Phillips subsidiary GPM Gas Corp. and a number of other NorthernNatural shippers are befuddled by a complex negotiated ratetransaction between Northern Natural and its affiliate Enron NorthAmerica Corp. that covers 295,000 MMBtu/d of firm transportationspace, or about one-third of Northern’s pipeline capacity. Thecontract was filed at FERC on Oct. 29 (Docket No. RP96-272). GPMhas filed a protest and request for technical conference with FERCon the matter, saying the transaction is large, complex and maydiscriminate against other shippers.

GPM said the description of the transaction leaves a lot ofquestions unanswered. It’s not clear what the fuel charge is.There’s no minimum price level, and Northern provided nodescription of how the transaction would work in practice. Thereservation charge is based on multiple alternate pricingmethodologies involving complex pricing calculations with variousoptions for Enron on fuel charges.

“If the economic effect of Northern’s proposed negotiated ratedis to provide a discount below variable cost (i.e. below the valueof the fuel required for the transaction) that would constitute anundue preference for Northern’s affiliate,” GPM said indicating thefuel calculations in the deal are suspect.

“While Northern states that it will comply with the Commissionaccounting requirements for negotiated rate transaction, it is notclear that those requirements contemplated a transaction as complexas that proposed here. For example, give the interrelationshipbetween pricing of the reservation fee and the fuel calculation,the Commission should require Northern to clearly and separatelyaccount for fuel prices and volumes under the negotiatedtransaction so that parties can verify that fuel reimbursementoperates in accordance with Northern’s tariff and with nocross-subsidies from other customers,” GPM said.

GPM said the description of the negotiated rate deal “appears tostray beyond a negotiated rate into the area of negotiated termsand conditions, contrary to Commission policy. For example, therevised tariff sheets include an arbitration clause, as well as aterm or condition which requires the shipper to submit informationto Northern about the shipper’s financial derivative activity.”

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