Canadian producers, distributor customers and Idaho potato processors are protesting a rate case filing by Viking Gas Transmission that the protesters claim would raise the pipeline’s rates by over 50% at the same time it proposes a number of changes in its rate and scheduling scheme, including term-differentiated rates.

The Wisconsin Distributor Group, firm shippers holding over one-third of Viking’s total capacity, protested the Dec. 28 filing (RP02-132) and moved for partial summary disposition of certain of the rate and tariff proposals. “The sheer magnitude of Viking’s proposed rate and cost-of-service increases — over 50% on a Zone 1 to Zone 2 firm haul, or over 60% on an annual cost-of-service basis — is unjustified and unsupported.”

The group claimed Viking had “not explained, much less justified,” the large increase. Part of the increased costs are ascribed to the roll-in of its 1999 expansion, and the recovery of the acquisition premium committed by its parent Northern States Power (NSP), in acquiring Viking from Tennessee Gas Pipeline in 1993. Both items, the distributors claim, “directly contravene Commission policy.” These are the items the distributors would have summarily dismissed.

J.R. Simplot and RDO Foods, both with potato processing plants served by Viking, which runs from the Manitoba-Minnesota border into central Wisconsin, protested the pipeline’s proposed term-differentiated rates based on increasing or decreasing the return on equity (ROE) and the recalculation of the demand charge for each category or rates. Viking has assigned a higher ROE to shorter-term contracts and a lower ROE for longer term pacts. The rates are divided into three categories: (1) terms of less than three years, 16% ROE; (2) terms of three and less than five years, 15%; (3) five years or more, 14% ROE. Strangely, despite their long-term contracts running until 2012, Simplot and RDO and any other FT-B and FT-C shippers would arbitrarily fall into category 2 and pay a higher rate regardless of their qualification for Category 3. “Such a result is unreasonable, unduly discriminatory and as such contrary to Commission policy,” they said.

“Viking has in effect penalized its long-term shippers for entering into 15-year service agreements by denying them the long-term differentiated rates for the duration of their primary term, and ignoring the loss of flexibility and risk of turnback cost exposure that entering into such contracts entailed.”

The Canadian Association of Petroleum Producers and the Alberta Department of Energy have also protested Viking’s rate increase, saying “several of the most prominent elements of the proposed cost of service, including return on equity and depreciation rates, including a claimed negative net salvage allowance in excess of one percent, are patently overstated and facially inflated beyond reason. Other elements, such as the proposed rate base treatment of Vikings’s claimed acquisition premium, have not been justified.”

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