North Baja Pipeline LLC has denounced what it believes is the “one-size-fits-all approach” being taken by FERC in establishing creditworthy requirements for interstate natural gas pipelines.
It specifically asked the Commission to reconsider a February rehearing ruling that rejected North Baja’s request to require non-creditworthy shippers to post collateral equal to one year’s worth of reservation charges to continue receiving service on its system [RP02-363]. Instead, the agency said the standard collateral that could be demanded from non-creditworthy shippers was three months of charges (see Daily GPI, Feb. 21).
North Baja accused FERC of “mechanically importing” the credit requirement decisions it made for Northern Natural Gas and Tennessee Gas Pipeline and applying them to its own system, without considering the “critical differences between the risk profiles” of the three pipelines. This action by the Commission amounts to a violation of the Natural Gas Act (NGA), it said.
“These systems could not be more different.” Tennessee, which consists of almost 15,000 miles of pipe, “has literally hundreds of shippers, the bulk of which are creditworthy local distribution companies, electric utilities, municipalities and producers,” North Baja said. “A default by one non-investment grade shipper on Tennessee’s system is not likely to have a material impact on Tennessee’s overall revenue stream.”
In contrast, “North Baja is an 80-mile pipeline, serving a total of five entities, all of which are electric generators located in Mexico. Moreover, not a single one of North Baja’s customers is an investment-grade entity. Unlike Tennessee, [the] loss of any single customer on North Baja’s system…can have a profound impact on North Baja’s cash flow and ongoing operations,” the pipeline told FERC.
This “one-size-fits-all approach to creditworthiness policy, under which pipelines as different as Tennessee and North Baja are painted with the same brush, does not produce a just and reasonable result,” according to North Baja.
“The result the Commission reached [in North Baja] sends a clear message to the industry that the Commission intends to blindly apply its Tennessee and Northern policy to all, without accommodating the individual facts and circumstances unique to each pipeline.”
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