FERC earlier this week rejected Natural Gas Pipeline Company ofAmerica’s (NGPL) proposal to implement negotiated rates on itssystem, saying that such a move would be “premature” until it couldact on the pipeline’s proposed auction procedures that are pendingas part of a comprehensive settlement.

The complexity of merging the two proposals demands that theCommission put the proposed capacity-allocation procedures[RP97-431] in place ahead of proposed negotiated rates on Natural’ssystem, the Commission said. Only then will it be in a position tojudge the appropriateness of the pipeline’s negotiated-rateproposal [RP98-362], and will Natural be able to “eliminate anydiscrepancies” that may exist between the two. The Commission saidNatural could re-file its negotiated-rate plan after it issues anorder on the settlement package that calls for the new auctionprocedures.

“We want to get their primary way of allocating capacity, whichis their auction process, squared away first. And once they getthat in, then they can integrate negotiated rates into thatprocess,” said a FERC staff member. “[I]t did not appear thatNatural itself had integrated their negotiated-rate process intotheir auction process, and they need to do that,” he told NGI.

Right now, the pipeline has proposed two stand-alone measures,and it hasn’t indicated how the they are going to work in tandem,the FERC staffer said. “That’s something that they need to explainto us and to their customers. They need to come up with aninternally coherent program” for both negotiated rates and anauction process.

“Obviously we’re disappointed by the decision,” said Mark Stutz,a spokesman for KN Energy, parent of Natural. “But [we] understandthat the timing may not be the best in the Commission’s mind rightnow.”

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