Prequalification credit-worthiness requirements for prospective replacement shippers in capacity release programs are “unworkable for many capacity release transactions, particularly short-term releases,” Reliant Energy Services said in rebutting a call by KeySpan Delivery Cos. for prequalification, including the posting of collateral by non-creditworthy shippers.

“The timeline for posting, bidding and awarding of short-term capacity release transactions is so condensed that posting collateral prior to award would represent an insurmountable barrier for the potentially noncreditworthy replacement shipper,” Reliant said. KeySpan is seeking a policy ruling from the Federal Energy Regulatory Commission on creditworthy standards.

Reliant maintains that the most logical approach is for a company to post collateral within a reasonable time after it is informed it has won the bid. In a filing with FERC July 17, the company suggested that current Commission policy allowing a company five days after it signs a contract to post collateral for the first month of the contract should apply to capacity release transactions. Requiring everyone to prove creditworthiness or post collateral before bidding would put a tremendous burden on pipelines to review numerous applications for each bidding process, Reliant said.

KeySpan said the current Commission policy applies to an existing shipper, not to a new shipper.

Reliant also protested similar pre-qualification provisions proposed by Dominion Cove Point LNG for replacement shippers under its tariff, saying it would create a barrier to entry into the capacity market and “have a devastating effect on the liquidity of non-creditworthy replacement shippers.”

Pre-qualification is not only “unreasonable,” it is “unworkable. Capacity release transactions often occur in a matter of hours, rather than days, and shippers generally have no advance knowledge that capacity is about to be posted for release. Once posted, there may be too little time to request an evaluation by the pipeline or to post adequate collateral so that a potential replacement shipper can bid.”

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