Reliant Energy Services (RES), the marketing arm of financially troubled Reliant Resources, said Florida Gas Transmission (FGT) is demanding that it pay $36.7 million upfront before the pipeline will provide service under its latest expansion project, a move that Reliant Energy claims is a clear violation of FGT’s existing transportation tariff.

In a complaint filed at the Federal Energy Regulatory Commission Friday, Reliant Energy further contends it “understands and believes” that FGT plans to build its Phase VI looping and compression facilities to entirely bypass RES, which it insists would be at odds with the certificate that the Commission recently awarded the pipeline for the project [RP03-77].

Reliant Energy noted that FGT accepted the FERC certificate for the project this past July, at about the same time its parent, Reliant Resources, “was downgraded to a level below the basic creditworthiness threshold set forth in FGT’s tariff.” Nevertheless, it believes FGT committed itself to the expansion, as spelled out in the certificate order, when its accepted the certificate.

The dispute could take on an added layer of controversy in light of Reliant Resources’ disclosure on Friday that it may need to pursue Chapter 11 if it is unable to put together favorable refinancing deals in the months ahead. FGT isn’t on the best financial footing either. It is owned by Citrus Corp., a partnership of bankrupt Enron Corp. and embattled El Paso Corp.

FGT sought from the Reliant marketer a letter of credit or “other acceptable form of security” in the amount of $36.7 million by no later than Nov. 30 of this year to guarantee its participation in the Phase VI expansion, according to Reliant Energy. In a Sept. 19 letter, FGT said the amount was “based on the estimated construction cost FGT will incur for the incremental pipeline capacity to be constructed for [RES] in the FGT Phase VI expansion project.”

In response, Reliant Energy said it offered to pay the maximum level of security to which FGT is entitled to under its existing tariff — $2.7 million. This was equal to three months of transportation service under the agreement between Reliant Energy and the pipeline. The 20-year service agreement, due to take effect June 1, 2003, calls for FGT to provide Reliant Energy with an April-through-October maximum daily quantity (MDQ) of 40,000 MMBtu/d, and a November-through March MDQ of 11,200 MMBtu/d.

In a later letter on Oct. 30, Reliant Energy said FGT ignored its tariff completely, putting the marketer on notice that the expansion facilities to serve RES were “uneconomical,” and that the agreement would be terminated as of Nov. 30.

Reliant Energy argues that this action — to apparently cut the marketer out of the expansion project — violates FGT’s certificate. “Although it is not known to RES precisely which facilities FGT now has in mind [to build], FGT does not have certificate authority to construct a project other than the one certificated by the Commission, and RES is not aware that FGT has filed to amend its Phase VI facilities’ certificate,” the Reliant marketer said.

Reliant Energy has asked FERC for fast-track resolution of its complaint. Specifically it wants the Commission to declare that FGT, by its actions, has abused its tariff and the Commission’s orders approving the Phase VI facilities. It asked the agency to order FGT to build the expansion “without exclusion of facilities associated with the capacity subscribed by RES.”

Moreover, Reliant Energy urged the Commission to order FGT to “accept satisfaction of creditworthiness requirements in accordance with its tariff, and make clear that FGT has no authority to demand the posting of a letter of credit or other assurance of creditworthiness in excess of that permitted by its tariff.”

This is not the first time that a shipper has taken issue with a pipeline’s credit demands. Last month, Denver, CO-based e prime Inc. accused PG&E Transmission-Northwest Corp. (GTN) of violating the creditworthiness criteria in its own tariff and Commission regulations by demanding that it pre-pay $1.5 million in reservation charges for a one-year period, or face suspension of service. E prime filed a complaint, and is seeking fast-track resolution of the credit dispute [RP03-41].

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