A proposed expansion/replacement of Paiute Pipeline’s CarsonLateral last week became the first project to be challenged underthe FERC’s new policy statement, which requires new pipelineconstruction to be priced incrementally.

“Because Paiute proposes rolled-in pricing for its project, theCommission must reject the certificate request as Paiute has tomeet the threshold requirement that the project will not requiresubsidization by Paiute’s other customers,” Sierra Pacific Power ofReno, NV, said in an amended protest.

The “only caveats [to the pricing policy] are if incrementalpricing would result in lower rolled-in rates or for facilitiesconstructed solely for flexibility and system reliability…..thePaiute project clearly does not fit within the two possiblecaveats,” the utility noted.

Paiute has argued that rolled-in rate treatment should bepermitted because part of the expansion includes replacing an oldersegment of its line. But Sierra Power contends the Commission’s newpricing policy “requires the pipeline applicant to attempt toeliminate all adverse effects, including subsidization. It is onlywhere it is not possible for the pipeline to do so that theCommission may attempt a sliding scale balancing test to determinewhether the project is in the public interest.”

Paiute should be able to determine the project costs of theexpansion/replacement that would benefit solely its parent,Southwest Gas Corp., “and which, hence, should be incrementallypriced. Paiute’s failure to do so requires rejection of its presentcertificate proposal,” the utility said. It estimates that twosegments of the proposed project – at costs of about $2.4 million -are exclusively to serve the load growth of Southwest Gas, whileonly one segment would relate to replacement. Total costs of theproject was put at $5.45 million.

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