FERC has issued a preliminary determination (PD) for TennesseeGas Pipeline to replace and expand an existing lateral’s facilitiesto provide up to 130,000 Dth/d of firm transportation service to anew power generation facility planned in New Hampshire.

Specifically, Tennessee wants to remove about 19.3 miles of anexisting eight-inch line on its Concord Lateral, and replace itwith a 20-inch pipeline to serve AES Londonderry, a proposed 720 MWcombined-cycle gas-fired generating plant in Londonderry, NH. Thenew 20-inch line, if Tennessee receives final approval, would runparallel to an existing 12-inch loop line from Dracut, MA, toLondonderry. It also proposes to install measurement facilities, aflow control valve and other associated facilities, bringing thetotal cost of the project to $32.4 million.

AES Londonderry has signed a binding 20-year agreement for theentire 130,000 Dth/d of firm capacity that would be created by thereplacement/expansion project on the lateral, according toTennessee. It proposes to begin service to AES Londonderry on Oct.1, 2001.

FERC estimated Tennessee’s revenues for each year of the 20-yearcontract with AES will be $6,589,564, while the cost of serviceassociated with the new facilities will be $5,532,196. “This excessof revenues over costs assures that the Londonderry project willnot be subsidized by Tennessee’s existing customers.” Moreover,Tennessee’s service to AES “represents new load not currentlyserved by another pipeline.” Nor, will landowners be affected given”the short length of the replacement pipeline and the fact thatmost of the construction activities will occur within Tennessee’sexisting right-of-way.”

In the end, “existing shippers will suffer no degradation ofservice. Indeed, the increased capacity will allow Tennessee toserve not only AES, but also to maintain reliable service toexisting shippers and provide an improved level of service. Inaddition, the project will allow for lower cost expansions in thefuture to meet demand growth and relieve a capacity-constrainedmarket area,” the order said [CP00-48].

FERC rejected Tennessee’s request for incremental pricing,directing the pipeline to roll the project costs into the rates ofexisting customers in its next Section 4 rate proceeding. Thiswould lower rates for the pipeline’s existing customers, the ordersaid.

In explaining its decision, the Commission said that while itspolicy statement “supports incremental pricing in most instances toavoid subsidies for a new project, [it] emphasized that incrementalpricing may not be appropriate in cases of inexpensiveexpansibility that are made possible because of earlier, costlyconstruction. We find that the Londonderry project is such aproject.”

The FERC order approved Tennessee’s proposed negotiated rate forAES Londonderry, which consists of a fixed monthly reservationcharge of $1.1298/Dth and a fixed commodity charge of $0.0053/Dth.

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