Shippers on the Northern Natural Gas system called on FERC toreject the pipeline’s latest tariff proposal because they say ittries to pass off index-based rates as “discounted” rates ratherthan negotiated rates.

“Northern is attempting to have its ‘negotiated’ rates that arebased upon index price differentials to be declared ‘discounted’rates, so as to avoid the consumer protection mechanisms” that theCommission demanded in its 1996 policy statement on alternativepricing options, Indicated Shippers said in a protest filed earlierthis week.

With this proposal, Northern Natural is trying to do “an end-runaround the protections against improper cost-shifting” that FERCprovided for in the policy statement addressing negotiated rates,agreed GPM Gas Corp.

Specifically, Northern Natural’s proposal seeks to include a newcategory of discounts based on published indices or “otheragreed-upon pricing reference points.” The Enron pipelinecharacterized it as a “transportation discount” filing, but itsshippers insist it has all the earmarks of a negotiated rate. Ifthe proposal’s approved by FERC, the pipeline would no longer haveto file with FERC a negotiated index-based rate agreement, andNorthern would be able to shift the risk of such agreements awayfrom itself to its recourse shippers, critics said.

GPM said it was “particularly concerned” with the tariffproposal because it was “closely related” to Northern Natural’snegotiated-rate transaction with affiliate Enron North AmericaCorp., which is pending at FERC. The Enron transaction is for295,000 MMBtu/d of Northern Natural capacity, and “contains anindex-price rate formula that will tend to produce a fairly lowrate,” it noted.

By Northern Natural’s own admission, it “would like tocharacterize the transaction as a discounted rate, rather than anegotiated rate,” GPM said, adding that the tariff proposal”clearly is designed to support a future request by Northern thatthe Enron transaction, and similar transactions, will obtain adiscount adjustment in Northern’s next rate case.”

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.