwo-day advance notice of an auction, and to select the best bidsbased on the highest per unit rate rather than the net presentvalue (NPV) method. However, it said “parties may raise this issue[method for selecting best bids] again when Koch submits its reportnext year.”

Susan Parker

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