NGI The Weekly Gas Market Report
With a few minor changes, FERC last week approved Natural GasPipeline Co.’s (NGPL) proposal to establish procedures to reservecertain categories of existing capacity for future expansions andextensions.
Natural’s plan, subject to certain clarifications and revisions,was consistent with the Commission’s policy of “minimizing the rateimpact of allocating the costs of existing unsubscribed capacity toexisting customers, and it encourages the full utilization ofcapacity by those who value it the most,” the order said[RP99-450].
Additionally, it will permit Natural to “maximize the efficientuse of capacity that is or will become available,” and “minimizethe cost of construction of new facilities and environmentalimpacts,” the FERC order noted.
According to its proposal, Natural could reserve capacity that’sposted on its electronic bulletin board (DART) as unsubscribed,previously subject to a right-of-first-refusal (ROFR), turned back,or termination of an existing agreement. Prior to reservingcapacity that’s become available as a result of a terminatedagreement, Natural must make the capacity generally available forbidding through its auction procedures. The proposed tariff changesare effective Sept. 1.
Indicated Shippers, which represent producers, argued thatNatural’s proposal would enable the pipeline and/or its affiliatesto circumvent the auction procedures, but FERC disagreed. It saidNatural’s tariff would offer adequate protection against this. Itrequires the pipeline to hold an auction for the “posted capacity”if an existing shipper should submit a bid equal to 50% of theapplicable winter maximum rate or 25% of the summer rate.
And, “potential shippers do have [other] opportunities toacquire ‘posted capacity’ before Natural reserves it for anexpansion project,” the order said. For example, it noted that ROFRcapacity “has already gone through the bidding and matching processbefore Natural can reserve this capacity,” and Natural has proposedto subject terminated agreement capacity to the auction processprior to reserving it.
Indicated Shippers and the Process Gas Consumers Group, whichrepresents industrial gas users, were concerned the proposal wouldenable Natural to withhold long-term firm transportation capacityfrom the market indefinitely. But the Commission didn’t share theirmisgivings.
FERC didn’t find this to be a concern because Natural “hascommitted to marketing the reserved capacity during the interimperiod” preceding the in-service date for an expansion/extensionproject, according to the order. Moreover, the “capacity beingreserved is generally that which has already not been sold forvarious reasons,” it said, such as “no long-term interest has beenexhibited for the capacity prior to the reservation of thecapacity, it is already unsubcribed, [or] it is capacity for whicha ROFR was not exercised…”
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