In what some shippers see as ironic given the sorry status of the pipeline’s own credit rating, PG&E Gas Transmission Northwest’s (GTN) existing collateral demands on credit-risky customers have raised skepticism from federal regulators and shippers alike in recent weeks. The proposed tougher-than-federally-required credit standards for the pipeline’s shippers have been put on hold by the Federal Energy Regulatory Commission, which wants to hold a technical conference on the issue.

FERC accepted the tougher standards, which PG&E has used on its system since 1993, last Friday, but immediately suspended them, pending an investigation. It will hold the technical conference to gather information, and has ordered FERC staff to report back to the Commission within 120 days.

Questions about GTN’s collateral requirements were first raised at the Commission in late October by e-prime, an Xcel Energy company, but the pipeline said it has since worked out what it believed was a resolution of the shipper’s concerns. Subsequently, other shippers on PG&E’s pipeline filed protests at FERC against the pipeline’s collateral requirements.

Some of its largest shippers — BP, Calpine and Mirant — said the tariffs used by PG&E’s interstate pipeline, which is part of its junk-rated National Energy Group (NEG), were “excessive,” and they have asked FERC to reject them.

If the pipeline’s tariffs are allowed by FERC, Calpine officials said, “it would require shippers to post millions of dollars in collateral to a company that could be on the verge of bankruptcy,” according to a Reuters report on the issue. NEG last month defaulted on more than $400 million in credit revolver payments and interest as it seeks longer financial restructuring, asset sales and reorganization of its merchant energy businesses.

GTN, although downgraded in its credit ratings, too, has a more solid financial footing than the other NEG companies; and it was not one of several interstate pipelines that separately have asked FERC for tougher shipper creditworthiness standards in the wake of Enron’s bankruptcy and the general financial troubles in the energy industry.

GTN has required that shippers provide 12 months of alternative collateral in the form of a letter-of-credit or cash pre-payment, if a shippers’ credit rating falls to “junk” status or the shipper cannot provide an acceptable third-party guarantee from a creditworthy entity. In the past, however, few if any if GTN’s shippers were in the precarious financial situation that they find themselves in now.

Noting that FERC normally only requires alternative collateral of up to three months’ shipping charges, GTN urged FERC to have uniform credit rules for all pipelines and to allow them “an opportunity to protect themselves and their creditworthy shippers from non-creditworthy shipper default.”

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