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Ozark Sale Final, Owner Fighting FERC Over Rates
The sale of Ozark Gas Transmission to an Enogex affiliate hasbeen completed, but it remains to be seen whether the FERC willbless Enogex with the rates it seeks for an interstate pipelinecomposed of the combination of Ozark and its currentlynon-jurisdictional NOARK Pipeline.
Ozark seller Dynegy said it expects a $27 million pretax gain onthe sale of Ozark for $55 million. Dynegy acquired Ozark in 1995.”The sale of the Ozark Gas Transmission System is consistent withour plans to redeploy capital from the sale of non-strategic assetsto our wholesale gas and power business,” said Dynegy CEO ChuckWatson.
Enogex plans to combine Ozark with its NOARK Pipeline to createa new interstate system, Enogex Interstate. However, the company iswrangling with the Federal Energy Regulatory Commission over thetransportation rates it will be allowed to charge. The Commissiongenerally approved Enogex Interstate’s two-stage plan to acquireOzark and combine it with NOARK. Enogex Interstate proposed to useOzark’s existing rates for the combined system and sought rolled-intreatment of the costs of the combination. However, the Commissionestablished initial rates “that are substantially lower thanOzark’s existing rates for the services Enogex Interstate has beenauthorized to continue.” Enogex complains in a request forrehearing that the FERC derived initial rates using the aggregatemaximum capacity of the combined Ozark-NOARK system and selectedelements of cost data submitted by Enogex to justify roll-in of theNOARK system and integration facilities.
Enogex maintains the FERC ignored precedent in not authorizingEnogex Interstate to continue using Ozark’s existingCommission-approved rates. Also, even if the Commission had basisfor requiring adoption of new rates, it erred in their calculation.”By treating Enogex Interstate as a ‘new interstate pipeline’ forsome purposes, but not for others, the Order attributes overstatedbilling determinants and an understated return on equity to EnogexInterstate.”
The Commission authorized Enogex Interstate to charge a maximumbase reservation rate of $6.3412/Dth and a maximum/minimum baseusage rate of $0.0125/Dth for firm service. Because the FERC choseto establish initial rates, it dismissed the pipeline’s request foradvanced determination of rolled-in rate treatment of the costs fordedicating NOARK to interstate service and constructing facilitiesto integrate Ozark and NOARK.
Enogex is seeking FTS rates of $7.3087/Dth for the maximum basereservation rate, $0.0134/Dth for the maximum/minimum base usagerate; and ITS rates of $0.2537/Dth for the maximum base rate, and$0.0134/Dth for the minimum. Should the Commission continue toderive initial rates for Enogex Interstate, the pipeline wants itto use a return on equity of 13.5% and a utilization factor of 90%,”which approximates the effect of combining the utilization factorembedded in Ozark’s existing rates with a capacity factor relatingto the NOARK ‘expansion’ facilities of 95%.”
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